Document:

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                                                                     Exhibit 4.1

                            STOCK PURCHASE AGREEMENT

         This Stock Purchase Agreement (this "Agreement"), is made effective as
of March 14, 2000, between Venture Lending & Leasing III, Inc., a Maryland
corporation ("Seller"), and Venture Lending & Leasing III, LLC, a Delaware
limited liability company ("Buyer").

                                    RECITALS

         Seller was incorporated effective January 28, 2000 and, thus far,
Seller has issued no shares of its capital stock. Now, Seller wishes to issue
and sell to Buyer, and Buyer wishes to purchase from Seller, 100,000 shares of
Seller's common stock (the "Shares"), all on the terms and conditions herein set
forth, and all with the result that, after consummation of the transaction
contemplated hereunder, Buyer will be the sole shareholder of Seller. Buyer
intends to hold the Shares as its primary, but not necessarily its only, asset.
Buyer also intends to offer and sell (the "Offering") ownership interests in
Buyer ("Membership Interests") to investors ("Members"), who shall be both
"qualified purchasers" within the meaning of Section 2(a)(51)(A) of the
Investment Company Act of 1940, as amended, and "accredited investors" within
the meaning of the Securities Act of 1933, as amended (the "Act"), in an
offering exempt from the registration requirements of the Act pursuant to
Regulation D promulgated thereunder.

         NOW, THEREFORE, the parties hereto hereby agree as follows:

         1.       Purchase and Sale. Seller hereby sells to Buyer, and Buyer
hereby purchases from Seller, the Shares.

         2.       Purchase Price and Certificates. The purchase price for the
Shares is $25,000 (the "Purchase Price"), or $0.25 per Share. Seller hereby
acknowledges its receipt of the full Purchase Price in the form of a transfer of
funds, made contemporaneously herewith, to the account designated, and pursuant
to the instructions provided, by Seller. Buyer hereby acknowledges receipt of a
certificate for the Shares.

         3.       Capital Contributions. From time to time, Seller may request
that Buyer make contributions to Seller's capital ("Capital Contributions") to
pay expenses ("Expenses") or fund investments which Seller proposes to make
("Proposed Investments"). In connection with any requested Capital Contribution,
Seller shall furnish Buyer (a) in the case of an Expense, with invoices or other
documentation relating to such Expense or (b) in the case of a Proposed
Investment, with such materials as are reasonably sufficient to allow Buyer to
evaluate the Proposed Investment (in either case, the "Materials"). Buyer shall
then, in a reasonably timely manner, review the Materials and may, in its sole
and absolute discretion, but in no case shall be required to, make the Capital
Contribution requested by Seller. Notwithstanding the foregoing, the parties
hereby agree and acknowledge that in no event shall Capital Contributions
exceed, in the aggregate, the Members' aggregate amount of subscription
obligations for the purchase of Membership Interests in Buyer.

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         4.       Buyer's Representations and Warranties. Buyer represents and
warrants to, and covenants with, Seller as follows:

                  4.1      Investment Purposes. Except in connection with the
Offering, (a) the Shares are being acquired for investment for Buyer's own
account, not as a nominee or agent, and not with a view to the sale or
distribution of any part thereof, (b) Buyer has no intention of selling,
granting any participation in, or otherwise distributing the Shares, and (c)
Buyer does not have any contract, undertaking, agreement or arrangement to sell,
transfer or grant participations to any person with respect to any of the
Shares.

                  4.2      Lack of Registration. Buyer understands and
acknowledges that the Shares have not been registered under either the Act or
under the applicable securities laws of any state ("State Acts") by reason of
specific exemptions therefrom. Buyer must bear the economic risk of its
investment for an indefinite period of time since the sale of the Shares has not
been registered under the Act or State Acts and the Shares cannot be transferred
by Buyer unless such transfer is registered under the Act and qualified under
the State Acts or exemptions from such registration or qualification as may be
available. Seller has made no agreement, covenant or undertaking whatsoever to
register or qualify the transfer by Buyer of any of the Shares under the Act or
State Acts or qualify for an exemption therefor. Buyer acknowledges that there
is no market for the Shares and none will develop.

                  4.3      Buyer's Covenants. Buyer shall not dispose of any of
the Shares unless and until (a) Buyer shall have notified Seller of the proposed
disposition and shall have furnished Seller with a statement of the
circumstances surrounding the proposed disposition and (b) Buyer shall have
furnished Seller with an opinion of counsel satisfactory in form and substance
to Seller and Seller's counsel to the effect that such disposition will not
require registration under the Act or qualification under the State Acts and
that appropriate action necessary for compliance with the Act and the State Acts
and any other applicable local or foreign law has been taken. Buyer recognizes
and acknowledges that the certificate for the Shares, if any, shall contain the
following legend:

         THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
         SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. THEY MAY BE
         OFFERED AND SOLD ONLY IF REGISTERED OR QUALIFIED PURSUANT TO THE
         RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF AN
         EXEMPTION FROM SUCH REGISTRATION OR QUALIFICATION IS AVAILABLE.

                  4.4      Access to Information. Buyer has had the opportunity
to ask questions of, and to receive answers from, Seller with respect to the
terms and conditions of the transaction contemplated hereunder and with respect
to the Seller's proposed investments, business affairs and operations. Buyer has
had access to such financial and other information as is necessary in order for
it to make a fully-informed decision as to an investment in Seller by way of
purchase of the Shares, and has had the opportunity to obtain any additional
information necessary to verify any of such information to which he has had
access.

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         5.       Representations and Warranties of Seller. Seller represents
and warrants to, and covenants with, Buyer as follows:

                  5.1      Organization and Authority; Articles and Bylaws.
Seller is a corporation duly organized, validly existing and in good standing
under the laws of Maryland and has the corporate power and authority to own and
operate the properties and to carry on the business as it does now and as it
proposes to do in the future. Seller has furnished Buyer with copies of its
articles of incorporation and its bylaws and such copies are true, correct and
complete and contain all amendments through the date hereof.

                  5.2      Capitalization. Immediately prior to consummation of
the transaction contemplated hereunder, the authorized capital stock of Seller
consisted of 10,000,000 shares of common stock, $001 par value, none of which
had been issued and none of which were outstanding, such that, immediately after
consummation of the transaction contemplated hereunder, Buyer shall be the sole
shareholder of Seller. There are no outstanding warrants, options or conversion
privileges, or other rights or agreements to purchase or otherwise acquire or
issue any shares of common stock of Seller.

6.       Miscellaneous Provisions.

         6.1      Survival of Representations and Warranties. The
representations and warranties herein made shall survive consummation of the
transaction contemplated hereunder.

         6.2      Entire Agreement; Modification; Waiver. This Agreement
constitutes the entire agreement between the parties pertaining to the subject
matter contained herein and supersedes all prior and contemporaneous agreements,
representations, and understandings of the parties. Each party hereto represents
that, in entering into this Agreement, such party has relied solely upon the
express provisions of this Agreement and has not relied upon any other party's
inducements, promises, representations or obligations to make any disclosures.
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by both parties. No waiver of any of the provisions
of this Agreement shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
making the waiver.

         6.3      Assignment. This Agreement shall be binding on and, subject to
the provisions of Section 4, hereof, shall inure to the benefit of the parties'
respective successors and assigns, each of whom, subject to the provisions of
Section 4 hereof and the requirement that the written consent of the other party
be first obtained, which consent may be withheld for any reason whatsoever or no
reason at all, shall have the right to assign and otherwise transfer all or any
portion of this Agreement or the benefits thereof.

         6.4      Effect of Headings. The subject headings of the sections and
subsections of this Agreement are included for convenience only and shall not
affect the construction or interpretation of any of its provisions.

         6.5      Counterparts. This Agreement may be executed in one or more
counterparts and by facsimile with the same effect as if the parties had all
signed the same

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document in ink. All counterparts shall be construed together and shall
constitute one agreement.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed effective as of the date first above written.

"SELLER"

VENTURE LENDING & LEASING III, INC.,
a Maryland corporation

                                        Dated
------------------------------                --------------------------------
By:      Salvador O. Gutierrez
Its:     President

"BUYER"

VENTURE LENDING & LEASING III, LLC,
a Delaware limited liability company

By:      VLLI Capital, LLC,
         a Delaware limited liability company
Its:     Manager

         By:      Westech Investment Advisors, Inc.,
                  a California corporation
         Its:     Managing Member

                                                    Dated
                  --------------------------             -----------------------
                  By:      Ronald W. Swenson
                  Its:     Chief Executive Officer

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                                                                    Exhibit 10.1

                                     Form of
                               CUSTODIAN AGREEMENT

         THIS AGREEMENT, made as of this __________ day of _______________,
2000, between Venture Lending & Leasing III, Inc., a corporation organized under
the laws of Maryland with its principal place of business at 2010 North First
Street, Suite 310, San Jose, California 95131 (hereinafter called the "Fund"),
and ______________________ with its principal place of business at
_______________________________ (hereinafter called the "Custodian").

         WHEREAS, the Fund desires that certain securities, cash and other
property shall be hereafter held and administered by the Custodian as the Fund's
agent pursuant to the terms of this Agreement; and

         WHEREAS, the Custodian, directly and through its sub-custodian network,
provides services in the ordinary course of its business which will meet the
Fund's needs as provided for hereinafter.

         NOW, THEREFORE, in consideration of the mutual promises herein made,
the Fund and the Custodian agree as follows:

Section 1. Definitions.

         "Account" shall mean one or more separate accounts maintained by the
Custodian and/or its sub-custodians and other agents in the name of the Fund and
in which the Custodian holds the Assets pursuant to this Agreement.

         "Assets" shall mean any security (as defined in Section 2 (1) of the
Securities Act of 1933, as amended, and also shall include any "foreign
security" as that term is defined in Rule 17f-5 under the Investment Company Act
of 1940, as amended), any "contract of sale" of a "commodity" for "future
delivery" (as such terms are defined in the Commodity Exchange Act), any United
States or foreign currency and any other property.

         "Officers' Certificate" shall mean a request or directions in writing
or confirmation of an oral request or directions in writing signed in the name
of the Fund by, unless otherwise specifically indicated in any certified list
provided to the Custodian under Section 3, any two officers of the Fund, other
two persons, or combination thereof, in each case specifically authorized to
sign on behalf of the Fund by the Board of Directors of the Fund (each such
officer or other person, hereinafter referred to as an "Authorized Person").

Section 2. Custodian as Agent.

         The Custodian is authorized to act under the terms of this Agreement as
the Fund's agent and shall be representing the Fund whenever acting within the
scope of the Agreement. Subject to the provisions of Section 6, the Custodian is
authorized further to appoint sub-custodians and

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other agents from time to time to carry out some or all of the duties which the
Custodian is authorized to perform hereunder.

Section 3. Names, Titles and Signature of Fund's Officers.

         The President or Vice President of the Fund will certify to the
Custodian a list containing the names, titles, and signatures of those persons
authorized to sign Officers' Certificates ("Authorized Persons"). Said President
or Vice President, or his or her successor, will provide the Custodian promptly
with any changes which may occur from time to time.

         The Custodian is authorized to rely and act upon Officers' Certificates
of any persons (if less than two, so indicated) who are Authorized Persons.
Different persons may be "Authorized Persons" for different purposes. The Fund
will provide the Custodian with a list of authenticated specimen signatures of
Authorized Persons, will indicate on such list for what purposes each Authorized
Person is authorized, and will promptly incorporate any changes to such list for
what purposes each Authorized Person is authorized, and will promptly
incorporate any changes to such list as may occur from time to time. Should the
Fund fail to inform the Custodian that an Authorized Person has ceased to be an
Authorized Person, the Custodian shall be entitled to rely upon the signature of
that person (or, where expressly permitted by the terms hereof, the oral
instructions of that person) as if such person were still an Authorized Person,
until notified to the contrary by the Fund.

         The Custodian is further authorized to rely upon any instructions
received by any other means and identified as having been authorized or given by
any of such persons; provided, that, (a) the Custodian and the Fund shall have
previously agreed in writing upon the means of transmission and the method of
identification for such instructions; (b) the Custodian has not been notified by
the Fund to cease to recognize such means and methods, and (c) such means and
methods have in fact been used.

         If the Fund should choose to have dial-up or other means of direct
access to the Custodian's accounting system for assets in the Account, the
Custodian is also authorized to rely and act upon any instructions received by
the Custodian through any computer terminal device, regardless of whether such
instructions shall in fact have been given or authorized by the Fund, provided
that such instructions are accompanied by passwords which have been mutually
agreed to in writing by the Custodian and the Fund and the Custodian has not
been notified by the Fund to cease recognizing such passwords.

         Where dial-up or other direct means of access to the Custodian's
accounting system for Assets is utilized, the Fund agrees to indemnify the
Custodian and hold it harmless from and against any and all liabilities, losses,
damages, costs, reasonable counsel fees, and other reasonable expenses of every
nature suffered or incurred by the Custodian by reason of or in connection with
the willful misfeasance of the Fund in connection with the use by the Fund or
its employees of any terminal device with access to the Custodian's accounting
system for custodial accounts.

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Section 4. Receipt and Disbursement of Money.

         A.       The Custodian shall open and maintain the Account, subject to
debit only by a draft or order by the Custodian acting pursuant to the terms of
this Agreement. The Custodian shall hold in the Account, subject to the
provisions hereof, all cash received by it from or for the account of the Fund.

                  1.       The Custodian shall make payment of cash to the
Account or shall debit the Account only (a) for the purchase of Assets for the
Fund upon the delivery of such Assets to the Custodian, registered in the name
of the Fund or of the nominee of the Custodian referred to in Section 8 below;
(b) for payments in connection with the conversion, exchange or surrender of
Assets owned or subscribed to by the Fund held by or to be delivered to the
Custodian; (c) for payments in connection with the return of the cash collateral
received in connection with Assets loaned by the Fund; (d) for payments of
interest, dividends, taxes and in connection with rights offerings; or (e) for
other proper Fund purposes. All securities and other Assets accepted in
connection with the purchase of such Assets, if (a) usual in the course of local
market practice or (b) specifically required in instructions from the Fund,
shall be accompanied by payment of, or a "due bill" for, any dividends, interest
or other distributions of the issue due the purchaser.

                  2.       Except as hereinafter provided, the Custodian shall
make any payment for which it receives direction from an Authorized Person so
long as such direction (i) is (x) in writing (or is a facsimile transmission of
a written direction), (y) electronically transmitted to the Custodian as
provided in Section 3 or (z) when written or electronic directions cannot
reasonably be given within the relevant time period, orally when the person
giving such direction assures the Custodian that the directions will be
confirmed in writing by an Authorized Persons within twenty-four (24) hours and
(ii) states that such payment is for a purpose permitted under the terms of this
subsection A. Contemporaneously with the execution of this Agreement, the Fund
is furnishing to the Custodian a list of approved bank accounts to which funds
may be wired pursuant to this subsection A if the Officers' Certificates do not
contain such information. The Custodian shall not make any disbursements nor
wire any funds to any account not shown on such list unless the Custodian shall
first have received an Officers' Certificate specifically amending such list to
include such account. The Custodian shall not make any payment pursuant to
paragraph 1(e) of this subsection A unless the Custodian shall first have
received an Officers' Certificate specifying the amount of such payment, setting
forth the purpose for which such payment is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or persons to whom such
payment is to be made. Receipt of an Officer's Certificate or written notice
from an Authorized Person shall be deemed to establish that payment of cash
pursuant to such direction is for a valid corporate purpose.

                  3.       All funds received by the Custodian in connection
with the sale, transfer, exchange or loan of Assets will be credited to the
Account in immediately available funds as soon as reasonably possible on the
date such received funds are immediately available. Payments for purchase of
Assets for the Account made in immediately available funds will be charged
against the Account on the day of delivery of such Assets and all other payments
will be charged on the business day after the day of delivery.

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         B.       The Custodian is hereby authorized and required to (a) collect
on a timely basis all income and other payments with respect to Assets held
hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and to credit such income to the Account, (b)
detach and present for payment all coupons and other income items requiring
presentation as and when they become due, (c) collect interest when due on
Assets held hereunder, and (d) endorse and collect all checks, drafts or other
orders for the payment of money received by the Custodian for the account of the
Fund.

         C.       If the Custodian agrees to advance cash or securities of the
Custodian for delivery on behalf of the Fund to a third party, any property
received by the Custodian on behalf of the Fund in respect of such delivery
shall serve as security for the Fund's obligation to repay such advance until
such time as such advance is repaid, and, in the case where such advance is
extended for the purchase of Assets which constitute "margin stock" under
Regulation U of the Board of Governors of the Federal Reserve System, such
additional Assets of the Fund, as shall be necessary for the Custodian, in the
Custodian's reasonable determination, to be in compliance with such Regulation U
also shall constitute security for the Fund's obligation to repay such advance.
The Fund hereby grants the Custodian a security interest in such property of the
Fund to secure such advance and agrees to repay such advance promptly without
demand from the Custodian (and in any event, as soon as reasonably practicable
following any demand by the Custodian), unless otherwise agreed by both parties.
Should the Fund fail to repay such advance as required, the Custodian shall be
entitled immediately to apply such security to the extent necessary to obtain
repayment of the advance, subject, in the case of Fund failure to make prompt
repayment without demand, to prior notice to the Fund.

Section  5. Receipt of Other Assets.

         The Custodian shall hold in the Account, segregated at all times from
those of any other persons, firms or corporations, pursuant to the provisions
hereof, all Assets received by it from or for the account of the Fund. All such
Assets are to be held or disposed of by the Custodian for, and subject at all
times to the instructions of, the Fund pursuant to the terms of this Agreement.
The Custodian shall have no power or authority to assign, hypothecate, pledge or
otherwise dispose of any of the Assets, except pursuant to the directive of the
Fund and only for the account of the Fund as set forth in Section 7 of this
Agreement.

         The Custodian and its agents (including foreign sub-custodians) may
make arrangements with Depository Trust Fund ("DTC") and other foreign or
domestic depositories or clearing agencies, including the Federal Reserve Bank
and any foreign depository or clearing agency, whereby certain Assets may be
deposited for the purpose of allowing transactions to be made by bookkeeping
entry without physical delivery of such Assets, subject to such restrictions as
may be agreed upon by the Custodian and the Fund. No foreign depository or
clearing agency may be used by the Custodian for such purposes without the
approval of the Fund evidenced by an Officers' Certificate unless such foreign
depository or clearing agency is an "eligible foreign custodian" (within the
meaning of Rule 17f-5 under the Investment Company Act of 1940) or by
appropriate regulatory proceedings has received permission from the Securities
and Exchange Commission to be treated as an "eligible foreign custodian" for
purposes of such Rule. The Custodian shall immediately commence procedures to
replace Assets lost due to robbery,

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burglary or theft while such securities are within its control or that of its
agents or employees upon discovery of such loss.

Section 6. Foreign Sub-custodians and Other Agents.

         A.       It is understood and agreed that the Custodian will hold the
Fund's Assets through sub-custodians located in the foreign jurisdictions
described in Exhibit A and such additional foreign jurisdictions as may be
agreed to in writing by the Custodian and the Fund. The foreign sub-custodians
set forth in Exhibit A shall be the initial sub-custodians for the corresponding
foreign jurisdictions. The Custodian may replace the foreign sub-custodian for
any foreign jurisdiction, shall select the new sub-custodian(s) for each new
foreign jurisdiction added to Exhibit A and may appoint (and at any time remove)
any other entity as its agent to carry out the provision of this Agreement;
provided, however, that any such sub-custodian or other agent shall be approved
by an Officer's Certificate, such approval not to be unreasonably withheld; and
provided further that in no event shall the Custodian appoint any such
sub-custodian unless such sub-custodian is an "eligible foreign custodian"
(within the meaning of Rule 17f-5 under the Investment Company Act of 1940) or
by appropriate regulatory proceedings has received permission from the
Securities and Exchange Commission to be treated as an "eligible foreign
custodian" for purposes of such Rule or the Fund otherwise agrees in writing. No
approval by the Fund of any sub-custodian or other agent of the Custodian shall
exempt the Custodian from using reasonable care and diligence in selecting such
sub-custodian or other agent or relieve the Custodian of its responsibilities or
liabilities hereunder.

         The Custodian agrees further that in placing Assets with any such
foreign sub-custodian, it will enter into a written sub-custodian agreement
which shall provide that: (i) the Custodian will be adequately indemnified and
the Assets so placed adequately insured in the event of loss, as provided in
part B of this Section; (ii) the Assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the foreign
sub-custodian or its creditors (except any claim for payment for the services
provided by such sub-custodian and any related expenses; provided, however that
the Custodian shall use its best efforts promptly to release any such right,
charge, security interest, lien or claim on the assets, except to the extent
such right, charge, security interest, lien or claim arises with respect to a
special request or requirement by the Fund for services the cost of which and
the expenses incurred in connection with which the Fund has not paid or has
declined to pay, it being agreed and understood that, in the ordinary course,
all payments for usual and routine services rendered and expenses incurred by a
sub-custodian shall be the obligation of the Custodian); (iii) beneficial
ownership of the Assets will be freely transferable without payment of money or
value other than for safe custody or administration; (iv) adequate records will
be maintained identifying the Assets as belonging to the Fund; (v) the
Custodian's independent public accountants will be given access to those records
or the confirmation of the contents of those records; and (vi) the Custodian
will receive periodic reports with respect to the safekeeping of the Assets,
including, but not necessarily limited to, notification of any transfer to or
from the Account.

         B.       In addition to the indemnities included in Section 13 hereof,
the Custodian agrees to indemnify and hold harmless the Fund from any and all
loss or damage incurred or suffered by the Fund as a result of placement by the
Custodian of Assets with a foreign sub-custodian

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hereunder, to the extent the Custodian receives indemnification from such
foreign sub-custodian pursuant to part A(i) of this Section 6.

         C.       With respect to any Assets to be placed with foreign
sub-custodians pursuant to this section, the Custodian represents and warrants
that during the term of this Agreement it will carry Bankers Blanket Bond or
similar insurance for losses incurred as a result of such sub-custodial
arrangements.

         D.       The Fund authorizes the Custodian to release any and all
information regarding Assets placed with foreign sub-custodians hereunder as may
be required by court order of a court of competent jurisdiction.

Section 7. Transfer, Exchange and Redelivery of Assets.

         The Custodian (or a sub-custodian or any other agent of the Custodian)
shall have sole power to release or deliver any Assets of the Fund held by the
Custodian (or such sub-custodian or agent) pursuant to this Agreement. The
Custodian agrees (and will obtain an undertaking from each sub-custodian or
other agent) that Assets held by the Custodian (or by a sub-custodian or other
agent of the Custodian) will be transferred, exchanged or delivered only (a) for
sales of securities for the account of the Fund in accordance with (i) "New York
Street Practice", (ii) predominant established practice in the relevant local
market, or (iii) specific instructions from the Fund; or (b) when Assets are
called, redeemed or retired or otherwise become payable; (c) for examination by
any broker selling any such securities in accordance with "street delivery"
custom or other relevant local market practice; (d) in exchange for or upon
conversion into other Assets whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or otherwise;
(e) upon conversion of such Assets pursuant to their terms into other Assets;
(f) upon exercise of subscription, purchase or other similar rights represented
by such Assets pursuant to their terms; (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities; (h) for the
purpose of tendering Assets; (i) for the purpose of delivering Assets lent by
the Fund; (j) for purposes of delivering collateral upon redelivery of Assets
lent or for purposes of delivering excess collateral; or (k) for other proper
Fund purposes. As to any deliveries made by Custodian pursuant to items (b),
(d), (e), (f), (g), (i), (j) and (k), Assets in exchange therefor shall be
deliverable to the Custodian (or a sub-custodian or other agent of the
Custodian). The Custodian may rely upon any written, electronic or oral
instructions or an Officers' Certificate relating thereto as provided for in
Sections 3 and 4 above.

Section 8. The Custodian's Acts Without Instructions.

         Unless and until the Custodian receives instructions to the contrary,
the Custodian (or a sub-custodian or other agent of the Custodian) shall: (a)
present for payment all coupons and other income items held by it for the
account of the Fund which call for payment upon presentation and hold the cash
received by it upon such payment in the Account; (b) collect interest and cash
dividends and other distributions, provide notice to the Fund of receipts, and
deposit such amounts to the Account; (c) hold for the account of the Fund all
stock dividends, rights and similar securities issued with respect to any Assets
held by the Custodian under the terms of this Agreement; (d) execute as agent on
behalf of the Fund all necessary ownership certificates required by the Internal
Revenue Code or the Income Tax Regulations of the United

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States Treasury Department, the laws of any State or territory of the United
States, or, in the case of Assets held through foreign sub-custodians, the laws
of the jurisdiction in which such Assets are held, now or hereafter in effect,
inserting the Fund's name on such certificates as the owner of the Assets
covered thereby, to the extent it may lawfully do so; (e) use its best efforts,
in cooperation with the Fund, to file such forms, certificates and other
documents as may be required to comply with all applicable laws and regulations
relating to withholding taxation applicable to the Assets; and (f) use its best
efforts to assist the Fund in obtaining any refund of local taxes to which the
Fund may have a reasonable claim. The Fund agrees to furnish to the Custodian
such information and to execute such forms and other documents as the Custodian
may reasonably request or as otherwise may be reasonably necessary in connection
with the Custodian's performance of its obligations under clauses (e) and (f).

Section 9. Registration of Securities and Other Assets.

         Except as otherwise directed by an Officers' Certificate, the Custodian
shall register all securities and other Assets, except such as are in bearer
form, in the name of the Fund or a registered nominee of the Fund or a
registered nominee of the Custodian or a sub-custodian. Securities and other
Assets deposited with DTC or a foreign securities depository permitted under
Section 5 may be registered in the nominee name of DTC or such foreign
securities depository. The Custodian shall execute and deliver all such
certificates in connection therewith as may be required by the applicable
provisions of the Internal Revenue Code, the laws of any State or territory of
the United States, or, in the case of Assets placed with foreign sub-custodians,
the laws of the jurisdiction in which such Assets are held. The Custodian shall
maintain such books and records as may be necessary to identify the specific
Assets held by it hereunder at all times.

         The Fund shall from time to time furnish the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any Assets which
it may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.

Section 10. Voting and Other Action.

         Neither the Custodian nor any nominee, sub-custodian or other agent of
the Custodian or of DTC or any foreign securities depository shall exercise any
voting rights attributable to the Assets held hereunder by or for the account of
the Fund except in accordance with the instructions contained in an Officers'
Certificate.

         The Custodian shall use its best efforts, in cooperation with the Fund
to obtain and deliver (or have obtained and delivered) to the Fund all notices,
proxies and proxy soliciting materials with relation to such Assets, such
proxies to be executed by the registered holder of such Assets (if registered
otherwise than in the name of the Fund), but without indicating the manner in
which such proxies are to be voted.

Section 11. Transfer Tax and Other Disbursements.

         The Fund shall pay or reimburse the Custodian from time to time for any
transfer taxes payable upon transfers of Assets made hereunder and for all other
necessary and proper

                                       7
<PAGE>   8

disbursements and expenses made or incurred by the Custodian in the performance
of this Agreement, as required by U.S. law or the laws of the jurisdiction in
which the Assets are held, as the case may be.

         The Custodian shall use its best efforts, in cooperation with the Fund,
to execute and deliver such forms, certificates and other documents in
connection with Assets delivered to it or by it under this Agreement as may be
required under the laws of any jurisdiction to exempt from taxation any
exemptible transfers and/or deliveries of any such Assets and shall use its best
efforts to assist the Fund in any other manner which the Fund may reasonably
request in order to establish any such exemption or to obtain a refund of any
such tax.

Section 12. Compensation and the Custodian's Expenses.

         The Custodian shall be compensated for its services hereunder as shall
be agreed upon in writing by the parties from time to time and for all other
expenses incurred by the Custodian in the exercise of its duties hereunder. Such
compensation shall be payable by the Fund to the Custodian promptly following
receipt by the Fund of an invoice and any other appropriate documentation.

         If the Custodian submits an invoice and the Fund has requested further
information or documentation with respect to one or more items in the invoice,
the Fund shall nonetheless promptly make payment with respect to those items for
which the Fund has made no such request.

Section 13. Liability of Custodian: Indemnification.

         The Custodian shall be liable for and shall indemnify the Fund for, and
hold the Fund harmless from and defend the Fund against, any loss, damage, cost,
judgment, expense or any other liability (including, but not limited to, the
Fund's reasonable legal fees and expenses and any other reasonable legal fees
and expenses which the Fund incurs or for which the Fund is otherwise liable)
incurred by the Fund directly related to or arising from (a) the failure of the
Custodian to act as provided in specific, unambiguous and complete instructions,
relating to the movement of cash or securities of the Fund (including for these
purposes all instructions in "SWIFT") or in connection with a so called
"corporate rights" matter, timely received by the Custodian in the manner
required hereunder, from an Authorized Person or such person as otherwise
provided herein or (b) any negligent act or negligent failure to act of the
Custodian under this Agreement. The Custodian shall not be liable to the Fund
for acting in accordance with the Fund's directions and instructions or for the
acts, omissions, lack of financial responsibility, or failure to perform its
obligations of (i) any person or organization designated by the Fund to be the
authorized agent of the Fund as a party to any transaction or (ii) DTC, any
Federal Reserve Bank, any foreign securities depository or any other United
States or foreign depository in connection with any book entry system that the
Custodian is required to use in accordance with local market practice. The Fund
agrees to indemnify the Custodian for, and hold the Custodian harmless from and
defend the Custodian against, any loss, damage, cost, judgment, expense, or any
other liability (including, but not limited to, the Custodian's reasonable legal
fees and expenses or any other reasonable fees and expenses which the Custodian
incurs or for which the Custodian is otherwise liable) incurred by the Custodian

                                       8
<PAGE>   9

directly relating to or arising from actions taken pursuant to instructions from
an Authorized Person or such person as otherwise provided herein; provided,
however, that the Custodian shall not be indemnified if it fails to act in
accordance with specific, unambiguous, and complete instructions of the Fund or
is negligent with respect to the manner in which it carries out its obligations
hereunder. As to legal matters which may arise in connection with its following
instructions or otherwise carrying out its obligations hereunder, the Custodian
shall, in exercising its reasonable judgment in the performance of its duties
hereunder, be entitled to receive and act upon the prior advice of counsel and
shall be without liability to the Fund for any action taken or not taken or
other thing done or not done in good faith in reliance upon such advice,
including its determination to decline to follow the Fund's directions and
instructions.

         Within a reasonable time after receipt by a party of notice of the
commencement of any action for which such party (the "Indemnified Party") may
seek indemnity, the Indemnified Party will notify the other party (the
"Indemnifying Party") in writing of the commencement thereof; and the omission
so to notify the Indemnifying Party will not relieve the Indemnifying Party from
any liability hereunder as to the particular item for which indemnification is
then being sought, except to the extent that the omission results in a failure
of actual notice to the Indemnifying Party and the Indemnifying Party is damaged
solely as a result of such failure to give notice. In case any such action is
brought against an Indemnified Party, and it notifies the Indemnifying Party of
the commencement thereof, the Indemnifying Party will be entitled to participate
therein, and to assume the defense thereof, with counsel who shall be to the
reasonable satisfaction of the Indemnified Party, and after notice from the
Indemnifying Party of such party's election so to assume the defense thereof,
the Indemnifying Party will not be liable to the Indemnified Party for any legal
or other expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation. The
Indemnifying Party shall not be liable to the Indemnified Party on account of
any settlement of any claim or action effected without the consent of the
Indemnifying Party.

Section 14. Reports by the Custodian.

         The Custodian shall furnish the Fund with such reports concerning
transactions in the Account and/or the Assets as may be agreed upon from time to
time. The books and records of the Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times and
upon reasonable notice to the Custodian, by officers of and auditors employed by
the Fund (and such other persons as the Fund may designate from time to time).
All such books and records shall be the property of the Fund and the Custodian
shall forthwith upon the Fund's request, turn over to the Fund and cease to
retain in its files, records and documents created and maintained by the
Custodian pursuant to this Agreement, which are no longer needed by the
Custodian in performance of its services or for its protection.

Section 15. Termination and Assignment.

         This Agreement may be terminated by the Fund or the Custodian,
immediately upon written notice from the Fund or the Custodian, as applicable,
to the other party, if the other party fails materially to perform its
obligations hereunder, and may otherwise be terminated by the Fund or by the
Custodian on one hundred eighty (180) days' notice, given in writing and sent by
registered mail to the Custodian or the Fund as the case may be. Upon
termination of this

                                       9
<PAGE>   10

Agreement, the Custodian shall deliver the Assets of the Fund to such entity as
is designated in writing by the Fund and in the absence of such a designation
may, but shall not be obligated to, deliver them to a bank or trust company of
the Custodian's own selection having an aggregate capital, surplus and undivided
profits as shown by its last published report of not less than 50 million
dollars ($50,000,000), the Assets to be held by such bank or trust company for
the benefit of the Fund under terms similar to those of this Agreement and the
Fund to be obligated to pay to such transferee the then current rates of such
transferee for services rendered by it; provided, however, that the Custodian
may decline to transfer such amount of such Assets equivalent to all fees and
other sums owing by the Fund to the Custodian (except for such out-of-pocket
expenses as are described in Section 12 hereto), and the Custodian shall have a
charge against and security interest in such amount until all monies owing to it
have been paid, or escrowed to its satisfaction.

         This Agreement may not be assigned by the Custodian without the consent
of the Fund, authorized or approved by a resolution of the Fund's Board of
Directors.

Section 16. Force Majeure.

         The Custodian shall not be liable or accountable for any loss or damage
resulting from any condition or event beyond its reasonable control; provided,
however, that the Custodian shall promptly use its best efforts to mitigate any
such loss or damage to the Fund as a result of any such condition or event. For
the purposes of the foregoing, the actions or inactions of the Custodian's
sub-custodians and other agents shall not be deemed to be beyond the reasonable
control of the Custodian. In connection with the foregoing, the Custodian agrees
(and agrees that it will use its best efforts to obtain the undertaking of its
sub-custodians and other agents to the effect) that the Custodian (and/or such
sub-custodian or agent) shall maintain such alternate power sources for computer
and related systems and alternate channels for electronic communication with
such computers and related systems that the failure of the primary power source
and/or communications channel of the Custodian (and/or its sub-custodians or
other agents) will not foreseeable result in any loss or damage to the Fund.

Section 17. Third Parties.

         This Agreement shall be binding upon and the benefits hereof shall
inure to the parties hereto and their respective successors and assigns.
However, nothing in this Agreement shall give or be construed to give or confer
upon any third party any rights hereunder.

Section 18. Amendments.

         The terms of this Agreement shall not be waived, altered, modified,
amended, supplemented or terminated in any manner whatsoever, except by written
instrument signed by both of the parties hereto.

Section 19. Sweep Authorization.

         The Bank will automatically invest cash in money market funds or
repurchase agreements made available by the Bank and authorized by Customer.

                                       10
<PAGE>   11

Section 20. Governing Law.

         This Agreement shall be governed and construed in accordance with the
laws of  ______________________________________.

Section 21. Counterparts.

         This agreement may be executed in several counterparts, each of which
is an original.

Section 22. Notices.

         All notices provided for herein shall be in writing and shall become
effective when deposited in the United States mail, postage prepaid and
certified, addressed (a) if to the Custodian, at  _____________________________,
Attention: _______________, and, (b) if to the Fund, at 2010 North First Street,
Suite 310, San Jose, CA 95131, Attention: Ronald W. Swenson, or to such other
address as either party may notify the other in writing.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first written above.

                                     VENTURE LENDING & LEASING III, INC.

                                     By:
                                        ------------------------------
                                     Name:
                                          ----------------------------
                                     Title:
                                           ---------------------------

                                     ----------------------------------

                                     By:
                                        ------------------------------
                                     Name:
                                          ----------------------------
                                     Title:
                                           ---------------------------

                                       11
<PAGE>   12

                                    EXHIBIT A

<PAGE>   13

                                ADDENDUM NO. 1 TO
                               CUSTODIAN AGREEMENT

                            DOCUMENT CUSTODY SERVICE
                                       FOR
                 VENTURE LENDING & LEASING III, INC. (VLLI III)

This Addendum supplements and constitutes a part of the Custodian Agreement made
by and between VLLI III (the "Customer") and ______________________ (the "Bank")
dated _______________, 2000.

WHEREAS, the Customer has need for certain document custody services which the
Bank is willing and able to provide;

NOW, THEREFORE, in consideration of mutual promises herein made, the Customer
and the Bank agree as follows:

         A.       The Bank will provide physical safekeeping of documents
                  executed in connection with loans, leases, and installment
                  sales contracts held within custodial accounts and
                  subaccounts;

         B.       The Bank shall review each document received from or on behalf
                  of the Customer in accordance with instructions provided by
                  the Customer from time to time for that purpose;

         C.       The Bank shall notify the Customer of any missing, incomplete,
                  or inconsistent documents by means agreeable to Customer and
                  the Bank. The Customer may deposit such missing documents or
                  complete or correct the documents as may be specified in
                  instructions of record.

         D.       The Bank will release and deliver said documents pursuant to
                  Customer's direction and instruction as required.

In carrying out the foregoing services, the Bank will use reasonable care in
accordance with standard customs adhered to by banks that act as document
custodians under similar circumstances and conditions.

                                            Venture Lending & Leasing III, Inc.
--------------------------------

By:                                         By:
   ---------------------------                 --------------------------------
Title:                                      Title:
      ------------------------                    -----------------------------
Date:                                       Date:
     -------------------------                   ------------------------------

<PAGE>   14

                       INSTITUTIONAL CUSTODY FEE SCHEDULE
                                       for
                       VENTURE LENDING & LEASING III, INC.

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