Exhibit 10.8
EXECUTION COPY
PLEDGE AGREEMENT
          PLEDGE AGREEMENT dated as of November 16, 2009 (this “Agreement”), by
and between FIFTH STREET FINANCE CORP., a Delaware corporation (the “Pledgor”)
and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as collateral agent
(in such capacity, the “Collateral Agent”), on behalf of the Secured Parties.
          WHEREAS, Fifth Street Funding, LLC, a Delaware limited liability
company, as borrower (the “Borrower”), Fifth Street Finance Corp., as servicer
(in such capacity, the “Servicer”) and transferor, Wells Fargo Securities, LLC,
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 time party thereto,
Wells Fargo as the Collateral Agent, as the Account Bank and as the Collateral
Custodian, are parties to that certain Loan and Servicing Agreement dated as of
November 16, 2009 (as the same may be amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms hereof, the
“Loan and Servicing Agreement”). Capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed thereto in the Loan and
Servicing Agreement.
          WHEREAS, the Lenders have agreed to make Advances and certain other
financial accommodations to the Borrower pursuant to, and subject to the terms
and conditions of, the Loan and Servicing Agreement. The obligation of the
Lenders to make Advances and certain other financial accommodations under the
Loan and Servicing Agreement is conditioned on the execution and delivery by the
Pledgor of this Agreement securing the full and punctual payment and performance
of (a) the principal of and interest on the Advances, when and as due, whether
at maturity, by acceleration, or otherwise (including, without limitation, all
interest thereon, whether accruing prior or subsequent to the commencement of a
bankruptcy or similar proceeding involving the Pledgor as a debtor and whether
or not such interest is an allowed claim in any such proceeding) and (b) all
other Obligations of the Borrower (the foregoing collectively being herein
referred to as the “Secured Obligations”).
          WHEREAS, the Pledgor is the owner of all of the membership interests
of the Borrower and will receive substantial benefits from the Advances and
other financial accommodations made available to the Borrower under the Loan and
Servicing Agreement.
          NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
     1. Pledge and Collateral Assignment. As collateral security for the prompt
and complete payment, performance and observance of all present and future
Secured Obligations, the Pledgor hereby pledges and collaterally assigns to the
Collateral Agent for the benefit of the Secured Parties, and grants to the
Collateral Agent for the benefit of the Secured Parties, a lien on and security
interest in the collateral of the Pledgor described in Section 2 hereof
(collectively, the “Pledged Collateral”).

 

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     2. Description of Pledged Collateral. (a) The Pledged Collateral is
described as follows and on any separate schedules at any time furnished by the
Pledgor to the Collateral Agent (which schedules are hereby deemed part of this
Agreement):
     (i) all right, title and interest of the Pledgor, whether now existing or
hereafter acquired, in (a) the membership interests of the Borrower (the
“Membership Interests”) as set forth on Schedule I and (b) the Limited Liability
Company Agreement of the Borrower (as the same may be amended, supplemented,
restated or otherwise modified from time to time in accordance with the terms
hereof, the “LLC Agreement”) under which the Membership Interests exist;
     (ii) all right, title and interest of the Pledgor in and to all present and
future payments, proceeds, dividends, distributions, instruments, compensation,
property, assets, interests and rights in connection with or related to the
Membership Interests or the LLC Agreement and all monies due or to become due
and payable to the Pledgor in connection with or related to any of the foregoing
or otherwise paid, issued or distributed from time to time in respect of or in
exchange therefor, and any certificate, instrument or other document evidencing
or representing the same (including, without limitation, all proceeds of
dissolution or liquidation); and
     (iii) all proceeds (as defined in the UCC as in effect from time to time in
the State of New York (the “NY UCC”)) of every kind and nature, including
proceeds of proceeds, of any and all of the foregoing (including, without
limitation, proceeds which constitute property of the type described above and
to the extent not otherwise included, all cash proceeds thereof).
     (b) The Pledgor and the Borrower each acknowledge that, in conjunction with
the exercise of its remedies following the occurrence of an Event of Default,
the Collateral Agent (acting at the direction of the Administrative Agent) may
exercise all rights granted to the Pledgor under the LLC Agreement without the
consent of the Pledgor subject to and in accordance with the terms of Sections 7
and 9 hereof.
     3. Delivery of Certificates, Instruments, Etc.; Pledgor Remains Liable.
     (a) The Pledgor shall deliver to the Collateral Agent:
     (i) any and all original certificates, instruments and other documents at
any time evidencing or representing the Pledged Collateral to the extent
available; and
     (ii) any and all original certificates, instruments or other documents at
any time evidencing or representing the Pledged Collateral not delivered on the
date hereof within two Business Days after the Pledgor’s receipt thereof. Each
delivery of Pledged Collateral shall be accompanied by a schedule showing a
description of the collateral theretofor and then being pledged hereunder, which
schedule shall be attached hereto as Schedule I and made a part hereof. Each
schedule so delivered shall supersede any prior schedules so delivered.

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     (b) The Pledgor represents and warrants that none of the Membership
Interests constitute a “security” within the meaning of the NY UCC and covenants
that it will not suffer or permit any Membership Interest to constitute a
“security” within the meaning of the NY UCC.
     (c) Notwithstanding the foregoing, if any of the Pledged Collateral at any
time constitutes a “certificated security” or “instrument” (in each case as
defined in the NY UCC), such item shall be in bearer form or, if in registered
form, shall be issued in the name of the Collateral Agent or endorsed to the
Collateral Agent or accompanied by undated blank interest powers, note powers,
endorsements or other necessary instruments of transfer, registration or
assignment, duly executed in blank and in form and substance satisfactory to the
Collateral Agent.
     (d) Notwithstanding the foregoing, if any of the Pledged Collateral at any
time constitutes “uncertificated securities” within the meaning of the NY UCC,
the Pledgor will promptly notify the Collateral Agent, the Borrower and the
Servicer thereof and the Pledgor will promptly take and cause to be taken, and
will cause the issuer to take, all actions required under Articles 8 and 9 of
the NY UCC and any other applicable law, to enable the Collateral Agent to
acquire “control” (within the meaning of such term under Section 8-106 (or its
successor provision) of the NY UCC) of such uncertificated securities and as may
be otherwise necessary or deemed appropriate by the Administrative Agent to
perfect the security interest of the Collateral Agent therein.
     (e) Anything herein to the contrary notwithstanding, (i) the Pledgor shall
remain liable under the contracts and agreements included in the Pledged
Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Collateral Agent of any of the rights
hereunder shall not release the Pledgor from any of its duties or obligations
under the contracts and agreements included in the Pledged Collateral, except to
the extent that such duties and obligations may have been terminated by reason
of a sale, transfer or other disposition of such Pledged Collateral as provided
in Section 13 hereof and (iii) the Collateral Agent shall not have any
obligation or liability under the contracts and agreements included in the
Pledged Collateral by reason of this Agreement, nor shall the Collateral Agent
be obligated to perform any of the obligations or duties of the Pledgor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
     4. Additional Collateral. Subject to Sections 7 and 8 hereof, in case any
distribution payable in additional Pledged Collateral shall be declared with
respect to any of the Pledged Collateral, or any fractions thereof shall be
issued pursuant to any transaction involving any of the Pledged Collateral, or
any interests or obligations shall be distributed upon or with respect to any of
the Pledged Collateral, in each case pursuant to a recapitalization or
reclassification of the Membership Interests, or pursuant to the dissolution,
liquidation (in whole or in part), bankruptcy or reorganization of the Borrower,
or to the merger or consolidation of such entity with or into another entity,
the interests or obligations so distributed shall be delivered to the Collateral
Agent promptly, and in any event within three Business Days after receipt
thereof, to be held by the Collateral Agent as additional collateral hereunder
subject to the terms of this Agreement, and all of the same shall constitute
Pledged Collateral for all purposes hereof.

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     5. Representations, Warranties and Covenants of the Pledgor. The Pledgor
hereby represents, warrants and covenants that:
     (a) Pledged Collateral. Set forth on Schedule I hereto is a list and
description of all of the Pledged Collateral complete and accurate as of the
date hereof and as of each date such Schedule I is supplemental or otherwise
updated pursuant to the terms hereof, and the Pledgor is the sole holder of
record and the sole beneficial owner of such Pledged Collateral free and clear
of any Lien thereon, except Permitted Liens.
     (b) Chief Executive Office; Records; Etc. As of the date hereof, the
address of the chief executive office and principal place of business of the
Pledgor, and the location of the books and records relating to the Pledged
Collateral, are set forth below its signature hereto, and the Pledgor will not
change said address or location, other than in accordance with the provisions of
the Transaction Documents, or change its name or its jurisdiction of
incorporation, formation or organization, as applicable, unless it has provided
the Collateral Agent with such Opinions of Counsel and other documents and
instruments as the Collateral Agent or the Administrative Agent may request in
connection therewith.
     (c) Sale or Other Disposition of Pledged Collateral. Except as otherwise
expressly permitted under Section 8 hereof, the Pledgor will not assign (by
operation of law or otherwise), sell, lease, transfer, pledge or grant a
security interest in or otherwise dispose of or abandon, nor will it suffer or
permit any of the same to occur with respect to any Pledged Collateral. The
inclusion of “proceeds” of the Pledged Collateral under the security interest
granted herein shall not be deemed a consent by the Collateral Agent to any sale
or other disposition of any Pledged Collateral.
     (d) Percentage of Outstanding Equity. The Membership Interests constitute,
and until the indefeasible payment and performance in full of the Secured
Obligations (other than Obligations that survive the termination of the Loan and
Servicing Agreement) will continue to constitute, 100% of the membership
interests of the Borrower.
     (e) No Options or Similar Rights. None of the Membership Interests or other
Pledged Collateral is subject to any options to purchase or similar rights of
any Person.
     (f) Required Consents. Except as may be required in connection with any
disposition of any portion of the Pledged Collateral by laws affecting the
offering and sale of securities generally, no consent of any Person and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing (other than the filing of financing statements under
the UCC in order to perfect a security interest in that portion of the Pledged
Collateral constituting general intangibles) or declaration with any
governmental instrumentality is required in connection with (i) the execution,
delivery or performance by, or enforceability against, the Pledgor of this
Agreement, (ii) the perfection or maintenance of the security interest created
hereby (including the first priority nature of such security interest) or
(iii) the exercise by the Collateral Agent of the voting or other rights
provided for in this Agreement.

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     (g) Nature of Security Interest. Upon the delivery of control agreements to
the Collateral Agent, with respect to any Pledged Collateral that constitutes
deposit accounts, electronic chattel paper, investment property or
letter-of-credit rights, the Collateral Agent on behalf of the Secured Parties
shall have control as defined in Sections 9-104, 9-105, 9-106, or 9-107 of the
UCC. With respect to all Pledged Collateral not covered by the preceding
sentence, upon the filing of appropriate financing statements in the office of
the Secretary of State of the State of Delaware by the Pledgor, the Collateral
Agent shall have a valid and perfected first priority, security interest in such
Pledged Collateral in favor of the Collateral Agent, on behalf of the Secured
Parties, securing the prompt and complete payment, performance and observance of
the Secured Obligations.
     (h) No Modification of Certain Agreements; Certain Notices. The Pledgor
will not, without the prior written consent of the Administrative Agent (a copy
of such consent shall be provided to the Collateral Agent), (i) modify, amend or
alter in any respect the terms and conditions of any agreement included in the
Pledged Collateral (including, without limitation, the LLC Agreement) nor
forgive any indebtedness evidenced by any Pledged Collateral, or (ii) execute
any document or instrument or, without limitation of Section 7 hereof, take any
other action of any kind which may, in the reasonable judgment of the
Administrative Agent, result in impairing the value of the Pledged Collateral.
     (i) Further Assurances. The Pledgor will, at its sole cost and expense,
perform all acts and execute all documents requested by the Administrative Agent
from time to time to evidence, perfect, maintain or enforce the Collateral
Agent’s first priority security interest granted herein or otherwise in
furtherance of the provisions of this Agreement. The Pledgor authorizes the
Collateral Agent (acting at the direction of the Administrative Agent) to
execute any documents in the Pledgor’s name as necessary to evidence, perfect,
maintain or enforce the Collateral Agent’s first priority security interest
granted herein or otherwise in furtherance of the provisions of this Agreement.
The Pledgor, to the extent not properly filed by the Pledgor, authorizes the
Collateral Agent (acting at the direction of the Administrative Agent) to file
such financing statements in any appropriate filing office to evidence, perfect,
maintain or enforce the Collateral Agent’s first priority security interest
granted herein or otherwise in furtherance of the provisions of this Agreement.
Nothing herein shall be construed to imply an obligation or duty on the
Collateral Agent to monitor or maintain the perfection or priority of such
security interest.
     6. Agreement of the Borrower. The Borrower hereby agrees to be bound by the
terms of this Agreement relating to the Pledged Collateral issued by it and will
comply with such terms insofar as such terms are applicable to it. The Borrower
hereby consents (to the extent required by the LLC Agreement) to the pledge by
the Pledgor pursuant to the terms of this Agreement of the Membership Interests
and, subject in each case to compliance with the terms of this Agreement, to any
transfer of Membership Interests pursuant to the terms of this Agreement and in
conjunction with the exercise of its remedies following the occurrence of an
Event of Default, to the substitution of the Collateral Agent or its nominee as
a substituted member of the Borrower with all the rights, powers and duties of a
member of the Borrower.

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     7. Voting Rights Prior to Default. Except as otherwise provided in
Section 9 hereof, the Pledgor shall be entitled to exercise in a manner
consistent with the terms of this Agreement, the voting, consent and similar
rights with respect to the Membership Interests, and for that purpose the
Collateral Agent shall (if any Membership Interests shall be registered in the
name of the Collateral Agent or its nominee) execute or cause to be executed
from time to time, at the expense of the Pledgor, such proxies or other
instruments in favor of the Pledgor or its nominee, in such form and for such
purposes as shall be reasonably required by the Pledgor and shall be specified
in a written request therefor, to enable it to exercise such voting power with
respect to such Membership Interests; provided, that no vote shall be cast,
consent given, rights exercised or other action taken by the Pledgor that, in
the Administrative Agent’s judgment, would reasonably be expected to have an
adverse effect on any of the Membership Interests or result in a breach of this
Agreement or the Transaction Documents.
     8. Distributions. So long as no Event of Default has occurred, subject to
Section 5.02(n) of the Loan and Servicing Agreement, the Pledgor shall be
entitled to receive, retain for its own account and transfer any and all
payments, proceeds, dividends, distributions, monies, compensation, property,
assets, instruments or rights paid, issued or distributed from time to time in
respect of the Pledged Collateral free and clear of the liens pursuant to this
Agreement. All payments, proceeds, dividends, distributions, monies, property,
assets, instruments or rights which are received by the Pledgor in violation of
the preceding sentence shall be forthwith paid over to the Collateral Agent, on
behalf of the Secured Parties in the same form as so received (with any
necessary endorsement) and the Pledgor shall provide written notification to the
Administrative Agent of such violation and payment.
     9. Voting Rights After an Event of Default. Upon the occurrence of an Event
of Default and notice by the Collateral Agent (acting as directed by the
Administrative Agent) to the Pledgor (which notice shall not be required in the
event of an Event of Default due to a Bankruptcy Event of the Pledgor) all
rights of the Pledgor to exercise or refrain from exercising the voting,
managerial and other consensual rights which it would otherwise be entitled to
exercise pursuant to Section 7 hereof shall cease, and thereupon the Collateral
Agent (acting as directed by the Administrative Agent) shall be entitled to
exercise all voting power and other rights, powers and privileges with respect
to the Membership Interests.
     10. Application of Cash Received. Any cash received by the Collateral Agent
pursuant to the provisions of this Agreement shall be applied to the payment of
the Secured Obligations as provided in Section 14 hereof. Nothing contained
herein shall be construed as requiring the Collateral Agent to take any action
in connection with the sale or other disposition of any Pledged Collateral at
any time.
     11. Expenses. The Pledgor will, upon demand, pay the Collateral Agent and
the Administrative Agent, as applicable, for any and all reasonable
out-of-pocket costs, sums, and expenses which the Collateral Agent or the
Administrative Agent, as applicable, may pay or incur pursuant to the provisions
of this Agreement or in enforcing the Secured Obligations or the security
interest granted hereunder, including, but not limited to, all filing or
recording fees, court costs, collection charges, travel expenses, computer fees,
telephone fees, duplicating fees and reasonable attorneys’ fees and expenses.
Such expenses shall include, without limitation, any such costs paid or incurred
by the Collateral Agent or the Administrative Agent, as

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applicable, in connection with any waivers, amendments, modifications,
extensions, renewals or renegotiations.
     12. Events of Default. Each of the following events shall constitute an
“Event of Default” under this Agreement:
     (a) the Pledgor fails to make any payment when due hereunder and such
failure continues unremedied for two Business Days; or
     (b) the Pledgor fails to make any payment when due in one or more
agreements for borrowed money (other than as specified in clause (a) of this
Section 12) in an aggregate principal amount in excess of $1,000,000 and such
failure continues unremedied for two Business Days and such default is not cured
within the applicable cure period, if any, provided for under such agreement; or
     (c) the Pledgor fails to observe or perform in any material respect any
covenants or agreements set forth in this Agreement, and, if such failure is
susceptible to cure and is not a failure with respect to a covenant or agreement
to which an express cure period is already applicable, such failure continues
unremedied for a period of 30 days after the Pledgor has actual knowledge
thereof or receives written notice of such failure from the Administrative
Agent, the Collateral Agent (at the direction of the Administrative Agent) or
any other Person;
     (d) any representation, warranty or certification made by the Pledgor in
this Agreement shall prove to have been incorrect when made in any material
respect and, to the extent susceptible to cure, continues unremedied for a
period of 30 days after the Pledgor has knowledge thereof or receives written
notice of such failure from the Administrative Agent, the Collateral Agent (at
the direction of the Administrative Agent) or any other Person; or
     (e) the occurrence of any Bankruptcy Event in respect of the Pledgor or the
Borrower; or
     (f) either (i) any provision of this Agreement or any security interest
created hereunder shall terminate in whole or in part or cease to be effective
or the legally valid, binding and enforceable obligation of the Pledgor, or
(ii) the Pledgor or the Borrower contests such effectiveness; or
     (g) the Collateral Agent, on behalf of the Secured Parties, ceases to have
a valid, perfected first priority security interest in all of the Pledged
Collateral except as otherwise permitted to be released in accordance with this
Agreement; or
     (h) an “Event of Default” (past any applicable notice or cure period
provided in the definition thereof) under and as defined in the Loan and
Servicing Agreement shall have occurred.

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     13. Remedies.
     (a) Following the occurrence of an Event of Default or, in any case, the
declaration of the Facility Maturity Date, the Collateral Agent (acting as
directed by the Administrative Agent) or the Administrative Agent may exercise
in respect of any of the Pledged Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the NY UCC at that time (whether or
not applicable to the affected Pledged Collateral) and may also, without
obligation to resort to other security, at any time and from time to time sell,
resell, assign and deliver, in its sole discretion, all or any of the Pledged
Collateral, in one or more parcels at the same or different times, and all
right, title and interest, claim and demand therein and right of redemption
thereof, on any securities exchange on which any Pledged Collateral may be
listed, or at public or private sale, for cash, upon credit or for future
delivery, and in connection therewith the Collateral Agent (acting as directed
by the Administrative Agent) or the Administrative Agent may grant options. To
the fullest extent permitted by applicable law, the Pledgor hereby waives and
releases any and all equity and right of redemption with respect to the Pledged
Collateral.
     (b) If any of the Pledged Collateral is sold by the Collateral Agent
(acting at the direction of the Administrative Agent) or the Administrative
Agent upon credit or for future delivery, the Collateral Agent and the
Administrative Agent, as applicable, shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such failure,
the Collateral Agent (acting at the direction of the Administrative Agent) or
the Administrative Agent may resell such Pledged Collateral. In no event shall
the Pledgor be credited with any part of the proceeds of sale of any Pledged
Collateral until cash payment thereof has actually been received by the
Collateral Agent.
     (c) The Collateral Agent (acting at the direction of the Administrative
Agent) or the Administrative Agent may purchase any Pledged Collateral at any
public sale and, if any Pledged Collateral is of a type customarily sold in a
recognized market or is of the type which is the subject of widely distributed
standard price quotations, the Collateral Agent (acting at the direction of the
Administrative Agent) or the Administrative Agent may purchase such Pledged
Collateral at a private sale, free from any right of redemption, which is hereby
waived and released to the extent permitted by applicable law, and in each case
may make payment therefor by any means, including, without limitation, by
release or discharge of Secured Obligations in lieu of cash payment.
     (d) No demand, advertisement or notice, all of which are hereby expressly
waived, shall be required in connection with any sale or other disposition of
any part of the Pledged Collateral which threatens to decline rapidly in value
or which is of a type customarily sold on a recognized market; otherwise the
Collateral Agent (acting at the direction of the Administrative Agent) or the
Administrative Agent shall give the Pledgor at least 10 days’ prior notice of
the time and place of any public sale and of the time after which any private
sale or other disposition is to be made, which notice the Pledgor agrees is
reasonable, all other demands, advertisements and notices being hereby waived.

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     (e) The Collateral Agent (acting at the direction of the Administrative
Agent) and the Administrative Agent shall not be obligated to make any sale of
Pledged Collateral if either party shall determine not to do so, regardless of
the fact that notice of sale may have been given. The Collateral Agent (acting
at the direction of the Administrative Agent) or the Administrative Agent may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned.
     (f) The remedies provided herein in favor of the Collateral Agent and the
Administrative Agent shall not be deemed to be exclusive, but shall be
cumulative, and shall be in addition to all other remedies in favor of the
Collateral Agent and the Administrative Agent existing at law or in equity.
     14. Application of Proceeds of Sale. After the occurrence of an Event of
Default, all proceeds of any sale of Pledged Collateral, as well as all Pledged
Collateral consisting of cash, shall be applied by the Collateral Agent as
follows:
          FIRST, to the Collateral Agent, on behalf of the Secured Parties, for
the payment of all unpaid reasonable costs and expenses incurred by the
Administrative Agent or the Collateral Agent in connection with such collection
or sale or otherwise in connection with this Agreement or with respect to any of
the Secured Obligations, including, but not limited to, all court costs and the
reasonable fees and expenses of its agents and legal counsel and any other
reasonable costs or expenses incurred in connection with the exercise of any
right or remedy hereunder or with respect to any of the Secured Obligations;
          SECOND, to the Collateral Agent, on behalf of the Secured Parties, for
the payment in full of all remaining Secured Obligations, which shall be
distributed pursuant to Section 2.04(d) of the Loan and Servicing Agreement
(provided that such amounts shall not be duplicative of the amounts previously
paid to the Collateral Agent and the Administrative Agent in accordance with the
preceding clause of this Section 14); and
          THIRD, to the Pledgor, its successors and assigns, or as a court of
competent jurisdiction may otherwise direct.
     15. Collateral Agent Appointed Attorney-in-Fact.
     (a) To effectuate the terms and provisions hereof, the Pledgor hereby
appoints (effective upon the occurrence of any Event of Default) the Collateral
Agent as its attorney-in-fact for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any instrument which the
Collateral Agent may deem necessary or advisable to accomplish the purposes
hereof. Without limiting the generality of the foregoing, the Collateral Agent
shall, following the occurrence of an Event of Default, have the right and power
to:
     (i) receive, endorse and collect all checks and other orders for the
payment of money made payable to the Pledgor representing any interest or other
distribution or amount payable in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same; and

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     (ii) execute endorsements, assignments or other instruments of conveyance
or transfer with respect to all or any of the Pledged Collateral and to exercise
all rights and privileges of (or on behalf of) the owner of any Pledged
Collateral, including, without limitation, all voting rights with respect to the
Membership Interests.
     (b) All acts done under the foregoing authorization are hereby ratified and
approved by the Pledgor, and neither the Collateral Agent nor any designee or
agent thereof shall be liable for any acts of commission or omission, for any
error of judgment or for any mistake of fact or law, absent willful misconduct
or gross negligence as determined in a final judgment by a court of competent
jurisdiction.
     (c) This power of attorney, being coupled with an interest, is irrevocable
until the indefeasible payment and performance in full of the Secured
Obligations (other than Obligations that survive the termination of the Loan and
Servicing Agreement).
     16. Collateral Agent’s Duties.
     (a) Except for treatment of the Pledged Collateral in its possession and
the accounting for moneys actually received by it hereunder, in each case
pursuant to the terms hereof, the Collateral Agent and the Administrative Agent,
as applicable, shall have no duty as to any Pledged Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to the Pledged Collateral. The Collateral Agent and the
Administrative Agent, as applicable, shall not be liable to the Pledgor (i) for
any loss or damage sustained by the Pledgor, or (ii) for any loss, damage,
depreciation or other diminution in the value of any of the Pledged Collateral
that may occur as a result of or in connection with or that is in any way
related to any exercise by the Collateral Agent (acting at the direction of the
Administrative Agent) or the Administrative Agent of any right or remedy under
this Agreement, any failure to demand, collect or realize upon any of the
Pledged Collateral or any delay in doing so, or any other act or failure to act
on the part of the Collateral Agent (acting at the direction of the
Administrative Agent) or the Administrative Agent, except to the extent that the
same is caused by its own gross negligence or willful misconduct (as determined
in a final judgment by a court of competent jurisdiction).
     (b) The Pledgor hereby releases the Collateral Agent (in its capacity as
Collateral Agent hereunder) and the Administrative Agent from any claims, causes
of action and demands at any time arising out of or with respect to this
Agreement, the Pledged Collateral and/or any actions taken or omitted to be
taken by the Collateral Agent (acting at the direction of the Administrative
Agent) or the Administrative Agent with respect thereto (except such claims,
causes of action and demands arising from the gross negligence or willful
misconduct of the Collateral Agent or the Administrative Agent as determined in
a final judgment by a court of competent jurisdiction) and the Pledgor hereby
agrees to hold the Collateral Agent and the Administrative Agent harmless from
and with respect to any and all such claims, causes of action and demands
(except such claims, causes of action and demands arising from the gross
negligence or willful misconduct of the Collateral Agent or the Administrative
Agent, as applicable, as determined in a final judgment by a court of competent
jurisdiction).

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     17. Rights and Remedies Not Waived. The Collateral Agent’s prior recourse
to any Pledged Collateral shall not constitute a condition of any demand, suit
or proceeding for payment or collection of the Secured Obligations. No act,
omission or delay by the Collateral Agent shall constitute a waiver of its
rights and remedies hereunder or otherwise. No single or partial waiver by the
Collateral Agent of any default hereunder or right or remedy which it may have
shall operate as a waiver of any other default, right or remedy or of the same
default, right or remedy on a future occasion.
     18. Collateral Agent May Perform. If the Pledgor fails to perform any
agreement contained herein, the Collateral Agent (acting at the direction of the
Administrative Agent) may itself perform, or cause performance of, such
agreement, and the expenses of the Collateral Agent incurred in connection
therewith shall be payable by the Pledgor pursuant to the terms of Section 11
hereof.
     19. Consent to Jurisdiction; Service of Process; Setoff.
     (a) Each party hereto hereby irrevocably submits to the non-exclusive
jurisdiction of any New York State or Federal court sitting in New York City in
any action or proceeding arising out of or relating to this Agreement, and each
party hereto hereby irrevocably agrees that all claims 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 such Federal court. The parties hereto hereby
irrevocably waive, to the fullest extent they may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding. The
parties hereto agree that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Each of the parties hereto
agrees that service of process may be effected by mailing a copy thereof by
registered or certified mail, postage prepaid, to the Pledgor or the Collateral
Agent, as applicable, at its address specified in Section 21 or at such other
address as the Collateral Agent shall have been notified in accordance herewith.
Nothing in this Section 19 shall affect the right of the Pledgor or the
Collateral Agent to serve legal process in any other manner permitted by law.
     (b) Notwithstanding any contrary provision set forth herein, no claim may
be made by the Pledgor or any other Person against the Collateral Agent or the
Administrative Agent 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 other
theory of liability arising out of or related to the transactions contemplated
by this Agreement, or any act, omission or event occurring in connection
therewith; and the Pledgor hereby waives, releases, and agrees not to sue upon
any claim for any such damages, whether or not accrued and whether or not known
or suspected.
     (c) The Pledgor agrees that this Paragraph 19 is a specific and material
aspect of this Agreement and acknowledges that the Collateral Agent and the
Administrative Agent would not enter into the Loan and Servicing Agreement if
this Paragraph 19 was not part of this Agreement.

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     20. Admissibility of Agreement. The Pledgor agrees that any copy of this
Agreement signed by the Pledgor and transmitted by telecopier or by electronic
mail in portable document format (.pdf) for delivery to the Collateral Agent
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the original is in existence.
     21. Address for Notices. All notices and other communications hereunder,
unless otherwise stated herein, shall be in writing (which shall include
facsimile communication and communication by e-mail in portable document format
(.pdf)) and faxed, e-mailed or delivered, to each party hereto, at its address
set forth under its name on the signature pages hereto or at such other address
as shall be designated by such party in a written notice to the other parties
hereto. Notices and communications by facsimile and e-mail shall be effective
when sent (and shall be followed by hard copy sent by regular mail), and notices
and communications sent by other means shall be effective when received.
     22. Terms. All terms defined in the NY UCC and used herein shall have the
meanings as defined in the NY UCC, unless otherwise defined herein or in the
Loan and Servicing Agreement or the context otherwise requires.
     23. Amendments and Waivers. No provision hereof shall be modified, altered,
waived or limited except by written instrument expressly referring to this
Agreement and to such provision, and executed by the party to be charged.
     24. Continuing Security Interest; Assignments. This Agreement shall create
a continuing security interest in the Pledged Collateral and shall (a) remain in
full force and effect until the indefeasible payment and performance in full of
the Secured Obligations (other than Obligations that survive the termination of
the Loan and Servicing Agreement), (b) be binding upon and inure to the benefit
of, and be enforceable by, the Pledgor and its successors and assigns and (c) be
binding upon and inure to the benefit of, and be enforceable by, the Collateral
Agent and its successors, transferees and assigns. Upon the occurrence of an
event described in clause (a) of the preceding sentence, the security interest
granted hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor. Upon any such termination, the Collateral Agent will, at
Pledgor’s expense, execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination and will assign,
transfer and deliver to the Pledgor, without recourse and without representation
or warranty, such of the Pledged Collateral as may then be in possession of the
Collateral Agent.
     25. Counterparts. This Agreement may be executed by the parties hereto
individually or in any combination, in one or more counterparts; which
counterparts may be in the form of facsimile or electronic imaging, each of
which shall be an original and all of which shall together constitute one and
the same agreement.
     26. Captions; Separability. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.

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     27. Security Interest Absolute. All rights of the Collateral Agent and
security interests hereunder, and all of the obligations of the Pledgor
hereunder, shall be absolute and unconditional, irrespective of:
     (i) any lack of validity or enforceability of any Secured Obligation or any
agreement or instrument relating thereto;
     (ii) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations, or any other amendment or waiver
of or any consent to any departure from any agreement or instrument relating
thereto;
     (iii) any exchange, release or non-perfection of any other collateral, or
any release or amendment or waiver of or consent to departure from any guaranty,
relating to any of the Secured Obligations; or
     (iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Pledgor or a third party grantor of a
security interest, lien or other encumbrance.
     28. GOVERNING LAW; JURY WAIVER. THIS AGREEMENT SHALL, IN ACCORDANCE WITH
SECTION 5-1401 OF THE 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 A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREUNDER.
     29. Schedules. The Collateral Agent is authorized to annex hereto any
schedules referred to herein.
     30. Severability. The illegality or unenforceability of any provision of
this Agreement, any Secured Obligation, any agreement or instrument relating
thereto or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement, the Secured Obligations, any agreement or instrument relating
thereto or any instrument or agreement required hereunder.
     31. Acknowledgment of Receipt. The Pledgor acknowledges receipt of a copy
of this Agreement.
     32. Tax Characterization. The Pledgor shall cause the Borrower not to elect
to be treated as a corporation for U.S. federal income tax purposes and to take
all reasonable steps necessary to avoid being treated as a corporation for U.S.
federal income tax purposes. The Pledgor shall, and shall cause the Borrower to,
treat the Advances advanced under the Loan and Servicing Agreement as
indebtedness of the Borrower (or, so long as the Borrower is 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. federal income tax
purposes and to file or cause to be filed any and all tax forms in a manner
consistent therewith.

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     33. Confidentiality. Each party hereto agrees to maintain, and to cause
each of its Affiliates to maintain, the confidentiality of the terms and
conditions of the Transaction Documents and the transactions contemplated hereby
and thereby and the identity of the parties thereto and any other Persons
otherwise participating in such transactions, except as may be requested or
required by law, rule, regulation, regulatory authority or self-regulatory
authority or pursuant to other legal process or to officers, directors,
employees, agents and advisors of such party, or to legal counsel to such party
and any of their Affiliates and except as otherwise permitted under
Section 11.13 of the Loan and Servicing Agreement.
[Remainder of page intentionally left blank]

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          IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

            FIFTH STREET FINANCE CORP., as Pledgor
      By:           Name:           Title:        

Address:
Fifth Street Finance Corp.
10 Bank Street, 12th Floor
White Plains, NY 10606
Attention: Bernard D. Berman
Facsimile: (914) 328-4214
Phone: (914) 286-6800
Fifth Street Funding, LLC
Pledge Agreement

 

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            WELLS FARGO BANK, NATIONAL ASSOCIATION, as Collateral Agent
      By:           Name:           Title:        

Address:
Wells Fargo Bank, National Association
9062 Old Annapolis Rd.
Columbia, Maryland 21045
Attn: CDO Trust Services—Fifth Street Funding, LLC
Facsimile: (281) 667-3933
Phone: (410) 884-2000
Fifth Street Funding, LLC
Pledge Agreement

 

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          Agreed and accepted as of the date first written above:

FIFTH STREET FUNDING, LLC, as Borrower
    By:         Name:         Title:        

Fifth Street Funding, LLC
10 Bank Street, 12th Floor
White Plains, NY 10606
Attention: Bernard D. Berman
Facsimile: (914) 328-4214
Phone: (914) 286-6800
Fifth Street Funding, LLC
Pledge Agreement

 

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          Agreed and accepted as of the date first written above:

WELLS FARGO SECURITIES, LLC,
as Administrative Agent
    By:         Name:         Title:        

Address:
Wells Fargo Securities, LLC
One Wachovia Center, Mail Code: NC0600
Charlotte, North Carolina 28289
Attention: Kevin Sunday
Facsimile No: (704) 715-0067
Confirmation No.: (704) 374-6230
Fifth Street Funding, LLC
Pledge Agreement

 

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SCHEDULE I
to Pledge Agreement
Pledged Collateral
PLEDGOR: FIFTH STREET FINANCE CORP.
Description of Membership Interests

              Membership Interest Issuer   Type of Interests   Percentage of
Outstanding Interests
FIFTH STREET FUNDING, LLC
  Membership     100 %