Document:

Exhibit 10.4

 

EXECUTION VERSION

 

COLLATERAL MANAGEMENT AGREEMENT

 

dated as of June 18, 2013

 

by and between

 

KCAP SENIOR FUNDING I, LLC

as Issuer

 

and

 

KCAP FINANCIAL, INC.

as Collateral Manager

 

    	 

    	 

    

 

Table
of Contents

 

	 	 	 	Page
	 	 	 	 
	Section 1.	Definitions; Rules of Construction	 	1
	 	 	 	 
	Section 2.	General Duties and Authority of the Collateral Manager	 	4
	 	 	 	 
	Section 3.	Purchase and Sale Transactions; Brokerage	 	9
	 	 	 	 
	Section 4.	Additional Activities of the Collateral Manager	 	10
	 	 	 	 
	Section 5.	Certain Conflicts of Interest	 	12
	 	 	 	 
	Section 6.	Records; Confidentiality	 	13
	 	 	 	 
	Section 7.	Obligations of Collateral Manager	 	14
	 	 	 	 
	Section 8.	Compensation	 	14
	 	 	 	 
	Section 9.	Benefit of the Agreement	 	17
	 	 	 	 
	Section 10.	Limits of Collateral Manager Responsibility	 	17
	 	 	 	 
	Section 11.	No Joint Venture	 	20
	 	 	 	 
	Section 12.	Term; Termination	 	20
	 	 	 	 
	Section 13.	Assignments	 	22
	 	 	 	 
	Section 14.	Removal for Cause	 	23
	 	 	 	 
	Section 15.	Obligations of Resigning or Removed Collateral Manager	 	25
	 	 	 	 
	Section 16.	Representations and Warranties	 	25
	 	 	 	 
	Section 17.	Limited Recourse; No Petition	 	29
	 	 	 	 
	Section 18.	Notices	 	29
	 	 	 	 
	Section 19.	Binding Nature of Agreement; Successors and Assigns	 	30
	 	 	 	 
	Section 20.	Entire Agreement; Amendment	 	30
	 	 	 	 
	Section 21.	Governing Law	 	31
	 	 	 	 
	Section 22.	Submission to Jurisdiction	 	31
	 	 	 	 
	Section 23.	Waiver of Jury Trial	 	31
	 	 	 	 
	Section 24.	Conflict with the Indenture	 	31
	 	 	 	 
	Section 25.	Subordination; Assignment of Agreement	 	32
	 	 	 	 
	Section 26.	Indulgences Not Waivers	 	32
	 	 	 	 
	Section 27.	Costs and Expenses	 	32
	 	 	 	 
	Section 28.	Third Party Beneficiary	 	33
	 	 	 	 
	Section 29.	Titles Not to Affect Interpretation	 	33
	 	 	 	 
	Section 30.	Execution in Counterparts	 	33

 

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Table
of Contents

(continued)

 

	 	 	 	Page
	 	 	 	 
	Section 31.	Provisions Separable	 	33
	 	 	 	 
	Section 32.	Gender	 	33

 

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COLLATERAL
MANAGEMENT AGREEMENT

 

This Collateral Management
Agreement (as amended, supplemented or otherwise modified from time to time, this “Agreement”), dated as of
June 18, 2013, is entered into by and between KCAP SENIOR FUNDING I, LLC, a Delaware limited liability company, with its office
located at 295 Madison Avenue, 6th Floor, New York, NY 10017 (the “Issuer”), and KCAP FINANCIAL, INC., a Delaware
corporation, located at 295 Madison Avenue, 6th Floor, New York, NY 10017, as collateral manager (together with its successors
and permitted assigns, “KCAP Financial” and the “Collateral Manager”).

 

WITNESSETH:

 

WHEREAS, the Notes
(as defined in the Indenture) will be issued pursuant to an Indenture dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the “Indenture”), between the Issuer and U.S. Bank National Association,
as trustee (together with any successor trustee permitted under the Indenture, the “Trustee”);

 

WHEREAS, the Issuer
intends to pledge all Collateral Obligations and the other Assets, as set forth in the Indenture, to the Trustee as security for
the Secured Parties under the Indenture;

 

WHEREAS, the Issuer
desires to appoint KCAP Financial as the Collateral Manager to provide the services described herein and KCAP Financial desires
to accept such appointment;

 

WHEREAS, the Indenture
authorizes the Issuer to enter into this Agreement, pursuant to which the Collateral Manager agrees to perform, on behalf of the
Issuer, certain investment management duties with respect to the acquisition, administration and disposition of Assets in the manner
and on the terms set forth herein and to perform such additional duties as are consistent with the terms of this Agreement and
the Indenture as the Issuer may from time to time reasonably request; and

 

WHEREAS, the Collateral
Manager has the capacity to provide the services required hereby and is prepared to perform such services upon the terms and subject
to the conditions set forth herein;

 

NOW, THEREFORE, in
consideration of the agreements herein set forth, the parties hereto agree as follows:

 

Section
1.          Definitions; Rules of Construction 

 

(a)          As
used in this Agreement:

 

“Advisers
Act” shall mean the U.S. Investment Advisers Act of 1940, as amended.

 

“Agreement”
shall have the meaning set forth in the preamble.

 

    	 

    	 

    

 

“Asset Manager
Affiliates” shall mean Katonah Debt Advisors, L.L.C. and its asset manager affiliates and Trimaran Advisors, L.L.C.

 

“Cause”
shall have the meaning set forth in Section 14(a).

 

“Client”
means with respect to any specified Person, any Person or account for which the specified Person provides investment management
services or investment advice.

 

“Collateral
Management Fee” shall have the meaning set forth in Section 8(b).

 

“Collateral
Manager” shall have the meaning set forth in the preamble.

 

“Collateral
Manager Breaches” shall have the meaning set forth in Section 10(a).

 

“Collateral
Manager Information” shall have the meaning set forth in Section 16(b)(vi).

 

“Expenses”
shall have the meaning set forth in Section 10(b).

 

“Fee Basis
Amount” means, with respect to any Payment Date, the sum of (i) the Collateral Principal Amount, (ii) the aggregate principal
amount of all Defaulted Obligations and (iii) the aggregate amount of all Principal Financed Accrued Interest at the beginning
of the Collection Period relating to such Payment Date.

 

“Final Offering
Circular” shall mean the Offering Circular, dated June 16, 2013 with respect to the Secured Notes, and as further amended
or supplemented.

 

“Incentive
Collateral Management Fee” shall have the meaning set forth in Section 8(b).

 

“Indemnified
Party” shall have the meaning set forth in Section 10(b).

 

“Indemnifying
Party” shall have the meaning set forth in Section 10(b).

 

“Indenture”
shall have the meaning set forth in the recitals hereto.

 

“Instrument
of Acceptance” shall have the meaning set forth in Section 12(c).

 

“Internal
Policies” shall have the meaning set forth in Section 3(b).

 

“Issuer”
shall have the meaning set forth in the preamble.

 

“KCAP Financial”
shall have the meaning set forth in the preamble.

 

“KCAP Investment
Committee” shall have the meaning set forth in Section 5(b).

 

“LLC Agreement”
means, the Limited Liability Company Agreement of KCAP Senior Funding I, LLC (as amended from time to time in accordance with its
terms), effective as of April 17, 2013.

 

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“Losses”
shall have the meaning set forth in Section 10(b).

 

“Management
Fees” shall have the meaning set forth in the LLC Agreement.

 

“Material
Adverse Effect” means, with respect to any event or circumstance, a material adverse effect on (a) the business, financial
condition (other than the performance of the Assets) or operations of the Issuer, taken as a whole, (b) the validity or enforceability
of the Indenture, this Agreement or the Issuer’s Organizational Instruments or (c) the existence, perfection, priority or
enforceability of the Trustee’s lien on the Assets.

 

“Offering
Circulars” shall mean, collectively, the Final Offering Circular, as the same may be amended or supplemented, the Preliminary
Offering Circular and the Second Preliminary Offering Circular.

 

“Organizational
Instruments” shall mean the memorandum and articles of association or certificate of incorporation and bylaws (or the
comparable documents for the applicable jurisdiction), in the case of a corporation, or the partnership agreement, in the case
of a partnership, or the certificate of formation and limited liability company agreement (or the comparable documents for the
applicable jurisdiction), in the case of a limited liability company.

 

“Preliminary
Offering Circular” shall mean the Preliminary Offering Circular, dated April 3, 2013, with respect to the Secured Notes.

 

“Proceedings”
shall have the meaning set forth in Section 22.

 

“Referenced
Information” shall have the meaning set forth in the Final Offering Circular.

 

“Related
Person” means, with respect to any Person, the owners of the equity interests therein,
directors, officers, employees, managers, agents and professional advisors thereof.

 

“Second Preliminary
Offering Circular” shall mean the Second Preliminary Offering Circular, dated May 17, 2013, with respect to the Secured
Notes.

 

“Senior Collateral
Management Fee” shall have the meaning set forth in Section 8(b).

 

“Staffing
Agreement” shall have the meaning set forth in Section 13(b).

 

“Standard
of Care” shall have the meaning set forth in Section 2(a).

 

“Statement
of Cause” shall have the meaning set forth in Section 14(a).

 

“Subordinated
Collateral Management Fee” shall have the meaning set forth in Section 8(b).

 

“Termination
Notice” shall have the meaning set forth in Section 14(a).

 

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“Transaction”
shall mean any action taken by the Collateral Manager on behalf of the Issuer with respect to the Assets, including, without limitation,
(i) selecting the Collateral Obligations and Eligible Investments to be acquired by the Issuer, (ii) investing and reinvesting
the Assets, (iii) instructing the Trustee with respect to any acquisition, disposition or tender of, or Offer with respect to,
a Collateral Obligation, Equity Security or Eligible Investment by the Issuer and (iv) any of the services set forth in Section
2.

 

“Trustee”
shall have the meaning set forth in the recitals hereto.

 

(b)          Capitalized
terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Indenture and the rules
of construction set forth in Section 1.2 of the Indenture are hereby incorporated by reference herein.

 

Section
2.          General Duties and Authority of the Collateral Manager.

 

(a)          KCAP
Financial is hereby appointed as Collateral Manager of the Issuer for the purpose of performing certain investment management functions
including, without limitation, directing and supervising the investment and reinvestment of the Collateral Obligations and Eligible
Investments and performing certain administrative functions on behalf of the Issuer in accordance with the applicable provisions
of the Indenture and of this Agreement, and KCAP Financial hereby accepts such appointment. The Collateral Manager shall have the
power to execute and deliver all necessary and appropriate documents and instruments on behalf of the Issuer in connection with
performing its obligations set forth herein. The Collateral Manager shall perform its obligations hereunder and under the Indenture
with reasonable care and in good faith, (i) using a degree of skill, care, prudence, diligence and attention no less than the higher
of (a) that which the Collateral Manager exercises with respect to comparable assets that it may manage for itself and its other
clients having similar investment objectives and restrictions and (b) the customary and usual collateral management practices that
a prudent collateral manager of national recognition in the United States would use to manage comparable assets for its own account
and for the account of others, and (ii) in accordance with the Collateral Manager’s customary practices and procedures involving
assets of the nature and character of the Assets (the “Standard of Care”).

 

(b)          Subject
to Section 2(a), Section 2(d), Section 5 and Section 10 and to the applicable provisions of the Indenture
and of this Agreement, the Collateral Manager agrees, and is hereby authorized, to provide the following services to the Issuer:

 

(i)          select
the Collateral Obligations and Eligible Investments to be acquired and select the Collateral Obligations, Equity Securities and
Eligible Investments to be sold or otherwise disposed of by the Issuer;

 

(ii)         invest
and reinvest the Assets;

 

(iii)        instruct
the Trustee with respect to any acquisition, disposition, or tender of, or Offer with respect to, a Collateral Obligation, Equity
Security, Eligible Investment or other assets received in respect thereof in the open market or otherwise by the Issuer; and

 

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(iv)        perform
all other tasks and take all other actions that are specified, or not inconsistent with, the duties of the Collateral Manager set
forth in the Indenture, the Collateral Administration Agreement or this Agreement.

 

The Collateral Manager
shall, and is hereby authorized to, perform its obligations hereunder and under the Indenture in accordance with the Standard of
Care and in a manner which is consistent with the terms hereof and of the Indenture.

 

(c)          Subject
to the provisions concerning its general duties and obligations as set forth in paragraphs (a) and (b) above and the terms of the
Indenture, the Collateral Manager shall provide, and is hereby authorized to provide, the following services to the Issuer:

 

(i)          The
Collateral Manager shall perform the investment-related duties and functions (including, without limitation, the furnishing of
Issuer Orders, Issuer Requests and authorized Officer’s certificates) as are expressly required hereunder or under the Indenture
with regard to acquisitions, sales or other dispositions of Collateral Obligations, Equity Securities, Eligible Investments and
other securities and assets permitted to be acquired or sold under, and subject to, the Indenture (including any proceeds received
by way of Offers, workouts and restructurings on assets owned by the Issuer) and shall comply with the Investment Criteria and
other requirements in the Indenture. The Collateral Manager shall have no obligation to perform any other duties other than as
expressly specified herein or in the Indenture and the Collateral Manager shall be subject to no implicit obligations of any kind.
The Issuer hereby irrevocably (except as provided below) appoints the Collateral Manager as its true and lawful agent and attorney-in-fact
(with full power of substitution) in its name, place and stead and at its expense, in connection with the performance of its duties
provided for in this Agreement or in the Indenture, including, without limitation, the following powers: (A) to give or cause to
be given any necessary receipts or acquittance for amounts collected or received hereunder, (B) to make or cause to be made all
necessary transfers of the Collateral Obligations, Equity Securities and Eligible Investments in connection with any acquisition,
sale or other disposition made pursuant hereto and the Indenture, (C) to execute (under hand, under seal or as a deed) and deliver
or cause to be executed and delivered on behalf of the Issuer all necessary or appropriate bills of sale, assignments, agreements
and other instruments in connection with any such acquisition, sale or other disposition and (D) to execute (under hand, under
seal or as a deed) and deliver or cause to be executed and delivered on behalf of the Issuer any consents, votes, proxies, waivers,
notices, amendments, modifications, agreements, instruments, orders or other documents in connection with or pursuant to this Agreement
or the Indenture and relating to any Collateral Obligation, Equity Security or Eligible Investment. The Issuer hereby ratifies
and confirms all that such attorney-in-fact (or any substitute) shall lawfully do hereunder and pursuant hereto and authorizes
such attorney-in-fact to exercise full discretion and act for the Issuer in the same manner and with the same force and effect
as the managers or officers of the Issuer might or could do in respect of the performance of such services, as well as in respect
of all other things the Collateral Manager deems necessary or incidental to the furtherance or conduct of the Collateral Manager’s
services under this Agreement or under the Indenture, subject in each case to the applicable terms of this Agreement and of the
Indenture, including, without limitation, the Standard of Care. The Issuer hereby authorizes such attorney-in-fact, in its reasonable
business judgment (but subject to applicable law and the provisions of this Agreement and the Indenture), to take all actions that
it considers reasonably necessary and appropriate in respect of the Assets, this Agreement and the other Transaction Documents.
Nevertheless, if so requested by the Collateral Manager or by a purchaser of any Collateral Obligation or Eligible Investment,
the Issuer shall ratify and confirm any such sale or other disposition by executing and delivering to the Collateral Manager or
such purchaser all proper bills of sale, assignments, releases, powers of attorney, proxies, dividends, other orders and other
instruments as may reasonably be designated in any such request. Except as otherwise set forth and provided for herein, this grant
of power of attorney is coupled with an interest, and it shall survive and not be affected by the subsequent dissolution or bankruptcy
of the Issuer. Notwithstanding anything herein to the contrary, the appointment herein of the Collateral Manager as the Issuer’s
agent and attorney-in-fact shall automatically cease and terminate upon the effective date of any termination of this Agreement,
the resignation of the Collateral Manager pursuant to Section 12 or any removal of the Collateral Manager pursuant to Section
14. Each of the Collateral Manager and the Issuer shall take such other actions, and furnish such certificates, opinions and
other documents, as may be reasonably requested by the other party hereto in order to effectuate the purposes of this Agreement
and to facilitate compliance with applicable laws and regulations and the terms of this Agreement and of the Indenture.

 

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(ii)         The
Collateral Manager shall negotiate on behalf of the Issuer with prospective originators, sellers or purchasers of Collateral Obligations
as to the terms relating to the acquisition, sale or other dispositions thereof.

 

(iii)        Subject
to any applicable terms of the Collateral Administration Agreement, the Collateral Manager shall monitor the Assets on behalf of
the Issuer on an ongoing basis and shall provide or cause to be provided to the Issuer all reports, schedules and other data available
to the Collateral Manager that the Issuer is required to prepare and deliver or cause to be prepared and delivered under the Indenture,
in such forms and containing such information required thereby, in reasonably sufficient time for such required reports, schedules
and data to be reviewed and delivered by or on behalf of the Issuer to the parties entitled thereto under the Indenture. The obligation
of the Collateral Manager to furnish such information is subject to the Collateral Manager’s timely receipt of necessary
reports and the appropriate information from the Person responsible for the delivery of or preparation of such information or such
reports (including without limitation, the Obligors of the Collateral Obligations, the Rating Agencies, the Trustee and the Collateral
Administrator) and to any confidentiality restrictions with respect thereto. The Collateral Manager shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document
or other writing reasonably believed by it to be genuine and to have been signed or sent by a Person that the Collateral Manager
has no reason to believe is not duly authorized. The Collateral Manager also may rely upon any statement made to it orally or by
telephone and made by a Person the Collateral Manager has no reason to believe is not duly authorized, and shall not incur any
liability for relying thereon. The Collateral Manager is entitled to rely on any other information furnished to it by third parties
that it reasonably believes in good faith to be genuine.

 

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(iv)        The
Collateral Manager, on behalf of the Issuer, shall be responsible for obtaining, to the extent such information is available to
it, any information concerning whether a Collateral Obligation has become a Defaulted Obligation, a Credit Risk Obligation or a
Credit Improved Obligation.

 

(v)         The
Collateral Manager may, subject to and in accordance with the Indenture, as agent of the Issuer and on behalf of the Issuer, direct
the Trustee to take, or take on behalf of the Issuer, as applicable, any of the following actions with respect to a Collateral
Obligation, Equity Security or Eligible Investment:

 

(A)         purchase
or otherwise acquire such Collateral Obligation or Eligible Investment;

 

(B)         retain
such Collateral Obligation, Equity Security or Eligible Investment;

 

(C)         sell
or otherwise dispose of such Collateral Obligation, Equity Security or Eligible Investment (including any assets received by way
of Offers, workouts and restructurings on assets owned by the Issuer) in the open market or otherwise;

 

(D)         if
applicable, tender such Collateral Obligation, Equity Security or Eligible Investment;

 

(E)         if
applicable, consent to or refuse to consent to any proposed amendment, modification, restructuring, exchange, waiver or Offer and
give or refuse to give any notice or direction;

 

(F)         retain
or dispose of any securities or other property (if other than cash) received by the Issuer;

 

(G)         call
or waive any default with respect to any Defaulted Obligation;

 

(H)         vote
to accelerate the maturity of any Defaulted Obligation;

 

(I)         participate
in a committee or group formed by creditors of an obligor or an issuer under a Collateral Obligation or Eligible Investment;

 

(J)         after
or in connection with the payment in full of all amounts owed under the Secured Notes and the termination without replacement of
the Indenture or in connection with any Redemption or Refinancing of the Notes, advise the Issuer as to when, in the view of the
Collateral Manager, it would be in the best interest of the Issuer to liquidate all or any portion of the Issuer's investment portfolio
(and, if applicable, after discharge of the Indenture) and render such assistance as may be necessary or required by the Issuer
in connection with such liquidation or any actions necessary to effectuate a Redemption or Refinancing of the Notes;

 

(K)         advise
and assist the Issuer with respect to the valuation of the Assets, to the extent required or permitted by the Indenture;

 

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(L)         provide
strategic and financial planning (including advice on utilization of assets), financial statements and other similar reports;

 

(M)         negotiate
any Refinancing for the Issuer as authorized by the Indenture; and

 

(N)         exercise
any other rights or remedies with respect to such Collateral Obligation, Equity Security or Eligible Investment as provided in
the Underlying Documents of the obligor or issuer under such Assets or the other documents governing the terms of such Assets or
take any other action consistent with the terms of this Agreement or of the Indenture which the Collateral Manager reasonably determines
to be in the best interests of the Issuer.

 

(vi)        The
Collateral Manager may:

 

(A)         retain
accounting, tax, counsel and other professional services on behalf of the Issuer as may be needed by the Issuer; and

 

(B)         consult
on behalf of the Issuer with each Rating Agency at such times as may be reasonably requested by such Rating Agency and provide
the Rating Agencies with any information reasonably requested in connection with each Rating Agency’s monitoring of the acquisition
and disposition of Collateral Obligations and each Rating Agency’s maintenance of their ratings of the Secured Notes.

 

(vii)       In
connection with the purchase of any Collateral Obligation by the Issuer, the Collateral Manager shall prepare, on behalf of the
Issuer, the information required to be delivered to the Trustee pursuant to the Indenture.

 

(d)          In
performing its duties hereunder and when exercising its discretion and judgment in connection with any transactions involving the
Assets, the Collateral Manager shall carry out any reasonable written directions of the Issuer for the purpose of the Issuer’s
compliance with its Organizational Instruments and the Indenture; provided that such directions are not inconsistent with
any provision of this Agreement or the Indenture by which the Collateral Manager is bound and are permitted by applicable law.

 

(e)          In
providing services hereunder, the Collateral Manager may, without the consent of any party, employ third parties, including its
Affiliates, to render advice (including investment advice), to provide services to arrange for trade execution and otherwise provide
assistance to the Issuer and to perform any of its duties hereunder; provided that the Collateral Manager shall not be relieved
of any of its duties hereunder regardless of the performance of any services by such third parties, including its Affiliates.

 

(f)          The
Collateral Manager shall not be bound to comply with any supplemental indenture until it has received a copy of such supplemental
indenture from the Issuer or the Trustee and unless the Collateral Manager has consented thereto in writing, as provided in the
Indenture.

 

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Section
3.          Purchase and Sale Transactions; Brokerage.

 

(a)          The
Collateral Manager, subject to and in accordance with the Indenture, hereby agrees that it shall cause any Transaction to be conducted
on terms and conditions negotiated on an arm’s-length basis and in accordance with applicable law.

 

(b)          The
Collateral Manager will use reasonable efforts to obtain the best execution (but shall have no obligation to obtain the lowest
prices available) for all orders placed with respect to any Transaction, in a manner permitted by law and in a manner it believes
in its reasonable business judgment to be in the best interests of the Issuer. Subject to the preceding sentence, the Collateral
Manager may, in the allocation of business, select brokers and/or dealers with whom to effect trades on behalf of the Issuer and
may open cash trading accounts with such brokers and dealers (provided that none of the Assets may be credited to, held
in or subject to the lien of the broker or dealer with respect to any such account). In addition, subject to the first sentence
of this paragraph, the Collateral Manager may, in the allocation of business, take into consideration research and other brokerage
services furnished to the Collateral Manager or its Affiliates by brokers and dealers which are not Affiliates of the Collateral
Manager; provided that the Collateral Manager in good faith believes that the compensation for such services rendered by
such brokers and dealers complies with the requirements of Section 28(e) of the Securities Exchange Act of 1934, as amended (“Section
28(e)”), or in the case of principal or fixed income transactions for which the “safe harbor” of Section
28(e) is not available, the amount of the spread charged is reasonable in relation to the value of the research and other brokerage
services provided. Such services may be used by the Collateral Manager in connection with its other advisory activities or investment
operations. The Collateral Manager may aggregate sales and purchase orders placed with respect to the Assets with similar orders
being made simultaneously for other Clients of the Collateral Manager or of Affiliates of the Collateral Manager (including the
Asset Manager Affiliates), if in the Collateral Manager’s reasonable judgment such aggregation shall result in an overall
economic benefit to the Issuer, taking into consideration the advantageous selling or purchase price, brokerage commission or other
expenses, as well as the availability of such Assets on any other basis. In accounting for such aggregated order price, commissions
and other expenses may be apportioned on a weighted average basis. When a Transaction occurs as part of any aggregate sales or
purchase orders, the objective of the Collateral Manager and its Affiliates will be to allocate the executions among the Clients
(including Clients of the Asset Manager Affiliates) in an equitable manner and in accordance with the internal policies and procedures
of the Collateral Manager (as such may be amended from time to time, the “Internal Policies”) and applicable
law.

 

(c)          The
Issuer acknowledges and agrees that (i) the determination by the Collateral Manager of any benefit to the Issuer will be subjective
and will represent the Collateral Manager’s evaluation at the time that the Issuer will be benefited by relatively better
purchase or sales prices, lower brokerage commissions, lower transaction costs and expenses and beneficial timing of transactions
or any combination of any of these and/or other factors and (ii) the Collateral Manager shall be fully protected with respect to
any such determination to the extent the Collateral Manager acts in accordance with the Standard of Care.

 

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(d)          Subject
to the Collateral Manager’s execution obligations described herein, compliance with applicable law and compliance with the
applicable provisions of the Indenture, the Collateral Manager may effect transactions with the Issuer or its Affiliates (i) on
an agency basis or (ii) on a principal basis where the Collateral Manager or any of its Affiliates sells assets to or purchases
assets from the Issuer.

 

(e)          The
Collateral Manager or any of its Affiliates (including the Asset Manager Affiliates) may acquire or sell assets, for its own account
or for the accounts of its Clients, without either requiring or precluding the acquisition or sale of such assets for the account
of the Issuer. Such investments may be the same as or different from those made on behalf of the Issuer. In the event that, in
light of market conditions and investment objectives, the Collateral Manager determines that it would be advisable to acquire the
same Collateral Obligation both for the Issuer and either the proprietary account of the Collateral Manager or any Affiliate of
the Collateral Manager (including the Asset Manager Affiliates) or another Client of the Collateral Manager, the Collateral Manager
will allocate investment opportunities across such entities for which such opportunities are appropriate, consistent with (1) its
internal conflict of interest and allocation policies and (2) any applicable restrictions of the 1940 Act regarding co-investments
with affiliates.

 

(f)          The
Issuer acknowledges and agrees that the Collateral Manager and its Affiliates (including the Asset Manager Affiliates) may invest
for their own accounts or for the accounts of others in assets that would be appropriate investments for the Issuer. The Issuer
acknowledges that the Collateral Manager and its Affiliates (including the Asset Manager Affiliates) may enter into, for their
own accounts or for the accounts of others, credit default swaps relating to obligors and issuers with respect to the Collateral
Obligations included in the Assets. The Issuer understands that the Collateral Manager and its Affiliates (including the Asset
Manager Affiliates) may have economic interests in (including, without limitation, controlling equity interests or other equity
or debt interests), be lenders to, receive payments from, render services to, engage in transactions with or have other relationships
with obligors and issuers with respect to the Collateral Obligations included in the Assets. In particular, the Collateral Manager
and its Affiliates (including the Asset Manager Affiliates) may make and/or hold investments in an obligor’s or issuer’s
obligations or securities that may be pari passu, senior or junior in ranking to an investment in such obligor’s or
issuer’s obligations or securities made and/or held by the Issuer, or otherwise have interests different from or adverse
to those of the Issuer.

 

Section
4.          Additional Activities of the Collateral Manager.

 

Nothing herein shall
prevent the Collateral Manager or any of its Affiliates (including the Asset Manager Affiliates) from engaging in other businesses,
or from rendering services of any kind to the Issuer, the Trustee, the Initial Purchaser, any Holder or their respective Affiliates
or any other Person regardless of whether such business is in competition with the Issuer or otherwise. Without prejudice to the
generality of the foregoing, partners, members, managers, shareholders, directors, officers, employees and agents of the Collateral
Manager, Affiliates of the Collateral Manager, and the Collateral Manager may:

 

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(a)          serve
as managers or directors (whether supervisory or managing), officers, employees, partners, agents, nominees or signatories for
the Issuer or any Affiliate thereof, or for any obligor or issuer in respect of any of the Collateral Obligations, Equity Securities
or Eligible Investments or any Affiliate thereof, to the extent permitted by their respective Organizational Instruments and Underlying
Documents, as from time to time amended, or by any resolutions duly adopted by the Issuer, its Affiliates or any obligor or issuer
in respect of any of the Collateral Obligations, Eligible Investments or Equity Securities (or any Affiliate thereof) pursuant
to their respective Organizational Instruments;

 

(b)          receive
fees for services of whatever nature rendered to the obligor or issuer in respect of any of the Collateral Obligations, Eligible
Investments or Equity Securities or any Affiliate thereof;

 

(c)          be
retained to provide services unrelated to this Agreement to the Issuer or its Affiliates and be paid therefor, on an arm’s-length
basis;

 

(d)          be
a secured or unsecured creditor of, or hold a debt obligation of or equity interest in, the Issuer or any Affiliate thereof or
any obligor or issuer of any Collateral Obligation, Eligible Investment or Equity Security or any Affiliate thereof;

 

(e)          subject
to Section 3(b) and Section 5, applicable law and the applicable provisions of the Indenture sell any Collateral
Obligation or Eligible Investment to, or purchase any Collateral Obligation or Equity Security from, the Issuer while acting in
the capacity of principal or agent;

 

(f)          underwrite,
arrange, structure, originate, syndicate, act as a distributor of or make a market in any Collateral Obligation, Equity Security
or Eligible Investment;

 

(g)          serve
as a member of any “creditors’ board”, “creditors’ committee” or similar creditor group with
respect to any Collateral Obligation, Defaulted Obligation, Eligible Investment or Equity Security; or

 

(h)          act
as collateral manager, portfolio manager, investment manager and/or investment adviser or sub-adviser in collateralized bond obligation
vehicles, collateralized loan obligation vehicles and other similar warehousing, financing or investment vehicles.

 

The Issuer acknowledges
that the Collateral Manager may be prevented from causing the Issuer to transact in certain assets due, among other things, to
internal restrictions imposed on the Collateral Manager regarding the possession and use of material and/or non-public information
and certain restrictions of the 1940 Act regarding co-investments with affiliates.

 

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(i)          It
is understood that the Collateral Manager and any of its Affiliates (including the Asset Manager Affiliates) may engage in any
other business and furnish investment management and advisory services to others, including Persons which may have investment policies
similar to those followed by the Collateral Manager with respect to the Assets and which may own securities or obligations of the
same class, or which are of the same type, as the Collateral Obligations or the Eligible Investments or other securities or obligations
of the obligor or issuer of the Collateral Obligations or the Eligible Investments. Nothing in the Indenture and this Agreement
shall prevent the Collateral Manager or any of its Affiliates (including the Asset Manager Affiliates), acting either as principal
or agent on behalf of others, from buying or selling, or from recommending to or directing any other account to buy or sell, at
any time, securities or obligations of the same kind or class, or securities or obligations of a different kind or class of the
same issuer, as those directed by the Collateral Manager to be purchased or sold on behalf of the Issuer. It is understood that,
to the extent permitted by applicable law, the Collateral Manager, its Affiliates (including the Asset Manager Affiliates) or their
respective Related Persons or any member of their families or a person or entity advised by the Collateral Manager may have an
interest in a particular transaction or in securities or obligations of the same kind or class, or securities or obligations of
a different kind or class of the same issuer, as those whose purchase or sale the Collateral Manager may direct hereunder. In the
event that, in light of market conditions and investment objectives, the Collateral Manager determines that it would be advisable
to purchase the same Collateral Obligation both for the Issuer, and either the proprietary account of the Collateral Manager or
any Affiliate (including the Asset Manager Affiilates) of the Collateral Manager or another client of the Collateral Manager, the
Collateral Manager will allocate investment opportunities across such entities for which such opportunities are appropriate, consistent
with (1) its internal conflict of interest and allocation policies and (2) if and to the extent applicable, certain restrictions
of the 1940 Act regarding co-investments with affiliates.

 

Section
5.          Certain Conflicts of Interest.

 

(a)          Subject
to compliance with applicable laws and regulations and subject to this Agreement (including, without limitation, Section 5(b))
and the Indenture, the Collateral Manager may direct the Trustee to acquire an Asset from, or sell an Asset to, the Collateral
Manager, any of its Affiliates (including the Asset Manager Affiliates) or any Client for which the Collateral Manager or any of
its Affiliates (including the Asset Manager Affiliates) serves as investment adviser for fair market value.

 

(b)          So
long as KCAP Financial is the Collateral Manager, KCAP Financial shall establish and continuously maintain an investment committee
in compliance with the 1940 Act (the “KCAP Investment Committee”), which shall contain at least one independent
member of KCAP Financial’s board of directors. The approval of at least a majority of the KCAP Investment Committee shall
be required for all investments by the Issuer of less than $15 million, and the unanimous approval of the KCAP Investment Committee
shall be required for all investments by the Issuer of $15 million or greater. The Collateral Manager shall not direct the Trustee
to sell an Asset (other than Equity Securities) to an Affiliate of the Issuer for a price that is less than the Applicable Qualified
Valuation.

 

(c)          The
Issuer acknowledges that Affiliates of the Collateral Manager may acquire all of the Subordinated Notes and Membership Interests.
In certain circumstances, the interests of the Issuer and/or the Holders with respect to matters as to which the Collateral Manager
is advising the Issuer may conflict with the interests of the Collateral Manager. The Issuer hereby acknowledges that various potential
and actual conflicts of interest do or may exist with respect to the Collateral Manager as described in this Agreement and in the
Final Offering Circular; provided that nothing in this Section 5 shall be construed as altering the duties of the
Collateral Manager as set forth herein, in the Indenture or under applicable law.

 

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Section
6.          Records; Confidentiality.

 

The Collateral Manager
shall maintain or cause to be maintained appropriate books of account and records relating to its services performed hereunder,
and such books of account and records shall be accessible for inspection by representatives of the Issuer, the Trustee, the Holders,
and the Independent accountants appointed by the Collateral Manager on behalf of the Issuer pursuant to Article X of the Indenture
at any time during normal business hours and upon one Business Day prior notice. The Collateral Manager shall keep confidential
any and all information obtained in connection with the services rendered hereunder and shall not disclose any such information
to non-affiliated third parties except (a) with the prior written consent of the Issuer, (b) such information as a Rating Agency
shall reasonably request in connection with its rating of the applicable Class of Secured Notes or in supplying credit estimates
on any Collateral Obligation included in the Assets, (c) in connection with establishing trading or investment accounts or otherwise
in connection with effecting Transactions on behalf of the Issuer, (d) as required by (i) applicable law, regulation, court order,
or a request by a governmental regulatory agency with jurisdiction over the Collateral Manager or any of its Affiliates, (ii) the
rules or regulations of any self-regulating organization, body or official having jurisdiction over the Collateral Manager or any
of its Affiliates or (iii) the rules and regulations of any stock exchange on which the Secured Notes may be listed, (e) to its
professional advisors (including, without limitation, legal, tax and accounting advisors) who agree to keep such information confidential,
(f) such information as shall have been publicly disclosed other than in known violation of this Agreement or the provisions of
the Indenture or shall have been obtained by the Collateral Manager on a non-confidential basis, (g) as expressly permitted in
the Final Offering Circular, in the Indenture or in any other Transaction Document, (h) such information as is necessary or appropriate
to disclose so that the Collateral Manager may perform its duties hereunder, under the Indenture or any other Transaction Document
or (i) general performance information which may be used by the Collateral Manager, its Affiliates or their Related Persons in
connection with their marketing activities. For purposes of this Section 6, the Holders, the Trustee, the Calculation Agent
and the Collateral Administrator shall not be considered “non-affiliated third parties.” Notwithstanding the foregoing,
it is agreed that the Collateral Manager may disclose (a) that it is serving as collateral manager of the Issuer, (b) the nature,
aggregate principal amount and overall performance of the Issuer’s assets, (c) the amount of earnings on the Assets, and
(d) each of its respective employees, representatives or other agents may disclose to any and all Persons, without limitation of
any kind, the United States federal income tax treatment and United States federal income tax structure of the transactions contemplated
by the Indenture, this Agreement and the related documents and all materials of any kind (including opinions and other tax analyses)
that are provided to them relating to such United States federal income tax treatment and United States income tax structure.

 

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Section
7.          Obligations of Collateral Manager.

 

In accordance with
the Standard of Care set forth in Section 2(a), the Collateral Manager shall take care to avoid taking any action that would
(a) materially adversely affect the status of the Issuer for purposes of the United States federal or state law or other law applicable
to it, (b) not be permitted by the Issuer’s Organizational Instruments, copies of which the Collateral Manager acknowledges
the Issuer has provided to the Collateral Manager, (c) violate any law, rule or regulation of any governmental body or agency having
jurisdiction over the Issuer, including, without limitation, actions which would violate any law of the United States federal,
state or other applicable securities law which is known by the Collateral Manager to be applicable to the Issuer, (d) require registration
of either of the Issuer or the pool of Assets as an “investment company” under Section 8 of the 1940 Act, or (e) knowingly
adversely affect the interests of the Issuer in the Assets in any material respect (other than in connection with any action taken
in the ordinary course of business of the Collateral Manager in accordance with its Standard of Care). If the Collateral Manager
is ordered by the designated manager of the Issuer or the requisite Holders to take any action which would, or could reasonably
be expected to, in each case in its reasonable business judgment, have any such consequences, the Collateral Manager shall promptly
notify the Issuer and the Trustee that such action would, or could reasonably be expected to, in each case in its reasonable business
judgment, have one or more of the consequences set forth above and shall not take such action unless the Majority of the Controlling
Class then requests the Collateral Manager to do so. Notwithstanding any such request, the Collateral Manager shall not take such
action unless (i) arrangements satisfactory to it are made to insure or indemnify the Collateral Manager, Affiliates of the Collateral
Manager and shareholders, partners, members, managers, directors, officers or employees of the Collateral Manager or such Affiliates
from any liability and expense it may incur as a result of such action and (ii) if the Collateral Manager so requests in respect
of a question of law, the Issuer delivers to the Collateral Manager an Opinion of Counsel (from outside counsel satisfactory to
the Collateral Manager) that the action so requested does not violate any law, rule or regulation of any governmental body or agency
having jurisdiction over the Issuer or over the Collateral Manager. Neither the Collateral Manager nor its Affiliates, shareholders,
partners, members, managers, directors, officers or employees shall be liable to the Issuer or any other Person, except as provided
in Section 10. Notwithstanding anything contained in this Agreement to the contrary, any indemnification or insurance by
the Issuer provided for in this Section 7 or Section 10 shall be payable out of the Assets in accordance with the
Priority of Payments, and the Collateral Manager may take into account such Priority of Payments in determining whether any proposed
indemnity arrangements contemplated by this Section 7 are satisfactory. From and after the occurrence and continuance of
an Event of Default, the Collateral Manager shall continue to perform and be bound by the provisions of this Agreement and the
Indenture.

 

Section
8.          Compensation.

 

(a)          So
long as (i) KCAP Financial is the Collateral Manager and (ii) the Initial Subordinated Noteholder (together with its Affiliates)
owns and holds 100% of the Aggregate Outstanding Amount of the Subordinated Notes, the Collateral Management Fees shall be zero.
In connection with the transfer of the Subordinated Notes by the Initial Subordinated Noteholder, the Collateral Manager shall
notify the Trustee whether or not such transferee is an Affiliate of the Initial Subordinated Noteholder.

 

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(b)          On
each Payment Date, if (i) KCAP Financial is no longer the Collateral Manager or (ii) the Initial Subordinated Noteholder (together
with its Affiliates) no longer owns and holds 100% of the Aggregate Outstanding Amount of the Subordinated Notes, then, in either
case, the Collateral Manager, as compensation for its performance of its obligation as Collateral Manager under this Agreement,
will be entitled to receive a fee on each Payment Date (in accordance with the Priority of Payments), which shall consist of the
Senior Collateral Management Fee, the Subordinated Collateral Management Fee and the Incentive Collateral Management Fee (collectively,
the “Collateral Management Fee”).

 

The
Senior Collateral Management Fee (the “Senior Collateral Management Fee”) will be payable on each Payment Date
to the extent of the funds available for such purpose in accordance with the Priority of Payments. The Senior Collateral Management
Fee is payable to the Collateral Manager in arrears, on each Payment Date in an amount (as certified by the Collateral Manager
to the Trustee) shall accrue quarterly in an amount equal to 0.20% per annum (calculated on the basis of a 360-day year consisting
of twelve 30-day months) of the Fee Basis Amount at the beginning of the Collection Period relating to such Payment Date; provided
that the Senior Collateral Management Fee payable on any Payment Date shall not include any such fee (or any portion thereof)
that has been waived by the Collateral Manager hereunder.

 

The
Subordinated Collateral Management Fee (the “Subordinated Collateral Management Fee”) will be payable on each
Payment Date to the extent of the funds available for such purpose in accordance with the Priority of Payments. The Subordinated
Collateral Management Fee is payable to the Collateral Manager in arrears, on each Payment Date in an amount (as certified by
the Collateral Manager to the Trustee) shall accrue quarterly in an amount equal to 0.30% per annum (calculated on the basis of
a 360-day year consisting of twelve 30-day months) of the Fee Basis Amount at the beginning of the Collection Period relating
to such Payment Date; provided that the Subordinated Collateral Management Fee payable on any Payment Date shall not include
any such fee (or any portion thereof) that has been waived or deferred by the Collateral Manager hereunder.

 

The
Incentive Collateral Management Fee (the “Incentive Collateral Management Fee”) will be payable on each Payment
Date to the extent of the funds available for such purpose in accordance with the Priority of Payments. The Subordinated Collateral
Management Fee is payable to the Collateral Manager in arrears, on each Payment Date in an amount (as certified by the Collateral
Manager to the Trustee) in an amount equal to the sum of 20% of the amount of Interest Proceeds available to be distributed after
payment of amounts referred to in Section 11.1(a)(i)(A) through (Q) of the Indenture; 20% of the amount of Principal Proceeds
available to be distributed after payment of amounts referred to in Section 11.1(a)(ii)(A) through (O) of the Indenture and 20%
of the amount of proceeds of the collateral available to be distributed after payment of amounts referred to in Section 11.1(a)(iii)(A)
through (O) of the Indenture; provided that the Incentive Collateral Management Fee will not be payable on any Payment
Date unless the Subordinated Notes Internal Rate of Return exceeds 15%.

 

To the extent the Senior
Collateral Management Fee is not paid on a Payment Date due to insufficient Interest Proceeds or Principal Proceeds, the Senior
Collateral Management Fee due and payable on such Payment Date (if such fee was not voluntarily waived by the Collateral Manager)
shall accrue interest as specified in the Priority of Payments, until such amount has been paid in full, at the rate of LIBOR per
annum (calculated on the basis of the actual number of days elapsed in the applicable Interest Accrual Period divided by 360).
At such time as the Secured Notes are redeemed in connection with an Optional Redemption or a Tax Redemption, without duplication,
all accrued and unpaid Senior Collateral Management Fees (together with interest thereon) shall be due and payable to the Collateral
Manager.

 

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To the extent the Subordinated
Collateral Management Fee is not paid on a Payment Date due to insufficient Interest Proceeds or Principal Proceeds, the Subordinated
Collateral Management Fee due and payable on such Payment Date (if such fee was not voluntarily deferred or waived by the Collateral
Manager) shall accrue interest as specified in the Priority of Payments, until such amount has been paid in full, at the rate of
LIBOR per annum (calculated on the basis of the actual number of days elapsed in the applicable Interest Accrual Period
divided by 360).

 

To the extent the Collateral
Manager has elected pursuant to this Agreement to rescind the deferral of any previously deferred Subordinated Collateral Management
Fee, such previously deferred Subordinated Collateral Management Fee shall accrue interest, until such amount has been paid in
full, at the rate of LIBOR per annum (calculated on the basis of the actual number of days elapsed in the applicable Interest
Accrual Period divided by 360). At such time as the Secured Notes are redeemed in connection with an Optional Redemption or a Tax
Redemption, without duplication, all accrued and unpaid Subordinated Collateral Management Fees (together with interest thereon)
shall be due and payable to the Collateral Manager.

 

The Issuer hereby acknowledges
that so long as (i) KCAP Financial is the Collateral Manager hereunder and (ii) the Initial Subordinated Noteholder (together with
its Affiliates) owns and holds 100% of the Aggregate Outstanding Amount of the Subordinated Notes, the Collateral Manager shall
be entitled to receive the Management Fees in accordance with the terms of Section 7.2 of the LLC Agreement.

 

(c)          The
Collateral Manager may, in its sole discretion (but shall not be obligated to), elect to irrevocably waive all or a portion of
any Collateral Management Fee payable to the Collateral Manager on any Payment Date. In addition, the Collateral Manager may, in
its sole discretion (but shall not be obligated to), elect to defer all or a portion of the Subordinated Collateral Management
Fee, payable to the Collateral Manager on any Payment Date. Any such election shall be made by the Collateral Manager delivering
written notice thereof to the Issuer, the Collateral Administrator and the Trustee no later than the Determination Date immediately
prior to such Payment Date. Any election to defer or irrevocably waive the applicable Collateral Management Fee may also take the
place of written standing instructions to the Issuer, the Collateral Administrator and the Trustee; provided that such standing
instructions may be rescinded by the Collateral Manager at any time except during the period between a Determination Date and a
Payment Date.

 

(d)          Except
as otherwise set forth herein and in the Indenture, the Collateral Manager will continue to serve as Collateral Manager under this
Agreement notwithstanding that the Collateral Manager will not have received amounts due it under this Agreement because sufficient
funds were not then available hereunder to pay such amounts in accordance with the Priority of Payments.

 

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(e)          If
the Collateral Manager is terminated for any reason or resigns or is removed, Collateral Management Fees calculated as provided
in this Section 8 shall be prorated for any partial period elapsing from the last Payment Date on which such Collateral
Manager received the Collateral Management Fee to the effective date of such termination, resignation or removal and any unpaid
Collateral Management Fee shall be determined as of the effective date of such termination, resignation or removal and, in each
case, shall be due and payable on each Payment Date following the effective date of such termination, resignation or removal in
accordance with the Priority of Payments until paid in full. Otherwise, such Collateral Manager shall not be entitled to any further
compensation for further services but shall be entitled to receive any expense reimbursement accrued to the effective date of termination,
resignation or removal and any indemnity amounts owing (or that may become owing) under Section 7, Section 10, or
Section 15(a)(iii). Any Collateral Management Fee, expense reimbursement and indemnities owed to such Collateral Manager
in accordance with this Section 8(e) and any Collateral Management Fee, expense reimbursement and indemnities owed to any
successor Collateral Manager on any Payment Date shall be paid pro rata based on the amount thereof then due and owing to each
subject to the Priority of Payments.

 

Section
9.          Benefit of the Agreement.

 

The Collateral Manager
shall perform its obligations hereunder in accordance with the terms of this Agreement and the terms of the Indenture applicable
to it. The Collateral Manager agrees and consents to the provisions contained in Section 15.1(f) of the Indenture. In addition,
the Collateral Manager acknowledges the pledge of this Agreement under the granting clause of the Indenture.

 

Section
10.         Limits of Collateral Manager Responsibility.

 

(a)          None
of the Collateral Manager, its Affiliates or their respective Related Persons assumes any responsibility under this Agreement,
other than the Collateral Manager’s assumption of its responsibility to render the services required to be performed by it
hereunder and under the terms of the Indenture applicable to it in good faith, subject to the Standard of Care described in Section
2(a). The Collateral Manager shall not be responsible for any action or inaction of the Issuer or the Trustee in following
or declining to follow any advice, recommendation or direction of the Collateral Manager, including as set forth in Section
7. The Indemnified Parties (as defined below) shall not be liable to the Issuer, the Trustee, any Holder, the Initial Purchaser,
any of their respective Affiliates, or Related Persons or any other Persons for any act, omission, error of judgment, mistake of
law, or for any claim, loss, liability, damage, judgments, assessments, settlement, cost, or other expense (including attorneys’
fees and expenses and court costs) arising out of or with respect to any investment or for any other act or omission in the performance
of the Collateral Manager’s obligations under or in connection with this Agreement or the terms of any other Transaction
Document applicable to the Collateral Manager, incurred as a result of actions taken or recommended or for any omissions of the
Collateral Manager, or for any decrease in the value of the Assets, except for liability to which the Collateral Manager would
be subject (i) by reason of acts constituting bad faith, willful misconduct or gross negligence in the performance of its duties
hereunder and under the terms of the Indenture or (ii) with respect to the Collateral Manager Information, as of the date made,
such information containing any untrue statement of a material fact or omitting to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not misleading (the preceding clauses (i) and
(ii) collectively referred to for purposes of this Section 10 as “Collateral Manager Breaches”).
The Collateral Manager shall not be liable for any consequential, punitive, exemplary or treble damages or lost profits hereunder
or under the Indenture. Nothing contained herein shall be deemed to waive any liability which cannot be waived under applicable
state or federal law or any rules or regulations adopted thereunder.

 

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(b)          (i)
The Issuer shall indemnify and hold harmless (the Issuer in such case, the “Indemnifying Party”) the Collateral
Manager, its Affiliates and their respective Related Persons (each, an “Indemnified Party”) from and against
any and all losses, claims, damages, judgments, assessments, costs or other liabilities (collectively, “Losses”)
and will promptly reimburse each such Indemnified Party for all reasonable fees and expenses incurred by an Indemnified Party with
respect thereto (including reasonable fees and expenses of counsel) (collectively, “Expenses”) arising out of
or in connection with the issuance of the Notes (including, without limitation, any untrue statement of material fact contained
in the Offering Circulars, or omission or alleged omission to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading other than the Collateral Manager Information),
the transactions contemplated by the Offering Circulars, the Indenture or this Agreement and any acts or omissions of any such
Indemnified Party; provided, that such Indemnified Party shall not be indemnified for any Losses or Expenses incurred as
a result of any acts or omissions by such Indemnified Party that constitute a Collateral Manager Breach. Notwithstanding anything
contained herein to the contrary, the obligations of the Issuer under this Section 10 to indemnify any Indemnified Party
for any Losses or Expenses are non-recourse obligations of the Issuer payable solely out of the Assets in accordance with the Priority
of Payments set forth in the Indenture.

 

(i)          The
Collateral Manager shall indemnify and hold harmless (the Collateral Manager in such case, the “Indemnifying Party”)
the Issuer, its Affiliates and their respective Related Persons (each such party being, in such case, an “Indemnified
Party”) from and against any and all Losses and shall promptly reimburse each such Indemnified Party for all reasonable
Expenses as such Expenses are incurred in investigating, preparing, pursuing or defending any Actions in respect of or arising
out of any Collateral Manager Breaches; provided, however, that the Collateral Manager shall not be liable for any consequential,
punitive, exemplary or treble damages or lost profits.

 

(c)          An
Indemnified Party shall (or, with respect to the Related Persons of the Collateral Manager or of the Issuer, as applicable, the
Collateral Manager or the Issuer, as applicable, shall cause such Indemnified Party to) promptly notify the Indemnifying Party
if the Indemnified Party receives a complaint, claim, compulsory process or other notice of any Loss giving rise to a claim for
indemnification under this Section 10, but failure so to notify the Indemnifying Party or to comply with paragraph (d) below
shall not relieve such Indemnifying Party from its obligations under this Section 10 unless and to the extent that such
Indemnifying Party did not otherwise learn of such action or proceeding and to the extent such failure results in the forfeiture
by the Indemnifying Party of material rights and defenses.

 

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(d)          With
respect to any claim made or threatened against an Indemnified Party, or compulsory process or request served upon such Indemnified
Party for which such Indemnified Party is or may be entitled to indemnification under this Section 10, such Indemnified
Party shall (or with respect to the Related Persons of the Collateral Manager or of the Issuer, as applicable, the Collateral Manager
or the Issuer, as applicable, shall cause such Indemnified Party to):

 

(i)          at
the Indemnifying Party’s expense, provide the Indemnifying Party such information and cooperation with respect to such claim
as the Indemnifying Party may reasonably require, including, but not limited to, making appropriate personnel available to the
Indemnifying Party at such reasonable times as the Indemnifying Party may request;

 

(ii)         at
the Indemnifying Party’s expense, cooperate and take all such steps as the Indemnifying Party may reasonably request to preserve
and protect any defense to such claim;

 

(iii)        in
the event suit is brought with respect to such claim, upon reasonable prior notice, afford to the Indemnifying Party the right,
which the Indemnifying Party may exercise in its sole discretion and at its expense, (A) to participate in the investigation, defense
and settlement of such claim, and, (B) to the extent that it shall wish, to assume the defense thereof, with counsel satisfactory
to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the Indemnifying Party),
and, after notice from the Indemnifying Party to such Indemnified Party of its election so to assume the defense thereof, the Indemnifying
Party shall not be liable to such Indemnified Party under such subsection for any legal fees and expenses of other counsel or any
other expenses, in each case subsequently incurred by such Indemnified Party, in connection with the defense thereof other than
reasonable costs of investigation, except that, if such Indemnified Party reasonably determines that counsel selected by the Indemnifying
Party has a conflict of interest, such Indemnifying Party shall pay the reasonable fees and disbursements of one additional counsel
selected by the Indemnified Party (in addition to any local counsel) separate from its own counsel for all Indemnified Parties
in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general
allegations or circumstances; and

 

(iv)        neither
incur any material expense to defend against nor make any admission with respect thereto, nor permit a default or consent to the
entry of any judgment in respect thereof, in each case without the prior written consent of the Indemnifying Party; provided
that the Indemnifying Party shall have advised such Indemnified Party that such Indemnified Party is entitled to be indemnified
hereunder with respect to such claim.

 

(e)          No
Indemnified Party shall, without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld,
settle or compromise any claim giving rise to a claim for indemnity hereunder, or permit a default or consent to the entry of any
judgment in respect thereof; provided that if the Indemnified Party is the Collateral Manager or an Affiliate or a Related
Person of the Collateral Manager or of an Affiliate thereof, such Indemnified Party shall not be required to seek or obtain such
consent if it determines in good faith that the Indemnifying Party is unlikely to have sufficient funds available to indemnify
it in full, taking into account the Priority of Payments.

 

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(f)          No
Indemnifying Party shall, without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld,
settle or compromise or consent to the entry of any judgment with respect to any claim giving rise to a claim for indemnity hereunder
if such settlement includes a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any
Indemnified Party.

 

(g)          The
compliance of the Collateral Manager’s actions with the provisions of the Indenture and this Agreement shall be determined
on the date of action only, based upon the prices and characteristics of the Assets on the date of such action (or on the most
recent date practicable, in the case of Collateral Obligations not purchased or sold on such date); provided that the provisions
of the Indenture and this Agreement shall not be deemed breached as a result of changes in value, status or any other conditions
of an investment following the date of such action and the Collateral Manager shall not be responsible under this Agreement for
the performance of or any losses on the Assets acquired in accordance with this Agreement.

 

(h)          The
Assets shall be held by the Custodian appointed by the Issuer pursuant to the Indenture. The Collateral Manager and its Affiliates
shall at no time have custody or physical control of the Assets. The Collateral Manager shall not be liable for any act or omission
of the Collateral Administrator, the Trustee or any sub-custodian or other agent appointed by the Calculation Agent or the Issuer.
Any compensation owed to the Collateral Administrator, the Trustee or the Calculation Agent for their services to the Issuer shall
be the obligation of the Issuer and not the Collateral Manager.

 

Section
11.         No Joint Venture.

 

The Issuer and the
Collateral Manager are not partners or joint venturers with each other and nothing herein shall be construed to make them such
partners or joint venturers or impose any liability as such on either of them. The Collateral Manager shall be deemed, for all
purposes herein, an independent contractor and shall, except as otherwise expressly provided herein or in the Indenture or authorized
by the Issuer from time to time, have no authority to act for or represent the Issuer in any way or otherwise be deemed an agent
of the Issuer. It is acknowledged that neither the Collateral Manager nor any of its Affiliates has provided or shall provide any
tax, accounting or legal advice or assistance to the Issuer or any other Person in connection with the transactions contemplated
hereby.

 

Section
12.         Term; Termination.

 

(a)          This
Agreement shall commence as of the date first set forth above and shall continue in force until the first of the following occurs:
(i) the final liquidation of the Assets and the final distribution of the proceeds of such liquidation to the Noteholders, (ii)
the payment in full of the Notes, and the satisfaction and discharge of the Indenture in accordance with its terms or (iii) the
early termination of this Agreement in accordance with Section 12(b), (c), (d), (e) or (f) or
Section 14.

 

    	20

    	 

    

 

(b)          Subject
only to clause (c) below, the Collateral Manager may resign, upon 60 days’ prior written notice to the Issuer (or
such shorter notice as is acceptable to the Issuer) and the Trustee (and the Issuer shall direct the Trustee to distribute a copy
of such notice to the Holders within five (5) Business Days of receipt); provided that the Collateral Manager shall have
the right to resign immediately upon the effectiveness of any material change in applicable law or regulations which renders the
performance by the Collateral Manager of its duties hereunder or under the Indenture to be a violation of such law or regulation.

 

(c)          No
resignation or removal of the Collateral Manager pursuant to this Agreement shall be effective until the date as of which a successor
Collateral Manager shall have been appointed and approved and has accepted and assumed all of the Collateral Manager’s duties
and obligations pursuant to this Agreement in writing (an “Instrument of Acceptance”).

 

(d)          Promptly
after notice of any removal under Section 14 or any resignation of the Collateral Manager that is to take place while any
of the Notes are Outstanding, the Issuer shall transmit or cause the Trustee to transmit copies of such notice to the Holders and
each Rating Agency and shall appoint a successor Collateral Manager in accordance with the procedures set forth in clause (e)
below; provided that such successor Collateral Manager (i) has demonstrated an ability to professionally and competently
perform duties similar to those imposed upon the Collateral Manager hereunder, (ii) is legally qualified and has the capacity to
assume all of the responsibilities, duties and obligations of the Collateral Manager hereunder and under the applicable terms of
the Indenture, (iii) has agreed to coordinate with the replaced Collateral Manager regarding communications with the Rating Agencies,
(iv) does not cause or result in the Issuer becoming, or require the pool of Assets to be registered as, an investment company
under the 1940 Act and (v) with respect to which the Global Rating Agency Condition has been satisfied.

 

(e)          A
Majority of the Controlling Class will nominate a successor Collateral Manager that meets the criteria set forth in clause (d)
above (other than subclause (v) thereof) following the notice of the resignation or removal of the Collateral Manager and
such proposed successor will be appointed the successor Collateral Manager by the Issuer; provided that the Global Rating
Agency Condition has been satisfied with respect thereto.

 

(f)          The
successor Collateral Manager shall be entitled to such Collateral Management Fee set forth in Sections 8(b). Upon the later
of the expiration of the applicable notice periods with respect to termination specified in this Section 12 or in Section
14 and the acceptance of its appointment hereunder by the successor Collateral Manager, all authority and power of the Collateral
Manager hereunder, whether with respect to the Assets or otherwise, shall automatically and without action by any person or entity
pass to and be vested in the successor Collateral Manager. The Issuer, the Trustee and the successor Collateral Manager shall take
such action (or cause the outgoing Collateral Manager to take such action) consistent with this Agreement and as shall be necessary
to effect any such succession.

 

(g)          If
this Agreement is terminated pursuant to this Section 12, such termination shall be without any further liability or obligation
of either party to the other, except as provided in clause (h) below.

 

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(h)          Sections
6, 7 (with respect to any indemnity or insurance provided thereunder), 8 (with respect to any accrued and unpaid
Collateral Management Fees) 10, 12(g), 15, 17, 21, 22, 23 and 25 shall
survive any termination of this Agreement pursuant to this Section 12 or Section 14.

 

Section
13.         Assignments.

 

(a)          Except
as otherwise provided in this Section 13, the Collateral Manager may not assign or delegate (except as provided in Section
2(e)) its rights or responsibilities under this Agreement without (i) satisfaction of the Global Rating Agency Condition with
respect thereto and (ii) obtaining the consent of the Majority of the Controlling Class.

 

(b)          The
Collateral Manager may without satisfaction of the Global Rating Agency Condition and without obtaining the consent of the Majority
of the Controlling Class, (1) assign any of its rights or obligations under this Agreement to an Affiliate; provided that
such Affiliate (i) has demonstrated ability, whether as an entity or by its principals and employees, to professionally and competently
perform duties similar to those imposed upon the Collateral Manager pursuant to this Agreement, (ii) has the legal right and capacity
to act as Collateral Manager under this Agreement, and (iii) shall not cause the Issuer or the pool of Assets to become required
to register under the provisions of the 1940 Act or (2) enter into (or have its parent enter into) any consolidation or amalgamation
with, or merger with or into, or transfer of all or substantially all of its asset management business to, another entity and,
at the time of such consolidation, merger, amalgamation or transfer the resulting, surviving or transferee entity assumes all the
obligations of the Collateral Manager under this Agreement generally (whether by operation of law or by contract) and the other
entity has substantially the same investment staff providing investment management services to the Issuer; provided further
that the Collateral Manager shall deliver prior notice to the Rating Agencies of any assignment, delegation or combination made
pursuant to this sentence. Upon the execution and delivery of any such assignment by the assignee, the Collateral Manager will
be released from further obligations pursuant to this Agreement except with respect to its obligations and agreements arising under
Section 10, 12(g), 17, 21 through 23, and 25 in respect of its acts or omissions occurring
prior to such assignment and except with respect to its obligations under Section 15 after such assignment.

 

(c)          This
Agreement shall not be assigned by the Issuer without (i) the prior written consent of the Collateral Manager, the Trustee and
a Majority of the Controlling Class and (ii) satisfaction of the Global Rating Agency Condition, except in the case of assignment
by the Issuer (1) to an entity which is a successor to the Issuer permitted under the Indenture, in which case such successor organization
shall be bound hereunder and by the terms of said assignment in the same manner as the Issuer is bound thereunder or (2) to the
Trustee as contemplated by the granting clause of the Indenture. The Issuer may assign its rights, title and interest in (but not
its obligations under) this Agreement to the Trustee pursuant to the Indenture; and the Collateral Manager by its signature below
agrees to, and acknowledges, such assignment. Upon assignment by the Issuer, the Issuer shall use reasonable efforts to cause such
assignee to execute and deliver to the Collateral Manager such documents as the Collateral Manager shall consider reasonably necessary
to effect fully such assignment.

 

    	22

    	 

    

 

(d)          The
Issuer shall provide (or cause the Trustee to provide) the Rating Agencies and the Holders with notice of any assignment pursuant
to this Section 13.

 

Section
14.         Removal for Cause.

 

(a)          The
Collateral Manager may be removed for Cause upon (I) 10 Business Days’ prior written notice in the case of clauses (i)
through (vi) below or (II) 90 days’ prior written notice in the case of clause (vii) below, in each case, by
the Issuer or the Trustee (“Termination Notice”) at the direction of a Majority of the Controlling Class. Simultaneous
with its direction to the Issuer and the Trustee to remove the Collateral Manager for Cause, such Majority of the Controlling Class
shall give to the Issuer and the Trustee a written statement setting forth the reason for such removal (“Statement of
Cause”). The Trustee (at the direction of the Majority of the Controlling Class) shall distribute a copy of the Termination
Notice and the Statement of Cause to the Holders within five (5) Business Days of receipt. No such removal shall be effective (A)
until the date as of which a successor Collateral Manager shall have been appointed in accordance with Sections 12(d) and (e)
and delivered an Instrument of Acceptance to the Issuer and the successor Collateral Manager has effectively assumed all of
the Collateral Manager’s duties and obligations and (B) unless the Statement of Cause has been delivered to the Issuer as
set forth in this Section 14(a). “Cause” means any of the following:

 

(i)          the
Collateral Manager shall willfully and intentionally violate or breach any provision of this Agreement or the Indenture applicable
to it (not including a willful and intentional breach that results from a good faith dispute regarding reasonable alternative courses
of action or interpretation of instructions or provisions of the relevant Transaction Documents);

 

(ii)         the
Collateral Manager shall breach in any material respect any provision of this Agreement or any terms of the Indenture applicable
to it (other than as covered by clause (i) and it being understood that failure to meet any Concentration Limitation, Collateral
Quality Test or Coverage Test is not a breach for purposes of this clause (ii)), which breach would reasonably be expected
to have a Material Adverse Effect on the Holders of the Secured Notes (in their capacity as Holders of the Secured Notes) and shall
not cure such breach (if capable of being cured) within 30 days after the earlier to occur of a Responsible Officer of the Collateral
Manager receiving notice or having actual knowledge of such breach, unless, if such breach is remediable, the Collateral Manager
has taken action commencing the cure thereof within such 30 day period that the Collateral Manager believes in good faith will
remedy such breach within 60 days after the earlier to occur of a Responsible Officer receiving notice or having actual knowledge
thereof;

 

(iii)        the
failure of any representation, warranty, certification or statement made or delivered by the Collateral Manager in or pursuant
to this Agreement or the Indenture to be correct in any material respect when made which failure (A) would reasonably be expected
to have a Material Adverse Effect on the Issuer and (B) is not corrected by the Collateral Manager within 30 days of a Responsible
Officer of the Collateral Manager receiving notice of such failure, unless such failure is remediable, the Collateral Manager has
taken action commencing the cure thereof within such 30 day period that the Collateral Manager believes in good faith will remedy
such failure within 60 days after the earlier to occur of a Responsible Officer receiving notice thereof or having actual knowledge
thereof;

 

    	23

    	 

    

 

(iv)        the
Collateral Manager is wound up or dissolved or there is appointed over it or a substantial part of its assets a receiver, administrator,
administrative receiver, trustee or similar officer; or the Collateral Manager (A) ceases to be able to, or admits in writing its
inability to, pay its debts as they become due and payable, or makes a general assignment for the benefit of, or enters into any
composition or arrangement with, its creditors generally; (B) applies for or consents (by admission of material allegations of
a petition or otherwise) to the appointment of a receiver, trustee, assignee, custodian, liquidator or sequestrator (or other similar
official) of the Collateral Manager or of any substantial part of its properties or assets in connection with any winding up, liquidation,
reorganization or other relief under any bankruptcy, insolvency, receivership or similar law, or authorizes such an application
or consent, or proceedings seeking such appointment are commenced without such authorization, consent or application against the
Collateral Manager and continue undismissed for 60 days; (C) authorizes or files a voluntary petition in bankruptcy, or applies
for or consents (by admission of material allegations of a petition or otherwise) to the application of any bankruptcy, reorganization,
arrangement, readjustment of debt, insolvency, dissolution, or similar law, or authorizes such application or consent, or proceedings
to such end are instituted against the Collateral Manager without such authorization, application or consent and are approved as
properly instituted and remain undismissed for 60 days or result in adjudication of bankruptcy or insolvency or the issuance of
an order for relief; or (D) permits or suffers all or any substantial part of its properties or assets to be sequestered or attached
by court order and the order (if contested in good faith) remains undismissed for 60 days; 

 

(v)         the
occurrence and continuation of an Event of Default pursuant to Section 5.1(a) under the Indenture resulting from any willful, intentional
and material breach by the Collateral Manager of its duties under this Agreement or under the Indenture which breach or default
is not cured within any applicable cure period;

 

(vi)        the
occurrence of an act by the Collateral Manager (or an officer of the Collateral Manager engaged in the provision of advisory services
under the Collateral Management Agreement) that constitutes fraud or criminal activity in the performance of its obligations under
this Agreement (as determined pursuant to a final adjudication by a court of competent jurisdiction); and

 

(vii)       the
Overcollateralization Ratio applicable to the Class A-1 Notes fails to equal or exceed 102.0%.

 

(b)          If
any of the events specified in clauses (a)(i) through (vii) of this Section 14 shall occur, the Collateral
Manager shall give prompt written notice thereof to the Issuer, the Holders of the Controlling Class, the Holders of the Subordinated
Notes, the Trustee, and the Rating Agencies; provided that if any of the events specified in Section 14(a)(iv) shall
occur, the Collateral Manager shall give written notice thereof to the Issuer, the Trustee, and the Rating Agencies immediately
upon the Collateral Manager’s becoming aware of the occurrence of such event. A Majority of the Controlling Class may waive
any event described in Section 14(a)(i), (ii), (iii), (v), (vi) or (vii) as a basis for
termination of this Agreement and removal of the Collateral Manager under this Section 14.

 

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(c)          If
the Collateral Manager is removed pursuant to this Section 14, the Issuer shall have, in addition to the rights and remedies
set forth in this Agreement, all of the rights and remedies available with respect thereto at law or equity.

 

Section
15.         Obligations of Resigning or Removed Collateral Manager.

 

(a)          On,
or as soon as practicable after, the date any resignation or removal is effective, the Collateral Manager shall (at the Issuer’s
expense):

 

(i)          deliver
to the Issuer or to such other Person as the Issuer shall instruct all property and documents of the Issuer or otherwise relating
to the Assets then in the custody of the Collateral Manager;

 

(ii)         deliver
to the Trustee an accounting with respect to the books and records delivered to the Trustee or the successor Collateral Manager
appointed pursuant to Section 12; and

 

(iii)        agree
to cooperate with all reasonable requests related to any proceedings, even after its resignation or removal, which arise in connection
with this Agreement or the Indenture, assuming the Collateral Manager has received an indemnity in form reasonably satisfactory
to the Collateral Manager from an entity reasonably satisfactory to the Collateral Manager, and expense reimbursement reasonably
satisfactory to the Collateral Manager.

 

(b)          Notwithstanding
such resignation or removal, the Collateral Manager shall remain liable for its obligations under Section 10 and its acts
or omissions giving rise thereto and for any expenses, losses, damages, liabilities, demands, charges and claims of any nature
whatsoever (including reasonable attorneys’ fees) in respect of or arising out of a Collateral Manager Breach, subject to
the limitations of liability set forth in Section 10.

 

Section
16.         Representations and Warranties.

 

(a)          The
Issuer hereby represents and warrants to the Collateral Manager as follows:

 

(i)          The
Issuer has been duly organized and is validly existing and in good standing under the laws of the State of Delaware, has the full
power and authority to own its assets and the obligations and securities proposed to be owned by it and included in the Assets
and to transact the business in which it is presently engaged and is duly qualified under the laws of each jurisdiction where its
ownership or lease of property, the conduct of its business or the performance of this Agreement, the Indenture, the Notes or any
other Transaction Document require such qualification, except for those jurisdictions in which the failure to be so qualified,
authorized or licensed would not have a Material Adverse Effect on the Issuer.

 

    	25

    	 

    

 

(ii)         The
Issuer has full power and authority to execute, deliver and perform all of its obligations under this Agreement, the Indenture,
the Notes and any other Transaction Document to which it is a party and to perform all of its obligations under this Agreement,
the Indenture, the Notes, and any other Transaction Document to which it is a party and has taken all necessary action to authorize
this Agreement and the execution and delivery of this Agreement and the performance of all obligations imposed upon it hereunder,
and, as of the Closing Date, will have taken all necessary action to authorize the Indenture, the Notes and any other Transaction
Document to which it is a party and the execution, delivery and performance of this Agreement, the Indenture, the Notes and any
other Transaction Document to which it is a party and the performance of all obligations imposed upon it hereunder or thereunder.
No consent of any other Person including, without limitation, members and creditors of the Issuer, and no license, permit, approval
or authorization of, exemption by, notice or report to, or registration, filing (other than any filings pursuant to the UCC required
under the Indenture and necessary to perfect any security interest granted thereunder) or declaration with, any governmental authority
is required by the Issuer in connection with the execution, delivery, performance, validity or enforceability of this Agreement,
the Indenture, the Notes or any other Transaction Document to which the Issuer is a party or the obligations imposed upon the Issuer
hereunder and thereunder. This Agreement and all other Transaction Documents to which the Issuer is a party have been, and each
instrument and document to which the Issuer is a party required hereunder or under the Indenture, the Notes or any other Transaction
Document to which the Issuer is a party will be, executed and delivered by an authorized Officer of the Issuer, and this Agreement
or any other Transaction Document to which the Issuer is a party constitute, and each instrument or document required hereunder
to which the Issuer is a party, when executed and delivered hereunder or thereunder, will constitute, the legally valid and binding
obligation of the Issuer enforceable against the Issuer in accordance with its terms, subject, as to enforcement, (A) to the effect
of bankruptcy, receivership, insolvency, winding-up or similar laws affecting generally the enforcement of creditors’ rights
as such laws would apply in the event of any bankruptcy, receivership, insolvency, winding-up or similar event applicable to the
Issuer and (B) to general equitable principles (whether enforceability of such principles is considered in a proceeding at law
or in equity).

 

(iii)        The
execution, delivery and performance of this Agreement, any other Transaction Document to which the Issuer is a party and the documents
and instruments required hereunder and thereunder will not violate any provision of any existing law or regulation binding on the
Issuer, or any order, judgment, award or decree of any court, arbitrator or governmental authority binding on the Issuer, or the
Organizational Instruments of, or any securities issued by, the Issuer or of any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the Issuer is a party or by which the Issuer or any of its assets may be bound, the
violation of which would have a Material Adverse Effect on the Issuer, and will not result in or require the creation or imposition
of any lien on any of its property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract
or other agreement, instrument or undertaking (other than the lien of the Indenture).

 

(iv)        The
Issuer is not in violation of its Organizational Instruments or in breach or violation of or in default under any contract or agreement
to which it is a party or by which it or any of its property may be bound, or any applicable statute or any rule, regulation or
order of any court, government agency or body having jurisdiction over the Issuer or its properties, the breach or violation of
which or default under which would have a material adverse effect on the validity or enforceability of this Agreement, the provisions
of the Indenture or any other Transaction Document applicable to the Issuer, or the performance by the Issuer of its duties hereunder
or thereunder.

 

    	26

    	 

    

 

(b)          The
Collateral Manager hereby represents and warrants to the Issuer, as of the date hereof, as follows:

 

(i)          The
Collateral Manager is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland,
has full power and authority to own its assets and to transact the business in which it is currently engaged, and is duly qualified
to do business and is in good standing under the laws of each jurisdiction where the performance of this Agreement and any other
Transaction Document to which it is a party would require such qualification, except for those jurisdictions in which the failure
to be so qualified, authorized or licensed would not have a material adverse effect on the ability of the Collateral Manager to
perform its obligations under this Agreement, the provisions of the Indenture and any other Transaction Document applicable to
the Collateral Manager, or on the validity or enforceability of this Agreement, the provisions of the Indenture and any other Transaction
Document applicable to the Collateral Manager.

 

(ii)         The
Collateral Manager has full power and authority to execute and deliver this Agreement and any other Transaction Document to which
it is a party and to perform all of its required obligations hereunder and under the provisions of the Indenture and any other
Transaction Document applicable to the Collateral Manager, and has taken all necessary action to authorize this Agreement and any
other Transaction Document to which it is a party on the terms and conditions hereof and thereof and the execution and delivery
of this Agreement and any other Transaction Document to which it is a party and the performance of all obligations required hereunder
and thereunder applicable to the Collateral Manager. No consent of any other Person, including, without limitation, members and
creditors of the Collateral Manager, and no license, permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required by the Collateral Manager in connection with this
Agreement or any other Transaction Document applicable to it or the execution, delivery, performance, validity or enforceability
of this Agreement or any Transaction Document applicable to it or the obligations imposed on the Collateral Manager hereunder or
under the terms of the Indenture or any other Transaction Document applicable to the Collateral Manager other than those which
have been obtained or made. No representation is made herein with respect to the requirements of state securities laws or regulations.
This Agreement has been executed and delivered by an authorized Officer of the Collateral Manager, and this Agreement and any other
Transaction Document to which it is a party constitutes the valid and legally binding obligation of the Collateral Manager enforceable
against the Collateral Manager in accordance with its terms, subject, as to enforcement, (A) to the effect of bankruptcy, insolvency,
winding-up or similar laws affecting generally the enforcement of creditors’ rights as such laws would apply in the event
of any bankruptcy, receivership, insolvency, winding-up or similar event applicable to the Collateral Manager and (B) to general
equitable principles (whether enforceability of such principles is considered in a proceeding at law or in equity).

 

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(iii)        The
execution, delivery and performance of this Agreement and the terms of the Indenture and any other Transaction Document applicable
to the Collateral Manager will not violate any provision of any existing law or regulation binding on the Collateral Manager (except
that no representation is made herein with respect to the requirements of state securities laws or regulations), or any order,
judgment, award or decree of any court, arbitrator or governmental authority binding on the Collateral Manager, or the Organizational
Instruments of, or any securities issued by, the Collateral Manager or of any mortgage, indenture, lease, contract or other agreement,
instrument or undertaking to which the Collateral Manager is a party or by which the Collateral Manager or any of its assets may
be bound, the violation of which would have a material adverse effect on the business, operations, assets or financial condition
of the Collateral Manager or which would reasonably be expected to adversely affect in a material manner its ability to perform
its obligations hereunder or under the Indenture or any other Transaction Document.

 

(iv)        KCAP
Financial is an internally managed, non-diversified closed end investment company that has elected to be regulated as a business
development company under the 1940 Act with the SEC and to be taxed as a regulated investment company under the Code.

 

(v)         There
is no charge, investigation, action, suit or proceeding before or by any court pending or, to the actual knowledge of the Collateral
Manager, threatened, that, if determined adversely to the Collateral Manager, would have a material adverse effect upon the performance
by the Collateral Manager of its duties under this Agreement or the provisions of the Indenture and any other Transaction Document
applicable to the Collateral Manager.

 

(vi)        All
Referenced Information and any information in the sections entitled “Documents Incorporated by Reference,” “Summary
of Terms—Collateral Manager,” “Summary of Terms—Originator,” “Risk Factors—Risks Relating
to the Collateral Manager,” “Risk Factors—Relating to Certain Conflicts of Interest—Certain Conflicts of
Interest Relating to the Collateral Manager, the Asset Manager Affiliates and their respective Affiliates,” “Risk Factors—Other
Risks Relating to the Originator and the Issuer,” “The Collateral Manager,” “The Originator,” and
“The Depositor” contained in the Final Offering Circular, as thereafter amended or supplemented, as of the date of
the Final Offering Circular or as the date of any such amendment or supplement, as applicable (provided that the Collateral Manager
has consented to such amendment or supplement) (collectively, the “Collateral Manager Information”) does not
and, as of the Closing Date, will not contain any untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

    	28

    	 

    

 

Section
17.         Limited Recourse; No Petition.

 

The Collateral Manager
hereby agrees that it shall not institute against, or join any other Person in instituting against the Issuer any bankruptcy, reorganization,
arrangement, insolvency, moratorium or liquidation proceedings or other proceedings under U.S. federal or state or other bankruptcy
or similar laws until at least one year (or, if longer, the applicable preference period then in effect) plus one day after payment
in full of all Notes issued under the Indenture; provided that nothing in this Section 17 shall preclude the Collateral
Manager from (A) taking any action prior to the expiration of such applicable preference period in (x) any case or proceeding voluntarily
filed or commenced by the Issuer or (y) any insolvency proceeding filed or commenced against the Issuer by any Person other than
the Collateral Manager or (B) commencing against the Issuer or any properties of the Issuer any legal action that is not a bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation proceeding. The Collateral Manager hereby acknowledges and agrees
that the Issuer’s obligations hereunder will be solely the limited liability company obligations of the Issuer, and that
the Collateral Manager will not have any recourse to any of the shareholders, partners, members, managers, directors, officers,
employees, or Affiliates of the Issuer with respect to any claims, losses, damages, liabilities, indemnities or other obligations
in connection with any Transactions contemplated hereby. Notwithstanding any other provisions hereof or of any other Transaction
Document, recourse in respect of any obligations of the Issuer to the Collateral Manager hereunder or thereunder will be limited
to the Assets as applied in accordance with the Priority of Payments pursuant to the Indenture and, on the exhaustion of the Assets,
all claims against the Issuer arising from this Agreement or any Transaction Document or any Transactions contemplated hereby or
thereby shall be extinguished and shall not revive. This Section 17 shall survive the termination of this Agreement for
any reason whatsoever.

 

Section
18.         Notices.

 

Unless expressly provided
otherwise herein, all notices, requests, demands and other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received when delivered against receipt or upon actual receipt of
registered or certified mail, postage prepaid, return receipt requested, or, in the case of facsimile notice, when received in
legible form, addressed as set forth below:

 

(a)          If
to the Issuer:

 

KCAP Senior Funding I, LLC

295 Madison Avenue, 6th Floor

New York, New York 10017

Telephone No.: 212-455-8300

Facsimile No.: 212-983-7654

Attention: Daniel Gilligan

 

with a copy to the
Collateral Manager and a copy to:

 

Sutherland Asbill & Brennan

999 Peachtree Street, NE

Atlanta, GA 30309-3996

Telephone No.: (404) 853-8483

Facsimile No.: (404) 853-8806

Attention: Eric R. Fenichel

 

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(b)          If
to the Collateral Manager:

 

KCAP Financial, Inc.

295 Madison Avenue, 6th Floor

New York, New York 10017

Telephone No.: 212-455-8300

Facsimile No.: 212-455-8333

Attention: KCAP Senior Funding I, LLC

 

(c)          If
to the Trustee:

 

U.S. Bank National Association

One Federal Street, 3rd Floor

Boston, MA 02110

Telephone No.: 617-603-6536

Facsimile No.: 855-225-6612

Attention: Corporate Trust Services – KCAP Senior
Funding I, LLC

At their respective
addresses maintained in the Register or otherwise maintained by the Trustee pursuant to the Indenture.

 

Any party may change
the address or telecopy number to which communications or copies directed to such party are to be sent by giving notice to the
other parties of such change of address or telecopy number in conformity with the provisions of this Section 18 for the
giving of notice.

 

Section
19.         Binding Nature of Agreement; Successors and Assigns.

 

This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns as provided
herein.

 

Section
20.         Entire Agreement; Amendment.

 

This Agreement, the
Indenture and the Collateral Administration Agreement contain the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof, and supersede all prior and contemporaneous agreements, understandings, inducements and conditions,
express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof
and thereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in writing executed by each of the parties hereto. Neither
the Issuer nor the Collateral Manager will enter into any agreement amending, modifying or terminating this Agreement without satisfaction
of the Global Rating Agency Condition and obtaining the consent of a Majority of the Controlling Class; provided that no
such Global Rating Agency Condition or consent will be required in connection with any amendment hereto the sole purpose of which
is to (i) correct inconsistencies, typographical or other errors, defects or ambiguities or (ii) conform this Agreement to the
Final Offering Circular, the Collateral Administration Agreement or the Indenture (as it may be amended from time to time). The
Issuer shall provide the Holders with notice of any amendment of this Agreement.

 

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Section
21.         Governing Law.

 

THIS AGREEMENT SHALL
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK INCLUDING NEW YORK GENERAL OBLIGATIONS LAW §§ 5-1401 AND 5-1402
BUT OTHERWISE WITHOUT REGARD TO THE PRINCIPLES THEREOF GOVERNING CONFLICTS OF LAW.

 

Section
22.         Submission to Jurisdiction.

 

With respect to any
suit, action or proceedings relating to this Agreement or any matter between the parties arising under or in connection with this
Agreement (“Proceedings”), each party irrevocably: (i) submits to the non-exclusive jurisdiction of the
Supreme Court of the State of New York sitting in the Borough of Manhattan and the United States District Court for the Southern
District of New York, and any appellate court from any thereof; and (ii) waives any objection which it may have at any time
to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in
an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any
jurisdiction over such party. Nothing in this Agreement precludes any of the parties from bringing Proceedings in any other jurisdiction,
nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction.

 

Each of the Collateral
Manager and the Issuer irrevocably consents to the service of any and all process in any action or proceeding by the mailing or
delivery of copies of such process to it at the office to which notices are sent to it.

 

Section
23.         Waiver of Jury Trial.

 

EACH PARTY TO THIS
AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY PROCEEDING.

 

Section
24.         Conflict with the Indenture.

 

In the event that this
Agreement requires any action to be taken with respect to any matter and the Indenture requires that a different action be taken
with respect to such matter, and such actions are mutually exclusive, the provisions of the Indenture in respect thereof shall
control. In respect of any other conflict between the terms of this Agreement and the Indenture or actions required under the terms
of the Indenture and the terms of this Agreement, the terms of the Indenture shall control.

 

    	31

    	 

    

 

Section
25.         Subordination; Assignment of Agreement.

 

The Collateral Manager
agrees that the payment of all amounts to which it is entitled pursuant to this Agreement shall be subordinated to the extent set
forth in, and the Collateral Manager agrees to be bound by the provisions of, Article XI of the Indenture as if the Collateral
Manager were a party to the Indenture and hereby consents to the assignment of this Agreement as provided in Section 15.1 of the
Indenture.

 

Section
26.         Indulgences Not Waivers.

 

Neither the failure
nor any delay on the part of any party hereto to exercise any right, remedy, power or privilege under this Agreement shall operate
as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege
with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence.
No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

 

Section
27.         Costs and Expenses.

 

Except as otherwise
agreed to by the parties hereto, the costs and expenses (including the fees and disbursements of counsel and accountants) of the
Collateral Manager and of the Issuer incurred in connection with the negotiation and preparation of and the execution of this Agreement
and any amendment hereto, and all matters incidental thereto, shall be borne by the Issuer. The Issuer will reimburse the Collateral
Manager for expenses including fees and out-of-pocket expenses reasonably incurred by the Collateral Manager in connection with
services provided under this Agreement with respect to (a) legal advisers, consultants, rating agencies, accountants, brokers and
other professionals retained by the Issuer or the Collateral Manager (on behalf of the Issuer), (b) asset pricing and asset rating
services, compliance services and software, and accounting, programming and data entry services directly related to the management
of the Assets, (c) all taxes, regulatory and governmental charges (not based on the income of the Collateral Manager), insurance
premiums or expenses (d) any and all costs and expenses incurred in connection with the acquisition, disposition of investments
on behalf of the Issuer (whether or not actually consummated) and management thereof, including attorneys' fees and disbursements,
(e) any fees, expenses or other amounts payable to the Rating Agencies, (f) any extraordinary costs and expenses incurred by the
Collateral Manager in the performance of its obligations under this Agreement and the Indenture (g) any expenses related to compliance
with Rule 17g-5 of the Exchange Act and (h) as otherwise agreed upon by the Issuer and the Collateral Manager. The Issuer (or the
Collateral Manager on its behalf) shall be obligated to pay all reasonable costs and disbursements in connection with the perfection
and the maintenance of perfection, as against all third parties, of the Depositor’s, the Issuer’s and the Trustee’s
respective right, title and interest in and to the Assets (including, without limitation, the security interests provided for in
the Indenture).

 

    	32

    	 

    

 

Section
28.         Third Party Beneficiary.

 

The parties hereto
agree that the Trustee on behalf of the Secured Parties shall be a third party beneficiary of this Agreement, and shall be entitled
to rely upon and enforce such provisions of this Agreement to the same extent as if it were a party hereto.

 

Section
29.         Titles Not to Affect Interpretation.

 

The titles of paragraphs
and subparagraphs contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are
they to be used in the construction or interpretation hereof.

 

Section
30.         Execution in Counterparts.

 

This Agreement may
be executed in any number of counterparts by telegraphic or other written form of communication, each of which shall be deemed
to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the
same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall
bear the signatures of all of the parties reflected hereon as the signatories.

 

Section
31.         Provisions Separable.

 

The provisions of this
Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable
by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

 

Section
32.         Gender.

 

Words used herein,
regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural,
and any other gender, masculine, feminine or neuter, as the context requires.

 

    	33

    	 

    

 

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

 

	 	KCAP SENIOR FUNDING I, LLC,
	 	as Issuer
	 	 
	 	By:  KCAP Financial, Inc., its designated manager
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 	 
	 	KCAP FINANCIAL, INC.,
	 	as Collateral Manager
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:Exhibit 10.5

 

EXECUTION COPY

 

COLLATERAL ADMINISTRATION AGREEMENT

 

This COLLATERAL ADMINISTRATION AGREEMENT,
dated as of June 18, 2013 (the "Agreement") is entered into by and among KCAP SENIOR FUNDING I, LLC, a Delaware limited
liability company (the "Issuer"), KCAP FINANCIAL, INC., a Delaware limited liability company, as Collateral Manager (as
that term is defined in the Indenture referred to herein, together with any successor Collateral Manager under the Indenture, the
"Collateral Manager"), and U.S. BANK NATIONAL ASSOCIATION (“U.S. Bank”), acting as collateral administrator
under and for purposes of this Agreement (in such capacity, and together with any successor Collateral Administrator hereunder,
the "Collateral Administrator").

 

WITNESSETH:

 

WHEREAS, the Issuer intends to issue Class
A-1 Notes, Class B-1 Notes, Class C-1 Notes, Class D-1 Notes and Subordinated Notes (collectively, the “Notes”), each
as further described in the Indenture defined below;

 

WHEREAS, the Collateral Manager and the
Issuer have entered into a Collateral Management Agreement dated as of June 18, 2013 (the “Collateral Management Agreement”)
pursuant to which the Collateral Manager provides certain services relating to the matters contemplated by the Indenture;

 

WHEREAS, pursuant to the terms of the Indenture
dated as of June 18, 2013 (the “Indenture”) by and among the Issuer and U.S. Bank, as trustee (in such capacity, the
“Trustee”), the Issuer has pledged certain Collateral Obligations, Eligible Investments, Equity Securities and certain
other collateral (all as set forth in the Indenture) (sometimes collectively referred to herein as, the "Collateral")
as security for the Notes;

 

WHEREAS, the Issuer wishes to engage U.S.
Bank (i) to act as Collateral Administrator, and thereby to engage it to perform certain administrative duties with respect to
the Collateral pursuant to the terms of this Agreement and (ii) to act as the Information Agent pursuant to the terms of this Agreement;
and

 

WHEREAS, U.S. Bank is prepared to perform
as Collateral Administrator certain specified obligations of the Issuer, or the Collateral Manager on its behalf, under the Indenture
(and certain other services) as specified herein, upon and subject to the terms of this Agreement (but without assuming the obligations
and liabilities of the Issuer or the Collateral Manager under the Indenture or the Collateral Management Agreement).

 

NOW, THEREFORE, in consideration of the
mutual covenants contained herein, and other good and valuable consideration the receipt of which is hereby acknowledged, the parties
hereto agree as follows:

 

1.   Definitions.
Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in the Indenture.

 

    	 

    	 

    

 

2.   Powers and Duties
of Collateral Administrator.

 

(a)          U.S.
Bank shall act as Collateral Administrator pursuant to the terms of this Agreement, until U.S. Bank's resignation or removal as
Collateral Administrator pursuant to Section 7 hereof or until termination of this Agreement pursuant to Section 6 hereof. In such
capacity, the Collateral Administrator shall assist the Issuer and the Collateral Manager in connection with monitoring the Collateral
by maintaining a database of certain characteristics of the Collateral on an ongoing basis, and in providing to the Issuer and
the Collateral Manager certain reports, schedules and calculations, all as more particularly described in Section 2(b) below (in
each case in such form and content, and in such greater detail, as may be mutually agreed upon by the parties hereto from time
to time and as may be required by the Indenture), based upon information and data received from the Issuer and/or the Collateral
Manager, which reports, schedules and calculations the Issuer, or the Collateral Manager on its behalf, is required to prepare
and deliver (or which are necessary to be performed in order that certain reports, schedules and calculations can be performed
as required) under Section 10.6 and 7.18 of the Indenture. U.S. Bank’s duties and authority to act as Collateral Administrator
hereunder are limited to the duties and authority specifically set forth in this Agreement. By entering into, or performing its
duties under, this Agreement, the Collateral Administrator shall not be deemed to assume any obligations or liabilities of the
Issuer under the Indenture, or of the Collateral Manager under the Collateral Management Agreement or the Indenture, and nothing
herein contained shall be deemed to release, terminate, discharge, limit, reduce, diminish, modify, amend or otherwise alter in
any respect the duties, obligations or liabilities of the Issuer, the Collateral Manager or the Trustee under or pursuant to the
Indenture or of the Collateral Manager under or pursuant to the Collateral Management Agreement.

 

(b)          The
Collateral Administrator shall perform the following general functions from time to time:

 

(i)          Within
30 days after the Closing Date, create a collateral database with respect to the Collateral that is part of the trust estate Granted
to the Trustee from time to time, comprised of the Collateral Obligations and Equity Securities credited to the Accounts from time
to time and Eligible Investments in which amounts held in the Accounts may be invested from time to time, as provided in this Agreement
(the "Collateral Database");

 

(ii)         Update
the Collateral Database promptly for changes, including for ratings changes, and to reflect the sale or other disposition of the
Collateral Obligations, Equity Securities and Eligible Investments included in the Collateral and the addition to the trust estate
of additional Collateral Obligations, Equity Securities and Eligible Investments from time to time, in each case based upon, and
to the extent of, information furnished to the Collateral Administrator by the Issuer, Trustee, or Collateral Manager as may be
reasonably required by the Collateral Administrator from time to time;

 

(iii)        Track
the receipt and daily allocation to the Accounts of Interest Proceeds and Principal Proceeds and any withdrawals therefrom and,
on each Business Day, provide to the Collateral Manager daily reports reflecting such actions to the Accounts as of the close of
business on the preceding Business Day;

 

    	-2-

    	 

    

 

(iv)        Prepare,
on behalf of the Issuer, and arrange for delivery in accordance with the Indenture within the time frames stated therein, (A) the
Monthly Report pursuant to the terms of Section 10.6(a) of the Indenture (and cooperate with the Collateral Manager, on behalf
of the Issuer, in connection with the comparison of information and discrepancies, if any, required under the last paragraph of
said Section 10.6(a) of the Indenture) (B) the Distribution Report pursuant to Section 10.6(b) of the Indenture and (C) the Effective
Date Report pursuant to Section 7.18(c) of the Indenture (and cooperate with the Collateral Manager and the Trustee in connection
with the resolution of any discrepancy between the Effective Date Report and Effective Date Accountant’s Report;

 

(v)         Reasonably
cooperate with the Independent certified public accountants appointed by the Issuer in the preparation by such accountants of the
reports required under Sections 7.18 and 10.8 of the Indenture;

 

(vi)        Reasonably
cooperate with the Issuer and the Collateral Manager in providing the Rating Agencies with such additional information as may be
reasonably requested by the Rating Agencies and that can be provided without unreasonable burden or expense;

 

(vii)       Provide
other such information with respect to the Collateral Granted to the Trustee and not released from the trust estate as may be routinely
maintained by the Collateral Administrator in performing its ordinary Trustee function pursuant to the Indenture (so long as it
shall also serve as Trustee under the Indenture), or as may be required by the Indenture, as the Issuer or Collateral Manager may
reasonably request from time to time; and

 

(viii) Following the Effective
Date and in connection with the preparation of the Monthly Reports and upon the request of the Collateral Manager, run the computer
model setting forth the S&P CDO Monitor provided to the Collateral Administrator by S&P or the Collateral Manager.

 

(c)          After
the Effective Date, so long as the Reinvestment Period remains in effect, upon and subject to the written request of the Collateral
Manager on any Business Day and within three hours after the Collateral Administrator's receipt of such request (provided such
request is received by 12:00 Noon (Boston, Massachusetts time) on such date (otherwise such request will be deemed made on the
next succeeding Business Day), the Collateral Administrator shall perform the following functions: (A) as of the date the Collateral
Manager commits on behalf of the Issuer to purchase substitute Collateral Obligations to be included in the Collateral as Collateral
Obligations and (B) as of the date of such request, for the purpose of evaluating the inclusion of proposed substitute Collateral
Obligations, perform a pro forma calculation of the tests and other requirements constituting the Investment Criteria set forth
in Section 12.2 of the Indenture, in each case, based upon information contained in the Collateral Database and information furnished
by the Issuer or the Collateral Manager as to the proposed substitute Collateral Obligations, compare the results thereof against
the applicable requirements set forth in said Section 12.2 and report the results thereof to the Collateral Manager in a mutually
agreed format.

 

    	-3-

    	 

    

 

(d)          After
the Effective Date, so long as no Restricted Trading Period exists, upon the Collateral Administrator's receipt on any Business
Day of written notification from the Collateral Manager of its intent to sell certain Collateral Obligations pursuant to Section
12.1(g) of the Indenture and requesting that the Collateral Administrator make the following determinations, the Collateral Administrator
shall determine, within three hours after the Collateral Administrator's receipt of such request (provided such request is received
by no later than 12:00 P.M. (Boston, Massachusetts time) on such date; and otherwise such request will be deemed to be made on
the next succeeding Business Day) whether, for sales of Collateral Obligations to be sold pursuant to Section 12.1(g) of the Indenture,
the Aggregate Principal Balance of such proposed sale together with all other Collateral Obligations sold pursuant to Section 12.1(g)
of the Indenture during the twelve (12) month period immediately prior to such sale (or for the first twelve calendar months after
the Closing Date), exceeds 20% of the Collateral Principal Amount as of the first day of such twelve (12) calendar month period
(or as of the Closing Date, as the case may be) and report the results thereof to the Collateral Manager in a mutually agreed format.

 

(e)          The
Collateral Manager shall cooperate with the Collateral Administrator in connection with the preparation by the Collateral Administrator
of the Monthly Reports, the Distribution Reports, the Effective Date Report and the calculations set forth in Section 2 hereof.
 Without limiting the generality of the foregoing, the Collateral Manager shall supply in a timely fashion any information
maintained by it that the Collateral Administrator may from time to time request with respect to the Collateral and reasonably
need to complete the reports and certificates required to be prepared by the Collateral Administrator hereunder or required to
permit the Collateral Administrator to perform its obligations hereunder, including without limitation, the Market Value of a Collateral
Obligation to the extent required by the Indenture and any other information that may be reasonably required under the Indenture
with respect to, or as to the designation of, a Defaulted Obligation (including notifying the Collateral Administrator promptly
upon a Collateral Obligation becoming a Defaulted Obligation), Current Pay Obligation, Credit Improved Obligation, Discount Obligation,
Deferrable Obligation and Credit Risk Obligations. The Collateral Manager shall review and verify the contents of the aforesaid
reports, instructions, statements and certificates and shall send such reports, instructions, statements and certificates to the
Issuer for execution.

 

(f)          If,
in performing its duties under this Agreement, the Collateral Administrator is required to decide between alternative courses of
action, the Collateral Administrator may request written instructions from the Collateral Manager, acting on behalf of the Issuer,
as to the course of action desired by it. If the Collateral Administrator does not receive such instructions within two Business
Days after it has requested them, the Collateral Administrator may, but shall be under no duty to, take or refrain from taking
any such courses of action. The Collateral Administrator shall act in accordance with instructions received after such two-day
period except to the extent it has already taken, or committed itself to take action inconsistent with such instructions. The Collateral
Administrator shall be entitled to rely on the advice of legal counsel and independent accountants in performing its duties hereunder
and shall be deemed to have acted in good faith if it acts in accordance with such advice.

 

    	-4-

    	 

    

 

(g)          To
the extent of any ambiguity in the interpretation of any definition or term contained herein or the Indenture or to the extent
more than one methodology can be used to make any of the determinations or calculations set forth herein, the Collateral Administrator
shall request direction from the Collateral Manager as to the resolution of such ambiguity with respect to the interpretation and/or
methodology to be used, and the Collateral Administrator shall follow such direction and shall be entitled to conclusively rely
thereon without any responsibility or liability therefor.

 

(h)          Nothing
herein shall prevent the Collateral Administrator or any of its Affiliates from engaging in other businesses or from rendering
services of any kind to any Person.

 

2A.         17g-5
Information.

 

(a)          The
Issuer hereby appoints the Collateral Administrator to act as the Information Agent.

 

(b)          The
sole duty of the Information Agent shall be to (y) forward or cause to be forwarded via email the following information to the
extent that any such item is delivered to it via electronic mail to the email address and in the manner provided for in this Section
2A, the following items (collectively hereinafter referred to as the “Information”) and (z) deliver such Information
to each of Moody’s and S&P at the addresses provided in Section 14.3 of the Indenture:

 

(i)          Event
of Default or acceleration notices required to be provided to the Rating Agencies pursuant to Article V of the Indenture;

 

(ii)         Reports,
information or statements required to be provided to the Rating Agencies pursuant to Article X of the Indenture;

 

(iii)        Any
notices, information, requests or responses required to be delivered by the Issuer or the Trustee to the Rating Agencies pursuant
to the Indenture;

 

(iv)        Copies
of amendments or supplements to the Indenture and amendments to this Collateral Administration Agreement, the Collateral Management
Agreement and the Securities Account Control Agreement, in each case, provided by or on behalf of the Issuer to the Information
Agent; and

 

(v)         Any
additional items provided by the Issuer, the Trustee or the Collateral Manager to the Information Agent pursuant to Section 14.17
of the Indenture for posting to the 17g-5 Website.

 

Notwithstanding anything herein or any
other document to the contrary, in no event shall the Information Agent be responsible for posting any information other than the
Information in accordance herewith.

 

(c)          The
Issuer shall be responsible for posting (or causing to posted) all of the 17g-5 Information and any other information on the 17g-5
Website other than the Information delivered to the Information Agent.

 

    	-5-

    	 

    

 

(d)          The
Information Agent shall forward the foregoing information to the Issuer Website on the same Business Day of receipt, provided that
such information is received by it by 12:00 p.m. (eastern time) or, if received after 12:00 p.m. (eastern time), on the next Business
Day. The Information Agent shall have no obligation or duty to verify, confirm or otherwise determine whether the information being
delivered is accurate, complete, conforms to the transaction, or otherwise is or is not anything other than what, it purports to
be. In the event that any information is delivered or posted in error, the Information Agent may request that it be removed from
the 17g-5 Website. Except to the extent such information is prepared by the Trustee in accordance with the Indenture (and the Trustee
and Collateral Administrator are the same entity), neither the Trustee nor the Information Agent (acting in such capacity) shall
be deemed to have obtained actual knowledge of any information solely by receipt and posting to the 17g-5 Website. The Information
Agent shall promptly post all Information it receives in accordance with this Section in the manner required by Section 2A(f),
subject to Section 2A(b) hereof.

 

(e)          The
parties hereto agree that any Information required to be provided to the Information Agent under the Indenture or under this Agreement
shall be sent to the Information Agent at the following e-mail address: KCAPSeniorFundingILLC.17g-5.Information@usbank.com], with
(i) the subject line referring to “17g-5 Information” and “KCAP Senior Funding I, LLC” (or such other e-mail
address or subject line specified by the Information Agent in writing to the Issuer and the Collateral Manager) and (ii) an indication
of the type of Information being provided in the body of such e-mail. All e-mails sent to the Information Agent pursuant to this
Agreement or the Indenture shall only contain the Information and no other information, documents requests or communications. Each
e-mail sent to the Information Agent pursuant to this Agreement or the Indenture failing to be sent to the e-mail address or which
does not contain a subject line conforming to the requirements of the first sentence of this Section 2A(f) shall be deemed
incomplete and the Information Agent shall have no obligations with respect thereto.

 

(f)          The
Information Agent shall not be responsible for and shall not be in default hereunder or under the Indenture, or incur any
liability for any act or omission, failure, error, malfunction or delays in carrying out any of its duties which results from
(i) the Issuer’s, Collateral Manager’s or any other party’s failure to deliver all or a portion of the
Information to the Information Agent; (ii) defects in the Information supplied by the Issuer, the Collateral Manager or any
other party to the Information Agent; (iii) the Information Agent acting in accordance with Information prepared or supplied
by any party; (iv) the failure or malfunction of the 17g-5 Website; or (v) any other circumstances beyond the reasonable
control of the Information Agent. The Information Agent shall be under no obligation to make any determination as to the
veracity or applicability of any Information provided to it hereunder, or whether any such Information is required to
be maintained on the 17g-5 Website pursuant to the Indenture or under Rule 17g-5 promulgated under the Securities and
Exchange Act of 1934, as amended (or any successor provision to such rule) (the “Rule”).

 

(h)          In
no event shall the Information Agent be deemed to make any representation in respect of the content of the 17g-5 Website or
compliance of the 17g-5 Website with the Indenture, the Rule, or any other law or regulation.

 

    	-6-

    	 

    

 

(i)          The
Information Agent shall not be responsible or liable for the dissemination of any identification numbers or passwords for the
17g-5 Website, including by the Issuer, the Rating Agencies, the NRSROs, any of their agents or any other party.
Additionally, the Information Agent shall not be liable for the use of any information posted on the 17g-5 Website, whether
by the Issuer, the Collateral Manager, the Rating Agencies, the NRSROs or any other third party that may gain access to the
17g-5 Website or the information posted thereon.

 

(j)          In
no event shall the Information Agent be responsible for creating or maintaining the 17g-5 Website. The Information Agent
shall have no liability for any failure, error, malfunction, delay, or other circumstances beyond the reasonable control of
the Information Agent, associated with the 17g-5 Website.

 

(k)          The
Information Agent shall have no obligation to engage in or respond to any oral communications, in connection with the initial
credit rating of the Notes or the credit rating surveillance of the Notes, with any Rating Agency or any of their respective
officers, directors, employees, agents or attorneys.

 

(l)          To
the extent the entity acting as the Collateral Administrator is also acting as the Information Agent, the rights, privileges,
immunities and indemnities of the Collateral Administrator set forth herein and the Indenture shall also apply to it in its
capacity as the Information Agent.

 

3.   Compensation.
The Issuer agrees to pay, and the Collateral Administrator shall be entitled to receive compensation for, and reimbursement
for expenses in connection with, the Collateral Administrator's performance of the duties called for herein (including for
avoidance of doubt, its duties as Information Agent); provided that such amounts will be payable solely from and pursuant to
Section 11.1 of the Indenture.

 

4.   Limitation of Responsibility
of the Collateral Administrator; Indemnification.

 

(a)          The
Collateral Administrator will have no responsibility under this Agreement other than to render the services expressly called for
hereunder in good faith and without willful misfeasance, gross negligence or reckless disregard of its duties hereunder. The Collateral
Administrator shall incur no liability to anyone in acting upon any signature, instrument, statement, notice, resolution, request,
direction, consent, order, certificate, report, opinion, bond or other document or paper reasonably believed by it to be genuine
and reasonably believed by it to be signed by the proper party or parties. The Collateral Administrator may exercise any of its
rights or powers hereunder or perform any of its duties hereunder either directly or, upon notice to the Collateral Manager, by
or through agents or attorneys, and the Collateral Administrator shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed hereunder with due care by it. Neither the Collateral Administrator nor any of its affiliates,
directors, officers, shareholders, agents or employees will be liable to the Collateral Manager, the Issuer or any other Person,
except by reason of acts or omissions by the Collateral Administrator constituting bad faith, willful misfeasance, gross negligence
or reckless disregard of the Collateral Administrator's duties hereunder. The Collateral Administrator shall in no event have any
liability for the actions or omissions of the Issuer, the Collateral Manager or any other Person, and shall have no liability for
any inaccuracy or error in any duty performed by it that results from or is caused by inaccurate, untimely or incomplete information
or data received by it from the Issuer, the Collateral Manager or another Person (other than the Trustee, if the same entity shall
be serving as Trustee and Collateral Administrator hereunder) except to the extent that such inaccuracies or errors are caused
by the Collateral Administrator's own bad faith, willful misfeasance, gross negligence or reckless disregard of its duties hereunder.
The Collateral Administrator shall not be liable for failing to perform or delay in performing its specified duties hereunder which
results from or is caused by a failure or delay on the part of the Issuer, the Collateral Manager or another Person (other than
the Trustee, if the same entity shall be serving as Trustee and Collateral Administrator hereunder) in furnishing necessary, timely
and accurate information to the Collateral Administrator. The duties and obligations of the Collateral Administrator and its employees
or agents shall be determined solely by the express provisions of this Agreement and they shall not be under any obligation or
duty except for the performance of such duties and obligations as are specifically set forth herein, and no implied covenants shall
be read into this Agreement against them. The Collateral Administrator may consult with counsel and shall be protected in any action
reasonably taken in good faith in accordance with the advice of such counsel.

 

    	-7-

    	 

    

 

(b)          The
Collateral Administrator may rely conclusively on any notice, certificate or other document (including, without limitation, telecopier
or other electronically transmitted instructions, documents or information) furnished to it hereunder and reasonably believed by
it in good faith to be genuine. The Collateral Administrator shall not be liable for any action taken by it in good faith and reasonably
believed by it to be within the discretion or powers conferred upon it, or taken by it pursuant to any direction or instruction
by which it is governed hereunder, or omitted to be taken by it by reason of the lack of direction or instruction required hereby
for such action. The Collateral Administrator shall not be bound to make any investigation into the facts or matters stated in
any certificate, report or other document; provided, however, that, if the form thereof is prescribed by this Agreement, the Collateral
Administrator shall examine the same to determine whether it conforms on its face to the requirements hereof. The Collateral Administrator
shall not be deemed to have knowledge or notice of any matter unless actually known to a Trust Officer working in its Corporate
Trust Services Division/CDO Department (or successor group). Under no circumstances shall the Collateral Administrator be liable
for indirect, punitive, special or consequential damages under or pursuant to this Agreement, its duties or obligations hereunder
or arising out of or relating to the subject matter hereof. It is expressly acknowledged by the Issuer and the Collateral Manager
that application and performance by the Collateral Administrator of its various duties hereunder (including recalculations to be
performed in respect of the matters contemplated hereby) shall be based upon, and in reliance upon, data and information provided
to it by the Collateral Manager (and/or the Issuer) with respect to the Collateral, and the Collateral Administrator shall have
no responsibility for the accuracy of any such information or data provided to it by such persons. Nothing herein shall impose
or imply any duty or obligation on the part of the Collateral Administrator to verify, investigate or audit any such information
or data (except to the extent any such information provided is patently incorrect or inconsistent with any proximally received
information or instruction, in which case the Collateral Administrator shall investigate any such information), or to determine
or monitor on an independent basis whether any issuer of the Collateral is in default or in compliance with the underlying documents
governing or securing such securities, from time to time, the role of the Collateral Administrator hereunder being solely to perform
certain mathematical computations and data comparisons as provided herein. For purposes of monitoring changes in ratings, the Collateral
Administrator shall be entitled to use and rely (in good faith) exclusively upon a single electronic financial information reporting
services selected by the Collateral Administrator with due care (which for ratings by S&P may be www.standardandpoors.com
or www.ratingsdirect.com) and shall have no liability for any inaccuracies in the information
reported by, or other errors or omissions of, any such service. It is hereby expressly agreed that one such service (without implied
limitation) is Bloomberg Financial Markets.

 

    	-8-

    	 

    

 

(c)          The
Issuer shall, and hereby agrees to, reimburse, indemnify and hold harmless the Collateral Administrator and its affiliates, directors,
officers, shareholders, agents and employees for and from any and all losses, damages, liabilities, demands, charges, costs, expenses
(including the reasonable fees and expenses of counsel and other experts) and claims of any nature in respect of, or arising from
any acts or omissions performed or omitted by the Collateral Administrator, its affiliates, directors, officers, shareholders,
agents or employees pursuant to or in connection with the terms of this Agreement, or in the performance or observance of its duties
or obligations under this Agreement; provided the same are in good faith and without willful misfeasance and/or gross negligence
on the part of the Collateral Administrator or any of its affiliates, directors, officers, shareholders, agents or employees or
without reckless disregard of its duties hereunder provided that such amounts will be payable solely from and pursuant to Section
11.1 of the Indenture.

 

(d)          Neither
the Collateral Manager nor the Collateral Administrator, nor their respective affiliates, directors, officers, shareholders, agents
or employees, shall be liable for any expenses, losses, damages, liabilities, demands, charges and claims of any nature (whether
actual or consequential) suffered by the Issuer, the Collateral Administrator, the Collateral Manager, or any of their respective
affiliates, directors, officers, shareholders, agents or employees except for such expenses, losses, damages, liabilities, demands,
changes and claims that are the result of or caused by bad faith, willful misfeasance or gross negligence on its part, as the case
may be, in the performance of or reckless disregard of, its duties under this Agreement.

 

(e)          Without
limiting the generality of any terms of this Section 4, the Collateral Administrator shall have no liability for any failure, inability
or unwillingness on the part of the Collateral Manager or Issuer (or Trustee, if not the same Person as the Collateral Administrator)
to provide accurate and complete information on a timely basis to the Collateral Administrator, or otherwise on the part of any
such party to comply with the terms of this Agreement, the Indenture or Collateral Management Agreement, and shall have no liability
for any inaccuracy or error in the performance or observance on the Collateral Administrator's part of any of its duties hereunder
that is caused by or results from any such inaccurate, incomplete or untimely information received by it, or other failure on the
part of any such other party to comply with the terms hereof.

 

(f)          Nothing
herein shall obligate the Collateral Administrator to determine independently the characteristics or characterization (or to verify
or evaluate the Collateral Manager’s characterization of) any Collateral, including whether any item of Collateral is Margin
Stock, a a Defaulted Obligation, Current Pay Obligation, Credit Improved Obligation, Discount Obligation, Deferrable Obligation
and Credit Risk Obligation, within the meaning of those terms in the Indenture, it being understood that any such determination
shall be based exclusively upon notification the Collateral Administrator may receive from the Collateral Manager or from (or in
its capacity as) the Trustee (based upon notices received by the Trustee from the issuer, or trustee or agent bank under an Underlying
Instrument, or similar source).

 

    	-9-

    	 

    

 

(g)          Notwithstanding
anything herein and without limiting the generality of any terms of this Section 4, the Collateral Administrator shall have no
liability to the extent of any expense, loss, damage, demand, charge or claim resulting from or caused by events or circumstances
beyond the reasonable control of the Collateral Administrator including, without limitation, the interruption, suspension or restriction
of trading on or the closure of any securities markets, power or other mechanical or technological failures or interruptions, computer
viruses, communications disruptions, work stoppages, natural disasters, fire, war, terrorism, riots, rebellions, or other similar
acts.

 

5.   No Joint Venture.
Nothing contained in this Agreement (i) shall constitute the Issuer, the Collateral Administrator and the Collateral Manager members
of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (ii) shall be construed
to impose any liability as such on any of them or (iii) shall be deemed to confer on any of them any express, implied or apparent
authority to incur any obligation or liability on behalf of the others.

 

6.   Term. This Agreement
shall continue in effect so long as the Indenture remains in effect with respect to the Notes, unless this Agreement has been previously
terminated in accordance with Section 7 hereof.

 

7.   Termination.

 

(a)          This
Agreement may be terminated without cause by any party upon not less than 90 days' written notice to the other parties.

 

If at any time prior to the payment in full
of the obligations under the Notes U.S. Bank shall resign or be removed as Trustee under the Indenture, such resignation or removal
shall be deemed a resignation or removal of the Collateral Administrator hereunder.

 

(b)          At
the option of the Issuer, this Agreement may be terminated upon ten days' written notice of termination from the Issuer to the
Collateral Administrator if any of the following events shall occur:

 

(i)          the
Collateral Administrator shall default in any material respect in the performance of any of its duties under this Agreement and
shall not cure such default within thirty days (or, if such default cannot be cured in such time, shall not have given within thirty
days such assurance of cure as shall be reasonably satisfactory to the Issuer);

 

(ii)         a
court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Collateral Administrator in
any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a
receiver, conservator, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Collateral Administrator
or for any substantial part of its property, or order the winding up or liquidation of its affairs; or

 

    	-10-

    	 

    

 

(iii)        the
Collateral Administrator shall commence a voluntary case under applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to
the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official)
of the Collateral Administrator or for any substantial part of its property, or shall make any general assignment for the benefit
of creditors; shall fail generally to pay its debts as they become due; or permits or suffers all or substantially all of its properties
or assets to be sequestered or attached by a court order and the order remains undismissed for 60 days.

 

If any of the events specified in clauses
(ii) or (iii) of this Section 7 (b) shall occur, the Collateral Administrator shall give written notice thereof to the Collateral
Manager and the Issuer within one Business Day after the occurrence of such event.

 

(c)          No
removal or resignation of the Collateral Administrator shall be effective until the date as of which a successor collateral administrator
reasonably acceptable to the Issuer shall have agreed in writing to assume all of the Collateral Administrator's duties and obligations
pursuant to this Agreement and shall have executed and delivered an agreement in form and content reasonably satisfactory to the
Issuer, the Collateral Manager and the Trustee. Upon any resignation or removal of the Collateral Administrator hereunder, the
Issuer shall promptly, and in any case within thirty (30) days after the related notice of resignation or removal, appoint a qualified
successor to act as collateral administrator hereunder and cause such successor collateral administrator to execute and deliver
an agreement accepting such appointment as described in the preceding sentence. If the Issuer fails to appoint such a qualified
successor which duly accepts its appointment by properly executing and delivering such an agreement within such time, the retiring
Collateral Administrator shall be entitled to petition a court of competent jurisdiction for the appointment of a successor to
serve as collateral administrator hereunder and shall be indemnified pursuant to Section 4(c) for the reasonable costs and expenses
thereof.

 

(d)          Nothing
herein shall obligate the Collateral Administrator (so long as the same Person is serving as Trustee under the Indenture and as
Collateral Administrator hereunder) to take any action, or perform any duty, on its part as Collateral Administrator pursuant to
the terms of this Agreement would be in conflict with or in violation of its duties or obligations as Trustee under the Indenture.

 

(e)          Any
Person into which the Collateral Administrator may be merged or converted or with which it may be consolidated, or any Person resulting
from any merger, conversion or consolidation to which the Collateral Administrator shall be a party, or any Person succeeding to
all or substantially all of the corporate trust business of the Collateral Administrator, shall be the successor of the Collateral
Administrator hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto.

 

(f)          The
Collateral Administrator shall provide notice of any such termination to the Rating Agencies.

 

    	-11-

    	 

    

 

8.   Representations and
Warranties.

 

(a)          The
Collateral Manager hereby represents and warrants to U.S. Bank and the Issuer as follows:

 

(i)          The
Collateral Manager is a Delaware limited liability company and has the full limited liability company power and authority to execute,
deliver and perform this Agreement and all obligations required hereunder and has taken all necessary limited liability company
action to authorize this Agreement on the terms and conditions hereof, the execution, delivery and performance of this Agreement
and the performance of all obligations imposed upon it hereunder. No consent of any other person including, without limitation,
partners and creditors of the Collateral Manager, and no license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any governmental authority, except those that have been obtained, is required
by the Collateral Manager in connection with this Agreement or the execution, delivery, performance, validity or enforceability
of this Agreement and the obligations imposed upon it hereunder. This Agreement once executed by all parties hereto, constitutes
the legal, valid and binding obligations of the Collateral Manager enforceable against the Collateral Manager in accordance with
its terms subject, as to enforcement, (a) to the effect of bankruptcy, insolvency or similar laws affecting generally the enforcement
of creditors' rights as such laws would apply in the event of any bankruptcy, receivership, insolvency or similar event applicable
to the Collateral Manager and (b) to general equitable principles (whether enforceability of such principles is considered in a
proceeding at law or in equity).

 

(ii)         The
execution, delivery and performance of this Agreement and the documents and instruments required hereunder will not violate any
provision of any existing law or regulation binding on the Collateral Manager, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Collateral Manager, or the governing instruments of, or any securities or partnership
interests issued by, the Collateral Manager or of any mortgage, indenture, lease, contract or other agreement, instrument or undertaking
to which the Collateral Manager is a party or by which the Collateral Manager or any of its assets may be bound, the violation
of which would have a material adverse effect on the business, operations, assets or financial condition of the Collateral Manager
and will not result in, or require, the creation or imposition of any lien on any of its property, assets or revenues pursuant
to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking.

 

(b)          The
Issuer hereby represents and warrants to the Collateral Administrator and the Collateral Manager as follows:

 

    	-12-

    	 

    

 

(i)          The
Issuer is a Delaware limited liability company and has the full power and authority to execute, deliver and perform this Agreement
and all obligations required hereunder and has taken all necessary action to authorize this Agreement on the terms and conditions
hereof, the execution, delivery and performance of this Agreement and the performance of all obligations imposed upon it hereunder.
No consent of any other person including, without limitation, stockholders and creditors of the Issuer, and no license, permit,
approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental
authority, except those that have been obtained, is required by the Issuer in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and the obligations imposed upon it hereunder. This Agreement,
once executed by all parties hereto, constitutes the legal, valid and binding obligations of the Issuer enforceable against the
Issuer in accordance with their terms subject, as to enforcement, (a) to the effect of bankruptcy. insolvency or similar laws affecting
generally the enforcement of creditors' rights as such laws would apply in the event of any bankruptcy, receivership, insolvency
or similar event applicable to the Issuer and (b) to general equitable principles (whether unenforceability of such principles
is considered in a proceeding at law or in equity).

 

(ii)         
The execution, delivery and performance of this Agreement and the documents and instruments required hereunder will not violate
any provision of any existing law or regulation binding on the Issuer, or any order, judgment, award or decree of any court, arbitrator
or governmental authority binding on the Issuer, or the governing instruments of, or any securities issued by, the Issuer or of
any mortgage, indenture, lease, contract or other agreement, instrument or undertaking to which the Issuer is a party or by which
the Issuer or any of its assets may be bound, the violation of which would have a material adverse effect on the business, operations,
assets or financial condition of the Issuer and will not result in, or require, the creation or imposition of any lien on any of
its property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement,
instrument or undertaking.

 

(c)          The
Collateral Administrator hereby represents and warrants to the Collateral Manager and the Issuer as follows:

 

(i)          The
Collateral Administrator is a national banking association duly organized, and validly existing under the laws of The United States
of America and has full corporate power and authority to execute, deliver and perform this Agreement and all obligations required
hereunder and has taken all necessary corporate action to authorize this Agreement on the terms and conditions hereof, the execution,
delivery and performance of this Agreement and all obligations required hereunder. No consent of any other person including, without
limitation, stockholders and creditors of the Collateral Administrator, and no license, permit, approval or authorization of, exemption
by, notice or report to, or registration, filing or declaration with, any governmental authority, except those that have been obtained,
is required by the Collateral Administrator in connection with this Agreement or the execution, delivery, performance, validity
or enforceability of this Agreement and the obligations imposed upon it hereunder. This Agreement, once executed by all parties
hereto, constitutes the legal, valid and binding obligations of the Collateral Administrator enforceable against the Collateral
Administrator in accordance with its terms subject, as to enforcement, (a) to the effect of bankruptcy, insolvency or similar laws
affecting generally the enforcement of creditors' rights as such laws would apply in the event of any bankruptcy, receivership,
insolvency or similar event applicable to the Collateral Administrator and (b) to general equitable principles (whether enforceability
of such principles is considered in a proceeding at law or in equity).

 

    	-13-

    	 

    

 

(ii)         The
execution, delivery and performance of this Agreement and the documents and instruments required hereunder will not violate any
provision of any existing law or regulation binding on the Collateral Administrator, or any order, judgment, award or decree of
any court, arbitrator or governmental authority binding on the Collateral Administrator, or the Amended and Restated Articles of
Association or Amended and Restated Bylaws of the Collateral Administrator or of any mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the Collateral Administrator is a party or by which the Collateral Administrator
or any of its assets may be bound, the violation of which would have a material adverse effect on the business, operations, assets
or financial condition of the Collateral Administrator and will not result in, or require, the creation or imposition of any lien
on any of its property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.

 

9.   Amendments; Instrument
Under Seal. This Agreement may not be amended, changed, modified or terminated (except as otherwise expressly provided herein)
except (i) by the Collateral Manager, the Issuer and the Collateral Administrator in writing and (ii) with prior written notice
to the Rating Agencies. This Agreement is intended to take effect as an instrument under seal.

 

10.  Governing Law. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN CONFORMITY WITH THE LAWS OF THE STATE OF NEW YORK WITH RESPECT TO AGREEMENTS MADE
AND TO BE PERFORMED THEREIN.

 

11.  Notices. All notices,
requests, directions and other communications permitted or required hereunder shall be in writing and shall be deemed to have been
duly given when received.

 

If to the Collateral Administrator, to:

 

U.S. Bank National Association

Corporate Trust Services/CDO Department

One Federal Street, Third Floor

Boston, MA 02110

Ref: KCAP Senior Funding I, LLC

Facsimile: 855-225-6612

Email: KCAP.Senior.Funding@usbank.com

 

If to the Collateral Manager,
to:

 

KCAP Financial, Inc.

295 Madison Avenue, 6th
Floor

New York, NY 10017

Attention: Daniel Gilligan

 

    	-14-

    	 

    

 

Facsimile: 212-983-7654

Email: Gilligan@kcapinc.com

 

If to the Issuer, to:

 

KCAP Senior Funding I, LLC

295 Madison Avenue, 6th
Floor

New York, NY 10017

Attention: Daniel Gilligan

Facsimile: 212-983-7654

Email: Gilligan@kcapinc.com

 

12.  Successors and Assigns.
This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the Collateral Manager,
the Issuer and the Collateral Administrator; provided, however, that the Collateral Administrator may not assign (by operation
of law or otherwise) its rights and obligations hereunder without the prior written consent of the Collateral Manager and the Issuer,
and prior notice to the Rating Agencies, except that U.S. Bank as Collateral Administrator may delegate to, employ as agent, or
otherwise cause any duty or obligation hereunder to be performed by, any direct or indirect wholly owned subsidiary of U.S. Bancorp
or U.S. Bank National Association or its successors without the prior written consent of the Collateral Manager and the Issuer
(provided that in such event U.S. Bank as Collateral Administrator shall remain responsible for the performance of its duties as
Collateral Administrator hereunder); and the Collateral Administrator may perform duties through attorneys and agents as provided
in Section 4(a) hereof.

 

13.  Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together
shall constitute but one and the same instrument. Delivery of an executed counterpart signature page of this Agreement by e-mail
(.pdf) or facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.

 

14.  Conflict with the Indenture.
If this Agreement shall require that any action be taken with respect to any matter and the Indenture shall require that a different
action be taken with respect to such matter, and such actions shall be mutually exclusive, or if this Agreement should otherwise
conflict with the Indenture, the provisions of the Indenture in respect thereof shall control.

 

15.  Subordination. The
Collateral Administrator agrees that the payment of all amounts to which it is entitled pursuant to this Agreement shall be subordinated
to the extent set forth in, and the Collateral Administrator agrees to be bound by the provisions of, the Indenture (as if it were
a party to the Indenture, in the case of any successor Collateral Administrator that is not also serving as Trustee under the Indenture).
Notwithstanding anything to the contrary contained herein, the obligations of the Issuer hereunder are limited recourse obligations
of the Issuer payable solely from the Collateral and following realization of the Collateral, application of the proceeds thereof
in accordance with the Priority of Payments under the Indenture and their reduction to zero, all obligations of and all claims
against the Issuer for hereunder or arising in connection herewith shall be extinguished and shall not thereafter revive. Each
of the other parties hereto further agrees that it will not have any recourse against the directors, officers, employees and agents
of the Issuer for any such amounts. The Collateral Administrator consents to the assignment of this Agreement as provided in the
granting clause of the Indenture. The provisions of this clause shall survive termination of this Agreement for any reason whatsoever.

 

    	-15-

    	 

    

 

16.  Survival. Notwithstanding
any term herein to the contrary, all indemnifications set forth or provided for in this Agreement, together with Sections 15 and
17 of this Agreement, shall survive the terminations of this Agreement.

 

17.  No Petition in Bankruptcy.
The Collateral Administrator and the Collateral Manager agree not to file or join in the filing of an involuntary petition in bankruptcy
in any jurisdiction against the Issuer for the nonpayment of the Collateral Administrator's fees or other amounts payable by the
Issuer under this Agreement until the payment in full of all Notes and the redemption of the Preferred Shares issued by the Issuer
and the expiration of a period equal to the applicable preference period then in effect plus one (1) day following said payment.
And in no circumstances will any of the other parties hereto seek to bring any action against any officer, director, employee,
shareholder, incorporator, partner or affiliate of the Issuer for any amounts owing hereunder. The provisions of this clause shall
survive termination of this Agreement for any reason whatsoever.

 

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    	-16-

    	 

    

 

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

 

	 	KCAP Senior Funding I, LLC
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 
	 	KCAP Financial, Inc.
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:
	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as
	 	Collateral Administrator
	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:

 

    	-17-

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