Solar Senior Capital Ltd.
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: 814-00849 SOLAR SENIOR CAPITAL LTD.(Exact name of registrant as specified in its charter) Maryland 27-4288022(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 of 1934 during thepreceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-Tduring 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 ofRegistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment 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 company or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the ExchangeAct. 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 with any new or revisedfinancial 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 $16.31 on theNASDAQ Global Select Market was approximately $246.7 million. For the purposes of calculating this amount only, all directors and executive officers of the Registranthave been treated as affiliates. There were 16,040,485 shares of the Registrant’s common stock outstanding as of February 15, 2019. Table of ContentsSOLAR SENIOR 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 55 Item 2. Properties 55 Item 3. Legal Proceedings 55 Item 4. Mine Safety Disclosures 55 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 56 Item 6. Selected Financial Data 59 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 59 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 76 Item 8. Financial Statements and Supplementary Data 77 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 112 Item 9A. Controls and Procedures 112 Item 9B. Other Information 112 PART III Item 10. Directors, Executive Officers and Corporate Governance 113 Item 11. Executive Compensation 119 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 121 Item 13. Certain Relationships and Related Transactions, and Director Independence 122 Item 14. Principal Accounting Fees and Services 125 PART IV Item 15. Exhibits, Financial Statement Schedules 127 Item 16. Form 10-K Summary 128 Signatures 129 Table of ContentsPART I Item 1.BusinessSolar Senior Capital Ltd. (“Solar Senior”, the “Company”, “SUNS”, “we”, “us” or “our”), a Maryland corporation formed in December 2010, is aclosed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business developmentcompany (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, as the Company is an investment company,it continues to apply the guidance in the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. Inaddition, for U.S federal income tax purposes, we have elected, and intend to qualify annually, to be treated as a regulated investment company(“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).On February 24, 2011, we priced our initial public offering (the “IPO”), selling 9.0 million shares, including the underwriters’ over-allotment,raising approximately $168 million in net proceeds. Concurrent with this offering, Solar Senior Capital Investors LLC, an entity controlled by MichaelS. Gross, our Chairman and Chief Executive Officer, and Bruce Spohler, our Chief Operating Officer, purchased an additional 500,000 shares of ourcommon stock through a private placement transaction exempt from registration under the Securities Act of 1933, as amended, or the Securities Act(the “Concurrent Private Placement”), raising another $10 million.We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and theinvestment opportunities are most attractive. We define “middle market” to refer to companies with annual revenues typically between $50 million and$1 billion. Our investment objective is to seek to maximize current income consistent with the preservation of capital. We seek to achieve ourinvestment objective by directly and indirectly investing in senior loans, including first lien, stretch-senior, unitranche, and second lien debtinstruments, made to private middle-market companies whose debt is rated below investment grade, which we refer to collectively as “senior loans.”Our investments in stretch-senior loans represent loans where the amount of senior debt of the portfolio company is larger than a traditional seniorsecured loan but is less than a unitranche loan. We may also invest directly in the debt and equity securities of public companies that are thinly tradedor in other equity and equity related securities and such investments may not be limited to any minimum or maximum market capitalization. Inaddition, we may invest in foreign markets, including emerging markets. Under normal market conditions, at least 80% of the value of our net assets(including the amount of any borrowings for investment purposes) will be invested directly or indirectly in senior loans. Senior loans typically payinterest at rates which are determined periodically on the basis of a floating base lending rate, primarily LIBOR, plus a premium. Senior loans in whichwe invest are typically made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in variousindustries and geographical regions. Senior loans typically are rated below investment grade. In addition, some of our debt investments will not fullyamortize during their lifetime, which could result in a loss or a substantial amount of unpaid principal and interest due upon maturity. Securities ratedbelow investment grade are often referred to as “leveraged loans,” “high yield” or “junk” securities, and may be considered “high risk” compared todebt instruments that are rated investment grade. While the Company does not typically seek to invest in traditional equity securities as part of itsinvestment objective, the Company may occasionally acquire some equity securities in connection with senior loan investments and in certain otherunique circumstances, such as the Company’s equity investments in business that exclusively make senior loans, including Gemino HealthcareFinance, LLC (“Gemino”) and North Mill Capital LLC (“NMC”).We invest in senior loans made primarily to private, leveraged middle-market companies with approximately $20 million to $100 million ofearnings before income taxes, depreciation and amortization (“EBITDA”). Our business model is focused primarily on the direct origination ofinvestments through portfolio companies or their financial sponsors. Our direct investments in individual securities generally range between$5 million and $30 million each, although we expect that this investment size will vary with the size of our capital base and/or strategic initiatives. Inaddition, we may invest a portion of our portfolio in other types of 1Table of Contentsinvestments, which we refer to as opportunistic investments, which are not our primary focus but are intended to enhance our overall returns. Theseopportunistic investments may include, but are not limited to, direct investments in public companies that are not thinly traded and securities ofleveraged companies located in select countries outside of the United States. 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. Ourinvestment activities are managed by Solar Capital Partners, LLC (“Solar Capital Partners” or 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 (“Solar CapitalManagement”) provides the administrative services necessary for us to operate.As of December 31, 2018, our investment portfolio totaled $450.1 million and our net asset value was $261.4 million. Our portfolio wascomprised of debt and equity investments in 47 portfolio companies.During our fiscal year ended December 31, 2018, we invested approximately $186 million across 34 portfolio companies. Investments sold orprepaid during the fiscal year ended December 31, 2018 totaled $193 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 dedicated investment professionals. Solar Capital Partners’ investment team hasextensive experience in leveraged lending and private equity, as well as 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 SolarCapital Ltd., or “Solar Capital”, another publicly traded BDC that primarily invests directly and indirectly in leveraged, U.S. middle market companiesin the form of cash flow senior secured investments including first lien and second lien debt instruments and asset-based investments including seniorloans. Through December 31, 2018, the investment team led by Messrs. Gross and Spohler has invested approximately $8 billion in more than 360different portfolio companies involving approximately 200 different financial sponsors. As of February 15, 2019, Mr. Gross and Mr. Spohlerbeneficially owned, either directly or indirectly, approximately 5.4% of our outstanding 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 Senior Capital seeks to create a diverse portfolio of senior loans by investing approximately $5 million to $30 million of capital, onaverage, in the individual securities of leveraged companies, including middle-market companies. We expect that this investment size will varyproportionately with the size of our capital base and/or strategic initiatives. We may also invest in the debt and equity of public companies that arethinly traded. Under normal market conditions, at least 80% of the value of our net assets (including the amount of any borrowings for investmentpurposes) will be invested directly or indirectly in senior loans. 2Table of ContentsSenior loans typically pay interest at rates which are determined periodically on the basis of a floating base lending rate, primarily LIBOR, plus aspread or premium. Senior loans in which we invest are typically made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and otherbusiness entities which operate in various industries and geographical regions. Senior loans typically are rated below investment grade. Securities ratedbelow investment grade are often referred to as “leveraged loans,” “high yield” or “junk” securities, and may be considered “high risk” compared todebt instruments that are rated investment grade. Senior loans, however are generally less risky than subordinated debt, bearing lower leverage andhigher recovery statistics. In addition, many of our debt investments will not fully amortize during their lifetime, which could result in a loss or asubstantial amount of unpaid principal and interest due upon maturity.In addition to senior loans, we may invest a portion of our portfolio in opportunistic investments, which are not our primary focus, but areintended to enhance our returns to stockholders. These investments may include similar direct investments in public companies that are not thinlytraded and securities of leveraged companies located in select countries outside of the United States. We may invest up to 30% of our total assets insuch opportunistic investments, including loans issued by non-U.S. issuers, subject to compliance with our regulatory obligations as a BDC under the1940 Act.We currently borrow funds under our credit facilities and may borrow additional funds to make investments. As a result, we are exposed to therisks of leverage, which may be considered a speculative investment technique. The use of leverage magnifies the potential for loss on amountsinvested and therefore increases the risks associated with investing in our securities. In addition, the costs associated with our borrowings, includingany increase in management fees payable 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 expect to employ the same or similaranalytical process as 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 entirely related to currency fluctuations.Our principal focus is to provide senior loans, including first lien, stretch-senior and unitranche loans, to private middle-market companies in avariety of industries. We generally seek to target companies that generate positive cash flows and/or have substantial assets that secure our loans. Wegenerally seek to invest in companies 3Table of Contentsfrom the broad variety of industries in which our investment adviser has direct expertise. The following is a representative list of the industries in whichwe may invest. •  Aerospace & Defense •  Health Care Facilities•  Air Freight & Logistics •  Health Care Providers & Services•  Asset Management •  Health Care Technology•  Automobiles •  Hotels, Restaurants & Leisure•  Automotive Retail •  Industrial Conglomerates•  Beverages •  Insurance•  Building Products •  Internet Services & Infrastructure•  Capital Markets •  IT Services•  Chemicals •  Leisure Equipment & Products•  Commercial Services & Supplies •  Machinery•  Communications Equipment •  Media•  Construction & Engineering •  Multiline Retail•  Consumer Finance •  Paper & Forest Products•  Containers & Packaging •  Personal Products•  Distributors •  Pharmaceuticals•  Diversified Consumer Services •  Professional Services•  Diversified Financial Services •  Real Estate Management & Development•  Diversified Real Estate Activities •  Research & Consulting Services•  Diversified Telecommunications Services •  Software•  Education Services •  Specialty Retail•  Electronic Equipment, Instruments & Components •  Textiles, Apparel & Luxury Goods•  Food Products •  Utilities•  Footwear •  Wireless Telecommunications Services•  Health Care Equipment & Supplies We 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 new exemptive order obtained fromthe Securities 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 47 portfolio companies and was invested 77.8% directly in senior secured loans and 22.2% incommon equity/equity interests/warrants (of which 7.2% is Gemino and 14.9% is NMC, through which the Company indirectly investments in seniorsecured loans), in each case, measured at fair value. We expect that our portfolio will continue to primarily include senior secured loans. 4Table of ContentsWhile our primary investment objective is to maximize current income through direct and indirect investments in U.S. senior secured loans, andwe may also invest a portion of the portfolio in opportunistic investments, including foreign securities.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 2017:TOP TEN PORTFOLIO COMPANIES AND INDUSTRIES AS OF DECEMBER 31, 2018 Portfolio Company % of TotalAssets North Mill Capital LLC* 14.6% Gemino Healthcare Finance LLC*. 7.1% Ministry Brands, LLC. 3.1% On Location Events, LLC & PrimeSport Holdings Inc 3.1% Confie Seguros Holding II Co. 3.1% American Teleconferencing Services, Ltd 3.0% 1A Smart Start LLC 3.0% Edgewood Partners Holdings, LLC 2.9% Capstone Logistics Acquisition, Inc. 2.7% KORE Wireless Group, Inc. 2.6% *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 tobeneficially owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Industry % of TotalAssets Diversified Financial Services 21.7% Health Care Providers & Services 15.5% Professional Services 11.6% Insurance 11.0% Software 10.4% Communications Equipment 5.4% Media 3.1% Electronic Equipment, Instruments & Components 3.0% Wireless Telecommunication Services 2.6% Chemicals 2.6% TOP TEN PORTFOLIO COMPANIES AND INDUSTRIES AS OF DECEMBER 31, 2017 Portfolio Company % of TotalAssets NorthMill, LLC 9.8% First Lien Loan Program LLC 6.9% Gemino Healthcare Finance LLC 6.7% On Location Events, LLC & PrimeSport Holdings Inc 2.8% American Teleconferencing Services, Ltd 2.8% Polycom, Inc. 2.3% Logix Holding Company, LLC 2.0% PetVet Care Centers, LLC. 2.0% Confie Seguros Holding II Co. 1.9% Ministry Brands, LLC 1.8% 5Table of ContentsIndustry % of TotalAssets Diversified Financial Services 16.5% Communications Equipment 8.4% Health Care Providers & Services 8.0% Asset Management 7.6% Professional Services 6.7% Insurance 6.5% Software 5.7% Media 2.8% Electronic Equipment, Instruments & Components 2.7% Internet Software & Services 2.5% 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 have or will 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 Senior’s investment team works in concert with sponsors to proactively manage investment opportunities by acting as a partner throughoutthe investment process. We actively focus on the middle-market financial sponsor community, with a particular focus on the upper-end of the 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 will work with the management of that company and itsother capital providers, including senior, junior and equity capital providers, to structure an investment. We negotiate among these parties to agree onhow our investment is expected to perform relative to the other capital in the portfolio company’s capital structure.We seek to invest in portfolio companies primarily in the form of senior loans. These senior loans typically have current cash pay interest withsome amortization of principal. Interest is typically paid on a floating rate basis, often with a floor on the LIBOR rate. We generally seek to obtainsecurity interests in the assets of our portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take theform of first or second priority liens on the assets of a portfolio company. 8Table of ContentsTypically, we expect that our senior loans will have final maturities of four to seven years. However, we also expect that our portfolio companiesoften may repay these loans early, generally within three years from the date of initial investment. In some cases and when available, we seek tostructure these loans with prepayment premiums to capture foregone interest.In the case of our senior secured loan investments, we seek to tailor the terms of the investment to the facts and circumstances of the transactionand the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the portfoliocompany to achieve its business plan and improve its profitability. For example, in addition to seeking a senior position in the capital structure of ourportfolio companies, we may be able 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. In addition, we may from time to time make direct equity investments in portfoliocompanies.We generally seek to hold most of our investments to maturity or repayment, but believe we have the ability to sell our investments earlier,including if a liquidity event takes 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; • 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 and Solar Senior Capital portfolio companies in the industry, if any; and • Review of monthly and quarterly financial statements, asset valuations, 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. 9Table of ContentsWe 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 andrisk factors 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 areneutral to 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 requiresprocedures for closer 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 2. In connection withour 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 is determined, at all times consistent with GAAP and the 1940 Act.Our valuation procedures are set forth in more detail below:The Company conducts the valuation of its assets in accordance with GAAP and the 1940 Act. The Company generally values its assets on aquarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closingprice on the date of valuation. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers ordealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to GAAP to determine thefair value of the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shalleach be valued at cost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in thejudgment of the Investment Adviser, 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 the Company’s board of directors (the “Board”).Investments for which reliable market quotations are not readily available or for which the pricing sources do not provide a valuation ormethodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fair value, eachshall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolioinvestment; (ii) preliminary valuations are discussed with senior management of the Investment Adviser; (iii) independent valuation firms engaged by,or on behalf of, the Board will conduct independent appraisals and review the Investment Adviser’s preliminary valuations and make their ownindependent assessment for (a) each portfolio investment that, when taken together with all other investments in the same portfolio company, exceeds10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each portfolio investmentthat is presently in payment default; (iv) the Board will discuss the valuations and determine the fair value of each investment in our portfolio in goodfaith based on the input of the Investment Adviser and, where appropriate, the respective independent valuation firm.The recommendation of fair value generally considers the following factors among others, as relevant: applicable market yields; the nature andrealizable value of any collateral; the portfolio company’s ability to make payments; the portfolio company’s earnings and discounted cash flow; themarkets in which the issuer does business; and comparisons to publicly traded securities, among others. 10Table of ContentsWhen an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricingindicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do nothave a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had areadily available market value existed for such investments, and the differences could be material.Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practicalexpedient for fair value. The market approach uses prices and other relevant information generated by market transactions involving identical orcomparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cashflows or earnings) 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 our investments include, asrelevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields andmultiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company’s ability to makepayments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peercompanies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotationsprovided by pricing services are considered as an input in the valuation process. For the fiscal year ended December 31, 2018, there has been nochange to the Company’s valuation approaches or techniques and the nature of the related inputs considered in the valuation process.ASC Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date.Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets thatare not active, or other observable inputs other than quoted prices.Level 3: Unobservable inputs for the asset or liability.In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the 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 BDCs, commercial and investment banks, commercialfinancing companies and, to the extent they provide an alternative form of financing, private equity funds. Additionally, alternative investmentvehicles, such as hedge funds, frequently invest in middle-market companies. As a result, competition for investment opportunities at middle-marketcompanies can be intense. While many middle-market companies were previously able to raise senior debt financing through traditional large financialinstitutions, we believe this approach to financing is more difficult as implementation of U.S. and international financial reforms limits the capacity oflarge financial 11Table of Contentsinstitutions to hold non-investment grade leveraged loans on their balance sheets. We believe that many of these financial institutions havede-emphasized their service and product offerings to middle-market companies in particular.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 business development company. We use the industry information available to Messrs. Gross and Spohler and the other investment professionalsof Solar Capital Partners to assess investment risks and determine appropriate pricing for our investments in portfolio companies. In addition, webelieve that the relationships of Messrs. Gross and Spohler and the other senior investment professionals of our investment adviser enable us to learnabout, 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.Sarbanes-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 an annual report regarding its assessment of the effectiveness ofinternal controls over financial reporting and obtain an audit of the effectiveness of internal controls over financial reporting performed byour independent 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. 12Table of ContentsThe 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.The 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. 13Table of ContentsAs 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 negotiatedtransactions with certain affiliates, each of whose investment adviser was Solar Capital Partners in a manner consistent with our investment objective,positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and pursuant to the conditions of the PriorExemptive Order. On June 13, 2017, the Company, Solar Capital Ltd., and Solar Capital Partners, et al., received an exemptive order that supersedes thePrior Exemptive Order (the “New Exemptive Order”) and extends the relief granted in the Prior Exemptive Order such that it no longer applies tocertain affiliates only if their respective investment adviser is Solar Capital Partners, but also applies to certain affiliates whose investment adviser is aninvestment adviser that controls, is controlled by or is under common control with Solar Capital Partners and is registered as an investment adviserunder the Advisers Act. The terms of the New Exemptive Order are otherwise substantially similar to the Prior Exemptive Order. Co-investment underthe New Exemptive Order is subject to certain conditions therein, including the condition that, in the case of each co-investment transaction, our boardof directors determines that it would be in our best interest to participate in the transaction. If we are unable to rely on the New Exemptive Order for aparticular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with the opportunitybeing allocated, and second, if the terms of the opportunity are consistent with more than one entity’s investment strategy, on an alternating basis.However, neither we nor the affiliated funds are obligated to invest or co-invest when investment opportunities are referred to us or them.We will be periodically examined by the SEC for compliance with 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 portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligibleportfolio company is defined 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 that would bean 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. 14Table of Contents (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 portfolio companies and providing other organizational and financial guidance. We may also receive fees for these services. SolarCapital Management provides 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. 15Table of ContentsSenior 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.As 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. 16Table of ContentsPrivacy 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.We 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 17Table of Contents • 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 the time as to when a purchase or sale ofsecurities is deemed to occur; (vi) adversely alter the characterization of certain complex financial transactions; and (vii) produce income that will notbe qualifying income for purposes of the 90% gross income test described above. We will monitor our transactions and may make certain tax electionsin 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 18Table of Contentsstockholder’s tax basis, and any remaining distributions would be treated as a capital gain. To requalify as a RIC in a subsequent taxable year, wewould be required to satisfy the RIC qualification requirements for that year and dispose of any earnings and profits from any year in which we failed toqualify 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 year prior todisqualification 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 1.00% of our gross assets. For services rendered under the Advisory 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. Base management fees for any partial month or quarter will be appropriately pro-rated. For purposesof computing the base management fee, gross assets exclude temporary assets acquired at the end of each fiscal quarter for purposes of preservinginvestment flexibility in the next fiscal quarter. Temporary assets include, but are not limited to, U.S. treasury bills, other short-term U.S. government orgovernment 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) accrued during the calendar quarter,minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement to SolarCapital Management, and any interest expense and distributions 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 deferred interest feature (such as original issuediscount, debt instruments with pay in kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentivefee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation ordepreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediatelypreceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). Our net investment income used to calculate this part ofthe incentive fee is also included in the amount of our gross assets used to calculate the 1.00% base management fee. We pay Solar Capital Partners anincentive 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%; • 50% 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 2.9167% in any calendar quarter (11.67% annualized). We refer to this portion of our pre-incentivefee net investment income (which exceeds the hurdle but is less than 2.9167%) 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 2.9167% in any calendar quarter; and 19Table of Contents • 20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.9167% in any calendar quarter (11.67%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 the AdvisoryAgreement, as of the termination date), and equals 20% of our realized capital gains, if any, on a cumulative basis from inception through the end ofeach calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount ofany previously paid capital gain incentive fees with respect to each of the investments in our portfolio.Examples 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) = 0.25%Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%Pre-incentive fee net investment income(investment income – (management fee + other expenses)) = 0.80%Pre-incentive net investment income does not exceed hurdle rate, therefore there is no incentive fee. 20Table of ContentsAlternative 2:AssumptionsInvestment income (including interest, dividends, fees, etc.) = 2.70%Hurdle rate (1) = 1.75%Management fee (2) = 0.25%Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%Pre-incentive fee net investment income(investment income – (management fee + other expenses)) = 2.25%Incentive fee = 50% × pre-incentive fee net investment income, subject to the “catch-up” (4)= 50% × (2.25% – 1.75%)= 0.25%Alternative 3:AssumptionsInvestment income (including interest, dividends, fees, etc.) = 4.00%Hurdle rate (1) = 1.75%Management fee (2) = 0.25%Other expenses (legal, accounting, custodian, transfer agent, etc.) (3) = 0.20%Pre-incentive fee net investment income(investment income – (management fee + other expenses)) = 3.55%Incentive fee = 20% × pre-incentive fee net investment income, subject to “catch-up” (4)Incentive fee = 50% × “catch-up” + (20% × (pre-incentive fee net investment income – 2.9167%))Catch-up = 2.9167% – 1.75%= 1.1667%Incentive fee = (50% × 1.1667%) + (20% × (3.55% – 2.9167%))= 0.58334% + (20% × 0.6333%)= 0.58334% + 0.12667%= 0.71001% 21Table of Contents (*)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% 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 approximately 20% on all of our pre-incentivefee net investment income as if a hurdle rate did not apply when our net investment income exceeds 2.9167% 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 cumulative fee (20% multiplied by $25 million ($30 million cumulative capital gains less $5 million cumulative capitaldepreciation)) less $6 million (previous capital gains fee paid in Year 2) • Year 4: Capital gains incentive fee of $200,000$6.2 million cumulative fee ($31 million cumulative realized capital gains multiplied by 20%) less $6 million (previous capital gains fee paid inYear 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 fee 22Table of Contents20% multiplied by $25 million ($30 million realized capital gains on sale of Investment A less $5 million unrealized capital depreciation onInvestment B) • Year 3: $1.4 million capital gains incentive fee(1)$6.4 million cumulative fee (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capitaldepreciation)) less $5 million (previous capital gains fee paid in Year 2) • Year 4: None • Year 5: None$5 million cumulative fee (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10million)) less $6.4 million (previous cumulative capital gains fee paid in Year 2 and Year 3) (1)As illustrated in Year 3 of Alternative 1 above, if Solar Senior Capital were to be wound up on a date other than December 31 of any year,Solar Senior Capital may have paid aggregate capital gain incentive fees that are more than the amount of such fees that would be payableif Solar Senior Capital 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; • 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 23Table of Contents • 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.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.solarseniorcap.com. We make available free of charge on our website our annual report on Form 10-K, quarterlyreports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file suchmaterial with, or furnish it to, the SEC. Information contained on our website is not incorporated by reference into this annual report on Form 10-K, andyou should 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, commercial financing companies and, to the extent they provide an alternative form offinancing, private equity funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketingresources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. Inaddition, some of our competitors may have higher risk tolerances or different risk assessments than we have, which could allow them to consider awider variety of investments and establish more relationships and offer better pricing and more flexible structure than we are able to do. Furthermore,many of our potential competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. If we are unable to sourceattractive investments, we may hold a greater percentage of our assets in cash and cash equivalents than anticipated, which could impact potentialreturns on our portfolio. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financialcondition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunitiesfrom time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investmentobjective.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 offer, and we believe that some of ourcompetitors may make loans with 24Table of Contentsinterest rates that may be comparable to or lower than the rates we may offer. We may lose investment opportunities if we do not match ourcompetitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we may experience decreased net interestincome and increased risk of credit loss.Our investments are very risky and highly speculative.We invest primarily in senior secured loans, including first lien, stretch-senior, unitranche and second lien debt instruments, made to middle-market companies whose debt is rated below investment grade. We may also invest in debt of public companies that are thinly traded or equitysecurities. 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.Senior Secured Loans. When we make a senior secured term loan investment, including a first lien, stretch-senior, unitranche or second lien debtinvestment, in a portfolio company, we generally take a security interest in the available assets of the portfolio company, including the equity interestsof its subsidiaries, which we expect to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our loansmay decrease 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 thesuccess of 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.Equity Investments. When we invest in senior secured loans we may acquire common equity securities as well. In certain other uniquecircumstances we may also make equity investments in businesses that exclusively make senior loans, such as our investments in Gemino and NMC. Inaddition, we may invest directly in the equity securities of portfolio companies without limitation as to market capitalization. For instance, we mayinvest in thinly traded companies, the prices of which may be subject to erratic market movement. Our goal is ultimately to exit such equity interestsand realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may declinein value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equityinterests may not be sufficient to offset 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 25Table of Contents expansion or maintain their competitive position. In addition, our executive officers, directors and our investment adviser may, in theordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; 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 NMC and Gemino comprised 14.6% and 7.1%, respectively, of our total assets and our investments in diversified financial services andhealth care providers & services industries comprised 21.7% and 15.5%, respectively, of our total assets. Beyond the asset diversification requirementsassociated with our qualification as a RIC under Subchapter M of the Code, we do not have fixed guidelines for diversification, and while we are nottargeting any specific industries, our investments may be concentrated in relatively few industries or portfolio companies. As a result, the aggregatereturns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of anyone investment. Additionally, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns werealize.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 26Table of Contentsgrade issues, but typically involve greater risk. These securities are especially sensitive to adverse changes in general economic conditions, to changesin the financial condition of their issuers and to price fluctuation in response to changes in interest rates. During periods of economic downturn orrising interest rates, issuers of below investment grade instruments may experience financial stress that could adversely affect their ability to makepayments of principal and interest and increase the possibility of default. The secondary market for high yield securities may not be as liquid as thesecondary market for more highly rated securities. In addition, many of our debt investments will not fully amortize during their lifetime, which couldresult in a loss or a substantial amount of unpaid principal and interest due upon maturity.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 consecutive calendar quarters during thesame period. In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt, whichcreated 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 in Europe or any similar crisis elsewherecould have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in certain countries and the financial condition offinancial institutions generally. In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union(“Brexit”), and, subsequently, on March 29, 2017, the U.K. government began the formal process of leaving the European Union, which is set to occuron 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 last indefinitely. Because the U.K. Parliamentrejected Prime Minister Theresa May’s proposed Brexit deal with the European Union in January 2019, there is increased uncertainty on the timing ofBrexit. There is continued concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy amongEuropean Economic and Monetary Union member countries. In addition, the fiscal and monetary policies 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 senate portion of the legislative branch of government, which increases thelikelihood that legislation may be adopted that could significantly affect the 27Table of Contentsregulation of U.S. financial markets. Areas subject to potential change, amendment or repeal include the Dodd-Frank Wall Street Reform and ConsumerProtection Act and the authority of the Federal Reserve and the Financial Stability Oversight Council. For example, in March 2018, the U.S. Senatepassed a bill that eased financial regulations and reduced oversight for certain entities. The United States may also potentially withdraw from orrenegotiate various trade agreements and take other actions that would change current trade policies of the United States. We cannot predict which, ifany, of these actions will be taken or, if taken, their effect on the financial stability of the United States. Such actions could have a significant adverseeffect on our business, financial condition and results of operations. 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. We monitor developments and seek to manage our investments in a manner consistent withachieving our investment objective, but there can be no assurance 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 difficult to raise because, subject to some limited exceptions which apply to us, as a BDC we are generally notable to issue additional shares of our common stock at a price less than net asset value without first obtaining approval for such issuance from ourstockholders and our independent directors. At our 2018 Annual Stockholders Meeting, our stockholders approved our ability to sell or otherwise issueshares of our common stock, not exceeding 25% of our then outstanding common stock immediately prior to each such offering, at a price or pricesbelow the then current net asset value per share, in each case subject to the approval of our board of directors and compliance with the conditions setforth in the proxy statement pertaining thereto, during a period beginning on October 11, 2018 and expiring on the earlier of the one-year anniversaryof the date of the 2018 Annual Stockholders Meeting and the date of our 2019 Annual Stockholders Meeting. However, notwithstanding suchstockholder approval, since our initial public offering on February 24, 2011, we have not sold any shares of our common stock in an offering thatresulted in proceeds to us of less than our then current net asset value per share. Any offering of our common stock that requires stockholder approvalmust occur, if at all, within one year after receiving such stockholder approval. In addition, our ability to incur indebtedness (including by issuingpreferred stock) is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 150% immediatelyafter each time we incur indebtedness. The debt capital that will be available, if at all, may be at a higher cost and on less favorable terms andconditions in the future. Any inability to raise capital 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 28Table of Contentsour 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 theasset coverage ratio stipulated by the 1940 Act, which could, in turn, cause us to lose our status as a BDC and materially impair our businessoperations. A lengthy disruption in the credit markets could also materially decrease 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.Uncertainty 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 29Table of Contentsnew methods of calculating LIBOR will be established such that it continues to exist after 2021. The U.S. Federal Reserve, in conjunction with theAlternative Reference Rates Committee, a steering committee comprised of large US financial institutions, is considering replacing U.S. dollar LIBORwith a new index calculated by short-term repurchase agreements, backed by Treasury securities. The future of LIBOR at this time is uncertain. IfLIBOR ceases to exist, we may need to renegotiate the credit agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as afactor 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 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.These 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 30Table of Contentssubordinate to other debt of the portfolio company. If a portfolio company defaults on our loan or on debt senior to our loan, or in the event of aportfolio company bankruptcy, our loan will be satisfied only after the senior debt receives payment. Where debt senior to our loan exists, the presenceof inter-creditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through“standstill” periods) and control decisions made in bankruptcy proceedings relating to the portfolio company. Bankruptcy and portfolio companylitigation can significantly increase collection losses and the time needed for us to acquire the underlying collateral in the event of a default, duringwhich time the collateral may decline in value, causing us to suffer further 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.Some 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 31Table of Contentsdiscretion to make any follow-on investments, subject to the availability of capital resources. The failure to make follow-on investments may, in somecircumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us toincrease our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not tomake a follow-on investment because we may not want to increase our concentration of risk, either because we prefer other opportunities or because weare subject to BDC requirements that would prevent such follow-on investments or the desire to maintain 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 investments that we typically hold in our portfolio companies, we maynot be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in thevalue 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.We 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 ofthese covenants, including our right to payment, or waive or defer enforcement of remedies, such as acceleration of obligations or foreclosure oncollateral, depending upon the financial condition and prospects of the particular portfolio company. These actions may reduce the likelihood of ourreceiving the full amount of future payments of interest or principal and be accompanied by a deterioration in the value of the underlying collateral asmany of these companies may have limited financial resources, may be unable to meet future obligations and may go bankrupt. This could negativelyimpact our 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 32Table of Contentsengaged in unfair, inequitable or fraudulent conduct. The courts have also applied the doctrine of equitable subordination when a lender or itsaffiliates is found to have exerted inappropriate control over a client, including control resulting from the ownership of equity interests in a client. Wehave made direct equity investments or received warrants in connection with loans. Payments on one or more of our loans, particularly a loan to aclient in which we may also hold an equity interest, may be subject to claims of equitable subordination. If we were deemed to have the ability tocontrol or otherwise exercise influence over the business and affairs of one or more of our portfolio companies resulting in economic hardship to othercreditors of that company, this control or influence may constitute grounds for equitable subordination and a court may treat one or more of our loansas if it were unsecured or common equity in the portfolio company. In that case, if the portfolio company were to liquidate, we would be entitled torepayment of our loan on a pro-rata basis with other unsecured debt or, if the effect of subordination was to place us at the level of common equity, thenon an equal basis with other holders of the portfolio company’s common equity only after all of its obligations relating to its debt and preferredsecurities 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, some of our investments in such companies.We invest primarily in senior secured loans, including second lien, as well as unsecured debt instruments issued by our portfolio companies. If weinvest in second lien, or unsecured debt instruments, our portfolio companies typically may be permitted to incur other debt that ranks equally with, orsenior to, such debt instruments. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest orprincipal 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 the event ofinsolvency, 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. In such case, after repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying itsobligation to us. In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributionswith other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfoliocompany. Any such limitations on the ability of our portfolio companies to make principal or interest payments to us, if at all, may reduce our net assetvalue and have a negative 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. Investing in foreign companies may exposeus to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, politicaland social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the 33Table of Contentscase in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws,difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. These risks may be morepronounced for portfolio companies located or operating primarily in emerging markets, whose economies, markets and legal systems may be lessdeveloped.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 not seek to establish a perfect correlation between such hedging instruments and theportfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. Inaddition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S.currencies because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations. To the extent we engagein hedging transactions, we also face the risk that counterparties to the derivative instruments we hold may default, which may expose us tounexpected losses from positions where we believed that our risk had been appropriately 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. 34Table of ContentsRisks 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 24, 2011, 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; • 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. 35Table of ContentsOur 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 monthly basis to our stockholders out of assets legally available for distribution. We cannot assure you thatwe will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. Inaddition, 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.As 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 guidance, if too many stockholderselect to receive their distributions in cash, the cash available for distribution must be allocated among the stockholders electing to receive cash (withthe balance of distributions paid in stock). If we decide to make any distributions consistent with this revenue procedure that are payable in part in ourstock, taxable stockholders receiving such distributions will be required to include the full amount of the distribution (whether received in cash, ourstock, or a combination thereof) as ordinary income (or as long-term capital gain to the extent such distribution is properly reported as a capital gaindistribution) 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 maybe required to pay tax with respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it receives as a distributionin order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the marketprice of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be 36Table of Contentsrequired to withhold U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. If asignificant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on distributions, it may put downward pressureon the trading price of our stock.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 500,000 shares that were originally issued to Solar Senior Capital Investors LLC in the concurrent private placement in connection with ourinitial public offering (the “Concurrent Private Placement”) pursuant to the exemption from registration provided by Section 4(2) under the SecuritiesAct were subject to a 180 day lock-up period. Upon expiration of this lock-up period, such shares became generally freely tradable in the publicmarket, subject to the provisions of Rule 144 promulgated under the Securities Act. Sales of substantial amounts of our common stock, or theavailability of such common stock for sale, could adversely affect the prevailing market prices for our common stock. If this occurs and continues, itcould impair our ability to raise additional capital through the sale of securities should we desire to do so.We have also committed to file a registration statement to register the resale of the shares of common stock that were issued in the ConcurrentPrivate Placement to Solar Senior Capital Investors LLC within 60 days of receiving a request from Solar Senior Capital Investors LLC to do so. Wehave committed to use our commercially reasonable efforts to obtain effectiveness of such registration statement as soon as reasonably practicable afterthe filing of such registration statement. Assuming effectiveness of such registration statement, Solar Senior Capital Investors LLC will generally beable to resell its shares of common stock without restriction.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.We 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 sell shares of our common stock in one or more offerings at prices belowthe then current net asset value per share 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 37Table of Contentsapproval of our board of directors and compliance with the conditions set forth in the proxy statement pertaining thereto, during a period beginning onOctober 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 2019Annual Stockholders Meeting. However, notwithstanding such stockholder approval, since our initial public offering on February 24, 2011, we havenot sold any shares of our common stock in an offering that resulted in proceeds to us of less than our then current net asset value per share. Anyoffering of our common stock that requires stockholder approval must occur, if at all, within one year after receiving such stockholder approval.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. To the extent we receive the necessary approval, any decision to sell shares of our common stock below itsthen current net asset value per share would be subject to the determination by our board of directors that such issuance or sale is in our and ourstockholders’ best interests.If we were to sell shares of our common stock below its then current net asset value per share, such sales would result in an immediate dilution tothe net asset value per share of our common stock. This dilution would occur as a result of the sale of shares at a price below the then current net assetvalue per share of our common stock and a proportionately greater decrease in the stockholders’ interest in our earnings and assets and their votinginterest in us than the increase in our assets resulting from such sale. Because the number of shares of common stock that could be so issued and thetiming of any issuance is not currently known, the actual dilutive effect cannot be predicted.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 38Table of Contentsinvestment income might not be sufficient to meet the distribution requirements on the preferred stock. In order to counteract such an event, we mightneed to liquidate investments in order to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of commonstock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, including higher advisory fees if ourtotal return exceeds the distribution rate on the preferred stock. Holders of preferred stock may have different interests than holders of common stockand may 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 the effect of delaying, deferring or preventing a transaction or achange in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. The cost of any suchreclassification would be borne by our existing common stockholders. The issuance of shares of preferred stock convertible into shares of commonstock might also reduce the net income and net asset value per share of our common stock upon conversion, provided, that we will only be permitted toissue such convertible preferred stock to the extent we comply with the requirements of Section 61 of the 1940 Act, including obtaining commonstockholder approval. These effects, among others, could have an adverse effect on your investment 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. 39Table of ContentsYou 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.Risks 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 Senior Capital; however, they may be engaged in other businessactivities which could divert their time and attention in the future. Specifically, each of Messrs. Gross and Spohler serve as Chief Executive Officer andChief Operating Officer, respectively, of Solar 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. 40Table of ContentsA 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 they mature or to consummate new borrowing facilities to provide capital for normaloperations, including new originations. Reflecting concern about the stability of the financial markets, many lenders and institutional investors havereduced or ceased providing funding to borrowers. This market turmoil and tightening of credit have led to increased market volatility and widespreadreduction 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 Solar Capital Ltd.’sinvestment portfolio and SCP Private Credit Income BDC LLC’s investment portfolio. Such demands on their time may distract them or slow our rateof investment. In order to grow, we and Solar Capital Partners will need to retain, train, supervise and manage new investment professionals. However,we can offer no assurance that any such investment professionals will contribute effectively to the work of the investment adviser. Any failure tomanage our future growth effectively could have a material adverse effect on our business, financial condition 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 41Table of Contentslimit our ability to grow. We must distribute at least 90% of our investment company taxable income to our stockholders to maintain our tax treatmentas a RIC. As a result, any such cash earnings may not be available to fund investment originations. We expect to borrow from financial institutions andissue additional debt and equity securities. If we fail to obtain funds from such sources or from other sources to fund our investments, it could limit ourability to grow, which may have an adverse effect on the value of our securities. In addition, as a BDC, our ability to borrow or issue additionalpreferred stock may be restricted if our total assets are less than 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-traded U.S. public companies, cash, cash equivalents, U.S. governmentsecurities and other high quality debt investments that mature in one year or less. Furthermore, any failure to comply with the requirements imposed onBDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants. In addition, uponapproval of a majority of our stockholders, we may elect to withdraw our status as a BDC. If we decide to withdraw our election, or if we otherwise failto qualify, or maintain our qualification, as a BDC, we may be subject to the substantially greater regulation under the 1940 Act as a closed-endinvestment company. Compliance with such regulations would significantly decrease our operating flexibility, and could have a material adverseeffect 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 $119.2 million outstanding under our senior secured revolving credit facility (the “Credit Facility”) and$51.4 million outstanding under our FLLP credit facility (the “FLLP Facility”). If we issue preferred stock, the preferred stock would rank “senior” tocommon stock in our capital structure, preferred stockholders would generally vote together with common stockholders but would have separatevoting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and theissuance of preferred stock could have the effect of delaying, deferring or preventing a transaction or a change of control that might involve a premiumprice for holders of our common stock or otherwise be in your best interest. 42Table of ContentsWe 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 Senior Capital and its stockholders, and our stockholders approve such sale. In anysuch case, 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,closely approximates the market value of such securities (less any distributing commission or discount). If we raise additional funds by issuing morecommon stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our stockholders at thattime will decrease, and you might experience dilution. This dilution would occur as a result of a proportionately greater decrease in a stockholder’sinterest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. Because the number of futureshares of common stock that may be issued below our net asset value per share and the price and timing of such issuances are not currently known, wecannot predict the actual dilutive effect of any such issuance. We cannot determine the resulting reduction in our net asset value per share of any suchissuance. We also cannot predict 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 24, 2011, 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 do not participate in our dividend reinvestment plan.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. In the event we issue new shares in connection with our dividend reinvestment plan, our stockholders thatdo not elect to receive distributions in shares of common stock may experience dilution in their ownership percentage over time as a result of suchissuance.We have and may 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 $119.2 million outstanding under the CreditFacility and $51.4 million outstanding under the FLLP Facility. We may borrow from and issue senior debt securities to banks, insurance companiesand other lenders in the future. Lenders of these senior securities, including the Credit Facility and the FLLP Facility, will have fixed dollar claims onour assets that are superior to the claims of our common stockholders, 43Table of Contentsand we would expect such lenders to seek recovery against our assets in the event of a default. If the value of our assets decreases, leveraging wouldcause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would causenet income to decline more sharply than it would have had we not borrowed. Such a decline could also negatively affect our ability to makedistribution payments on our common stock. Leverage is generally considered a speculative investment technique. Our ability to service any debt thatwe incur will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures. Moreover,as the management fee payable to our investment adviser, Solar Capital Partners, will be payable based on our gross assets, including those assetsacquired through the use of leverage, Solar Capital Partners will have a financial incentive to incur leverage which may not be consistent with ourstockholders’ interests. In addition, our common stockholders will bear the burden of any increase in our expenses as a result of leverage, including anyincrease in the management fee payable to Solar Capital Partners.As a BDC, we generally had 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 facility or future borrowings may limit our ability to incuradditional indebtedness. Some of our wholly and substantially owned portfolio companies, including NMC and Gemino, may incur significantly moreleverage than we can but we do not consolidate NMC and Gemino and their leverage is non-recourse to us. Additionally, our credit facilities require usto comply with certain financial and other restrictive covenants, including maintaining an asset coverage ratio of at least 150% at any time. Failure tomaintain compliance with these covenants could result in an event of default and all of our debt being declared immediately due and payable. If thisratio declines below 150%, we may not be able to incur additional debt and could be required by law to sell a portion of our investments to repay somedebt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make distributions.The amount of leverage that we employ will depend on our investment adviser’s and our board of directors’ assessment of market and other factors atthe time of any proposed borrowing. We cannot assure you that we will be able to obtain credit at all or on terms acceptable to 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.The debt securities that we may issue will be governed by an indenture or other instrument containing covenants restricting our operatingflexibility. We, and indirectly our stockholders, bear the cost of issuing and servicing such debt securities. Any convertible or exchangeable securitiesthat we issue in the future may have rights, preferences and privileges more favorable than those of our common stock.Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annualreturns on our total assets, 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) (20.4)% (11.6)% (2.8)% 6.0% 14.8% (1) Assumes $459.3 million in total assets and $170.6 million in total debt outstanding, which reflects our total assets and total debt outstanding asof December 31, 2018, and a cost of funds of 4.30%. Excludes 44Table of Contents non-leverage related expenses. In order for us to cover our annual interest payments on our outstanding indebtedness at December 31, 2018, wemust achieve annual returns on our December 31, 2018 total assets of at least 1.6%.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 to our assets in the collateral pool. Our credit facilities and borrowingsalso subject us to various financial and operating covenants, including, but not limited to, maintaining certain financial ratios and minimum tangiblenet worth amounts. Future credit facilities and borrowings will likely subject us to similar or additional covenants. In addition, we may grant a securityinterest in our assets in connection with any such credit facilities and borrowings.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 the repayment of all outstanding debt on the maturity whichmay disrupt our business and potentially the business of our portfolio companies that are financed through our credit facilities. An event of defaultunder our credit facilities would likely result, among other things, in termination of the availability of further funds under our credit facilities andaccelerated maturity dates for all amounts outstanding under our credit facilities, which would likely disrupt our business and, potentially, the businessof the portfolio companies whose loans we finance through our credit facilities. This could reduce our revenues and, by delaying any cash paymentallowed to us under our credit facilities until the lender has been paid in full, reduce our liquidity and cash flow and impair our ability to grow ourbusiness 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 may allow 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 us at our annual meeting of stockholders, which was held onOctober 11, 2018. The stockholder proposal was approved by the required votes of our stockholders at such annual meeting of stockholders, and thuswe became subject to the 150% minimum asset coverage ratio on October 12, 2018. Changing the asset coverage ratio permits us to double ourleverage, 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 45Table of Contentspartially finance our investments, you will experience increased risks of investing in our securities. If the value of our assets increases, then leveragingwould cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely, if thevalue of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged ourbusiness. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increasemore than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it wouldhave had we not borrowed. Such a decline could negatively affect our ability to pay common stock dividends, scheduled debt payments or otherpayments related to our securities. Leverage is generally considered a speculative investment technique.Our 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.Our portfolio companies compete with larger, more established companies with greater access to, and resources for, further development in thesenew technologies. We also expect that our portfolio will continue to consist of investments that may have relatively limited operating histories. Thesecompanies may be particularly vulnerable to U.S. and foreign economic downturns, such as the U.S. recession that began in mid-2007 and theEuropean financial crisis, may have more limited access to capital and higher funding costs, may have a weaker financial position and may need morecapital to expand or compete. These businesses also may experience substantial variations in operating results. They may face intense competition,including from companies with greater financial, technical and marketing resources. Furthermore, some of these companies do business in regulatedindustries and could be affected by changes in government regulation. Accordingly, these factors could impair their cash flow or result in other events,such as bankruptcy, which could limit their ability to repay their obligations to us, and may adversely affect the return on, or the recovery of, ourinvestment in these companies. We cannot assure you that any of our investments in our portfolio companies will be successful. Therefore, we may loseour 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 and the FLLP Facility on a quarterly basis inaccordance with our valuation policy, which is at all times consistent with GAAP. Our board of directors utilizes the services of third-party valuationfirms to aid it in determining the fair value of material assets. The board of directors discusses valuations and determines the fair value in good faithbased on the input of our investment adviser and, when utilized, the respective third-party valuation firms. The factors that may be considered in fairvalue pricing our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments and itsearnings, the 46Table of Contentsmarkets 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 of private securities and private companies, are inherently uncertain, may fluctuate over shortperiods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if aready market for these securities existed. Our net asset value could be adversely affected if our determinations regarding the fair value of ourinvestments were materially higher than the values that we ultimately realize upon the disposal of such securities.Our 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 SolarCapital Ltd. and SCP Private Credit Income BDC LLC, which could impact our investment returns, and an investment in Solar Senior Capital isnot an investment in Solar 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 Capital, a publicly-traded BDC, and SCP Private Credit Income BDC LLC, a private BDC. In addition,Michael S. Gross, our Chairman, Chief Executive 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 Capital Ltd. and SCP Private Credit Income BDC LLC. Accordingly, they mayhave obligations to investors in those entities, the fulfillment of which obligations might not be in the best interests of us or our stockholders. Inaddition, we note that any affiliated investment vehicle formed in the future, and managed by our investment adviser or its affiliates may,notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in assetclasses similar to those targeted by us. As a result, Solar Capital Partners may face conflicts in allocating investment opportunities between us and suchother entities. Although Solar Capital Partners will endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that, inthe future, we may not be given the opportunity to participate in investments made by investment funds managed by our investment adviser or aninvestment manager affiliated with our investment adviser. In any such case, when Solar Capital Partners identifies an investment, it will be forced tochoose which investment fund should make 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 Capital Ltd., and Solar Capital Partners received an exemptive order(the “New Exemptive Order”) for a co-investment order that supersedes the Prior Exemptive Order and extends the relief granted in the Prior ExemptiveOrder such that it no longer applies to certain affiliates only if their respective investment adviser is 47Table of ContentsSolar Capital Partners, but also applies to certain affiliates whose investment adviser is an investment adviser that controls, is controlled by or is undercommon control with Solar Capital Partners and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. Theterms of the New Exemptive Order are otherwise substantially similar to the Prior Exemptive Order. If we are unable to rely on the New ExemptiveOrder for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most consistent with theopportunity being allocated, and second, if the terms of the opportunity are consistent with more than one entity’s investment strategy, on analternating basis. Although our investment professionals will endeavor to allocate investment opportunities in a fair and equitable manner, we and ourcommon stockholders could be adversely affected to the extent investment opportunities are allocated among us and other investment vehiclesmanaged or sponsored by, or affiliated with, our executive officers, directors and members of our investment 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 party transactions may occur among Solar Senior Capital, Gemino and NMC. These transactions may occur in the normal course ofbusiness. No administrative fees are paid to Solar Capital Partners by Gemino or NMC.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 financial officer and their respective staffs. These arrangements create conflicts of interest that our board of directors mustmonitor.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. 48Table of ContentsWe 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 threshold is based on a percentage of our net asset value, decreases in our net asset value make it easier to achievethe performance threshold. Our pre-incentive fee net investment income for incentive compensation purposes excludes realized and unrealized capitallosses or depreciation that we may incur in the fiscal quarter, even if such capital losses or depreciation result in a net loss on our statement ofoperations for that quarter. Thus, we may be required to pay Solar Capital Partners incentive compensation for a fiscal quarter even if there is a declinein the value of our portfolio or we incur 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 49Table of Contentstreatment under the Code, we must meet the following annual distribution, income source 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 subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants under loan andcredit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the Annual DistributionRequirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject tocorporate-level U.S. federal 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. 50Table of ContentsOther 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 difficulty meeting the RIC tax requirement to distribute at least 90% of our net ordinary income and realizednet short-term capital gains in excess of realized net long-term capital losses, if any. Under such circumstances, we may have to sell some of ourinvestments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet thesedistribution requirements. If we are unable to obtain cash from other sources and are otherwise unable to satisfy such distribution requirements, we mayfail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax on allour 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 Senior Capital or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to anyapplicable requirements of the 1940 Act. Our board of directors has adopted a resolution exempting from the Maryland Business Combination Act anybusiness combination between us and any other person, subject to prior approval of such business combination by our board of directors, includingapproval by a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our board of directors does notapprove a business combination, the Maryland Business Combination Act may discourage third parties from trying to acquire control of us andincrease the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act (the “Control Share Act”)acquisitions of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Act, the Control Share Act also maymake it more difficult for a third party to obtain control of us and increase the difficulty of consummating such a transaction. However, we will amendour bylaws to be 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 doesnot object to our determination that our being subject to the Control Share Act does not conflict with the 1940 Act. The SEC staff has issued informalguidance setting 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 51Table of Contentsdirectors. However, these provisions may deprive a stockholder of the opportunity to sell such stockholder’s shares at a premium to a potentialacquirer. We believe that the benefits of these provisions outweigh the potential disadvantages of discouraging any such acquisition proposalsbecause, among other things, the negotiation of such proposals may improve their terms. Our board of directors has considered both the positive andnegative effects of the foregoing provisions 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. 52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 53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. 54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 Advisory Agreement, to resign at any time upon 60 days’ written notice, whether we have found areplacement or not. If our investment adviser resigns, we may not be able to find a new investment adviser or hire internal management with similarexpertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, ouroperations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions arelikely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investmentactivities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertisepossessed by our investment adviser and its affiliates. Even if we are able to retain comparable management, whether internal or external, theintegration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that mayadversely affect our financial condition, business and results of operations. Item 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. 55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 “SUNS”. 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 NAV or atpremiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value will decrease. Since our initial publicoffering on February 24, 2011, our shares of common stock have traded at both a discount and a premium to the net assets attributable to those shares.As of February 15, 2019, we had 4 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. 56Table of ContentsAll 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 participate in the dividend reinvestment plan may experience dilutionover time. Stockholders who do not elect to receive distributions in shares of common stock may experience accretion to the net asset value of theirshares if our shares are trading at a premium and dilution if our shares are trading at a discount. The level of accretion or discount would depend onvarious factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares aretrading and the amount of the distribution payable to a stockholder.Recent Sales of Unregistered SecuritiesNone.Issuer Purchases of Equity SecuritiesNone. 57Table of ContentsSTOCK 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 $10,000 in each of the following: our common stock (SUNS), the S&P BDC Index, the S&P 500 Index, and the Russell 2000Financial Services Index. The graph measures total stockholder return, which takes into account both changes in stock price and dividends. It assumesthat dividends paid are invested in additional shares of the same class of equity securities at the frequency with which dividends are paid of suchsecurities during the applicable fiscal year. The graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be “soliciting material” or to be“filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the 1934 Act. The stock price performance included inthe above graph is not necessarily indicative of future stock price performance. 58Table of ContentsItem 6.Selected Financial DataThe selected financial and other data below should be read in conjunction with our “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and the consolidated financial statements and notes thereto. Financial information is presented for the fiscalyears ended December 31, 2018, 2017, 2016, 2015 and 2014. Financial information has been derived from our consolidated financial statements thatwere audited by KPMG LLP (“KPMG”), an independent registered public accounting firm. ($ in thousands, except per 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 $39,809 $32,167 $27,196 $25,446 $22,104 Net expenses $17,189 $9,563 $8,880 $10,073 $8,290 Net investment income $22,620 $22,604 $18,316 $15,373 $13,814 Net realized gain (loss) $(8,291) $233 $81 $18 $(638) Net change in unrealized gain (loss). $(516) $549 $5,855 $(14,344) $(1,486) Net increase in net assets resulting from operations $13,813 $23,386 $24,252 $1,047 $11,690 Per share data: Net investment income (1) $1.41 $1.41 $1.42 $1.33 $1.20 Net realized and unrealized gain (loss)(1) $(0.54) $0.05 $0.50 $(1.24) $(0.18) Dividends and distributions declared $1.41 $1.41 $1.41 $1.41 $1.41 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 $450,111 $408,081 $365,534 $306,518 $340,466 Cash and cash equivalents $4,875 $108,600 $151,828 $53,067 $42,471 Total assets $459,295 $521,941 $521,989 $362,577 $384,797 Debt $170,571 $124,200 $98,300 $116,200 $143,200 Net assets $261,392 $270,131 $269,145 $188,304 $203,519 Per share data: Net asset value per share $16.30 $16.84 $16.80 $16.33 $17.65 Other data (unaudited): Total return (2) (7.3)% 17.1% 20.7% 8.9% (10.5%) Number of portfolio companies at period end 47 45 51 45 43 (1)The per-share calculations are based on weighted average shares of 16,040,060, 16,031,303, 12,869,937, 11,533,315 and 11,532,985 for the years ended December 31,2018, 2017, 2016, 2015 and 2014, 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 dividendreinvestment plan. Total return does not 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; 59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 Senior Capital Ltd. (“Solar Senior”, the “Company”, “we” or “our”), a Maryland corporation formed in December 2010, is a closed-end,externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”)under the Investment Company Act of 1940, as amended (the “1940 Act”). Furthermore, as the Company is an investment company, it continues 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, and intend to qualify annually, as a regulated investment company (“RIC”) under Subchapter M ofthe Internal Revenue Code of 1986, as amended (the “Code”).On February 24, 2011, we priced our initial public offering, selling 9.0 million shares, including the underwriters’ over-allotment, raisingapproximately $168 million in net proceeds. Concurrent with this offering, Solar Senior Capital Investors LLC, an entity controlled by Michael S.Gross, our Chairman and Chief Executive Officer, and Bruce Spohler, our Chief Operating Officer, purchased an additional 500,000 shares through aconcurrent private placement, raising another $10 million.We invest primarily in privately held U.S. middle-market companies, where we believe the supply of primary capital is limited and theinvestment opportunities are most attractive. We define “middle market” to refer to companies with annual revenues between $50 million and$1 billion. Our investment objective is to seek to maximize current income consistent with the preservation of capital. We seek to achieve ourinvestment objective by directly and indirectly investing in senior loans, including first lien, stretch-senior, and second lien debt instruments, made toprivate middle-market companies whose debt is rated below investment grade, which we refer to collectively as “senior loans.” We may also invest indebt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the value of our net assets(including the amount of any borrowings for investment purposes) will be invested in senior loans. Senior loans typically pay interest at rates which aredetermined periodically on the basis of a floating base lending rate, primarily LIBOR, plus a premium. Senior loans in which we invest are typicallymade to U.S. and, to a limited extent, non-U.S. 60Table of Contentscorporations, partnerships and other business entities which operate in various industries and geographical regions. Senior loans typically are ratedbelow investment grade. Securities rated below investment grade are often referred to as “leveraged loans,” “high yield” or “junk” securities, and maybe considered “high risk” compared to debt instruments that are rated investment grade. In addition, some of our debt investments are not scheduled tofully amortize over their stated terms, which could cause us to suffer losses if the respective issuer of such debt investment is unable to refinance orrepay their remaining indebtedness at maturity. While the Company does not typically seek to invest in traditional equity securities as part of itsinvestment objective, the Company may occasionally acquire some equity securities in connection with senior loan investments and in certain otherunique circumstances, such as the Company’s equity investments in Gemino Healthcare Finance, LLC (“Gemino”) and North Mill Capital LLC(“NMC”).We invest in senior loans made primarily to private, leveraged middle-market companies with approximately $20 million to $100 million ofearnings before income taxes, depreciation and amortization (“EBITDA”). Our business model is focused primarily on the direct origination ofinvestments through portfolio companies or their financial sponsors. Our direct investments in individual securities will generally range between$5 million and $30 million each, although we expect that this investment size will vary proportionately with the size of our capital base and/orstrategic initiatives. In addition, we may invest a portion of our portfolio in other types of investments, which we refer to as opportunistic investments,which are not our primary focus but are intended to enhance our overall returns. These opportunistic investments may include, but are not limited to,direct investments in public companies that are not thinly traded and securities of leveraged companies located in select countries outside of theUnited States. We may invest up to 30% of our total assets in such opportunistic investments, including loans issued by non-U.S. issuers, subject tocompliance with our regulatory obligations as a BDC under the 1940 Act. Our investment activities are managed by Solar Capital Partners, LLC(“Solar Capital Partners” or “Investment Adviser”) and supervised by our board of directors, a majority of whom are non-interested, as such term isdefined in the 1940 Act. Solar Capital Management, LLC (“Solar Capital Management” or “Administrator”) provides the administrative servicesnecessary for us to operate.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 January 8, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on February 1, 2019 to holders of record asof January 24, 2019.On February 6, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on March 1, 2019 to holders of record asof February 21, 2019.On February 21, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on April 3, 2019 to holders of record asof March 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. 61Table of ContentsRevenueWe 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; • 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. 62Table of ContentsWe 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 our fiscal year ended December 31, 2018, we invested $186 million across 34 portfolio companies through a combination of primary andsecondary market purchases. This compares to investing $195 million in 24 portfolio companies for the previous fiscal year ended December 31, 2017.Investments sold or prepaid during the fiscal year ended December 31, 2018 totaled $193 million versus $156 million for the fiscal year endedDecember 31, 2017.At December 31, 2018, our portfolio consisted of 47 portfolio companies and was invested 77.8% directly in senior secured loans and 22.2% incommon equity/equity interests/warrants (of which 7.2% is Gemino and 14.9% is NMC, through which the Company indirectly investments in seniorsecured loans), in each case, measured at fair value versus 45 portfolio companies invested 70.1% directly in senior secured loans and 29.9% incommon equity (of which 8.6% is Gemino, 8.8% is FLLP and 12.5% is NMC) at December 31, 2017.At December 31, 2018, 93.0% or $418.2 million of our income producing investment portfolio* was floating rate and 7.0% or $31.7 million wasfixed rate, measured at fair value. At December 31, 2017, 94.5% or $385.7 million of our income producing investment portfolio* was floating rate and5.5% or $22.3 million was fixed rate, measured at fair value.Since the initial public offering of Solar Senior on February 24, 2011 and through December 31, 2018, invested capital totaled over $1.4 billionin over 130 portfolio companies. Over the same period, Solar Senior completed transactions with more than 75 different financial sponsors. *We have included Gemino Healthcare Finance, LLC and North Mill Capital LLC within our income producing investment portfolio.Gemino Healthcare Finance, LLCWe acquired Gemino (d/b/a Gemino Senior Secured Healthcare Finance) on September 30, 2013. Gemino is a commercial finance company thatoriginates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companies operating in the healthcare industry. Ourinitial investment in Gemino was $32.8 million. The management team of Gemino co-invested in the transaction and continues to lead Gemino. As ofDecember 31, 2018, Gemino’s management team and Solar Senior own approximately 7% and 93% of the equity in Gemino, respectively.Concurrent with the closing of the transaction, Gemino entered into a new, four-year, non-recourse, $100.0 million credit facility withnon-affiliates, which was expandable to $150.0 million under its accordion feature. Effective March 31, 2014, the credit facility was expanded to$105.0 million and again on June 27, 2014 to $110.0 million. On May 27, 2016, Gemino entered into a new $125.0 million credit facility whichreplaced the previously existing facility. The new facility has similar terms as compared to the previous facility and includes an accordion featureincrease to $200.0 million and has a maturity date of May 27, 2020.Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of December 31,2018, the portfolio totaled approximately $174.1 million of commitments, of which $108.6 million were funded, on total assets of $108.6 million. Asof December 31, 2017, the portfolio 63Table of Contentstotaled approximately $176.3 million of commitments, of which $106.6 million were funded, on total assets of $110.6 million. At December 31, 2018,the portfolio consisted of 34 issuers with an average balance of approximately $3.2 million versus 29 issuers with an average balance of approximately$3.7 million at December 31, 2017. All of the commitments in Gemino’s portfolio are floating-rate, senior-secured, cash-pay loans. Gemino’s creditfacility, which is non-recourse to us, had approximately $75.0 million and $75.0 million of borrowings outstanding at December 31, 2018 andDecember 31, 2017, respectively. For the years ended December 31, 2018, 2017 and 2016, Gemino had net income of $3.6 million, $3.6 million and$4.6 million, respectively, on gross income of $11.5 million, $11.4 million and $13.3 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 Gemino’s fundedcommitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that Gemino will be able to maintainconsistent dividend payments to us. Gemino’s consolidated financial statements for the fiscal years ended December 31, 2018 and December 31, 2017are attached as an exhibit to this annual report on Form 10-K.First Lien Loan Program LLCOn September 10, 2014, the Company entered into a limited liability company agreement to create FLLP with Voya Investment ManagementLLC (“Voya”). Voya acts as the investment advisor for several wholly-owned insurance subsidiaries of Voya Financial, Inc. (NYSE: VOYA). The jointventure vehicle, structured as an unconsolidated Delaware limited liability company, invested primarily in senior secured floating rate term loans tomiddle market companies predominantly owned by private equity sponsors or entrepreneurs. The Company and Voya committed to provide$50.75 million and $7.25 million, respectively, of capital to the joint venture. All portfolio decisions and generally all other decisions in respect of theFLLP had to be approved by an investment committee of the FLLP consisting of representatives of the Company and Voya (with approval from arepresentative of each required). On February 13, 2015, FLLP commenced operations. On February 13, 2015, FLLP as transferor and FLLP 2015-1,LLC, a newly formed wholly-owned subsidiary of FLLP, as borrower entered into a $75.0 million senior secured revolving credit facility (the “FLLPFacility”) with Wells Fargo Securities, LLC acting as administrative agent. Solar Senior acts as servicer under the FLLP Facility. The FLLP Facility wasscheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.25%-2.50%. FLLP and FLLP2015-1, 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 FLLP Facility also includes usual andcustomary events of default for credit facilities of this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to$100.0 million and extending the maturity date to August 16, 2021. On December 19, 2018, the FLLP Facility was amended, reducing commitments to$75.0 million. On September 18, 2018, the Company acquired Voya’s share of the equity in FLLP to hold 100% of the equity in FLLP. As such, theCompany consolidated FLLP 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 $3.2 million in unrealized depreciation on the Company’s equity investment in FLLP 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, FLLP andthe Company merged, with the Company the surviving entity. FLLP 2015-1 LLC is now a wholly-owned subsidiary of the Company and borrowingsunder the FLLP Facility are consolidated.North Mill Capital LLCWe acquired 100% of the equity interests of North Mill Capital LLC (“NMC”) on October 20, 2017. NMC is a leading asset-backed lendingcommercial finance company that provides senior secured asset-backed financings to U.S. based small-to-medium-sized businesses primarily in themanufacturing, services and distribution industries. We invested approximately $51 million to effect the transaction. Subsequently, the 64Table of ContentsCompany contributed 1% of its equity interest in NMC to ESP SSC Corporation. Immediately thereafter, the Company and ESP SSC Corporationcontributed their equity interests to North Mill. On May 1, 2018, North Mill merged with and into NMC, with NMC being the surviving company. TheCompany and ESP SSC Corporation own 99% and 1% of the equity interests of NMC, respectively. The management team of NMC continues to leadNMC.NMC currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of December 31,2018, the portfolio totaled approximately $247.3 million of commitments, of which $122.3 million were funded, on total assets of $155.6 million. Asof December 31, 2017, the portfolio totaled approximately $283.5 million of commitments, of which $151.6 million were funded, on total assets of$176.4 million. At December 31, 2018, the portfolio consisted of 80 issuers with an average balance of approximately $1.5 million versus 92 issuerswith an average balance of approximately $1.6 million at December 31, 2017. NMC has a senior credit facility with a bank lending group for$160.0 million which expires on October 20, 2020. Borrowings are secured by substantially all of NMC’s assets. NMC’s credit facility, which isnon-recourse to us, had approximately $88.9 million and $116.6 million of borrowings outstanding at December 31, 2018 and December 31, 2017,respectively. For the year ended December 31, 2018 and the period October 20, 2017 through December 31, 2017, NMC had net income (loss) of ($2.8)million and $0.4 million, respectively on gross income of $21.8 million and $3.1 million, respectively. Due to timing and non-cash items, there may bematerial differences between GAAP net income and cash available for distributions. As such, and subject to fluctuations in NMC’s fundedcommitments, the timing of originations, and the repayments of financings, the Company cannot guarantee that NMC will be able to maintainconsistent dividend payments to us. NMC’s consolidated financial statements for the fiscal years ended December 31, 2018 and 2017 are attached asan exhibit to this annual report on Form 10-K.Solar Life Science Program LLCOn February 22, 2017, the Company and Solar Capital Ltd. formed LSJV with an affiliate of Deerfield Management. The Company committed$75.0 million to LSJV. On August 16, 2018, the LSJV was dissolved, without commencing operations.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:The Company conducts the valuation of its assets in accordance with GAAP and the 1940 Act. The Company generally values its assets on aquarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued at the closingprice on the date of valuation. The Company may also obtain quotes with respect to certain of its investments from pricing services or brokers ordealers in order to value assets. When doing so, management determines whether the quote obtained is sufficient according to GAAP to determine thefair value of the investment. If determined adequate, the Company uses the quote obtained. Debt investments with maturities of 60 days or less shalleach be valued at 65Table of Contentscost plus accreted discount, or minus amortized premium, which is expected to approximate fair value, unless such valuation, in the judgment of theInvestment Adviser, does not represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or underthe direction of the Company’s board of directors (the “Board”).Investments for which reliable market quotations are not readily available or for which the pricing sources do not provide a valuation ormethodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fair value, eachshall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolioinvestment; (ii) preliminary valuations are discussed with senior management of the Investment Adviser; (iii) independent valuation firms engaged by,or on behalf of, the Board will conduct independent appraisals and review the Investment Adviser’s preliminary valuations and make their ownindependent assessment for (a) each portfolio investment that, when taken together with all other investments in the same portfolio company, exceeds10% of estimated total assets, plus available borrowings, as of the end of the most recently completed fiscal quarter, and (b) each portfolio investmentthat is presently in payment default and the Investment Adviser does not expect to reach an agreement with the portfolio company in the subsequentquarter; (iv) the Board will discuss the valuations and determine the fair value of each investment in our portfolio in good faith based on the input ofthe Investment Adviser and, where appropriate, the respective independent valuation firm.The recommendation of fair value generally considers the following factors among others, as relevant: applicable market yields; the nature andrealizable value of any collateral; the portfolio company’s ability to make payments; the portfolio company’s earnings and discounted cash flow; themarkets in which the issuer does business; and comparisons to publicly traded securities, among others.When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider the pricingindicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value of investments that do nothave a readily available market value, the fair value of the investments may differ significantly from the values that would have been used had areadily available market value existed for such investments, and the differences could be material.Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance with ASC820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset value as a practicalexpedient for fair value. The market approach uses prices and other relevant information generated by market transactions involving identical orcomparable assets or liabilities (including a business). The income approach uses valuation approaches to convert future amounts (for example, cashflows or earnings) 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 our investments include, asrelevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields andmultiples, security covenants, call protection provisions, the nature and realizable value of any collateral, the portfolio company’s ability to makepayments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peercompanies that are public, M&A comparables, and enterprise values, among other factors. When available, broker quotations and/or quotationsprovided by pricing services are considered as an input in the valuation process. For the fiscal year ended December 31, 2018, there has been nochange to the Company’s valuation approaches or techniques and the nature of the related inputs considered in the valuation process.Accounting Standards Codification (“ASC”) Topic 820 classifies the inputs used to measure these fair values into the following hierarchy:Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by the Company at the measurement date. 66Table of ContentsLevel 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets thatare not active, or other observable inputs other than quoted prices.Level 3: Unobservable inputs for the asset or liability.In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the 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 FLLP FacilityThe Company has made an irrevocable election to apply the fair value option of accounting to the FLLP Facility, in accordance with ASC825-10. We believed accounting for this facility at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigatecertain earnings volatility.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 and/or when it is no longer probable that principal or interest/dividend cash paymentswill be collected. Such non-accrual investments are restored to accrual status if past due principal and interest or dividends are paid in cash, and inmanagement’s judgment, are likely to continue timely payment of their remaining interest or dividend obligations. Interest or dividend cash paymentsreceived on investments may be recognized as income or applied to principal depending upon management’s judgment. Some of our investments mayhave contractual PIK interest or dividends. PIK interest and dividends computed at the contractual rate are accrued into income and reflected asreceivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additionalsecurities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the originalsecurities issued. On these payment dates, the Company capitalizes the accrued interest or dividends receivable (reflecting such amounts as the basis inthe additional securities received). PIK generally becomes due at the maturity of the investment or upon the investment being called by the issuer. Atthe point the Company believes PIK is not expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment isplaced on non-accrual status, the accrued, uncapitalized interest or dividends is reversed from the related receivable through interest or dividendincome, respectively. The Company does not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fairvalue estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if the Company againbelieves that PIK is expected to be realized. Loan origination fees, original issue discount, and market discounts are capitalized and amortized intoincome using the interest method or straight-line, as applicable. Upon the prepayment of a loan, any unamortized loan origination fees are recorded asinterest income. We record prepayment premiums on loans and other investments as interest income when we receive such amounts. Capital structuringfees 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 67Table of Contentsbecause their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associatedcollateral. PIK interest has the effect of generating investment income and increasing the incentive fees payable at a compounding rate. In addition, thedeferral of PIK interest also increases the loan-to-value ratio at a compounding rate. PIK securities create the risk that incentive fees will be paid to theInvestment Adviser based on non-cash accruals that ultimately may not be realized, but the Investment Adviser will be under no obligation toreimburse the Company for these fees. For the fiscal years ended December 31, 2018, 2017 and 2016, capitalized PIK income totaled $1.4 million,$0.5 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 Senior Capital, a U.S. corporation, has elected to be treated, and intends to qualify annually, as a RIC under Subchapter M of the Code. Inorder to qualify for taxation as a RIC, the Company is required, among other things, to timely distribute to its stockholders at least 90% of investmentcompany taxable income, as defined by the Code, for each year. Depending on the level of taxable income earned in a given tax year, we may chooseto carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, as required. Tothe extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions,the Company accrues an estimated excise tax, if any, on estimated excess taxable income.Recent Accounting 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 68Table of Contentsrestricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. For public business entities, theamendments were effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has adoptedASU 2016-18 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 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 $39.8 million, $32.2 million and $27.2 million,respectively. The increase in gross investment income from fiscal year 2017 to fiscal year 2018 was primarily due to average portfolio growth,including from our investment in NMC. The increase in gross investment income from fiscal year 2016 to fiscal year 2017 was primarily due to thegrowth of the income producing portfolio, as well as the increase in LIBOR year over year.ExpensesNet expenses totaled $17.2 million, $9.6 million and $8.9 million, respectively, for the fiscal years ended December 31, 2018, 2017 and 2016, ofwhich $7.5 million, $4.9 million and $4.9 million, respectively, were gross base management fees and gross performance-based incentive fees, and$7.8 million, $3.8 million and $3.3 million, respectively, were interest and other credit facility expenses. Over the same periods, $0.0 million,$2.0 million and $0.8 million of base management fees were waived and $1.1 million, $0.7 million and $1.2 million of performance-based incentivefees were waived. Administrative services and other general and administrative expenses totaled $3.0 million, $3.4 million and $2.7 million,respectively, for the fiscal years ended December 31, 2018, 2017 and 2016. Expenses generally consist of management fees, performance-basedincentive fees, administrative services expenses, insurance, legal expenses, directors’ expenses, audit and tax expenses, transfer agent fees andexpenses, and other general and administrative expenses. Interest and other credit facility expenses generally consist of interest, unused fees, agencyfees and loan origination fees, if any, among others. The increase in net expenses for the year ended December 31, 2018 was primarily due to higherinterest expense, including from the increase in LIBOR, as well as higher incentive and management fee expense on a larger portfolio as compared tothe year ago period. The increase in net expenses for the year ended December 31, 2017 was primarily due to higher interest expense stemming fromthe increase in LIBOR year over year. 69Table of ContentsNet Investment IncomeThe Company’s net investment income totaled $22.6 million or $1.41 per average share, $22.6 million or $1.41 per average share and$18.3 million or $1.42 per average share, for the fiscal years ended December 31, 2018, 2017 and 2016, respectively.Net Realized Gain (Loss)The Company had investment sales and prepayments totaling approximately $193 million, $156 million and $112 million, respectively, for thefiscal years ended December 31, 2018, 2017 and 2016. Net realized gain (loss) for the fiscal years ended December 31, 2018, 2017 and 2016 totaled($8.3) million, $0.2 million and $0.1 million, respectively. Net realized losses for the fiscal year ended December 31, 2018 were primarily related to theCompany’s exit from its direct and indirect investments in Metamorph US 3, LLC. Net realized gain for the fiscal year ended December 31, 2017 wasprimarily related to select sales of a few portfolio investments. Modest net realized gains for the fiscal year ended December 31, 2016 were alsoprimarily related to select sales of a few portfolio investments.Net Change in Unrealized Gain (Loss)For the fiscal years ended December 31, 2018, 2017 and 2016, the net change in unrealized gain (loss) on the Company’s assets and liabilitiestotaled ($0.5) million, $0.5 million and $5.9 million, respectively. Net unrealized loss for the fiscal year ended December 31, 2018 was primarily due todepreciation in the value of our investments in Trident USA Health Services, Gemino Healthcare Finance, LLC and PPT Management Holdings, LLC,among others, partially offset by the reversal of previously recorded unrealized loss on our direct and indirect investments in Metamorph US 3, LLCand Hostway Corporation. Net unrealized gain for the fiscal year ended December 31, 2017 was primarily due to appreciation in the value of ourinvestments in Advantage Sales and Marketing, Inc., FLLP and Trident USA Health Services, among others. Partially offsetting the unrealized gainswas depreciation in our investments in PPT Management Holdings, LLC, Meter Readings Holding, LLC and Polycom, Inc., among others. Netunrealized gain for the fiscal year ended December 31, 2016 was primarily due to appreciation in the value of our investments in SecurusTechnologies, Inc., Gemino and Global Tel*Link Corporation, among others. Partially offsetting the unrealized gains was depreciation in ourinvestments in TwentyEighty, Inc., Metamorph US 3, LLC and Engineering Solutions & Products, 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$13.8 million, $23.4 million and $24.3 million, respectively. For the fiscal years ended December 31, 2018, 2017 and 2016, earnings per average sharewere $0.86, $1.46 and $1.88, respectively.LIQUIDITY AND CAPITAL RESOURCESThe Company’s liquidity and capital resources are generally available through its revolving credit facilities, through periodic follow-on equityofferings, as well as from cash flows from operations, investment sales and pre-payments of investments. At December 31, 2018, the Company had$170.6 million in borrowings outstanding on its credit facilities and $129.4 million of unused capacity, subject to borrowing base limits.In September 2016, the Company closed a follow-on public equity offering of 4.5 million shares of common stock at $16.76 per share raisingapproximately $75.0 million in net proceeds. In the future, the Company may raise additional equity or debt capital, among other considerations. Theprimary uses of funds will be investments in portfolio companies, reductions in debt outstanding and other general corporate purposes. The issuance ofdebt or equity securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuancewill occur or be successful. 70Table of ContentsWe currently expect that our liquidity needs will be met with cash flows from operations, borrowings under our $225 million senior securedrevolving credit facility (the “Credit Facility”), including its accordion feature, the FLLP Facility as well as from other available financing activities.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 no cash equivalents as of December 31, 2018.DebtCredit Facility—On August 26, 2011, the Company established our wholly-owned subsidiary, SUNS SPV LLC (the “SUNS SPV”) which enteredinto the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On January 10, 2017, commitments to the Credit Facility, asamended, were increased from $175 million to $200 million by utilizing the accordion feature. The commitments can also be expanded up to$600 million. The stated interest rate on the Credit Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current maturity date isJune 1, 2023. The Credit Facility is secured by all of the assets held by SUNS SPV. Under the terms of the Credit Facility, Solar Senior Capital andSUNS SPV, 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 Credit Facility also includes usual andcustomary events of default for credit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014 and May 29, 2015to extend maturities and add greater investment flexibility, among other changes. On June 1, 2018, the Credit Facility was refinanced by way ofamendment, allowing for greater investment flexibility and the extension of the maturity date, among other changes. On July 13, 2018, commitmentsto the Credit Facility, as amended, were increased from $200 million to $225 million by utilizing the accordion feature. At December 31, 2018, theCompany was in compliance with all financial and operational covenants required by the Credit Facility.FLLP Facility—On February 13, 2015, FLLP as transferor and FLLP 2015-1, LLC, a newly formed wholly-owned subsidiary of FLLP, as borrowerentered into a $75.0 million FLLP Facility with Wells Fargo Securities, LLC acting as administrative agent. Solar Senior acts as servicer under theFLLP Facility. The FLLP Facility was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a rate of LIBOR plus arange of 2.25%-2.50%. FLLP and FLLP 2015-1, 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 FLLP Facility also includes usual and customary events of default for credit facilities of this nature. On August 15, 2016, the FLLP Facility wasamended, expanding commitments to $100.0 million and extending the maturity date to August 16, 2021. On December 19, 2018, the FLLP Facilitywas amended, reducing commitments to $75.0 million. There were $51.4 million of borrowings outstanding as of December 31, 2018. 71Table of ContentsContractual Obligations Payments due by Period as of December 31, 2018(dollars in millions) Total Less than1 year 1-3 years 3-5 years More than5 years Revolving credit facilities (1) $170.6 $— $51.4 $119.2 $— (1)At December 31, 2018, we had a total of $129.4 million of unused borrowing capacity under our revolving credit facilities, subject to borrowingbase limits.Information about our senior securities is shown in the following table (in thousands) as of each year ended December 31 since the Companycommenced operations, unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certaintypes of senior securities. Class and Year Total AmountOutstanding(1) AssetCoveragePer Unit(2) InvoluntaryLiquidatingPreferencePer Unit(3) AverageMarket ValuePer Unit(4) Credit Facility Fiscal 2018 $119,200 $1,770 $— N/A Fiscal 2017 124,200 3,175 — N/A Fiscal 2016 98,300 3,738 — N/A Fiscal 2015 116,200 2,621 — N/A Fiscal 2014 143,200 2,421 — N/A Fiscal 2013 61,400 4,388 — N/A Fiscal 2012 39,100 5,453 — N/A Fiscal 2011 8,600 21,051 — N/A FLLP Facility Fiscal 2018 51,371 762 — N/A Total Senior Securities Fiscal 2018 $170,571 $2,532 $— N/A Fiscal 2017 124,200 3,175 — N/A Fiscal 2016 98,300 3,738 — N/A Fiscal 2015 116,200 2,621 — N/A Fiscal 2014 143,200 2,421 — N/A Fiscal 2013 61,400 4,388 — N/A Fiscal 2012 39,100 5,453 — N/A Fiscal 2011 8,600 21,051 — N/A (1)Total amount of each class of senior securities outstanding 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 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 was divided based on the amount outstanding at the end of the period for each. As of December 31, 2018,asset coverage was 253.2%.(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, we do not have senior securities that are registered for public trading.We have also entered into two contracts under which we have future commitments: the Advisory Agreement, pursuant to which Solar CapitalPartners has agreed to serve as our investment adviser, and the Administration Agreement, pursuant to which Solar Capital Management has agreed tofurnish us with the 72Table of Contentsfacilities and administrative services necessary to conduct our day-to-day operations and provide on our behalf managerial assistance to those portfoliocompanies to which we are required to provide such assistance. Payments under the Advisory Agreement are equal to (1) a percentage of the value ofour average gross assets and (2) a two-part incentive fee. Payments under the Administration Agreement are equal to an amount based uponour allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent, technologysystems, insurance and our allocable portion of the costs of our chief financial officer and chief compliance officer and their respective staffs. Eitherparty may terminate each of the Advisory Agreement and Administration Agreement without penalty upon 60 days’ written notice to the other. Seenote 3 to our Consolidated Financial Statements.Off-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: (in millions) December 31,2018 December 31,2017 Rubius Therapeutics, Inc.** $4.1 $— MSHC, Inc. 3.3 — The Hilb Group, LLC & Gencorp Insurance Group, Inc. 3.2 0.4WIRB-Copernicus Group, Inc. 2.7 — DISA Holdings Acquisition Corp 2.6 — MRI Software LLC 2.5 2.4Solara Medical Supplies, Inc. 2.1 — Gemino Healthcare Finance, LLC* 1.4 5.0GenMark Diagnostics, Inc. 0.7 — Engineering Solutions & Products, LLC 0.5 1.7Centria Healthcare LLC. 0.3 — AQA Acquisition Holding, Inc. 0.1 — TwentyEighty, Inc 0.1 0.1VetCor Professional Practices LLC — 6.7 Alera Group Intermediate Holdings, Inc — 4.7 VT Buyer Acquisition Corp. (Veritext) — 3.5MHE Intermediate Holdings, LLC — 1.0PetVet Care Centers, LLC — 1.6Ministry Brands, LLC — 0.4Total Commitments $23.6 $27.5 *The Company controls the funding of the Gemino 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. 73Table of ContentsGenerally, these financial instruments represent future commitments to purchase or sell other financial instruments at specific terms at future dates.These financial instruments contain varying degrees of off-balance sheet risk whereby changes in the market value or our satisfaction of the obligationsmay exceed the amount recognized in our Consolidated Statements of Assets and Liabilities.DistributionsThe 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 $0.1175 February 6, 2019 February 21, 2019 March 1, 2019 0.1175 January 8, 2019 January 24, 2019 February 1, 2019 0.1175 YTD Total (2019) $0.3525 Fiscal 2018 December 6, 2018 December 20, 2018 January 4, 2019 $0.1175 November 5, 2018 November 21, 2018 December 4, 2018 0.1175 October 4, 2018 October 24, 2018 November 1, 2018 0.1175 September 6, 2018 September 25, 2018 October 2, 2018 0.1175 August 2, 2018 August 23, 2018 August 31, 2018 0.1175 July 3, 2018 July 19, 2018 July 31, 2018 0.1175 June 6, 2018 June 21, 2018 July 3, 2018 0.1175 May 7, 2018 May 23, 2018 June 1, 2018 0.1175 April 3, 2018 April 19, 2018 May 2, 2018 0.1175 February 22, 2018 March 22, 2018 April 3, 2018 0.1175 February 7, 2018 February 22, 2018 March 1, 2018 0.1175 January 5, 2018 January 18, 2018 January 31, 2018 0.1175 Fiscal YTD Total (2018) $1.41 Fiscal 2017 December 7, 2017 December 21, 2017 January 4, 2018 $0.1175 November 2, 2017 November 22, 2017 December 1, 2017 0.1175 October 5, 2017 October 19, 2017 November 1, 2017 0.1175 September 14, 2017 September 22, 2017 October 3, 2017 0.1175 August 1, 2017 August 17, 2017 August 31, 2017 0.1175 July 6, 2017 July 20, 2017 August 1, 2017 0.1175 June 7, 2017 June 22, 2017 July 6, 2017 0.1175 May 2, 2017 May 18, 2017 June 2, 2017 0.1175 April 6, 2017 April 20, 2017 May 2, 2017 0.1175 February 22, 2017 March 23, 2017 April 4, 2017 0.1175 February 7, 2017 February 23, 2017 March 1, 2017 0.1175 January 5, 2017 January 19, 2017 February 1, 2017 0.1175 Total (2017) $1.41 Tax characteristics of all distributions will be reported to stockholders on Form 1099 after the end of the calendar year. Future distributions, ifany, will be determined by our Board. We expect that our distributions to stockholders will generally be from accumulated net investment income,from net realized capital gains or non-taxable return of capital, if any, as applicable. 74Table of ContentsWe have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC status, we must distribute at least 90% of 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.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. For the years ended December 31, 2018and December 31, 2017, 4.9% and 11.8% of distributions were funded from the waiver of management and incentive fees.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 75Table of Contentsadviser to Solar Capital Ltd., a publicly traded BDC, which focuses on investing in senior secured loans, including stretch-senior and unitranche loansand to a lesser extent mezzanine loans and equity securities. In addition, Michael S. Gross, our Chairman and Chief Executive Officer, Bruce Spohler,our Chief Operating Officer, and Richard L. Peteka, our Chief Financial Officer, serve in similar capacities for Solar Capital Ltd. The InvestmentAdviser and certain investment advisory affiliates may determine that an investment is appropriate for us and for one or more of those other funds. Insuch event, depending on the availability of such investment and other appropriate factors, the Investment Adviser or its affiliates may determine thatwe should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law andinterpretive positions of the SEC and its staff, and consistent with the Investment Adviser’s allocation procedures.Related party transactions may occur among Solar Senior Capital Ltd., Gemino and NMC. These transactions may occur in the normal course ofbusiness. No administrative fees are paid to Solar Capital Partners by Gemino or NMC.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 Disclosures 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 theseinvestments 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 eleven 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) $0.11 76Table of ContentsItem 8.Financial Statements and Supplementary DataINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Management’s Report on Internal Control over Financial Reporting 78 Report of Independent Registered Public Accounting Firm 79 Consolidated Statements of Assets & Liabilities as of December 31, 2018 and December 31, 2017 81 Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016 82 Consolidated Statements of Changes in Net Assets for the years ended December 31, 2018, 2017 and 2016 83 Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 84 Consolidated Schedule of Investments as of December 31, 2018 and December 31, 2017 85 Notes to Consolidated Financial Statements 91 77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. 78Table of ContentsReport of Independent Registered Public Accounting FirmTo the Stockholders and Board of DirectorsSolar Senior 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, of SolarSenior Capital Ltd. (and consolidated subsidiaries) (the Company) as of December 31, 2018 and 2017, the related consolidated statements ofoperations, 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, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31,2018, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of theTreadway Commission.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company asof 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 ended December 31,2018, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects,effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework(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 the consolidatedfinancial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on atest basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our procedures included confirmation of securitiesowned as of December 31, 2018 and 2017, by correspondence with the custodian, portfolio companies or agents. Our audits also included evaluatingthe accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financialreporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control basedon the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that ouraudits provide a reasonable basis for our opinions. 79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 80Table of ContentsSOLAR SENIOR 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: $355,354 and $289,848, respectively) $348,211 $283,983 Companies 5% to 25% owned (cost: $3,524 and $3,625, respectively) 2,350 2,213 Companies more than 25% owned (cost: $98,439 and $121,298, respectively) 99,550 121,885 Cash 4,875 3,726 Cash equivalents (cost: $0 and $104,874, respectively) — 104,874 Interest receivable 2,141 1,732 Dividends receivable 1,893 2,723 Receivable for investments sold 87 508 Other receivable — 20 Prepaid expenses and other assets 188 277 Total assets $459,295 $521,941 Liabilities Payable for investments and cash equivalents purchased $22,805 $122,110 Credit facility ($119,200 and $124,200 face amounts, respectively, reported net of unamortized debt issuancecosts of $1,662 and $0, respectively. See notes 6 and 7) 117,538 124,200 FLLP 2015-1, LLC revolving credit facility (the “FLLP Facility”) (see notes 6 and 7) 51,371 — Distributions payable 1,885 1,884 Management fee payable (see note 3) 1,189 999 Performance-based incentive fee payable (see note 3) 106 374 Interest payable (see note 7) 1,260 401 Administrative services expense payable (see note 3) 923 944 Other liabilities and accrued expenses 826 898 Total liabilities $197,903 $251,810 Commitments and contingencies (see notes 12, 13 and 14) Net Assets Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized,respectively, and 16,040,485 and 16,036,730 issued and outstanding, respectively $160 $160 Paid-in capital in excess of par (see note 2f) 288,789 287,841 Accumulated distributable net loss (see note 2f) (27,557) (17,870) Total net assets $261,392 $270,131 Net Asset Value Per Share $16.30 $16.84 See notes to consolidated financial statements. 81Table of ContentsSOLAR SENIOR 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 $27,145 $22,652 $19,728 Companies 5% to 25% owned 360 201 201 Dividends: Companies more than 25% owned 12,040 8,866 7,077 Other income: Companies less than 5% owned 191 369 125 Companies 5% to 25% owned 23 — — Companies more than 25% owned 50 79 65 Total investment income 39,809 32,167 27,196 EXPENSES: Management fees (see note 3) $4,603 $3,861 $3,385 Performance-based incentive fees (see note 3) 2,922 1,083 1,560 Interest and other credit facility expenses (see note 7) 7,808 3,848 3,281 Administrative services expense (see note 3) 1,529 1,554 1,245 Other general and administrative expenses 1,434 1,888 1,411 Total expenses 18,296 12,234 10,882 Management fees waived (see note 3) — (1,962) (797) Performance-based incentive fees waived (see note 3) (1,107) (709) (1,205) Net expenses 17,189 9,563 8,880 Net investment income $22,620 $22,604 $18,316 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS: Net realized gain (loss) on investments and cash equivalents: Companies less than 5% owned $(5,082) $233 $81 Companies more than 25% owned (3,209) — — Net realized gain (loss) on investments and cash equivalents (8,291) 233 81 Net change in unrealized gain (loss) on investments and cash equivalents: Companies less than 5% owned 1,931 (227) 5,233 Companies 5% to 25% owned 238 473 (492) Companies more than 25% owned (2,685) 303 1,114 Net change in unrealized gain (loss) on investments and cash equivalents (516) 549 5,855 Net realized and unrealized gain (loss) on investments and cash equivalents (8,807) 782 5,936 NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $13,813 $23,386 $24,252 EARNINGS PER SHARE (see note 5) $0.86 $1.46 $1.88 See notes to consolidated financial statements. 82Table of ContentsSOLAR SENIOR CAPITAL LTD.CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS(in thousands, except share amounts) Year ended December 31, 2018 2017 2016 Increase (decrease) in net assets resulting from operations: Net investment income $22,620 $22,604 $18,316 Net realized gain (loss) (8,291) 233 81 Net change in unrealized gain (loss) (516) 549 5,855 Net increase in net assets resulting from operations 13,813 23,386 24,252 Distributions to stockholders (see note 9a): From net investment income (22,617) (22,604) (18,316) Capital transactions (see note 16): Net proceeds from shares sold — — 75,255 Less common stock offering costs — — (376) Reinvestment of distributions 65 204 26 Net increase in net assets resulting from capital transactions 65 204 74,905 Total increase (decrease) in net assets (8,739) 986 80,841 Net assets at beginning of year 270,131 269,145 188,304 Net assets at end of year $261,392 $270,131 $269,145 Capital share activity: Common stock sold — — 4,490,152 Common stock issued from reinvestment of distributions 3,755 11,719 1,544 Net increase from capital share activity 3,755 11,719 4,491,696 See notes to consolidated financial statements. 83Table of ContentsSOLAR SENIOR 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 $13,813 $23,386 $24,252 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 8,291 (233) (81) Net change in unrealized (gain) loss on investments and cash equivalents 516 (549) (5,855) (Increase) decrease in operating assets: Purchase of investments (238,711) (196,172) (176,924) Proceeds from disposition of investments 188,967 154,907 123,844 Capitalization of payment-in-kind interest (1,128) (500) — Collection of payment-in-kind interest 35 — — Receivable for investments sold 421 942 (1,405) Interest receivable (409) (269) 564 Dividends receivable 830 (1,301) (896) Other receivable 20 (1) (6) Prepaid expenses and other assets 89 (4) 108 Increase (decrease) in operating liabilities: Payable for investments and cash equivalents purchased (99,305) (29,202) 96,415 Management fee payable 190 895 (727) Performance-based incentive fees payable (268) 374 — Administrative services expense payable (21) 323 87 Interest payable 859 160 (21) Other liabilities and accrued expenses (72) 515 189 Net Cash Provided by (Used in) Operating Activities (125,883) (46,729) 59,544 Cash Flows from Financing Activities: Net proceeds from shares sold — — 75,255 Deferred financing costs 218 — — Consolidations of FLLP Facility 49,796 — — Common stock offering costs — — (376) Cash distributions paid (22,551) (22,399) (17,762) Proceeds from borrowings 205,070 162,000 136,800 Repayments of borrowings (210,375) (136,100) (154,700) Net Cash Provided by (Used in) Financing Activities 22,158 3,501 39,217 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (103,725) (43,228) 98,761 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 108,600 151,828 53,067 CASH AND CASH EQUIVALENTS AT END OF YEAR $4,875 $108,600 $151,828 Supplemental disclosure of cash flow information: Cash paid for interest $6,949 $3,688 $3,302 Non-cash financing activities consist of the reinvestment of dividends of $65, $204 and $26 for the fiscal years ended December 31, 2018, 2017 and2016, respectively.See notes to consolidated financial statements. 84Table of ContentsSOLAR SENIOR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTSDecember 31, 2018(in thousands, except share/unit amounts) Description Industry SpreadaboveIndex (3) LiborFloor InterestRate (1) Acquisition Date MaturityDate ParAmount Cost FairValue Bank Debt/Senior Secured Loans — 134.1% 1A Smart Start LLC(2)(11)(14) Electrical Equipment, Instruments &Components L+450 1.00% 7.02% 12/21/2017 2/21/2022 $13,936 $13,883 $13,902 Acrisure, LLC(2) Insurance L+425 1.00% 6.77% 5/3/2017 11/22/2023 7,372 7,358 7,164 Advantage Sales and Marketing, Inc.(2)(11) Professional Services L+325 1.00% 5.77% 2/14/2018 7/23/2021 4,950 4,873 4,838 Advantage Sales and Marketing, Inc.(11) Professional Services L+650 1.00% 9.02% 2/14/2013 7/25/2022 8,000 7,969 7,680 Aegis Toxicology Sciences Corporation(2)(11)(14) Health Care Providers & Services L+550 1.00% 8.10% 5/7/2018 5/9/2025 10,973 10,788 10,973 Alera Group Intermediate Holdings, Inc.(2)(11) Insurance L+450 — 7.02% 7/27/2018 8/1/2025 4,993 4,985 4,943 Alimera Sciences, Inc.(2)(11) Pharmaceuticals L+765 — 10.03% 1/5/2018 7/1/2022 5,000 5,009 5,025 Alteon Health, LLC (fka Island Medical)(2)(11)(14) Health Care Providers & Services L+650 1.00% 9.02% 3/31/2017 9/1/2022 7,469 7,414 7,095 American Teleconferencing Services, Ltd. (PGI) (2)(11) Communications Equipment L+650 1.00% 9.09% 5/5/2016 12/8/2021 14,113 13,643 13,937 AQA Acquisition Holding, Inc. (2)(11) Software L+425 1.00% 7.05% 9/7/2018 5/24/2023 5,675 5,621 5,604 Capstone Logistics Acquisition, Inc.(2)(11)(14) Professional Services L+450 1.00% 7.02% 10/3/2014 10/7/2021 12,358 12,302 12,204 Centria Healthcare LLC (2)(11) Health Care Providers & Services L+400 1.00% 6.64% 11/19/2018 11/3/2021 4,720 4,674 4,672 Confie Seguros Holding II Co.(2)(11)(14) Insurance L+475 1.00% 7.46% 10/13/2016 4/19/2022 14,173 14,082 14,014 DISA Holdings Acquisition Subsidiary Corp.(2)(11) Professional Services L+400 1.00% 6.35% 6/14/2018 6/30/2022 7,731 7,696 7,712 Edgewood Partners Holdings, LLC(2)(11)(14) Insurance L+425 1.00% 6.77% 3/28/2018 9/8/2024 13,272 13,255 13,272 Empower Payments Acquisition, Inc. (RevSpring).(2)(11) Professional Services L+425 1.00% 7.05% 11/28/2016 10/11/2025 5,000 4,988 4,988 Engineering Solutions & Products, LLC(6)(11) Aerospace & Defense L+600 2.00% 8.59% 11/5/2013 11/5/2019 2,282 2,157 2,282 Falmouth Group Holdings Corp. (AMPAC) (2)(11)(14) Chemicals L+675 1.00% 9.27% 12/15/2016 12/14/2021 11,859 11,859 11,859 GenMark Diagnostics, Inc(2)(4)(11) Health Care Providers & Services — — 6.90% 4/22/2016 1/1/2021 10,039 10,953 10,953 Global Holdings LLC & Payment Concepts LLC(2)(11) Consumer Finance L+750 1.00% 10.24% 3/31/2017 5/5/2022 11,400 11,241 11,400 Kellermeyer Bergensons Services, LLC (KBS)(2)(11)(14) Commercial Services & Supplies L+475 1.00% 7.27% 10/31/2014 10/29/2021 8,623 8,579 8,623 Kore Wireless Group, Inc.(2)(11) Wireless Telecommunication Services L+550 1.00% 8.29% 12/21/2018 12/21/2024 12,046 11,805 11,926 Logix Holding Company, LLC(2)(11) Communications Equipment L+575 1.00% 8.27% 8/11/2017 12/22/2024 10,688 10,593 10,688 Mavenir Systems, Inc.(2)(11) Software L+600 1.00% 8.39% 5/1/2018 5/8/2025 9,950 9,765 9,920 MHE Intermediate Holdings, LLC (TFS-Miner)(2)(11)(14) Air Freight & Logistics L+500 1.00% 7.74% 3/8/2017 3/10/2024 5,951 5,902 5,891 Ministry Brands, LLC(2)(11)(14) Software L+400 1.00% 6.52% 11/21/2016 12/2/2022 14,320 14,223 14,320 MRI Software LLC(2)(11)(14) Software L+550 1.00% 7.90% 6/7/2017 6/30/2023 9,147 9,074 9,055 MSHC, Inc. (Service Logic) (2)(11)(14) Commercial Services & Supplies L+425 1.00% 6.89% 7/12/2018 7/31/2023 2,719 2,706 2,705 National Spine and Pain Centers, LLC (11)(14) Health Care Providers & Services L+450 1.00% 7.02% 9/18/2018 6/2/2024 2,585 2,574 2,546 On Location Events, LLC & PrimeSport HoldingsInc. (2)(11)(14) Media L+550 1.00% 7.90% 12/7/2017 9/29/2021 14,375 14,242 14,267 Pet Holdings ULC & Pet Supermarket, Inc. (4)(11)(14) Specialty Retail L+550 1.00% 7.90% 9/18/2018 7/5/2022 4,593 4,548 4,570 PPT Management Holdings, LLC(2)(11) †† Health Care Providers & Services L+750 PIK 1.00% 9.85% 12/15/2016 12/16/2022 8,583 8,523 7,295 Pre-Paid Legal Services, Inc.(2) Diversified Consumer Services L+300 — 5.52% 4/13/2018 5/1/2025 1,453 1,446 1,425 Radiology Partners, Inc.(2)(11) Health Care Providers & Services L+425 — 6.66% 6/28/2018 7/9/2025 7,481 7,411 7,350 Restoration Robotics, Inc. (2)(11) Health Care Equipment & Supplies L+795 — 10.33% 5/10/2018 5/1/2022 2,000 1,975 1,995 Rubius Therapeutics, Inc. (2)(11) Pharmaceuticals L+550 — 7.97% 12/21/2018 12/21/2023 2,061 2,056 2,055 SHO Holding I Corporation (Shoes for Crews)(2)(11) Footwear L+500 1.00% 7.53% 11/20/2015 10/27/2022 5,820 5,788 5,674 Solara Medical Supplies, Inc.(2)(11)(14) Health Care Providers & Services L+600 1.00% 8.52% 5/31/2018 5/31/2023 5,933 5,853 5,933 The Hilb Group, LLC & Gencorp Insurance Group,Inc.(2)(11)(14) Insurance L+475 1.00% 7.55% 3/16/2016 6/24/2021 10,982 10,876 10,982 Trident USA Health Services (2)(11) †† Health Care Providers & Services L+600(13) 1.25% 8.53% 7/29/2013 7/31/2022 7,057 7,051 4,234 TwentyEighty, Inc.(11) Professional Services L+800 1.00% 10.80% 1/31/2017 3/31/2020 96 95 96 TwentyEighty, Inc.(11) †† Professional Services — — 8.00%(7) 1/31/2017 3/31/2020 2,067 2,014 2,067 TwentyEighty, Inc.(11) †† Professional Services — — 9.00%(8) 1/31/2017 3/31/2020 1,981 1,934 1,952 U.S. Acute Care Solutions, LLC(2)(11)(14) Health Care Providers & Services L+500 1.00% 7.52% 12/22/2016 5/15/2021 6,370 6,333 6,370 US Radiology Specialists, Inc.(2)(11) Health Care Providers & Services L+450 1.00% 7.12% 11/27/2018 1/1/2024 3,766 3,738 3,738 Web.com Group, Inc.(2)(11) Software L+375 — 6.17% 9/17/2018 10/10/2025 9,000 8,978 8,685 WIRB-Copernicus Group, Inc.(2)(11)(14) Professional Services L+425 1.00% 6.77% 3/27/2017 8/15/2022 11,524 11,471 11,524 Total Bank Debt/Senior Secured Loans $ 354,303 $ 350,403 Common Equity/Equity Interests/Warrants — 38.1% Shares/Units Engineering Solutions & Products, LLC(6)(9)(11)† Aerospace & Defense 11/5/2013 133,668 $1,367 $68 Essence Group Holdings Corporation (Lumeris)Warrants(11)†. .. Health Care Technology 3/22/2017 52,000 16 89 Gemino Healthcare Finance, LLC(4)(5)(11) Diversified Financial Services 9/30/2013 32,839 31,439 32,550 North Mill Capital LLC(4)(5)(11)(12) Diversified Financial Services 10/20/2017 131 67,000 67,000 Restoration Robotics, Inc. Warrants(11)† Health Care Equipment & Supplies 5/10/2018 16,173 25 1 TwentyEighty Investors, LLC(11)†. Professional Services 1/31/2017 17,214 3,167 — Total Common Equity/Equity Interests/Warrants $103,014 $99,708 Total Investments(10) — 172.2% $457,317 $450,111 Liabilities in Excess of Other Assets — (72.2%) (188,719) Net Assets — 100.0% $261,392 See notes to consolidated financial statements. 85Table of ContentsSOLAR SENIOR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2018(in thousands) (1)Floating rate debt investments typically bear interest at a rate determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) index rate or the prime index rate (PRIME or “P”), and whichtypically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2018.(2)Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary SUNS SPV LLC (the “SUNS SPV”). Such investments are pledged ascollateral under the Senior Secured Revolving Credit Facility (the “Credit Facility”) (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company.(3)Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the LIBOR or PRIME rate. These instruments are typically subject to a LIBOR or PRIME rate floor.(4)Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest a sufficient portionof our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order tocomply with the 1940 Act. As of December 31, 2018, on a fair value basis, non-qualifying assets in the portfolio represented 25.5% of the total assets of the Company.(5)Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or throughone or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2018 in these controlled investments are as follows: Name of Issuer Fair Value atDecember 31,2017 GrossAdditions GrossReductions RealizedGain(Loss) Change inUnrealizedGain(Loss) Dividend/OtherIncome Fair Value atDecember 31,2018 First Lien Loan Program LLC (15) $35,835 $5,521 $42,980 $(3,209) $(1,585) $2,889 $— Gemino Healthcare Finance, LLC 35,050 — 1,400 — (1,100) 3,498 32,550 North Mill Capital LLC 51,000 16,000 — — — 5,703 67,000 $121,885 $21,521 $44,380 $(3,209) $(2,685) $12,090 $99,550 (6)Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlledcompanies, 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 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 Engineering Solutions & Products, LLC (1st lien) — 602 602 — — 54 — Engineering Solutions & Products, LLC (2nd lien) 2,145 76 226 — 238 329 2,282 Engineering Solutions & Products, LLC (equity interests) 68 — — — — — 68 $2,213 $678 $828 $— $238 $383 $2,350 (7)Coupon is 4.00% Cash / 4.00% PIK.(8)Coupon is 0.25% Cash / 8.75% PIK.(9)Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corporation, a taxable consolidated subsidiary.(10)Aggregate net unrealized depreciation for federal income tax purposes is $10,007; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $1,362 and $11,369, respectively, basedon a tax cost of $460,118. The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). Theseinvestments are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act.(11)Level 3 investment valued using significant unobservable inputs.(12)Our equity investment in North Mill Capital LLC is partially held through ESP SSC Corporation, a taxable consolidated subsidiary.(13)Spread is 3.00% Cash / 3.00% PIK.(14)Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary FLLP 2015-1 LLC (the “FLLP SPV”). Such investments are pledged ascollateral under the FLLP 2015-1, LLC Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of the Company.(15)On September 18, 2018, the Company acquired 100% of the equity of FLLP and as such consolidated this investment as of this date. On December 19, 2018, FLLP was merged into the Company.† Non-incomeproducing security.†† Investmentcontains a payment-in-kind (“PIK”) feature. See notes to consolidated financial statements. 86Table of ContentsSOLAR SENIOR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2018Industry Classification Percentage of TotalInvestments (atfair value) as ofDecember 31, 2018 Diversified Financial Services (includes Gemino Healthcare Finance, LLC and North Mill Capital LLC) 22.1% Health Care Providers & Services 15.8% Professional Services 11.8% Insurance 11.2% Software 10.6% Communications Equipment 5.5% Media 3.2% Electronic Equipment, Instruments & Components 3.1% Wireless Telecommunication Services 2.6% Chemicals 2.6% Consumer Finance 2.5% Commercial Services & Supplies 2.5% Pharmaceuticals 1.6% Air Freight & Logistics 1.3% Footwear 1.3% Specialty Retail 1.0% Aerospace & Defense 0.5% Health Care Equipment & Supplies 0.5% Diversified Consumer Services 0.3% Health Care Technology 0.0% Total Investments 100.0% See notes to consolidated financial statements. 87Table of ContentsSOLAR SENIOR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTSDecember 31, 2017(in thousands, except share/unit amounts) Description Industry SpreadaboveIndex (3) LiborFloor Interest Rate (1) Acquisition Date MaturityDate ParAmount Cost FairValue Bank Debt/Senior Secured Loans — 105.9% 1A Smart Start LLC(2)(14) Electrical Equipment, Instruments &Components L+450 1.00% 6.19% 12/21/2017 2/21/2022 $6,105 $6,089 $6,089 Acrisure, LLC(2) Insurance L+425 1.00% 5.65% 5/3/2017 11/22/2023 7,446 7,429 7,531 Advantage Sales and Marketing, Inc. Professional Services L+650 1.00% 7.88% 2/14/2013 7/25/2022 8,000 7,961 7,520 Aegis Toxicology Sciences Corporation(14) Health Care Providers & Services L+850 1.00% 10.17% 2/20/2014 8/24/2021 4,000 3,965 3,880 Alera Group Intermediate Holdings, Inc.(2)(14) Insurance L+550 1.00% 6.85% 11/28/2016 12/30/2022 4,279 4,241 4,257 American Teleconferencing Services, Ltd. (PGI) (2)(14) Communications Equipment L+650 1.00% 7.90% 5/5/2016 12/8/2021 14,933 14,269 14,710 Anesthesia Consulting & Management, LP (2)(14) Health Care Providers & Services L+625 1.00% 7.94% 10/20/2016 10/31/2022 4,530 4,492 4,258 Capstone Logistics Acquisition, Inc.(2)(14) Professional Services L+450 1.00% 6.07% 10/3/2014 10/7/2021 8,159 8,111 8,078 Confie Seguros Holding II Co.(2)(14) Insurance L+525 1.00% 6.73% 10/13/2016 4/19/2022 9,900 9,820 9,909 Empower Payments Acquisition, Inc. (RevSpring).(2)(14) Professional Services L+550 1.00% 7.19% 11/28/2016 11/30/2023 4,579 4,499 4,579 Engineering Solutions & Products, LLC(6)(14) Aerospace & Defense L+600 2.00% 8.00% 11/5/2013 11/5/2018 2,258 2,258 2,145 Falmouth Group Holdings Corp. (AMPAC) (2)(14) Chemicals L+675 1.00% 8.44% 12/15/2016 12/14/2021 8,668 8,668 8,668 GenMark Diagnostics, Inc(2)(4)(14) Health Care Providers & Services — — 6.90% 4/22/2016 10/12/2019 7,633 8,040 8,039 Global Holdings LLC & Payment Concepts LLC(2)(14) Consumer Finance L+650 1.00% 7.99% 3/31/2017 5/5/2022 9,341 9,173 9,341 Global Tel*Link Corporation(2) Communications Equipment L+400 1.25% 5.69% 11/6/2015 5/23/2020 3,364 3,118 3,381 Global Tel*Link Corporation Communications Equipment L+825 1.25% 9.94% 5/21/2013 11/23/2020 3,000 2,972 3,007 Hostway Corporation(2)(14) Internet Software & Services L+475 1.25% 8.44% 6/27/2014 12/13/2019 8,526 8,511 8,185 Island Medical Management Holdings, LLC(2)(14) Health Care Providers & Services L+550 1.00% 7.00% 3/31/2017 9/1/2022 4,570 4,528 4,432 Kellermeyer Bergensons Services, LLC (KBS)(2)(14) Commercial Services & Supplies L+500 1.00% 6.48% 10/31/2014 10/29/2021 4,850 4,821 4,850 LegalZoom.com, Inc.(2)(14) Internet Software & Services L+450 1.00% 5.94% 11/17/2017 11/21/2024 5,000 4,950 4,950 Logix Holding Company, LLC(2)(14) Communications Equipment L+575 1.00% 7.28% 8/11/2017 12/22/2024 10,800 10,692 10,692 Lumeris Solutions Company, LLC(2)(14) Health Care Technology L+860 0.25% 9.98% 3/22/2017 2/1/2020 4,000 4,037 4,040 Metamorph US 3, LLC (Metalogix)(2)(14) †† Software L+750(7) 1.00% 9.07% 12/1/2014 12/1/2020 7,953 7,848 5,805 Meter Readings Holding, LLC (Aclara)(2)(14) Electronic Equipment, Instruments &Components L+575 1.00% 7.23% 6/15/2017 8/29/2023 7,940 7,921 7,940 MHE Intermediate Holdings, LLC (TFS-Miner)(2)(14) Air Freight & Logistics L+500 1.00% 6.69% 3/8/2017 3/10/2024 5,460 5,410 5,405 Ministry Brands, LLC(2)(14) Software L+500 1.00% 6.38% 11/21/2016 12/2/2022 9,636 9,557 9,636 MRI Software LLC(2)(14) Software L+625 1.00% 7.83% 6/7/2017 6/30/2023 8,224 8,147 8,183 MYI Acquiror Corp. (McLarens Young)(2)(14) Insurance L+450 1.25% 5.83% 5/21/2014 5/28/2019 3,348 3,337 3,348 MYI Acquiror Ltd. (McLarens Young)(2)(4)(14) Insurance L+450 1.25% 5.84% 5/21/2014 5/28/2019 4,271 4,258 4,271 On Location Events, LLC & PrimeSport Holdings Inc.(2)(14) Media L+550 1.00% 7.04% 12/7/2017 9/29/2021 15,000 14,815 14,812 PetVet Care Centers, LLC(2)(14) Health Care Facilities L+600 1.00% 7.35% 6/1/2017 6/8/2023 10,332 10,235 10,435 Polycom, Inc.(2)(14) Communications Equipment L+525 1.00% 6.72% 9/29/2016 9/27/2023 11,811 11,411 11,933 PPT Management Holdings, LLC(2)(14) Health Care Providers & Services L+600 1.00% 9.50% 12/15/2016 12/16/2022 7,920 7,854 7,603 PSP Group, LLC (Pet Supplies Plus)(2)(8)(14) Specialty Retail L+475 1.00% 6.32% 4/2/2015 4/6/2021 482 479 482 QBS Holding Company, Inc. (Quorum)(2)(14) Software L+475 1.00% 6.13% 8/1/2014 8/7/2021 6,059 6,025 6,014 Salient Partners, L.P.(2)(14) Asset Management L+850 1.00% 9.85% 6/10/2015 6/9/2021 3,932 3,882 3,932 SHO Holding I Corporation (Shoes for Crews)(2)(14) Footwear L+500 1.00% 6.42% 11/20/2015 10/27/2022 5,880 5,839 5,762 Suburban Broadband, LLC (Jab Wireless, Inc.)(2)(14)†† Wireless Telecommunication Services L+650(15) 1.00% 8.19% 11/29/2016 3/26/2019 4,938 4,911 4,938 The Hilb Group, LLC & Gencorp Insurance Group, Inc.(2)(14) Insurance L+475 1.00% 6.44% 3/16/2016 6/24/2021 4,436 4,377 4,436 Trident USA Health Services (2)(14) Health Care Providers & Services L+575 1.25% 7.44% 7/29/2013 7/31/2019 8,693 8,670 7,389 TwentyEighty, Inc.(14) †† Professional Services L+800(9) 1.00% 9.42% 1/31/2017 3/31/2020 918 887 918 TwentyEighty, Inc.(14) †† Professional Services — — 8.00%(10) 1/31/2017 3/31/2020 1,984 1,894 1,865 TwentyEighty, Inc.(14) †† Professional Services — — 9.00%(11) 1/31/2017 3/31/2020 1,814 1,733 1,651 U.S. Acute Care Solutions, LLC(2)(14) Health Care Providers & Services L+500 1.00% 6.69% 12/22/2016 5/15/2021 6,435 6,384 6,371 VT Buyer Acquisition Corp. (Veritext)(2)(14) Professional Services L+475 1.00% 6.44% 2/17/2017 1/29/2022 5,983 5,957 5,953 WIRB-Copernicus Group, Inc.(2)(14) Professional Services L+500 1.00% 6.69% 3/27/2017 8/15/2022 4,466 4,447 4,466 Total Bank Debt/Senior Secured Loans $288,923 $ 286,089 Common Equity/Equity Interests/Warrants — 45.2% Shares/Units Engineering Solutions & Products, LLC(6)(12)(14)† Aerospace & Defense 11/5/2013 133,668 $1,367 $68 Essence Group Holdings Corporation (Lumeris)Warrants(14)† Health Care Technology 3/22/2017 52,000 16 39 First Lien Loan Program LLC(4)(5)(14) Asset Management 2/13/2015 — 37,459 35,835 Gemino Healthcare Finance, LLC(4)(5)(14) Diversified Financial Services 9/30/2013 32,839 32,839 35,050 NorthMill LLC(4)(5)(14)(16) Diversified Financial Services 10/20/2017 100 51,000 51,000 TwentyEighty Investors, LLC(14)† Professional Services 1/31/2017 17,214 3,167 — Total Common Equity/Equity Interests/Warrants $ 125,848 $121,992 Total Investments(13) — 151.1% $414,771 $408,081 Cash Equivalents — 38.8% Par Amount U.S. Treasury Bill Government 12/28/2017 2/8/2018 105,000 $104,874 $104,874 Total Investments & Cash Equivalents —189.9% $ 519,645 $512,955 Liabilities in Excess of Other Assets — (89.9%) (242,824) Net Assets — 100.0% $270,131 See notes to consolidated financial statements. 88Table of ContentsSOLAR SENIOR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2017(in thousands) (1)Floating rate debt investments typically bear interest at a rate determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) index rate or the prime index rate (PRIME or “P”), and whichtypically reset monthly, quarterly or semi-annually. For each debt investment we have provided the current interest rate in effect as of December 31, 2017.(2)Indicates an investment that is wholly or partially held by Solar Senior Capital Ltd. through its wholly-owned financing subsidiary SUNS SPV LLC (the “SPV”). Such investments are pledged as collateralunder the Senior Secured Revolving Credit Facility (see Note 7 to the consolidated financial statements) and are not generally available to creditors, if any, of Solar Senior Capital Ltd. The respective paramount for the investment partially held through the SPV is $3,673 for Genmark Diagnostics, Inc. The par balance in excess of this stated amount is held directly by Solar Senior Capital Ltd.(3)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 rate floor.(4)Indicates assets that the Company believes may not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940 (“1940 Act”), as amended. If we fail to invest a sufficient portionof our assets in qualifying assets, we could be prevented from making follow-on investments in existing portfolio companies or could be required to dispose of investments at inappropriate times in order tocomply with the 1940 Act. As of December 31, 2017, on a fair value basis, non-qualifying assets in the portfolio represented 25.7% of the total assets of the Company.(5)Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially owning, either directly or throughone or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the year ended December 31, 2017 in these controlled investments are as follows: Name of Issuer Fair Value atDecember 31,2016 GrossAdditions GrossReductions RealizedGain(Loss) Change inUnrealizedGain(Loss) Dividend/OtherIncome Fair Value atDecember 31,2017 FLLP $38,810 $2,835 $ 6,563 $ — $753 $4,129 $35,835 Gemino Healthcare Finance, LLC 35,500 — — — (450) 3,694 35,050 NorthMill LLC — 51,000 — — — 1,122 51,000 $74,310 $ 53,835 $6,563 $— $303 $ 8,945 $121,885 (6)Denotes investments in which we are an “Affiliated Person” but not exercising a controlling influence, as defined in the 1940 Act, due to beneficially owning, either directly or through one or more controlledcompanies, 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 investments are as follows: Name of Issuer Fair Value atDecember 31,2016 GrossAdditions GrossReductions RealizedGain(Loss) Change inUnrealizedGain(Loss) Interest/DividendIncome Fair Value atDecember 31,2017 Engineering Solutions & Products, LLC (1st lien) — 2,257 2,257 — — 11 — Engineering Solutions & Products, LLC (2nd lien) 1,757 — — — 473 190 2,145 Engineering Solutions & Products, LLC (equity interests) 68 — — — — — 68 $1,825 $— $— $ — $ 473 $ 201 $ 2,213 (7)Spread is 5.50% Cash / 2.00% PIK.(8)PSP Group, LLC, PSP Service Newco, Inc., PSP Subco, LLC, PSP Stores, LLC, and PSP Distribution, LLC are co-borrowers.(9)Spread is 3.50% Cash / 4.50% PIK.(10)Coupon is 1.00% Cash / 7.00% PIK.(11)Coupon is 0.25% Cash / 8.75% PIK.(12)Our equity investment in Engineering Solutions & Products, LLC is held through ESP SSC Corporation, a taxable consolidated subsidiary.(13)Aggregate net unrealized depreciation for federal income tax purposes is $9,267; aggregate gross unrealized appreciation and depreciation for federal tax purposes is $3,219 and $12,486, respectively, based ona tax cost of $417,348.(14)Investment valued using significant unobservable inputs.(15)Spread is 4.50% Cash / 2.00% PIK.(16)Our equity investment in NorthMill LLC is partially held through ESP SSC Corporation, a taxable consolidated subsidiary.†Non-income producing security.††Investment contains a payment-in-kind (“PIK”) feature.See notes to consolidated financial statements. 89Table of ContentsSOLAR SENIOR CAPITAL LTD.CONSOLIDATED SCHEDULE OF INVESTMENTS (continued)December 31, 2017Industry Classification Percentage of TotalInvestments (atfair value) as ofDecember 31,2017 Diversified Financial Services (includes Gemino Healthcare Finance, LLC and NorthMill LLC) 21.1% Communications Equipment 10.7% Health Care Providers & Services 10.3% Asset Management (includes FLLP) 9.8% Professional Services 8.6% Insurance 8.3% Software 7.3% Media 3.6% Electronic Equipment, Instruments & Components 3.4% Internet Software & Services 3.2% Health Care Facilities 2.6% Consumer Finance 2.3% Chemicals 2.1% Footwear 1.4% Air Freight & Logistics 1.3% Wireless Telecommunication Services 1.2% Commercial Services & Supplies 1.2% Health Care Technology 1.0% Aerospace & Defense 0.5% Specialty Retail 0.1% Total Investments 100.0% See notes to consolidated financial statements. 90Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2018(in thousands, except share amounts)Note 1. OrganizationSolar Senior Capital Ltd. (“Solar Senior”, the “Company”, “SUNS”, “we”, “us”, or “our”), a Maryland corporation formed on December 16, 2010,is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business developmentcompany (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). Furthermore, as the Company is an investment company, it continuesto apply the guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946. In addition, fortax purposes, we have elected to be treated, and intend to qualify annually, as a regulated investment company (“RIC”), under Subchapter M of theInternal Revenue Code of 1986, as amended (“the Code”).On January 28, 2011, Solar Senior was capitalized with initial equity of $2 and commenced operations. On February 24, 2011, Solar Seniorpriced its initial public offering, selling 9.0 million shares, including the underwriters’ over-allotment, raising approximately $168,000 of net proceeds.Concurrent with this offering, our senior management team purchased an additional 500,000 shares through a private placement, raising another$10,000.The Company’s investment objective is to seek to maximize current income consistent with the preservation of capital. We seek to achieve ourinvestment objective by investing directly or indirectly in senior secured loans, including first lien, stretch-senior, unitrache, and second lien debtinstruments, made primarily to leveraged private middle-market companies whose debt is rated below investment grade, which the Company refers tocollectively as “senior loans.” From time to time, we may also invest in public companies that are thinly traded. Under normal market conditions, atleast 80% of the value of the Company’s net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans.Note 2. Significant Accounting PoliciesThe accompanying consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accountingprinciples generally accepted in the United States of America (“GAAP”), and include the accounts of the Company and certain wholly-ownedsubsidiaries. The consolidated financial statements reflect all adjustments and reclassifications which, in the opinion of management, are necessary forthe fair presentation of the results of the operations and financial condition for the periods presented. All significant intercompany balances andtransactions have been eliminated. Certain prior period amounts may have been reclassified to conform to 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.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; 91Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) (b)The Company conducts the valuation of its assets in accordance with GAAP and the 1940 Act. The Company generally values its assets ona quarterly basis, or more frequently if required. Investments for which market quotations are readily available on an exchange are valued atthe closing price on the date of valuation. The Company may also obtain quotes with respect to certain of its investments from pricingservices or brokers or dealers in order to value assets. When doing so, management determines whether the quote obtained is sufficientaccording to GAAP to determine the fair value of the investment. If determined adequate, the Company uses the quote obtained. Debtinvestments with maturities of 60 days or less shall each be valued at cost plus accreted discount, or minus amortized premium, which isexpected to approximate fair value, unless such valuation, in the judgment of Solar Capital Partners, LLC (the “Investment Adviser”), doesnot represent fair value, in which case such investments shall be valued at fair value as determined in good faith by or under the directionof the Company’s board of directors (the “Board”).Investments for which reliable market quotations are not readily available or for which the pricing sources do not provide a valuation ormethodology or provide a valuation or methodology that, in the judgment of the Investment Adviser or the Board does not represent fairvalue, shall be valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsiblefor the portfolio investment; (ii) preliminary valuations are discussed with senior management of the Investment Adviser; (iii) independentvaluation firms engaged by, or on behalf of, the Board will conduct independent appraisals and review the Investment Adviser’spreliminary valuations and make their own independent assessment for (a) each portfolio investment that, when taken together with allother investments in the same portfolio company, exceeds 10% of estimated total assets, plus available borrowings, as of the end of themost recently completed fiscal quarter, and (b) each portfolio investment that is presently in payment default and the Investment Adviserdoes not expect to reach an agreement with the portfolio company in the subsequent quarter; (iv) the Board will discuss the valuations anddetermine the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, whereappropriate, the respective independent valuation firm.The recommendation of fair value generally considers the following factors among others, as relevant: applicable market yields; the natureand realizable value of any collateral; the portfolio company’s ability to make payments; the portfolio company’s earnings and discountedcash flow; the markets in which the issuer does business; and comparisons to publicly traded securities, among others.When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Company will consider thepricing indicated by the external event to corroborate the valuation. Due to the inherent uncertainty of determining the fair value ofinvestments that do not have a readily available market value, the fair value of the investments may differ significantly from the values thatwould have been used had a readily available market value existed for such investments, and the differences could be material.Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. However, in accordance withASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946, may be valued using net asset valueas 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 convertfuture amounts (for example, cash flows or earnings) to 92Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those futureamounts. In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, asrelevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable marketyields 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,comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors. Whenavailable, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process. For thefiscal year ended December 31, 2018, there has been no change to the Company’s valuation approaches or techniques and the nature of therelated 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 on loans repaid as interest income when we receive such amounts. Capitalstructuring fees, amendment fees, consent fees, and any other non-recurring fee income as well as management fee and other fee income forservices 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. 93Table of ContentsSOLAR SENIOR 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, $883 was reclassified on our balance sheet betweenaccumulated 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 the U.S. dollar on the date of valuation. The Companywill not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from thefluctuations arising from changes in market prices of securities held. Such fluctuations would be included with the net unrealized gain orloss from investments. The Company’s investments in foreign securities, if any, may involve certain risks, including without limitation:foreign exchange restrictions, expropriation, taxation or other political, social or economic risks, all of which could affect the marketand/or credit risk of the investment. In addition, changes in the relationship of foreign currencies to the U.S. dollar can significantly affectthe value of these investments in terms of U.S. dollars and therefore the earnings of the Company. (j)The Company made an irrevocable election to apply the fair value option of accounting to the FLLP Facility, in accordance with ASC825-10. (k)In accordance with ASC 835-30, the Company records origination and other expenses related to certain debt issuances, if any, 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 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. (m)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 and/or when it is no longer probable that principal or interest cash payments will becollected. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in 94Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) management’s judgment, are likely to continue timely payment of their remaining principal and interest obligations. Cash interestpayments received on such investments may be recognized as income or applied to principal depending on management’s judgment. (n)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 valuemeasurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration ofcosts and benefits. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2019. Early adoption is permitted. The Company is evaluating the impact of ASU 2018-13 on its consolidated financialstatements and disclosures.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, 2018. Early adoption is permitted, includingadoption in an interim period. The Company is evaluating the impact of ASU 2017-08 on its consolidated financial statements anddisclosures. 95Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) 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 fiscal years,and interim periods within those fiscal years, beginning after December 15, 2017. The Company has adopted ASC 606 and determined thatthe adoption has not had a material impact on its consolidated financial statements and disclosures.Note 3. AgreementsSolar Senior has an Advisory Agreement with the Investment Adviser, under which the Investment Adviser manages the day-to-day operations of,and provides investment advisory services to, Solar Senior. For providing these services, the Investment Adviser receives a fee from Solar Senior,consisting of two components—a base management fee and a performance-based incentive fee. The base management fee is calculated at an annualrate of 1.00% of gross assets. For services rendered under the Advisory Agreement, the base management fee is payable quarterly in arrears. The basemanagement fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters. Basemanagement fees for any partial month or quarter will be appropriately pro-rated. For purposes of computing the base management fee, gross assetsexclude temporary assets acquired at the end of each fiscal quarter for purposes of preserving investment flexibility in the next fiscal quarter.Temporary assets include, but are not limited to, U.S. treasury bills, other short-term U.S. government or government agency securities, repurchaseagreements 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 (other than fees for providing managerial assistance) accrued during the calendar quarter, minus ouroperating expenses for the quarter (excluding the performance-based incentive fee). Pre-incentive fee net investment income includes, in the case ofinvestments, if any, with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind interest and zero-couponsecurities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gainsor losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of ournet assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). The Companypays the Investment Adviser a performance-based incentive fee with respect to pre-incentive fee net investment income for each calendar quarter asfollows: • 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%; • 50% of pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, thatexceeds the hurdle but is less than 2.9167% in any calendar quarter (11.67% annualized);and • 20% of the amount of pre-incentive fee net investment income, if any, that exceeds 2.9167% in any calendar quarter (11.67% annualized)will be payable to the Investment Adviser. 96Table of ContentsSOLAR SENIOR 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 Investment Advisory Agreement, as of the termination date) and will equal 20% of the Company’s cumulative realized capital gainsless cumulative 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 $4,603, $3,861 and $3,385, respectively, in gross basemanagement fees and $2,922, $1,083 and $1,560, respectively, in gross performance-based incentive fees. For the fiscal years ended December 31,2018, 2017 and 2016, $0, $1,962 and $797, respectively, of such base management fees were waived. For the fiscal years ended December 31, 2018,2017 and 2016, $1,107, $709 and $1,205, respectively, of such performance-based incentive fees were waived. For the fiscal years ended December 31,2018, 2017 and 2016, there were $153, $0 and $0, respectively, of performance-based incentive fees recaptured by the Investment Adviser. Any feewaivers prior to July 1, 2017 are not subject to recapture. Subsequent voluntary fee waivers were made at the Investment Adviser’s discretion and aresubject to recapture by the Investment Adviser and reimbursement by the company under the conditions noted below. No fees will be recouped by theInvestment Adviser if (i) for the period in which recoupment occurs, the ratio of operating expenses to average net assets, when considering thereimbursement, exceeds the same ratio for the period in which the waiver occurred; (ii) for the period in which recoupment occurs, the annualizeddistribution rate cannot fall below the annualized distribution rate for the period in which the waiver occurred; and (iii) recoupment can only occurwithin three years from the date of the waiver. The table below presents a summary of fees waived that may be subject to recoupment: Three MonthsEnded ManagementandPerformance-Based IncentiveFees Waived Management andPerformance-BasedIncentive FeesRecouped UnreimbursedManagementandPerformance-BasedIncentive Fees Ratio ofOperatingExpense toAverageNet Assetsfor thePeriod(1) AnnualizedDistributionRate forthePeriod(2) Eligiblefor RecoupmentThroughSeptember 30, 2017 $712 $— $712 0.32% 8.40% June 30, 2019December 31, 2017 281 — 281 0.33% 8.39% September 30, 2019March 31, 2018 308 — 308 0.28% 8.37% December 31, 2019June 30, 2018 437 153 284 0.30% 8.37% March 31, 2020December 31, 2018 362 — 362 0.20% 8.38% September 30, 2020Total $ 2,100 $ 153 $ 1,947 (1)Operating expense includes all expenses borne by the Company, except for organizational and offering costs, base management fees,performance-based incentive fees and interest expense.(2)Annualized distribution rate equals the annualized rate of distributions paid to stockholders based on the amount of the distributions declaredprior to the date that the waivers of expenses related to management and performance-based incentive fees were incurred.Solar Senior has also entered into an Administration Agreement with Solar Capital Management, LLC (the “Administrator”) under which theAdministrator provides administrative services for Solar Senior. For providing these services, facilities and personnel, Solar Senior reimburses theAdministrator for Solar Senior’s allocable 97Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, includingrent. The Administrator will also provide, on Solar Senior’s behalf, managerial assistance to those portfolio companies to which Solar Senior is requiredto 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$1,529, $1,554 and $1,245, 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 $261,392 and $16.30, respectively. This compares tototal net assets and net asset value per share at December 31, 2017 of $270,131 and $16.84, 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: $13,813 $23,386 $24,252 Denominator—weighted average shares: 16,040,060 16,031,303 12,869,937 Earnings per share: $0.86 $1.46 $1.88 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 measuring fair value that includes a hierarchy used to classify the inputs usedin measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fairvalue hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair valuemeasurement. 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; 98Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) 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.The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, as of December 31, 2018 andDecember 31, 2017:Fair Value MeasurementsAs of December 31, 2018 Level 1 Level 2 Level 3 Total Assets: Bank Debt/Senior Secured Loans $— $8,589 $341,814 $350,403 Common Equity/EquityInterests/Warrants — — 99,708 99,708 Total Investments $— $8,589 $441,522 $450,111 Liabilities: FLLP Facility $— $— $51,371 $51,371 99Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Fair Value MeasurementsAs of December 31, 2017 Level 1 Level 2 Level 3 Measuredat NetAssetValue* Total Assets: Bank Debt/Senior Secured Loans $— $21,439 $264,650 $— $286,089 Common Equity/EquityInterests/Warrants — — 86,157 35,835 121,992 Total Investments $— $21,439 $350,807 $35,835 $408,081 Liabilities: Credit Facility $— $— $124,200 $— $124,200 *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 portfolioinvestment in this category is FLLP. See Note 11 for more information on this investment, including its investment strategy and the Company’sunfunded equity commitment to FLLP. This investment is not redeemable by the Company absent an election by the members of the entity toliquidate all investments and distribute the proceeds to the members.The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the year ended December 31, 2018, aswell as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held atDecember 31, 2018:Fair Value Measurements Using Level 3 Inputs Bank Debt/SeniorSecured Loans CommonEquity/EquityInterests/Warrants Total Fair value, December 31, 2017 $264,650 $86,157 $350,807 Total gains or losses included in earnings: Net realized gain (loss) (5,218) — (5,218) Net change in unrealized gain (loss) (1,052) (1,073) (2,125) Purchase of investment securities 168,768 16,024 184,792 Proceeds from dispositions of investment securities (176,482) (1,400) (177,882) Transfers in/out of Level 3 91,148 — 91,148Fair value, December 31, 2018 $341,814 $99,708 $441,522 Unrealized gains (losses) for the period relating to those Level 3 assets thatwere still held by the Company at the end of the period: Net change in unrealized gain (loss): $(1,053) $(1,073) $(2,126) 100Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) During the quarter ended June 30, 2018, Advantage Sales and Marketing Inc. was transferred from Level 2 to Level 3. At June 30, 2018, theInvestment Adviser believed that the available quote for Advantage Sales and Marketing Inc. was no longer representative of fair value. However, thequote was still considered as an input to the fair value determination. As such, Advantage Sales and Marketing Inc. was transferred from Level 2 toLevel 3 as the Investment Adviser could no longer rely on the available quote from a third-party source and was using additional assumptions in fairvaluing the investment. During the quarter ended September 30, 2018, the Company’s investment in FLLP was consolidated, and as such the Level 3assets held by FLLP are reflected as transfers into Level 3. During the quarter ended December 31, 2018, Pre-Paid Legal Services, Inc. was transferredfrom Level 3 to Level 2 as the Investment Adviser believed that there was ample liquidity in the available quote given known transactions and thusbelieved the quote to be representative of fair value.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: Beginning fair value at December 31, 2017 $124,200 Borrowings 30,950 Repayments (29,376) Transfers in/out of Level 3 (74,403) Ending fair value at December 31, 2018 $51,371 The Company made an irrevocable election to apply the fair value option of accounting to the FLLP Facility, in accordance with ASC 825-10.On December 31, 2018, there were borrowings of $51,371 on the FLLP Facility. For the year ended December 31, 2018, the FLLP Facility had no netchange in unrealized (appreciation) depreciation. As a result of the consolidation of FLLP, the FLLP Facility is shown as a transfer into Level 3.The Company did not elect to apply the fair value option of accounting to the Credit Facility, which was refinanced by way of amendment onJune 1, 2018. As this refinancing was deemed to be a significant modification of debt, per ASC 825-10-25, a new election date was triggered. As suchthe Credit Facility is shown as a transfer out of Level 3. 101Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) The following table provides a summary of the changes in fair value of Level 3 assets and liabilities for the year ended December 31, 2017, aswell as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held atDecember 31, 2017:Fair Value Measurements Using Level 3 Inputs Bank Debt/SeniorSecured Loans CommonEquity/EquityInterests/Warrants Fair value, December 31, 2016 $250,268 $35,568 Total gains or losses included in earnings: Net realized gain (loss) 129 — Net change in unrealized gain (loss) 3,436 (3,593) Purchase of investment securities 132,045 54,182 Proceeds from dispositions of investment securities (137,054) — Transfers in/out of Level 3 15,826 — Fair value, December 31, 2017 $264,650 $86,157 Unrealized gains (losses) for the period relating to those Level 3 assets that were stillheld by the Company at the end of the period: Net change in unrealized gain (loss): $3,436 $(3,593) During the fiscal year ended December 31, 2017, Securus Technologies, Inc. and nThrive, Inc. were transferred from Level 2 to Level 3. AtJune 30, 2017, the Investment Adviser believed that Securus Technologies, Inc. was likely going to be prepaid at par in the near future. As such, theInvestment Adviser, in its recommendation to the Board, provided that it was more representative of fair value to price the position at par, matching theprice we would receive if the investment was prepaid. Securus Technologies, Inc. was repaid at par in the quarter ended December 31, 2017. AtMarch 31, 2017, the Investment Adviser also believed that nThrive, Inc. was likely going to be prepaid in the near future. As such, the InvestmentAdviser, in its recommendation to the Board, provided that it was more representative of fair value to price the position at par, matching the price wewould receive if the investment was prepaid. nThrive, Inc. was repaid in the quarter ended June 30, 2017.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: Beginning fair value at December 31, 2016 $98,300 Borrowings 162,000 Repayments (136,100) Transfers in/out of Level 3 — Ending fair value at December 31, 2017 $124,200 The Company has made an irrevocable election to apply the fair value option of accounting to the Credit Facility, in accordance with ASC825-10. On December 31, 2017, there were borrowings of $124,200 on the Credit Facility. For the year ended December 31, 2017, the Credit Facilityhad no net change in unrealized (appreciation) depreciation. The Company used an independent third-party valuation firm to assist in measuring thefair value of the Credit Facility. 102Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) 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)Bank Debt / Senior Secured Loans Asset $341,814 Income Approach Market Yield 6.9% – 25.5% (8.7%)Common Equity/EquityInterests/Warrants Asset $$15899,550 Market ApproachMarket Approach EBITDA MultipleReturn on Equity 5.8x – 14.4x (14.4x)7.5% – 25.2% (10.1%)FLLP Facility Liability $51,371 Income Approach Market Yield L+1.4% – L+4.8%(L+2.3%)Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-askspreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities.Quantitative information about the Company’s Level 3 asset and liability fair value measurements as of December 31, 2017 is summarized in thetable below: Asset orLiability Fair Value atDecember 31,2017 Principal ValuationTechnique/Methodology Unobservable Input Range (WeightedAverage)Bank Debt/ Senior Secured Loans Asset $264,650 Yield Analysis Market Yield 6.1% – 21.6% (8.6%)Common Equity/Equity Interests/Warrants Asset $$10786,050 Enterprise ValueEnterprise Value EBITDA MultipleReturn on Equity 5.5x – 16.0x (16.0x)5.9% – 24.4% (13.4%)Credit Facility Liability $124,200 Yield Analysis Market Yield L+1.4% – L+4.8%(L+2.0%) 103Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Significant increases or decreases in any of the above unobservable inputs in isolation, including unobservable inputs used in deriving bid-askspreads, if applicable, would result in a significantly lower or higher fair value measurement for such assets and liabilities.Note 7. DebtCredit Facility—On August 26, 2011, the Company established our wholly-owned subsidiary, SUNS SPV LLC (the “SUNS SPV”) which enteredinto the Credit Facility with Citigroup Global Markets Inc. acting as administrative agent. On January 10, 2017, commitments to the Credit Facility, asamended, were increased from $175,000 to $200,000 by utilizing the accordion feature. The commitment can also be expanded up to $600,000. Thestated interest rate on the Credit Facility is LIBOR plus 2.00% with no LIBOR floor requirement and the current final maturity date is June 1, 2023. TheCredit Facility is secured by all of the assets held by SUNS SPV. Under the terms of the Credit Facility, Solar Senior and SUNS SPV, as applicable, havemade certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reportingrequirements and other customary requirements for similar credit facilities. The Credit Facility also includes usual and customary events of default forcredit facilities of this nature. The Credit Facility was amended on November 7, 2012, June 30, 2014, May 29, 2015 to extend maturities and addgreater investment flexibility, among other changes. On June 1, 2018, the Credit Facility was refinanced by way of amendment, allowing for greaterinvestment flexibility and the extension of the maturity date, among other changes. On July 13, 2018, commitments to the Credit Facility, as amended,were increased from $200,000 to $225,000 by utilizing the accordion feature.FLLP Facility—On February 13, 2015, FLLP as transferor and FLLP 2015-1, LLC, a newly formed wholly-owned subsidiary of FLLP, as borrowerentered into a $75,000 FLLP Facility with Wells Fargo Securities, LLC acting as administrative agent. Solar Senior Capital Ltd. acts as servicer underthe FLLP Facility. The FLLP Facility was scheduled to mature on February 13, 2020. The FLLP Facility generally bears interest at a rate of LIBOR plusa range of 2.25%-2.50%. FLLP and FLLP 2015-1, 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 FLLP Facility also includes usual and customary events of default for credit facilities of this nature. On August 15, 2016, the FLLP Facility wasamended, expanding commitments to $100,000 and extending the maturity date to August 16, 2021. On December 19, 2018, the FLLP Facility wasamended, reducing commitments to $75.0 million. There were $51,371 of borrowings outstanding as of December 31, 2018.The Company made an irrevocable election to apply the fair value option of accounting to the FLLP Facility, in accordance with ASC 825-10.We believe accounting for this facility at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certainearnings volatility. ASC 825-10 requires entities to display the fair value of the selected assets and liabilities on the face of the ConsolidatedStatement of Assets and Liabilities and changes in fair value of the above facilities are reported 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 4.30%and 3.16%, respectively. These costs are exclusive of other credit facility expenses such as unused fees and fees paid to the back-up servicer, if any.The maximum amount borrowed on the revolving credit facilities during the year ended December 31, 2018 and the year ended December 31, 2017,was $214,296 and $136,000, respectively. 104Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Note 8. 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 $16.84 $16.80 $16.33 $17.65 $18.04 Net investment income 1.41 1.41 1.42 1.33 1.20 Net realized and unrealized gain (loss) (0.54) 0.04 0.50 (1.24) (0.18) Net increase (decrease) in net assets resulting fromoperations 0.87 1.45 1.92 0.09 1.02 Distributions to stockholders (see note 9a): From net investment income (1.41) (1.41) (1.42) (1.41) (1.29) From other sources — — — — (0.12)**Offering costs and other — — (0.03) — — Net asset value, end of year $16.30 $16.84 $16.80 $16.33 $17.65 Per share market value, end of year $15.12 $17.76 $16.44 $14.90 $14.97 Total Return(b) (7.28%) 17.11% 20.70% 8.90% (10.47%) Net assets, end of year $261,392 $270,131 $269,145 $188,304 $203,519 Shares outstanding, end of year 16,040,485 16,036,730 16,025,011 11,533,315 11,533,315 Ratios to average net assets: Net investment income 8.38% 8.39% 8.68% 7.63% 6.69% Operating expenses 3.48%* 2.12%* 2.65%* 2.92%* 2.50%* Interest and other credit facility expenses *** 2.89% 1.43% 1.56% 2.08% 1.52% Total expenses 6.37%* 3.55%* 4.21%* 5.00%* 4.02%* Average debt outstanding $168,359 $100,700 $109,938 $136,900 $72,132 Portfolio turnover ratio 42.5% 41.4% 38.4% 34.0% 47.5% (a)Calculated using the average shares outstanding method.(b)Total return is based on the change in market price per share during the year and takes into account any dividends, if any, reinvested in accordance with the dividendreinvestment plan. Total return does not include a sales load.*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 fee waiver (see note 3).For the year ended December 31, 2018, the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.89% and 6.78%,respectively, without the voluntary management and incentive fee waivers. For the year ended December 31, 2017, the ratios of operating expenses to average net assetsand total expenses to average net assets would be 3.11% and 4.54%, respectively, without the voluntary management and incentive fee waivers. For the year ended December 31, 2016, the ratios of operating expenses to average net assets and total expenses to average net assets would be 3.60% and 5.15%, respectively, without thevoluntary management and incentive fee waivers. For the year ended December 31, 2015, the ratios of operating expenses to average net assets and total expenses toaverage net assets would be 3.29% and 5.37%, respectively, without the voluntary incentive fee waiver. For the year ended December 31, 2014, the ratios of operatingexpenses to average net assets and total expenses to average net assets would be 2.61% and 4.13%, respectively, without the voluntary incentive fee waiver.**Represents tax return of capital.***Ratios shown without the non-recurring costs associated with the amendments of the Credit Facility would be 2.89%, 1.43%, 1.56%, 1.67% and 1.05%, respectivelyfor the years shown. 105Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Information about our senior securities is shown in the following table as of each year ended December 31 since the Company commencedoperations, unless otherwise noted. The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of seniorsecurities. Class and Year Total AmountOutstanding(1) AssetCoveragePer Unit(2) InvoluntaryLiquidatingPreferencePer Unit(3) AverageMarket ValuePer Unit(4) Credit Facility Fiscal 2018 $119,200 $1,770 $— N/A Fiscal 2017 124,200 3,175 — N/A Fiscal 2016 98,300 3,738 — N/A Fiscal 2015 116,200 2,621 — N/A Fiscal 2014 143,200 2,421 — N/A Fiscal 2013 61,400 4,388 — N/A Fiscal 2012 39,100 5,453 — N/A Fiscal 2011 8,600 21,051 — N/A FLLP Facility Fiscal 2018 51,371 762 — N/A Total Senior Securities Fiscal 2018 $170,571 $2,532 $— N/A Fiscal 2017 124,200 3,175 — N/A Fiscal 2016 98,300 3,738 — N/A Fiscal 2015 116,200 2,621 — N/A Fiscal 2014 143,200 2,421 — N/A Fiscal 2013 61,400 4,388 — N/A Fiscal 2012 39,100 5,453 — N/A Fiscal 2011 8,600 21,051 — N/A (1)Total amount of each class of senior securities outstanding 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 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 was divided based on the amount outstanding at the end of the period for each. As of December 31, 2018,asset coverage was 253.2%.(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, we do not have senior securities that are registered for public trading. 106Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Note 9(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 $22,617 100.0% $22,604 100.0% $18,316 100.0% Capital gains — 0.0% — 0.0% — 0.0% Return of capital — 0.0% — 0.0% — 0.0% Total distributions $22,617 100.0% $22,604 100.0% $18,316 100.0% 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 $— $640 $1,595 Undistributed long-term net capital gains — — — Total undistributed net earnings — 640 1,595 Other book/tax temporary differences (362) 756 1,084 Post-October capital losses — — — Capital loss carryforward (16,714) (6,565) (6,026) Net unrealized appreciation (depreciation) investments (10,007) (9,627) (10,676) Total tax accumulated earnings (loss) $(27,083) $(14,796) $(14,023) (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.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 9(b). Other Tax Information (unaudited)No distributions paid during the fiscal years ended December 31, 2018, 2017 or 2016 were eligible for qualified dividend income treatment orwere eligible for the 70% dividends received deduction for corporate stockholders. For the fiscal years ended December 31, 2018, 2017, and 2016,85.92%, 95.53% and 99.34%, 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. 107Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share amounts) Note 10. Gemino Healthcare Finance, LLCWe acquired Gemino Healthcare Finance, LLC (d/b/a Gemino Senior Secured Healthcare Finance) (“Gemino”) on September 30, 2013. Gemino isa commercial finance company that originates, underwrites, and manages primarily secured, asset-based loans for small and mid-sized companiesoperating in the healthcare industry. Our initial investment in Gemino was $32,839. The management team of Gemino co-invested in the transactionand continues to lead Gemino. As of December 31, 2018, Gemino’s management team and Solar Senior own approximately 7% and 93% of the equityin Gemino, respectively.Concurrent with the closing of the transaction, Gemino entered into a new, four-year, non-recourse, $100,000 credit facility with non-affiliates,which was expandable to $150,000 under its accordion feature. Effective March 31, 2014, the credit facility was expanded to $105,000 and again onJune 27, 2014 to $110,000. On May 27, 2016, Gemino entered into a new $125,000 credit facility which replaced the previously existing facility. Thenew facility has similar terms as compared to the previous facility and includes an accordion feature increase to $200,000 and has a maturity date ofMay 27, 2020.Gemino currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of December 31,2018, the portfolio totaled approximately $174,083 of commitments, of which $108,643 were funded, on total assets of $108,640. As of December 31,2017, the portfolio totaled approximately $176,332 of commitments, of which $106,620 were funded, on total assets of $110,584. At December 31,2018, the portfolio consisted of 34 issuers with an average balance of approximately $3,195 versus 29 issuers with an average balance ofapproximately $3,677 at December 31, 2017. All of the commitments in Gemino’s portfolio are floating-rate, senior-secured, cash-pay loans. Gemino’scredit facility, which is non-recourse to us, had approximately $75,000 and $75,000 of borrowings outstanding at December 31, 2018 andDecember 31, 2017, respectively. For the years ended December 31, 2018, 2017 and 2016, Gemino had net income of $3,629, $3,571 and $4,562,respectively, on gross income of $11,542, $11,389 and $13,274, respectively. Due to timing and non-cash items, there may be material differencesbetween GAAP net income and cash available for distributions. Gemino’s consolidated financial statements 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. 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 $9,984 $0.62 $5,550 $0.35 $(8,179) $(0.51) $(2,629) $(0.16) September 30, 2018 11,013 0.69 5,762 0.36 (356) (0.02) 5,406 0.34 June 30, 2018 9,471 0.59 5,654 0.35 (135) (0.01) 5,519 0.34 March 31, 2018 9,341 0.58 5,654 0.35 (137) (0.01) 5,517 0.34 December 31, 2017 $9,047 $0.56 $5,653 $0.35 $582 $0.04 $6,235 $0.39 September 30, 2017 7,966 0.50 5,652 0.35 360 0.02 6,012 0.37 June 30, 2017 7,658 0.48 5,651 0.35 (422) (0.02) 5,229 0.33 March 31, 2017 7,496 0.47 5,649 0.35 262 0.02 5,911 0.37 108Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share and per share amounts) Note 12. Commitments and ContingenciesThe Company had unfunded debt and equity commitments to various revolving and delayed draw loans as well as to Gemino HealthcareFinance, LLC. The total amount of these unfunded commitments as of December 31, 2018 and December 31, 2017 is $23,619 and $27,472,respectively, comprised of the following: December 31,2018 December 31,2017 Rubius Therapeutics, Inc.** $4,121 $— MSHC, Inc. 3,326 — The Hilb Group, LLC & Gencorp Insurance Group, Inc. 3,156 332WIRB-Copernicus Group, Inc. 2,649 — DISA Holdings Acquisition Corp. 2,586 — MRI Software LLC 2,446 2,361Solara Medical Supplies, Inc. 2,056 — Gemino Healthcare Finance, LLC* 1,400 5,000GenMark Diagnostics, Inc. 700 — Engineering Solutions & Products, LLC 535 1,736Centria Healthcare LLC 333 — AQA Acquisition Holding, Inc. 142 — TwentyEighty, Inc. 140 140MHE Intermediate Holdings, LLC 29 983VetCor Professional Practices LLC — 6,721 Edgewood Partners Holdings, LLC — — Alera Group Intermediate Holdings, Inc. — 4,695VT Buyer Acquisition Corp. (Veritext) — 3,450PetVet Care Centers, LLC — 1,627Ministry Brands, LLC — 427Total Commitments $23,619 $27,472 *The Company controls the funding of the Gemino 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 13. First Lien Loan Program LLCOn September 10, 2014, the Company entered into a limited liability company agreement to create FLLP with Voya Investment ManagementLLC (“Voya”). Voya acts as the investment advisor for several wholly-owned insurance subsidiaries of Voya Financial, Inc. (NYSE: VOYA). The jointventure vehicle, structured as an unconsolidated Delaware limited liability company, invested primarily in senior secured floating rate term loans tomiddle market companies predominantly owned by private equity sponsors or entrepreneurs. The Company and Voya had committed to provide$50,750 and $7,250, respectively, of capital to the joint venture. All portfolio decisions and generally all other decisions in respect of the FLLP had tobe approved by an investment committee of the FLLP consisting of representatives of the Company and Voya (with approval from a 109Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share and per share amounts) representative of each required). On February 13, 2015, FLLP commenced operations. On February 13, 2015, FLLP as transferor and FLLP 2015-1,LLC, a newly formed wholly-owned subsidiary of FLLP, as borrower entered into the FLLP Facility with Wells Fargo Securities, LLC acting asadministrative agent. Solar Senior Capital Ltd. acts as servicer under the FLLP Facility. The FLLP Facility was scheduled to mature on February 13,2020. The FLLP Facility generally bears interest at a rate of LIBOR plus a range of 2.25%-2.50%. FLLP and FLLP 2015-1, LLC, as applicable, havemade certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reportingrequirements and other customary requirements for similar credit facilities. The FLLP Facility also includes usual and customary events of default forcredit facilities of this nature. On August 15, 2016, the FLLP Facility was amended, expanding commitments to $100,000 and extending the maturitydate to August 16, 2021. On September 18, 2018, the Company acquired Voya’s share of the equity in FLLP to hold 100% of the equity in FLLP. Assuch, the Company consolidated FLLP as of this date. For financial reporting purposes, assets consolidated were recorded at fair value and the costbasis of the assets consolidated were carried forward to align with the ongoing reporting of the Company’s realized and unrealized gains and losses.Also due to the consolidation, the then $3,210 in unrealized depreciation on the Company’s equity investment in FLLP 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, FLLP and the Company merged, with the Company the surviving entity. FLLP 2015-1 LLC is now a wholly-owned subsidiary of the Companyand borrowings under the FLLP Facility are consolidated.Note 14. Solar Life Science Program LLCOn February 22, 2017, the Company and Solar Capital Ltd. formed LSJV with an affiliate of Deerfield Management. The Company committed$75,000 to LSJV. On August 16, 2018, the LSJV was dissolved, without commencing operations.Note 15. North Mill Capital LLCWe acquired 100% of the equity interests of North Mill Capital LLC (“NMC”) on October 20, 2017. NMC is a leading asset-backed lendingcommercial finance company that provides senior secured asset-backed financings to U.S. based small-to-medium-sized businesses primarily in themanufacturing, services and distribution industries. We invested approximately $51,000 to effect the transaction. Subsequently, the Companycontributed 1% of its equity interest in NMC to ESP SSC Corporation. Immediately thereafter, the Company and ESP SSC Corporation contributedtheir equity interests to NorthMill LLC (“North Mill”). On May 1, 2018, North Mill merged with and into NMC, with NMC being the survivingcompany. The Company and ESP SSC Corporation own 99% and 1% of the equity interests of NMC, respectively. The management team of NMCcontinues to lead NMC.NMC currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments. As of December 31,2018, the portfolio totaled approximately $247,259 of commitments, of which $122,323 were funded, on total assets of $155,568. As of December 31,2017, the portfolio totaled approximately $283,461 of commitments, of which $151,604 were funded, on total assets of $176,354. At December 31,2018, the portfolio consisted of 80 issuers with an average balance of approximately $1,529 versus 92 issuers with an average balance ofapproximately $1,600 at December 31, 2017. NMC has a senior credit facility with a bank lending group for $160,000 which expires on October 20,2020. Borrowings are secured by substantially all of NMC’s assets. NMC’s credit facility, which is non-recourse to us, had approximately $88,892 and$116,574 of borrowings outstanding at December 31, 2018 and December 31, 2017, respectively. For the 110Table of ContentsSOLAR SENIOR CAPITAL LTD.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)December 31, 2018(in thousands, except share and per share amounts) year ended December 31, 2018 and the period October 20, 2017 through December 31, 2017, NMC had net income (loss) of ($2,754) and $372,respectively, on gross income of $21,789 and $3,097, respectively. Due to timing and non-cash items, there may be material differences between GAAPnet income and cash available for distributions. As such, and subject to fluctuations in NMC’s funded commitments, the timing of originations, and therepayments of financings, the Company cannot guarantee that NMC will be able to maintain consistent dividend payments to us. NMC’s consolidatedfinancial statements for the fiscal years ended December 31, 2018 and December 31, 2017 are attached as an exhibit to this annual report on Form10-K.Note 16. 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 ofdistributions 3,755 11,719 $65 $204 Net increase 3,755 11,719 $65 $204 Note 17. 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 January 8, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on February 1, 2019 to holders of record asof January 24, 2019.On February 6, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on March 1, 2019 to holders of record asof February 21, 2019.On February 21, 2019, our board of directors declared a monthly dividend of $0.1175 per share payable on April 3, 2019 to holders of record asof March 21, 2019. 111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. 112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 Senior 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 Principal Occupation(s)During Past 5 Years Other Directorships Heldby Director or Nomineefor Director During Past5 Years(2)Independent Director David S. Wachter, 55 Director Class I Directorsince 2011; Termexpires 2021. Founding Partner,Managing Director andPresident of W CapitalPartners, a private equityfund manager, since2001. Director of Solar CapitalLtd. since 2007, SCP PrivateCredit Income BDC LLCsince 2018 and of severalprivate companies.Mr. Wachter’s extensive knowledge of private equity and investment banking provides the board of directors with the valuable insight of anexperienced financial manager. 113Table of ContentsName, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed Principal Occupation(s)During Past 5 Years Other Directorships Heldby Director or Nomineefor Director During Past5 Years(2)Interested Director Bruce Spohler, 58 Director; ChiefOperating Officer. Class II Directorsince 2010; Termexpires 2019. Chief Operating Officerof SCP Private CreditIncome BDC LLS since2018, Solar SeniorCapital Ltd. since 2010and of Solar Capital Ltd.since 2007; previously,Managing Director and aformer Co- Head of U.S.Leveraged Finance forCIBC World Markets. Director of Solar CapitalLtd. since 2009 and SCPPrivate Credit Income BDCLLC since 2018.Mr. Spohler’s depth of experience in managerial positions in investment management, leveraged finance and financial services, as well as his intimateknowledge of the Company’s business and operations, gives the board of directors valuable industry-specific knowledge and expertise on these andother matters. 114Table of ContentsName, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed Principal Occupation(s)During Past 5 Years Other Directorships Heldby Director or Nomineefor Director During Past5 Years(2)Independent DirectorSteven Hochberg, 57 Director Class II Director since2011; Term expires2019. Partner at DeerfieldManagement, ahealthcare investmentfirm, since 2013.Co-founder and managerof Ascent BiomedicalVentures, a venturecapital firm focused onearly stage investmentand development ofbiomedical companies,since 2004. Partner at DeerfieldManagement, a healthcareinvestment firm, since 2013.Co-founder and manager ofAscent BiomedicalVentures, a venture capitalfirm focused on early stageinvestment anddevelopment of biomedicalcompanies, since 2004.Director of Solar CapitalLtd. since 2007 and SCPPrivate Credit Income BDCLLC since 2018. Since2011, Mr. Hochberg hadbeen the Chairman of theBoard of Continuum HealthPartners until its merger withMount Sinai in 2013, wherehe is the Senior ViceChairman of the MountSinai Health System, anon-profit healthcareintegrated delivery systemin New York City. Directorof DFB HealthcareAcquisitions Corp., a newlyorganized special purchaseacquisition company.Director of theCardiovascular ResearchFoundation, an organizationfocused on advancing newtechnologies and educationin the field of cardiovascularmedicine.Mr. 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. 115Table of ContentsName, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed Principal Occupation(s)During Past 5 Years Other Directorships Heldby Director or Nomineefor Director During Past5 Years(2)Interested Director Michael S. Gross, 57 Chairman of theBoard ofDirectors, ChiefExecutiveOfficer andPresident. Class IIIDirector since2010; Termexpires 2020. Chairman of the Board ofDirectors, ChiefExecutive Officer andPresident of SCP PrivateCredit Income BDC LLCsince 2018, Solar SeniorCapital Ltd. since 2010and of Solar Capital Ltd.since 2007; Presidentand Chief ExecutiveOfficer of ApolloInvestment Corporationfrom 2004 to 2006. Chairman of the Board ofDirectors, Chief ExecutiveOfficer and President of SCPPrivate Credit Income BDCLLC since 2018 and SolarCapital Ltd. since 2007;Chairman of the Board ofDirectors of Global ShipLease Inc.; Director of Saks,Inc. (1992-2013) and JardenCorporation (2007-2016);Chairman of the Board ofMt. Sinai Children’s CenterFoundation; Director of NewYork Road Runners;Member of the KelloggGlobal Advisory Board; andMember of the Ross SchoolAdvisory Board at theUniversity of Michigan.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 gives the board of directors valuableinsight and positions him well to continue to serve as the Chairman of our board of directors. 116Table of ContentsName, Address and Age(1) Position(s) Heldwith Company Terms of Office andLength of TimeServed Principal Occupation(s)During Past 5 Years Other Directorships Heldby Director or Nomineefor Director During Past5 Years(2)Independent DirectorLeonard A. Potter, 57 Director Class III Directorsince 2011; Termexpires 2020. President and ChiefInvestment Officer ofWildcat CapitalManagement LLC since2011; Chief ExecutiveOfficer of Infinity QCapital Management,LLC since 2014; ChiefInvestment Officer of SaltCreek Hospitality from2009 to 2011; ManagingDirector of Soros PrivateEquity at Soros FundManagement LLC from2002 to 2009. Director of SCP PrivateCredit Income BDC LLCsince 2018, Solar CapitalLtd. since 2009, HiltonGrand Vacations Inc. since2017, GSV Capital Corp.since 2011, Crumbs BakeShop, Inc. from 2009 to2014, and several privatecompanies.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 nominee and other directors is c/o Solar Senior Capital Ltd., 500 Park Avenue, New York, New York 10022.(2)All of the Company’s directors also serve as directors of Solar Capital Ltd. and SCP Private Credit Income BDC LLC, which are investmentcompanies that have each elected to be regulated as a business development company (“BDC”) and for which Solar Capital Partners serves asinvestment adviser. Mr. Potter also serves as a director of GSV Capital Corp., which is a closed-end management investment company that haselected to be regulated as a BDC. 117Table of ContentsInformation 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) Heldwith Company Principal Occupation(s) During Past 5 YearsRichard L. Peteka, 57 Chief Financial Officer, Treasurer andSecretary Chief Financial Officer, Treasurer and Secretary of the Companyand of Solar Capital Ltd. since May 2012 and of SCP Private CreditIncome BDC LLC since June 2018. Mr. Peteka joined the Companyfrom Apollo Investment Corporation, a publicly-traded businessdevelopment company, where he served from 2004 to 2012 as theChief Financial Officer and Treasurer.Guy Talarico, 63 Chief Compliance Officer Chief Compliance Officer of Solar Capital Ltd. since 2009, SolarSenior Capital Ltd. since 2011, Solar Capital Partners, LLC sinceFebruary 2016 and SCP Private Credit Income BDC LLC since June2018 – all affiliated entities; and Chief Executive Officer of AlaricCompliance Services, LLC (successor to EOS Compliance ServicesLLC) since December 2005. In conjunction with this primaryoccupation, Mr. Talarico has served and continues to serve as ChiefCompliance Officer for other business development companies,funds, and/or investment advisers who are not affiliated with theSolar 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.solarseniorcap.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 “audit 118Table of Contentscommittee 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 Senior Capital Ltd., c/o Richard L. Peteka, Corporate Secretary, 500 Park Avenue, New York, New York 10022. Allstockholder communications received in this manner will be 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.solarseniorcap.com . The Company intends to disclose amendments to or waivers from a required provision of the code of ethics onForm 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. 119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 $64,500 — — $64,500 David S. Wachter $62,000 — — $62,000 Leonard A. Potter $61,250 — — $61,250 (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 $50,000. The independent directors also receive $1,250 ($500 if participating telephonically) plusreimbursement of reasonable out-of-pocket expenses incurred in connection with attending each board meeting and $500 plus reimbursement ofreasonable out-of-pocket expenses incurred in connection with each committee meeting attended. In addition, the Chairman of the AuditCommittee receives an annual fee of $3,750, the Chairman of the Nominating and Corporate Governance Committee receives an annual fee of$1,250 and the Chairman of the Compensation Committee receives an annual fee of $1,250. Further, we purchase directors’ and officers’ liabilityinsurance on behalf of our directors and officers. In addition, no compensation was paid to directors who are interested persons of the Companyas 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.solarseniorcap.com. The charter sets forth the responsibilities of the Compensation Committee. The Compensation Committee isresponsible for reviewing and recommending for approval to our board of directors the Advisory Agreement and the Administration Agreement. Inaddition, although we do not directly compensate our executive officers currently, to the extent that we do so in the future, the CompensationCommittee would also be responsible for reviewing and evaluating their compensation and making recommendations to the board of directorsregarding their compensation. Lastly, the compensation committee would produce a report on our executive compensation practices and policies forinclusion in our proxy statement if required by applicable proxy rules and regulations and, if applicable, make recommendations to the board ofdirectors on matters related to compensation generally. The Compensation Committee has the authority to engage compensation consultants and todelegate their duties and responsibilities to a member or to a subcommittee of the Compensation Committee. The members of the CompensationCommittee are Messrs. Hochberg, Wachter and Potter, all of whom are considered independent under the rules of the NASDAQ Stock Market and arenot “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 CompensationCommittee. 120Table of ContentsCompensation 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 other boardcommittee performing equivalent functions) of any entities that had one or more executive officers serve on the Compensation Committee of theCompany 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 on executiveofficer 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 nominee for director, the Company’sexecutive officers, each person known to us to beneficially own 5% or more of the outstanding shares of our common stock, and the executive officersand 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) 868,186 5.4% Bruce Spohler(3) 539,017 3.4% Independent Directors Steven Hochberg 20,000 * Leonard A. Potter 6,250 * David S. Wachter 8,863 * Executive Officers Richard L. Peteka 6,250 * Guy Talarico — — All executive officers and directors as a group (7 persons) 913,549 5.7% John W. Jordan II(5) 981,427 6.1% JPMorgan Chase & Co. (6) 805,964 5.0% *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 16,040,485 shares of the Company’s common stock issued and outstanding as of February 15, 2019. 121Table of Contents(3)Includes 455,500 shares held by Solar Senior Capital Investors, LLC and 100 shares held by Solar Capital Management, LLC, a portion of bothof which may be deemed to be indirectly beneficially owned by Michael S. Gross and by Bruce Spohler by virtue of their collective ownershipinterests therein. Also includes 79,417 shares held by Solar Capital Partners Employee Stock Plan LLC, which is controlled by Solar CapitalPartners, LLC. Mr. Gross and Mr. Spohler may be deemed to indirectly beneficially own a portion of the shares held by Solar Capital PartnersEmployee Stock Plan LLC by virtue of their collective ownership interest in Solar Capital Partners, LLC. Each of Mr. Gross and Mr. Spohlerdisclaim beneficial ownership of any shares of our common stock directly held by Solar Capital Partners Employee Stock Plan LLC, SolarSenior Capital Investors, LLC or Solar Capital Management, LLC, except to the extent of their respective pecuniary interest therein.(4)Includes (i) 4,844 shares directly held by Michael S. Gross’ profit sharing plan (the “Profit Sharing Plan”), which may be deemed to be directlybeneficially owned by Mr. Gross as the sole participant in the Profit Sharing Plan, and (ii) 96,717 shares directly held by a grantor retainedannuity trust (“GRAT”) setup by and for Michael S. Gross. As the sole trustee of the GRAT, Mr. Gross may be deemed to directly beneficially ownall of the shares held by the GRAT.(5)Based on information contained in Schedule 13G filed on March 28, 2018 by John W. Jordan II. Includes 856,726 shares held by The John W.Jordan II Revocable Trust, a trust formed under the laws of Illinois (the “JWJ Trust”) and 124,701 shares held by The GSJ 2003 Trust.Mr. Jordan is the trustee of the JWJ Trust and the GSJ 2003 Trust and may be deemed to have voting and dispositive power with respect to theshares of our common stock held by these trusts. The address for Mr. Jordan is 875 North Michigan Avenue, Suite 4020, Chicago, Illinois60611.(6)Based on information contained in Schedule 13G filed on January 14, 2019 by JPMorgan Chase & Co. Such securities are held by certaininvestment vehicles controlled and/or managed by JPMorgan Chase & Co. or its affiliates. The address for JPMorgan Chase & Co. is 270 ParkAvenue, New York, NY 10022.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 part of a“family of investment companies,” as that term is defined in the 1940 Act. Name of Director Dollar Range of EquitySecurities BeneficiallyOwned(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 $16.79 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. 122Table of ContentsSolar 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 Capital Ltd., a publicly traded BDC, which focuses on investing primarily in senior secured loans, mezzanine loans and equity securities. Inaddition, Michael S. Gross, our Chairman and Chief Executive Officer, Bruce Spohler, our Chief Operating Officer, and Richard L. Peteka, our ChiefFinancial Officer, serve in similar capacities for Solar 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 Senior Capital Ltd., Gemino Healthcare Finance, LLC and North Mill Capital LLC. Thesetransactions may occur in the normal course of business. No administrative fees are paid to Solar Capital Partners by Gemino Healthcare Finance, LLCor North Mill Capital 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 Capital Ltd., and Solar Capital Partners received an exemptiveorder that supersedes the Prior Exemptive Order (the “New 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 New Exemptive Order are otherwisesubstantially similar to the Prior Exemptive Order. We believe that it will be advantageous for us to co-invest with funds managed by Solar CapitalPartners where such investment is consistent with the investment objectives, investment positions, investment policies, investment strategy,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 Senior Capital.” In addition, pursuant to the terms of the Administration Agreement, SolarCapital Management 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 re-approve the Advisory Agreement between the Company andSolar Capital Partners. In its consideration of the re-approval of the Advisory Agreement, the board of directors focused on information it had receivedrelating to, 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 123Table of Contents objectives and in comparison to the performance of the Company’s peer group and relevant market indices, and concluded that suchadvisory and other services are satisfactory and the Company’s investment performance is reasonable; • 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 Capital Ltd. and to SCP Private Credit Income BDC LLC, andcomparative data regarding the advisory fees charged by other investment advisers to business development companies with similarinvestment 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. 124Table of ContentsIn 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) provides that a director of a BDC, shall be considered to be independent if he or sheis not an “interested person” of the Company, as defined in Section 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 Senior 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 $275.5 $290.0 Audit-Related Fees 28.5 35.5 Tax Fees 38.0 35.8 All Other Fees — — Total Fees: $342.0 $361.3 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. 125Table of ContentsPre-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 firm (“KPMG”). The policy requires that the Audit Committeepre-approve the audit and non-audit services performed by the independent auditor in order to assure that the provision of such service does not impairthe 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. 126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: Management’s Report on Internal Control over Financial Reporting 78 Report of Independent Registered Public Accounting Firm 79 Consolidated Statements of Assets & Liabilities as of December 31, 2018 and December 31, 2017 81 Consolidated Statements of Operations for the years ended December 31, 2018, 2017 and 2016 82 Consolidated Statements of Changes in Net Assets for the years ended December 31, 2018, 2017 and 2016 83 Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016 84 Consolidated Schedules of Investments as of December 31, 2018 and December 31, 2017 85 Notes to Consolidated Financial Statements 91 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(1)10.1 Dividend Reinvestment Plan(1)10.2 First Amended and Restated Investment Advisory and Management Agreement by and between Registrant and Solar Capital Partners,LLC(5)10.3 Form of Custody Agreement(4)10.4 Amended and Restated Administration Agreement by and between Registrant and Solar Capital Management, LLC(4)10.5 Form of Indemnification Agreement by and between Registrant and each of its directors(1)10.6 Trademark License Agreement by and between Registrant and Solar Capital Partners, LLC(1)10.7 Form of Share Purchase Agreement by and between Registrant and Solar Senior Capital Investors, LLC(1)10.8 Form of Amendment No. 1 to Share Purchase Agreement by and between Registrant and Solar Senior Capital Investors, LLC(2)10.9 Form of Contribution Agreement, dated as of August 26, 2011, by and between SUNS SPV LLC, as the contributee, and Solar SeniorCapital Ltd., as the contributor(3)10.10 Form of Loan and Servicing Agreement, dated as of August 26, 2011 (as amended through the Sixth Amendment dated as of June 1,2018), by and among the Registrant, as the servicer and the transferor, SUNS SPV LLC, as the borrower, each of the conduit lendersfrom time to time party thereto, each of the liquidity banks from time to time party thereto, each of the lender agents from time to timeparty thereto, Citibank, N.A., as the administrative agent and collateral agent, and Wells Fargo Bank, N.A., as the account bank, thebackup servicer and the collateral custodian(7) 127Table of Contents10.11 Consent and Omnibus Amendment to Transaction Documents by and among the Registrant, FLLP 2015-1, 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(6)14.2 Code of Business Conduct(4)21.1 Subsidiaries of Solar Senior 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 Gemino Healthcare Finance, LLC and Subsidiary Consolidated Financial Statements years ended December 31, 2018 and December 31,2017*99.2 North Mill Capital LLC Consolidated Financial Statements year ended December 31, 2018 and period ended December 31, 2017* (1)Previously filed in connection with Solar Senior Capital Ltd.’s registration statement on Form N-2 (File No. 333-171330) filed on February 14,2011.(2)Previously filed in connection with Solar Senior Capital Ltd.’s report on Form 10-K filed on February 22, 2012.(3)Previously filed in connection with Solar Senior Capital Ltd.’s report on Form 8-K filed on August 31, 2011.(4)Previously filed in connection with Solar Senior Capital Ltd.’s report on Form 10-K filed on February 25, 2014.(5)Previously filed in connection with Solar Senior Capital Ltd.’s report on Form 10-Q filed on August 2, 2016.(6)Previously filed in connection with Solar Senior Capital Ltd.’s registration statement on Form N-2 (File No. 333-223830) filed on March 21,2018.(7)Previously filed in connection with Solar Senior Capital Ltd.’s report on Form 10-Q filed on August 6, 2018.*Filed herewith.c. Consolidated Financial Statement SchedulesSeparate Financial Statements of Subsidiaries Not Consolidated:Consolidated Financial Statements for Gemino Healthcare Finance, LLC and Subsidiary years ended December 31, 2018 and December 31, 2017are attached as Exhibit 99.1 hereto. Consolidated Financial Statements for North Mill Capital LLC year ended December 31, 2018 and period endedDecember 31, 2017 are attached as Exhibit 99.2 hereto. Item 16.Form 10-K SummaryNone. 128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 SENIOR CAPITAL LTD.By: /S/ MICHAEL S. GROSS Michael S. GrossChief Executive Officer, President, Chairman of the Boardand DirectorDate: 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 of the Boardand Director (Principal Executive Officer)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 Financial Officer) andSecretary 129Exhibit 10.11EXECUTION VERSIONCONSENT AND OMNIBUS AMENDMENTTHIS CONSENT AND OMNIBUS AMENDMENT TO TRANSACTION DOCUMENTS (this “Amendment”) is made as of December 19, 2018,by and among:(1) FLLP 2015-1, LLC, a Delaware limited liability company, as the borrower (together with its successors and assigns in such capacity, the“Borrower”);(2) SOLAR SENIOR CAPITAL LTD., a Maryland corporation, as servicer (together with its successors and assigns in such capacity, the“Servicer”);(3) SOLAR SENIOR CAPITAL LTD., a Maryland corporation, as transferor (in such capacity, the “Transferor”);(4) EACH OF THE CONDUIT LENDERS FROM TIME TO TIME PARTYHERETO (together with its respective successors and assigns in such capacity, each a “Conduit Lender” and collectively, the “ConduitLenders”);(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 SWHEREAS, the Borrower, the Servicer, First Lien Loan Program LLC, as transferor (the “Existing Transferor”), the Administrative Agent, each ofthe 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, theCollateral Agent and the Collateral Custodian are parties to that certain Loan and Servicing Agreement dated as of February 13, 2015 (such agreementas amended, modified, supplemented, waived or restated from time to time, the “Agreement”);WHEREAS, First Lien Loan Program LLC will merge with and into Solar Senior Capital Ltd. on the date hereof (the “Transferor Merger”);WHEREAS, Solar Senior Capital Ltd. agrees to act in the capacity of transferor under the Agreement from and after the date hereof;WHEREAS, pursuant to the Agreement, the Servicer is not permitted to enter into the Transferor Merger without the consent of theAdministrative 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 First Lien LoanProgram LLC Purchase Agreement, dated as of September 14, 2018, by and among First Lien Loan Program LLC, Solar Senior Capital Ltd., as buyer,Voya Retirement Insurance and Annuity 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 Sale and Transferor Merger 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, and pursuant to Section 5.04(a) of the Agreement, the Administrative Agent hereby consents to the Transferor Merger. In connection with theTransferor Merger, 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 “First Lien Loan Program LLC, a Delawarelimited liability 2company” or “First Lien Loan Program LLC” shall be deleted in its entirety and the text “Solar Senior Capital Ltd., a Maryland corporation” or“Solar Senior Capital Ltd.”, as the case may be, shall be inserted in the place thereof, and Solar Senior Capital Ltd. hereby agrees to assume theobligations of First Lien Loan 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.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; 3(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;(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; 4(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 Transferor Merger and has received all necessary certifications in connection with the Transferor Merger inaccordance with the Transaction Documents; and(g) the Administrative Agent shall have received a financing statement naming Solar Senior Capital Ltd., in its capacity of Transferor, asdebtor, 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 Senior Capital Ltd. hereby agrees to be bound by the terms of the Purchase and SaleAgreement, in its capacity as the Servicer thereunder. Without limiting the generality of the foregoing, in the event that, notwithstanding the intent ofthe parties to the Purchase and Sale Agreement, the Sale Portfolio (as defined in the Purchase and Sale Agreement) is held to continue to be property ofSolar Senior Capital Ltd., then Solar Senior Capital Ltd. agrees to be bound by Section 2.4 of the Purchase and Sale Agreement and hereby grants to theBorrower a first priority security interest (subject only to Permitted Liens) in all of Solar Senior Capital Ltd.’s right, title and interest in and to the SalePortfolio and all amounts payable to the holders of the Sale Portfolio in accordance with the terms thereof and all proceeds of the conversion, voluntaryor involuntary, of the foregoing into cash, instruments, securities or other property, including all amounts from time to time held or invested in theCollection Account, whether in the form of cash, instruments, securities or other property, to secure the prompt and complete payment of a loan deemedto have been made in an amount equal to the aggregate Purchase Price (as defined in the Purchase and Sale Agreement) of the Sale Portfolio togetherwith all of the other obligations of Solar Senior 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.(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. 5(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. FLLP 2015-1, LLC, as the Borrower, debtor and purchaserBy: /s/ Richard Peteka Name: Richard Peteka Title: Chief Financial Officer and Secretary SOLAR SENIOR CAPITAL LTD., as the ServicerBy: /s/ Richard Peteka Name: Richard Peteka Title: Chief Financial Officer and Secretary[SIGNATURES CONTINUE ON THE FOLLOWING PAGE] [Signature Page to Omnibus Amendment] SOLAR SENIOR 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, as the 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, as an Institutional LenderBy: /s/ Ben Love Name: Ben Love Title: Vice President [Signature Page to Omnibus Amendment]WELLS FARGO BANK, NATIONAL ASSOCIATION, as the Collateral Agent, Collateral Custodian, Securities Intermediary 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 Fourth Amendment Up to $75,000,000LOAN AND SERVICING AGREEMENTDated as of February 13, 2015amongFLLP 2015-1, LLC,as the BorrowerSOLAR SENIOR CAPITAL LTD.,as the TransferorSOLAR SENIOR 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 44 Section 1.03 Computation of Time Periods 44 Section 1.04 Interpretation 44 ARTICLE II. THE FACILITY 46 Section 2.01 Variable Funding Note and Advances 46 Section 2.02 Procedure for Advances 47 Section 2.03 Determination of Yield 48 Section 2.04 Remittance Procedures 48 Section 2.05 Instructions to the Collateral Agent and the Account Bank 53 Section 2.06 Borrowing Base Deficiency Payments 53 Section 2.07 Substitution and Sale of Loan Assets; Affiliate Transactions 54 Section 2.08 Payments and Computations, Etc. 58 Section 2.09 Non-Usage Fee 59 Section 2.10 Increased Costs; Capital Adequacy 60 Section 2.11 Taxes 62 Section 2.12 Collateral Assignment of Agreements 64 Section 2.13 Grant of a Security Interest 64 Section 2.14 Evidence of Debt 65 Section 2.15 Survival of Representations and Warranties 65 Section 2.16 Release of Loan Assets 65 Section 2.17 Treatment of Amounts Received by the Borrower 66 Section 2.18 Prepayment; Termination 66 Section 2.19 Collections and Allocations 67 Section 2.20 Reinvestment of Principal Collections 68 Section 2.21 Additional Lenders 69 Section 2.22 Defaulting Lenders 70 ARTICLE III. CONDITIONS PRECEDENT 71 Section 3.01 Conditions Precedent to Effectiveness 71 Section 3.02 Conditions Precedent to All Advances 72 Section 3.03 Advances Do Not Constitute a Waiver 74 Section 3.04 Conditions to Acquisitions of Loan Assets 75 -i-ARTICLE IV. REPRESENTATIONS AND WARRANTIES 76 Section 4.01 Representations and Warranties of the Borrower 76 Section 4.02 Representations and Warranties of the Borrower Relating to the Agreement and the Collateral Portfolio 85 Section 4.03 Representations and Warranties of the Servicer 86 Section 4.04 Representations and Warranties of the Collateral Agent 89 Section 4.05 Representations and Warranties of each Lender 90 Section 4.06 Representations and Warranties of the Collateral Custodian 90 ARTICLE V. GENERAL COVENANTS 91 Section 5.01 Affirmative Covenants of the Borrower 91 Section 5.02 Negative Covenants of the Borrower 98 Section 5.03 Affirmative Covenants of the Servicer 101 Section 5.04 Negative Covenants of the Servicer 106 Section 5.05 Affirmative Covenants of the Collateral Agent 107 Section 5.06 Affirmative Covenants of the Collateral Custodian 108 Section 5.07 Negative Covenants of the Collateral Custodian 108 ARTICLE VI. ADMINISTRATION AND SERVICING OF CONTRACTS 108 Section 6.01 Appointment and Designation of the Servicer 108 Section 6.02 Duties of the Servicer 110 Section 6.03 Authorization of the Servicer 113 Section 6.04 Collection of Payments; Accounts 114 Section 6.05 Realization Upon Loan Assets 116 Section 6.06 Servicing Compensation 116 Section 6.07 Payment of Certain Expenses by Servicer 116 Section 6.08 Reports to the Administrative Agent; Account Statements; Servicing Information 117 Section 6.09 Annual Statement as to Compliance 118 Section 6.10 Annual Independent Public Accountant or Other Third Party’s Servicing Reports 119 Section 6.11 The Servicer Not to Resign 120 ARTICLE VII. EVENTS OF DEFAULT 120 Section 7.01 Events of Default 120 Section 7.02 Additional Remedies of the Administrative Agent 123 ARTICLE VIII. INDEMNIFICATION 126 Section 8.01 Indemnities by the Borrower 126 Section 8.02 Indemnities by Servicer 129 -ii-Section 8.03 Legal Proceedings. 131 Section 8.04 After-Tax Basis 132 ARTICLE IX. THE ADMINISTRATIVE AGENT AND LENDER AGENTS 132 Section 9.01 The Administrative Agent 132 Section 9.02 The Lender Agents 135 ARTICLE X. COLLATERAL AGENT 138 Section 10.01 Designation of Collateral Agent 138 Section 10.02 Duties of Collateral Agent 138 Section 10.03 Merger or Consolidation 141 Section 10.04 Collateral Agent Compensation 141 Section 10.05 Collateral Agent Removal 141 Section 10.06 Limitation on Liability 141 Section 10.07 Collateral Agent Resignation 143 ARTICLE XI. MISCELLANEOUS 143 Section 11.01 Amendments and Waivers 143 Section 11.02 Notices, Etc. 144 Section 11.03 No Waiver; Remedies 146 Section 11.04 Binding Effect; Assignability; Multiple Lenders 146 Section 11.05 Term of This Agreement 147 Section 11.06 GOVERNING LAW; JURY WAIVER 147 Section 11.07 Costs, Expenses and Taxes 147 Section 11.08 No Proceedings 148 Section 11.09 Recourse Against Certain Parties 149 Section 11.10 Execution in Counterparts; Severability; Integration 150 Section 11.11 Consent to Jurisdiction; Service of Process 150 Section 11.12 Characterization of Conveyances Pursuant to the Purchase and Sale Agreement 151 Section 11.13 Confidentiality 152 Section 11.14 Non-Confidentiality of Tax Treatment 153 Section 11.15 Waiver of Set Off 154 Section 11.16 Headings and Exhibits 154 Section 11.17 Ratable Payments 154 Section 11.18 Failure of Borrower or Servicer to Perform Certain Obligations 154 Section 11.19 Power of Attorney 154 Section 11.20 Delivery of Termination Statements, Releases, etc. 155 Section 11.21 Intent of the Parties 155 -iii-ARTICLE XII. COLLATERAL CUSTODIAN 155 Section 12.01 Designation of Collateral Custodian 155 Section 12.02 Duties of Collateral Custodian 155 Section 12.03 Merger or Consolidation 158 Section 12.04 Collateral Custodian Compensation 159 Section 12.05 Collateral Custodian Removal 159 Section 12.06 Limitation on Liability 159 Section 12.07 Collateral Custodian Resignation 160 Section 12.08 Release of Documents 160 Section 12.09 Return of Required Loan Documents 161 Section 12.10 Access to Certain Documentation and Information Regarding the Collateral Portfolio; Audits of Servicer 162 Section 12.11 Bailment 162 -iv-LIST OF SCHEDULES AND EXHIBITSSCHEDULES 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 Form of Variable Funding NoteEXHIBIT 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 Form of Transferee LetterEXHIBIT 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 DividendANNEXES ANNEX A CommitmentsThis LOAN AND SERVICING AGREEMENT is made as of February 13, 2015, among:(1) FLLP 2015-1, LLC, a Delaware limited liability company (together with its successors and assigns in such capacity, the “Borrower”);(2) SOLAR SENIOR CAPITAL LTD., a Maryland corporation, as the Transferor (as defined herein);(3) SOLAR SENIOR 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 butsolely as the collateral agent (together with its successors and assigns in such capacity, the “Collateral Agent”), not in its individual capacity butsolely as the collateral custodian (together with its successors and assigns in such capacity, the “Collateral Custodian”) and not in its individualcapacity but solely as 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 under the Variable Funding Note(s) from time to time in an aggregate principal amount not to exceed the Borrowing Base. The proceeds ofthe Advances will be used to finance the Borrower’s origination of Eligible Loan Assets or purchase, on a “true sale” basis, of Eligible Loan Assetsfrom (i) the Transferor, pursuant to the Purchase and Sale Agreement between the Borrower and the Transferor or (ii) other third parties, in each case,with the prior written approval of the Administrative 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 otheraccrued and unpaid expenses (including reasonable and documented attorneys’ fees, costs and expenses) and indemnity amounts in each case payableby the Borrower 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 paidas interest as it accrues.“Action” has the meaning assigned to that term in Section 8.03.“Additional Amount” has the meaning assigned to that term in Section 2.11(a).“Adjusted Borrowing Value” means for any Eligible Loan Asset, for any date of determination, an amount equal to the lower of: (i) theOutstanding Balance of such Eligible Loan Asset at such time and (ii) the Assigned Value of such Eligible Loan Asset at such time multiplied by theOutstanding Balance of such Eligible Loan Asset at such time; provided that (A) the parties hereby agree that the Adjusted Borrowing Value of anyLoan Asset that is no longer an Eligible Loan Asset shall be zero and (B) the aggregate Adjusted Borrowing Value with respect to all Eligible LoanAssets that are loans to a single Obligor and its Affiliates shall not exceed $5,500,000; 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 $5,500,000 so long as(x) such Adjusted Borrowing Value does not -2-exceed $7,000,000. For the avoidance of doubt, companies owned by the same Financial Sponsor shall not be considered “Affiliates” for purposes ofthis definition of “Adjusted Borrowing Value”.“Administrative Agent” means Wells Fargo Bank, National Association, in its capacity as administrative agent for the Lender Agents,together with 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 suchPerson. For the purposes of this definition, “control,” when used with respect to any specified Person, means the power to vote 20% or more of thevoting securities of such Person or to direct the management and policies of such Person, directly or indirectly, whether through the ownership ofvoting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing; provided that forpurposes of determining whether any Loan Asset is an Eligible Loan Asset, the term Affiliate shall not include any Affiliate relationship which mayexist solely as a result of direct or indirect ownership of, or control by, a common Financial Sponsor; provided, further, that for purposes ofSection 2.07(e), 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 the Purchase and SaleAgreement, the term “Affiliate” shall not include any portfolio company of the Servicer or the Transferor, as applicable, that is not consolidated on thefinancial 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, payingand/or collateral agents who receive payments and hold the collateral pledged by the related Obligor on behalf of all lenders with respect to the relatedcredit facility. -3-“Aggregate Unfunded Exposure Amount” means, as of any date of determination, the sum of the Unfunded Exposure Amounts of allDelayed Draw 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 modifiedfrom time 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 Transferoror any 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 anyof their respective 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,temporary and 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” or any comparable definition in the LoanAgreement for such Loan Asset.“Applicable Percentage” means, (i) with respect to any Traditional Middle Market Loan Asset, 67.5% and (ii) with respect to any LargeMiddle Market Loan Asset, 70.0%.“Applicable Prime Rate” means with respect to any Loan Asset, the prime or base rate (or any comparable definition) applicable to suchLoan Asset pursuant to the Loan Agreement for such Loan Asset.“Applicable Spread” shall be determined in accordance with the following formula, rounded to four decimal places; provided that, in lieuof the following formula, any time after the occurrence and during the continuance of an Event of Default, the Applicable Spread shall be 4.50% perannum for all Advances. Applicable Spread = (ASLMML x PercentageLMML) + (ASTMML x PercentageTMML)where: ASLMML = 2.25%; ASTMML = 2.50% -4- PercentageLMML = AverageLMML / AverageAgg; PercentageTMML = AverageTMML / AverageAgg; AverageLMML = (the aggregate Adjusted Borrowing Value of all Large Middle Market Loan Assets on the first day of the relatedRemittance Period + the aggregate Adjusted Borrowing Value of all Large Middle Market Loan Assets on the lastday of the related Remittance Period) / 2 AverageTMML = (the aggregate Adjusted Borrowing Value of all Traditional Middle Market Loan Assets on the first day of the relatedRemittance Period + the aggregate Adjusted Borrowing Value of all Traditional Middle Market Loan Assets on thelast day of the related Remittance Period) / 2 AverageAgg = AverageLMML + AverageTMML“Approval Notice” means, with respect to any Eligible Loan Asset, the written notice, in substantially the form attached hereto as ExhibitA, evidencing the approval by the Administrative Agent, in its sole discretion, of the acquisition or origination, as applicable, of such Eligible LoanAsset by the Borrower.“Asset Coverage Ratio” means the ratio, determined on a consolidated basis, without duplication and in accordance with GAAP of (a) thefair market value of the total assets of the BDC and its consolidated Subsidiaries as required by, and in accordance with, GAAP and Applicable Lawand any orders of the Securities and Exchange Commission issued to the BDC, to be determined by the board of directors of the BDC and reviewed byits auditors, 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 ofsuch Eligible Loan Asset or (ii) the value (expressed as a percentage of the Outstanding Balance of such Eligible Loan Asset) of such Eligible LoanAsset as determined by the Administrative Agent in its sole discretion as of the Cut-Off Date of such Eligible Loan Asset, subject to the followingterms:(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. -5-(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: Loan AssetsNet 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 0.00x Designated Loan AssetsTotal 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.“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 -6-Collection Account from time to time, and all proceeds of Permitted Investments with respect to the Controlled Accounts; provided that, for theavoidance of doubt, “Available Collections” shall not include amounts on deposit in the Unfunded Exposure Account which do not represent proceedsof 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 theliquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, theappointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of itsassets under any Bankruptcy Laws, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency,reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayedand in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary caseunder the federal bankruptcy laws or other 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 similarofficial) for such Person or all or substantially all of its assets under any Bankruptcy Laws or shall make any general assignment for thebenefit of creditors, or shall fail to, or admit in writing its inability to, pay its debts generally as they become due, or, if a corporation orsimilar entity, its board of directors 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 therights of creditors generally.“Bankruptcy Proceeding” means any case, action or proceeding before any court or other Governmental Authority relating to anyBankruptcy Event.“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 Rateplus 0.5%.“BDC” means Solar Senior Capital Ltd., a Maryland corporation that has elected to be regulated as a business development company underthe 1940 Act. -7-“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 OwnershipRegulation, which certification shall be substantially similar in form and substance to the form of Certification Regarding Beneficial Owners of LegalEntity Customers 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, asmodified by Section 3(42) of ERISA, and includes an employee benefit plan that is subject to the fiduciary responsibility provisions of Title I ofERISA, a plan that 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”.“Borrowing Base Certificate” means a certificate setting forth the calculation of the Borrowing Base as of the applicable date ofdetermination substantially in the form of Exhibit B hereto, prepared by the Servicer. -8-“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 than lost profits), if any, related to such repayment, based upon the assumption that the Lender funded its loan commitment in the LondonInterbank Eurodollar market and using any reasonable attribution or averaging methods which the Lender deems appropriate and practical, it herebybeing understood that the amount of any loss, costs or expense payable by the Borrower to any Lender as Breakage Fee shall be determined in therespective Lender 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,New York, 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 leaseof (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classifiedand accounted 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 Solar to own, directly or indirectly, 100% of the limited liability company membership interests in the Borrower;(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(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) -9-“Closing Date” means February 13, 2015.“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 thisAgreement.“Collateral Custodian Expenses” means the expenses set forth in the WFBNA Fee Letter that are payable to the Collateral Custodian andany other accrued and unpaid expenses (including reasonable and documented attorneys’ fees, costs and expenses) and indemnity amounts in eachcase payable 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, supplementedand/or otherwise 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 chattel paper,electronic chattel paper, copyrights, copyright licenses, equipment, fixtures, contract rights, general intangibles, instruments, certificates of deposit,certificated securities, uncertificated securities, financial assets, securities entitlements, commercial tort claims, deposit -10-accounts, inventory, investment property, letter-of-credit rights, software, supporting obligations, accessions, or other property consisting of, arisingout of, or related to any of 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);(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 allYield and Fees and all other Obligations (other than contingent indemnification and reimbursement obligations which are unknown, unmatured and/orfor which 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 thecommercial paper market.“Commitment” means, with respect to each Lender, (i) prior to the end of the Reinvestment Period or for purposes of Advances madepursuant to Section 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 totime in accordance with the terms hereof) or the amount set forth as such Lender’s “Commitment” on Schedule I to the Joinder Supplement relating tosuch Lender, as applicable and (ii) on or after the Reinvestment Period (other than for purposes of Advances made pursuant to Section 2.02(f)), suchLender’s Pro Rata Share of the aggregate Advances Outstanding.“Conduit Lender” means each commercial paper conduit as may from time to time become a Lender hereunder by executing and deliveringa Joinder Supplement to the Administrative Agent and the Borrower as contemplated by Section 2.21. -11-“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of aPerson, 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,the Account 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 withinone Business Day of the date required to be funded by it hereunder, (ii) has otherwise failed to pay over to the Administrative Agent or any otherLender any 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 agood faith dispute, (iii) has notified the Borrower, the Administrative Agent or any other Lender in writing that it does not intend to comply with anyof its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply or has failed to complywith its funding obligations under this Agreement or generally under other agreements in which it commits or is obligated to extend credit, or (iv) hasbecome or is insolvent or has become the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee or custodianappointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding orappointment.“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.“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 befully funded 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. -12-“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.“EBITDA” means, with respect to any period and any Loan Asset, the meaning of “EBITDA”, “Adjusted EBITDA” or any comparabledefinition in the Loan Agreement for each such Loan Asset (together with all add-backs and exclusions as designated in such Loan Agreement), and inany case that “EBITDA”, “Adjusted EBITDA” or such comparable definition is not defined in such Loan Agreement, an amount, for the principalobligor on such Loan Asset and any of its parents or Subsidiaries that are obligated pursuant to the Loan Agreement for such Loan Asset (determinedon a consolidated basis without duplication in accordance with GAAP) equal to earnings from continuing operations for such period plus interestexpense, 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 clauselisted below that the Administrative Agent in its sole discretion has, prior to the applicable Cut-Off Date, waived in writing with respect to such LoanAsset, 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 Traditional Middle Market Loan Asset or a Large Middle Market LoanAsset.(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 United States dollars.(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 requiredto be registered 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. -13-(viii) Each such Loan Asset constitutes a legal, valid, binding and enforceable obligation of the Obligor thereunder and eachguarantor thereof, enforceable against each such Person in accordance with its terms, subject to usual and customary bankruptcy,insolvency and equity limitations.(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,has been 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 LoanAsset.(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(whether or not having the force of law) from any banking or other Governmental Authority having jurisdiction over the AdministrativeAgent, the Lenders 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 Borrowerand able to be Pledged to the Collateral Agent, on behalf of the Secured Parties, without the consent of the Obligor or (b) all consentsnecessary for assignment of such Loan Asset to the Borrower and Pledge to the Collateral Agent for the benefit of the Secured Parties havebeen obtained.(xv) The funding obligations for each such Loan Asset and the Loan Agreement under which such Loan Asset was created have beenfully satisfied and all sums available thereunder have been fully advanced, or if such Loan Asset 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 the Borrower, deposited into theUnfunded Exposure Account an amount in United States dollars equal to the Unfunded Exposure Equity Amount or (b) the UnfundedExposure 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 ofany Person, right of rescission, set-off, counterclaim or defense, including the defense of usury, by the related Obligor and (b) the LoanAgreements with respect to such Loan Asset contain provisions substantially to the effect that the payment -14-obligations of the Obligor(s) thereunder are absolute and unconditional without any right of rescission, setoff, counterclaim or defenseagainst the Transferor or other assignor, as applicable, and the assignees thereof and the Loan Agreements with respect to the Loan Assetprovide for an affirmative waiver by the related Obligor of all rights of rescission, set-off and counterclaim against the Transferor and itsassignees.(xvii) With respect to each such Loan Asset acquired by the Borrower from the Transferor under the Purchase and Sale Agreement, bythe Cut-Off Date on which such Loan Asset is Pledged under the Agreement and on each day thereafter on which the Borrower continues toown such Loan Asset, the Transferor will have caused its master computer records relating to such Loan Asset to be clearly andunambiguously marked to show 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 partor in full.(xix) No such Loan Asset has been sold, transferred, assigned or pledged by the Borrower to any Person other than the CollateralAgent for the 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, assignmentand conveyance of such Loan Asset (and the other Portfolio Assets related thereto) is not subject to and will not result in any tax, fee orgovernmental charge (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 suchLoan Asset and any other documents related thereto.(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 allnecessary licenses and permits to originate such Loan Asset in the State where the Obligor was located and (b) such Loan Asset was sold bythe Transferor to the Borrower under the Purchase and Sale Agreement and, to the extent required by Applicable Law, the Borrower has allnecessary licenses and permits to purchase and own such Loan Assets and enter into Loan Agreements pursuant to which each such LoanAsset was created, in the State where the Obligor is located. -15-(xxiv) As of the related Cut-Off Date, there are no proceedings pending or, to the Borrower’s knowledge, threatened (a) assertinginsolvency of the Obligor of such Loan Asset or (b) wherein the Obligor of such Loan Asset, any other party or any GovernmentalAuthority has alleged that such 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 ingood repair 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, andwill not, be used by the related Obligor in any manner or for any purpose which would result in any material risk of material liability beingimposed upon the 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) withregards to such Loan Asset so long as the Lenders, the Lender Agents and the Administrative Agent, as applicable, have agreed to maintainthe confidentiality of such information in accordance with the provisions of the applicable Loan Agreements.(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.Each Fixed 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 limitation, the completion of due diligence and, if applicable, acollateral assessment as the Transferor or the Servicer on the Borrower’s behalf considered necessary and (ii) is being serviced by theServicer.(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 Custodianwithin five Business Days of the applicable Cut-Off Date. -16-(xxxii) Each such Loan Asset is not an extension of credit to the Obligor for the purpose of (a) making any past due principal, interestor other payments due on such Loan Asset, (b) preventing such Loan Asset or any other loan to the related Obligor from becoming past dueor (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 itsjurisdiction of organization; (b) is a legal operating entity or holding company; (c) has not entered into the Loan Asset primarily forpersonal, family or household purposes; and (d) as of the related Cut-Off Date is not the subject of a Bankruptcy Event, and, as of therelated Cut-Off Date, such Obligor is not in financial distress and has not experienced a material adverse change in its condition, financialor otherwise, in each case, as determined by the Servicer in its reasonable discretion unless approved in writing by the AdministrativeAgent.(xxxiv) To the knowledge of the Servicer and the Borrower, all information provided by the Borrower or the Servicer to theAdministrative Agent in writing with respect to such Loan Asset is true and correct in all material respects as of the date such information isprovided.(xxxv) No Loan Asset is an Equity Security nor does any Loan Asset provide for the conversion into an Equity Security at any timeon or after 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 theBorrower in 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 AdjustedBorrowing Value with respect to all Eligible Loan Assets consisting of Fixed Rate Loan Assets will not exceed, in the aggregate, 10% ofthe Maximum Facility Amount.(xxxviii) As of the related Cut-Off Date such Loan Asset shall not cause Delayed Draw Loan Assets to collectively exceed 10% of theMaximum Facility Amount.(xxxix) Such Loan Asset is not a participation interest in all or a portion of a loan (for the avoidance of doubt, a syndication orco-lending interest which is not documented as a participation interest shall not be deemed a participation interest). -17-“Eligible Loan Asset” means, at any time, a Loan Asset in respect of which each of the representations and warranties contained inSection 4.02 is true 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) any security 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.“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 (withinthe meaning of Section 414(b) of the Code) as that Person, (b) a trade or business (whether or not incorporated) under common control (within themeaning of 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) ofthe Code) as that Person, any corporation described in clause (a) above or any trade or business described in clause (b) above. -18-“Eurodollar Disruption Event” means the occurrence of any of the following: (a) Wells Fargo shall have notified the Administrative Agentof a determination 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 centralbank or other Governmental Authority (whether or not having the force of law) to obtain United States dollars in the London interbank market to fundany Advance, (b) Wells Fargo shall have notified the Administrative Agent of the inability, for any reason, of Wells Fargo or any of its respectiveassignees or participants to determine LIBOR, (c) Wells Fargo, as Lender, shall have notified the Administrative Agent of a determination by WellsFargo, as Lender, or any of its respective assignees or participants that the rate at which deposits of United States dollars are being offered to WellsFargo or any of its respective assignees or participants in the London interbank market does not accurately reflect the cost to Wells Fargo or itsassignee or participant of making, funding or maintaining any Advance or (d) Wells Fargo shall have notified the Administrative Agent of the inabilityof Wells Fargo or any of its respective assignees or participants to obtain United States dollars in the London interbank market to make, fund ormaintain 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 promulgatedthereunder.“Excluded Amounts” means (a) any amount received in the Collection Account with respect to any Loan Asset included as part of theCollateral Portfolio, which amount is attributable to the payment of any Tax, fee or other charge imposed by any Governmental Authority on suchLoan Asset or on any Underlying Collateral and (b) any amount received in the Collection Account or other Controlled Account representing (i) anyamount representing a reimbursement of insurance premiums, (ii) any escrows relating to Taxes, insurance and other amounts in connection with LoanAssets which are held in an escrow account for the benefit of the Obligor and the secured party pursuant to escrow arrangements under a LoanAgreement and (iii) any amount received in the Collection Account with respect to any Loan Asset retransferred or substituted for upon the occurrenceof a Warranty Event or that is otherwise replaced by a Substitute Eligible Loan Asset, or that is otherwise sold or transferred by the Borrower pursuantto Section 2.07, to the extent such amount is attributable to a time after the effective date of such replacement or sale.“Excluded Taxes” has the meaning assigned to that term in Section 2.11(a).“Facility Attachment Ratio” means, with respect to any Eligible Loan Asset, as of any date of determination, an amount equal to theproduct of (a) the Net Senior Leverage Ratio, (b) the Applicable Percentage and (c) 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 the Facility 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. -19-“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement, any current regulations or officialinterpretations thereof, any agreements entered into pursuant to Section 1471(c)(1) of the Code, and any law implementing an intergovernmentalagreement or approach thereto.“Federal Funds Rate” means, for any period, a fluctuating interest per annum rate equal, for each day during such period, to the weightedaverage of the overnight federal funds rates as in Federal Reserve Board Statistical Release H.15(519) or any successor or substitute publicationselected by the Administrative Agent (or, if such day is not a Business Day, for the next preceding Business Day), or, if for any reason such rate is notavailable on any day, the rate determined, in the sole discretion of the Administrative Agent, to be the rate at which overnight federal funds are beingoffered in the national federal funds market at 9:00 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 FeeLetter.“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,and selling investments (including controlling interests) in otherwise unrelated companies that each are distinct legal entities with separatemanagement, books and records and bank accounts, whose operations are not integrated with one another and whose financial condition andcreditworthiness are independent of the other companies so owned by such Person.“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 theApplicable Prime Rate or the Applicable LIBOR Rate, plus some specified interest percentage in addition thereto, and the Eligible Loan Asset providesthat such Loan Rate will reset in accordance with customary terms immediately upon any change in the related Applicable Prime Rate or theApplicable LIBOR Rate.“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,any central 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 ofwhich are subject to state statutes regulating investments of and fiduciary obligations with respect to such governmental plans or to state statutes thatimpose prohibitions similar to those contained in Section 406 of ERISA or Section 4975 of the Code. -20-“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,” “Total NetLeverage Ratio” and “Net Senior Leverage Ratio,” the meaning of “Indebtedness” or any comparable definition in the Loan Agreement foreach such Loan Asset, and in any case that “Indebtedness” or such comparable definition is not defined in such Loan Agreement, withoutduplication, (a) all obligations of such entity for borrowed money or with respect to deposits or advances of any kind, (b) all obligations ofsuch entity evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such entity under conditional sale or othertitle retention agreements relating to property acquired by such entity, (d) all obligations of such entity in respect of the deferred purchaseprice of property or services (excluding current accounts payable incurred in the ordinary course of business), (e) all indebtedness of otherssecured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien onproperty owned or acquired by such entity, whether or not the indebtedness secured thereby has been assumed, (f) all guarantees by suchentity of indebtedness of others, (g) all Capital Lease Obligations of such entity, (h) all obligations, contingent or otherwise, of such entityas an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such entity inrespect 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 thedeferred purchase price of property or services (other than current liabilities incurred in the ordinary course of business and payable inaccordance with customary trade practices) or that is evidenced by a note, bond, debenture or similar instrument or other evidence ofindebtedness customary for indebtedness of that type, (b) all obligations of such Person under leases that have been or should be, inaccordance with GAAP, recorded as capital leases, (c) all obligations of such Person in respect of acceptances issued or created for theaccount of such Person, (d) all liabilities secured by any Lien on any property owned by such Person even -21-though such Person has not assumed or otherwise become liable for the payment thereof, (e) all indebtedness, obligations or liabilities ofthat Person in respect of derivatives, and (f) all obligations under direct or indirect guaranties in respect of obligations (contingent orotherwise) to purchase or otherwise acquire, or to otherwise assure a creditor against loss in respect of, indebtedness or obligations of othersof the kind referred to in clauses (a) through (e) of this clause (ii). The amount of any Indebtedness under clause (d) shall be equal to thelesser of (A) the aggregate unpaid amount of the relevant obligations and (B) the fair market value (as determined by such Person in goodfaith) 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.“Indemnifying Party” has the meaning assigned to that term in Section 8.03.“Independent Director” means a natural person who, (A) for the five-year period prior to his or her appointment as Independent Director,has not been, and during the continuation of his or her service as Independent Director is not: (i) an employee, director, stockholder, member, manager,partner or officer of the Borrower or any of its Affiliates (other than his or her service as an Independent Director, independent officer or otherindependent capacity of the Borrower or other Affiliates that are structured to be “bankruptcy remote”); (ii) a customer or supplier of the Borrower orany of its Affiliates (other than his or her service as an Independent Director, independent officer or other independent capacity of the Borrower or otherAffiliates that 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)prior experience as an Independent Director for a corporation or limited liability company whose charter documents required the unanimous consent ofall Independent 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 areapplicable to 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 timebecome a Lender hereunder by executing and delivering a Joinder Supplement to the Administrative Agent and the Borrower as contemplated bySection 2.21. -22-“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 withrespect to 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.“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” orany comparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Interest Coverage Ratio” or such comparabledefinition is not defined in such Loan Agreement, the ratio of (a) EBITDA to (b) Interest.“Joinder Supplement” means an agreement among the Borrower, a Lender, its Lender Agent and the Administrative Agent in the form ofExhibit D to this Agreement (appropriately completed) delivered in connection with a Person becoming a Lender hereunder after the Closing Date.“Large Middle Market Loan Asset” means any Loan Asset that meets the definition of “Traditional Middle Market Loan” and additionally,as of the related Cut-Off Date, has (i) a facility size of $150,000,000 or greater, (ii) trailing twelve month EBITDA as of the Cut-Off Date of at least$35,000,000 and (iii) is held by three (3) or more non-affiliated lenders. For avoidance of doubt, the reference to “facility size” in clause (i) hereofincludes any funded and unfunded commitments of any delayed draw tranche included in such facility so long as such delayed draw tranche isdocumented under the same Loan Agreement, is pari passu with, and has the same stated maturity as, the associated term facility and is to the facilitycurrently held or contemplated for purchase by the Borrower. -23-“Lender” means any Institutional Lender or Conduit Lender, and/or any other Person to whom an Institutional Lender or Conduit Lenderassigns any 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 partyhereto, the Person designated as the “Lender Agent” with respect to such Conduit Lender in the applicable Joinder Supplement and (iii) eachInstitutional Lender 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 oftheir respective successors and assigns.“Lender Fee Letter” means each fee letter agreement that shall be entered into by and among the Borrower, the Servicer, the applicableLender and 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.“LIBOR” means, for any day during the Remittance Period, with respect to any Advance (or portion thereof), (a) the rate per annumappearing on Reuters Screen LIBOR01 Page (or any successor or substitute page) as the London interbank offered rate for deposits in United Statesdollars at approximately 11:00 a.m., London time, for such day; provided that, if such day is not a Business Day, the immediately preceding BusinessDay, 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 anysuccessor or substitute page), the interest rate per annum at which dollar deposits of $5,000,000 and for a three-month maturity are offered by theprincipal London office of Wells Fargo in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, forsuch day. Notwithstanding any other provision in this Agreement, for purposes of calculating the Yield Rate, “LIBOR” shall not at any time be deemedto be lower than 0%.“Lien” means any mortgage or deed of trust, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien(statutory or other), charge, claim, preference, priority or other security interest or preferential arrangement in the nature of a security interest of anykind or nature whatsoever (including any conditional sale, lease or other title retention agreement, sale subject to a repurchase obligation, anyeasement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any ofthe foregoing) or the authorized filing of or agreement to give any financing statement perfecting a security interest under the UCC or comparable lawof any jurisdiction.“Lien Release Dividend” has the meaning assigned to that term in Section 2.07(g). -24-“Lien Release Dividend Date” means the date specified by the Borrower, which date may be any Business Day; provided that writtennotice is given 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 tomake purchases from or advances to, or purchase assets from, any Conduit Lender in order to provide liquidity support for such Conduit Lender’sAdvances hereunder.“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 orcreated and each other agreement that governs the terms of or secures the obligations represented by such Loan Asset or of which the holders of suchLoan Asset are the beneficiaries.“Loan Asset” means any loan originated, sourced or acquired by the Borrower in the ordinary course of its business, which loan includes,without limitation, (i) the Required Loan Documents and Loan Asset File, and (ii) all right, title and interest of the Transferor and/or the Borrower, asapplicable, in and to the loan and any Underlying 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 ofthe Borrower 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 LoanAsset Checklist with respect to such Loan Asset and (b) duly executed originals (to the extent required by the Servicing Standard) and electroniccopies of any 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, asspecified in 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 ScheduleIV. -25-“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 Management Agreement, dated as of February 24, 2011, between Solar SeniorCapital 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 or otherwise), operations, performance or properties of the Transferor, the Servicer or the Borrower, (b) the validity, enforceability orcollectability of this Agreement or any other Transaction Document or the validity, enforceability or collectability of the Loan Assets generally or anymaterial portion of the Loan Assets, (c) the rights and remedies of the Collateral Agent, the Collateral Custodian, the Account Bank, the AdministrativeAgent, any Lender, any Lender Agent and the Secured Parties with respect to matters arising under this Agreement or any other Transaction Document,(d) the ability of each of the Borrower and the Servicer, to perform their respective obligations under this Agreement or any other TransactionDocument, 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 EligibleLoan Asset 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 thatis senior 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); -26-(d) contractually or structurally subordinates such Eligible Loan Asset by operation of a priority of payments, turnover provisions, thetransfer of assets in order to limit recourse to the related Obligor or the granting of Liens (other than Permitted Liens) on any of the UnderlyingCollateral securing such Loan Asset or increases the commitment amount of any loan 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 this clause (e) shall not apply to any release in conjunction with a relatively contemporaneous disposition by therelated 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”, “Total Net LeverageRatio”, “Interest Coverage Ratio” or “Permitted Liens” or any respective comparable definitions in the Loan Agreement for such Eligible LoanAsset or (ii) any term or provision of such Loan Agreement referenced in or utilized in the calculation of the “Net Senior Leverage Ratio”, “TotalNet Leverage Ratio”, “Interest Coverage Ratio” or “Permitted Liens” or any respective comparable definitions for such Eligible Loan Asset, ineither case in a manner that, in the commercially reasonable judgment of the Administrative Agent, is materially adverse to the Secured Parties.“Maximum Facility Amount” means the aggregate Commitments as then in effect, which amount shall not exceed $75,000,000; providedthat at 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, $30,000,000.“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 Affiliateof that Person 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 LeverageRatio” or any comparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Net Senior Leverage Ratio” or suchcomparable definition is not defined in such Loan Agreement, the ratio of (a) all senior Indebtedness of the Primary Obligor with respect to such LoanAsset minus Unrestricted Cash to (b) EBITDA. -27-“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 anddeliver a promissory note to evidence the indebtedness created under such Loan Asset or (ii) require execution and delivery of such a promissory noteonly upon the request of any holder of the indebtedness created under such Loan Asset and as to which the Borrower has not requested a promissorynote from the related Obligor.“Notice of Borrowing” means an irrevocable written notice of borrowing from the Borrower to the Administrative Agent and each LenderAgent in the form attached hereto as Exhibit E.“Notice of Exclusive Control” has the meaning given to such term in the Control Agreement.“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,whether direct or indirect, absolute or contingent, or due or to become due) of the Borrower to the Lenders, the Lender Agents, the AdministrativeAgent, the Account Bank, the Collateral Agent or the Collateral Custodian arising under this Agreement and/or any other Transaction Document andshall include, without limitation, all liability for principal of and interest on the Advances, Breakage Fees, indemnifications and other amounts due orto become 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. -28-“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 itssole discretion; provided that Latham & Watkins LLP and Sutherland Asbill & Brennan LLP shall be considered acceptable counsel for purposes ofthis definition.“Outstanding Balance” means the principal balance of a Loan Asset, expressed exclusive of PIK Interest and accrued interest.“Payment Date” means the 15th calendar day of each January, April, July and October or, if such day is not a Business Day, the nextsucceeding Business Day, commencing in July 2015; 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 interestby, the United States or any agency or instrumentality of the United States, the obligations of which are backed by the full faith and creditof the United States;(ii) demand or time deposits in, certificates of deposit of, demand notes of, or bankers’ acceptances issued by any depositoryinstitution or trust company organized under the laws of the United States or any State thereof (including any federal or state branch oragency of a foreign depository institution or trust company) and subject to supervision and examination by federal and/or state bankingauthorities (including, if applicable, the Collateral Agent, the Collateral Custodian or the Administrative Agent or any agent thereof actingin its commercial capacity); provided that, the short-term unsecured debt obligations of such depository institution or trust company at thetime of such investment, or contractual commitment providing for such investment, are rated at least “A-1” by S&P’s and “P-1” byMoody’s;(iii) commercial paper that (i) is payable in United States 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” byS&P. -29-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 bemade or acquired from or through the Collateral Agent or the Administrative Agent or any of their respective affiliates, or any entity for whom theCollateral Agent, the Administrative Agent, the Collateral Custodian or any of their respective affiliates provides services and receives compensation(so long as such investment 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), unless the Borrower and the Servicer have received the written advice of counselof national reputation experienced in such matters to the contrary (together with an Officer’s Certificate of the Borrower or the Servicer to theAdministrative Agent and the Collateral Agent that the advice specified in this definition has been received by the Borrower and the Servicer), on andafter the Required Sale Date, Permitted Investments may only include obligations or securities that constitute cash equivalents for purposes of therights and assets in paragraph (c)(8)(i)(B) of the exclusions from the definition of “covered fund” for purposes of the Volcker Rule. The CollateralAgent 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 havebeen commenced (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 validitythereof in good faith by appropriate proceedings and with respect to which reserves in accordance with GAAP have been provided on the books of suchPerson, (b) Liens imposed by law, such as materialmen’s, warehousemen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similarLiens, 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 respectto any Underlying Collateral, Liens permitted under the related Loan Agreements that are customary for similar Loan Assets and consistent with theServicing Standard, (d) with respect to Agented Loans, Liens in favor of the lead agent, the collateral agent or the paying agent for the benefit of allholders of indebtedness of such Obligor, and (e) Liens granted pursuant to or by the Transaction Documents.“Person” means an individual, partnership, corporation, company, limited liability company, limited liability partnership, joint stockcompany, trust (including a statutory or business trust), estate, unincorporated association, sole proprietorship, joint venture, nonprofit corporation,group, sector, government (or any agency, instrumentality or political subdivision thereof), territory or other entity or organization.“PIK 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.“PIK Loan Asset” means a Loan Asset which provides for a portion of the interest that accrues thereon to be added to the principal amountof such Loan Asset for some period of the time prior to such Loan Asset requiring the current cash payment of such previously capitalized interest,which cash payment shall be treated as an Interest Collection at the time it is received. -30-“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 orproperty related thereto, including all right, title and interest of the Borrower in and to:(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 oninvestments therein;(iv) any Underlying Collateral securing a Loan Asset and all Recoveries related thereto, all payments paid in respect thereof and allmonies due, 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 totime purporting to secure or support payment of any Loan Asset, together with all UCC financing statements, mortgages or similar filingssigned or authorized by an Obligor relating thereto;(viii) the Purchase and Sale Agreement (including, without limitation, rights of recovery of the Borrower against the Transferor) andthe assignment to the Collateral Agent, for the benefit of the Secured Parties, of all UCC financing statements filed by the Borrower againstthe Transferor 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 Assetgranted their credit approval. -31-“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 tochange as and when such designated rate changes. The Prime Rate is not intended to be the lowest rate of interest charged by Wells Fargo or any otherspecified financial institution in connection with extensions of credit to debtors.“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) with respect 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, followingthe termination thereof, the outstanding principal amount of all Advances of such Lender), by the aggregate Commitments of all the Lenders (or,following the 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 suchassets are collected, sold, liquidated, foreclosed, exchanged, or otherwise disposed of, whether such disposition is voluntary or involuntary, andincludes all rights 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 fundthat is similar to any of the foregoing or any other Person engaged in the business of making loans to, and other investments in, middle-marketcompanies that is in competition with Solar, but excluding (i) banks, (ii) insurance companies and (iii) funds that primarily invest in publicly tradedsecurities.“Purchase and Sale Agreement” means that certain Purchase and Sale Agreement, dated as of the date hereof, between the Transferor, as theseller, 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 paidby the Borrower for such Eligible Loan Asset (exclusive of any accrued interest, Accreted Interest and original issue discount) divided by (ii) theprincipal balance of such Eligible Loan Asset outstanding as of the date of such purchase (exclusive of any accrued interest, Accreted Interest andoriginal issue discount); provided that any Eligible Loan Asset acquired by the Borrower with a “Purchase Price” equal to or greater than 97%(including, for the avoidance of doubt, in excess of 100%) shall be deemed to have a “Purchase Price” equal to 100%. -32-“Records” means all documents relating to the Loan Assets, including books, records and other information executed in connection withthe origination or acquisition of the Collateral Portfolio or maintained with respect to the Collateral Portfolio and the related Obligors that theBorrower, the Transferor or the Servicer have generated, in which the Borrower has acquired an interest pursuant to the Purchase and Sale Agreement orin 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 definitionof “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.“Reinvestment Period” shall mean the period commencing on the Closing Date and ending on the day preceding the earliest of(i) August 15, 2019, (ii) the occurrence of an Event of Default (past any applicable notice or cure period provided in the definition thereof) and (iii) thedate of any voluntary termination by the Borrower pursuant to Section 2.18(b); provided that if any of the foregoing is not a Business Day, theReinvestment 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, NetSenior Leverage Ratio or Interest Coverage Ratio, as applicable, for such Loan Asset in the Loan Agreements or, if no such period is provided fortherein, for Obligors delivering monthly financial statements, each period of the last 12 consecutive reported calendar months, and for Obligorsdelivering quarterly financial statements, each period of the last four consecutive reported fiscal quarters of the principal Obligor on such Loan Asset;provided that 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 entity as to which 12 consecutive calendar months have not yet elapsed, “Relevant Test Period” shall initially include the period from the dateof formation of 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 shallsubsequently include each period of the last 12 consecutive reported calendar months or four consecutive reported fiscal quarters (as the case may be)of such Obligor. -33-“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 of each calendar month, commencing in March, 2015.“Required Lenders” means (i) Wells Fargo (as a Lender hereunder) and its successors and assigns and (ii) the Lenders representing anaggregate of at least 51% of the aggregate Commitments of the Lenders then in effect; provided that the Commitment of, and the portion of anyoutstanding Advances, as applicable, held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of theRequired Lenders.“Required Loan Documents” means, for each Loan Asset, the following documents or instruments, all as specified on the related LoanAsset Checklist:(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. -34-“Required Reports” means, collectively, the Servicing Report required pursuant to Section 6.08(b), the Servicer’s Certificate requiredpursuant to Section 6.08(c), the financial statements of the Servicer required pursuant to Section 6.08(d), the financial statements and valuation reportsof each Obligor required pursuant to Section 6.08(e), the annual statements as to compliance required pursuant to Section 6.09, and the annualindependent public accountant’s (or other third party’s) report required pursuant to Section 6.10.“Required Sale Assets” means all assets owned by the Borrower that would disqualify the Borrower from using the “loan securitizationexemption” under the Volcker Rule (as determined by the Administrative Agent in its reasonable discretion).“Required Sale Date” means the date immediately prior to July 21, 2015 (or the date immediately prior to such later date (to the extentapplicable to the transactions contemplated hereby) as shall be determined by written order of the Board of Governors of the Federal Reserve Systemwith respect to the required conformance with the Volcker Rule by banking entities generally); provided that if the Administrative Agent receives anopinion of nationally recognized counsel satisfactory to it in its sole discretion that (A) the ownership of the Required Sale Assets will not cause theBorrower to be a “covered fund” under the Volcker Rule, (B) the Advances are not considered to constitute “ownership interests” under the VolckerRule or (C) ownership of the Advances will be otherwise exempt from the Volcker Rule, then the Required Sale Date shall not occur; provided, further,that upon receipt of further official guidance from or on behalf of the Board of Governors of the Federal Reserve System with respect to compliancewith the Volcker Rule, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith in respect of amendments or modificationsto the Transaction Documents appropriate to assure compliance with or exemption from the Volcker Rule.“Responsible Officer” means, with respect to any Person, any duly authorized officer of such Person (or, if applicable, a duly authorizedofficer of the general partner or manager of such Person) with direct responsibility for the administration of this Agreement and also, with respect to aparticular matter, any other duly authorized officer of such Person to whom such matter is referred because of such officer’s knowledge of andfamiliarity with the particular subject.“Restricted Junior Payment” means (i) any dividend or other distribution, direct or indirect, on account of any class of membershipinterests of the Borrower now or hereafter outstanding, except a dividend paid solely in interests of that class of membership interests or in any juniorclass of membership interests of the Borrower; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value,direct or indirect, of any class of membership interests of the Borrower now or hereafter outstanding, (iii) any payment made to redeem, purchase,repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire membership interests of the Borrower nowor hereafter outstanding, and (iv) any payment of management fees by the Borrower. For the avoidance of doubt, (x) payments and reimbursements dueto the Servicer in accordance with -35-this Agreement or any other Transaction Document do not constitute Restricted Junior Payments, and (y) distributions by the Borrower to holders of itsmembership interests of Loan Assets or of cash or other proceeds relating thereto which have been substituted by the Borrower in accordance with thisAgreement 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 theagent(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).“Sanction” or “Sanctions” means, individually and collectively, respectively, any and all economic or financial sanctions, sectoralsanctions, secondary sanctions, trade embargoes and anti-terrorism laws including but not limited to those imposed, administered or enforced from timeto time by: (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 NationsSecurity Council; (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’sSpecially Designated Nationals (SDN) and Blocked Persons List; (b) a Person organized or resident in a country or territory that is the target ofcomprehensive sanctions (presently, Cuba, Iran, North Korea, Syria, and the Crimea region of Ukraine); or (c) any Person 50% or more owned or, whererelevant under applicable 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 LoanAsset, as adjusted 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. -36-“Servicer” means at any time the Person then authorized, pursuant to Section 6.01 to service, administer, and collect on the Loan Assetsand exercise 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 (including, without limitation, anydelegation of the Servicer’s duties that is not permitted by Section 6.01) or (ii) comply in any material respect with the Servicing Standardregarding the servicing of the Collateral Portfolio and in each case the same continues unremedied for a period of 30 days (if such failure can beremedied) after the earlier to occur of (x) the date on which written notice of such failure requiring the same to be remedied shall have been givento the Servicer by the Administrative Agent or the Collateral Agent (at the direction of the Administrative Agent) and (y) the date on which aResponsible 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 United States $2,500,000, individually or in the aggregate, or theoccurrence of any 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 without the consent of each Lender Agent and theAdministrative Agent (as required in the last sentence of Section 11.04(a));(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; -37-(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 United States$2,500,000, individually or in the aggregate (excluding, in each case, any amounts covered by insurance; provided that this parenthetical shallnot be applicable to (a) more than two such final judgments, decrees or orders in any 60 month period and shall not be applicable to more thanone such final judgment, decree or order in the event a second judgment, decree or order occurs in a 12 month period following the first finaljudgment and (b) any such final judgment, decree or order if the Administrative Agent determines that such judgment, decree or order reasonablycould cause a Material Adverse Effect on the assets, liabilities, financial condition, business or operations of the Servicer or the ability of theServicer to meets its obligations under the Transaction Documents to which it is party), and the continuance of such judgment, decree or orderunsatisfied 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 feeshall be equal 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 thelast day of the related Remittance Period and (iii) the actual number of days in such Remittance Period divided by 360. -38-“Servicing File” means, for each Loan Asset, (a) copies of each of the Required Loan Documents and (b) any other portion of the LoanAsset File which 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 LoanAssets on behalf of the Secured Parties in accordance with Applicable Law, the terms of this Agreement, the Loan Agreements, all customary and usualservicing practices for loans like the Loan Assets and to the extent consistent with the foregoing, (a)(i) if the Servicer is the Transferor or an Affiliatethereof, the higher of: (A) the standards, policies and procedures that the Servicer reasonably believes to be customarily followed by institutionalmanagers of national standing relating to assets of the nature and character of the Collateral Portfolio, and (B) the same care, skill, prudence anddiligence with which the Servicer services and administers loans for its own account or for the account of others, and (ii) if the Servicer is not theTransferor or an Affiliate thereof, the same care, skill, prudence and diligence with which the Servicer services and administers loans for its ownaccount or for the account of others; (b) with a view to maximize the value of the Loan Assets; and (c) without regard to: (i) the Servicer’s obligationsto incur servicing and administrative expenses with respect to a Loan Asset, (ii) the Servicer’s right to receive compensation for its services hereunderor with respect to any particular transaction, (iii) the ownership by the Servicer or any 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 the Servicer.“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 Senior 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 ofthe property 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. -39-“State” means one of the fifty states of the United States or the District of Columbia.“Stated Maturity Date” means August 16, 2021.“Structuring Fee” means the structuring fee set forth in the Lender Fee Letter, as such fee letter may be amended, restated, supplementedand/or otherwise 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.“Substitute Eligible Loan Asset” means each Eligible Loan Asset Pledged by the Borrower to the Collateral Agent, on behalf of theSecured Parties, pursuant to Section 2.07(a) or Section 2.07(c)(ii).“Taxes” means any present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), charges,assessments or fees of any nature (including interest, penalties, and additions thereto) that are imposed by any Governmental Authority.“Third Amendment Closing Date” means August 15, 2016.“Total Net Leverage Ratio” means, with respect to any Designated Loan Asset for any Relevant Test Period, the meaning of “Total NetLeverage Ratio” or any comparable definition in the Loan Agreement for each such Loan Asset, and in any case that “Total Net Leverage Ratio” orsuch comparable definition is not defined in such Loan Agreement, the ratio of (a) Indebtedness minus Unrestricted Cash, as of the applicable test date,to (b) EBITDA, for the applicable test period, as calculated by the Servicer in good faith using information from and calculations consistent with therelevant compliance statements and financial reporting packages provided by the relevant Obligor as per the requirements of the related LoanAgreement.“Traditional Middle Market Loan Asset” means any Loan Asset, as of the related Cut-Off Date (i) that is not (and cannot by its termsbecome) subordinate (except with respect to liquidation preferences, if any, in respect of certain pledged collateral that collectively do not comprise amaterial portion of the collateral securities of the Loan Asset) in right of payment to any obligation of the Obligor in any Bankruptcy Proceeding,(ii) that is secured by a pledge of collateral, which security interest is validly perfected and first priority under Applicable Law (subject to lienspermitted under the applicable credit agreement that are reasonable and -40-customary for similar loans, and liens accorded priority by law in favor of the United States or any state or agency) and (iii) for which the Servicerdetermines in good faith that the value of the collateral and/or enterprise value securing the loan on or about the time of origination equals or exceedsthe outstanding principal balance of the loan plus the aggregate outstanding balances of all other loans of equal seniority secured by the samecollateral.“Transaction Documents” means this Agreement, the Variable Funding Note(s), any Joinder Supplement, the Purchase and Sale Agreement,the Control Agreement, the WFBNA Fee Letter, each Lender Fee Letter and each document, instrument or agreement related to any of the foregoing.“Transferee Letter” has the meaning assigned to that term in Section 11.04(a).“Transferor” means Solar Senior 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.“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 ascollateral to secure repayment of such Loan Asset, as applicable, including, without limitation, mortgaged property and/or a pledge of the stock,membership or other 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).“Unfunded Exposure Amount” means, as of any date of determination, with respect to an Eligible Loan Asset, an amount equal to theaggregate amount 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 UnfundedExposure Amount for each such Eligible Loan Asset multiplied by (b) the difference of (x) 100% minus (y) the Applicable Percentage foreach such Eligible Loan 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. -41-“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,constitute an Event of Default.“Unrestricted Cash” the meaning of “Unrestricted Cash” or any comparable definition in the Loan Agreements for each Loan Asset, and inany case 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 afterthe related 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 anyRelevant Test Period with respect to such Loan Asset is both (1) less than 85% of the Interest Coverage Ratio with respect to any such LoanAsset as of the applicable Cut-Off Date and (2) less than 1.50x or (y) the Net Senior Leverage Ratio for any Relevant Test Period of therelated Obligor with respect to such Loan Asset is both (1) more than 0.50x higher than such Net Senior Leverage Ratio as calculated onthe applicable Cut-Off Date and (2) is greater than 3.50x; provided that in connection with any Revenue Recognition Implementation orany Operating Lease Implementation, the Administrative Agent may retroactively adjust the Interest Coverage Ratio or the Net SeniorLeverage Ratio for any Loan Asset 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 setforth in 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 otherIndebtedness, but not to exceed five Business Days) which such default would trigger a default under the related Loan Agreement; -42-(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 laterthan (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 eachcase, unless waived 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 LoanAsset; or(vii) the occurrence of a Material Modification (in accordance with clause (a) of the definition thereof) with respect to such LoanAsset.“Variable Funding Note” has the meaning assigned to such term in Section 2.01(a).“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 abreach of any 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 30 days after the earlier to occur of the Borrower’s receipt of notice thereof from the Administrative Agent or the Borrower becoming awarethereof (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 definitionof “Eligibility Criteria.”“Warranty Loan Asset” means any Loan Asset with respect to which a Warranty Event has occurred.“Wells Fargo” shall mean Wells Fargo Bank, N.A., 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 AccountBank, and the Borrower, as such letter may be amended, modified, supplemented, restated or replaced from time to time.“Yield” means with respect to any Remittance Period, the sum for each day in such Remittance Period determined in accordance with thefollowing formula: -43- YR x L Dwhere: 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 Base Rate, 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. Allterms used 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.Section 1.03 Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from aspecified date 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 arepermitted by the Transaction Documents;(c) reference to any gender includes each other gender; -44-(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 orinstrument as amended, 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 orrenewal thereof 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,and in effect from time to time, including rules and regulations promulgated thereunder and reference to any Section or other provision of anyApplicable Law 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 such due 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 graceperiod applicable to such Unmatured Event of Default, Event of Default or Servicer Termination Event and shall not include any Unmatured Event ofDefault, Event of Default or Servicer Termination Event that has been expressly waived in writing in accordance with the terms of this Agreement;(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 (includingthe adoption of IFRS) would affect the computation of any covenant (including the computation of any financial covenant) set forth in this Agreementor any 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. -45-ARTICLE II.THE FACILITYSection 2.01 Variable Funding Note and Advances.(a) Variable Funding Note. The Borrower has heretofore delivered or shall, on the date hereof (and on the terms and subject to theconditions hereinafter set forth), deliver, to each Lender Agent, at the address set forth in Section 11.02 of this Agreement, and on the effective date ofany Joinder Supplement, to each additional Lender Agent, at the address set forth in the applicable Joinder Supplement, a duly executed variablefunding note (the “Variable Funding Note”), in substantially the form of Exhibit G, in an aggregate face amount equal to the applicable Lender’sCommitment as of the Closing Date or the effective date of any Joinder Supplement, as applicable, and otherwise duly completed. Interest shall accrueon the Variable Funding Note, and the Variable Funding Note shall be payable, as described herein.(b) Advances. On the terms and conditions hereinafter set forth, from time to time from the Closing Date until the end of the ReinvestmentPeriod, the Lenders shall make Advances under the Variable Funding Notes, secured by the Collateral Portfolio, (x) to the Borrower for the purpose ofpurchasing Eligible Loan Assets or (y) to the Unfunded Exposure Account in an amount up to the Aggregate Unfunded Exposure Amount. Other thanpursuant to Section 2.02(f), under no circumstances shall any Lender be required to make any Advance if after giving effect to such Advance and theaddition to the Collateral Portfolio of the Eligible Loan Assets being acquired by the Borrower using the proceeds of such Advance, (i) an Event ofDefault has occurred and is continuing or would result therefrom or an Unmatured Event of Default exists or would result therefrom or (ii) the aggregateAdvances Outstanding would exceed the Borrowing Base. Notwithstanding anything to the contrary herein (other than pursuant to Section 2.02(f)), noLender shall be obligated to provide the Borrower (or to the Unfunded Exposure Account, if applicable) with aggregate funds in connection with anAdvance that would exceed the lesser of (x) such Lender’s unused Commitment then in effect and (y) the aggregate unused Commitments then ineffect.(c) Notations on Variable Funding Note. Each Lender Agent is hereby authorized to enter on a schedule attached to the Variable FundingNote with respect to each Conduit Lender and each Institutional Lender a notation (which may be computer generated) with respect to each Advanceunder the Variable Funding Note made by the applicable Lender of: (i) the date and principal amount thereof, and (ii) each repayment of principalthereof, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. The failure of any Lender Agentto make any such notation on the schedule attached to any Variable Funding Note shall not limit or otherwise affect the obligation of the Borrower torepay the Advances in accordance with their respective terms as set forth herein. -46-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.(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 anyDelayed Draw 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 DelayedDraw Loan 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. -47-(d) Subject to Section 2.18 and the other terms, conditions, provisions and limitations set forth herein (including, without limitation, thepayment of the Make-Whole Premium, as applicable), the Borrower may borrow, repay or prepay and reborrow Advances without any penalty, fee orpremium on and after the Closing Date and prior to the end of the Reinvestment Period.(e) A determination by Wells Fargo, as Lender, of the existence of any Eurodollar Disruption Event (any such determination to becommunicated to the Borrower by written notice from the Administrative Agent promptly after the Administrative Agent learns of such event), or of theeffect of any Eurodollar 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 ofan Unmatured 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 fromthat of each other Lender and the failure of any Conduit Lender or Institutional Lender to so make such amount available to the Borrower shall notrelieve any other 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 (includingunpaid Yield related thereto, if any, due and payable on a prior Payment Date) to be paid by the Borrower on each Payment Date for the relatedRemittance Period and shall advise the Servicer thereof on the third Business Day prior to such Payment Date. The Borrower shall pay all such Yield onsuch Payment Date.Section 2.04 Remittance Procedures. On each Payment Date, the Servicer shall instruct the Collateral Agent by delivery of the ServicingReport and, if the Servicer fails to do so, the Administrative Agent may instruct the Collateral Agent, to apply funds on deposit in the ControlledAccounts as described in this Section 2.04; provided that, at any time after delivery of a Notice of Exclusive Control, the Administrative Agent shallinstruct the Collateral 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 MaturityDate, on each Payment Date the Collateral Agent shall (as directed pursuant to the first paragraph of this Section 2.04) transfer -48-Interest Collections held by the Account Bank in the Collection Account to the following Persons in the following amounts, calculated as of the mostrecent Determination Date, and priority:(i) pari passu to (a) the payment of taxes and any applicable government fees; provided that amounts payable pursuant to thissubclause (a) (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 Collateral Agent, in payment in full of all accrued Collateral Agent Fees and Collateral Agent Expenses, (c) the CollateralCustodian, in payment in full of all accrued Collateral Custodian Fees and Collateral Custodian Expenses and (d) the Account Bank, inpayment in full of all accrued Account Bank Fees and Account Bank Expenses; provided that amounts payable with respect to CollateralAgent Expenses, Collateral Custodian Expenses and the Account Bank Expenses pursuant to this clause (i) (and Sections 2.04(b)(i) and2.04(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,all Yield 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, allaccrued and unpaid fees, expenses (including reasonable and documented attorneys’ fees, costs and expenses) and indemnity amountspayable by the Borrower 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 completerefinancing or termination 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 previouslypaid, (b) the Collateral Custodian, in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid, and(c) the Account Bank, in payment in full of all accrued Account Bank Expenses to the extent not previously paid; -49-(viii) to pay any other amounts due and payable (other than with respect to the repayment of Advances Outstanding) under thisAgreement and the other Transaction Documents;(ix) to the Servicer in respect of all reasonable expenses (except allocated overhead) incurred in connection with the performance ofits duties 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.(b) Principal Payments prior to an Event of Default. Prior to an Event of Default occurring and continuing or prior to the Facility MaturityDate, on each Payment Date the Collateral Agent shall (as directed pursuant to the first paragraph of this Section 2.04) transfer Principal Collectionsheld by the Account Bank in the Collection Account to the following Persons in the following amounts, calculated as of the most recent DeterminationDate, 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 anamount necessary to cause the amount on deposit in the Unfunded Exposure Account to equal the aggregate Unfunded Exposure EquityAmount; or (y) after the end of the Reinvestment Period, to the Unfunded Exposure Account in an amount necessary to cause the amounton deposit in the Unfunded 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 anyapplicable Make-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 previouslypaid, (b) the Collateral Custodian in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid, and(c) the Account 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 -50-(vii) (a) during an Unmatured Event of Default, to remain in the Collection Account or (b) otherwise, to the Borrower (x) prior to theend of the Reinvestment Period, any remaining amounts (provided that the Borrower will not be permitted to receive an amount greaterthan 7.0% of the Maximum Facility Amount per annum pursuant to this clause (vii)(b)(x)) and (y) after the end of the Reinvestment Period,any remaining amounts.(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 shall (as directed pursuant tothe first paragraph of this Section 2.04) transfer collected funds held by the Account Bank in the Collection Account to the following Persons in thefollowing 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 thissubclause (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 Collateral Agent, in payment in full of all accrued Collateral Agent Fees and Collateral Agent Expenses, (b) the CollateralCustodian, in payment in full of all accrued Collateral Custodian Fees and Collateral Custodian Expenses and (c) the Account Bank, inpayment in full of all accrued Account Bank Fees and Account Bank Expenses; provided that amounts payable with respect to CollateralAgent Expenses, Collateral Custodian Expenses 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,all Yield 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, allaccrued and unpaid fees, expenses (including reasonable and documented attorneys’ fees, costs and expenses) and indemnity amountspayable by the Borrower to the Administrative Agent, any Lender Agent or any Lender under the Transaction Documents; -51-(v) to the Unfunded Exposure Account in an amount necessary to cause the amount on deposit in the Unfunded Exposure Account toequal the Aggregate Unfunded Exposure Amount;(vi) to pay the Advances Outstanding, and any applicable Make-Whole Premium incurred in connection with any completerefinancing or termination 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 previouslypaid, (b) the Collateral Custodian, in payment in full of all accrued Collateral Custodian Expenses to the extent not previously paid, and(c) the Account 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;(ix) to the Servicer in respect of all reasonable expenses (except allocated overhead) incurred in connection with the performance ofits duties 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 therelevant Obligors under any Delayed Draw Loan Asset; provided that, until the earlier to occur of the end of the Reinvestment Period or the FacilityMaturity Date, the amount withdrawn to fund such draw request shall not create any Borrowing Base Deficiency. Any such draw request made by anObligor, along with wiring instructions for the applicable Obligor, shall be forwarded by the Borrower or the Servicer to the Collateral Agent (with acopy to the Administrative Agent and each Lender Agent) in the form of a Disbursement Request, and the Collateral Agent shall instruct the AccountBank to fund such draw request in accordance with the Disbursement Request. As of any date of determination, the Servicer (or, after delivery of aNotice of Exclusive Control, the Administrative Agent) may cause any amounts on deposit in the Unfunded Exposure Account that exceed (i) theaggregate Unfunded Exposure Equity Amount prior to the earlier to occur of the end of the Reinvestment Period or the Facility Maturity Date and(ii) the aggregate of all Unfunded Exposure Amounts following the earlier to occur of the end of the Reinvestment Period or the Facility Maturity Dateto be deposited 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 areinsufficient to pay any amounts due and payable on a Payment Date or otherwise, the Borrower shall nevertheless remain responsible for, and shall paywhen due, all amounts payable under this Agreement and the other Transaction Documents in accordance with the terms of this Agreement and theother Transaction Documents. Notwithstanding the foregoing, the Servicer, in its capacity as the sole -52-owner of the Borrower, may at any time contribute amounts to the Borrower for deposit into the Collection Account or the Unfunded ExposureAccount for application in accordance with the terms 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 the Servicer under Section 2.04 or otherwise pursuant to this Agreement, or upon their respective instructions, it shall so notify theBorrower, the Servicer and the Collateral Agent in writing and in reasonable detail to identify the specific disagreement. If such disagreement cannotbe resolved within two Business Days, the determination of the Administrative Agent as to such amounts shall be conclusive and binding on theparties hereto absent manifest error. In the event the Collateral Agent or the Account Bank receives instructions from the Servicer or the Borrowerwhich conflict with any instructions received by the Administrative Agent, the Collateral Agent or the Account Bank, as applicable, shall rely on andfollow the instructions 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 any day prior to the Collection Date, any Borrowing Base Deficiency exists, then the Borrower shall, within three (3) Business Days from the date ofsuch Borrowing Base Deficiency, cure such Borrowing Base Deficiency in its entirety; provided that, notwithstanding the foregoing, if the Borrowershall provide 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. -53-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 United States dollars into the Principal CollectionAccount, (ii) repay Advances Outstanding (together with any Breakage Fees and all accrued and unpaid costs and expenses of the AdministrativeAgent, the Lender Agents and the Lenders, in each case in respect of the amount so prepaid), and/or (iii) subject to the approval of the AdministrativeAgent, in its sole discretion, Pledge additional Eligible Loan Assets. The Administrative Agent shall use all commercially reasonable efforts to respondto any approval request 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.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 anEligible Loan Asset so long as (i)(A) no event has occurred and is continuing, or would result from such substitution, which constitutes an Event ofDefault, (B) no event has occurred and is continuing, or would result from such substitution, which constitutes an Unmatured Event of Default and(C) both before and after giving effect to such substitution, no Borrowing Base Deficiency shall exist (provided that the Borrower may effect asubstitution as necessary to facilitate a cure of a Borrowing Base Deficiency (and any Unmatured Event of Default arising therefrom) with thecontribution of an Eligible Loan Asset) and (ii) simultaneously therewith, the Borrower Pledges (in accordance with all of the terms and provisionscontained herein) a Substitute 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 ofsuch sale 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. -54-(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 30days following the earlier of knowledge by the Borrower or the Servicer of such Loan Asset becoming a Warranty Loan Asset or receipt by theBorrower from 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 amountequal to (x) the Assigned Value as of the Cut-Off Date with respect to such Loan Asset multiplied by the Outstanding Balance of such LoanAsset and (y) any expenses or fees with respect to such Loan Asset and costs and damages incurred by the Administrative Agent or by anyLender in connection with any violation by such Loan Asset of any predatory or abusive lending law which is an Applicable Law (anotification regarding the amount of such expenses or fees to be provided by the Administrative Agent to the Borrower); provided that theAdministrative Agent shall have the right to determine whether the amount so deposited is sufficient to satisfy the foregoing requirements;or(ii) with the prior written consent of the Administrative Agent, in its sole discretion, substitute for such Warranty Loan Asset aSubstitute Eligible 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 Borrowerof a Substitute Eligible Loan Asset for each Warranty Loan Asset (the date of such confirmation or delivery, the “Release Date”), such Warranty LoanAsset and related Portfolio Assets shall be removed from the Collateral Portfolio and, as applicable, the Substitute Eligible Loan Asset and relatedPortfolio Assets shall be included in the Collateral Portfolio. On the Release Date of each Warranty Loan Asset, the Collateral Agent, for the benefit ofthe Secured Parties, shall automatically and without further action be deemed to release to the Borrower, without recourse, representation or warranty,all the 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 andany related 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) shall be subject to the satisfaction of the following conditions (as certified in writing to the Administrative Agent and Collateral Agent by theBorrower):(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; -55-(iii) no selection procedures adverse to the interests of the Administrative Agent, the Lender Agents or the Lenders were utilized bythe Borrower 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 connectionwith any sale, 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 allrespects, 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, theCollateral Agent and the Collateral Custodian in connection with any such sale, substitution or repurchase (including, but not limited to,expenses incurred in connection with the release of the Lien of the Collateral Agent on behalf of the Secured Parties and any other partyhaving an interest in the Loan Asset in connection with such sale, substitution or repurchase), which agreement to pay is set forth inSection 11.07 hereof.(e) Affiliate Transactions. Notwithstanding anything to the contrary set forth herein or in any other Transaction Document, the Transferor(or an Affiliate thereof) shall not reacquire from the Borrower and the Borrower shall not transfer to the Transferor or to Affiliates of the Transferor, andnone of 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’length basis 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 andSale Agreement or substitutions of Loan Assets pursuant to Section 6.2 of the Purchase and Sale Agreement) and (ii) to the extent any Loan Asset withan Assigned 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 thesubject of a proposed sale or substitution or Lien Release Dividend, together with the Outstanding Balance of all Loan Assets (other than WarrantyLoan Assets) sold pursuant to Section 2.07(b) or substituted pursuant to Section 2.07(a) during the 12-month period immediately preceding theproposed date of sale or -56-substitution (or such lesser number of months as shall have elapsed as of such date) does not exceed 25% of the Maximum Facility Amount.; providedthat the Outstanding Balance of the Loan Assets sold pursuant to that certain First Lien Loan Program LLC Purchase Agreement, dated as ofSeptember 14, 2018, by and First Lien Loan Program LLC, Solar Senior 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 ReleaseDividend, in the form of Exhibit O hereto (a “Notice of Lien Release Dividend”);(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 hereofshall continue to be correct in all respects, except to the extent relating to an earlier date, (C) the eligibility of any Loan Asset remaining aspart of the Collateral Portfolio after the Lien Release Dividend will be redetermined as of the Lien Release Dividend Date, (D) no claimshall have been asserted or proceeding commenced challenging the enforceability or validity of any of the Required Loan Documents and(E) there shall have been 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 or defraud 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 presentand anticipated business 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 LienRelease Dividend; -57-(vi) A portion of a Loan Asset may be transferred pursuant to a Lien Release Dividend; provided that (A) such transfer does not havean adverse effect on the portion of such Loan Asset remaining as a part of the Collateral Portfolio, any other aspect of the CollateralPortfolio, the Lenders, the Lender Agents, the Administrative Agent or any other Secured Party and (B) a new promissory note (other thanwith respect to a Noteless Loan Asset) for the portion of the Loan Asset remaining as a part of the Collateral Portfolio has been executed,and the original thereof has 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 AdjustedBorrowing Value thereof;(viii) The Borrower shall deliver a Borrowing Base Certificate (including a calculation of the Borrowing Base after giving effect tosuch Lien Release Dividend) to the Administrative Agent;(ix) The Borrower shall have paid in full an aggregate amount equal to the sum of all amounts due and owing to the AdministrativeAgent, the Lenders, the Collateral Agent or the Collateral Custodian, as applicable, under this Agreement and the other TransactionDocuments, if any, to the extent accrued to such date (including, without limitation, Breakage Fees) with respect to the Loan Assets to betransferred pursuant to such Lien Release Dividend and incurred in connection with the transfer of such Loan Assets pursuant to such LienRelease Dividend; and(x) The Borrower and the Servicer (on behalf of the Borrower) shall pay the reasonable and documented legal fees and expenses ofthe Administrative Agent, the Collateral Agent and the Collateral Custodian in connection with any Lien Release Dividend (including, butnot limited to, reasonable and documented expenses incurred in connection with the release of the Lien of the Collateral Agent, on behalfof the Secured 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 termshereof no 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 orsuch other account as is designated by the Administrative Agent. The Borrower or the Servicer, as applicable, shall, to the extent permitted by law, payto the 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 -58-Base Rate (other than with respect to any Advances outstanding, which shall accrue at the Yield Rate), payable on demand, from the date of suchnonpayment until such amount is paid in full (as well after as before judgment); provided that such interest rate shall not at any time exceed themaximum rate permitted by Applicable Law. Any Obligation hereunder shall not be reduced by any distribution of any portion of AvailableCollections if at any time such distribution is rescinded or required to be returned by any Lender to the Borrower or any other Person for any reason. Allcomputations of interest and all computations of Yield and other fees hereunder shall be made on the basis of a year of 360 days for the actual numberof days (including the first but excluding the last day) elapsed, other than calculations with respect to the Base Rate, which shall be based on a yearconsisting 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 isnot for 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 effectuated, as the case may be, on the date specified therefor, the Borrower shallindemnify such Lender against any loss, cost or expense incurred by such Lender related thereto (other than any such loss, cost or expense solely dueto the gross negligence or willful misconduct or failure to fund such Advance on the part of the Lenders, the Administrative Agent or an Affiliatethereof), including, without limitation, any loss (including cost of funds and reasonable out-of-pocket expenses but excluding lost profits), cost orexpense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund Advances or maintain theAdvances. Any such Lender shall provide to the Borrower documentation setting forth the amounts of any loss, cost or expense referred to in theprevious 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 suchRemittance Period of (i) one divided by 360, (ii) the applicable Non-Usage Fee Rate (as defined below), and (iii) the aggregate Commitments minus theAdvances Outstanding on such day (such amount, the “Unused Portion”). The Non-Usage Fee Rate (the “Non-Usage Fee Rate”) shall be equal to, (i)0.50% on any Unused Portion up to or equal to 25.0% of the Maximum Facility Amount and (ii) 2.00% on any Unused Portion in excess of 25.0% ofthe Maximum Facility Amount. -59-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), 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),successor or assign thereof (each of which shall be an “Affected Party”) of agreeing to make or making, funding or maintaining any Advance (or anyreduction of the amount of any payment (whether of principal, interest, fee, compensation or otherwise) to any Affected Party hereunder), as the casemay be, or there shall be any reduction in the amount of any sum received or receivable by an Affected Party under this Agreement, under any otherTransaction Document or any Liquidity Agreement, the Borrower shall, from time to time, after written demand by the Administrative Agent (whichdemand shall be accompanied by a statement setting forth in reasonable detail the basis for such demand), on behalf of such Affected Party, pay to theAdministrative Agent, on behalf of such Affected Party, additional amounts sufficient to compensate such Affected Party for such increased costs orreduced payments within 10 days after such demand; provided that the amounts payable under this Section 2.10 shall be without duplication ofamounts payable under Section 2.11 and shall not include any Excluded Taxes.(b) If either (i) the introduction of or any change following the date hereof in or in the interpretation, administration or applicationfollowing 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 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, hasor would have the effect of reducing the rate of return on the capital of any Affected Party, as a consequence of its obligations hereunder or any relateddocument or arising in connection herewith or therewith to a level below that which any such Affected Party could have achieved but for suchintroduction, change or compliance (taking into consideration the policies of such Affected Party with respect to capital adequacy), by an amountdeemed by such Affected Party to be material, then, from time to time, after demand by such Affected Party (which demand shall be accompanied by astatement setting forth in reasonable detail the basis for such demand), the Borrower shall pay the Administrative Agent on behalf of such AffectedParty such additional amounts as will compensate such Affected Party for such reduction. For -60-the avoidance of doubt, any increase in cost and/or reduction in Yield with respect to any Affected Party caused by regulatory capital allocationadjustments due to FAS 166, 167 and subsequent statements and interpretations shall constitute a circumstance on which such Affected Party may basea claim for reimbursement under this Section 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 isrequired to compensate a bank or other financial institution providing liquidity support, credit enhancement or other similar support to such AffectedParty in connection with this Agreement or the funding or maintenance of Advances hereunder, then within ten days after demand by such AffectedParty, the Borrower shall pay to such Affected Party such additional amount or amounts as may be necessary to reimburse such Affected Party for anyamounts payable 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 attributionmethods. The Administrative Agent, on behalf of any Affected Party making a claim under this Section 2.10, shall submit to the Borrower a certificatesetting forth in reasonable detail the basis for and the computations of such additional or increased costs, which certificate shall be conclusive absentmanifest error.(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 ofsuch Affected 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 theBorrower shall have the option, at its sole expense and effort, upon notice to the applicable Affected Party and the Administrative Agent, to requiresuch Affected 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 Agentand (ii) such Affected Party shall have received payment of an amount equal to all Obligations due and payable to such Affected Party. An AffectedParty shall not be required to make any such assignment and delegation if, prior thereto, it has waived any amounts owed to it under this Section 2.10. -61-Section 2.11 Taxes.(a) All payments made by an Obligor in respect of a Loan Asset and all payments made by the Borrower, including any allocations ordistributions to the Servicer, or made by the Servicer on behalf of the Borrower under this Agreement will be made free and clear of and withoutdeduction or withholding for or on account of any Taxes, except as required by Applicable Law. If any Taxes are required to be withheld from anyamounts payable to any Indemnified Party, then (i) the amount payable to such Person will be increased (the amount of such increase, the “AdditionalAmount”) such that every net payment made under this Agreement after withholding for or on account of any Taxes (including, without limitation, anyTaxes on such increase) is not less than the amount that would have been paid had no such deduction or withholding been made and (ii) the Borroweror Servicer shall timely pay the full amount withheld to the relevant Governmental Authority in accordance with Applicable Law. The foregoingobligation to pay Additional Amounts with respect to payments required to be made by the Borrower or Servicer under this Agreement will not,however, apply with respect to the following: (a) Taxes that are imposed on or measured by net income (however denominated) or that are franchiseTaxes or branch profits Taxes imposed on any Indemnified Party (i) by the jurisdiction (or any political subdivision thereof) under the laws of whichsuch Indemnified Party is organized or in which its principal office is located, or in the case of any Lender, in which its applicable lending office islocated or (ii) by any other jurisdiction as a result of a present or former connection between such Indemnified Party and the jurisdiction imposing suchTax (other than any connection arising from the Indemnified Party having executed, delivered, or performed its obligations or received paymentsunder, or enforced this Agreement), (b) Taxes imposed under FATCA on any “withholdable payment” payable to such Indemnified Party as a result ofthe failure of such Indemnified Party to satisfy the applicable requirements of FATCA, (c) in the case of a Lender, U.S. federal withholding Taxesimposed on amounts payable to or for the account of such Lender with respect to an applicable interest in an Advance or Variable Funding Note (orportion thereof) pursuant to a law in effect on the date on which (i) such Lender acquires such interest or (ii) such Lender changes its lending office,except in each case to the extent that (and only to the extent that), pursuant to this Section 2.11, amounts with respect to such Taxes were payableeither to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lendingoffice, and (d) any interest, penalties, and additions to tax attributable to any of the foregoing (“Excluded Taxes”).(b) The Borrower will indemnify, from funds available to it pursuant to Section 2.04 (and to the extent the funds available forindemnification provided by the Borrower are insufficient the Servicer, on behalf of the Borrower, will indemnify) each Indemnified Party for the fullamount of Taxes, other than Excluded Taxes, payable or paid by such Person in respect of Taxes (including Additional Amounts) with respect to anypayment by or on account of any obligation of an Obligor hereunder or under any other Transaction Documents, whether or not such Taxes werecorrectly or legally imposed or asserted by the relevant Governmental Authority; provided, however, that the Borrower (or the Servicer acting on behalfof the Borrower) shall not have any obligation to make any additional payments in respect of any deduction or withholding of Taxes as set forth in thisSection 2.11 unless the Indemnified Party complied with its obligations under Section 2.11(d). All payments in respect of this indemnification shall bemade within 10 days from the date a written invoice therefor is delivered to the Borrower. -62-(c) Within 30 days after the date of any payment by the Borrower or by the Servicer on behalf of the Borrower of any Taxes, the Borrower orthe Servicer, as applicable, will furnish to the Administrative Agent and the Lender Agents at the applicable address set forth on this Agreement,evidence reasonably satisfactory to the Administrative Agent of payment thereof.(d) Each Lender and Lender Agent that is a United States person as that term is defined in Section 7701(a)(30) of the Code hereby agreesthat it shall deliver, no later than date upon which such Lender or Lender Agent becomes a party hereto, two accurate, complete and signed copies (oneto the Borrower and one to the Administrative Agent) of U.S. Internal Revenue Service Form W-9 or any successor form, certifying that such Lender orLender Agent is, on the date of delivery thereof, entitled to an exemption from U.S. backup withholding tax. Each Lender and Lender Agent that isorganized under the laws of a jurisdiction outside the United States shall, no later than the date on which such Lender or Lender Agent becomes a partyhereto, deliver two properly completed and duly executed copies (one to the Borrower and one to the Administrative Agent) of either U.S. InternalRevenue Service Form W-8BEN, W-8ECI or W-8IMY or any subsequent versions thereof or successors thereto, in each case to the extent legallyentitled to do so, claiming a reduction of or complete exemption from U.S. federal withholding tax. In addition, in the case of a Lender or Lender Agentclaiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code, such Lender or Lender Agent hereby represents thatit is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) ofthe Borrower and is not a controlled foreign corporation related to the Borrower (within the meaning of Section 864(d)(4) of the Code), and it agreesthat it shall promptly notify the Borrower in the event any such representation is no longer accurate. Such forms shall be delivered by each Lender andLender Agent on or before the date it becomes a party to this Agreement or participant herein and on or before the date, if any, such Lender or LenderAgent designates a new lending office. In addition, each Lender and Lender Agent agrees that, from time to time after the Closing Date, it shall deliverthe forms described above, as applicable, as promptly as practicable after receipt of a reasonable written request therefor from the Borrower.Notwithstanding anything to the contrary in this subparagraph (d), the completion, execution and submission of such documentation shall not berequired if in such Lender’s or Lender Agent’s reasonable judgment such completion, execution or submission would subject such Lender or LenderAgent to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender or Lender Agent.(e) If, in connection with an agreement or other document providing liquidity support, credit enhancement or other similar support to anyLender in connection with this Agreement or the funding or maintenance of Advances hereunder, such Lender is required to compensate a bank orother financial institution in respect of Taxes under circumstances similar to those described in this Section 2.11, then, within 10 days after demand byeach applicable Lender, the Servicer shall pay (or to the extent the Servicer does not make such payment the Borrower shall pay) to such Lender suchadditional amount or amounts as may be necessary to reimburse such Lender for any amounts paid by such Lender. -63-(f) If a payment made to an Indemnified Party under this Agreement would be subject to U.S. federal withholding tax imposed by FATCA ifsuch Indemnified Party were to fail to comply with the applicable reporting requirements of FATCA, such Indemnified Party shall deliver to theBorrower, at the time or times prescribed by law and at such time or times reasonably requested by Borrower, such documentation prescribed byapplicable law and such additional documentation reasonably requested by Borrower as may be necessary to determine the amount to deduct andwithhold from such payment.(g) If at any time the Borrower shall be liable for the payment of any additional amounts in accordance with this Section 2.11, then theBorrower shall 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 Agentand (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.Without prejudice to the survival of any other agreement of the Borrower and the Servicer hereunder, the agreements and obligations of theBorrower and the Servicer contained in this Section 2.11 shall survive the termination of this Agreement.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 oftime, 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 -64-Secured Parties, and (b) grants a security interest to the Collateral Agent, on behalf of the Secured Parties, in all of the Borrower’s right, title and interestin, to and under (but none of the obligations under) all of the Collateral Portfolio, whether now existing or hereafter arising or acquired by theBorrower, and wherever the same may be located. For the avoidance of doubt, the Collateral Portfolio shall not include any Excluded Amounts, and theBorrower does not hereby assign, pledge or grant a security interest in any Excluded Amounts. Anything herein to the contrary notwithstanding, (a) theBorrower shall remain liable under the Collateral Portfolio to the extent set forth therein to perform all of its duties and obligations thereunder to thesame extent as if this Agreement had not been executed, (b) the exercise by the Collateral Agent, for the benefit of the Secured Parties, of any of itsrights in the Collateral Portfolio shall not release the Borrower from any of its duties or obligations under the Collateral Portfolio, and (c) none of theAdministrative Agent, the Collateral Agent, any Lender (nor its successors and assigns), any Lender Agent, any Liquidity Bank nor any Secured Partyshall have any obligations or liability under the Collateral Portfolio by reason of this Agreement, nor shall the Administrative Agent, the CollateralAgent, any Lender (nor its successors and assigns), any Lender Agent, any Liquidity Bank nor any Secured Party be obligated to perform any of theobligations or duties of the Borrower thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.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 and participation agreement delivered to and accepted by it and aregister for the recordation of the names and addresses and interests of the Lenders (the “Register”). The entries in the Register shall be conclusive andbinding for all purposes, absent manifest error, and the Borrower, the Administrative Agent, each Lender and each Lender Agent shall treat each personwhose name is recorded in the Register as a Lender under this Agreement for all purposes of this Agreement. The Register shall be available forinspection by the Borrower or any 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 inSections 4.01, 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 aLien Release Dividend or sold or substituted in accordance with the applicable provisions of Section 2.07 or liquidated in accordance with Sections6.05 and 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 inrespect thereof have been paid in full by the related Obligor and deposited in the Collection Account. The Collateral Agent, for the benefit of theSecured Parties, shall at the sole expense of the Servicer and at the direction of the Administrative Agent, execute such documents and instruments ofrelease as may 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 the Collateral Custodian and -65-Collateral Agent are the same Person) and take other such actions as shall reasonably be requested by the Borrower to effect such release of the Liencreated pursuant to this Agreement. Upon receiving such notification by the Collateral Agent as described in the immediately preceding sentence, ifapplicable, 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 respectiveinterests, shall release to the Borrower, for no consideration but at the sole expense of the Borrower, their respective remaining interests in the PortfolioAssets, free and clear of any Lien resulting solely from an act by the Collateral Agent, any Lender or the Administrative Agent but without any otherrepresentation or 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 ofLoan Assets shall be treated as payments of Principal Collections or Interest Collections, as applicable, on Loan Assets hereunder.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’ priorwritten notice to the Administrative Agent and the Lender Agents and upon payment in full of all Advances Outstanding, all accrued and unpaid Yield,any Breakage 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. -66-(c) Notwithstanding anything to the contrary in Section 2.18(b), no Make-Whole Premium shall be payable by the Borrower in the eventthat the Obligations are refinanced by the proceeds of any other financing of the Transferor or any of its Affiliates by any of the Administrative Agentor any of its respective Affiliates (provided that the aggregate commitments of such financing shall equal or exceed the Advances Outstanding on suchdate, and the 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 toenter into this Agreement.(e) Unless sooner prepaid pursuant to the terms hereof, the Advances Outstanding shall be repaid in full on the Facility Maturity Date or onsuch later 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 onaccount of Interest Collections or Principal Collections and shall segregate all Principal Collections and Interest Collections and transfer the same tothe Principal Collection Account and the Interest Collection Account, respectively. The Servicer shall transfer, or cause to be transferred, anycollections received directly by it (if any) to the Collection Account by the close of business within two Business Days after such Principal Collectionsand Interest Collections are received; provided that the Servicer shall identify to the Collateral Agent any collections received directly by the Serviceras being 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),the Servicer may direct the Collateral Agent to withdraw from the Collection Account any deposits thereto constituting Excluded Amounts if theServicer has, prior to such withdrawal and consent, delivered to the Administrative Agent ( with a copy to the Collateral Agent) a report setting forththe calculation of such Excluded Amounts in form and substance satisfactory to the Administrative Agent in its sole discretion. -67-(d) Prior to the delivery of a Notice of Exclusive Control, the Servicer shall, pursuant to written instruction (which may be in the form ofstanding instructions), direct the Collateral Agent to invest, or cause the investment of, funds on deposit in the Collection Account in PermittedInvestments, from the date of this Agreement until the Collection Date. Absent any such written instruction, such funds shall not be invested. APermitted Investment acquired with funds deposited in the Collection Account shall mature not later than the Business Day immediately preceding anyPayment Date, and shall not be sold or disposed of prior to its maturity unless (i) the Servicer determines (in its commercially reasonable discretion)there is a substantial risk of material deterioration of such Permitted Investment and (ii) the Administrative Agent consents, in its sole discretion, tosuch sale or disposition. All such Permitted Investments shall be registered in the name of the Account Bank or its nominee for the benefit of theAdministrative 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 the Servicer, in itscapacity as the sole owner of the Borrower, may deposit in the Collection Account or the Unfunded Exposure Account, as the case may be (with respectto investments made hereunder of funds held therein), an amount equal to the amount of any actual loss incurred, in respect 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 Lendershall be liable for the amount of any loss incurred, in respect of any investment, or lack of investment, of funds held in the Collection Account, otherthan with respect to fraud or their own gross negligence or willful misconduct. The parties hereto acknowledge that the Collateral Agent or any of itsAffiliates 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 amountsheld in 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 AdministrativeAgent, the Servicer 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; -68-(ii) no Event of Default has occurred and is continuing, or would result from such withdrawal and reinvestment, and no UnmaturedEvent of Default 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 allrespects, 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;(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 thatsame day) a statement reflecting the total amount on deposit as of the opening of business on such day in the Principal CollectionAccount; or(b) prior to the Facility Maturity Date, withdraw such funds for the purpose of making payments in respect of the Advances Outstanding atsuch time 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 Supplementand a Transferee Letter. -69-Section 2.22 Defaulting Lenders.(a) Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until suchtime as that 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 shallbe restricted 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 DefaultingLender (whether voluntary or mandatory, at maturity, or otherwise), shall be applied at such time or times as may be determined by theAdministrative Agent as follows: first, to the payment of any amounts owing by that Defaulting Lender to the Administrative Agenthereunder: second, as the Borrower may request (so long as no Unmatured Event of Default or Event of Default exists), to the funding ofany Advance in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determinedby the Administrative Agent; third, if so determined by the Administrative Agent and the Borrower, to be held in a non-interest bearingdeposit account and released in order to satisfy obligations of that Defaulting Lender to fund Advances under this Agreement; fourth, tothe payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lenderagainst that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement fifth, so long as noUnmatured Event of Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment ofa court of competent jurisdiction obtained by such Borrower against that Defaulting Lender as a result of that Defaulting Lender’s breachof its obligations under this Agreement; and sixth, to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction;provided that if such payment is a payment of the principal amount of any Advances in respect of which that Defaulting Lender has notfully funded its appropriate share, such payment shall be applied solely to pay the Advances of all non-Defaulting Lenders on a pro ratabasis prior to being applied to the payment of any Advances of that Defaulting Lender. Any payments, prepayments or other amounts paidor payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuantto this Section 2.22 shall be deemed paid to and redirected by that Defaulting 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 anyNon-Usage Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such feethat otherwise would have been required to have been paid to such Defaulting Lender). -70-(b) If the Administrative Agent determines (subject to the consent of the Borrower, not to be unreasonably withheld, conditioned ordelayed) that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto,whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements withrespect to any cash collateral), that Lender will, to the extent applicable purchase that portion of outstanding Advances of the other Lenders or takesuch other actions as the Administrative Agent may determine to be necessary to cause the Advances to be held on a pro rata basis by the Lenders inaccordance with their Pro Rata Shares, whereupon that Lender will cease to be a Defaulting Lender; provided that no adjustments will be maderetroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided,further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender willconstitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. For the avoidance ofdoubt, no Breakage Fee shall be payable to any Lender under this Section 2.22(b).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 infull and all other acts and conditions (including, without limitation, the obtaining of any necessary consents, all required legal opinionsand regulatory approvals and the making of any required filings, recordings or registrations) required to be done and performed and to havehappened prior to the execution, delivery and performance of this Agreement and all related Transaction Documents and to constitute thesame legal, valid and binding obligations, enforceable in accordance with their respective terms, shall have been done and performed andshall have happened in due and 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 datehereof in Applicable Law which adversely affects any Lender’s or the Administrative Agent’s ability to enter into the transactionscontemplated by the Transaction Documents or any material adverse change or material disruption after the date hereof in the financial,banking or commercial loan or 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 materialrespect; -71-(iv) each Lender Agent shall have received, all documentation and other information requested by such Lender Agent in its solediscretion and/or required by regulatory authorities with respect to the Borrower, the Transferor and the Servicer (and each Affiliate andany key personnel of the foregoing) under applicable “know your customer” and anti-money laundering rules and regulations, including,without limitation, the USA 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, eachin form and substance satisfactory to the Administrative Agent and each Lender Agent;(vi) [Reserved.](vii) in the judgment of the Administrative Agent, there shall have been no material adverse changes in the Borrower’s (and theServicer’s, as applicable) underwriting, servicing, collection, operating, and reporting procedures and systems since the completion of duediligence;(viii) the results of Administrative Agent’s financial, legal, tax and accounting due diligence relating to the Transferor, the Borrower,the Servicer, the Eligible Loan Assets and the transactions contemplated hereunder are satisfactory to Administrative Agent; and(ix) each applicable Lender Agent shall have received a duly executed copy of its Variable Funding Note, in a principal amountequal to the Commitment of the related Lender.Section 3.02 Conditions Precedent to All Advances. Each Advance (including the Initial Advance, except as explicitly set forth below) tothe Borrower 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 ofsuch Advance 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 tothe Collateral Custodian and the Collateral Agent) no later than 2:00 p.m. on the date of such Advance: (A) a Notice of Borrowing, (B) aBorrowing Base Certificate, (C) a Loan Tape, (D) an Approval Notice (with respect to any such Loan Asset added to the Collateral Portfolioon the related Advance Date) and (E) such additional information as may be reasonably requested by the Administrative Agent and, exceptwith respect to an Advance under Section 2.02(f), and an executed copy of each assignment and assumption agreement, transfer documentor instrument -72-(including any Loan Assignment) relating to each Loan Asset to be Pledged evidencing the assignment of such Loan Asset from any priorthird party owner thereof directly to the Borrower (other than in the case of any Loan Asset acquired or funded by the Borrower atorigination) and a Loan Assignment 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 acopy to the Administrative Agent), no later than 2:00 p.m. on the related Advance Date, a faxed or e-mailed copy of the duly executedoriginal promissory notes of the Loan Assets (and, in the case of any Noteless Loan Asset, a fully executed assignment agreement) and ifany Loan Assets are closed in escrow, a certificate (in the form of Exhibit H) from the closing attorneys of such Loan Assets certifying thepossession of the Required Loan Documents; provided that, notwithstanding the foregoing, the Borrower shall cause the Loan AssetChecklist and the Required Loan Documents to be in the possession of the Collateral Custodian within five Business Days of any relatedAdvance Date as to any Loan Assets;(iii) except with respect to an Advance required by Section 2.02(f), 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 of any covenant contained in Sections 5.01, 5.02, 5.03 and 5.04before and after giving effect to the Advance to take place on such Advance Date and to the application of proceeds therefrom, on and as ofsuch day as though 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 resultfrom such Advance, 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 orany event 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 toperform its obligations 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 LoanAsset to be pledged on such Advance Date; and -73-(viii) all terms and conditions of the Purchase and Sale Agreement required to be satisfied in connection with the assignment of eachLoan Asset being pledged hereunder on such Advance Date (and the Portfolio Assets related thereto), including, without limitation, theperfection of the Borrower’s interests therein, shall have been satisfied in full, and all filings (including, without limitation, UCC filings)required to be made by any Person and all actions required to be taken or performed by any Person in any jurisdiction to give the CollateralAgent, for the benefit of the Secured Parties, a first priority perfected security interest (subject only to Permitted Liens) in such Loan Assetsand the Portfolio Assets related 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 Assetsidentified in 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.(d) Except with respect to an Advance required by Section 2.02(f), the proposed Advance Date shall take place during the ReinvestmentPeriod and 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 LenderFee Letters and the WFBNA Fee Letter and shall have reimbursed the Lenders, the Administrative Agent, each Lender Agent, the Collateral Custodian,the Account 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 anyLender’s obligation to make such an advance unless such waiver is in writing and executed by such Lender. -74-Section 3.04 Conditions to Acquisitions of Loan Assets. Each Pledge of an additional Eligible Loan Asset pursuant to Section 2.06, aSubstitute Eligible 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 aLoan Asset hereunder and the inclusion of each such Eligible Loan Asset in the calculation of the Borrowing Base shall be subject to the furtherconditions precedent 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);(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 therelated Cut-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 LoanAsset, a fully executed assignment agreement) and if any Loan Assets are closed in escrow, a certificate (in the form of Exhibit H) from the closingattorneys of such Loan Assets certifying the possession of the Required Loan Documents; provided that, notwithstanding the foregoing, the Borrowershall cause the Loan Asset Checklist and the Required Loan Documents for a Loan Asset to be in the possession of the Collateral Custodian within fiveBusiness Days 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 Assetsidentified in 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, orwould result from such Pledge (other than, with respect to any Pledge of an Eligible Loan Asset necessary to facilitate a cure of a Borrowing BaseDeficiency in accordance with Section 2.06 or Section 2.07, an Unmatured Event of Default arising solely pursuant to such Borrowing BaseDeficiency);(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; -75-(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 LoanAsset being Pledged (and the Portfolio Assets related thereto), including, without limitation, the perfection of the Borrower’s interests therein, shallhave been satisfied in full, and all filings (including, without limitation, UCC filings) required to be made by any Person and all actions required to betaken or performed by any Person in any jurisdiction to give the Collateral Agent, for the benefit of the Secured Parties, a first priority perfectedsecurity interest (subject only to Permitted Liens) in such Loan Assets and the Portfolio Assets related thereto and the proceeds thereof shall have beenmade, 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 nobreach of any 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 asof such day as though made on and as of such date (other than any representation and warranty that is made as of a specific date).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 ofeach applicable Cut-Off Date, as of each applicable Advance Date, as of each Reporting Date and as of each other date provided under this Agreementor the other 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 andin good 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 transactthe business in which it is engaged and is duly qualified and in good standing under the laws of each jurisdiction where the transaction of suchbusiness or its 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 and perform this Agreement and each of the Transaction Documents to which it is a party and all of the transactions contemplated hereby andthereby, and has taken all necessary action to authorize the execution, delivery and performance of this Agreement and each of the TransactionDocuments to which it is a party, and to grant to the Collateral Agent, for the benefit of the Secured Parties, a first priority perfected security interest inthe Collateral Portfolio on the terms and conditions of this Agreement, subject only to Permitted Liens. -76-(c) Binding Obligation. This Agreement and each of the Transaction Documents to which the Borrower is a party constitutes the legal,valid and binding obligation of the Borrower, enforceable against it in accordance with their respective terms, except as the enforceability hereof andthereof may be limited by Bankruptcy Laws and by general principles of equity (whether such enforceability is considered in a proceeding in equity orat law).(d) All Consents Required. No consent of any other party and no consent, license, approval or authorization of, or registration ordeclaration with, any Governmental Authority, bureau or agency is required in connection with the execution, delivery or performance by the Borrowerof this Agreement or any Transaction Document to which it is a party or the validity or enforceability of this Agreement or any such TransactionDocument or the 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 forceand effect.(e) No Violation. The execution, delivery and performance of this Agreement by the Borrower and all other agreements and instrumentsexecuted and delivered or to be executed and delivered by it pursuant hereto or thereto in connection with the Pledge of the Collateral Portfolio willnot (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.(f) No Proceedings. There is no litigation or administrative proceeding or investigation pending or, to the knowledge of the Borrower,threatened against the Borrower or any properties of the Borrower, before any Governmental Authority (i) asserting the invalidity of this Agreement orany other Transaction Document to which the Borrower is a party, (ii) seeking to prevent the consummation of any of the transactions contemplated bythis Agreement or any other Transaction Document to which the Borrower is a party or (iii) seeking any determination or ruling that could reasonablybe expected 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 theSecured Parties, pursuant to this Agreement, is in the ordinary course of business for the Borrower and is not subject to the bulk transfer or any similarstatutory provisions 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 Portfoliohas been sold, transferred, assigned or pledged by the Borrower to any Person, other than as contemplated by Article II and the Pledge of suchCollateral Portfolio 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 (includingguaranteeing any obligation), other than (i) Indebtedness incurred under the terms of the Transaction Documents and (ii) Indebtedness incurredpursuant to certain ordinary business expenses arising pursuant to the transactions contemplated by this Agreement and the other TransactionDocuments. -77-(j) Sole Purpose. The Borrower has been formed solely for the purpose of engaging in transactions of the types contemplated by thisAgreement, and has not engaged in any business activity other than the negotiation, execution and to the extent applicable, performance of thisAgreement and the transactions 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 othermaterial tax returns (including, without limitation, all federal and material foreign, state, local and other tax returns) required to be filed by it (subjectto any extensions to file properly obtained by the same), is not liable for Taxes payable by any other Person and has paid or made adequate provisionsfor the payment of all Taxes, assessments and other governmental charges due and payable from the Borrower except for those Taxes being contestedin good faith by appropriate proceedings and in respect of which it has established proper reserves on its books in accordance with GAAP. No Tax lienor similar adverse claim has been filed, and no claim is being asserted, with respect to any such Tax, assessment or other governmental charge. AnyTaxes, fees and other governmental charges due and payable by the Borrower, as applicable, in connection with the execution and delivery of thisAgreement and the other Transaction Documents and the transactions contemplated hereby or thereby have been paid or shall have been paid if andwhen 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(and the 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,the Borrower has not changed its name since its formation; does not have tradenames, fictitious names, assumed names or “doing business as” namesother than 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 thetransactions under this Agreement and any other Transaction Document to which the Borrower is a party do not and will not render the Borrower notSolvent. The Borrower is paying its debts as they become due (subject to any applicable grace period); and the Borrower, after giving effect to thetransactions contemplated hereby, will have adequate capital to conduct its business. -78-(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 purchaseof the Loan Assets (or any number of them) purchased from the Transferor pursuant to the Purchase and Sale Agreement. No such transfer has beenmade for or on account of an antecedent debt owed by the Borrower to the Transferor and no such transfer is or may be voidable or subject to avoidanceunder any section of the Bankruptcy Code.(r) Reports Accurate. All Servicer’s Certificates, Servicing Reports (if prepared by the Borrower or to the extent that information containedtherein is 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 with respect to written or electronic information furnished bythe Borrower which was provided to the Servicer from an Obligor with respect to a Loan Asset, such information need only be true, complete andcorrect in all material respects to the knowledge of the Borrower; provided, further, that the foregoing proviso shall not apply to any informationpresented in a Servicer’s Certificate, Servicing Report, Notice of Borrowing or Borrowing Base Certificate.(s) Exchange Act Compliance; Regulations T, U and X. None of the transactions contemplated herein or in the other TransactionDocuments (including, without limitation, the use of proceeds from the sale of the Collateral Portfolio) will violate or result in a violation of Section 7of the Exchange 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,the grant 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 noevent has 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). -79-(v) Servicing Standard. Borrower has purchased and will purchase only Loan Assets underwritten in accordance with the ServicingStandard.(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) ofERISA, that is subject to Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA (other than any Multiemployer Plan) andthat is, or at any time during the preceding six years was, maintained by the Borrower or any ERISA Affiliate of the Borrower, or open toparticipation by employees of the Borrower or of any ERISA Affiliate of the Borrower, as from time to time in effect (each, a “PensionPlan”), does not exceed the value of the assets of the Pension Plan allocable to such vested benefits (based on the value of such assets as ofthe last annual valuation date). No non-exempt prohibited transactions, failure to meet the minimum funding standard set forth inSection 302(a) of ERISA and Section 412(a) of the Code (with respect to any Pension Plan other than a Multiemployer Plan), withdrawalsor reportable events have occurred with respect to any Pension Plan that, in the aggregate, could subject the Borrower to any material Tax,penalty or other liability. No notice of intent to terminate a Pension Plan has been filed, nor has any Pension Plan been terminated underSection 4041(c) of ERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to terminate, or appoint a trustee toadminister a Pension Plan and no event has occurred or condition exists that might constitute grounds under Section 4042 of ERISA for thetermination of, or the appointment of a trustee to administer, 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 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 Transferor 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 theServicer on the Borrower’s behalf, to send Principal Collections and Interest Collections on the Collateral Portfolio. The Borrower has not granted anyPerson other than the Collateral Agent, on behalf of the Secured Parties, an interest in the Collection Account. -80-(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 noitem of 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 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.(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.(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 thatany Loan 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. -81-(gg) Sanctions. None of the Borrower nor, to its knowledge, any Person directly or indirectly Controlling the Borrower (i) is a SanctionedPerson; (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 fromany transaction that would be prohibited by Sanctions or would otherwise cause any Lender or any other party to this Agreement to be in breach of anySanctions. To each such Person’s knowledge, 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 inall respects.(ii) Confirmation from the Servicer. The Borrower has received in writing from the Servicer confirmation that such Servicer will not causethe Borrower to file a voluntary bankruptcy petition under the Bankruptcy Code.(jj) 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.(kk) 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) 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 for Permitted 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 towhich the Borrower has complied with its obligations under this Section 4.01(ll); -82-(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 foreach Controlled Account has agreed to treat all assets credited to such Controlled Account as “financial assets” within the meaningof the applicable UCC;b. the Borrower has taken all steps necessary to cause the securities intermediary to identify in its records the Borrower,subject to the lien of the Collateral Agent, for the benefit of the Secured Parties, as the Person having a security entitlement againstthe securities intermediary 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 CollateralAgent, for the benefit of the Secured Parties. The securities intermediary of any Controlled Account which is a “securities account”under the UCC has agreed to comply with the entitlement orders and instructions of the Borrower, the Servicer and the CollateralAgent (acting at the direction of the Administrative Agent) in accordance with the Transaction Documents, including causing cashto be invested in Permitted Investments; provided that, upon the delivery of a Notice of Exclusive Control by the Collateral Agent(acting at the direction of the Administrative Agent), the securities intermediary has agreed to only follow the entitlement ordersand instructions of the Collateral Agent, on behalf of the Secured Parties, including with respect to the investment of cash inPermitted Investments.(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,the Account Bank and the Collateral Agent, on behalf of the Secured Parties, have entered into an account control agreement whichpermits the Collateral Agent on behalf of the Secured Parties to direct disposition of the funds in such deposit account following deliveryof a Notice of Exclusive Control;(vi) the Borrower owns and has good and marketable title to (or with respect to assets securing any Loan Assets, a valid securityinterest 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 securityinterest in the Loan Assets hereunder to the Collateral Agent, on behalf of the Secured Parties; -83-(viii) the Borrower has caused the filing of all appropriate financing statements in the proper filing office in the appropriatejurisdictions under Applicable Law in order to perfect the security interest in the Collateral Portfolio and that portion of the Loan Assets inwhich a security interest may be perfected by filing of a UCC financing statement granted to the Collateral Agent, on behalf of the SecuredParties, under this Agreement;(ix) other than as expressly permitted by the terms of this Agreement the security interest granted to the Collateral Agent, on behalf ofthe Secured Parties, pursuant to this Agreement, the Borrower has not pledged, assigned, sold, granted a security interest in or otherwiseconveyed any of the Collateral Portfolio. The Borrower has not authorized the filing of and is not aware of any financing statementsagainst the Borrower that include a description of collateral covering the Collateral Portfolio other than any financing statement(A) relating to the security interests granted to the Borrower under the Purchase and Sale Agreement, or (B) that has been terminated and/orfully and validly assigned to the Collateral Agent on or prior to the date hereof. The Borrower is not aware of the filing of any judgment orTax 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,that constitute or evidence each Loan Asset has been, or subject to the delivery requirements contained herein, will be delivered to theCollateral Custodian;(xi) other than in the case of Noteless Loan Assets, the Borrower has received, or subject to the delivery requirements containedherein will receive, a written acknowledgment from the Collateral Custodian that the Collateral Custodian, as the bailee of the CollateralAgent, is holding the underlying promissory notes that constitute or evidence the Loan Assets solely on behalf of and for the CollateralAgent, for the benefit of the Secured Parties; provided that the acknowledgement of the Collateral Custodian set forth in Section 12.11 mayserve as such acknowledgement;(xii) none of the underlying promissory notes, or Loan Asset Registers, as applicable, that constitute or evidence the Loan Assets hasany marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the CollateralAgent, on behalf of the Secured Parties;(xiii) with respect to any Collateral Portfolio that constitutes a “certificated security,” such certificated security has been delivered tothe Collateral Custodian, on behalf of the Secured Parties and, if in registered form, has been specially Indorsed to the CollateralCustodian, for the benefit of the Secured Parties, or in blank by an effective Indorsement or has been registered in the name of theCollateral Custodian, for the benefit of the Secured Parties, upon original issue or registration of transfer by the Borrower of suchcertificated security; and -84-(xiv) with respect to any Collateral Portfolio that constitutes an “uncertificated security”, that the Borrower shall either cause theissuer of such uncertificated security to register the Collateral Agent, on behalf of the Secured Parties, as the registered owner of suchuncertificated security or will cause the issuer to comply with the instructions of the Collateral Agent without further consent of theBorrower.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 theCollateral Agent, for the benefit of the Secured Parties, which upon the delivery of the Required Loan Documents to the Collateral Custodian, thecrediting of Loan Assets to the Controlled Accounts and the filing of the financing statements, shall be a valid and first priority perfected securityinterest in the Loan Assets forming a part of the Collateral Portfolio and in that portion of the Loan Assets in which a security interest may be perfectedby filing subject only to Permitted Liens. Neither the Borrower nor any Person claiming through or under the Borrower shall have any claim to orinterest 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 andcomplete listing of all the Loan Assets contained in the Collateral Portfolio as of the related Cut-Off Date and the information contained therein withrespect to the identity of such item of Collateral Portfolio and the amounts owing thereunder is true and correct in all material respects as of the relatedCut-Off Date, (ii) each Loan Asset designated on any Borrowing Base Certificate as an Eligible Loan Asset and each Loan Asset included as an EligibleLoan Asset in any calculation of Borrowing Base or Borrowing Base Deficiency is an Eligible Loan Asset, in each case, satisfying all criteria set forthin the definition of “Eligibility Criteria” and (iii) with respect to each item of Collateral Portfolio, all consents, licenses, approvals or authorizations ofor registrations 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. -85-(c) No Fraud. Each Loan Asset was originated or acquired without any fraud or material misrepresentation by the Transferor or, to theBorrower’s knowledge, 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 underthe laws of the State of Maryland (except as such jurisdiction is changed as permitted hereunder), with all requisite power and authority to own or leaseits properties and to conduct its business as such business is presently conducted and to enter into and perform its obligations pursuant to thisAgreement.(b) Due Qualification. The Servicer is duly qualified to do business as a corporation and is in good standing as a corporation, and hasobtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of its property and or the conduct of its businessrequires such qualification, licenses or approvals, except where failure to be in good standing or obtain such licenses or approvals would notreasonably be expected to have a Material Adverse Effect.(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, validand binding 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 itis a party 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. -86-(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 furnishedby the Servicer 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 knowledge of the Borrower; provided, further, that the foregoingproviso 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 theCollateral Portfolio Pledged hereunder are held and shall be held in trust for the benefit of the Collateral Agent, on behalf of the Secured Parties untildeposited into 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 developmentcompany” 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 Agreementand any 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 federaland material foreign, state, local and other tax returns) that are required to be filed by it (subject to any extensions to file properly obtained by thesame). 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 (otherthan any amount of Tax the validity of which is currently being contested in good faith by appropriate proceedings andwith respect to which reserves in accordance with GAAP have been provided on the books of the Servicer), and no Tax lien has been filed and, to theServicer’s knowledge, no claim is being asserted, with respect to any such Tax, assessment or other governmental charge. -87-(m) Security Interest. Upon the filing of UCC-1 financing statements naming the Collateral Agent as secured party and the Borrower asdebtor, the Collateral Agent, for the benefit of the Secured Parties, shall have a valid and first priority perfected security interest in the Loan Assets andthe Borrower’s rights in that portion of the Collateral Portfolio in which a security interest may be perfected by filing of a UCC financing statement(except for any Permitted Liens). All filings (including, without limitation, such UCC filings) as are necessary for the perfection of the Secured Parties’security interest in the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing a financingstatement have 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) ofERISA, 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 atany time during the preceding six years was, maintained by the Servicer or any ERISA Affiliate of the Servicer, or open to participation by employeesof the Servicer 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 theassets of the Servicer Pension Plan allocable to such vested benefits (based on the value of such assets as of the last annual valuation date). Noprohibited transactions, failure to meet the minimum funding standard set forth in Section 302(a) of ERISA and Section 412(a) of the Code (withrespect to any Servicer Pension Plan other than a Multiemployer Plan), withdrawals or reportable events have occurred with respect to any ServicerPension Plan that, in the aggregate, could subject the Servicer to any material Tax, penalty or other liability. No notice of intent to terminate a ServicerPension Plan has been filed, nor has any Servicer 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 Servicer Pension Plan and no event has occurred or conditionexists that might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ServicerPension Plan.(o) Sanctions. None of the Servicer nor, to its knowledge, any Person directly or indirectly Controlling the Servicer (i) is a SanctionedPerson; (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 fromany transaction that would be prohibited by Sanctions or would otherwise cause any Lender or any other party to this Agreement to be in breach of anySanctions. The Servicer will notify each Lender and Administrative Agent in writing promptly after becoming aware of any breach of thisSection 4.03(o). -88-(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.(r) Instructions to Obligors. The Collection Account is the only account to which Obligors have been instructed by the Servicer on theBorrower’s behalf 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 anyServicer Termination 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 besubject, and no 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 CollateralAgent 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 thelaws of the United States. It has full corporate power, authority and legal right to execute, deliver and perform its obligations as Collateral Agent underthis Agreement.(b) Due Authorization. The execution and delivery of this Agreement and the consummation of the transactions provided for herein havebeen duly authorized by all necessary association action on its part, either in its individual capacity or as Collateral Agent, as the case may be. -89-(c) No Conflict. The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillmentof the 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, orconstitute (with or without notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed of trust, or otherinstrument to which 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 thefulfillment of the 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 Authorityapplicable to the Collateral Agent, required in connection with the execution and delivery of this Agreement, the performance by the Collateral Agentof the transactions contemplated hereby and the fulfillment by the Collateral Agent of the terms hereof have been obtained.(f) Validity, Etc. The Agreement constitutes the legal, valid and binding obligation of the Collateral Agent, enforceable against theCollateral Agent in accordance with its terms, except as such enforceability may be limited by applicable Bankruptcy Laws and general principles ofequity (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 itacting for 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 asCollateral Custodian 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 thelaws of the United States. It has full corporate power, authority and legal right to execute, deliver and perform its obligations as Collateral Custodianunder this Agreement.(b) Due Authorization. The execution and delivery of this Agreement and the consummation of the transactions provided for herein havebeen duly authorized by all necessary association action on its part, either in its individual capacity or as Collateral Custodian, as the case may be. -90-(c) No Conflict. The execution and delivery of this Agreement, the performance of the transactions contemplated hereby and the fulfillmentof the 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, orconstitute (with or without notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed of trust, or otherinstrument to which 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 thefulfillment of the 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 Authorityapplicable to the Collateral Custodian, required in connection with the execution and delivery of this Agreement, the performance by the CollateralCustodian of the transactions 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).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. -91-(b) Special Purpose Entity Requirements. The Borrower will at all times: (i) maintain at least one Independent Director; (ii) maintain itsown separate books and records and bank accounts; (iii) hold itself out to the public and all other Persons as a legal entity separate from the Transferorand any other Person (although, in connection with certain advertising and marketing, the Borrower may be identified as a Subsidiary of theTransferor); (iv) have a board of directors separate from that of the Transferor and any other Person; (v) file its own Tax returns, if any, as may berequired 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 divisionfor Tax purposes of another taxpayer, and pay any Taxes so required to be paid under Applicable Law in accordance with the terms of this Agreement;(vi) except as contemplated by Section 2.20(a), not commingle its assets with assets of any other Person; (vii) conduct its business in its own name andstrictly comply with all organizational formalities to maintain its separate existence (although, in connection with certain advertising and marketing,the Borrower may be identified as a Subsidiary of Solar); (viii) maintain separate financial statements, except to the extent that the Borrower’s financialand operating results are consolidated with those of the Transferor in consolidated financial statements; (ix) pay its own liabilities only out of its ownfunds; (x) maintain an arm’s-length relationship with its Affiliates and the Transferor; (xi) pay the salaries of its own employees, if any; (xii) not holdout its credit or assets as being available to satisfy the obligations of others; (xiii) maintain separate office space (which may be a separately identifiedarea in office space shared with one or more Affiliates of the Borrower) and allocate fairly and reasonably any overhead for shared office space;(xiv) use separate stationery, invoices and checks; (xv) not pledge its assets as security for the obligations of any other Person; (xvi) correct any knownmisunderstanding regarding its separate identity; (xvii) maintain adequate capital in light of its contemplated business purpose, transactions andliabilities and pay its operating expenses and liabilities from its own assets; (xviii) cause its board of directors to meet or act pursuant to writtenconsents and keep minutes of such meetings and actions, in each case in accordance with Delaware limited liability company formalities, and observein all material respects all other Delaware limited liability company formalities; (xix) not acquire the obligations or any securities of its Affiliates;(xx) cause the directors, officers, agents and other representatives of the Borrower to act at all times with respect to the Borrower consistently and infurtherance of the foregoing and in the best interests of the Borrower and (xxi) not divide or permit any division of the Borrower. Where necessary, theBorrower will obtain proper authorization from its members for limited liability company action.(c) Preservation of Company Existence. The Borrower will maintain its limited liability company existence in good standing under thelaws of its jurisdiction of formation and will promptly obtain and thereafter maintain qualifications to do business as a foreign limited liabilitycompany in any other state in which it is required to so qualify under Applicable Law, in each case (other than in respect of maintenance of itsexistence) where the failure 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 factualassumptions set forth in the legal opinions of Latham & Watkins LLP, as special counsel to the Borrower, issued in connection with the Purchase andSale Agreement and relating to the issues of substantive consolidation and true sale of the Loan Assets. -92-(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 disclosuremay be included 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 AdministrativeAgent and the Lender Agents within five Business Days of the Borrower’s, the Transferor’s or the Servicer’s actual knowledge of the occurrence of anydefault by an Obligor under any Loan Asset or any Bankruptcy Event with respect to any Obligor under any Loan Asset.(h) Required Loan Documents. The Borrower shall deliver to the Collateral Custodian copies of the Required Loan Documents and theLoan Asset 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 forthose Taxes contested in good faith by appropriate proceedings and in respect of which it establishes proper reserves on its books in accordance withGAAP).(j) Notice of Event of Default. The Borrower shall notify the Administrative Agent and each Lender Agent of the occurrence of any Eventof Default 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 10Business Days of the receipt of revenue agent reports or other written proposals, determinations or assessments of the Internal Revenue Service or anyother taxing authority which propose, determine or otherwise set forth positive adjustments to the Tax liability of the Borrower itself in an amountequal to or greater than $500,000 in the aggregate. Any such notice shall specify the nature of the items giving rise to such adjustments and theamounts thereof. -93-(m) Notice of Auditors’ Management Letters. The Borrower shall promptly notify the Administrative Agent and each Lender Agent afterthe receipt 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 the Collateral Portfolio, the Transferor or the Borrower in excess of$500,000, with respect to the Borrower, or $2,500,000, with respect to the Transferor, shall be deemed to be material and (ii) any settlement, judgment,labor controversy, litigation, action, suit or proceeding affecting the Servicer in excess of $2,500,000 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 havebeen waived 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 theAdministrative Agent and the Lender in the event the Borrower becomes a Benefit Plan Investor or a Governmental Plan Entity or in theevent the Borrower knows or expects that this Agreement or any other action or transaction in connection with this Agreement or any otherTransaction Document will constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of theCode or in a non-exempt violation 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, theBorrower will 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 asthe Administrative Agent or any Lender Agent may reasonably request evidencing the truthfulness of the representations set forth in this Agreement. -94-(r) Protection of Security Interest. With respect to the Collateral Portfolio acquired by the Borrower, the Borrower will (i) acquire suchCollateral Portfolio pursuant to and in accordance with the terms of the Purchase and Sale Agreement or such other similar agreement, as applicable, (ii)(at the expense of the Servicer, on behalf of the Borrower) take all action necessary to perfect, protect and more fully evidence the Borrower’sownership of such Collateral Portfolio free and clear of any Lien other than the Lien created hereunder and Permitted Liens, including, withoutlimitation, (a) with respect to the Loan Assets and that portion of the Collateral Portfolio in which a security interest may be perfected by filing, filingand maintaining (at the expense of the Servicer, on behalf of the Borrower), effective financing statements against the Transferor in all necessary orappropriate filing offices, (including any amendments thereto or assignments thereof) and filing continuation statements, amendments or assignmentswith respect thereto in such filing offices, (including any amendments thereto or assignments thereof) and (b) executing or causing to be executed suchother instruments or notices as may be necessary or appropriate, (iii) (at the expense of the Servicer, on behalf of the Borrower) take all action necessaryto cause a valid, subsisting and enforceable first priority perfected security interest, subject only to Permitted Liens, to exist in favor of the CollateralAgent (for the benefit of the Secured Parties) in the Borrower’s interests in all of the Collateral Portfolio being Pledged hereunder including the filingof a UCC financing statement in the applicable jurisdiction adequately describing the Collateral Portfolio (which may include 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 withrespect thereto in such filing offices, (including any amendments thereto or assignments thereof), (iv) permit the Administrative Agent or any LenderAgent or their respective agents or representatives to visit the offices of the Borrower during normal office hours and upon reasonable advance noticeexamine and make copies of all documents, books, records and other information concerning the Collateral Portfolio and discuss matters relatedthereto with any of the officers or employees of the Borrower having knowledge of such matters no more than twice in any fiscal year when no Event ofDefault is in existence, and (v) take all additional action that the Administrative Agent, any Lender Agent or the Collateral Agent may reasonablyrequest to perfect, protect and more fully evidence the respective first priority perfected security interests of the parties to this Agreement in theCollateral Portfolio, or to enable the Administrative Agent or the Collateral Agent to exercise or enforce any of their respective 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). -95-(u) Compliance with Law. The Borrower shall at all times comply in all material respects with all Applicable Law applicable to Borrower orany of its assets (including, without limitation, Environmental Laws, and all federal securities laws), and Borrower shall do or cause to be done allthings necessary 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 bemade of 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 becomedelinquent, as the case may be, all its obligations of whatever nature, except where the amount or validity thereof is currently being contested in goodfaith by appropriate proceedings and 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 Borroweris treated 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 ofits business 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 powerof attorney 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. -96-(bb) Officer’s Certificate. On or within 30 days prior to each anniversary of the date of this Agreement, the Borrower shall deliver anOfficer’s Certificate, in form and substance acceptable to the Lender Agents and the Administrative Agent, providing (i) a certification, based upon areview and summary of UCC search results, that there is no other interest in the Collateral Portfolio that is perfected by filing of a UCC financingstatement other than in favor of the Collateral Agent and (ii) a certification, based upon a review and summary of Tax and judgment lien searches, thatthere is no other interest 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 anniversaryof the date 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:(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 thecounsel for the Borrower, in form and substance reasonably satisfactory to the Administrative Agent, confirming and updating the opiniondelivered pursuant to Schedule I with respect to perfection and otherwise to the effect that the security interest hereunder continues to be avalid and perfected security interest, and stating that counsel has reviewed applicable searches of the UCC filing office in the Borrower’sjurisdiction of organization and that such searches do not indicate any other Liens of record except as specified therein, provided herein orotherwise permitted hereunder, 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. -97-(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, 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 use anyof 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 anyrepayment of the Obligations in violation of any Anti-Corruption Laws or Anti-Money Laundering Laws in any material respect. The Borrower shallconduct the requisite due diligence in connection with the transactions contemplated herein for purposes of complying with the Anti-MoneyLaundering Laws, including with respect to the legitimacy of any applicable investor and the origin of the assets used by such investor to purchase theproperty in question, and will maintain sufficient information to identify any applicable investor for purposes of the Anti-Money Laundering Laws.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 anyobligation of any Person, including any Affiliate; (ii) engage, directly or indirectly, in any business, other than the actions required or permitted to beperformed under the Transaction Documents; (iii) incur, create or assume any Indebtedness, other than Indebtedness incurred under the TransactionDocuments and arising in connection with ordinary business expenses arising pursuant to the transactions contemplated by this Agreement and theother Transaction Documents; (iv) make or permit to remain outstanding any loan or advance to, or own or acquire any stock or securities (other thanany equity 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 documentsshall reflect) that the unanimous consent of all directors (including the consent of the Independent Director(s)) is required for the Borrower to(i) dissolve or liquidate, in whole or part, or institute proceedings to be adjudicated bankrupt or not Solvent, (ii) institute or consent to the institutionof bankruptcy or insolvency proceedings against it, (iii) file a petition seeking or consent to reorganization or relief under any applicable federal orstate law relating to bankruptcy or insolvency, (iv) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator,custodian or any similar official for the Borrower, (v) make any assignment for the benefit of the Borrower’s creditors, (vi) admit in writing its inabilityto pay its debts generally as 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 titleto the Collateral Portfolio, except for dispositions of the Collateral Portfolio expressly permitted or contemplated by this Agreement. -98-(d) Transfer Limitations. The Borrower shall not transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, orpledge or hypothecate, directly or indirectly, any interest in the Collateral Portfolio to any person other than the Collateral Agent for the benefit of theSecured Parties, or engage in financing transactions or similar transactions with respect to the Collateral Portfolio with any person other than theAdministrative Agent and the Lenders, in each case, except as otherwise expressly permitted or contemplated by the terms of this Agreement.(e) Liens. The Borrower shall not create, incur or permit to exist any lien, encumbrance or security interest in or on any of the CollateralPortfolio subject 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 withoutthe prior written 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“true sale” basis, of Collateral Portfolio, (y) to fund the Unfunded Exposure Account in order to establish reserves for unfunded commitments ofDelayed Draw Loan Assets included in the Collateral Portfolio or (z) in those instances where sufficient Borrowing Base capacity exists, to distributesuch proceeds to the Transferor 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 anyassets released 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 inconnection therewith), (ii) a repurchase or substitution of a Warranty Loan Asset effected in accordance with Section 2.07(c) or (iii) a Lien ReleaseDividend effected 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 thisAgreement and in accordance with the Servicing Standard, extend, amend or otherwise modify the terms of any Loan Asset (including the UnderlyingCollateral). -99-(k) Purchase and Sale Agreement. The Borrower will not amend, modify, waive or terminate any provision of the Purchase and SaleAgreement without 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.(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 toObligors regarding payments to be made with respect to the Collateral Portfolio to the Collection Account, unless the Administrative Agent hasconsented to such change (such consent not to be unreasonably withheld or delayed, it being understood that any such account to which the Obligorsmay be instructed to make payments shall be subject to an account control agreement which provides the Collateral Agent with a first priorityperfected security 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 areprincipally secured by an interest in real property (within the meaning of Treasury Regulation Section 301.7701(i)-1(d)(3)) shall not at any time exceed35% of the aggregate 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 itsformation, make any change to its corporate name or use any tradenames, fictitious names, assumed names, “doing business as” names or other names(other than those listed on Schedule II hereto, as such schedule may be revised from time to time to reflect name changes and name usage permittedunder the terms of this Section 5.02(p) after compliance with all terms and conditions of this Section 5.02(p) related thereto) -100-unless, prior to the effective date of any such change in the jurisdiction of its formation, name change or use, the Borrower receives prior writtenconsent from the Administrative Agent of such change and delivers to the Administrative Agent such financing statements as the Administrative Agentmay request to reflect such name change or use, together with such Opinions of Counsel and other documents and instruments as the AdministrativeAgent may request in connection therewith. The Borrower will not change the location of its chief executive office unless prior to the effective date ofany such change of location, the Borrower notifies the Administrative Agent of such change of location in writing. The Borrower will not move, orconsent to the Collateral Custodian or the Servicer moving, the Loan Asset Files from the location thereof on the Closing Date, unless theAdministrative Agent shall consent to such move in writing and the Servicer shall provide the Administrative Agent with such Opinions of Counseland other documents and instruments as the Administrative Agent may reasonably request in connection therewith.(q) Allocation of Charges. There will not be any agreement or understanding between the Servicer and the Borrower (other than asexpressly set forth herein or as consented to by the Administrative Agent), providing for the allocation or sharing of obligations to make payments orotherwise in respect of any Taxes, fees, assessments or other governmental charges; provided that it is understood and acknowledged that the Borrowerwill be consolidated with the Transferor for tax purposes.(r) Compliance with Sanctions. None of the Borrower nor any Person directly or indirectly Controlling the Borrower will, directly orknowingly indirectly, use the proceeds of any Advance hereunder, or lend, contribute, or otherwise make available such 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 any manner that would be prohibitedby Sanctions or would otherwise cause any Lender to be in breach of any Sanctions. The Borrower shall comply with all applicable Sanctions in allmaterial 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 toservicing the Collateral 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 inthe jurisdiction of its incorporation, and qualify and remain qualified in good standing as a corporation in each jurisdiction where the failure topreserve and maintain such existence, rights, franchises, privileges and qualification could reasonably be expected to have a Material Adverse Effect. -101-(c) Obligations and Compliance with Collateral Portfolio. The Servicer will take all actions within its control so as to permit the Borrowerto fulfill 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.(d) Keeping of Records and Books of Account.(i) The Servicer will maintain and implement administrative and operating procedures (including, without limitation, an ability torecreate records evidencing Collateral Portfolio in the event of the destruction of the originals thereof), and keep and maintain alldocuments, books, records and other information reasonably necessary or advisable for the collection of all Collateral Portfolio and theidentification of the Collateral Portfolio.(ii) The Servicer shall permit the Administrative Agent, each Lender Agent or their respective agents or representatives, to visit theoffices of the Servicer during normal office hours and upon reasonable advance notice and examine and make copies of all documents,books, records and other information concerning the Collateral Portfolio and the Servicer’s servicing thereof and discuss matters relatedthereto with any of the officers or employees of the Servicer having knowledge of such matters and to review the Servicer’s collection andadministration of the Collateral Portfolio in order to assess compliance by the Servicer with the Servicing Standard, as well as with theTransaction Documents and to conduct an audit of the Collateral Portfolio and Required Loan Documents in conjunction with such areview. For the avoidance of doubt, the right of the Administrative Agent provided herein to visit and inspect the financial records andproperties of the Borrower and the Servicer and conduct such audits shall be limited to not more than two such visits and inspections inany fiscal year; provided that after the occurrence and during the continuance of an Event of Default, there shall be no limit to the numberof 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 tothe Collateral Portfolio indicating that the Collateral Portfolio is owned by the Borrower subject to the Lien of the Collateral Agent, for thebenefit of the 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. -102-(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 Days following the Servicer’s knowledge or notice of the occurrence ofany Event of Default or Unmatured Event of Default, the Servicer will provide to the Collateral Agent, the Administrative Agent and each LenderAgent a written statement of the chief financial officer or chief accounting officer of the Servicer setting forth the details of such event and the actionthat 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, allfederal and 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 or reports respecting the Collateral Portfolio or the condition or operations, financial or otherwise, of the Borrower or the Servicer as theCollateral Agent or the Administrative Agent may from time to time reasonably request in order to protect the interests of the Administrative Agent, theCollateral Agent or 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 $2,500,000 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. -103-(k) Loan Asset Register. The Servicer shall maintain, or cause to be maintained, with respect to each Noteless Loan Asset a register (whichmay be in physical or electronic form and readily identifiable as the loan asset register) (each, a “Loan Asset Register”) in which it will record, or causeto be recorded, (v) the amount of such Noteless Loan Asset, (w) the amount of any principal or interest due and payable or to become due and payablefrom the Obligor thereunder, (x) the amount of any sum in respect of such Noteless Loan Asset received from the Obligor, (y) the date of origination ofsuch Noteless Loan Asset and (z) the maturity date of such Noteless Loan Asset. All of the information (and related certifications) required to be setforth with respect to the Loan Asset Register may be included in the applicable Borrowing Base Certificate.(l) Special Purpose Entity Requirements. The Servicer shall take such actions as are necessary to cause the Borrower to be in compliancewith the special purpose entity requirements set forth in Sections 5.01(a) and (b) and 5.02(a); provided that, for the avoidance of doubt, the Servicershall not be required to expend any of its own funds to cause the Borrower to be in compliance with subsection 5.02(a)(viii) or subsection 5.01(a)(xv)(it being understood that this proviso shall in no way affect the obligation of the Servicer to manage the activities and liability of the Borrower suchthat the Borrower 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 aspossible and in any event within three Business Days after any Responsible Officer of the Servicer receives notice or has actual knowledge of anysettlement 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 orforeign, that could reasonably be expected to have a Material Adverse Effect on the interests of the Collateral Agent or the Secured Parties in, to andunder the Collateral Portfolio. Solely for purposes of this Section 5.03(n), any settlement, judgment, labor controversy, litigation, action, suit orproceeding affecting the Collateral Portfolio or the Collateral Agent’s or the Secured Parties’ interest in the Collateral Portfolio in excess of $2,500,000or more shall 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 factualassumptions set forth in the legal opinions of Latham & Watkins LLP, as special counsel to the Servicer, issued in connection with the TransactionDocuments and relating to the issues of substantive consolidation and true sale of the Loan Assets. -104-(p) Instructions to Agents and Obligors. The Servicer shall direct, or shall cause the Transferor to direct, any agent or administrative agentfor any Loan Asset to remit all payments and collections with respect to such Loan Asset, and, if applicable, to direct the Obligor with respect to suchLoan Asset to remit all such payments and collections with respect to such Loan Asset directly to the Collection Account. The Borrower and theServicer shall take commercially reasonable steps to ensure, and shall cause the Transferor to take commercially reasonable steps to ensure, that onlyfunds constituting payments and collections relating to Loan Assets shall be deposited into the Collection Account.(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 itscapacity as Servicer, 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 andeach Lender Agent (during normal office hours and upon advance notice) to review the Servicer’s collection and administration of the CollateralPortfolio in order to assess compliance by the Servicer with the Servicing Standard, as well as with the Transaction Documents and to conduct an auditof the Collateral Portfolio and Required Loan Documents in conjunction with such a review. Such review shall be reasonable in scope and shall becompleted in 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 facilityto preserve 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 Controllingthe Servicer and each Person directly or indirectly Controlled by the Servicer and, to the Servicer’s knowledge, any Related Party of the foregoingshall: (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. -105-(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 itsproperties and assets substantially as an entirety to any Person (other than an Affiliate), unless the Servicer is the surviving entity and unless:(i) the Servicer has delivered to the Administrative Agent and each Lender Agent an Officer’s Certificate and an Opinion of Counseleach stating that any such consolidation, merger, conveyance or transfer and any supplemental agreement executed in connectiontherewith comply with this Section 5.04 and that all conditions precedent herein provided for relating to such transaction have beencomplied with and, in the case of the Opinion of Counsel, that such supplemental agreement is legal, valid and binding with respect to theServicer and such other matters as the Administrative Agent may reasonably request;(ii) the Servicer shall have delivered notice of such consolidation, merger, conveyance or transfer to the Administrative Agent andeach Lender 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 consentnot to be unreasonably 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. -106-(c) Change in Payment Instructions to Obligors. The Servicer will not make any change in its instructions to Obligors regarding paymentsto be made with respect to the Collateral Portfolio to the Collection Account, unless the Administrative Agent has consented to such change (suchconsent not to be unreasonably withheld or delayed, it being understood that any such account to which the Obligors may be instructed to makepayments shall be subject to an account control agreement which provides the Collateral Agent with a first priority perfected security interest in suchaccount, as evidenced 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 orotherwise modify the terms of any Loan Asset (including the Underlying Collateral).(e) Taxable Mortgage Pool Matters. The Servicer will manage the portfolio and advise the Borrower with respect to purchases from theTransferor so as to not at any time allow 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)) to exceed 35% of the aggregateOutstanding Balance of all Loan Assets.(f) Allocation of Charges. There will not be any agreement or understanding between the Servicer and the Borrower (other than as expresslyset forth herein or as consented to by the Administrative Agent), providing for the allocation or sharing of obligations to make payments or otherwisein respect 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 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. -107-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.(c) Location of Required Loan Documents. Subject to Article XII of this Agreement, the Required Loan Documents delivered in originalform shall remain at all times in the possession of the Collateral Custodian at the address located at 1055 10th Ave S.E., Minneapolis, MN 55414unless notice of a different address is given in accordance with the terms hereof or unless the Administrative Agent agrees to allow certain RequiredLoan Documents to be released to the Servicer on a temporary basis in accordance with the terms hereof, except as such Required Loan Documents maybe released 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 RequiredLoan Documents in any manner that is inconsistent with the performance of its obligations as the Collateral Custodian pursuant to this Agreement andwill not 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 andconditions of this Agreement, as Servicer, with the authority to service, administer and exercise rights and remedies, on behalf of the Borrower, inrespect of the Collateral Portfolio. Until the Administrative Agent gives Solar a Servicer Termination Notice, Solar hereby accepts such appointmentand agrees to perform the duties and responsibilities of the Servicer pursuant to the terms hereof. The Servicer and the Borrower hereby acknowledgethat the Administrative Agent and the Secured Parties are third party beneficiaries of the obligations undertaken by the Servicer hereunder. -108-(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 agrees that it will terminate its activities as Servicer hereunder in a mannerthat the Administrative Agent believes will facilitate the transition of the performance of such activities to a successor Servicer, and the successorServicer shall assume each and all of the Servicer’s obligations to service and administer the Collateral Portfolio, on the terms and subject to theconditions herein set forth, and the Servicer shall use its best efforts to assist the successor Servicer in assuming such obligations.(c) Appointment of Replacement Servicer. At any time following the delivery of a Servicer Termination Notice, the Administrative Agentmay, in its sole discretion, (i) appoint Wells Fargo (or an Affiliate thereof) as Servicer under this Agreement and, in such case, all authority, power,rights and obligations 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 United States $50,000,000 and whose regular businessincludes the servicing 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 allrespects to the Servicer with respect to servicing functions under this Agreement and shall be subject to all the responsibilities, duties and liabilitiesrelating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to referto the Replacement 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 -109-obligation with respect to any Servicer indemnification obligations of any prior Servicer, including the original Servicer. The indemnificationobligations of the Replacement Servicer upon becoming a Replacement Servicer, are expressly limited to those arising on account of its failure to actin good faith and with reasonable care under the circumstances. In addition, the Replacement Servicer shall have no liability relating to therepresentations 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 terminateupon termination 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.(f) Subcontracts. The Servicer may, with the prior written consent of the Administrative Agent, subcontract with any other Person forservicing, administering or collecting the Collateral Portfolio; provided that (i) the Servicer shall select any such Person with reasonable care and shallbe solely responsible for the fees and expenses payable to any such Person, (ii) the Servicer shall not be relieved of, and shall remain liable for, theperformance of the duties and obligations of the Servicer pursuant to the terms hereof without regard to any subcontracting arrangement and (iii) anysuch subcontract 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 theServicer, and the Borrower waives any and all claims against the Administrative Agent, each Lender Agent or any of their respective Affiliates, theCollateral Agent and the Servicer (other than claims relating to each such party’s gross negligence or willful misconduct) relating in any way to thecustodial or collateral administration functions having been performed by the Administrative Agent or any of its Affiliates in accordance with the termsand provisions (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 collecton the Collateral 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 andwaivers, enforcing and collecting on the Collateral Portfolio and otherwise managing the Collateral Portfolio on behalf of the Borrower; -110-(ii) maintaining all necessary servicing records with respect to the Collateral Portfolio and providing such reports to theAdministrative Agent and each Lender Agent (with a copy to the Collateral Agent and the Collateral Custodian) in respect of the servicingof the Collateral Portfolio (including information relating to its performance under this Agreement) as may be required hereunder or as theAdministrative Agent or any Lender Agent may reasonably request;(iii) maintaining and implementing administrative and operating procedures (including, without limitation, an ability to recreateservicing records evidencing the Collateral Portfolio in the event of the destruction of the originals thereof) and keeping and maintainingall 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 timeto time, such information and servicing records (including information relating to its performance under this Agreement) as theAdministrative Agent, 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,defense or counterclaim (1) that is or is threatened to be asserted by an Obligor with respect to any Loan Asset (or portion thereof) of whichit has knowledge 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 CollateralPortfolio;(viii) except to the extent held by the Collateral Custodian in accordance with Section 12.02(b), maintaining the Loan Asset Filewith respect to Loan Assets included as part of the Collateral Portfolio; provided that, so long as the Servicer is in possession of anyRequired Loan Documents, the Servicer will hold such Required Loan Documents in a fireproof safe or fireproof file cabinet; -111-(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 CollectionAccount established and maintained with the Collateral Agent;(xiii) delivering the Loan Asset Files and the Loan Tape to the Collateral Custodian; and(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 andremedies with respect to the Loan Assets and the Underlying Collateral and under the Loan Agreements with respect to the related Loan Asset, andtherefore, for all purposes under this Agreement, the Servicer shall perform its administrative and management duties hereunder only to the extent that,as a lender under the related Loan Agreements, it has the right to do so. Notwithstanding anything to the contrary contained herein, it is acknowledgedand agreed that the performance by the Servicer of its duties hereunder shall be limited insofar as such performance would conflict with or result in abreach of any of the express terms of the related Loan Agreements; provided that the Servicer shall (a) provide prompt written notice to theAdministrative Agent (who will provide each Lender Agent with a copy promptly upon receipt thereof) upon becoming aware of such conflict orbreach, (b) have determined that there is no other commercially reasonable performance that it could render consistent with the express terms of theLoan Agreements which would result in all or a portion of the servicing duties being performed in accordance with this Agreement, and (c) undertakeall commercially reasonable efforts to mitigate the effects of such non-performance including performing as much of the servicing duties as possibleand performing such other commercially 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, eachLender Agent 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. -112-(c) Any payment by an Obligor in respect of any indebtedness owed by it to the Transferor or the Borrower shall, except as otherwisespecified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Administrative Agent, be applied as acollection of a payment by such Obligor (starting with the oldest such outstanding payment due) to the extent of any amounts then due and payablethereunder before being 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 theReplacement Servicer in assuming each and all of the Servicer’s obligations to service and administer the Collateral Portfolio in accordance with thisAgreement and comply with reasonable instructions from the Administrative Agent with respect thereto.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 anysuccessor thereto) 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. -113-(b) After the declaration of the Facility Maturity Date, at the direction of the Administrative Agent, the Servicer shall take such action asthe Administrative Agent may deem necessary or advisable to enforce collection of the Collateral Portfolio; provided that the Administrative Agentmay, 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 tobe collected, all payments called for under the terms and provisions of the Loan Assets included in the Collateral Portfolio as and when the samebecome due, all in accordance with the Servicing Standard.(b) Taxes and other Amounts. The Servicer will use its commercially reasonable efforts to collect all payments with respect to amounts duefor Taxes, assessments and insurance premiums relating to each Loan Asset to the extent required to be paid to the Borrower for such application underthe applicable 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 theapplicable administrative or paying agent) to make all payments in respect of the Collateral Portfolio directly to the Collection Account; provided thatthe Servicer 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 “leadborrower” 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, asapplicable, prior to the delivery of a Notice of Exclusive Control, the Borrower and the Servicer shall be entitled to exercise the rights that compriseeach Financial Asset held in each Controlled Account which is a securities account and have the right to direct the disposition of funds in anyControlled Account which is a deposit account; provided that after the delivery of a Notice of Exclusive Control (as defined in the Control Agreement,as applicable), such rights shall be exclusively held by the Collateral Agent (acting at the direction of the Administrative Agent). Each of the partieshereto hereby agrees to cause the securities intermediary that holds any property for the Borrower in a Controlled Account that is a securities accountto agree with the parties hereto that (A) such property (subject to Section 6.04(e) below with respect to any property other than investment property, asdefined in Section 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 anyother agreement, for purposes of the UCC, with respect to the Controlled Accounts, New York shall be deemed to be the Account Bank’s jurisdiction(within the 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 -114-credited to the Controlled Accounts in the form of securities or instruments shall be registered in the name of the Account Bank or if in the name of theBorrower or the Collateral Agent, Indorsed to the Account Bank, Indorsed in blank, or credited to another securities account maintained in the name ofthe Account Bank, and in no case will any Financial Asset credited to the Controlled Accounts be registered in the name of the Borrower, payable tothe order of the Borrower or specially Indorsed to the Borrower, except to the extent the foregoing have been specially Indorsed to the Account Bank orIndorsed 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 documents or instruments delivered to it byor on behalf of the Borrower under the related Loan Agreements, or otherwise to examine the Loan Agreements, in order to determine or compelcompliance with any applicable requirements of or restrictions on transfer (including without limitation any necessary consents). The CollateralCustodian shall hold any Instrument delivered to it evidencing any Loan Asset granted to the Collateral Agent hereunder as custodial agent for theCollateral 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 FLLP 2015-1, 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 Collectionof a Loan Asset and such Interest Collection or Principal Collection was received by the Servicer in the form of a check that is not honored for anyreason or (ii) the Servicer makes a mistake with respect to the amount of any Interest Collection or Principal Collection and deposits an amount that isless than or more than the actual amount of such Interest Collection or Principal Collection, the Servicer shall appropriately adjust the amountsubsequently deposited into the Collection Account to reflect such dishonored check or mistake. Any Scheduled Payment in respect of which adishonored check is received shall be deemed not to have been paid. -115-(h) Establishment of the Unfunded Exposure Account. The Borrower established, on or before the Closing Date, with the Account Bank,and maintained in the name of the Borrower, subject to the lien of the Collateral Agent, for the benefit of the Secured Parties, a segregated corporatetrust account entitled “Unfunded Exposure Account for FLLP 2015-1, 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 theReinvestment 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 aDefaulted Loan Asset in order to maximize recoveries thereunder in accordance with the Servicing Standard. Subject to the terms of the LoanAgreements and the Servicing Standard, the Servicer will comply with Applicable Law in exercising such remedies. The Servicer will remit to theCollection Account the Recoveries 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 shallbe entitled 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 withits activities under this Agreement, including fees and disbursements of its independent accountants, Taxes imposed on the Servicer, expenses incurredby the 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. -116-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 the Servicer on its behalf) will provide a Notice of Borrowing or a Notice of Reduction, as applicable, and a Borrowing Base Certificate, eachupdated as of such 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 that will be required to set forth only (x) calculations of the Net Senior Leverage Ratio and the Interest Coverage Ratio foreach such Loan Asset for the most recently ended Relevant Test Period for each such Loan Asset and (y) whether or not each such Loan Asset shallhave become subject to a material amendment, restatement, supplement, waiver or other modification and whether such amendment, restatement,supplement, waiver or other modification is a Material Modification and (iii) if such Reporting Date precedes a Payment Date, amounts to be remittedpursuant to Section 2.04 to the applicable parties (which shall include any applicable wiring instructions of the parties receiving payment) (suchmonthly statement, 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,the Collateral Agent and any Liquidity Bank a certificate substantially in the form of Exhibit I (a “Servicer’s Certificate”), signed by a ResponsibleOfficer of the Servicer, which shall include a certification by such Responsible Officer that no Event of Default or Unmatured Event of Default hasoccurred and is continuing.(d) Financial Statements. The Servicer will submit to the Administrative Agent and each Lender Agent, (i) within 60 days after the end ofeach of the first three fiscal quarters of each fiscal year of the Servicer (excluding the fiscal quarter ending on the date specified in clause (ii)),commencing with the fiscal quarter ended March 31, 2015, consolidated unaudited financial statements of the Servicer for the most recent fiscalquarter, and (ii) within 120 days after the end of each fiscal year, commencing with the fiscal year ended December 31, 2015, consolidated auditedfinancial statements of 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 LenderAgents and the Collateral Agent, with respect to each Obligor, (i) to the extent received by the Borrower and/or the Servicer pursuant to the LoanAgreement, the complete financial reporting package with respect to such -117-Obligor and with respect to each Loan Asset for such Obligor provided to the Borrower and/or the Servicer either monthly or quarterly, as the case maybe, by such Obligor, which delivery shall be made within 10 Business Days after Servicer’s or Borrower’s receipt thereof and (ii) asset and portfoliolevel monitoring reports prepared by the Servicer with respect to the Loan Assets, which delivery shall be made within 60 days of the end of eachquarter (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 andfinancial covenant testing information. The Servicer will promptly deliver to the Administrative Agent and any Lender Agent, upon reasonable requestand to the extent received by the Borrower and/or the Servicer, all other documents and information required to be delivered by the Obligors to theBorrower with respect to any Loan Asset included in the Collateral Portfolio.(f) Amendments to Loan Assets. The Servicer will deliver to the Administrative Agent, the Lender Agents and the Collateral Custodian acopy of any material amendment, restatement, supplement, waiver or other modification to the Loan Agreement of any Loan Asset (along with anymaterial internal 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 othermodification.(g) Website Access to Information. Notwithstanding anything to the contrary contained herein, information required to be delivered orsubmitted to 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 suchinformation is posted on Intralinks (or other replacement) website to which the Administrative Agent and Lender Agents have access or upon receipt ofsuch information 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 bya Responsible Officer of the BDC of the aggregate assets and commitments of the BDC and its consolidated Subsidiaries (determined in accordancewith GAAP and Applicable Law) as of the end of the previous fiscal quarter. A “BDC Asset Coverage Event” shall be deemed to occur and becontinuing if the Asset Coverage Ratio of the BDC and its consolidated Subsidiaries (determined in accordance with GAAP and Applicable Law) onany BDC Reporting Date is less than the amount required under the 1940 Act (which as of the Third Amendment 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 theCollateral Agent within 120 days following the end of each fiscal year of the Servicer, commencing with the fiscal year ending on December 31, 2015,a report signed by a Responsible Officer of the Servicer certifying that (a) a review of the activities of the Servicer, and the Servicer’s performancepursuant to this Agreement, for the fiscal period ending on the last day of such fiscal year has been made under such Person’s supervision and (b) theServicer has performed or has caused to be performed in all material respects all of its obligations under this Agreement throughout such year and noServicer Termination Event has occurred. -118-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, 2015, 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 certain documents and records relating to the Collateral Portfoliounder any Transaction Document, compared the information contained in the Servicing Reports and the Servicer’s Certificates delivered during theperiod covered by such report with such documents and records and that no matters came to the attention of such accountants or other third party thatcaused them to believe that such servicing was not conducted in compliance with this Article VI, except for such exceptions as such accountants orother third party shall believe to be immaterial and such other exceptions as shall be set forth in such statement. In the event such firm of independentpublic accountants or other third party requires the Collateral Agent to agree to the procedures performed by such firm (with respect to any of thereports or certificates of such firm), or sign any other agreement in connection therewith, the Collateral Agent shall, upon direction from the Servicer soagree to the terms and conditions requested by such firm of independent public accountants or other third parties as a condition to receivingdocumentation required by this Agreement; it being understood and agreed that the Collateral Agent shall deliver such letter of agreement or otheragreement in conclusive reliance on such direction and shall make no inquiry or investigation as to, and shall have no obligation or responsibility inrespect of, the terms of the engagement of such independent public accountants or other third party by the Servicer or the sufficiency, validity orcorrectness of the agreed upon procedures in respect of such engagement. Upon direction from the Servicer, the Collateral Agent shall be authorized,without liability on its part, to execute and deliver any acknowledgement or other agreement with such firm of independent public accountants orother third party required for the receipt of the certificates, reports or instructions provided for herein, which acknowledgement or agreement, to theextent so directed by the Servicer, may include, amongst other things, (i) acknowledgement that the Servicer has agreed that the procedures by theindependent public accountants or other third party are sufficient for relevant purposes, (ii) releases by the Collateral Agent of any claims, liabilitiesand expenses arising out of or relating to such independent public accountant or other third party’s engagement, agreed-upon procedures or any reportissued by such independent public accountants or other third party under any such engagement and acknowledgement of other limitations of liabilityin favor of the independent public accountants or other third party and (iii) restrictions or prohibitions on the disclosure of any such certificates, reportsor other information or documents provided to it by such firm of independent public accountants or other third party. -119-Section 6.11 The Servicer Not to Resign. The Servicer shall not resign from the obligations and duties hereby imposed on it except uponthe Servicer’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.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 moneyto which 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 oragreements of the Borrower or the Transferor set forth in this Agreement or the other Transaction Documents to which the Borrower or the Transferor isa party and the same continues unremedied for a period of 30 days (if such failure can be remedied) after the earlier to occur of (i) the date on whichwritten notice of such failure requiring the same to be remedied shall have been given to the Borrower or the Transferor by the Administrative Agent orCollateral Agent and (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 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 ofmoney in excess, individually or in the aggregate, of $500,000, against the Borrower and the Borrower shall not have either (i) discharged or providedfor the discharge of any such judgment, decree or order in accordance with its terms or (ii) perfected a timely appeal of such judgment, decree or orderand caused 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 nolonger render a substantive nonconsolidation opinion with respect to the Borrower and the Transferor; or -120-(g) (1) any material provision of any Transaction Document, or any lien or security interest granted thereunder, shall (in each case, exceptin accordance 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,(2) the Borrower, the Transferor or the Servicer shall, directly or indirectly, contest in any manner the effectiveness, validity, bindingnature or 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 theapplicable Transaction Document; or(h) A Borrowing Base Deficiency exists and has not been remedied in accordance with Section 2.06; provided that, during the period oftime that such 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, withrespect to bifurcation and remittance of Interest Collections and Principal Collections or any other payment or deposit required to be made by the termsof the Transaction Documents to any Secured Party, Affected Party or Indemnified Party) or the Borrower, the Servicer or the Transferor fails to observeor perform 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 five 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 CollateralPortfolio shall 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 orthe Transferor and such lien shall not have been released within five Business Days, or the Pension Benefit Guaranty Corporation shall file notice of alien pursuant 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 releasedwithin five Business Days; or(l) any Change of Control shall occur; or -121-(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(n) failure of the Borrower to pay, on the Facility Maturity Date, the outstanding principal of all Advances Outstanding and all Yield andall Fees accrued and unpaid thereon together with all other Obligations, including, but not limited to, any Make-Whole Premium; 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 threeBusiness Days of 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 ofBorrowing on an Advance Date;(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;(s) (i) failure of the Borrower to maintain at least one Independent Director, (ii) the removal of any Independent Director of the Borrowerwithout “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, Global Securitization Servicesor Puglisi & Associates or, if none of those companies is then providing professional Independent Directors, another nationally recognized servicereasonably acceptable to the Administrative Agent shall be appointed without the consent of the Administrative Agent;(t) the Servicer fails to maintain a minimum of $5,000,000 of unencumbered liquidity; 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 -122-the occurrence of such event. Upon any such declaration or automatic occurrence, (i) the Borrower shall cease purchasing Loan Assets from theTransferor under the Purchase and Sale Agreement or from any other third party and shall cease originating Loan Assets, (ii) the Administrative Agent(so long as the Administrative Agent is Wells Fargo Bank, National Association) or all of the Lenders may declare the Variable Funding Notes to beimmediately due and payable in full (without presentment, demand, protest or notice of any kind all of which are hereby waived by the Borrower) andany other Obligations to be immediately due and payable, and (iii) all proceeds and distributions in respect of the Portfolio Assets shall be distributedby the Collateral Agent (at the direction of the Administrative Agent) as described in Section 2.04(c) (provided that the Borrower shall in any eventremain liable to pay such Advances and all such amounts and Obligations immediately in accordance with Section 2.04(e) hereof). In addition, uponany such declaration or upon any such automatic occurrence, the Collateral Agent, on behalf of the Secured Parties and at the direction of theAdministrative Agent, shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies providedunder the UCC of the applicable jurisdiction and other Applicable Law, which rights shall be cumulative. Without limiting any obligation of theServicer hereunder, the Borrower confirms and agrees that the Collateral Agent, on behalf of the Secured Parties and at the direction of theAdministrative Agent, (or any designee thereof, including, without limitation, the Servicer), during the existence of an Event of Default, shall, at itsoption, have the sole right to enforce the Borrower’s rights and remedies under each Assigned Document, but without any obligation on the part of theAdministrative Agent, the Lenders, the Lender Agents or any of their respective Affiliates to perform any of the obligations of the Borrower under anysuch Assigned Document. If any Event of Default shall have occurred and be continuing, the Yield Rate shall be increased pursuant to the increase setforth 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 ofsuch Event of Default until 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 immediatelydue and payable pursuant to Section 7.01 upon the occurrence of an Event of Default, or (ii) on the Facility Maturity Date (other than a FacilityMaturity Date occurring pursuant to clause (iv) of the definition thereof prior to an Event of Default), the aggregate outstanding principal amount ofthe Advances, all accrued and unpaid Fees and Yield and any other Obligations are not immediately paid in full, then the Collateral Agent (acting asdirected by the Administrative Agent) or the Administrative Agent, in addition to all other rights specified hereunder, shall have the right, in its ownname and as agent for the Lenders and Lender Agents, to immediately sell (at the Borrower’s expense) in a commercially reasonable manner, in arecognized market (if one exists) at such price or prices as the Administrative Agent may reasonably deem satisfactory, any or all of the CollateralPortfolio and apply the proceeds thereof to the Obligations; provided that the Borrower, or its Affiliates, may exercise its right of first refusal torepurchase the Collateral Portfolio, 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 contingent indemnification and reimbursement obligations which are unknown, unmatured and/or for which no claim giving rise theretohas been asserted), which right of first refusal shall terminate not later than 5:00 p.m. on the tenth Business Day following the Facility Maturity Date. -123-(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 transactionwith the same purchaser, or in the same manner because the market for the assets constituting the Collateral Portfolio may not be liquid. Accordingly,the Administrative Agent may elect, in its sole discretion, the time and manner of liquidating any of the Collateral Portfolio, and nothing containedherein shall obligate the Administrative Agent to liquidate any of the Collateral Portfolio on the date the Administrative Agent or all of the LenderAgents declares the Advances made to the Borrower hereunder to be immediately due and payable pursuant to Section 7.01 or to liquidate all of theCollateral 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 CollateralPortfolio or any part thereof in one or more parcels at a public or private sale, at the request of the Collateral Agent or the Administrative Agent, asapplicable, the Borrower and the Servicer shall make available to (i) the Administrative Agent, on a timely basis, all information (including anyinformation that the Borrower and the Servicer is required by contract to be kept confidential), to the extent such information can be provided withoutviolation of any Applicable Law; provided that (A) notwithstanding the foregoing, neither the Borrower nor the Servicer shall intentionally act or failto act in a manner that causes a confidentiality restriction to exist or otherwise arise on any such information, (B) to the extent otherwise permissibleunder Applicable Law or contract, the Borrower and the Servicer shall provide the Administrative Agent written notice promptly (and in any eventwithin one Business Day) after the earlier of obtaining actual knowledge or receiving written notice of the existence of a confidentiality restrictionwhich would preclude delivery of any information with respect to the Collateral Portfolio, and (C) the Borrower and the Servicer shall undertakecommercially reasonable efforts to remove any such confidentiality restrictions so that such information can be made available to the AdministrativeAgent) relating to the Collateral Portfolio subject to sale, including, without limitation, copies of any disclosure documents, contracts, financialstatements of the applicable Obligors, covenant certificates and any other materials requested by the Administrative Agent, and (ii) each prospectivebidder, on a timely basis, all reasonable information relating to the Collateral Portfolio subject to sale, including, without limitation, copies of anydisclosure documents, contracts, financial statements of the applicable Obligors, covenant certificates and any other materials reasonably requested byeach 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 throughor under it will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in force inany locality 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 -124-marshaled upon any such sale, and agrees that the Collateral Agent, or the Administrative Agent on its behalf, or any court having jurisdiction toforeclose the security interests granted in this Agreement may sell the Collateral Portfolio as an entirety or in such parcels as the Collateral Agent(acting at the direction of the Administrative Agent) or such court may determine.(e) Any amounts received from any sale or liquidation of the Collateral Portfolio pursuant to this Section 7.02 in excess of the Obligationswill be applied 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 otherremedy, each and every remedy shall be cumulative and in addition to any other remedy, and no delay or omission to exercise any right or remedyshall impair any 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 trueand lawful attorney (with full power of substitution) in its name, place and stead and at its own expense, in connection with the enforcement of therights and remedies after the occurrence of an Event of Default provided for in this Agreement, including without limitation the following powers:(a) to give any necessary receipts or acquittance for amounts collected or received hereunder, (b) to make all necessary transfers of the CollateralPortfolio in connection with any such sale or other disposition made pursuant hereto, (c) to execute and deliver for value all necessary or appropriatebills of sale, assignments and other instruments in connection with any such sale or other disposition, the Borrower and the Servicer hereby ratifyingand confirming all that such attorney (or any substitute) shall lawfully do hereunder and pursuant hereto, and (d) to sign any agreements, orders orother documents in connection with or pursuant to any Transaction Document. Nevertheless, if so requested by the Collateral Agent or theAdministrative Agent, the Borrower shall ratify and confirm any such sale or other disposition by executing and delivering to the Collateral Agent orthe Administrative Agent or all proper bills of sale, assignments, releases and other instruments as may be designated in any such request; providedthat, 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 occurrenceof an Event of Default. -125-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 LenderAgents, the Collateral Agent, the Account Bank, the Collateral Custodian or any of their respective Affiliates may have hereunder or under ApplicableLaw, the Borrower hereby agrees to indemnify the Affected Parties, the Secured Parties, Administrative Agent, the Lenders, the Lender Agents, theCollateral 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, liabilities and related costs andexpenses, including reasonable and documented attorneys’ fees and disbursements, but excluding Taxes, which are addressed in Section 2.11 (all ofthe foregoing being collectively referred to as “Indemnified Amounts”), awarded against or actually incurred by such Indemnified Party or othernon-monetary damages of any such Indemnified Party arising out of or as a result of this Agreement or in respect of any of the Collateral Portfolio,excluding, however, Indemnified Amounts to the extent resulting solely from gross negligence or willful misconduct on the part of an IndemnifiedParty. Without limiting the foregoing, the Borrower shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from anyof 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 anEligible Loan 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 isthe Servicer) or any of their respective officers under or in connection with this Agreement or any Transaction Document, which shall havebeen false or 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 withrespect to any 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 perfectedsecurity interest in the Collateral Portfolio, free and clear of any Lien, whether existing at the time of the related Advance or at any timethereafter; -126-(v) on each Business Day prior to the Collection Date, the occurrence of a Borrowing Base Deficiency and the same has not beenremedied in accordance with Section 2.06;(vi) the failure to file, or any delay in filing, financing statements, continuation statements or other similar instruments or documentsunder the UCC of any applicable jurisdiction or other Applicable Law with respect to any Loan Assets included in the Collateral Portfolioor the other Portfolio Assets related thereto, whether at the time of any Advance or at any subsequent time;(vii) any dispute, claim, offset or defense (other than the discharge in bankruptcy of an Obligor) to the payment of any Loan Assetincluded in the Collateral Portfolio (including, without limitation, a defense based on such Loan Asset (or the Loan Agreement evidencingsuch Loan Asset) not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), orany other claim resulting 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 Affiliatethereof to 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 maybe located 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 orany similar report;(x) any action taken by the Borrower or the Servicer in the enforcement or collection of the Collateral Portfolio which results in anyclaim, suit or action of any kind pertaining to the Collateral Portfolio or which reduces or impairs the rights of the Administrative Agent,Lender Agent or 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 or personal property Taxes payable in connection with the Collateral Portfolio; -127-(xiv) any repayment by the Administrative Agent, the Lender Agents, the Lenders or a Secured Party of any amount previouslydistributed in payment of Advances or payment of Yield or Fees or any other amount due hereunder, in each case which amount theAdministrative 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 Accountor the Unfunded Exposure Account with other funds;(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 forthe transfer by the Transferor or such third party seller to the Borrower of any item of Collateral Portfolio or any attempt by any Person tovoid or otherwise avoid any such transfer under any statutory provision or common law or equitable action, including, without limitation,any provision of 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 Accountwithin two Business Days of receipt, payments and collections with respect to the Collateral Portfolio remitted to the Borrower, theServicer or any such agent 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 Agenton behalf 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. -128-(c) If for any reason the indemnification provided above in this Section 8.01 is unavailable to the Indemnified Party or is insufficient tohold an Indemnified Party harmless in respect of any losses, claims, damages or liabilities, then the Borrower shall contribute to the amount paid orpayable by such Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only therelative benefits received by such Indemnified Party on the one hand and the Borrower on the other hand but also the relative fault of such IndemnifiedParty as well 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 IndemnifiedParty pursuant to this Section 8.01 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party willpromptly repay such amounts collected to the Borrower, without interest.(e) The obligations of the Borrower under this Section 8.01 shall survive the resignation or removal of the Administrative Agent, theLenders, the Lender 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 herebyagrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts, awarded against or incurred by any Indemnified Partyas a consequence of any of the following, excluding, however, Indemnified Amounts to the extent resulting primarily from (a) gross negligence orwillful misconduct on the part of any Indemnified Party claiming indemnification hereunder or (b) Loan Assets which are uncollectible due to theObligor’s financial 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 withthis Agreement or any other Transaction Document, any Servicing Report, Servicer’s Certificate or any other information or reportdelivered by or on behalf of the Servicer pursuant hereto, which shall have been false, incorrect or misleading in any material respect whenmade or deemed made or delivered;(iii) the failure by the Servicer to comply with (A) any term, provision or covenant contained in this Agreement or any otherTransaction Document, or any other agreement executed in connection with this Agreement, or (B) any Applicable Law applicable to itwith respect to any Portfolio 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 firstpriority perfected security interest in the Collateral Portfolio, free and clear of any Lien, whether existing at the time of the related Advanceor any time thereafter; -129-(vi) except as permitted by this Agreement, the commingling by the Servicer of payments and collections required to be remitted tothe Collection 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 andemployees of such Servicer acting pursuant to authority granted under Section 6.01 hereof) to remit to Collection Account, payments andcollections with respect to Loan Assets remitted to the Servicer or any such agent or representative within two Business Days of receipt;(viii) the failure by the Servicer to perform any of its duties or obligations in accordance with the provisions of this Agreement or anyother Transaction 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 serviceand administer the Collateral Portfolio, or failure or unreasonable delay in complying with instructions from the Administrative Agent withrespect thereto; 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 covenantsset forth 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 theAdministrative Agent, for the benefit of the applicable Indemnified Party, within five Business Days following receipt by the Servicer of theAdministrative Agent’s written demand therefor (and the Administrative Agent shall pay such amounts to the applicable Indemnified Party promptlyafter the receipt by the Administrative Agent of such amounts). The Agent, on behalf of any Indemnified Party making a request for indemnificationunder this Section 8.02, shall submit to the Servicer a certificate setting forth in reasonable detail the basis for and the computations of the IndemnifiedAmounts with respect to which 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 tohold an Indemnified Party harmless in respect of any losses, claims, damages or liabilities, then the Servicer shall contribute to the amount paid orpayable by such Indemnified Party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect not only therelative benefits received by such Indemnified Party on the one hand and the Servicer on the other hand but also the relative fault of such IndemnifiedParty as well 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 thisSection 8.02 and such Indemnified Party thereafter collects any of such amounts from others, such Indemnified Party will promptly repay such amountscollected to the Servicer, without interest. -130-(e) The Servicer shall have no liability for making indemnification hereunder to the extent any such indemnification constitutes recoursefor uncollectible 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, theLenders, the Lender Agents, the Collateral Agent, the Account Bank or the Collateral Custodian and the termination of this Agreement.(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 timeafter such Indemnified Party’s receipt thereof, copies of all notices and documents (including court papers) received by such Indemnified Party relatingto the 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 them -131-informed 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 Partywhole after taking into account any Tax consequences to the Indemnified Party of the receipt of the indemnity provided hereunder, including the effectof such Tax or refund on the amount of Tax measured by net income or profits that is or was payable by the Indemnified Party.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 agenthereunder and hereby further authorizes the Administrative Agent to appoint additional agents to act on its behalf and for the benefit of each LenderAgent and each Secured Party. Each Lender Agent and each Secured Party further authorizes the Administrative Agent to take such action as agent onits behalf and to exercise such powers under this Agreement and the other Transaction Documents as are delegated to the Administrative Agent by theterms hereof and thereof, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary containedelsewhere in this Agreement or in any other Transaction Document, the Administrative Agent shall not have any duties or responsibilities, except thoseexpressly set forth in this Agreement, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender orLender Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any otherTransaction Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of theterm “agent” in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express)obligations arising under agency doctrine of any Applicable Law. Instead, such term is used merely as a matter of market custom, and is intended tocreate or reflect only an administrative 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 Documentby or through agents, employees or attorneys in fact (other than any Prohibited Transferee) and shall be entitled to advice of counsel concerning allmatters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney in factthat it selects with reasonable care. -132-(c) Administrative Agent’s Reliance, Etc. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall beliable for 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 liable for any action taken or omittedto be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation and shallnot be responsible for any statements, warranties or representations made in or in connection with this Agreement; (iii) shall not have any duty toascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or any of the otherTransaction Documents on the part of the Borrower, the Transferor, or the Servicer or to inspect the property (including the books and records) of theBorrower, the Transferor, or the Servicer; (iv) shall not be responsible for the due execution, legality, validity, enforceability, genuineness, sufficiencyor value of this Agreement, any of the other Transaction Documents or any other instrument or document furnished pursuant hereto or thereto; and(v) shall incur no liability under or in respect of this Agreement or any of the other Transaction Documents by acting upon any notice (including noticeby telephone), consent, certificate or other instrument or writing (which may be by facsimile) believed by it to be genuine and signed or sent by theproper 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 deemedto have knowledge or notice of the occurrence of an Event of Default, Unmatured Event of Default or Servicer Termination Event, unless theAdministrative Agent has received written notice from a Lender, Lender Agent, the Borrower or the Servicer referring to this Agreement, describingsuch Event of -133-Default, 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 Affiliates has made any representation or warranty to it, and that no act by the Administrative Agent hereinaftertaken, including any consent to and acceptance of any assignment or review of the affairs of the Borrower, the Servicer, the Transferor or any of theirrespective Affiliates or review or approval of any of the Collateral Portfolio, shall be deemed to constitute any representation or warranty by any of theAdministrative Agent or its Affiliates to any Lender Agent as to any matter, including whether the Administrative Agent has disclosed materialinformation in its possession. Each Lender Agent and each Secured Party acknowledges that it has, independently and without reliance upon theAdministrative Agent, or any of the Administrative Agent’s Affiliates, and based upon such documents and information as it has deemed appropriate,made its own evaluation and decision to enter into this Agreement and the other Transaction Documents to which it is a party. Each Lender Agent andeach Secured Party also acknowledges that it will, independently and without reliance upon the Administrative Agent, or any of the AdministrativeAgent’s Affiliates, and based on such documents and information as it shall deem appropriate at the time, continue to make its own decisions in takingor not taking action under this Agreement and the other Transaction Documents to which it is a party. Each Lender Agent and each Secured Partyhereby agrees that the Administrative Agent shall not have any duty or responsibility to provide any Lender Agent with any credit or other informationconcerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower, the Servicer, the Transferoror their respective 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 notreimbursed by 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 the -134-administration, 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 provided below, by giving at least five days’ written notice thereof to each Lender Agent. The Administrative Agentmay be removed at any time with cause by the Lender Agents and the Borrower acting jointly. Upon any such resignation or removal, the LenderAgents acting jointly shall appoint a successor Administrative Agent with the consent of the Borrower. Each Lender Agent agrees that it shall notunreasonably withhold or delay its approval of the appointment of a successor Administrative Agent. If no such successor Administrative Agent shallhave been so appointed, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice ofresignation or the removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Secured Parties, appoint asuccessor Administrative Agent which successor Administrative Agent shall be either (i) a commercial bank organized under the laws of the UnitedStates or of any state thereof and have a combined capital and surplus of at least $50,000,000 or (ii) an Affiliate of such a bank. Upon the acceptance ofany appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereuponsucceed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring AdministrativeAgent shall be discharged from its duties and obligations under this Agreement. After any retiring Administrative Agent’s resignation or removalhereunder as Administrative Agent, the provisions of this Article IX shall continue to inure to its benefit as to any actions taken or omitted to be takenby it while it was Administrative Agent under this Agreement.(i) Payments by the Administrative Agent. Unless specifically allocated to a specific Lender Agent pursuant to the terms of this Agreement,all amounts 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 agenthereunder and under each other Transaction Document, and authorizes such Lender Agent to take such actions as agent on its behalf and to exercisesuch powers as are delegated to such Lender Agent by the terms of this -135-Agreement and the other Transaction Documents, together with such powers as are reasonably incidental thereto. No Lender Agent shall have anyduties or responsibilities, except those expressly set forth herein or in any other Transaction Document, or any fiduciary relationship with its relatedLender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of such Lender Agent shall be read into thisAgreement or any other Transaction Document or otherwise exist for such Lender Agent. In performing its functions and duties hereunder and underthe other Transaction Documents, each Lender Agent shall act solely as agent for its related Lender and does not assume nor shall be deemed to haveassumed any obligation or relationship of trust or agency with or for the Borrower or the Servicer or any of the Borrower’s or the Servicer’s successorsor assigns. No Lender Agent shall be required to take any action that exposes such Lender Agent to personal liability or that is contrary to thisAgreement, any other Transaction Document or Applicable Law. The appointment and authority of each Lender Agent hereunder shall terminate uponthe indefeasible payment in full of all Obligations. Each Lender Agent hereby authorizes the Administrative Agent to file any UCC financingstatement deemed necessary by the Administrative Agent on behalf of such Lender Agent (the terms of which shall be binding 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 byor through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Lender Agent shallbe responsible 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 anydocument or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and uponadvice and statements of legal counsel (including, without -136-limitation, counsel to the Borrower), independent accountants and other experts selected by such Lender Agent. Each Lender Agent shall in all casesbe fully justified in failing or refusing to take any action under this Agreement or any other Transaction Document unless it shall first receive suchadvice or concurrence of its related Lender as it deems appropriate and it shall first be indemnified to its satisfaction by its related Lender; providedthat, unless and until such Lender Agent shall have received such advice, such Lender Agent may take or refrain from taking any action, as the LenderAgent shall deem advisable and in the best interests of its related Lender. Each Lender Agent shall in all cases be fully protected in acting, or inrefraining from acting, in accordance with a request of its related Lender, and such request and any action taken or failure to act pursuant thereto shallbe binding upon its related Lender.(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 Agenthereafter taken, including, without limitation, any review of the affairs of the Borrower or the Servicer, shall be deemed to constitute any representationor warranty by such Lender Agent. Each Lender represents and warrants to its related Lender Agent that it has and will, independently and withoutreliance upon its related Lender Agent, and based on such documents and information as it has deemed appropriate, made its own appraisal of andinvestigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Borrower and made its owndecision to enter into this 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 depositsfrom and generally engage in any kind of business with the Borrower or any Affiliate of the Borrower as though such Lender Agent were not a LenderAgent hereunder. With respect to Advances pursuant to this Agreement, each Lender Agent shall have the same rights and powers under this Agreementin its individual 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 Agentwill, upon the direction of its related Lender resign as the Lender Agent for such Lender. If any Lender Agent shall resign, then its related Lenderduring such five day period shall appoint a successor agent. If for any reason no successor agent is appointed by such Lender during such five dayperiod, then effective upon the termination of such five day period, and the Borrower shall make all payments in respect of the Obligations due to suchLender directly to such Lender, and for all purposes shall deal directly with such Lender. After any retiring Lender Agent’s resignation hereunder as aLender Agent, 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 aLender Agent under this Agreement. -137-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 theCollateral Agent to act as its agent for the purposes of perfection of a security interest in the Collateral Portfolio and hereby authorizes the CollateralAgent to take such actions on its behalf and on behalf of each of the Secured Parties and to exercise such powers and perform such duties as areexpressly granted to the Collateral Agent by this Agreement. The Collateral Agent hereby accepts such agency appointment to act as Collateral Agentpursuant to the terms of this Agreement, until its resignation or removal as Collateral Agent pursuant to the terms hereof.(b) Successor Collateral Agent. Upon the Collateral Agent’s receipt of a Collateral Agent Termination Notice from the AdministrativeAgent of the designation of a successor Collateral Agent pursuant to the provisions of Section 10.05, the Collateral Agent agrees that it will terminateits activities as Collateral Agent hereunder.(c) Secured Party. The Administrative Agent, the Lender Agents and the Lenders hereby appoint WFBNA, in its capacity as CollateralAgent hereunder, as their agent for the purposes of perfection of a security interest in the Collateral Portfolio. WFBNA, in its capacity as CollateralAgent hereunder, 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,for the benefit of the Secured Parties. The Collateral Agent hereby accepts such appointment and agrees to perform the duties and obligations withrespect thereto 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, onbehalf of the 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 theBorrower, calculate the Borrowing Base and, if the Collateral Agent’s calculation does not correspond with the calculation provided by theServicer on such Borrowing Base Certificate, deliver such calculation to each of the Administrative Agent, Borrower and Servicer withinone (1) Business Day of receipt by the Collateral Agent of such Borrowing Base Certificate. The Collateral Agent shall calculate amountsto be remitted pursuant to Section 2.04 to the applicable parties and notify the Servicer and the Administrative Agent in the event of anydiscrepancy between the Collateral Agent’s calculations and the Servicing Report (such dispute to be resolved in accordance withSection 2.05); -138-(ii) The Collateral Agent shall make payments pursuant to the terms of the Servicing Report or as otherwise directed in accordancewith Sections 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 itin connection with the Loan Assets and the other Collateral Portfolio held hereunder which it receives from the related Obligor,participating bank and/or agent bank. In no instance shall the Collateral Agent be under any duty or obligation to take any action onbehalf of the Servicer in respect of the exercise of any voting or consent rights, or similar actions, unless it receives specific writteninstructions from the Servicer, prior to the occurrence of an Event of Default or the Administrative Agent, after the occurrence and duringthe continuance of Event of Default, in which event the Collateral Agent shall vote, consent or take such other action in accordance withsuch instructions.(c) (i) The Administrative Agent, each Lender Agent and each Secured Party further authorizes the Collateral Agent to take such action asagent on its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are expressly delegated to the CollateralAgent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. In furtherance, and without limiting thegenerality of the foregoing, each Secured Party hereby appoints the Collateral Agent (acting at the direction of the Administrative Agent) as its agentto execute and deliver all further instruments and documents, and take all further action that the Administrative Agent deems necessary or desirable inorder to perfect, protect or more fully evidence the security interests granted by the Borrower hereunder, or to enable any of them to exercise or enforceany of their respective rights hereunder, including, without limitation, the execution by the Collateral Agent as secured party/assignee of suchfinancing or continuation statements, or amendments thereto or assignments thereof, relative to all or any of the Loan Assets now existing or hereafterarising, and such other instruments or notices, as may be necessary or appropriate for the purposes stated hereinabove. Nothing in this Section 10.02(c)shall be deemed to relieve the Borrower or the Servicer of their respective obligations to protect the interest of the Collateral Agent (for the benefit ofthe Secured Parties) in the Collateral Portfolio, including to file financing and continuation statements in respect of the Collateral Portfolio inaccordance with Section 5.01(r).(ii) The Administrative Agent may direct the Collateral Agent to take any such incidental action hereunder. With respect to otheractions which are incidental to the actions specifically delegated to the Collateral Agent hereunder, the Collateral Agent 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 inacting or refraining from acting) upon the direction of the Administrative Agent; provided that the Collateral Agent shall not be required totake any action hereunder at the request of the Administrative Agent, any Secured Party or otherwise if the taking of such action, in thereasonable determination of -139-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 withrespect thereto). In the event the Collateral Agent requests the consent of the Administrative Agent and the Collateral Agent does notreceive a consent (either positive or negative) from the Administrative Agent within 10 Business Days of its receipt of such request, thenthe Administrative Agent shall 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 affirmativeaction to exercise or enforce any power, right or remedy available to it under this Agreement (x) unless and until (and to the extent)expressly so directed by the Administrative Agent or (y) prior to the Facility Maturity Date (and upon such occurrence, the CollateralAgent shall act in accordance with the written instructions of the Administrative Agent pursuant to clause (x)). The Collateral Agent shallnot be liable for any action taken, suffered or omitted by it in accordance with the request or direction of any Secured Party, to the extentthat this Agreement provides such Secured Party the right to so direct the Collateral Agent, or the Administrative Agent. The CollateralAgent 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 knowledge of such matter or written notice thereof is received by 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) Concurrently herewith, the Administrative Agent directs the Collateral Agent and the Collateral Agent is hereby authorized to enterinto the Control Agreement. For the avoidance of doubt, all of the Collateral Agent’s rights, protections and immunities provided herein shall apply tothe Collateral Agent for any actions taken or omitted to be taken under the Control Agreement in such capacity. -140-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 towhich the Collateral Agent shall be a party, or (iii) that may succeed to the properties and assets of the Collateral Agent substantially as a whole, whichPerson in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Collateral Agent hereunder, shall be thesuccessor to the Collateral Agent under this Agreement without further act of any of the parties to this Agreement; provided that such Person isorganized under the laws of the United States of America or any one of the States thereof or the District of Columbia (or any domestic branch of aforeign 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-termunsecured debt rating or certificate of deposit rating of “A-1” or better by S&P or “P-1” or better by Moody’s, (b) the parent corporation which haseither (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 orcertificate of deposit rating of “A-1” or better by 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 andCollateral Agent Expenses from the Borrower as set forth in the WFBNA Fee Letter, payable to the extent of funds available therefor pursuant to theprovisions of Section 2.04. The Collateral Agent’s entitlement to receive the Collateral Agent Fees shall cease on the earlier to occur of: (i) its removalas Collateral Agent 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 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,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 Agent may rely conclusively on and shall be fully protected in acting upon (i) the written instructions of any designated officerof the Administrative Agent or (ii) the verbal instructions of the Administrative Agent.(b) The Collateral Agent 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. -141-(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 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 Agent 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 Agent shall not be obligated to take any legal action hereunder that might in its judgment involve anyexpense or liability 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 CollateralAgent may, prior to the occurrence of an Event of Default or the Facility Maturity Date, request instructions from the Servicer and may, after theoccurrence of an Event of Default or the Facility Maturity Date, request instructions from the Administrative Agent, and shall be entitled at all times torefrain from taking any action unless it has received instructions from the Servicer or the Administrative Agent, as applicable. The Collateral Agentshall in all events have no liability, risk or cost for any action taken pursuant to and in compliance with the instruction of the Administrative Agent. Inno event shall the Collateral Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited tolost profits), even if the Collateral Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. -142-(i) The Collateral Agent shall not be liable for the acts or omissions of the Collateral Custodian under this Agreement and shall not berequired to monitor the performance of the Collateral Custodian. Notwithstanding anything herein to the contrary, the Collateral Agent shall have noduty to perform any of the duties of the Collateral Custodian under 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 withthe consent of the Administrative Agent, which consent shall not be unreasonably withheld. Upon receiving such notice of resignation, theAdministrative Agent shall promptly appoint a successor collateral agent or collateral agents by written instrument, in duplicate, executed by theAdministrative Agent, one copy of which shall be delivered to the Collateral Agent so resigning and one copy to the successor collateral agent orcollateral agents, together with a copy to the Borrower, Servicer and Collateral Custodian. If no successor collateral agent shall have been appointedand an instrument of acceptance by a successor Collateral Agent shall not have been delivered to the Collateral Agent within 45 days after the givingof such notice of resignation, the resigning Collateral Agent may petition any court of competent jurisdiction for the appointment of a successorCollateral Agent. Notwithstanding anything herein to the contrary, the Collateral Agent may not resign prior to a successor Collateral Agent beingappointed.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,the Servicer, 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”. -143-(c) Notwithstanding the provisions of Section 11.01(a) and (b), (i) any amendment of this Agreement that is solely for the purpose ofadding a Lender may be effected with the consent of the Administrative Agent, but without the written consent of any Lender and (ii) theAdministrative Agent and the Borrower shall be permitted to amend any provision of the Transaction Documents (and such amendment shall becomeeffective without any further action or consent of any other party to any Transaction Document) if the Administrative Agent and the Borrower shallhave jointly identified an obvious 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 Event of Default has occurred but has been waived unconditionally and in its entirety in accordance with the terms hereof, suchEvent of Default shall be deemed to have not “occurred” and references to “after the occurrence of an Event of Default” shall be inapplicable for allpurposes in this Agreement or any of the Transaction Documents, except to the extent otherwise provided for in the relevant waiver; provided that anywaiver which by its terms becomes effective upon certain conditions precedent being met will not be considered a conditional waiver solely due to theexistence of such conditions precedent if all such conditions precedent to effectiveness have been satisfied. Notwithstanding anything to the contraryherein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitmentof such Lender may not be increased or extended without the consent of such Lender.Section 11.02 Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (whichshall include facsimile communication and communication by e-mail) and faxed, e-mailed or delivered, to each party hereto, at its address set forthbelow: BORROWER: FLLP 2015-1, LLC 500 Park Avenue, New York, NY 10022 Attention: Chief Financial Officer Facsimile: 212-994-8545 Phone: 212-993-1660 SERVICER: Solar Senior Capital Ltd. 500 Park Avenue, New York, NY 10022 Attention: Chief Financial Officer Facsimile: 212-994-8545 Phone: 212-993-1660 TRANSFEROR: Solar Senior Capital Ltd. 500 Park Avenue, New York, NY 10022 Attention: Chief Financial Officer Facsimile: 212-994-8545 Phone: 212-993-1660 -144-ADMINISTRATIVE 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) 410-2431 INSTITUTIONAL LENDER: Wells Fargo Bank, N.A. 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 COLLATERAL AGENT: Wells Fargo Bank, National Association Corporate Trust Services Division 9062 Old Annapolis Road Columbia, MD 21045 Attention: CDO Trust Services – FLLP 2015-1, LLC Facsimile: (281) 667-3933 Phone: (410) 884-2000 COLLATERAL CUSTODIAN: Wells Fargo Bank, National Association Corporate Trust Services Division 9062 Old Annapolis Road Columbia, MD 21045 Attention: CDO Trust Services – FLLP 2015-1, LLC Facsimile: (281) 667-3933 Phone: (410) 884-2000 ACCOUNT BANK: Wells Fargo Bank, National Association Corporate Trust Services Division 9062 Old Annapolis Road Columbia, MD 21045 Attention: CDO Trust Services – FLLP 2015-1, 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. -145-Section 11.03 No Waiver; Remedies. No failure on the part of the Administrative Agent, the Collateral Agent, any Lender or any LenderAgent to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any righthereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and notexclusive of any remedies 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 andassigns 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) or anyVariable Funding Note (or any portion thereof) to any Person other than the Borrower or an Affiliate thereof; provided that, (w) subject to the followingclauses (x), (y) and (z), unless the Borrower shall otherwise consent, a Lender may only assign, grant a security interest or sell a participation in, itsrights and obligations hereunder to an Affiliate or a Permitted Assignee who is not a Prohibited Transferee, (x) after an Event of Default has occurred, aLender may assign its rights and obligations hereunder to any Person without the consent of the Borrower, but with the consent of the AdministrativeAgent, (y) a Lender may assign its rights and obligations hereunder to any Person without the consent of the Borrower if such Lender makes a goodfaith determination based on advice of counsel that such assignment is required by Applicable Law and gives prior written notice of such assignmentto the Borrower identifying the reasons necessitating such assignment and (z) any Conduit Lender shall not need prior consent to at any time assign, orgrant a security interest or sell a participation interest in, any Advance (or portion thereof) to a Liquidity Bank or any commercial paper conduitsponsored by a Liquidity Bank or an Affiliate of its related Lender Agent. Any such assignee shall execute and deliver to the Servicer, the Borrowerand the Administrative Agent a fully-executed Transferee Letter substantially in the form of Exhibit K hereto (a “Transferee Letter”) and 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. -146-(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 anyportion of its rights (including, without limitation, rights to payment of principal and interest) under this Agreement to secure obligations of suchLender to a Federal Reserve Bank, without notice to or consent of the Borrower or the Administrative Agent; provided that no such pledge or grant of asecurity interest shall release such Lender from any of its obligations hereunder, or substitute any such pledgee or grantee for such Lender as a partyhereto.(c) Each Affected Party and each Indemnified Party shall be an express third party beneficiary of this Agreement.Section 11.05 Term of This Agreement. This Agreement, including, without limitation, the Borrower’s representations and covenants setforth in Articles 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 effectuntil the Collection Date; provided that the rights and remedies with respect to any breach of any representation and warranty made or deemed madeby the Borrower 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 OFTHE GENERAL 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.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,the Lender Agents, the Collateral Custodian and their respective Affiliates under Section 8.01 and Section 8.02 hereof, each of the Borrower, theServicer and the Transferor agrees to pay on demand all reasonable and documented out-of-pocket costs and expenses of the Administrative Agent, theLenders, 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 issuedin connection with, this Agreement, the Transaction Documents and the other documents to be delivered hereunder or in connection herewith,including, without limitation, the reasonable fees -147-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 the Administrative Agent, the Lenders, the LenderAgents, the Collateral Agent, the Account Bank and the Collateral Custodian as to their respective rights and remedies under this Agreement and theother documents to be delivered hereunder or in connection herewith, and all invoiced out-of-pocket costs and expenses, if any (including reasonablecounsel fees and expenses), incurred by the Administrative Agent, the Lenders, the Lender Agents, the Collateral Agent, the Account Bank or theCollateral Custodian in connection with the enforcement or potential enforcement of this Agreement or any Transaction Document by such Person andthe other documents to be delivered hereunder or in connection herewith. Notwithstanding the foregoing, unless an Event of Default has occurred andis continuing, the Borrower shall only be obligated to reimburse any Lender or Lender Agent pursuant to this Section 11.07(a) to the extent suchLender 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 instituteagainst, or join any other Person in instituting against, the Borrower any proceedings of the type referred to in the definition of “Bankruptcy Event” solong as there shall not have elapsed one 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. -148-(c) The provisions of this Section 11.08 are a material inducement for the Administrative Agent, the Collateral Agent and the Lenders toenter into 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 orany other 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 administrator, or any of them, for breaches bythe Administrative Agent, the Lenders, the Lender Agents or any Secured Party of any such obligations, covenants or agreements, which liability mayarise either at common law or in equity, by statute or constitution, or otherwise, is hereby expressly waived as a condition of and in consideration forthe 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 anyother Person 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. -149-(c) No obligation or liability to any Obligor under any of the Loan Assets is intended to be assumed by the Administrative Agent, theLenders, 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 requiredto be paid by it hereunder in excess of any amount available to such Conduit Lender after paying or making provision for the payment of itsCommercial Paper Notes. All payment obligations of each Conduit Lender hereunder are contingent on the availability of funds in excess of theamounts necessary to pay its Commercial Paper Notes; and each of the other parties hereto agrees that it will not have a claim under Section 101(5) ofthe Bankruptcy Code if and to the extent that any such payment obligation owed to it by a Conduit Lender exceeds the amount available to suchConduit Lender to pay 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 andby different 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.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 NewYork City 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. -150-(b) Each of the Borrower and the Servicer agrees that service of process may be effected by mailing a copy thereof by registered or certifiedmail, postage prepaid, to the Borrower or the Servicer, as applicable, at its address specified in Section 11.02 or at such other address as theAdministrative Agent shall have been notified in accordance herewith. Nothing in this Section 11.11 shall affect the right of the Lenders, the LenderAgents or the Administrative 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 ascontemplated by the Purchase and Sale Agreement be, and be treated for all purposes (other than accounting purposes and subject to the taxcharacterization of the Borrower 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 intention of the parties that such conveyance be deemed a pledge of the Eligible Loan Assets by the Transferor to the Borrower tosecure a debt or other obligation of the Transferor. However, in the event that, notwithstanding the intent of the parties, the Eligible Loan Assets areheld to continue to be property of the Transferor, then the parties hereto agree that: (i) the Purchase and Sale Agreement shall also be deemed to be asecurity agreement under Applicable Law; (ii) as set forth in the Purchase and Sale Agreement, the transfer of the Eligible Loan Assets provided for inthe Purchase and Sale Agreement shall be deemed to be a grant by the Transferor to the Borrower of a first priority security interest (subject only toPermitted Liens) in all of the Transferor’s right, title and interest in and to the Eligible Loan Assets and all amounts payable to the holders of theEligible Loan Assets in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash,instruments, securities or other 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 theSecured Parties) of Loan Assets and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be,subject to clause (iv), for purposes of perfecting the security interest pursuant to the UCC; and (iv) acknowledgements from Persons holding suchproperty shall be deemed acknowledgements from custodians, bailees or agents (as applicable) of the Borrower for the purpose of perfecting suchsecurity interest under Applicable Law. The parties further agree that any assignment of the interest of the Borrower pursuant to any provision hereofshall also be deemed to be an assignment of any security interest created pursuant to the terms of the Purchase and Sale Agreement. The Borrower shall,to the extent consistent with this Agreement and the other Transaction Documents, take such actions as may be necessary to ensure that, if the Purchaseand Sale Agreement was deemed to create a security interest in the Eligible Loan Assets, such security interest would be deemed to be a perfectedsecurity interest of first priority (subject only to Permitted Liens) under Applicable Law and will be maintained as such throughout the term of thisAgreement. -151-(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,the Transferor 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.(b) Anything herein to the contrary notwithstanding, the Borrower and the Servicer each hereby consents to the disclosure of anynonpublic information with respect to it (i) to the Administrative Agent, the Lenders, the Lender Agents, the Account Bank, the Collateral Agent or theCollateral Custodian by each other, (ii) by the Administrative Agent, the Lenders, the Lender Agents, the Account Bank, the Collateral Agent and theCollateral Custodian to any prospective or actual assignee or participant of any of them provided that (A) such Person would be permitted to be anassignee or participant pursuant to the terms hereof and (B) such Person agrees to hold such information confidential in accordance with the terms ofthis -152-Agreement, 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 allinformation that is or becomes publicly known; (ii) disclosure of any and all information (a) if required to do so by any applicable statute, law, rule orregulation, (b) to any government agency or regulatory body having or claiming authority to regulate or oversee any aspects of the Lenders’, theLender Agents’, the Administrative Agent’s, the Collateral Agent’s, the Account Bank’s or the Collateral Custodian’s business or that of their affiliates,(c) pursuant to any subpoena, civil investigative demand or similar demand or request of any court, regulatory authority, arbitrator or arbitration towhich the Administrative 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 orcontract or other 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 partyadvises such recipient of the confidential nature of the information being disclosed; or (iii) any other disclosure authorized by the Borrower, Servicer orthe Transferor.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 allPersons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including, withoutlimitation, opinions or other tax analyses) that are provided to any of them relating to such tax treatment and tax structure. “Tax treatment” and “taxstructure” shall have the same meaning as such terms have for purposes of Treasury Regulation Section 1.6011-4; provided that with respect to anydocument or similar item that in either case contains information concerning the tax treatment or tax structure of the transaction as well as otherinformation, the provisions of this Section 11.14 shall only apply to such portions of the document or similar item that relate to the tax treatment or taxstructure of the transactions contemplated hereby. -153-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 totime against 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.The schedules and exhibits attached hereto and referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement forall purposes.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 rightof setoff, 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 asits attorney-in-fact to act on behalf of the Borrower (i) to file financing statements necessary or desirable in the Administrative Agent’s sole discretionto perfect and to maintain the perfection and priority of the interest of the Secured Parties in the Collateral Portfolio and (ii) to file a carbon,photographic or other reproduction of this Agreement or any financing statement with respect to the Collateral Portfolio as a financing statement insuch offices as the Administrative Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of theinterests of the Secured Parties in the Collateral Portfolio. This appointment is coupled with an interest and is irrevocable until the Collection Date. -154-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 tothe Borrower 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 thePerson designated as Collateral Custodian hereunder from time to time in accordance with this Section 12.01. Each of the Borrower, the Lender Agentsand the Administrative Agent hereby designate and appoint the Collateral Custodian to act as agent on behalf of the Secured Parties and herebyauthorizes the Collateral Custodian to take such actions on its behalf and to exercise such powers and perform such duties as are expressly granted tothe Collateral Custodian by this Agreement. The Collateral Custodian hereby accepts such agency appointment to act as Collateral Custodian pursuantto the terms of 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 CollateralCustodian, for the benefit of the Secured Parties. The Collateral Custodian hereby accepts such appointment and agrees to perform the duties andobligations with respect thereto set forth herein. -155-(b) Duties. From the Closing Date until its removal pursuant to Section 12.05, the Collateral Custodian shall perform, on behalf of theSecured Parties, the following duties and obligations:(i) The Collateral Custodian shall take and retain custody of the Required Loan Documents delivered by the Borrower pursuant toSections 3.02(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 Business Days of its receipt of any Required Loan Documents and the related Loan Asset Checklist, the Collateral Custodianshall review the Required Loan Documents to confirm that (A) the Obligor name matches the Loan Asset Checklist, (B) such RequiredLoan Documents have been executed by each party thereto and have no missing or mutilated pages, (C) each item listed in the Loan AssetChecklist has been provided to the Collateral Custodian (D) the related original balance (based on a comparison to the note or assignmentagreement, as applicable) is greater than or equal to the loan balance listed on the related Loan Tape (such items (A) through (D)collectively, the “Review Criteria”). In order to facilitate the foregoing review by the Collateral Custodian, in connection with eachdelivery of Required Loan Documents hereunder to the Collateral Custodian, the Servicer shall provide to the Collateral Custodian a hardcopy (which may be preceded by an electronic copy, as applicable) of the related Loan Asset Checklist which contains the Loan Assetinformation with respect to the Required Loan Documents being delivered, identification number and the name of the Obligor with respectto such Loan Asset. Notwithstanding anything herein to the contrary, the Collateral Custodian’s obligation to review the Required LoanDocuments shall be limited to reviewing such Required Loan Documents based on the information provided on the Loan Asset Checklist.If, at the conclusion of such review, the Collateral Custodian is unable to confirm clauses (A) or (D) of the Review Criteria, the CollateralCustodian shall notify the Administrative Agent and the Servicer of such discrepancy within one Business Day, or (ii) any other ReviewCriteria is not satisfied, the Collateral Custodian shall within one Business Day notify the Servicer and the Administrative Agent of suchdetermination and provide the Servicer and the Administrative Agent with a list of the non-complying Loan Assets and the applicableReview Criteria that they fail to satisfy. The Servicer shall have five 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 bea Warranty Loan Asset and shall no longer be included in the calculation of any Borrowing Base hereunder until such deficiency is cured.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 aReview Criteria to the Borrower. Other than the foregoing, the Collateral Custodian shall not have any responsibility for reviewing anyRequired Loan Documents. -156-(ii) In taking and retaining custody of the Required Loan Documents, the Collateral Custodian shall be deemed to be acting as theagent of the Secured Parties; provided that the Collateral Custodian makes no representations as to the existence, perfection or priority ofany Lien on the Required Loan Documents or the instruments therein; and provided, further, that, the Collateral Custodian’s duties shall belimited to those expressly 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 at such other office as shall be specified to the Administrative Agent and the Servicer by the Collateral Custodian in a written noticedelivered at least 30 days (or such shorter notice period as consented to by the Administrative Agent) prior to such change. All RequiredLoan Documents shall be placed together with an appropriate identifying label and maintained in such a manner so as to permit retrievaland access. The Collateral Custodian shall segregate the Required Loan Documents on its inventory system and will not commingle thephysical Required Loan Documents with any other files of the Collateral Custodian other than those, if any, relating to Solar and itsAffiliates and subsidiaries; provided, however, the Collateral Custodian shall segregate any commingled files upon written request of theAdministrative 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), commencingin March 2015, the Collateral Custodian shall provide a written report to the Administrative Agent and the Servicer (in a form mutuallyagreeable to the Administrative Agent and the Collateral Custodian) identifying each Loan Asset for which it holds Required LoanDocuments and the applicable Review Criteria that any Loan Asset fails to satisfy. The Servicer shall have 20 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 withinsuch time period and the Administrative Agent has provided the Servicer with written confirmation of such non-compliance, such LoanAsset shall be deemed to be a Warranty Loan Asset and shall no longer be included in the calculation of any Borrowing Base hereunderuntil such deficiency is cured.(v) Notwithstanding any provision to the contrary elsewhere in the Transaction Documents, the Collateral Custodian shall not haveany fiduciary relationship with any party hereto or any Secured Party in its capacity as such, and no implied covenants, functions,obligations or responsibilities shall be read into this Agreement, the other Transaction Documents or otherwise exist against the CollateralCustodian. Without limiting the generality of the foregoing, it is hereby expressly agreed and stipulated by the other parties hereto that theCollateral Custodian shall not be required to exercise any discretion hereunder and shall have no investment or managementresponsibility.(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 interests -157-granted 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 notbe required to take any such incidental action hereunder, but shall be required to act or to refrain from acting (and shall be fully protectedin acting or refraining from acting) upon the direction of the Administrative Agent; provided that the Collateral Custodian shall not berequired to take any action hereunder at the request of the Administrative Agent, any Secured Party or otherwise if the taking of suchaction, in the reasonable determination of the Collateral Custodian, (x) shall be in violation of any Applicable Law or contrary to anyprovisions of this Agreement or (y) shall expose the Collateral Custodian to liability hereunder or otherwise (unless it has receivedindemnity which it reasonably deems to be satisfactory with respect thereto). In the event the Collateral Custodian requests the consent ofthe Administrative Agent and the Collateral Custodian does not receive a consent (either positive or negative) from the AdministrativeAgent within 10 Business Days of its receipt of such request, then the Administrative Agent shall be deemed to have declined to consent tothe relevant action.(iii) The Collateral Custodian shall not be liable for any action taken, suffered or omitted by it in accordance with the request ordirection of any Secured Party, to the extent that this Agreement provides such Secured Party the right to so direct the CollateralCustodian, or the Administrative Agent. The Collateral Custodian shall not be deemed to have notice or knowledge of any matterhereunder, including an Event of Default, unless a Responsible Officer of the Collateral Custodian has knowledge of such matter or writtennotice thereof is received by the Collateral Custodian.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 towhich the Collateral Custodian shall be a party, or (iii) that may succeed to the properties and assets of the Collateral Custodian substantially as awhole, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Collateral Custodianhereunder, shall be the successor to the Collateral Custodian under this Agreement without further act of any of the parties to this Agreement. -158-Section 12.04 Collateral Custodian Compensation.As compensation for its Collateral Custodian activities hereunder, the Collateral Custodian shall be entitled to the Collateral CustodianFees from 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 notice given in writing to the CollateralCustodian (the “Collateral Custodian Termination Notice”); provided that notwithstanding its receipt of a Collateral Custodian Termination Notice,the Collateral Custodian shall continue to act in such capacity until a successor Collateral Custodian has been appointed and has agreed to act asCollateral 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 partyor parties. The Collateral Custodian may rely conclusively on and shall be fully protected in acting upon the written instructions of the AdministrativeAgent.(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, orfor any 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 misconductor grossly 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. -159-(e) The Collateral Custodian shall have no duties or responsibilities except such duties and responsibilities as are specifically set forth inthis Agreement 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 forthe obligations 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, theCollateral Custodian may, prior to the occurrence of an Event of Default or the Facility Maturity Date, request instructions from the Servicer and may,after the occurrence and during the continuance of an Event of Default or the Facility Maturity Date, request instructions from the AdministrativeAgent, and shall be entitled at all times to refrain from taking any action unless it has received instructions from the Servicer or the AdministrativeAgent, as applicable. The Collateral Custodian shall in all events have no liability, risk or cost for any action taken pursuant to and in compliance withthe instruction of the Administrative Agent. In no event shall the Collateral Custodian be liable for special, indirect or consequential loss or damage ofany kind whatsoever (including but not limited to lost profits), even if the Collateral Custodian has been advised of the likelihood of such loss ordamage and regardless of the form of action.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).Notwithstanding anything herein to the contrary, the Collateral 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, theCollateral Custodian is hereby authorized (unless and until such authorization is revoked by the Administrative Agent), upon written receipt from theServicer of a request for release of documents and receipt in the form -160-annexed hereto as Exhibit J, to release to the Servicer within two Business Days of receipt of such request, the related Required Loan Documents or thedocuments set forth in such request and receipt to the Servicer. All documents so released to the Servicer shall be held by the Servicer in trust for thebenefit of the Collateral Agent, on behalf of the Secured Parties in accordance with the terms of this Agreement. The Servicer shall return to theCollateral Custodian the Required Loan Documents or other such documents (i) promptly upon the request of the Administrative Agent, or (ii) whenthe Servicer’s need therefor in connection with such foreclosure or servicing no longer exists, unless the Loan Asset shall be liquidated, in which case,the Servicer shall deliver an additional request for release of documents to the Collateral Custodian and receipt certifying such liquidation from theServicer 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 anddocuments by the Collateral Custodian upon request by the Servicer shall be operative only to the extent that the Administrative Agent has consentedto such release. Promptly after delivery to the Collateral Custodian of any request for release of documents, the Servicer shall provide notice of thesame to the Administrative Agent. Any additional Required Loan Documents or documents requested to be released by the Servicer may be releasedonly upon written authorization of the Administrative Agent. The limitations of this paragraph shall not apply to the release of Required LoanDocuments to the Servicer 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),require that the Collateral Custodian return each Required Loan Document (a) delivered to the Collateral Custodian in error or (b) released from theLien of the Collateral Agent hereunder pursuant to Section 2.16, in each case by submitting to the Collateral Custodian and the Administrative Agent awritten request in the form of Exhibit J hereto (signed by both the Borrower and the Administrative Agent) specifying the Collateral Portfolio to be soreturned and reciting that the conditions to such release have been met (and specifying the Section or Sections of this Agreement being relied upon forsuch release). 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. -161-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 andall other documentation regarding the Collateral Portfolio including in such cases where the Administrative Agent and each Lender Agent is requiredin connection with the enforcement of the rights or interests of the Secured Parties, or by applicable statutes or regulations, to review suchdocumentation, such access being afforded without charge but only (i) upon two Business Days prior written request, (ii) during normal business hoursand (iii) subject to the Servicer’s and the Collateral Custodian’s normal security and confidentiality procedures. Prior to the Closing Date andperiodically thereafter at the discretion of the Administrative Agent and each Lender Agent, the Administrative Agent and each Lender Agent mayreview the Servicer’s collection and administration of the Collateral Portfolio in order to assess compliance by the Servicer with the ServicingStandard, as well as with this Agreement and may conduct an audit of the Collateral Portfolio, and Required Loan Documents in conjunction with sucha review. Such review shall be (subject to Section 5.03(d)(ii)) reasonable in scope and shall be completed in a reasonable period of time. Withoutlimiting the foregoing provisions of this Section 12.10, from time to time upon reasonable request of the Administrative Agent, the CollateralCustodian shall, at least twice each fiscal year of the Servicer, permit certified public accountants or other auditors acceptable to the AdministrativeAgent to conduct, at the expense of the Servicer (on behalf of the Borrower), a review of the Required Loan Documents and all other documentationregarding 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 timesheld by 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.] -162-IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, asof the date first above written. THE BORROWER: FLLP 2015-1, LLC By: /s/ Richard Peteka Name: Richard Peteka Title: Chief Financial Officer and Secretary[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]THE SERVICER: SOLAR SENIOR CAPITAL LTD. By: /s/ Richard Peteka Name: Richard Peteka Title: Chief Financial Officer and Secretary[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]THE TRANSFEROR: SOLAR SENIOR CAPITAL LTD. By: /s/ Bruce Spohler Name: Bruce Spohler Title: Manager[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, N.A. By: Name: Title:[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]THE COLLATERAL AGENT, THECOLLATERAL CUSTODIAN ANDTHE ACCOUNT BANK: WELLS FARGO BANK, NATIONALASSOCIATION 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;(e) Duly executed Variable Funding Note;(f) 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(g) Financing statements, if any, necessary to release all security interests and other rights of any Person in the Collateral Portfoliopreviously granted by the Transferor;(h) 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);(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 such matters as the Administrative Agent may reasonably request(including an opinion, with respect to the perfected security interest of the Collateral Agent, for the benefit of the Secured Parties, in theCollateral Portfolio under the UCC laws of the State of New York);(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 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;(k) 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, among other things, no conflicts and the dueauthorization, execution and delivery of, and enforceability of, the Transaction Documents;(l) One or more favorable Opinions of Counsel to Transferor, 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 Transferor is a party;(m) 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(n) Duly completed copies of IRS Form W-9 (or any successor forms or other certificates or statements that may be required from time totime by the relevant United States taxing authorities or Applicable Law) for the Borrower; and(o) 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 (Large Middle Market Loan Asset or Traditional Middle Market Loan Asset)(e) Original Loan Asset amount (par amount)(f) Whether such Loan Asset is a Designated Loan Asset(g) Whether such Loan Asset is a Delayed Draw Loan Asset(h) Purchase Price(i) Domicile(j) Initial tranche size(k) Calculation of the Net Senior Leverage Ratio as of the applicable Cut-Off Date for such Loan Asset and for the most recent RelevantTest Period(l) Calculation of the Total Net Leverage Ratio as of the applicable Cut-Off Date for such Loan Asset and for the most recent Relevant TestPeriod(m) Calculation of the Interest Coverage Ratio as of the applicable Cut-Off Date for such Loan Asset and for the most recent Relevant TestPeriod(n) Trailing twelve month EBITDA as of the applicable Cut-Off Date for such Loan Asset and for the most recent Relevant Test Period(o) Trailing twelve month revenue as of the applicable Cut-Off Date for such Loan Asset and for the most recent Relevant Test Period(p) Loan Asset status (whether in default or on nonaccrual status)(q) Fixed/Floating(r) Days delinquent Sch. IV- 1(s) Scheduled maturity date(t) Rate of interest (and reference rate)(u) LIBOR floor (if applicable)(v) Outstanding Balance(w) Assigned Value(x) Adjusted Borrowing Value(y) Industry classification(z) Whether such Loan Asset has been subject to a Value Adjustment Event (and of what type)(aa) Whether such Loan Asset has been subject to a Material Modification(bb) The Cut-Off Date for such Loan Asset(cc) PIK percentage(dd) Applicable Percentage(ee) Maintenance capital expenditure or, if unavailable, a good faith approximation by the Servicer of the maintenance capital expenditure(ff) Cash taxes Sch. IV- 2ANNEX A Conduit Lender Commitment N/A N/A Institutional Lender Commitment Wells Fargo Bank, N.A. $75,000,000 Annex AEXHIBITSTOLOAN AND SERVICING AGREEMENTDated as of February 13, 2015(FLLP 2015-1, 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 Form of Variable Funding NoteEXHIBIT 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 Form of Transferee LetterEXHIBIT 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 DividendEXHIBIT ALOAN ASSETAPPROVAL NOTICE DATE ELIGIBLE LOAN ASSET INFORMATIONObligor 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 APPROVALApproval Good Until Approval Conditioned Upon Ex. A- 1SUPPORTING CALCULATIONS/MISCELLANEOUS NOTES Reviewed by: Telephone No. Ex. A- 2EXHIBIT BFORM OF BORROWING BASE CERTIFICATE[__] [__], 20[__]In connection with that certain Loan and Servicing Agreement, dated as of February 13, 2015 (as amended, modified, waived,supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among FLLP 2015-1, LLC, as the borrower (in such capacity,the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Senior Capital Ltd. as the servicer (in suchcapacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”), each ofthe Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each of the Lender Agents from time to time partythereto (the “Lender Agents”), and 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”). Capitalized termsused 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. FLLP 2015-1, LLC, as the BorrowerBy: Name: Title: SOLAR SENIOR CAPITAL LTD., as the ServicerBy: Name: Title: SOLAR SENIOR CAPITAL LTD., as the TransferorBy: 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 Principal Collections)[Date](FLLP 2015-1, LLC)Wells Fargo Bank, National Association as the Collateral Agent9062 Old Annapolis RoadColumbia, MD 21045Attention: CDO Trust Services – FLLP 2015-1, 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) 410-2431[Lender Agent Name and Address] Re:Loan and Servicing Agreement dated as of February 13, 2015Ladies 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 February 13, 2015 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), byand among FLLP 2015-1, LLC, as the borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the“Transferor”), Solar Senior 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”), and Wells Fargo Bank, National Association, as thecollateral agent (in such capacity, the “Collateral Agent”), as the collateral custodian (in such capacity, the “Collateral Custodian”) and as the accountbank (in such capacity, the “Account Bank”). Capitalized terms used but not defined herein shall have the meanings provided in the Loan andServicing Agreement. Ex. C-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. 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 as follows: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. FLLP 2015-1, LLC, as the BorrowerBy: Name: Title:SOLAR SENIOR 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, FLLP 2015-1, 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 February 13, 2015 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), byand among FLLP 2015-1, LLC, as the borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the“Transferor”), Solar Senior 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; 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 with respect to anyVariable Funding Note issued under the Loan and Servicing Agreement, or the Collateral Portfolio or the financial condition of the Transferor,the Servicer or the Borrower, or the performance or observance by the Transferor, the Servicer or the Borrower of any of their respectiveobligations under the Loan and Servicing Agreement, any other Transaction Document or any other instrument or document furnished pursuantthereto; (ii) the Proposed Lender confirms that it has received a copy of such documents and information as it has deemed appropriate to make itsown credit analysis and decision to enter into this Joinder Supplement; (iii) the Proposed Lender will, independently and without reliance uponthe Administrative Agent, the Collateral Agent, the Lender Agents or any other Lender and based on such documents and information as it shalldeem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan and Servicing Agreement;(iv) the Proposed Lender appoints and authorizes the Lender Agent to take such action as agent on its behalf and to exercise such powers underthe Loan and Servicing Agreement as are delegated to the Lender Agent by the terms thereof, together with such powers as are reasonablyincidental thereto, all in accordance with Article IX of the Loan and Servicing Agreement; (v) the Proposed Lender appoints and authorizes theAdministrative Agent, the Collateral Custodian and the Collateral Agent, as applicable, to take such action as agent on its behalf and to exercisesuch powers under the Loan and Servicing Agreement as are delegated to the Administrative Agent, the Collateral Custodian and CollateralAgent, as applicable, by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with the Loan andServicing Agreement; and (vi) the Proposed Lender agrees (for the benefit of the parties hereto and the other Lender(s)) that it will perform inaccordance with their terms all of the obligations which by the terms of the Loan and Servicing Agreement are required to be performed by it as aLender designated as a[n] [Conduit Lender][Institutional Lender].(d) Schedule II hereto sets forth administrative information with respect to the Proposed Lender. Ex. D-2(e) 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 February 13, 2015, among FLLP 2015-1, 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FLLP 2015-1, LLC, as BorrowerBy: Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative AgentBy: Name: Title: WELLS FARGO BANK, NATIONAL ASSOCIATION, as Collateral AgentBy: Name: Title: [NAME OF LENDER AGENT][NAME OF INSTITUTIONAL 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 February 13, 2015 (as amended, modified,waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among FLLP 2015-1, LLC, as the borrower (in suchcapacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Senior Capital Ltd. as the servicer (insuch 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”), thecollateral custodian (in such capacity, the “Collateral Custodian”) and as the account bank (in such capacity, the “Account Bank”). [Note: attachcopies of Schedules I and II from such Joinder Supplement.] Terms defined in such Joinder Supplement are used herein as therein defined.Pursuant to such Joinder Supplement, you are advised that the Joinder Effective Date for [Name of Proposed Lender] will be ________ andsuch 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, as Administrative AgentBy: Name: Title: Ex. D-8EXHIBIT EFORM OF NOTICE OF BORROWINGNOTICE OF BORROWING[Date](FLLP 2015-1, LLC) To: Wells Fargo Bank, National Association Wells Fargo Bank, National Associationas the Administrative Agent as the Collateral CustodianDuke Energy Center 9062 Old Annapolis Road550 South Tryon Street, 5th Floor Columbia, MD 21045Charlotte, North Carolina 28202 Attention: CDO Trust Services –Attention: Corporate Debt Finance FLLP 2015-1, LLCFacsimile No: (704) 715-0089 Facsimile No: (281) 667-3933Confirmation No: (704) 410-2431 Phone No: (410) 884-2000[Lender Agent Name and Address] With a copy to: With a copy to:Wells Fargo Bank, National Association Wells Fargo Bank, National Association as theas the Collateral Agent Account Bank 9062 Old Annapolis Road 9062 Old Annapolis Road Columbia, MD 21045Columbia, MD 21045 Attention: CDO Trust Services – FLLP 2015-1, LLCAttention: CDO Trust Services – FLLP Facsimile No: (281) 667-39332015-1, LLC Phone No: (410) 884-2000Facsimile No: (281) 667-3933 Phone No: (410) 884-2000 Re: Loan and Servicing Agreement, dated as of February 13, 2015Ladies and Gentlemen: Ex. E-1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 ofFebruary 13, 2015 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and amongFLLP 2015-1, LLC, as the borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the “Transferor”),Solar Senior Capital Ltd. as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in suchcapacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each ofthe Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in suchcapacity, 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 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. [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 inSection 2.04(d) of the Loan and Servicing Agreement) to deposit in the Unfunded Exposure Account. Such Advance shall be deposited in theUnfunded Exposure Account 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 $____________.] Ex. E-2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 theUnfunded Exposure Account 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 $____________.]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 connectionwith any Delayed 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); Ex. E-3(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 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. FLLP 2015-1, LLC, as the BorrowerBy: Name: Title:SOLAR SENIOR CAPITAL LTD., as the ServicerBy: Name: Title: Ex. E-5EXHIBIT FFORM OF NOTICE OF REDUCTION(Reduction of Advances Outstanding)[Date](FLLP 2015-1, 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) 410-2431[Lender Agent Name and Address] Wells Fargo Bank, National Association,as the Collateral Agent9062 Old Annapolis RoadColumbia, MD 21045Attention: CDO Trust Services – FLLP 2015-1, LLCFacsimile No: (281) 667-3933Phone No: (410) 884-2000Re: Loan and Servicing Agreement, dated as of February 13, 2015 Ladies and Gentlemen:This Notice of Reduction is delivered to you pursuant to Section 2.18 of that certain Loan and Servicing Agreement, dated as ofFebruary 13, 2015 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and amongFLLP 2015-1, LLC, as the borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the “Transferor”),Solar Senior Capital Ltd. as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in suchcapacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each ofthe Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in suchcapacity, 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 the Loan and Servicing Agreement. 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. FLLP 2015-1, LLC, as the BorrowerBy: Name: Title:SOLAR SENIOR CAPITAL LTD., as the ServicerBy: Name: Title: Ex. F- 3EXHIBIT GFORM OF VARIABLE FUNDING NOTE $ [________] [__], 20[ ]THIS VARIABLE FUNDING NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIESACT”). NEITHER THIS VARIABLE FUNDING NOTE NOR ANY PORTION HEREOF MAY BE OFFERED OR SOLD EXCEPT IN COMPLIANCEWITH THE REGISTRATION PROVISIONS OF THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCHREGISTRATION PROVISIONS.THIS VARIABLE FUNDING NOTE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISEPLEDGED OR CONVEYED EXCEPT TO A QUALIFIED INSTITUTIONAL BUYER UNDER RULE 144A OF THE SECURITIES ACT OR ANINSTITUTIONAL “ACCREDITED INVESTOR” AS DEFINED IN RULE (1)- 501(A)(1)-(3) OR (7) UNDER THE SECURITIES ACT, IN EACH CASE,WHO IS ALSO A QUALIFIED PURCHASER FOR PURPOSES OF SECTION 3(c)(7) OF THE 1940 ACT, AND IN COMPLIANCE WITH THE TERMSOF THE LOAN AND SERVICING AGREEMENT REFERRED TO HEREIN.FOR VALUE RECEIVED, FLLP 2015-1, LLC, a Delaware limited liability company (the “Borrower”), promises to pay to [Name of LenderAgent] [__________] (the “Lender Agent”), or its [Name of Lender]’s (“Lender”) assigns, the principal sum of [J DOLLARS ($[J), or, if less, the unpaidprincipal amount of the aggregate Advances (the “Advances Outstanding”) made by the Lender to the Borrower pursuant to the Loan and ServicingAgreement (as defined below), as set forth on the attached Schedule, on the dates specified in the Loan and Servicing Agreement, and to pay interest onthe unpaid principal amount of the Advances Outstanding on each day that such unpaid principal amount is outstanding, at the Yield Rate related tosuch Advances Outstanding as provided in the Loan and Servicing Agreement, on each Payment Date and each other date specified in the Loan andServicing Agreement.This Variable Funding Note (the “Note”) is issued pursuant to the Loan and Servicing Agreement, dated as of February 13, 2015 (asamended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among FLLP 2015-1, LLC, asthe borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Senior CapitalLtd. 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. Ex. G-1Notwithstanding any other provisions contained in this Note, if at any time the rate of interest payable by the Borrower under this Note,when combined with any and all other charges provided for in this Note, in the Loan and Servicing Agreement or in any other document (to the extentsuch other charges would constitute interest for the purpose of any applicable law limiting interest that may be charged on this Note), exceeds thehighest rate of interest permissible under applicable law (the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate would be exceeded,the rate of interest under this Note shall be equal to the Maximum Lawful Rate. If at any time thereafter the rate of interest payable under this Note isless than the Maximum Lawful Rate, the Borrower shall continue to pay interest under this Note at the Maximum Lawful Rate until such time as thetotal interest paid by the Borrower is equal to the total interest that would have been paid had applicable law not limited the interest rate payable underthis Note. In no event shall the total interest received by the Lender under this Note exceed the amount which the Lender could lawfully have receivedhad the interest due under this Note been calculated since the date of this Note at the Maximum Lawful Rate.Payments of the principal of, and interest on, Advances Outstanding represented by this Note shall be made by or on behalf of the Borrowerto the holder hereof by wire transfer of immediately available funds in the manner and at the address specified for such purpose as provided in the Loanand Servicing Agreement, or in such manner or at such other address as the holder of this Note shall have specified in writing to the Borrower for suchpurpose, without the presentation or surrender of this Note or the making of any notation on this Note.If any payment under this Note falls due on a day that is not a Business Day, then such due date shall be extended to the next succeedingBusiness Day and interest shall be payable on any principal so extended at the applicable Yield Rate.If all or a portion of (i) any interest payable hereunder or (ii) any other amounts payable hereunder shall not be paid when due other thanthe principal amount hereof (whether at maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum that isequal to the Base Rate plus 2.0% (unless otherwise specified in the Loan and Servicing Agreement), in each case from the date of such non-payment to(but excluding) the date such amount is paid in full.For the avoidance of doubt, if any Event of Default shall have occurred, the Yield Rate shall be increased pursuant to the increase set forthin the definition of “Applicable Spread” set forth in the Loan and Servicing Agreement, effective as of the date of the occurrence of such Event ofDefault, and shall apply after the occurrence of such Event of Default.Portions or all of the principal amount of the Note shall become due and payable at the time or times set forth in the Loan and ServicingAgreement. Any portion or all of the principal amount of this Note may be prepaid, together with interest thereon (and, as set forth in the Loan andServicing Agreement, certain costs and expenses of the Lender) at the time and in the manner set forth in, but subject to the provisions of, the Loan andServicing Agreement. Ex. G-2Except as provided in the Loan and Servicing Agreement, the Borrower expressly waives presentment, demand, diligence, protest and allnotices of any kind whatsoever with respect to this Note.All amounts evidenced by this Note, the Lender’s Advances Outstanding and all payments and prepayments of the principal hereof and therespective dates and maturity dates thereof shall be endorsed by the Lender Agent, on the Schedule attached hereto and made a part hereof or on acontinuation thereof, which shall be attached hereto and made a part hereof; provided, however, that the failure of the Lender Agent to make such anotation shall not in any way limit or otherwise affect the obligations of the Borrower under this Note as provided in the Loan and ServicingAgreement.The holder hereof may sell, assign, transfer, negotiate, grant participations in or otherwise dispose of all or any portion of any AdvancesOutstanding made by the Lender and represented by this Note and the indebtedness evidenced by this Note, subject to the applicable provisions of theLoan and Servicing Agreement.This Note is secured by the security interests granted pursuant to Section 2.13 of the Loan and Servicing Agreement. The holder of thisNote is entitled to the benefits of the Loan and Servicing Agreement and may enforce the agreements of the Borrower contained in the Loan andServicing Agreement and exercise the remedies provided for by, or otherwise available in respect of, the Loan and Servicing Agreement, all inaccordance with, and subject to the restrictions contained in, the terms of the Loan and Servicing Agreement. If an Event of Default shall occur, theunpaid balance of the principal of all Advances Outstanding, together with accrued interest thereon, may be declared, and may become, due andpayable in the manner and with the effect provided in the Loan and Servicing Agreement.The Borrower, the Transferor and the Servicer, the Lenders, the Administrative Agent, the Lender Agents, the Collateral Agent, the AccountBank and the Collateral Custodian each intend, for federal, state and local income and franchise tax purposes only, that this Note be evidence ofindebtedness of the Borrower secured by the Collateral Portfolio and the Lender, as a[n] [institutional lender] [conduit lender] under the Loan andServicing Agreement, by the acceptance hereof, agrees to treat the Note for federal, state and local income and franchise tax purposes as indebtednessof the Borrower.The Borrower, the Transferor and the Servicer, the Lenders, the Administrative Agent, the Lender Agents, the Collateral Agent, the AccountBank and the Collateral Custodian each intend the obligation of indebtedness under this Note to be a “loan” and not a “security” for purposes ofSection 8-102(15) of the UCC.This Note is a “Variable Funding Note” as referred to in Section 2.01 of the Loan and Servicing Agreement. This Note shall be construed inaccordance with and governed by the laws of the State of New York.[Remainder of Page Intentionally Left Blank] Ex. G-3IN WITNESS WHEREOF, the undersigned has executed this Note as on the date first written above. FLLP 2015-1, LLCBy: Name: Title: Ex. G-4Schedule attached to Variable Funding Note dated February 13, 2015 of FLLP 2015-1, LLC payable to the order of [LENDER/LENDER AGENT] Date ofAdvance orRepayment PrincipalAmount ofAdvance PrincipalAmount ofRepayment OutstandingPrincipalAmount Ex. G-5EXHIBIT HFORM OF CERTIFICATE OF CLOSING ATTORNEYS[__][__], 20[__]Wells Fargo Bank, National Associationas the Collateral Custodian9062 Old Annapolis RoadColumbia, MD 21045Attention: CDO Trust Services – FLLP 2015-1, 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) 410-2431 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 FLLP 2015-1, LLC, has granted a security interest to WellsFargo Bank, 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 February 13, 2015 (as amended, modified, waived, supplemented or restated from time to time,the “Loan and Servicing Agreement”), by and among FLLP 2015-1, LLC, as the borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd.,as the transferor (in such capacity, the “Transferor”), Solar Senior 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 InstitutionalLenders from time to time party thereto (the “Lenders”), each of the Lender Agents from time to time party thereto (the “Lender Agents”), Wells FargoBank, 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”). Capitalized terms used but not defined herein shall have themeanings provided in the Loan and Servicing Agreement. Ex. H-1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 theCollateral Custodian. The original promissory note(s) is/are in our possession and will be forwarded to the Collateral Custodian or as otherwisedirected in writing to ____________ (hereinafter referred to as “Outside Counsel”) by the Collateral Custodian or the Administrative Agent on itsbehalf, for receipt within five Business 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 theLoan Asset is funded, it will follow the written direction of the Collateral Custodian or the Administrative Agent on its behalf, with regard to theoriginal promissory 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)], theBorrower and Outside Counsel acknowledge and agree that:(2) 1. The security interest and the rights in the Required Loan Documents granted to the Collateral Agent, for the benefit of the SecuredParties, are paramount and superior to the rights of [the Transferor][,] [insert other applicable assignor(s)] and the Borrower.(3) 2. Outside Counsel shall not be required to perform any duties other than the duties expressly set forth in this letter. No impliedobligations or duties shall be inferred by any other agreement, written or verbal, or any representation made by any party.(4) 3. Outside Counsel is authorized to comply with and obey laws, orders, judgments, decrees and regulations of any governmentalauthority, court, tribunal or arbitrator. If Outside Counsel complies with any such law, order, judgment, decree or regulation Outside Counsel shall notbe liable to the Collateral Custodian, the Collateral Agent, the Administrative Agent, [the Transferor][,] [insert other applicable assignor(s)] or theBorrower or to any other person even if such law, order, judgment, decree or regulation is subsequently reversed, 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. Ex. H-2(5) 4. Outside Counsel shall be responsible hereunder solely to hold the original promissory note(s) for the account of the Collateral Agent,on behalf of the Secured Parties and to deliver the original promissory note(s) and the other relevant documents to the Collateral Custodian inaccordance with the terms of this letter.(6) 5. Outside Counsel may act relative hereto upon the advice of counsel in reference to any matter in connection herewith and shall notbe liable for 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 grossnegligence.(7) 6. Outside Counsel shall be entitled to rely or act upon any notice, direction, instrument or document believed by Outside Counsel tobe genuine and to be executed and delivered by the proper person and shall have no obligation to verify any statements contained in any notice,instrument or document or the accuracy or due authorization of the execution of any notice, instrument or document.(8) 7. Outside Counsel shall not be responsible or liable in any manner whatsoever for (a) the sufficiency, correctness, genuineness orvalidity of any document, agreement or instrument delivered to it, (b) the form of execution of any such document, agreement or instrument, (c) theidentity, authority or rights of any person executing or delivering any such document, agreement or instrument, or (d) the terms and conditions of anyinstrument pursuant to which the parties may act.(9) 8. Outside Counsel may serve and shall continue to serve as counsel to [the Transferor][,] [insert other applicable assignor(s)] inconnection with the transactions contemplated by the Collateral Portfolio and other matters, and notwithstanding anything herein to the contrary, mayrepresent [the Transferor][,] [insert other applicable assignor(s)] (or any affiliate) as its counsel in any action, suit or other proceeding in which theCollateral Custodian, the Collateral Agent, the Administrative Agent or [the Transferor][,] [insert other applicable assignor(s)] (or any affiliate) may beinvolved.(10) 9. Outside Counsel shall be deemed to have satisfied any delivery requirement set forth herein if it shall have deposited the relevantdocuments for 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 SENIOR CAPITAL LTD., as the ServicerBy: Name: Title:SOLAR SENIOR CAPITAL LTD., as the TransferorBy: Name: Title:WELLS FARGO BANK, NATIONAL ASSOCIATION, asthe Collateral Agent, the Collateral Custodian and as theAccount BankBy: Name: Title:WELLS FARGO BANK, NATIONAL ASSOCIATION, asthe Administrative AgentBy: Name: Title: Ex. H-4FLLP 2015-1, LLC, as the BorrowerBy: Name: Title:[insert other applicable assignor(s)], as an assignorBy: 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 ofFebruary 13, 2015 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and amongFLLP 2015-1, LLC, as the borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the “Transferor”),Solar Senior Capital Ltd. as the servicer (in such capacity, the “Servicer”), Wells Fargo Bank, National Association, as the administrative agent (in suchcapacity, the “Administrative Agent”), each of the Conduit Lenders and Institutional Lenders from time to time party thereto (the “Lenders”), each ofthe Lender Agents from time to time party thereto (the “Lender Agents”), Wells Fargo Bank, National Association, as the collateral agent (in suchcapacity, 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 and not otherwise defined herein shall have the meanings provided in the Loan and Servicing Agreement.This Servicer’s Certificate relates to the Servicing Report set forth on the attached Schedule A. A.Solar Senior 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 other Secured Partiesthat, as of the date hereof, no Event of Default has occurred and no Unmatured Event of Default exists (other than any Event of Default orUnmatured 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 other Secured Partiesthat, as of the date hereof, each of the representations and warranties by the Servicer contained in the Loan and Servicing Agreement 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 other Secured Partiesthat all of the foregoing information and all of the information set forth on the attached Schedule A is accurate, true and correct in all materialrespects as of the date hereof; provided that, solely with respect to information provided to the Servicer from an Obligor with respect to a LoanAsset, such information is accurate, true and correct in all material respects to the knowledge of the Servicer; provided further that the foregoingproviso shall not apply except to the extent the information is derived from information provided to the Servicer from an Obligor with respect toa Loan Asset. Ex. I-1[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 SENIOR 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, MD 21045Attention: CDO Trust Services – FLLP 2015-1, 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) 410-2431 Re:Loan and Servicing Agreement, dated as of February 13, 2015 (as amended, modified, waived, supplemented or restated from time to time,the “Loan and Servicing Agreement”), by and among FLLP 2015-1, LLC, as the borrower (in such capacity, the “Borrower”), Solar SeniorCapital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Senior 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 thecollateral 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 below, for the reason indicated. All capitalized terms used but not defined hereinshall have the meaning provided in the Loan and Servicing Agreement. Ex. J-1Obligor’s Name, Address & Zip Code:Loan Asset Number:Loan Asset File: Ex. J-2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, condemnationor other 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-3SOLAR SENIOR CAPITAL LTD.,as the ServicerBy: Name: Title: Date: Ex. J-4EXHIBIT KFORM OF TRANSFEREE LETTER__________ ___, 20___Solar Senior Capital Ltd.,as the Servicer500 Park Avenue,New York, NY 10022Attention: Chief Financial OfficerFacsimile: 212-994-8545Phone: 212-993-1660Solar Senior Capital Ltd.,as the Transferorc/o Solar Senior Capital Ltd.500 Park Avenue,New York, NY 10022Attention: Chief Financial OfficerFacsimile: 212-994-8545Phone: 212-993-1660FLLP 2015-1, LLC,as the Borrower500 Park Avenue,New York, NY 10022Attention: Chief Financial OfficerFacsimile: 212-994-8545Phone: 212-993-1660Wells 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) 410-2431 Re:FLLP 2015-1, LLC Variable Funding Note Ex. K-1Ladies and Gentlemen:In connection with our acquisition of the above-captioned Variable Funding Note (the “Note”), we certify that (a) we understand that theNote is not registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and are being transferred to us in atransaction that is exempt from the registration requirements of the Securities Act and any such laws, (b) we are (i) either a Qualified Institutional Buyerunder Rule 144A of the Securities Act or an institutional “Accredited Investor” as defined in Rule 501(a)(1)-(3) or (7) under the Securities Act and (ii) a“qualified purchaser” under the 1940 Act, and have such knowledge and experience in financial and business matters that we are capable of evaluatingthe merits and risks of investments in the Note, [(c) we are an Affiliate of the applicable Lender,] (d) we have had the opportunity to ask questions ofand receive answers from the Transferor and the Servicer concerning the purchase of the Note and all matters relating thereto or any additionalinformation deemed necessary to our decision to purchase the Note, (e) we are acquiring the Note for investment for our own account and not with aview to any distribution of such Note (but without prejudice to our right at all times to sell or otherwise dispose of the Note in accordance with clause(g) below), (f) we have not offered or sold any Note to, or solicited offers to buy any Note from, any person, or otherwise approached or negotiated withany person with respect thereto, or taken any other action which would result in a violation of Section 5 of the Securities Act, (g) we will not sell,transfer or otherwise dispose of any Note unless (1) such sale, transfer or other disposition is made pursuant to an effective registration statement underthe Securities Act or is exempt from such registration requirements, and if requested, we will at our expense provide an opinion of counsel satisfactoryto the addressees of this certificate that such sale, transfer or other disposition may be made pursuant to an exemption from the Securities Act, (2) thepurchaser or transferee of such Note has executed and delivered to you a certificate to substantially the same effect as this certificate, and (3) thepurchaser or transferee has otherwise complied with any conditions for transfer set forth in the Loan and Servicing Agreement, dated as of February 13,2015, by and among FLLP 2015-1, LLC, as the Borrower, Solar Senior Capital Ltd., as the Transferor, Solar Senior Capital Ltd. as the Servicer, WellsFargo Bank, National Association, as the Administrative Agent, each of the Conduit Lenders and the Institutional Lenders from time to time partythereto, each of the Lender Agents from time to time party thereto, Wells Fargo Bank, National Association, as the Collateral Agent, as the CollateralCustodian and as the Account Bank, (h) the purchaser is not acquiring a Note, directly or indirectly, for or on behalf of an employee benefit plan orother retirement arrangement subject to the Employee Retirement Income Security Act of 1974, as amended, and/or Section 4975 of the InternalRevenue Code of 1986, as amended, or any entity, the assets of which would be deemed plan assets under Section 3(42) of ERISA and the Departmentof Labor regulations set forth at 29 C.F.R. § 2510.3–101; unless Prohibited Transaction Class Exemption (“PTCE”) 84–14, PTCE 90–1, PTCE 91–38,PTCE 95–60 or PTCE 92–23 or some other applicable prohibited transaction exemption is applicable such that the acquisition and holding of suchNote will not constitute or result in a non-exempt prohibited transaction under Title I of ERISA or Section 4975 of the Code and (i) the purchaser is aU.S. Person, as such term is defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended. Ex. K-2Very truly yours,Print Name of TransfereeBy: Responsible Officer Ex. K-3EXHIBIT LFORM OF POWER OF ATTORNEYSOLAR SENIOR CAPITAL LTD.This Power of Attorney is executed and delivered by Solar Senior Capital Ltd., as the Transferor and as the Servicer under the Loan andServicing Agreement (each as defined below), to Wells Fargo Bank, National Association, as the [Collateral Agent]/[Administrative Agent] under theLoan and Servicing Agreement (in such capacity, the “Attorney”), pursuant to that certain Loan and Servicing Agreement, dated as of February 13,2015 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among FLLP 2015-1,LLC, as the borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar SeniorCapital 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.No person to whom this Power of Attorney is presented, as authority for Attorney to take any action or actions contemplated hereby, shallinquire into or seek confirmation from Servicer as to the authority of Attorney to take any action described below, or as to the existence of orfulfillment of any condition to this Power of Attorney, which is intended to grant to Attorney unconditionally the authority to take and perform theactions contemplated herein, and Servicer irrevocably waives any right to commence any suit or action, in law or equity, against any person or entitythat acts in reliance upon or acknowledges the authority granted under this Power of Attorney. The power of attorney granted hereby is coupled with aninterest and may not be revoked or canceled by Servicer until all obligations of the Borrower under the Transaction Documents have been indefeasiblypaid in full and Attorney has provided its written consent thereto (which consent shall not be unreasonably withheld or delayed).Solar Senior Capital Ltd., as the Servicer, hereby irrevocably constitutes and appoints Attorney (and all officers, employees or agentsdesignated by Attorney), solely in connection with the enforcement of the rights and remedies of the Administrative Agent, the Collateral Agent, theLenders, the Lender Agents and the other Secured Parties under the Loan and Servicing Agreement and in connection with notifying Obligors of theSecured Parties’ interest in the Collateral Portfolio pursuant to Section 5.01(aa) 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 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 Ex. L-1documents and instruments that may be necessary or desirable to exercise the rights of the Servicer under the Loan and Servicing Agreement and theother 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 the following 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, anychecks, drafts, notes, acceptances, or other instruments for the payment of moneys due, and sign and endorse any invoices, freight or express bills, billsof lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, and notices, in each case in connection with the CollateralPortfolio; (b) effect any repairs to any of the Collateral Portfolio, or continue or obtain any insurance with respect to the Collateral Portfolio and pay allor any part of the premiums therefor and costs thereof, and make, settle and adjust all claims under such policies of insurance, and make alldeterminations and decisions with respect to such policies; (c) pay or discharge any taxes, Liens, or other encumbrances levied or placed on orthreatened against the Collateral Portfolio; (d) to the extent related to the Collateral Portfolio and the transactions contemplated by the TransactionDocuments, defend any suit, action or proceeding brought against Servicer with respect to the Collateral Portfolio if Servicer does not defend such suit,action or proceeding or if Attorney reasonably believes that it is not pursuing such defense in a manner that will maximize the recovery to Attorneywith 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 as Attorney may deem appropriate; (e) file or prosecute any claim, litigation, suit or proceeding in any court ofcompetent jurisdiction or before any arbitrator, or take any other action otherwise deemed appropriate by Attorney for the purpose of collecting anyand all such moneys due to Servicer with respect to the Collateral Portfolio whenever payable and to enforce any other right in respect of the CollateralPortfolio; (f) sell, transfer, pledge, make any agreement with respect to, or otherwise deal with the Collateral Portfolio, and execute, in connection withsuch sale or action, any endorsements, assignments or other instruments of conveyance or transfer in connection therewith; (g) to give any necessaryreceipts or acquittance for amounts collected or received under the Loan and Servicing Agreement; (h) to make all necessary transfers of the CollateralPortfolio in connection with any such sale or other disposition made pursuant to the Loan and Servicing Agreement; (i) to execute and deliver forvalue all necessary or appropriate bills of sale, assignments and other instruments in connection with any such sale or other disposition of theCollateral Portfolio, the Servicer hereby ratifying and confirming all that such Attorney (or any substitute) shall lawfully do or cause to be donehereunder 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 Collateral Portfolio; (k) to sign any agreements, orders or other documents in connection with or pursuant to any Transaction Document;and (l) to cause the certified public accountants then engaged by the Servicer to prepare and deliver to the Attorney at any time and from time to time,promptly upon Attorney’s request, any reports required to be prepared by or on behalf of the Servicer or Borrower under the Transaction Documents, allas though Attorney were the absolute owner of the Collateral Portfolio for all purposes, and to do, at Attorney’s option and Servicer’s expense, at anytime or from time to time, all acts and other things that Attorney reasonably deems necessary to perfect, preserve or realize upon the Collateral Portfolioand the Liens of the Collateral Agent, for benefit of the Secured Parties, thereon (including without limitation the execution and filing of UCCfinancing Ex. L-2statements and continuation statements), all as fully and effectively as Servicer might do. Servicer hereby ratifies, to the extent permitted by law, allthat said attorneys shall lawfully 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 tothe authority of its managers and/or members as of the date first written above. SOLAR SENIOR CAPITAL LTD.By: Name: Title: Sworn to and subscribed before me this February 13, 2015: Notary Public Ex. L-4EXHIBIT MFORM OF POWER OF ATTORNEYFLLP 2015-1, LLCThis Power of Attorney is executed and delivered by FLLP 2015-1, LLC, as the Borrower under the Loan and Servicing Agreement (each asdefined 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 of February 13, 2015 (as amended, modified,waived, supplemented or restated from time to time, the “Loan and Servicing Agreement”), by and among FLLP 2015-1, LLC, as the borrower (in suchcapacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in such capacity, the “Transferor”), Solar Senior Capital Ltd. as the servicer (insuch 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”). Capitalized termsused but not defined herein shall have the meanings provided in the Loan and Servicing Agreement.No person to whom this Power of Attorney is presented, as authority for Attorney to take any action or actions contemplated hereby, shallinquire into or seek confirmation from Borrower as to the authority of Attorney to take any action described below, or as to the existence of orfulfillment of any condition to this Power of Attorney, which is intended to grant to Attorney unconditionally the authority to take and perform theactions contemplated herein, and Borrower irrevocably waives any right to commence any suit or action, in law or equity, against any person or entitythat acts in reliance upon or acknowledges the authority granted under this Power of Attorney. The power of attorney granted hereby is coupled with aninterest and may not be revoked or canceled by Borrower until all obligations of the Borrower under the Transaction Documents have beenindefeasibly paid in full and Attorney has provided its written consent thereto (which consent shall not be unreasonably withheld or delayed).FLLP 2015-1, LLC hereby irrevocably constitutes and appoints Attorney (and all officers, employees or agents designated by Attorney),solely in connection with the enforcement of the rights and remedies of the Administrative Agent, the Collateral Agent, the Lenders, the Lender Agentsand the other 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 lawfulattorney-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 nameor in Attorney’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 pursuantto the authority of its managers and/or members as of the date first written above. FLLP, 2015-1, LLCBy: Name: Title: Sworn to and subscribed before me this February 13, 2015: 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[__]FLLP 2015-1, LLCTo: Administrative Agent, with a copy to the Collateral Agent and the Collateral CustodianRe: Loan and Servicing Agreement dated as of February 13, 2015Ladies and Gentlemen:This Notice of Lien Release Dividend (this “Notice”) is delivered to you under Section 2.07(g) of that certain Loan and ServicingAgreement, dated as of February 13, 2015 (as amended, modified, waived, supplemented or restated from time to time, the “Loan and ServicingAgreement”), by and among FLLP 2015-1, LLC, as the borrower (in such capacity, the “Borrower”), Solar Senior Capital Ltd., as the transferor (in suchcapacity, the “Transferor”), Solar Senior 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.Each of the undersigned, each being a duly elected Responsible Officer of the Borrower and the Transferor, 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 Transferor 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 Noticeis received 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, asfollows:(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 ofDefault or Unmatured Event of Default shall exist, (ii) the representations and warranties contained in Sections 4.01, 4.02 and 4.03 of theLoan and Servicing Agreement shall continue to be correct in all respects, except to the extent relating to an earlier date, (iii) the eligibilityof any Loan Asset remaining as part of the Collateral Portfolio after the Lien Release Dividend will be redetermined as of the Lien ReleaseDividend Date, (iv) no claim shall have been asserted or proceeding commenced challenging the enforceability or validity of any of theRequired Loan Documents 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, delayor defraud 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 presentand anticipated business 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 LienRelease Dividend;(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,the Lenders, the Lender Agents, the Administrative Agent or any other Secured Party and (ii) a new promissory note (other than withrespect to a Noteless Loan Asset) for the portion of the Loan Asset remaining as a part of the Collateral Portfolio has been executed, and theoriginal thereof has 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 BorrowingValue thereof; Ex. O-2(g) 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;(h) The Borrower shall have paid in full an aggregate amount equal to the sum of all amounts due and owing to the AdministrativeAgent, the Lenders, the Collateral Agent or the Collateral Custodian, as applicable, under this Agreement and the other TransactionDocuments, if any, to the extent accrued to such date (including, without limitation, Breakage Fees) with respect to the Loan Assets to betransferred pursuant to such Lien Release Dividend and incurred in connection with the transfer of such Loan Assets pursuant to such LienRelease 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, butnot limited to, reasonable and documented expenses incurred in connection with the release of the Lien of the Collateral Agent, on behalfof the Secured 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 LienRelease Dividend.This Notice shall not be effective unless all of the conditions applicable to the Lien Release Dividend requested herein set forth in theLoan and Servicing 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. FLLP 2015-1, LLC, as the BorrowerBy: Name: Title: SOLAR SENIOR 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 21.1Subsidiaries of Solar Senior Capital Ltd.The following list sets forth each of our consolidated subsidiaries, the state or country under whose laws the subsidiary is organized, and the percentageof voting securities or membership interests owned by us in such subsidiary:ESP SSC Corporation (Delaware) – 100%SUNS SPV LLC (Delaware) – 100%FLLP 2015-1, 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 Senior Capital Ltd., certify that:1. I have reviewed this annual report on Form 10-K of Solar Senior Capital Ltd.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to 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 officer(s) 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 under oursupervision, 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; andd) 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 officer(s) 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; andb) 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.Date: February 21, 2019 /S/ MICHAEL S. GROSSMichael S. GrossChief Executive Officer Exhibit 31.2Certification Pursuant to Section 302Certification of Chief Financial OfficerI, Richard L. Peteka, Chief Financial Officer of Solar Senior Capital Ltd., certify that:1. I have reviewed this annual report on Form 10-K of Solar Senior Capital Ltd.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to 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 officer(s) 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 under oursupervision, 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; andd) 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 officer(s) 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; andb) 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.Date: February 21, 2019 /S/ RICHARD L. PETEKARichard 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 fiscal year ended December 31, 2018 (the “Report”) of Solar Senior Capital Ltd. (the“Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Michael S. Gross, the 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 fiscal year ended December 31, 2018 (the “Report”) of Solar Senior Capital Ltd. (the“Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Richard L. Peteka, the Chief Financial Officer of 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 99.1Gemino Healthcare Finance, LLC and SubsidiaryConsolidated Financial StatementsDecember 31, 2018 and 2017 Gemino Healthcare Finance, LLC and SubsidiaryTable of ContentsDecember 31, 2018 and 2017 Page Independent Auditors’ Report 1 Consolidated Financial Statements Consolidated Balance Sheet 3 Consolidated Statement of Operations 4 Consolidated Statement of Changes in Members’ Equity 5 Consolidated Statement of Cash Flows 6 Notes to Consolidated Financial Statements 7 Independent Auditors’ ReportBoard of ManagersGemino Healthcare Finance, LLCWe have audited the accompanying consolidated financial statements of Gemino Healthcare Finance, LLC and Subsidiary, which comprise theconsolidated balance sheet as of December 31, 2018 and 2017, and the related consolidated statements of operations, changes in members’ equity, andcash flows for the years then ended, and the related notes to the consolidated financial statements.Management’s Responsibility for the 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.Baker 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OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of GeminoHealthcare Finance, LLC and Subsidiary as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years thenended in accordance with accounting principles generally accepted in the United States of America. Philadelphia, PennsylvaniaFebruary 14, 2019 2Gemino Healthcare Finance, LLC and SubsidiaryConsolidated Balance SheetDecember 31, 2018 and 2017 2018 2017 Assets Assets Cash and cash equivalents $8,983,921 $12,957,611 Loans receivable, net of allowance of $966,488 and $944,935, respectively 89,366,544 87,299,916 Accrued interest receivable 996,146 699,965 Intangible asset—trade name 2,800,000 2,800,000 Goodwill 5,663,531 5,663,531 Furniture and equipment, net 38,664 43,968 Deferred financing costs, net 724,624 1,024,468 Other assets 66,575 94,717 Total assets $108,640,005 $110,584,176 Liabilities and Members’ Equity Liabilities Credit facility payable $75,000,000 $75,000,000 Accounts payable and accrued expenses 1,579,134 1,824,185 Accrued dividend payable 529,848 592,837 Total liabilities 77,108,982 77,417,022 Members’ Equity Units, $1,000 par value, issued and outstanding 35,301 32,854,432 34,359,388 Accumulated deficit (1,323,409) (1,192,234) Total members’ equity 31,531,023 33,167,154 Total liabilities and members’ equity $108,640,005 $110,584,176 See notes to consolidated financial statements 3Gemino Healthcare Finance, LLC and SubsidiaryConsolidated Statement of OperationsYears Ended December 31, 2018 and 2017 2018 2017 Interest Income Interest income on loans $8,850,076 $8,194,577 Interest expense (4,071,865) (3,503,254) Net interest income 4,778,211 4,691,323 (Provision) Credit for Loan Losses (21,553) 56,144 Net interest income after provision/credit for loan losses 4,756,658 4,747,467 Other Income 2,691,843 3,194,400 General and Administrative Expenses (3,819,359) (4,370,777) Net income $3,629,142 $3,571,090 See notes to consolidated financial statements 4Gemino Healthcare Finance, LLC and SubsidiaryConsolidated Statement of Changes in Members’ EquityYears Ended December 31, 2018 and 2017 Balance at December 31, 2016 $33,115,211 Additional capital contributions 440,902 Dividends declared (3,960,049) Net income 3,571,090 Balance at December 31, 2017 33,167,154 Return of capital contributions (1,504,956) Dividends declared (3,760,317) Net income 3,629,142 Balance at December 31, 2018 $31,531,023 See notes to consolidated financial statements 5Gemino Healthcare Finance, LLC and SubsidiaryConsolidated Statement of Cash FlowsYears Ended December 31, 2018 and 2017 2018 2017 Cash Flows from Operating Activities Net income $3,629,142 $3,571,090 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 19,647 15,854 Amortization of deferred origination fees and costs (434,647) (690,255) Amortization of deferred financing costs 299,844 299,844 Provision (credit) for loan losses 21,553 (56,144) Changes in assets and liabilities: (Increase) decrease in accrued interest receivable (296,181) 36,130 Decrease (increase) in other assets 28,142 (6,327) Increase in deferred origination fees and costs 300,416 732,000 (Decrease) increase in accounts payable and accrued expenses (245,051) 72,908 Net cash provided by operating activities 3,322,865 3,975,100 Cash Flows from Investing Activities (Increase) decrease in loans receivable, net (1,953,950) 5,578,272 Purchase of furniture and equipment (14,343) (36,120) Net cash (used in) provided by investing activities (1,968,293) 5,542,152 Cash Flows from Financing Activities Repayments of credit facility, net — (8,000,000) Dividends paid (3,823,306) (3,948,582) Return of contributed capital (1,504,956) — Proceeds from contributed capital — 398,902 Net cash used in financing activities (5,328,262) (11,549,680) Net decrease in cash and cash equivalents (3,973,690) (2,032,428) Cash and Cash Equivalents, Beginning 12,957,611 14,990,039 Cash and Cash Equivalents, Ending $8,983,921 $12,957,611 Supplemental Disclosure of Cash Flow Information Interest paid $3,696,216 $3,170,797 Supplemental Disclosure of Non-Cash Financing Activities Issuance of Units using long-term incentive plan accrual $— $42,000 See notes to consolidated financial statements 6Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 20171. Description of BusinessGemino Healthcare Finance, LLC (“Gemino”), a Delaware limited liability company formed in December 2006, is a commercial finance companythat originates, underwrites and manages primarily secured, asset-based loans for small and mid-sized companies operating across the U.S. in thehealthcare industry. Gemino’s loans are primarily in the form of revolving lines of credit, secured by accounts receivable of the borrowers. Theaccounts receivable serving as collateral are primarily third party obligations from government payers, such as Medicare or Medicaid, andcommercial insurers.In certain cases, Gemino may provide senior term loan financing to qualified borrowers in addition to a revolving line of credit. Senior term loansare typically secured by accounts receivable and all other assets of the borrowers and a pledge of the stock of the borrowers.Gemino Healthcare Funding, LLC (“Gemino Funding”) is a wholly-owned special purpose limited liability company that purchases and holdscertain eligible loans and related property from Gemino.On September 30, 2013, Solar Senior Capital Ltd. (“Solar”), a Maryland corporation, acquired a controlling interest in Gemino. The remaininginterest is held by various employees of Gemino, through their investment in Gemino Management Investment, LLC.2. Summary of Significant Accounting PoliciesPrinciples of ConsolidationThe consolidated financial statements include the accounts of Gemino and Gemino Funding (collectively, the “Company”). All significantintercompany balances have been eliminated in consolidation.Use of EstimatesThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States ofAmerica requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the consolidated financial statements and to report amounts of revenues andexpenses during the reporting period. Actual results could differ from these estimates. The allowance for loan loss represents an estimatethat is particularly susceptible to material change.Cash and Cash EquivalentsCash and cash equivalents include funds deposited with financial institutions and short-term, liquid investments in money marketaccounts with original maturities of three months or less.Loans ReceivableLoans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported attheir outstanding unpaid principal balances less the allowance for loan loss and any deferred fees or costs. 7Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 Commitment terms of the Company’s financing agreements generally range from two to five years with interest charged on a floating ratebasis. Funding under revolving loan commitments is subject to the Company’s estimation of the accounts receivable pledged as collateral.Revenue RecognitionIncome on loans receivable is recognized using the simple interest method. Revolving loan origination fees and costs are deferred andamortized on a straight-line basis over the terms of the related loan commitments as an adjustment to interest income on loans. Term loanorigination fees and costs are deferred and amortized using either the effective interest method or the straight-line method over the life ofthe loan as an adjustment to interest income. The straight-line method may be used for term loan facilities when it approximates theeffective interest method. Other fees, such as unused balance and collateral monitoring fees, are recognized when the services are provided.Termination fees are recognized when a loan is terminated. These other fees are included in other income.The accrual of interest on loans is discontinued at the time the loan is 90 days delinquent unless the loan is secured and/or in the process ofcollection. Typically, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considereddoubtful. When a loan is placed on non-accrual status, all interest previously accrued, but not collected, is reversed against current interestincome and all future proceeds received will generally be applied against principal or interest, in the judgment of management. Loans arereturned to accrual status when all principal and interest amounts contractually due are reasonably assured.In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue fromContracts with Customers (Topic 606) (ASU 2014-09), which outlines a single comprehensive model for entities to use in accounting forrevenue arising from contracts with customers. The core principle of the revenue model is for an entity to recognize revenue to depict thetransfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled inexchange for those goods and services. The new standard was effective for the Company on January 1, 2018. Adoption of ASU 2014-09 for2018 using the modified retrospective method did not have a material impact on the Company’s consolidated financial statements.While the guidance replaces most existing revenue recognition guidance in GAAP, ASU 2014-09 is not applicable to financial instrumentsand, therefore, does not impact most of the Company’s revenues, including interest income and other loan fees such unused balance andcollateral monitoring fees. The Company has evaluated the nature of its contracts with customers and generally fully satisfies itsperformance obligations on its contracts as services are rendered and the transaction prices are typically fixed; they are charged either on aperiodic basis or based on activity. The Company’s revenue recognition pattern for revenue streams within the scope of ASU 2014-09,including collateral examination fees and certain loan modification fees, did not change from prior practice and approximated $808,000for the year ended December 31, 2018. The Company has determined that further disclosure of disaggregation of revenue into morecategories was not necessary. 8Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 Impaired LoansA 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. Loans are evaluated for impairment by the Company based onan ongoing analysis of each borrower’s repayment capacity, the value of the collateral support and the strength of any guarantees. Loansidentified as impaired are further evaluated to determine the estimated extent of impairment.Allowance for Loan LossThe allowance for loan loss represents the Company’s recognition of the assumed risks of extending credit. The allowance is maintained ata level considered adequate to provide for probable losses inherent in the loan portfolio. Management establishes a general portfolioreserve for unimpaired loans based on various factors including historical loss experience, the overall credit quality of the loan portfolio,economic trends and conditions, and the regulatory environment.The overall credit quality of the Company’s borrowers is reflected in the individual and weighted average credit risk ratings of the loans inthe portfolio. Credit risk ratings for each borrower are established based on a number of qualitative and quantitative factors including anassessment of management and strategy, historical and projected repayment capacity, collateral coverage and performance, financialcondition and sponsorship, strength of guarantees and any contingencies.Specific allowances for loan losses on impaired loans are typically measured based on a comparison of the recorded carrying value of theloan to the present value of the loan’s expected cash flow using the loan’s effective interest rate, the loan’s estimated market price or theestimated fair value of the underlying collateral, if the loan is collateral-dependent combined with the strength of any guaranteearrangements. Specific allowances are recorded when the discounted cash flows, collateral value, or aggregate market price of the impairedloan is lower than the carrying value of that loan.Loans are charged off when collection is questionable and when the Company can no longer justify maintaining the loan as an asset on theconsolidated balance sheet. Loans qualify for charge off when, after thorough analysis, all possible sources of collection are determined tobe insufficient to repay the loan. These include impairment of potential future cash flow, value of collateral and/or financial strength ofguarantors. Recoveries of previous charge-offs are recorded when received.Goodwill and Intangible AssetGoodwill represents the excess of consideration paid for an acquired business over the fair value of the related assets acquired andliabilities assumed. Goodwill and intangible asset—trade name arose from the acquisition of the Company on September 30, 2013 (Note1). Intangible asset—trade name has an indefinite life. The Company is required to assess its goodwill and indefinite-lived intangible assetfor impairment annually, or more frequently if events or changes in circumstances indicate impairment may have occurred. 9Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 The Company assesses its indefinite-lived intangible asset – trade name for impairment by comparing the carrying value of the asset to itsfair value, and assesses goodwill for impairment by comparing the carrying value of the Company to its fair value. The fair value ofintangible asset—trade name is estimated using the relief from royalty method, which is an income approach based on the present value ofroyalties the Company would theoretically have to pay to license the trade name from a third party. The fair value of the Company isestimated using a weighted average amount of the present value of expected future cash flows and the adjusted market multiples ofcomparable companies. If the fair value is less than the carrying value, an impairment loss would be recorded. For the years endedDecember 31, 2018 and 2017, there were no impairments.Furniture and EquipmentFurniture and equipment are recorded at cost, net of accumulated depreciation, and are depreciated on a straight-line basis over theirestimated useful lives ranging from three to five years.Deferred Financing CostsDeferred financing costs represents capitalized expenses incurred with debt financing transactions. These costs are being amortized on astraight-line basis over the life of the related credit facility agreement as an adjustment to interest expense.Income TaxesThe Company is not subject to federal or state income taxes. Members of the Company have elected to report the taxable income or loss ontheir individual tax returns. Accordingly, no provision for income taxes has been recorded in the accompanying consolidated financialstatements.The Company applies authoritative guidance relating to the accounting for uncertain tax positions. Accordingly, a provision for uncertaintax positions and related penalties and interest is recognized when it is more-likely-than-not, based on the technical merits, that the taxposition will not be realized or sustained upon examination by the appropriate taxing authority. Management determined there were no taxuncertainties that met the recognition threshold in 2018 and 2017.The Company files both federal and state income tax returns. The Company remains subject to examination by taxing authorities for theyears 2015 and after.Recent Accounting PronouncementsIn June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) to replace the incurred loss model, whichis referred to as the current expected credit loss (“CECL”) model. The CECL model is applicable to the measurement of credit losses onfinancial assets measured at amortized cost, including loans receivable and held-to maturity debt securities. It also applies to off-balancesheet credit exposures including loan commitments, standby letters of credit, financial guarantees, and other similar instruments. For theassets within the scope of CECL, a cumulative-effect adjustment will be recognized in retained earnings as of the beginning of the firstreporting period in which the guidance is effective. This new standard will be effective for fiscal years beginning after December 15, 2019.The Company is currently evaluating the impact this new standard will have on its consolidated financial statements. 10Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), which simplifies how an entityis required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 is effective for theCompany’s annual and any interim goodwill impairment tests beginning in 2021, with early adoption permitted for annual or interim testsperformed on testing dates after January 1, 2017. The amendments included in this ASU are to be applied prospectively. The Companydoes not expect implementation of this new standard to have a material impact on its consolidated financial statements.3. Loans ReceivableThe following table shows the composition of loans receivable, net as of December 31, 2018 and 2017: 2018 2017 Revolving loans receivable $88,437,141 $88,217,980 Term loans receivable 2,434,456 699,667 Total loans receivable 90,871,597 88,917,647 Less allowance for loan losses (966,488) (944,935) Less deferred origination fees and costs, net (538,565) (672,796) Loans receivable, net $89,366,544 $87,299,916 4. Allowance for Loan Losses and Recorded Investment in Loans ReceivablesThe following table summarizes the activity in the allowance for loan losses by loan class for the respective years ended December 31, 2018 and2017: BeginningBalance Charge-Offs Recoveries Provisions(Credits) EndingBalance EndingBalance:IndividuallyEvaluated forImpairment EndingBalance:CollectivelyEvaluated forImpairment Allowance for Loan Losses—December 31, 2018 Revolving loans $937,938 $— $— $4,205 $942,143 $48,293 $893,850 Term loans 6,997 — — 17,348 24,345 18,534 5,811 Total $944,935 $— $— $21,553 $966,488 $66,827 $899,661 Allowance for Loan Losses—December 31, 2017 Revolving loans $924,671 $— $— $13,267 $937,938 $66,081 $871,857 Term loans 76,408 — — (69,411) 6,997 — 6,997 Total $1,001,079 $— $— $(56,144) $944,935 $66,081 $878,854 11Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 The following table presents loans receivable individually and collectively evaluated for impairment by loan class at December 31, 2018 and2017: Ending BalanceIndividuallyEvaluated forImpairment Ending BalanceCollectivelyEvaluated forImpairment Ending Balance Loans Receivables—December 31, 2018 Revolving loans $88,437,141 $48,293 $88,388,848 Term loans 2,434,456 1,853,354 581,102 Total $90,871,597 $1,901,647 $88,969,950 Loans Receivables—December 31, 2017 Revolving loans $88,217,980 $1,732,196 $86,485,784 Term loans 699,667 — 699,667 Total $88,917,647 $1,732,196 $87,185,451 The following table summarizes the non-accrual loans by loan class at December 31, 2018. RecordedInvestment UnpaidPrincipal RelatedAllowance Loans Receivables—December 31, 2018 Revolving loans $48,293 $48,293 $48,293 Term loans 1,853,354 1,853,354 18,534 Total $1,901,647 $1,901,647 $66,827 Credit Quality IndicatorsThe following table summarizes the loan portfolio by the Company’s internal credit rating (scale: 1 to 7) as of December 31, 2018 and2017: Loans with a rating of 4 or better generally pose minimal risk to the Company as they exhibit, among other things, one or more ofthe following attributes: (1) secured collateral position; (2) satisfactory cash flows; and (3) history of timely payment of debt obligations.Loans credit rated below 4 are considered “watchlist” loans; an overall degree of risk exists with these loans that warrants management’sreview each quarter. 12Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 December 31, 2018 RevolvingLoans Term Loans Rated 4 or better $87,808,090 $500,000 Rated 5 580,758 81,102 Rated 6 48,293 1,853,354 Total $88,437,141 $2,434,456 December 31, 2017 Rated 4 or better $85,984,629 $226,667 Rated 5 501,155 473,000 Rated 6 1,732,196 — Total $88,217,980 $699,667 5. Furniture and EquipmentFurniture and equipment are comprised of the following at December 31, 2018 and 2017: 2018 2017 Computer software and equipment $72,678 $60,159 Furniture and fixtures 41,032 40,384 Leasehold improvement 21,551 20,375 Total 135,261 120,918 Less accumulated depreciation (96,597) (76,950) Furniture and equipment, net $38,664 $43,968 Depreciation expense was $19,647 and $15,854 for the years ended December 31, 2018 and 2017, respectively.6. DebtOn May 27, 2016, the Company entered into a four-year, non-recourse $125,000,000 secured revolving credit facility, which is expandable to$200,000,000 under its accordion feature and has a maturity date of May 27, 2020. Under the terms of the credit facility, the Company has madecertain customary representations and warranties, and is required to comply with various covenants, including financial and reportingrequirements and other customary requirements for similar credit facilities. The credit facility also includes usual and customary events of defaultfor credit facilities of this nature. 13Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 Amounts available to borrow under the credit facility are also subject to compliance with a borrowing base that applies different advance rates todifferent types of assets in the Company’s portfolio that are pledged as collateral. As of December 31, 2018 and 2017, there were principalborrowings of $75,000,000 and $75,000,000 outstanding, respectively, under the credit facility. As of December 31, 2018 and 2017, there wereapproximately $107,792,000 and $103,915,000 of eligible loans and related security pledged as collateral under the credit facility, respectively.Interest on the credit facility accrues at a variable rate per annum of one-month LIBOR plus 2.60% (5.10% and 4.16% at December 31, 2018 and2017, respectively), payable monthly. The Company also pays customary loan fees for the credit facility.7. Commitments and ConcentrationsAt December 31, 2018 and 2017, the Company has committed facilities to its borrowers totaling approximately $174,083,000 and $176,332,000,respectively, of which approximately $83,211,000 and $87,414,000, respectively, was unused. Borrowers may borrow up to the lesser of (i) thecommitted facility or (ii) the underlying collateral value multiplied by the advance rate. Of the unused committed facility amount atDecember 31, 2018 and 2017, borrowers could borrow up to approximately $21,824,000 and $17,842,000, respectively.At December 31, 2018, the Company had three loans approximating 16%, 12% and 11% of the total loans receivable and at December 31, 2017,the Company had one loan approximating 15% of the total loans receivable, respectively.8. Lease CommitmentsThe Company leases its headquarters, regional sales offices and equipment under non-cancelable operating leases, which expire at various datesthrough 2020. As of December 31, 2018, future lease payments under non-cancelable operating leases, are as follows: Years ending December 31: 2019 $149,956 2020 14,080 Total $164,036 Total rent expense for all leases amounted to approximately $156,000 and $158,000 for the years ended December 31, 2018 and 2017,respectively.9. 401(k) Savings PlanThe Company has a savings incentive plan covering substantially all employees of the Company. The Company’s contribution for the yearsended December 31, 2018 and 2017 was approximately $136,000 and $152,000, respectively. 14Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 10. Long-Term Incentive PlanThe Company has a Long-Term Incentive Plan (“LTIP Plan”) that provides for an annual bonus pool to employees based on the Companyachieving certain performance criteria.11. Fair Value DisclosureFair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageousmarket for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputsthat may be used to measure fair values:Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of themeasurement date.Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices inmarkets that are not active; or other inputs that are observable or can be corroborated by observable market data.Level 3: Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants woulduse in pricing an asset or liability.The following information should not be interpreted as an estimate of the fair value of the entire Company, since a fair value calculation is onlyprovided for a limited portion of the Company’s assets and liabilities. Assets and liabilities measured at fair value on a recurring basis aresummarized in the table below at December 31, 2018 and 2017. 2018 Carrying Value Fair Value Financial assets: Cash and cash equivalents (Level 1) $8,983,921 $8,983,921 Loan receivables, net (Level 2) 87,552,267 88,070,289 Accrued interest receivable (Level 1) 996,146 996,146 Financial liabilities: Credit facility payable (Level 2) 75,000,000 75,000,000 Accrued interest payable (Level 1) 352,063 352,063 2017 Carrying Value Fair Value Financial assets: Cash and cash equivalents (Level 1) $12,957,611 $12,957,611 Loan receivables, net (Level 2) 87,299,916 87,972,712 Accrued interest receivable (Level 1) 699,965 699,965 Financial liabilities: Credit facility payable (Level 2) 75,000,000 75,000,000 Accrued interest payable (Level 1) 276,258 276,258 15Gemino Healthcare Finance, LLC and SubsidiaryNotes to Consolidated Financial StatementsDecember 31, 2018 and 2017 Assets measured at fair value on a non-recurring basis are summarized in the table below at December 31, 2018. There were no assets measured atfair value on a non-recurring basis at December 31, 2017. There were no liabilities measured at fair value on a non-recurring basis atDecember 31, 2018 and 2017. 2018 Carrying Value Fair Value Non-accrual loans (Level 3): Term loans $1,814,277 $1,390,015 12. Related Party TransactionAn employee of an affiliated entity provides marketing and sales services to the Company for which the Company reimburses the affiliatedentity. For the years ended December 31, 2018 and 2017, the Company has expensed approximately $128,000 and $-0-, respectively, for theseservices.13. Subsequent EventsThe Company evaluated subsequent events for recognition or disclosure through February 14, 2019, which was the date the consolidatedfinancial statements were available to be issued. 16Exhibit 99.2North Mill Capital LLCand Subsidiaries(Formerly NorthMill LLC)Consolidated Financial ReportDecember 31, 2018North Mill Capital LLC and Subsidiaries Independent auditor’s report 1-2 Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statements of Members’ Equity 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 RSM US LLPIndependent Auditor’s ReportAudit CommitteeNorth Mill Capital LLCReport on the Financial StatementsWe have audited the accompanying consolidated financial statements of North Mill Capital LLC and Subsidiaries (the Company), which comprise theconsolidated balance sheets as of December 31, 2018 and 2017 the related consolidated statements of operations, members’ equity and cash flows forthe year ended December 31, 2018, and for the period from October 20, 2017 to December 31, 2017, and the related notes to the consolidated financialstatements (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 audit 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.THE POWER OF BEING UNDERSTOODAUDIT | TAX | CONSULTING 1RSM 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.OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of North Mill Capital LLC andSubsidiaries as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the year ended December 31, 2018, and theperiod from October 20, 2017 to December 31, 2017, in accordance with accounting principles generally accepted in the United States of America. Blue Bell, PennsylvaniaFebruary 18, 2019 2North Mill Capital LLC and SubsidiariesConsolidated Balance SheetsDecember 31, 2018 and 2017 2018 2017 Assets Cash $5,606,256 $5,128,517 Finance receivables: Loans receivable 88,416,892 111,851,853 Less: unearned fee income 129,577 33,083 88,287,315 111,818,770 Accounts receivable 33,906,316 39,752,634 Less: allowance for uncollectible finance receivables 4,861,666 100,000 Finance receivables, net 117,331,965 151,471,404 Equity subscription receivable 11,000,000 — Foreclosed assets 2,233,464 — Goodwill 18,228,018 18,228,018 Accrued interest receivable 893,788 1,021,225 Other assets 176,454 420,879 Furniture and equipment, net 98,497 84,424 Total assets $155,568,442 $176,354,467 Liabilities and Members’ Equity Liabilities: Note payable, net of issuance costs $88,482,136 $116,046,137 Due to factoring clients 6,821,940 8,199,256 Accounts payable and accrued expenses 1,071,904 737,474 Total liabilities 96,375,980 124,982,867 Commitments (Note 8) Members’ equity 59,192,462 51,371,600 Total liabilities and members’ equity $155,568,442 $176,354,467 See notes to consolidated financial statements. 3North Mill Capital LLC and SubsidiariesConsolidated Statements of OperationsYear Ended December 31, 2018 and period from October 20, 2017 to December 31, 2017 Year EndedDecember 31, 2018 October 20, 2017to December 31, 2017 Interest and finance charges $17,239,572 $3,096,689 Less: interest expense 5,100,230 836,319 Net interest income 12,139,342 2,260,370 Service fees and other finance charges 4,549,739 580,786 16,689,081 2,841,156 Provision for uncollectible finance receivables 11,300,000 100,000 Net interest income after provision for uncollectible finance receivables 5,389,081 2,741,156 Expenses: Personnel 5,759,664 1,214,160 Acquisition expenses — 804,438 General and administrative 2,045,512 293,524 Legal and professional fees 337,918 57,434 8,143,094 2,369,556 Net (loss) income $(2,754,013) $371,600 See notes to consolidated financial statements. 4North Mill Capital LLC and SubsidiariesConsolidated Statements of Members’ EquityYear Ended December 31, 2018 and period from October 20, 2017 to December 31, 2017 Balance, October 20, 2017 $— Net income 371,600 Purchase of equity units in connection with acquisition 51,000,000 Balance, December 31, 2017 51,371,600 Net loss (2,754,013) Distribution to members (5,425,125) Purchase of equity units 16,000,000 Balance, December 31, 2018 $59,192,462 See notes to consolidated financial statements. 5North Mill Capital LLC and SubsidiariesConsolidated Statements of Cash FlowsYear Ended December 31, 2018 and period from October 20, 2017 to December 31, 2017 Year EndedDecember 31, 2018 October 20, 2017 toDecember 31, 2017 Cash flows from operating activities: Net (loss) income $(2,754,013) $371,600 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 53,189 56,347 Amortization of deferred financing costs 234,307 82,479 Provision for uncollectible finance receivables 11,300,000 100,000 Changes in assets and liabilities: (Increase) decrease in: Accrued interest receivable 127,437 (464,129) Other assets 244,425 (125,277) Increase (decrease) in: Unearned fee income 96,494 (49,396) Accounts payable and accrued expenses 334,430 (187,933) Due to factoring clients (1,377,316) 798,266 Net cash provided by operating activities 8,258,953 581,957 Cash flows from investing activities: Decrease (increase) in finance receivables, net 20,509,481 (22,191,947) Acquisition of business, net of cash acquired — (47,447,956) Purchases of furniture and equipment (67,262) (27,527) Net cash provided by (used in) investing activities 20,442,219 (69,667,430) Cash flows from financing activities: Net proceeds from (repayments of) note payable (27,682,683) 23,773,173 Purchase of equity units 5,000,000 51,000,000 Payment of debt issuance costs (115,625) (559,183) Distribution to members (5,425,125) — Net cash provided by (used in) financing activities (28,223,433) 74,213,990 Net increase in cash 477,739 5,128,517 Cash: Beginning 5,128,517 — Ending $5,606,256 $5,128,517 Supplemental disclosure of cash flow information: Cash paid for interest $4,831,587 $433,179 Transfer of loan to foreclosed asset $2,233,464 $— Equity subscription receivable $11,000,000 $— See notes to consolidated financial statements. 6North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements Note 1. Nature of the BusinessThe operations of North Mill Capital LLC and Subsidiaries (collectively, the Company) consist primarily of those financial activities common tothe commercial asset-based finance industry.NorthMill LLC (“NM”) was formed on September 25, 2017 in connection with the acquisition of North Mill Capital LLC (“NMC”) by SolarSenior Capital Ltd. (“Solar”). NM was merged with and into NMC on May 1, 2018 with NMC being the surviving limited liability company.NMC was formed as a single-member Delaware limited liability company on August 18, 2010 and commenced operations on October 29, 2010.On September 13, 2017, Colford Capital Holding LLC (“Colford”), NMC’s sole member, entered into an Equity Purchase Agreement with Solar,whereby Colford agreed to sell, and Solar agreed to purchase the outstanding equity securities of NMC. The acquisition, as described in Note 2,closed on October 20, 2017 (Acquisition Date). Coinciding with the acquisition, the Limited Liability Agreement of NMC was amended andrestated.NMC is a specialty finance company engaged in providing asset-based commercial financing to small and medium-sized businesses. TheCompany’s core business is providing and servicing loans ranging from $200,000 to $12,500,000 secured by accounts receivable, inventory, andequipment. Borrowers are located throughout the United States.PrinSource Capital Companies, LLC, a wholly owned subsidiary of NMC, and their wholly-owned subsidiary Partner Plus, LLC (collectively,“PrinSource”), were acquired by NMC on December 30, 2011. PrinSource provides financial services through the funding and financing ofworking capital assets, primarily accounts receivable and inventory.Note 2: AcquisitionSolar’s cash consideration to effect the acquisition, including acquisition related expenses and other general corporate purchases, totaled$51,000,000. Through Solar’s investment in NM, Solar gained 100% ownership of NMC and the proceeds from the acquisition were also used topay-off all of the Company’s outstanding subordinated notes to the prior owners. The acquisition was accounted for as a purchase transaction andthe assets acquired and liabilities assumed were recorded at their respective fair values as of the date of the acquisition. The excess of thepurchase price over the fair value of assets acquired and liabilities assumed has been recorded as goodwill on the accompanying consolidatedbalance sheet. Assets Acquired Cash $3,295,547 Loans receivable 129,412,540 Goodwill 18,228,018 Other assets 934,967 Fair value of assets acquired 151,871,072 Liabilities Assumed Other liabilities and accrued expenses 925,407 Note payable 92,801,172 Due to factoring clients 7,400,990 Fair value of liabilities assumed 101,127,569 Purchase price $50,743,503 7North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements Upon allocating the purchase price to the fair value of assets acquired and liabilities assumed, the book value of intangible assets, consisting ofgoodwill, increased by $18,228,018. The book value of assets acquired and liabilities assumed approximates fair value.Acquisition related costs of $804,438, including legal, profession and other expenses, were recorded in the period incurred and not included in thepurchase price.Note 3: Significant Accounting PoliciesSignificant accounting policies are as follows:Principles of consolidation: The financial statements include the accounts of NMC and its subsidiaries. All material intercompany accounts andtransactions have been eliminated in consolidation.Revenue recognition: Fees received for the origination of loans are deferred and amortized into interest income over the contractual lives of theloans and annual fees received for loans are deferred and amortized into interest income over a twelve-month period using the straight-linemethod, which approximates the effective interest rate method. Unamortized amounts are recognized as income at the time that loans are paid infull. Interest income on loans receivable is recognized using the interest method. Interest and fee income are accrued based on the outstandingloan balance and charged monthly to the loan balance as earned, except in instances that a reasonable doubt exists as to the collectability ofinterest, in which case the accrual of income may be suspended. Other fee income, which includes wire transfers, field examination charges, latereporting fees and other items charged to borrowers, is recognized as charged.Cash: The Company maintains its cash balances at several financial institutions which at various times during the year have exceeded thethreshold for insurance provided by the Federal Deposit Insurance Corporation.Loans and accounts receivable: The Company provides asset-based financing primarily in the form of revolving credit facilities collateralizedby the borrower’s assets, including, but not limited to, accounts receivable, inventory, equipment and general intangibles. The loan term isgenerally two years and management has the intention and ability to hold until maturity or payoff. Provisions for credit losses for loansreceivable are charged to operations in amounts sufficient to maintain the allowance for credit losses at an amount considered adequate to coverthe estimated losses of principal and accrued interest in the existing loan portfolio. The Company’s charge-off policy is based on a loan-by-loanreview for all receivables. Management periodically evaluates the adequacy of the allowance for credit losses by reviewing credit lossexperience, change in size and character of credit risks, the value of collateral and general economic conditions. Loans are charged off against theallowance when management determines the loan to be permanently impaired.Specific allowances for loan losses are generally applied to impaired loans and are typically measured based on a comparison of the recordedvalue of the loan to the present value of the loan’s expected future cash flows from the liquidation of the underlying collateral. 8North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements Accounts receivable are stated at cost, net of an allowance for credit losses. The allowance for credit losses is based on management’s assessmentof the collectability of specific customer accounts, the aging of the accounts receivable, historical experience and other currently availableevidence. If there is a deterioration of a major customer’s credit worthiness or actual defaults are higher than the historical experience,management’s estimates of the recoverability of amounts due to the Company could be adversely affected.When the Company determines there is insufficient collateral to support an outstanding loan or accounts receivable balance and believes it is nolonger probable that principal and/or interest payments will be collected, the Company will place the loan on non-accrual status. Suchnon-accrual loans may be restored to accrual status if past due principal and interest are paid in cash, and, in management’s judgment, are likelyto continue.Participation funding: The Company enters into participation funding and servicing arrangements with other lending institutions whereby theother institutions pay the Company a processing fee for servicing financing arrangements that the other institutions have entered into with theircustomers. Under these arrangements, the Company, as the participant, assumes the risk related to their percentage share of the arrangement. TheCompany pays the lending institutions a pro rata percentage of the fee income earned. The arrangements are presented in accounts receivable inthe accompanying consolidated balance sheet net of the amount due to the institution.The Company enters into participation funding arrangements with third-party lending institutions, whereby those institutions participate inloans originated by the Company. These arrangements are used by the Company to manage risk associated with loans and accounts receivablethat may potentially exceed funding limits. Transfers of financial assets are accounted for as sales, when control over the assets has beensurrendered. Control over transferred assets is deemed to be surrendered when: the assets have been isolated from the Company – putpresumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership; the transferee obtains the right (freeof conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets; and the Company does notmaintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterallycause the holder to return specific assets, other than through a cleanup call.Foreclosed Assets: Foreclosed assets consist primarily of accounts receivable and machinery and equipment held-for-sale and are carried at thelower of cost or fair value less cost to sell. Losses from property obtained in partial satisfaction of debt are treated as credit losses. Gains or lossesare recorded when assets are sold.Furniture and Equipment: Property and equipment acquired in acquisitions is recorded at fair value. Additions are recorded at cost and statednet of accumulated depreciation. Depreciation and amortization are provided using the straight-line method over the estimated lives of the assets,which is generally three to five years for equipment and ten years for furniture and fixtures.Debt issuance costs: Costs incurred in connection with the placement of the revolving credit facility have been capitalized and recorded as areduction to the note payable on the balance sheets. These costs are amortized as interest expense over the life of the facility using the effectiveinterest method or straight line method if it approximates the effective interest method. 9North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements Impairment of long-lived assets: The Company reviews long-lived assets, including furniture and equipment and intangible assets, forimpairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.An impairment loss would be recognized when undiscounted future cash flows expected to result from the use of the asset and its eventualdisposition is less than the carrying amount. No impairments have occurred to date.Goodwill: Goodwill represents the excess of consideration paid for an acquired business over the fair value of the related assets acquired andliabilities assumed. Goodwill arose from the acquisition of the Company on October 20, 2017 (Note 1). The Company is required to assess itsgoodwill for impairment annually, or more frequently if events or changes in circumstances indicate impairment may have occurred.The Company assesses goodwill for impairment by comparing the carrying value of the Company to its fair value. If the fair value is less than thecarrying value, an impairment loss would be recorded for the difference between the fair value and carrying value. For the year endedDecember 31, 2018 and period ended December 31, 2017, there was no impairment.Income taxes: No provision has been made for income taxes, if any, as these are the obligation of the members. The Company files income taxreturns as a partnership in the U.S. federal jurisdiction and in various state jurisdictions.The Company applies authoritative guidance relating to the accounting for uncertain tax positions. Accordingly, a provision for uncertain taxpositions and related penalties and interest is recognized when it is more likely-than-not, based on the technical merits, that the tax position willbe realized or sustained upon examination. The term more-likely-than-not means a likelihood or more than 50%. A tax position that meets themore-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than50% likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determinationof whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and informationavailable at the reporting date and is subject to management’s judgment.Interest rate risk: Inherent in the Company’s principal business activities is the potential for the Company to assume interest rate risks that resultfrom differences in the maturities and re-pricing characteristics of certain assets and liabilities.Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States ofAmerica (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during thereporting period. Actual results could differ materially from those estimates.Subsequent events: The Company has evaluated its subsequent events (events occurring after December 31, 2018) through February 18, 2019,which represents the date the financial statements were available to be issued, and determined that there were no material subsequent eventsrequiring adjustment to, or disclosure in the financial statements for the period ended December 31, 2018 except those events disclosed in Note9. 10North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements Recent Accounting Pronouncement: In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates(“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). ASU 2014-09 provides a single comprehensive revenuerecognition framework and supersedes existing revenue recognition guidance. Included in the new principles-based revenue recognition modelare changes to the basis for deciding on the timing for revenue recognition. In addition, the standard expands and improves revenue disclosures.In August 2015, FASB subsequently issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606); Deferral of the Effective Datewhich defers the effective date of ASU 2014-09. After the deferral, ASU 2014-09 is effective retroactively for annual or interim reporting periodsbeginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2015. The majority of theCompany’s revenue streams, including interest and fee income associated with the origination of loans, are outside the scope of the newguidance and will not be impacted with the implementation of the new standard. Overadvance fees, which are one-time fees received fromcustomers if financing is provided in excess of the borrower’s borrowing base amounts and audit exam fees are within the scope of ASU 2014-09.The Company recognizes income on these fees at the time the service is provided to the borrower, in accordance with the updated guidance. Assuch, adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements.In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on FinancialInstruments, which creates a new credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities.The ASU requires financial assets measured at amortized cost (including loans, trade receivables and held-to-maturity debt securities) to bepresented at the net amount expected to be collected, through an allowance for credit losses that are expected to occur over the remaining life ofthe asset, rather than incurred losses. The ASU requires that credit losses on available-for-sale debt securities be presented as an allowance ratherthan as a direct write-down. The measurement of credit losses for newly recognized financial assets (other than certain purchased assets) andsubsequent changes in the allowance for credit losses are recorded in the statements of operations as the amounts expected to be collectedchange. The ASU is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted for fiscal years beginning afterDecember 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this new guidanceon its consolidated financial statements.In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350), which simplifies how an entity isrequired to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. ASU 2017-04 is effective for annual or anyinterim goodwill impairment tests in fiscal year 2021, with early adoption permitted for annual or interim tests performed on testing dates afterJanuary 1, 2017. The amendments included in this ASU are to be applied prospectively. The Company does not expect implementation of thisnew standard to have a material impact on its consolidated financial statements.In 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 inTopic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including 11North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements 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 the consolidatedfinancial statements and disclosures.Note 4. Fair Value of Financial InstrumentsFASB ASC 820, Fair Value Measurements (“ASC 820”), establishes a hierarchy of valuation techniques based on whether the inputs to thosevaluation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, whileunobservable inputs reflect management’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 andinterest rate caps.Level 3 – Unobservable inputs.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 otherfactors. Changes in these assumptions could significantly affect the estimates.The Company estimates the carrying amounts of cash approximated its fair value as of December 31, 2018. Since there is no liquid secondarymarket for the Company’s financing receivables, the Company estimated the fair value of its secured loans by comparing the average yield of theportfolio to recent issuances of similar loans. The Company has determined that the secured loans and note payable are considered level threeunder the fair value hierarchy described above.The carrying amount and estimated fair values of the Company’s financial instruments at December 31, 2018 and 2017 were as follows: December 31, 2018 December 31, 2017 CarryingAmount Estimated FairValue CarryingAmount Estimated FairValue Financial assets: Cash $5,606,256 $5,606,256 $5,128,517 $5,128,517 Secured loans 118,584,659 118,584,659 151,604,487 151,604,487 Liabilities: Note Payable 88,482,136 88,482,136 116,046,137 116,046,137 12North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements Note 5. Loans and Accounts Receivable and Allowance for Credit LossesLoans receivable at December 31, 2018 and 2017 consist of revolving lines of credit to commercial customers that range from one to three yearsand are secured by accounts receivable, inventory and equipment.Changes in the allowance for credit losses for loans receivable and accounts receivable are as follows: Balance, October 20, 2017 $— Provision for uncollectible finance receivables 100,000 Balance, December 31, 2017 100,000 Provision for uncollectible finance receivables 11,300,000 Charge-offs (6,538,334) Balance, December 31, 2018 $4,861,666 All balances were individually evaluated for impairment.The Company has implemented and adheres to an internal review system and credit loss allowance methodology designed to provide for thedetection of problem receivables and an adequate allowance to cover credit losses. At least quarterly, a risk rating is assigned to individualbalances. Management assigns a higher risk rating when they determine that their credit exposure has increased. Management assigns these riskratings based on a number of factors including, but not limited to, the profitability, cash flow position, tangible net worth, strength of collateralperformance and coverage, the probability of a loss being realized and results of internal audits and verifications related to each specificreceivable.The Company typically classifies all loans as held to maturity. On the Acquisition Date, the acquired loans were recorded at their estimatedAcquisition Date fair values. The estimated fair values include consideration of discounted cash flows as well as various other factors includingthe type of loan and related collateral, estimated future cash flows, as well as a discount rate that reflects the Company’s assessment of riskinherent in the cash flow estimates. The fair value of the loans acquired effectively removed the Company’s allowance for loan losses for suchacquired loans. Loans funded subsequent to the Acquisition Date are recorded at the amount of unpaid principal, net of unearned fees, discountsand includes an allowance for loan losses.A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect thescheduled payments in accordance with the contractual terms of the loan. Factors considered in determining impairment include payment status,collateral value and the probability of collecting payments when due. The significance of payment delays and/or shortfalls is determined on acase-by-case basis. All circumstances surrounding the loan are taken into account. Such factors include the length of the delinquency, theunderlying reasons and the borrower’s prior payment record. Impairment is measured on these loans on a loan-by-loan basis. Impaired loansinclude non-accrual loans and other loans deemed to be impaired based on the aforementioned factors.NMC had a non-performing loan of $3,738,549 as of December 31, 2018 and did not have any loans or accounts receivable that arenon-performing, impaired, modified or past due as of December 31, 2017. The allowance for uncollectible finance receivables at December 31,2018 included a specific reserve of $3,500,000 related to the non-performing loan. The Company is not committed to advance additional fundson this loan. 13North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements Note 6. Furniture and EquipmentFurniture and equipment consists of the following at December 31, 2018 and 2017: 2018 2017 Furniture and fixtures $65,412 $65,412 Equipment 384,943 317,681 450,355 383,093 Accumulated depreciation 351,858 298,669 $98,497 $84,424 Depreciation expense was $53,189 for the year ended December 31, 2018 and $5,654 for the period from October 20, 2017 to December 31,2017.Note 7. Note PayableThe Company has entered into a $160,000,000 credit facility which expires October 20, 2020. Borrowings are secured by substantially all of theCompany’s assets. Interest on borrowings under the facility is payable monthly and is based on the LIBOR plus an applicable margin, as defined.The interest rate is 4.60 percent as of December 31, 2018. Outstanding borrowings under the credit facility are generally limited to 85 percent ofeligible receivables, less any reserves established by the bank, as defined. The Company is required to maintain specified financial ratios and tocomply with other covenants. The balance outstanding under this credit facility was $88,891,662 at December 31, 2018 and $116,574,345 atDecember 31, 2017. Note payable as of December 31, 2018 and 2017 consist of the following: 2018 2017 Outstanding principal balance $88,891,662 $116,574,345 Less: debt issuance costs, net of accumulated amortization of $285,000 and$50,693, respectively 409,526 528,208 $88,482,136 $116,046,137 Total interest expense related to note payable was $4,748,540 for the year ended December 31, 2018 and $785,626 for the period fromOctober 20, 2017 to December 31, 2017.Note 8. CommitmentsEmployment agreements: The Company has entered into service agreements with certain members of management. Annual base compensationdue under these agreements is included in personnel expenses in the consolidated statements of operations. The annual base compensation issubject to review and adjustment by the Company. The employees are also eligible to receive bonus compensation at the discretion of the Boardof Managers. The agreements can be terminated by either the Company or the employees at any time upon written notice. Certain additionalamounts may be paid to the employees, contingent upon the circumstances surrounding the termination, as defined in the service agreements. 14North Capital Mill LLC and SubsidiariesNotes to Consolidated Financial Statements Operating lease: The Company rents its office space under non-cancelable operating leases that expire through September 2024. Base rents dueunder the leases escalate throughout the term of the leases.The total minimum rental commitment at December 31, 2018, is due as follows:Years ending December 31: 2019 248,805 2020 284,188 2021 223,785 2022 94,696 2023 96,885 2024 99,075 TOTAL $1,047,434 Note 9. Equity TransactionsOn December 21, 2018, NMC’s members committed to increase its investment in NMC by $11 million. This commitment has been recorded as anequity subscription in the equity section of the December 31, 2018 consolidated balance sheet with a corresponding receivable recorded as anasset. NMC received the equity subscription on January 22, 2019.Note 10. Related Party TransactionsAn employee of NMC provides marketing and sales services to an affiliated entity for which NMC was reimbursed $113,200 for these services in2018 and has been recorded as a reduction of personnel expenses. 15

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