10-12G

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES

EXCHANGE ACT OF 1934

VENTURE LENDING & LEASING V, INC.

(Exact name of registrant as specified in charter)

MARYLAND	14-1974295
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2010 NORTH FIRST STREET, SUITE 310, SAN JOSE, CA	95131
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (408) 436-8577

Securities to be registered pursuant to 12(b) of the Act:

NONE

Securities to be registered pursuant to 12(g) of the Act:

   Common Stock, $.001 Par Value   

(Title of Class)

INFORMATION REQUIRED IN REGISTRATION STATEMENT

ITEM 1.  BUSINESS

(a)  General Development of Business.

GENERAL.  Venture Lending & Leasing V, Inc. (“Fund”), a Maryland corporation, is a newly organized, non-diversified, closed-end management investment company electing status as a business development company (a “BDC”) under the Investment Company Act of 1940 (the “1940 Act”).  The Fund’s investment objective is to achieve a high total return.  The Fund will primarily provide secured debt financing to carefully selected venture capital-backed companies.  Secondarily, the Fund may provide debt financing to public and late-stage private companies.  In most cases, the Fund will receive warrants to acquire equity securities of the companies in which the Fund invests in connection with the Fund’s loans.  Westech Investment Advisors, Inc. (“Westech Advisors” or the “Investment Manager”) will serve as the Fund’s Investment Manager.  See Items 5 and 7 for the information about the Investment Manager.  The Fund was incorporated on August 18, 2006.  The Fund has not yet commenced operations and is registering its shares of Common Stock, $.001 par value (the “Shares”), pursuant to Section 12(g) of the Securities Exchange Act of 1934 (the “Act” or the “1934 Act”), in compliance with the requirement of Section 54(a)(2) of the 1940 Act.  Its principal office is located at 2010 North First Street, Suite 310, San Jose, California 95131 and its telephone number is (408) 436-8577.

OWNERSHIP OF THE FUND.  Initially, the Fund will be owned entirely by Venture Lending & Leasing V, LLC, a Delaware limited liability company (the “Company”), to which the Fund will sell 100,000 Shares (“Initial Shares”), at a price of $0.25 per Share in an offering exempt from the registration requirements of the Securities Act of 1933 (“1933 Act”) pursuant to Section 4(2) and Regulation D (“Regulation D”) thereof.  The Company will offer and sell membership interests (the “Interests”) to investors (the “Members”) in an offering exempt from the registration requirements of the 1933 Act pursuant to Regulation D, and will sell its Interests in that offering solely to persons that are both “accredited investors”, as that term is defined in Regulation D, and “qualified purchasers” within the meanin g of the 1940 Act.  To the extent called for by the Fund, the Company, subject to its approval of the need for such funds, may make further contributions to the capital (“LLC Contributions”) of the Fund to the extent of the Members’ capital commitment to the Company (“Committed Equity Capital”).  The Company intends to seek $250 million in such capital commitments, but may accept up to $300 million.

USE OF PROCEEDS.  The Fund intends to apply the net proceeds from its initial sale of Shares and the LLC Contributions primarily to provide debt financing in the form of secured loans to carefully selected venture-capital backed companies, and secondarily to public and late-stage private companies.  To a lesser extent, the Fund may use net proceeds to make equity investments in Eligible Portfolio Companies (as defined below) and other companies, in furtherance of its investment objective and policies.

(b)  Financial Information About Industry Segments.

Not applicable; the Fund has not commenced business and has no reserves.

(c)  Narrative Description of Business.

Investment Program

GENERAL.  The Fund’s investment objective is to achieve a high total return.  There can be no assurance that the Fund will attain its investment objective.  The Fund primarily will provide financing to carefully selected venture capital-backed companies; such financing will be in the form of secured loans.  Secondarily, up to 20% of the aggregate cost of all investments of the Fund determined over the life of the Fund may be used for special situation investments, which are expected to consist principally of convertible and subordinated debt financing to public and late-stage private companies.  In most cases, the Fund will receive warrants to acquire equity securities in connection with its venture loans.  The Fund also may directly purchase equity securities of venture-backed companies (including equity securities of companies whose loans are held by the Fund).  Such purchases will not exceed 10% of the aggregate cost of all investments of the Fund determined over the life of the Fund.  The Fund will make available significant managerial assistance through its officers to certain companies whose securities are held in the Fund’s portfolio, as described under “Regulation.”  

As a BDC, the Fund must invest at least 70% of its total assets in qualifying assets (“Qualifying Assets”) consisting of (a) interests in “eligible portfolio companies” as defined in the 1940 Act (“Eligible Portfolio Companies”) and (b) certain other assets including cash and cash equivalents.  An Eligible Portfolio Company is a United States company that is not an investment company and that (i) does not have a class of securities registered on an exchange or included in the Federal Reserve Board’s over-the-counter margin list; (ii) is actively controlled by a BDC and has an affiliate of a BDC on its board of directors; or (iii) meets such other criteria as may be established by the United States Securities and Exchange Commission (the “SEC”).  The Fund may invest up to 30% of its total assets in non-Qualifyin g Assets, including interests in companies that are not Eligible Portfolio Companies (for example, because the company’s securities are quoted on the National Association of Securities Dealers’ Automated Quotation System (“NASDAQ”)) and Eligible Portfolio Companies as to which the Fund does not offer to make available significant managerial assistance.

VENTURE LOANS.  Venture loans generally will be made pursuant to a negotiated loan agreement, and be evidenced by promissory notes secured by specific equipment or other assets of the borrower financed with the proceeds of such loans, or secured by a broader lien on substantially all of the borrower’s assets where the purpose of the loan is to provide growth or general working capital to the borrower.  The loans typically are secured by a first-position lien on such assets.  The Fund will receive periodic payments (usually monthly) of interest and principal, and may receive a final payment in the nature of additional, deferred interest in an amount equal to a percentage of the original loan amount, payable at maturity of the loan (whether as stated or accelerated).  The interest rate and amortization terms of venture loans and all other t ransaction terms will be individually negotiated between the Fund and each borrower.  

The documentation for venture loans will include representations, warranties, covenants and events of default intended to protect the Fund and which are customary for commercial transactions of this type and size.  Typical material terms include restrictions on additional debt, covenants to maintain the collateral and keep it adequately insured and free of liens, prohibitions against sale or other disposition of the assets except under specified conditions, and acceleration provisions making the remaining outstanding amounts under the loan immediately due and payable and giving rise to a right to take possession of the collateral upon certain events of default, including failure to make required payments, insolvency, and failure to comply with covenants.  There can be no assurance that the value of the collateral at the time of default will be at least equal t o the outstanding amount due under the loan.

Typically, loans will be structured as commitments by the Fund to provide financing, in one or more advances over a specified period of availability, determined during the underwriting process.  The commitment of the Fund to finance future asset acquisitions or growth capital needs is typically subject to the absence of any default under the loan and compliance by the borrower with requirements relating to, among other things, the type of assets to be acquired.  Although the Fund’s commitment generally will provide that the Fund is not required to continue to fund additional asset purchases or growth capital if there is a material adverse change in the borrower’s financial condition, it is possible that a borrower’s financial condition will not be as strong at the time a loan is funded as it was when the related commitment was made.

WARRANTS.  In most cases, the Fund will acquire warrants to purchase equity securities of the borrower in connection with financings.  It is anticipated that such warrants, generally, will be distributed by the Fund to the Company shortly following their acquisition.  The terms of the warrants, including the expiration date, exercise price and terms of the equity security for which the warrant may be exercised, will be negotiated individually with each borrower, and will likely be affected by the price and terms of securities issued by the company to its venture capitalists and other holders in equity financings close in time to the Fund’s making of the loan commitment.  Based upon the Investment Manager’s past experience, it is anticipated that most warrants will be for exercisable for a term of five to ten years, and will have an e xercise price based upon the price at which the borrower most recently issued equity securities or, if a new equity offering is anticipated, the future price of such equity securities (and sometimes a “blended price”).  The equity securities for which the warrant will be exercised generally will be convertible preferred stock (of which there may be one or more classes) or common stock.  Substantially all the warrants and underlying equity securities will be restricted securities under the 1933 Act at the time of issuance; the Fund generally negotiates registration rights with the borrower that may provide “piggyback” and S-3 registration rights, which permit the owner of the warrant under certain circumstances to include some or all of the securities that will be acquired upon exercise of the warrant in a registration statement filed by the borrower.  The Fund generally will negotiate “net issuance” provisions in the warrants, which allow the owner of the warrant to exercise the warrant without payment of any cash, and thereby receive a net amount of shares determined by the increase in the value of the issuer’s stock (at the time of exercise) above the exercise price stated in the warrant.

EQUITY SECURITIES.  The Fund also may make direct investments in equity securities having an aggregate cost of up to 10% of the aggregate cost of all investments of the Fund and the Company determined over the life of the Fund and the Company.  The Investment Manager will seek to make at least 80% of these investments (based on cost) in companies in which a professionally managed venture capital fund is the lead investor, with up to 20% (based on cost) in seed-stage companies or other early stage transactions where the Investment Manager may take a more active role, including a board of directors’ position.  Such direct investments generally will be in equity securities of borrowers in the Fund’s portfolio, although equity securities of other companies could also be purchased.  It is anticipated that the Fund would not make loans to companies in which the Fund has made a direct equity investment until such time as a professionally managed venture capital firm has made an investment as a lead and the Investment Manager is no longer in an active role.  The Investment Manager expects that the equity securities generally will be convertible preferred stock, though it is possible the Fund would invest directly in common stock of venture capital-backed companies.  The Investment Manager also expects the transfer restrictions and registration and other rights with respect to direct equity investments will be substantially the same as those applicable to the equity securities underlying the warrants which the Fund will receive in connection with its loans.  It is likely that, as in the case of warrants, direct equity investments generally will be distributed by the Fund to the Company shortly following their acquisition, although, in this case, as a result of U.S. federal income tax and 1940 Act requirements, the equity investmen ts may be held by the Fund for a longer period of time prior to their distribution to the Company.

Investment Policies

For purposes of these investment policies and unless otherwise specified, references to the percentage of the Fund’s total assets “invested” in securities of a company will be deemed to refer, in the case of financings in which the Fund commits to provide financing prior to funding the commitment, to the amount of the Fund’s total assets represented by the value of the maximum amount of securities to be issued by the borrower to the Fund pursuant to such commitment; the Fund will not be required to divest securities in its portfolio or decline to fund an existing commitment because of a subsequent change in the value of securities the Fund has previously acquired or committed to purchase.  

DIVERSIFICATION STANDARDS.  The Fund will be classified as a “non-diversified” closed-end investment company under the 1940 Act.  Until the Fund qualifies as a regulated investment company (“RIC”), it will not be subject to the diversification requirements applicable to RICs under the Internal Revenue Code.  Commencing with the first capital call, the Investment Manager will seek to increase the diversification of the Fund’s portfolio so as to make it possible to meet the RIC diversification requirements, as described below.  There can be no assurance, however, that the Fund will be able to meet those requirements.

To qualify as a RIC, the Fund must meet the issuer diversification standards under the Internal Revenue Code that require that, at the close of each quarter of the Fund’s taxable year, (i) not more than 25% of the market value of its total assets is invested in the securities of a single issuer, and (ii) at least 50% of the market value of its total assets is represented by cash, cash items, government securities, securities of other RICs and other securities (with each investment in such other securities limited so that not more than 5% of the market value of the Fund’s total assets is invested in the securities of a single issuer and the Fund does not own more than 10% of the outstanding voting securities of a single issuer).

INDUSTRY SEGMENT CONCENTRATION.  The Fund will invest no more than 30% of its total assets in securities of companies in any single industry segment.  The broad industry categories in which the Fund anticipates that most of its investments will fall (and within each of which there may be several “segments” for purposes of the industry diversification policy) include computer and semiconductor-related, medical/biotechnology, software and communications.

INVESTMENT GUIDELINES.  In selecting investments for the Fund’s portfolio, the Investment Manager will endeavor to meet the investment guidelines as established by the Fund’s board of directors.  The Fund may, however, make investments that do not conform to one or more of these guidelines when deemed appropriate by the Investment Manager.  Such investments might be made if the Investment Manager believes that a failure to conform in one area is offset by exceptional strength in another or is compensated for by a higher yield, favorable warrant issuance or other attractive transaction terms or features.

STAGE OF DEVELOPMENT GUIDELINES.  The Investment Manager will seek to diversify the Fund’s portfolio based on the development stage of the companies in which it invests.  The Investment Manager will seek to invest the Fund’s assets in securities of companies that, in its opinion, are in the start-up, emerging growth or mezzanine stages of development, except that the Investment Manager may invest up to 5% of the Fund’s total assets in securities of companies that, in its opinion, are in the seed capital stage.  The Fund would invest in seed capital stage companies for strategic purposes, with the goal of making additional, larger investments if the company succeeds.  For purposes of these investment guidelines, the stages of development are defined as follows:

·

Seed capital companies represent the earliest stage of development.  These companies have raised relatively modest equity capital to prove a concept and qualify for start-up capital.  

Their activities generally are limited to product development, scientific and market research, recruiting a management team and developing a business plan.  These companies likely do not have financial support from either venture capitalists or large companies making strategic investments.

·

Start-up stage companies are completing or have recently completed product development and initial marketing, but have not sold their products commercially.  Generally such firms have made market studies, assembled key management, developed a business plan and are ready to commence operations.

·

Emerging growth stage companies have initiated or are about to initiate full-scale operations and sales, but may not be showing a profit.

·

Mezzanine stage companies are approaching or have attained break even or profitability and are continuing to expand.  An acquisition or initial public offering may be imminent.

Classification of a company by stage of development necessarily involves a subjective judgment by the Investment Manager, and it is possible that other investors or market analysts would classify a company differently than the classification used by the Fund.

QUALITY GUIDELINES.  The Investment Manager will seek to invest at least 65% of the Fund’s aggregate investments (determined over the life of the Fund) that meet the following criteria:

Company Criteria

·

The company has a minimum capitalization of at least $1 million.

·

The company has at least nine months’ available cash to fund its operations (excluding the cost of the financing to be provided by the Fund) or indications from its equity investors that they will make investments necessary to provide such cash.

·

At least two venture capital investors have indicated a current intention to make additional equity financing available to the company, or the company has a forecasted positive cash flow.

·

The company’s business plan contemplates sales of at least $25 million within five years.

·

The company has or will consummate equity venture capital financing prior to funding the loan.

Transaction Criteria for Loans

·

The term of the loan does not exceed 60 months, and does not extend beyond December 31, 2015.

·

Debt service requirements of the loan are, in the opinion of the Investment Manager, not likely to become an impediment to the company raising additional capital.

·

At least 75% of the assets to be financed are, in the opinion of the Investment Manager, critical to the company’s day-to-day operations or the loan is secured by substantially all of the assets of the borrower.

Equity Venture Capital Support Criteria

·

At least two of the company’s equity venture capital investors (including the lead investor) have (i) in the opinion of the Investment Manager, significant venture capital industry experience and (ii) at least $50 million under management.

SPECIAL SITUATIONS.  The Investment Manager may invest up to 20% of the Fund’s aggregate investments determined over the life of the Fund in special situation investments.  Such special situations could include investments targeted towards late-stage or public companies seeking additional growth capital to expand product offerings, increase market penetration or fund strategic acquisitions of other companies or technology.  The Investment Manager will target companies whose cash flow from operations and cash reserves are expected to service the Fund’s investment on a current basis.  Investments may be structured as senior debt, convertible debt, or other debt/equity structures.  In addition, special situations could include investments in a “troubled” company undergoing a restructuring or recapitalization of its existi ng debt or equity, and making investments in subordinated debt, providing bridge financing to a company which is in the process of raising additional private equity, planning an initial public offering or is seeking to enter into a business combination through which it would be acquired.

INTERNATIONAL INVESTMENTS.  As a BDC, the Fund may invest no more than 30% of its total assets in companies which are not “Eligible Portfolio Companies.”  An “Eligible Portfolio Company” must be organized under the laws of, and have its principal place of business in, the United States.  Therefore, the Fund could invest up to, but no more than, 30% of its total assets in foreign based companies.  If reasonably practicable, investments in foreign based companies would be secured by foreign based assets in addition to being secured by any assets located in the United States.  

LEVERAGE. The Fund intends to borrow money from and issue debt securities to banks, insurance companies and other lenders to obtain additional funds to originate loans (and possibly for special situation investments).  Under the 1940 Act, the Fund may not incur borrowings unless, immediately after the borrowing is incurred, such borrowings would have “Asset Coverage” of at least 200%.  “Asset Coverage” means the ratio which the value of the Fund’s total assets, less all liabilities not represented by (i) the borrowings and (ii) any other liabilities constituting “senior securities” under the 1940 Act, bears to the aggregate amount of such borrowings and senior securities.  The practical effect of this limitation is to limit the Fund’s borrowings and other senior securities to 50% of its total assets less its liabilities other than the borrowings and other senior securities.  The 1940 Act also requires that, if the Fund borrows money, provision be made to prohibit the declaration of any dividend or other distribution on the Shares (other than a dividend payable in Shares), or the repurchase by the Fund of Shares, if, after payment of such dividend or repurchase of Shares, the Asset Coverage of such borrowings would be below 200%.  If the Fund is unable to pay dividends or distributions in the amounts required under the Internal Revenue Code, it might not be able to qualify as a RIC or, if qualified, to continue to so qualify.

The use of leverage increases investment risk.  Lenders will most likely require that the Fund pledge portfolio assets as collateral for loans, and may require that the Company provide guarantees or other credit enhancement. If the Fund is unable to service the borrowings, the Fund may risk the loss of such pledged assets.  Lenders will likely require that the Fund agree to loan covenants limiting the Fund’s ability to incur additional debt or otherwise limiting the Fund’s flexibility, and loan agreements may provide for acceleration of the maturity of the indebtedness if certain financial tests are not met.  To minimize risks associated with borrowing money at variable rates, while the Fund lends money at fixed rates, the Fund may (or may be required by its lenders to) enter into interest rate hedging transactions with respect to all or any por tion of the Fund’s borrowings.  There can be no assurance that such interest rate

hedging transactions will be available in forms acceptable to the Fund.  In addition, entering into interest rate hedging transactions raises costs to the Fund.

TEMPORARY INVESTMENTS.  Pending investment, and until distributions to the shareholders are made, the Fund and the Company will invest excess cash in: (i) time deposits, certificates of deposit and similar instruments of highly-rated banks; (ii) securities issued or guaranteed by the U.S. government, its agencies or instrumentalities; (iii) repurchase agreements that are: (a) issued by highly-rated banks or securities dealers; and (b) fully collateralized by U.S. government securities; (iv) short-term high-quality debt instruments of U.S. corporations; and (v) pooled investment funds whose investments are restricted to those described above.  The average maturity of such investments, weighted by their par value, will not exceed 90 days.  Pooled funds that seek to maintain a constant net asset value will be considered to have a maturity of one day f or the purpose of calculating weighted average maturity.  

OTHER INVESTMENT POLICIES.  The Fund will not sell securities short (except to the extent the Fund has a warrant for, or owns, shares equal to the number of shares which is the subject of the proposed short sale), purchase securities on margin (except to the extent the Fund’s permitted borrowings are deemed to constitute margin purchases), write puts or calls, purchase or sell commodities or commodity contracts (except interest rate hedging transactions in connection with the Fund’s permitted borrowings), or purchase or sell real estate.  Options, however, may be acquired as a hedge for equity investments.  The Fund will not underwrite the securities of other companies, except to the extent it may be deemed an underwriter upon the disposition of restricted securities acquired in the ordinary course of its business.  The Fund may, how ever, use borrowed funds for its lending activities.

The Fund’s investment objectives, investment policies and investment guidelines (other than its status as a BDC) are not fundamental policies and may be changed by the Fund’s board of directors at any time.

Regulation

After filing an election to be treated as a BDC, a company may not withdraw its election without first obtaining the approval of holders of a majority of its outstanding voting securities (as defined under the 1940 Act).  The following is a brief description of the 1940 Act and is qualified in its entirety by reference to the full text of the 1940 Act and the rules thereunder.

Generally, to be eligible to elect BDC status, a company must engage in the business of furnishing capital and offering significant managerial assistance to Eligible Portfolio Companies.  More specifically, in order to qualify as a BDC, a company must (i) be a domestic company; (ii) have registered a class of its securities, or have filed a registration statement, with the SEC pursuant to Section 12 of the 1934 Act; (iii) operate for the purpose of investing in the securities of certain types of Eligible Portfolio Companies; (iv) offer to extend significant managerial assistance to such Eligible Portfolio Companies; (v) have a majority of disinterested directors; and (vi) file (or under certain circumstances, intend to file) a proper notice of election with the SEC.  The National Securities Markets Improvement Act of 1996 relaxed the requirement set forth in c lause (iv), above, in certain respects; in this regard, a BDC is not required to offer significant managerial assistance to an issuer (x) which has total assets of not more than $4 million and capital and surplus of not less than $2 million or (y) with respect to any other issuer that meets such criteria as the SEC otherwise may provide.

“Making available significant managerial assistance” is defined under the 1940 Act, in relevant part, as: (i) an arrangement whereby the BDC, through its officers, directors, employees or general partners, offers to provide and, if accepted, does provide, significant guidance and counsel concerning the management, operations or business objectives of a portfolio company; or (ii) the exercise by a BDC of a

controlling influence over the management or polices of the portfolio company by the BDC acting individually or as part of a group acting together which controls the portfolio company.  The officers of the Fund, on behalf of the Fund, and the officers of the Investment Manager, on behalf of the Company, intend to offer to provide managerial assistance, including advice on equipment acquisition and financing, cash flow and expense management, general financing opportunities, acquisition opportunities and opportunities to access the public securities markets, to the great majority of companies to whom the Fund provides venture loans.  The right to offer such assistance will typically be provided in the negotiated documents for the loan transactions.  In some instances, officers of the Fund might serve on the board of directors of borrowers or of companies i n which it makes an equity investment.  

An “Eligible Portfolio Company” is a United States company that is not an investment company and that either: (i) does not have a class of securities registered on an exchange or included in the Federal Reserve Board’s over-the-counter margin list; (ii) is actively controlled by a BDC and has an affiliate of a BDC on its board of directors; or (iii) meets such other criteria as may be established by the SEC.  Control under the 1940 Act is presumed to exist where a BDC owns more than 25% of the outstanding voting securities of the eligible portfolio company.

The 1940 Act prohibits or restricts BDCs from investing in certain types of companies, such as brokerage firms, insurance companies, investment banking firms, and investment companies.  Moreover, the 1940 Act limits the type of assets that BDCs may acquire to certain prescribed “Qualifying Assets” and certain assets necessary for its operations (such as office furniture, equipment, and facilities) if, at the time of acquisition, less than 70% of the value of BDCs assets consist of Qualifying Assets.  Qualifying Assets include:  (i) privately acquired securities of companies that were Eligible Portfolio Companies at the time such BDC acquired their securities; (ii) securities of bankrupt or insolvent companies; (iii) securities of Eligible Portfolio Companies controlled by a BDC; (iv) securities received in exchange for or distributed with respec t to any of the foregoing; and (v) cash items, government securities and high-quality short-term debt.  The 1940 Act also places restrictions on the nature of transactions in which, and the persons from whom, securities can be purchased in order for the securities to be considered Qualifying Assets.  Such restrictions include limiting purchases to transactions not involving a public offering and the requirement that securities be acquired directly from either the Eligible Portfolio Company or its officers, directors or affiliates.

The Fund, as a BDC, may sell its securities at a price that is below its net asset value per share provided a majority of the Fund’s disinterested directors determines that such sale would be in the best interests of the Fund and its shareholders and upon the approval by the holders of a majority of its outstanding voting securities, including a majority of the voting securities held by non-affiliated persons, of such policy or practice within one year of such sale.  A majority of the disinterested directors also must determine in good faith, in consultation with the underwriters of the offering if the offering is underwritten, that the price of the securities being sold is not less than a price which closely approximates market value of the securities, less any distribution discounts or commissions.  As defined in the 1940 Act, the term “majority of the outstanding voting securities” of the Fund means the vote of (i) 67% or more of the shares present at a meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy, or (ii) more than 50% of outstanding shares, whichever is less.

Many of the transactions involving a company and its affiliates (as well as affiliates of those affiliates) which were prohibited without the prior approval of the SEC under the 1940 Act (prior to its amendment in 1980) are permissible for BDCs, including the Fund, upon the prior approval of a majority of the Fund’s disinterested directors and a majority of the directors having no financial interest in the transactions.  Some transactions, however, involving certain persons related to the Fund, including its directors, officers, the Investment Manager and the Company, may still require the prior approval of the SEC.  In general: (i) any person who owns, controls, or holds power to vote more than 5% of the Fund’s

outstanding shares; (ii) any director, executive officer, or general partner of a person described in clause (i); and (iii) any person who directly or indirectly controls, is controlled by, or is under common control with, a person described in clause (i), must obtain the prior approval of a majority of the Fund’s disinterested directors, and, in some situations, the prior approval of the SEC, before engaging in certain transactions with the Fund or any company controlled by the Fund.  The 1940 Act generally does not restrict transactions between the Fund and its Eligible Portfolio Companies.  While a BDC may change the nature of its business so as to cease being a BDC (and in connection therewith withdraw its election to be treated as a BDC) only if authorized to do so by a majority vote (as defined by the 1940 Act) of its outstanding voting securities, shareholder approval of changes in other fundamental investment policies of a BDC is not required (in contrast to the general 1940 Act requirement, which requires shareholder approval for a change in any fundamental investment policy).

Taxation

The following is a general summary of certain of the United States federal income tax laws relating to the Fund.  This discussion is based on the Internal Revenue Code, the Treasury Regulations thereunder (“Regulations”), published rulings, procedures and announcements and court decisions as of the date hereof.  The tax law, as well as the implementation thereof, is subject to prospective and retroactive change, and any such change might interfere with the Fund’s ability to qualify as a RIC or, if the Fund so qualifies, to maintain such qualification.  This discussion does not purport to deal with all of the United States federal income tax consequences applicable to the Fund or to all categories of investors, some of whom may be subject to special rules.  In addition, it does not address state, local, foreign or other taxes to which the Fund or its investors may be subject, or any proposed changes in applicable tax laws.  Investors should consult their tax advisers with respect to an investment in Fund Shares.

TAXATION OF THE FUND AS AN ORDINARY CORPORATION

It is anticipated that, commencing with the second year of its investment operations, the Fund will seek to meet the requirements, including diversification requirements, to qualify for the special pass-through status available to RICs under the Internal Revenue Code, and thus to be relieved of federal income tax on that part of its net investment income and realized capital gains that it distributes to shareholders.  Unless and until the Fund meets these requirements, it will be taxed as an ordinary corporation on its taxable income for that year (even if that income is distributed to the shareholders) and all distributions out of its earnings and profits will be taxable to shareholders as dividends; thus, such income will be subject to a double layer of tax (although corporate shareholders may be entitled to a dividends-received deduction).  There is no assu rance that the Fund will meet the requirements to qualify as a RIC.

TAXATION OF THE FUND AS A RIC

Consequences of Converting From an Ordinary Corporation to a RIC.  In order to qualify as a RIC, the Fund must, at the end of the first year in which it so qualifies, have no accumulated earnings and profits from years in which it was not taxed as a RIC.  To meet this requirement, the Fund must, before the end of the first year in which it qualifies as a RIC, distribute as dividends all of its accumulated earnings and profits.  In addition to the foregoing, pursuant to the Regulations, the Fund must either (i) recognize gain on the disposition of any asset during the ten year period (the “Recognition Period”) beginning on the first day of the first taxable year for which the Fund qualifies for pass-through status as a RIC that is held by the Fund as of the beginning of such Recognition Period, to the extent of the excess of (a) the fair m arket value of such asset as of the beginning of such Recognition Period over (b) the Fund’s adjusted tax basis in such asset as of the beginning of such Recognition Period (such excess, hereinafter, “built-in gain”), taxable at the highest regular corporate rates or (ii) elect to immediately recognize and

pay tax on any such built-in gain with respect to any of its portfolio holdings and, as described above, distribute the earnings and profits from such deemed sales.  As a RIC, the Fund generally would not be able to use any net operating loss carryforwards relating to periods prior to the first year in which the Fund qualifies as a RIC.

RIC Qualification Requirements.  In order to qualify as a RIC under Subchapter M of the Internal Revenue Code, the Fund must, among other things, (1) derive at least 90% of its gross income for each taxable year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including gains from options, futures and forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and net income derived from an interest in a qualified publicly traded partnership (as defined in Section 851(h) of the Internal Revenue Code), (2) diversify its holdings so that, at the end of each quarter of each taxable year: (a) at least 50% of the value of the Fund’s total assets is represented by (i) cash and cash items, U .S. government securities, and securities of other RICs, and (ii) other securities, with such other securities limited, in respect to any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets and to not more than 10% of the outstanding voting securities of such issuer and (b) not more than 25% of the value of the Fund’s total assets is invested in (i) the securities (other than U.S. government securities and securities of other RICs) of any one issuer, (ii) the securities (other than securities of other RICs) of two or more issuers that the Fund controls and that are engaged in the same, similar, or related trades or businesses, or (iii) the securities of one or more qualified publicly traded partnerships, and (3) file an election to be a RIC.

If the Fund qualifies as a RIC and properly distributes to its shareholders each taxable year an amount equal to or exceeding the sum of (1) 90% of its “investment company taxable income” as that term is defined in the Internal Revenue Code (which includes, among other things, dividends, taxable interest, and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses) without regard to the deduction for dividends paid and (2) 90% of the excess of its gross tax-exempt interest, if any, over certain disallowed deductions, the Fund generally will not be subject to U.S. federal income tax on any income of the fund, including “net capital gain” (the excess of net long-term capital gain over net short-term capital loss), distributed to its shareholders. However, if the Fund meets such distrib ution requirements and, thus, is eligible for pass-through status, but chooses to retain some portion of its investment company taxable income or net capital gain, it generally will be subject to U.S. federal income tax at regular corporate income tax rates on the amount retained.  A distribution of warrants or equity investments to its shareholders will be treated as a sale by the Fund of such assets with the excess of the fair market value of those assets over their tax basis being the amount of the income or gain to the Fund arising from the distribution.  

If, after initially qualifying as a RIC, the Fund fails to qualify as a RIC that is eligible for pass-through status for any taxable year, it will be treated as a U.S. corporation subject to U.S. federal income tax, thereby subjecting any income earned by the fund to tax at the corporate level and to a further tax at the shareholder level when such income is distributed.  In such a case, there may be substantial tax and other costs associated with re-qualifying as a RIC.  

The Fund will be subject to a nondeductible 4% excise tax (“Excise Tax”) to the extent it fails to distribute by the end of any calendar year at least 98% of its ordinary income for such calendar year and 98% of its capital gain net income for the one-year period ending on October 31 of such calendar year, plus certain other undistributed amounts.  For these purposes, any taxable income retained by the Fund, and on which it pays federal income tax, will be treated as having been distributed.

The Fund currently intends to distribute in each year for which it qualifies as a RIC substantially all of its net investment income and capital gain net income so as not to be subject to either federal income tax or Excise Tax.

Effect of Certain Investments and Investment Practices.  The Fund’s activities generally will be unlike the typical activities engaged in by most investment companies that seek to qualify as RICs for federal income tax purposes.  Certain aspects of these activities may at times make it more difficult for the Fund to satisfy the requirements for qualifying as a RIC than is the case for other investment companies.  For example, because the timing of borrowings under the Fund’s loan commitments will be primarily controlled by the borrower, it is possible that, due to borrowings being made under some commitments at a faster pace than others, the Fund might experience difficulty in meeting the Diversification Requirement as of the close of a quarter of a taxable year.  This difficulty might be exacerbated during the early period of the Fu nd’s existence, when the Fund will have outstanding financing commitments and loans funded thereunder to fewer borrowers than will be the case for later periods.  If the Fund does not meet the diversification requirement as of the close of any fiscal quarter by reason of a discrepancy existing immediately after the acquisition of any security or other property which is wholly or partly the result of such acquisition during such quarter, it generally will not lose its status as a RIC for such quarter if such discrepancy is eliminated within 30 days after the close of such quarter and in such cases it shall be considered to have met such requirements at the close of such quarter.  There can be no assurance, however, that the Fund will be able to eliminate a discrepancy within the 30 day period.

To the extent that the terms of venture loans provide for the receipt by the Fund of additional interest at the end of the loan term (known as residual income), the Fund would be required to accrue such residual income over the life of the loan, and to include such accrued income in its gross income for each taxable year even if it receives no portion of such residual income in that year.  Thus, in order to meet the distribution requirement and avoid payment of income taxes or the Excise Tax on undistributed income, the Fund may be required in a particular year to distribute as a dividend an amount in excess of the total amount of income it actually receives.  Those distributions will be made from the Fund’s cash assets, from amounts received through amortization of loans or from borrowed funds.

TAXATION OF THE FUND’S SHAREHOLDERS IF THE FUND QUALIFIES AS A RIC

General.  Generally, dividends paid to shareholders that are attributable to the Fund’s net investment income (which, for this purpose, includes net short-term capital gains) will be taxable to shareholders (and, therefore, the Members) as ordinary income.  Since the Fund’s income is expected to be derived primarily from sources that do not pay “qualified dividend income,” such dividends generally will not qualify for the maximum 15% federal income tax rate available to individuals on qualified dividend income.  Capital gain distributions are taxable to Members as long-term capital gains regardless of how long the shareholder has held its Shares or the Member has held its Interests.  It is not anticipated that a significant portion of the Fund’s dividends will qualify for the dividends-received deduction for corporate Members in respect of their distributive shares of Fund dividends.

Distributions are generally includible in the income of the shareholders at the time the distribution is received.  Any distribution, however, declared by the Fund as of a record date in October, November or December, and paid to the shareholders the following January, is deemed to have been paid by the Fund and received by the shareholders (and, therefore, the Company) on December 31 of the year declared for both federal income and Excise Tax purposes.  This will prevent the application of the Excise Tax to the Fund as a result of the delay in the payment of the dividends.

If, for any calendar year, the Fund’s total distributions exceed its current and accumulated earnings and profits, the excess will generally be considered a tax-free return of capital to the

shareholders (and, therefore, the Company) to the extent of each shareholder’s adjusted basis in its shares and then as capital gain.  The amount treated as tax-free return of capital will reduce the adjusted tax basis of the shareholders’ Shares, thereby increasing the potential gain or reducing the potential loss on the sale of the Shares.

In general, upon the sale or other disposition of Shares, the seller will recognize a gain or loss equal to the difference between the amount realized on the sale and the seller’s adjusted basis in the shares.  Any loss on the sale recognized will be disallowed to the extent the seller has acquired (or entered into a contract to acquire) substantially identical Shares within a period beginning 30 days before the disposition and ending 30 days after the disposition.  In such case, the basis of the Shares acquired will be adjusted to reflect the disallowed loss.  Gain or loss realized upon a sale of Shares generally will be treated as a capital gain or loss.  The gain or loss will be a long-term capital gain or loss if the Shares were held for more than one year.  In addition, if the Shares sold were not held for more than six months, any los s on the sale will be treated as long-term capital loss to the extent of any capital gain dividend received by the seller with respect to such Shares.

The Fund is required to withhold 28% of reportable payments (which may include dividends and capital gain distributions) to individuals and certain other noncorporate shareholders who do not provide the Fund with a correct taxpayer identification number on IRS Form W-9 or who otherwise are subject to backup withholding.  

Federal withholding taxes at a rate of 30% (or a lesser treaty rate) may apply to distributions to shareholders of the Fund and Members who are nonresident aliens or foreign partnerships, trusts or corporations.  The rules governing United States federal income taxation of foreign Members are complex, and prospective non-U.S.  Members should consult with their own tax advisors to determine the impact of federal, state and local income tax laws with regard to an investment in Interests, including any reporting requirements.

If the Fund is not deemed to be engaged in a trade or business, individuals and certain other persons who are Members will be required to include in their gross income their allocable share of certain Fund expenses relating to the production of gross income that are allocable to the Company.  These Members, therefore, will be deemed to receive gross income from the Company in excess of the distributions they actually receive.  Such allocated expenses may be deductible by an individual Member as a miscellaneous itemized deduction, subject to the limitation on miscellaneous itemized deductions not exceeding 2% of adjusted gross income to the extent the Fund is not engaged in a trade or business.

The Fund will notify shareholders following the end of each calendar year of the amounts of dividends and capital gain distributions paid or deemed paid during the year.

Transactions Involving “Qualified Small Business Stock”.  Section 1202 of the Internal Revenue Code permits a non-corporate taxpayer to exclude, for U.S. federal income tax purposes, 50% of any gain (subject to certain limitations) realized upon the sale or exchange of “qualified small business stock” held for more than five years.  Generally, qualified small business stock is stock of a small business corporation acquired at its original issuance either directly from the issuing corporation or indirectly through an underwriter, which must (a) at the time of issuance and immediately thereafter have assets of not more than $50 million and (b) throughout substantially all of the holding period for the stock be actively engaged in the conduct of a trade or business not excluded by law.  If the Fund acquires qualified small business stock, holds such stock for five years and disposes of such stock at a profit, then a non-corporate Member who held his or her Interest at the time the qualified small business stock was acquired and at all times thereafter until such stock is disposed of would be entitled to exclude from his or her taxable income, subject to applicable limitations, 50% of his or her share of such gain.  Note, however,

that 7% of any amount so excluded would be treated as a preference item for alternative minimum tax purposes.  Comparable rules apply under the qualified small business stock “rollover’ provisions of Section 1045 of the Internal Revenue Code, under which gain otherwise reportable by individual Members with respect to sales by the Fund of qualified small business stock held for more than six months can be deferred if the sales proceeds are reinvested by the Fund (or if a Member reinvests an amount equal to his or her share of such sales proceeds) within 60 days in other qualified small business stock.

Tax-Exempt Investors.  Qualified plans, Individual Retirement Accounts and investors exempt from taxation under Section 501(c)(3) of the Internal Revenue Code (collectively, “Tax-Exempt Entities”) are generally exempt from taxation except to the extent that they have UBTI (determined in accordance with Sections 511-514 of the Internal Revenue Code).  If the Fund qualifies as a RIC, it is likely that distributions by the Fund to the Company allocable to a Tax-Exempt Entity Member that are treated as dividends will not be considered UBTI and, therefore, will be exempt from federal income tax even if the Fund borrows to acquire its investment assets.  Under Section 512(b) of the Internal Revenue Code, UBTI does not include dividends received by a Tax-Exempt Entity.  As a general rule, the income tax provisions relating to corporations apply to RICs unless Subc hapter M of the Internal Revenue Code provides otherwise and, thus, Section 512(b) should apply to exclude from UBTI dividends paid by a RIC to a Tax-Exempt Entity.  This conclusion is also supported by Revenue Ruling 66-106, which applies Section 512(b) to exclude from UBTI dividends paid to the tax-exempt shareholders of a real estate investment trust, a conduit entity that invests in real estate and is substantially similar to a RIC for tax purposes, on the same theory.  If a Tax-Exempt Entity, however, borrows money to purchase its Interests, a portion of its income from the Company will constitute UBTI pursuant to the “debt-financed property” rules of the Internal Revenue Code.

Social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal service organizations that are exempt from taxation under Sections 501(c)(7), (9), (17) and (20), respectively, of the Internal Revenue Code, are subject to different UBTI rules, which generally will require them to characterize as UBTI their allocable share of distributions from the Fund.  Dividend distributions by the Fund allocable to a charitable organization that is a private foundation should constitute investment income for purposes of the excise tax on net investment income of private foundations imposed by Section 4940 of the Internal Revenue Code.

ITEM IA.  RISK FACTORS

GENERAL

No Operating History; Reliance on Management.  The Fund is newly organized, and has not yet entered into any financing or equity transactions or identified any specific transactions in which to invest.  The Fund could require substantial time to become fully invested.  Pending investment, all cash that the Fund has received pursuant to capital calls from the Company will be committed to short-term, high grade investments that present relatively low investment risk but provide a correspondingly lower return.

The Fund will be wholly dependent for the selection, structuring, closing and monitoring of its investments on the diligence and skill of the Investment Manager, acting under the supervision of the Fund’s board of directors.  Although the principals of the Investment Manager have over 50 years’ of combined experience in investing in venture lending transactions and equity investments, there can be no assurance that the Fund will attain its investment objective.  Furthermore, the Investment Manager does not have substantial experience investing in special situations such as convertible and subordinated debt of public and late-stage private companies. The officers of the Investment Manager will have primary responsibility for the selection of the companies in which the Fund will invest, the negotiation of the

terms of such investments and the monitoring of such investments after they are made.  Although the officers of the Investment Manager intend to devote such time as is necessary to the affairs of the Fund, they are not required to devote full time to the management of the Fund.  Furthermore, there can be no assurance that any officer will remain associated with the Investment Manager or that, if an officer ceased to be associated with the Investment Manager, the Investment Manager would be able to find a qualified person or persons to fill their positions.

Illiquid Investment.  The Shares will not be registered under the 1933 Act and are subject to substantial restrictions on transfer.  There will be no trading market for the Shares, and shareholders most likely will have to hold their Shares until the final liquidation of the Fund.  An investment in the Fund is, therefore, illiquid and should be considered only by investors financially able to maintain their investment for the long term.

Long-Term Investment. After the fourth anniversary following the first closing of the Company’s offering of Interests, the Fund will cease to make new equity investments as well as investments in venture loans (except pursuant to commitments made before such fourth anniversary) and will distribute to its shareholders all proceeds received from principal payments and sales of investments, net of: (i) reserves and expenses; (ii) principal repayments on the Fund’s borrowings; (iii) amounts required to fund financing commitments entered into before such fourth anniversary; and (iv) any amounts paid on exercise of warrants or otherwise paid to protect the value of existing investments (including, for example, pay-to-play provisions and purchases of equity securities in “down rounds” to avoid dilution).  The Fund’s Articles of Incorporatio n provide that, on December 31, 2015, the Fund automatically will be dissolved without any action by its shareholders.  From and after such dissolution, the Fund’s activities will be limited to the winding-up of its affairs, the liquidation of its remaining assets and the distribution of the net proceeds thereof to its shareholders.  Although the Fund generally would not make any loan with a stated maturity date later than December 31, 2015, it is possible that, due to a default by a borrower or a transaction restructuring due to a borrower’s financial difficulties, such a loan may remain outstanding in whole or in part beyond its original maturity date.  Furthermore, the Fund may not be able to sell warrants it receives from borrowers, or the equity securities (including those received upon exercise of warrants or conversion of debt instruments or in connection with the restructuring of a troubled loan), to the extent those investments were retained by the Fund and not distributed e arlier to its shareholders, for a significant period of time due to legal or contractual restrictions on resale or the absence of a liquid secondary market.  As a result, the liquidation process might not be completed for a significant period after the Fund’s dissolution.  In addition, it is possible that, if certain of the Fund’s assets are not liquidated within a reasonable time after the Fund’s dissolution, the Fund may elect to make a distribution in kind of all or part of such assets to its shareholders.  In such case, the shareholders would bear any expenses attendant to the liquidation of such assets.

Competition.  Other entities and individuals compete for investments similar to those proposed to be made by the Fund, some of whom, with respect to investments in the form of loans, and many of whom, with respect to the equity investments and convertible and subordinated debt, have greater resources than the Fund.  Competition could increase given the low barriers to entry into the industry.  Additionally, the Fund’s need to comply with provisions of the 1940 Act pertaining to BDCs and, if the Fund qualifies as a RIC, provisions of the Internal Revenue Code pertaining to RICs, might restrict the Fund’s flexibility as compared with its competitors.  The need to compete for investment opportunities may make it necessary for the Fund to offer borrowers or companies in which it makes equity investments more attractive terms than otherwi se might be the case.

Convertible Debt.  Convertible debt instruments issued by public and late-stage private companies may comprise some of the special situations in which the Fund may invest.  Convertible debt generally offers lower interest yields than non-convertible debt of similar quality.  The market value of

convertible debt tends to decline as interest rates increase and, conversely, to increase as interest rates decline.  However, the market value of convertible debt often reflects the market price of common stock of the issuing company when that stock price is greater than the conversion price of the convertible debt.  The conversion price is the predetermined price at which the debt instrument could be exchanged for the associated stock.  As the market price of the underlying common stock declines, the price of the convertible debt tends to be influenced more by the yield of the debt instrument.  Thus, it may not decline in price to the same extent as the underlying common stock.

Subordinated debt.  Part of the special situations in which the Fund may invest may consist of subordinated debt instruments, which tend to be predominantly high-yield non-convertible debt securities.  Investments in high-yield securities involve substantial risk of loss.  Sub-investment grade non-convertible debt securities, or comparable unrated securities, are commonly referred to as “junk debt” and are considered speculative with respect to the issuer’s ability to pay interest and principal, and are susceptible to default or decline in market value due to adverse economic or business developments.  The market values for high-yield securities tend to be very volatile, and these securities are less liquid than investment grade debt securities.

Leverage. The Fund intends to borrow money from and issue debt securities to banks, insurance companies and other lenders to obtain additional funds to originate venture loans.  Under the 1940 Act, the Fund may not incur borrowings unless, immediately after the borrowing is incurred, such borrowings would have “Asset Coverage” of at least 200%.  “Asset Coverage” means the ratio which the value of the Fund’s total assets, less all liabilities not represented by (i) the borrowings and (ii) any other liabilities constituting “senior securities” under the 1940 Act, bears to the aggregate amount of such borrowings and senior securities.  The practical effect of this limitation is to limit the Fund’s borrowings and other senior securities to 50% of its total assets less its liabilities other than the borrowings and other senior securities.  The 1940 Act also requires that, if the Fund borrows money, provision be made to prohibit the declaration of any dividend or other distribution on the shares (other than a dividend payable in shares), or the repurchase by the Fund of shares, if, after payment of such dividend or repurchase of shares, the Asset Coverage of such borrowings would be below 200%.  If the Fund is unable to pay dividends or distributions in the amounts required under the Internal Revenue Code, it might not be able to qualify for the pass-through status as a RIC or, if qualified, to continue to so qualify.

The use of leverage increases investment risk.  The Fund’s use of leverage is premised upon the expectation that the Fund’s all-in borrowing costs will be lower than the return the Fund achieves on its investments. To the extent the income or capital gains derived from investments purchased with borrowed funds exceeds the cost of borrowing, the Fund’s overall return will be greater than if leverage had not been used.  Conversely, if the income or capital gain from the investments purchased with borrowed funds is not sufficient to cover the cost of borrowing, or if the Fund incurs capital losses, the return to the Fund will be less than if leverage had not been used, and therefore the amount available for distribution will be reduced or potentially eliminated.  Furthermore, since the calculation of the investment management fee paid to the I nvestment Manager (the “Investment Management Fee”) is based on part on a percentage of the managed assets, such fee will be higher if the Fund utilizes leverage than if no borrowings were incurred.  The Fund expects that lenders will require that the Fund pledge portfolio assets as collateral for borrowings, and may require that the Company provide guarantees or other credit enhancement.  If the Fund is unable to service the borrowings, the Fund may risk the loss of such pledged assets.  

Lenders are also expected to require that the Fund agree to loan covenants limiting the Fund’s ability to incur additional debt or otherwise limiting the Fund’s flexibility, and loan agreements may provide for acceleration of the maturity of the indebtedness if certain financial tests are not met.  To minimize risks associated with lending money at fixed rates, the Fund may enter into interest rate hedging

transactions with respect to all or any portion of the Fund’s investments.  There can be no assurance that such interest rate hedging transactions will be available in forms acceptable to the Fund.  In addition, entering into interest rate hedging transactions raises costs to the Fund.  Finally, it is possible that the Fund could incur losses from being “overhedged,” which would result if the loan that was hedged is repaid faster than expected.

Regulation. The Fund has elected to be treated as a BDC under the Small Business Incentive Act of 1980, which modified the 1940 Act.  Although BDCs are now exempt from registration under the 1940 Act and are relieved from compliance with many provisions of the 1940 Act, there are now greater restrictions in some respects on permitted types of investments for BDCs.  Moreover, the applicable provisions of the 1940 Act continue to impose numerous restrictions on the activities of the Fund, including restrictions on leverage and on the nature of its investments.  While the Fund is not aware of any judicial rulings under, and is aware of only a few administrative interpretations of, the Small Business Incentive Act of 1980, there can be no assurance that such Act will be interpreted or administratively implemented in a manner consistent with the Fund’s objectives or manne r of operation.

Litigation.  The Fund could be subject to litigation by borrowers, based on theories of breach of contract to lend, “lender liability” or otherwise in connection with its loan and investment transactions. The defense of such a lawsuit, even if ultimately determined to be without merit, could be costly and time-consuming.

Tax Status.  The Fund must meet a number of requirements, described under “Federal Income Taxation,” to qualify for the pass-through status as a RIC and, if qualified, to continue to so qualify.  For example, the Fund must meet specified asset diversification standards under the Internal Revenue Code which might be difficult to meet if the borrowers under some loans drew down their committed financing at a faster rate than other borrowers, particularly during the early periods of the Fund’s operations.  If the Fund experiences difficulty in meeting the diversification requirement for any fiscal quarter of its taxable year, it might accelerate capital calls or borrowings in order to increase the portion of the Fund’s total assets represented by cash, cash items and U.S. government securities as of the close of the following fisca l quarter and thus attempt to meet the diversification requirement.  However, the Fund would incur additional interest and other expenses in connection with any such accelerated borrowings, and increased investments by the Fund in cash, cash items and U.S. government securities (whether the funds to make such investments are derived from called equity capital or from accelerated borrowings) are likely to reduce the Fund’s return.  Furthermore, there can be no assurance that the Fund would be able to meet the diversification requirements through such actions.  Failure to qualify as a RIC would deny the Fund pass-through status and, in a year in which the Fund has taxable income, would have a significant adverse effect on the return of the Fund.

When the Fund elects to convert its status from that of an ordinary, or C, corporation to that of a RIC, it must choose either to (i) pay tax whenever an asset is sold during the ten years following the conversion on, at most, the amount of gain which would have been realized had the property been sold on the conversion date, or (ii) treat the entire amount of “built-in gain” as income at the time of conversion.

Allocation of Expenses.  If the Fund is not deemed to be engaged in a trade or business, individuals and certain other persons who are Members of the Company will be required to include in their gross income an amount of certain Fund expenses relating to the production of gross income that are allocable to the Company. These Members, therefore, will be deemed to receive gross income from the Fund in excess of the distributions they actually receive.  Such allocated expenses may be deductible by an individual Member as a miscellaneous itemized deduction, subject to the limitation on miscellaneous itemized deductions not exceeding 2% of adjusted gross income to the extent the Fund is not engaged in a trade or business.

Calculation of Investment Management Fee.  For the period from the second anniversary of the Fund’s investment operations until the eighth anniversary of such operations, the Investment Management Fee will be computed and paid quarterly, at an annual rate of the sum of (i) 2.5% of the value of the total assets of the Fund (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter and (ii) the excess of 1.5% of the amount of Committed Equity Capital of the Company (regardless of when or if such committed capital is called), over the sum of (a) 2.5% of the value of the total assets of the Fund (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter and (b) the Company Management Fee (as defined below) payable for such quarter.  This calculation could result in the Investment M anagement Fee being disproportionately large relative to the value of the Fund’s portfolio if the total assets of the Fund during such period are low compared to the Committed Equity Capital.  This could occur, for example, if the loans in the Fund’s portfolio are repaid at a rapid rate during such period, or if a large number of the companies in which the Fund holds equity securities are acquired during such period.  

INVESTMENT RISKS

International Investments.  The Fund could invest up to, but not more than, 30% of its total assets in foreign based companies.  Foreign investments are subject to most of the same risks as domestic investments, as well as the political, economic and other uncertainties associated with foreign activities, including the risk of war and political unrest, the impact of laws and policies of foreign governments and the United States affecting foreign investment, and the possibility of being subject to the jurisdiction of foreign courts in connection with legal disputes and the possible inability to subject foreign persons to the jurisdiction of courts in the United States.  Additionally, as discussed under “Remedies on Default” below, there may be practical and local law impediments to cost-effective recovery against collateral located in a fo reign country.

Credit Risks.  Most of the companies with which the Fund will enter into financing transactions will not have achieved profitability, may experience substantial fluctuations in their operating results or, in some cases, will not have significant operating revenues.  The ability of any borrower to meet its obligations to the Fund, therefore, will depend to a significant extent on the willingness of such borrower’s equity venture capital investors or outside investors to provide additional equity financing, which in turn will depend on the borrower’s success in meeting its business plan, the market climate for venture capital investments generally and many other factors.  The companies to which the Fund will provide financing will frequently be engaged in the development of new products or technologies, and the success of these efforts, or the ability of the companies to successfully manufacture or market products or technologies developed, cannot be assured.  These companies frequently face intense competition, including competition from companies with greater resources, and may face risks of product or technological obsolescence, non-acceptance in the market, or rapidly changing regulatory environments, any of which could adversely affect their prospects.  The success of such companies often depends on the management talents and efforts of one person or small group of persons whose death, disability or resignation would adversely affect the company.

Remedies Upon Default.  In the event of a default on a portfolio loan, the available remedies to the Fund would include legal action against the borrower and foreclosure or repossession of collateral given by the borrower.  The Fund could experience significant delays in exercising its rights as a secured lender and might incur substantial costs in taking possession of and liquidating its collateral and in taking other steps to protect its investment.  The Fund generally will require that it have a first priority security interest in any equipment of a borrower financed with the proceeds of the Fund’s loans, although that security interest may extent to the borrower’s other assets in which another lender might have a senior or parity security interest.  On occasion, the Fund will make loans to a borrower that has one or more other se cured lenders (including the Fund’s immediate predecessor, Venture Lending & Leasing IV, Inc. (“VLL

IV”)).  In such circumstances, the Fund may share all or a portion of its collateral with the other lender(s) and will enter into intercreditor agreements governing the respective rights of the Fund and such other lender(s), which could limit the Fund’s flexibility in pursuing its remedies as a secured creditor, and reduce the proceeds realized from foreclosing or taking possession of the collateral.  In the case of growth capital or working capital loans (where the loan proceeds can be used by the company for general working capital purposes), the Fund will typically receive a broader lien on substantially all of the borrower’s assets, including its intellectual property.

The Fund will utilize certain of its funds in investments that involve the financing of equipment assets.  Equipment assets are often subject to rapid depreciation or obsolescence such that it is likely the value of the assets underlying a loan to finance such assets will depreciate during the term of the loan transaction below the amount of the borrower’s obligations.  In addition, although borrowers will be required under the transaction documents to provide customary insurance for the assets underlying a loan, and will be prohibited from disposing of the assets without the Fund’s consent, compliance with these covenants cannot be assured and, in the event of non-compliance, the assets could become unavailable to the Fund due to destruction, theft, sale or other circumstances.  Realization of value from intellectual property collateral can als o be time consuming and present special challenges, given the often unique nature and limited market for such assets.  The Fund’s ability to obtain payment beyond the collateral underlying the loan from the borrower might be limited by bankruptcy or similar laws affecting creditors’ rights.  In limited circumstances where the Fund takes security interests in a borrower’s assets located in a foreign country, there may be practical and local law impediments to cost-effective recovery against such collateral.  Therefore, there can be no assurance that the Fund would ultimately collect the full amount owed on a defaulted loan.

Emerging Company Risks.  The possibility that the companies in which the Fund invests will not be able to commercialize their technology or product concept presents significant risk to the Fund.  Additionally, although some of such companies may already have a commercially successful product or product line at the time of investment, technology products and services often have a more limited market or life span than products in other industries.  Thus, the ultimate success of these companies may depend on their ability to continually innovate in increasingly competitive markets.  Most of the companies in which the Fund invests will require substantial additional equity financing to satisfy their continuing growth and working capital requirements.  Each round of venture financing is typically intended to provide a company with enough capit al to reach the next stage of development.  The circumstances or market conditions under which such companies will seek additional capital is unpredictable.  It is possible that one or more of such companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable.

Privately-held Company Risks.  The Fund intends to invest primarily in privately-held companies.  Generally, very little public information exists about these companies and the Fund will be required to rely on the ability of the Investment Manager to obtain adequate information to evaluate the potential returns from investing in these companies.  Moreover, these companies typically depend upon the management talents and efforts of a small group of individuals and the loss of one or more of these individuals could have a significant impact on the investment returns from a particular company.  Also, these companies frequently have less diverse product lines and smaller market presence than larger companies.  They are thus generally more vulnerable to economic downturns and may experience substantial variations in operating results.

Global Economic Risks. The ability of the Fund to provide an acceptable return may be adversely affected by economic and business factors to which the U.S. marketplace is subject.  These factors, which generally are beyond the control of the Investment Manager, include: general economic conditions, such as inflation and fluctuations in general business conditions; the impact of further terrorist attacks against

the United States; the effects of strikes, labor disputes and foreign political unrest; and uncertainty of the recovery of the U.S. economy.

Speculative Nature of Warrants and Equity Investments.  The value of the warrants that the Fund generally will receive in connection with its financing investments is dependent on the value of the equity securities for which the warrants can be exercised.  The value of such warrants, direct equity investments, and equities received upon conversion of debt instruments is dependent primarily on the success of the company’s business strategy and the growth of its earnings, but also depends on general economic and equity market conditions.  The prospects for achieving consistent profitability in the case of many companies in which the Fund will invest are speculative.  The warrants, equity securities for which the warrants can be exercised, direct equity investments, and equities received upon conversion of debt instruments generally will be restricted securities that cannot readily be sold for some period of time.  If the value of the equity securities underlying a warrant does not increase above the exercise price during the life of the warrant, the Fund would permit the warrant to expire unexercised and the warrant would then have no value.

Illiquidity of Investments.  The Fund anticipates that substantially all of its portfolio investments (other than short-term investments) will consist of securities that, at the time of acquisition, are subject to restrictions on sale and for which no ready market will exist.  Restricted securities cannot be sold publicly without prior agreement with the issuer to register the securities under the 1933 Act, or by selling such securities under Rule 144 or other provisions of the 1933 Act which permit only limited sales under specified conditions.  Venture loans and equity investments are privately negotiated transactions, and there is no established trading market in which such loans and equity investments can be sold.  Convertible and subordinated debt investments may also be privately negotiated transactions.  In the case of warrants or equity securities, the Fund generally will realize the value of such securities only if the issuer is able to make an initial public offering of its shares, or enters into a business combination with another company which purchases the Fund’s warrants or equity securities or exchanges them for publicly-traded securities of the acquiror.  The feasibility of such transactions depends upon the entity’s financial results as well as general economic and equity market conditions.  Furthermore, even if the restricted warrants or equity securities owned become publicly-traded, the Fund’s ability to sell such securities may be limited by the lack (or limited nature) of a trading market for such securities.  When restricted securities are sold to the public, the Fund, under certain circumstances, may be deemed an “underwriter” or a controlling person with respect thereto for the purposes of the 1933 Act, and be subject to liabilities as such under that Act.

Because of the illiquidity of the Fund’s investments, a substantial portion of its assets will be carried at fair value as determined by the Investment Manager, approved by the board of directors.  This value will not necessarily reflect the value of the assets which may be realized upon a sale.

Non-Diversified Status.  The Fund will be classified as a “non-diversified” investment company under the 1940 Act.  At such time as the Fund meets certain asset diversification requirements, the Fund intends to qualify as a RIC under the Internal Revenue Code and will thereafter seek to continually meet the diversification standards thereunder.  Nevertheless, the Fund’s assets may be subject to a greater risk of loss than if its investments were more widely diversified.

CONFLICTS OF INTEREST

Transactions with Fund IV.  The Investment Manager also serves as investment manager for VLL IV, which is continuing to make new investments.  The Fund’s board of directors has determined that so long as VLL IV has capital available to invest in loan transactions with final maturities earlier than December 31, 2012 (the date on which VLL IV will be dissolved), the Fund will invest in each portfolio

company in which VLL IV invests (“Investments”).  The amount of each Investment will be allocated between the Fund and VLL IV in accordance with the committed equity capital of VLL IV and, initially, $250 million for the Fund (or such greater amount that is received upon the closing of the offering of Interests in the Company, which may be as much as $300 million) so long as VLL IV has capital available to invest.  The committed equity capital of VLL IV is $250 million.  Therefore, if subscriptions for $250 million of Interests are received by the Company, each Investment will be allocated approximately 50% to the Fund and 50% to VLL IV.  In any case, VLL IV can only invest to the extent that it has capital available for investment; after VLL IV no longer has capital available for investment, VLL IV will no longer invest in t ransactions in which the Fund invests.  As of June 30, 2006, VLL IV has approximately $62.5 million of committed capital ($25 million of which was called in July, 2006) which has not yet been called from its investors but must be called if at all, by May of 2009.  This means that the funds with which VLL IV has available to invest with the Fund consist of (a) $37.5 million plus (b) amounts which VLL IV borrows by leveraging its available capital funds plus (c) any proceeds from principal payments received on loans, plus (d) the proceeds from the sale of securities in an amount equal to the cost basis of securities sold.  After May of 2008, VLL IV will no longer be permitted to enter into new commitments to borrowers; however, VLL IV will be permitted to fund existing commitments from the sources described above.  While investing the Fund’s capital in the same companies in which VLL IV is also investing could provide the Fund with greater diversification and access to larger tran sactions, it could also result in a slower pace of investment than would be the case if the Fund were investing in companies by itself.

Although VLL IV and the Fund intend to invest in the same companies in the respective proportions described above, the Fund may, at any time, with the approval of its board of directors, (i) discontinue investing with VLL IV with respect to any or all future investments or (ii) choose to invest in different proportions with VLL IV than described above.  In addition, the Fund has no control over VLL IV, which is not required to invest with the Fund in any particular proportion or at all, and may choose to discontinue investing with the Fund or to invest in different proportions than described in the prior paragraph.  In the event that VLL IV and the Fund invest other than in the pro rata manner described above (which can occur only with board approval of each), the Investment Manager may have a conflict of interest in determining which of VLL IV a nd the Fund will invest in a particular company and, if both, in what proportions.  The Fund may also engage in loan transactions with, or make equity investments in, companies that are preexisting borrowers from VLL IV or its predecessor funds.

To the extent that clients, other than VLL IV, advised by the Investment Manager (but in which the Investment Manager has no proprietary interest) invest in opportunities available to the Fund, the Investment Manager will allocate such opportunities among the Fund and such other clients in a manner deemed fair and equitable considering all of the circumstances in accordance with procedures approved by the Fund’s board of directors (including a majority of the disinterested directors).

Intercreditor Agreements.  In each transaction in which both the Fund and VLL IV invest, it is expected that the Fund and VLL IV will enter into an intercreditor agreement pursuant to which the Fund and VLL IV will cooperate in pursuing their remedies following a default by the common borrower.  Generally, under such intercreditor agreements, each party would agree that its security interest would be treated in parity with the security interest of the other party, regardless of which security interest would have priority under applicable law.  Accordingly, proceeds realized from the sale of any collateral or the exercise of any other creditor’s rights will be allocated between the Fund and VLL IV pro rata in accordance with the amounts of their respective investments.  An exception to the foregoing arrangement would occur in situations where, for e xample, one of the lenders financed specific items of equipment collateral; in that case, usually the lender who financed the specific assets will have a senior lien on that asset, and the other lender will have a junior lien (even though they ay ratably share liens of equal priority on other assets of the common borrower).  As a result of such intercreditor agreements, the Fund may

have less flexibility in pursuing its remedies following a default than it would have had there been no intercreditor agreement, and the Fund may realize fewer proceeds.  In addition, because the Fund and VLL IV invest at the same time in the same borrower, such borrower would be required to service two loans rather than one.  Any additional administrative costs or burdens resulting therefrom may make the Fund a less attractive lender, and may make it more difficult for the Fund to acquire such loans.

Effect of Borrowings.  During the first two years of the Fund’s investment operations, the Investment Management Fee will be calculated with reference to the Committed Equity Capital of the Company, regardless of when or if all of such capital is called.  Thereafter until the eighth anniversary of the Fund’s investment operations, the Investment Management Fee will be computed and paid quarterly, at an annual rate of the sum of (i) 2.5% of the value of the Fund’s total assets (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter and (ii) the excess of 1.5% of the amount of the Committed Equity Capital of the Company (regardless of when or if such Committed Equity Capital is called), over the sum of (a) 2.5% of the value of the total assets of the Fund (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter and (b) the Company Management Fee (as defined below) payable for such quarter.  Following such eighth anniversary of the Fund’s investment operations, the Investment Management Fee will be computed and paid quarterly at an annual rate of 2.5% of the value of the total assets of the Fund (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter.  Therefore, decisions by the Investment Manager to cause the Fund to borrow additional funds may increase the quarterly fees payable to the Investment Manager.  The Fund’s overall borrowing limits, however, are set by the Fund’s board of directors in light of its fiduciary obligations.

Indemnification and Exculpation.  The Articles of Incorporation of the Fund provide for indemnification of directors, officers, employees and agents (including the Investment Manager) of the Fund to the full extent permitted by applicable state law and the 1940 Act, including the advance of expenses and reasonable counsel fees.  The Articles of Incorporation of the Fund also contain a provision eliminating personal liability of a Fund director or officer to the Fund or its shareholder for monetary damages for certain breaches of their duty of care.

Selection of Disinterested Directors.  Initially, a majority of the Fund’s directors will be interested directors.  The board of directors of the Fund anticipates electing three or more additional disinterested directors.  Although the continued tenure of all directors will be subject to annual election by shareholders, the initial selection of directors, including the disinterested directors, is made by the Investment Manager.

Employees

The Fund expects to have no employees and will rely on the Investment Manager and its officers (all of whom are employed and paid by the Investment Manager) to administer its affairs, subject to the supervision of the Fund’s board of directors.

(d)  Financial Information About Foreign and Domestic Operations and Export Sales

The Fund has not commenced business and has no revenues or assets other than the $25,000 received from the Company as consideration for the purchase of Shares.

ITEM 2.  FINANCIAL INFORMATION

The Fund has not commenced business and has no revenues or assets other than the $25,000 received from the Company as consideration for the purchase of Shares.

ITEM 3.  PROPERTIES

The Fund has not commenced business and has no assets other than the $25,000 received from the Company as consideration for the purchase of Shares.  It is anticipated that the Fund’s principal assets following commencement of operations will be securities.

ITEM 4.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGERS

The Investment Manager has contributed $25,000 to the Company, and the Company in turn has purchased 100,000 Shares at a price of $0.25 per share as the Fund’s initial capital.  Therefore, until immediately subsequent to the first call for further capital contributions to the Fund, the Investment Manager will be deemed to “control” the Fund through its control of the Company.

ITEM 5.  DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Fund are:

Name	Age	Position with the Fund
Ronald W. Swenson* 2010 North First Street, Suite 310 San Jose, CA  95131	61	Chairman, Chief Executive Officer, President and Director
Salvador O. Gutierrez* 2010 North First Street, Suite 310 San Jose, CA  95151	63	Director
Martin D. Eng* 2010 North First Street, Suite 310 San Jose, CA  95151	55	Vice President, Treasurer, Chief Financial Officer and Secretary
Brian R. Best* 2010 North First Street, Suite 310 San Jose, CA  95131	40	Vice President and Assistant Secretary
Jay L. Cohan* 2010 North First Street, Suite 310 San Jose, CA  95131	41	Vice President
Maurice C. Werdegar* 2010 North First Street, Suite 310 San Jose, CA  95131	41	Vice President
David R. Wanek* 2010 North First Street, Suite 310 San Jose, CA  95131	33	Vice President

*  Interested person of the Fund within the meaning of the 1940 Act.

The board of directors of the Fund anticipates electing three or more additional disinterested directors.  Directors who are “disinterested directors” of the Fund will each receive an annual fee from the Fund of $10,000.  Such directors also will be reimbursed by the Fund for their expenses in attending meetings of the board of directors or any committee thereof and will receive a fee for attendance in person at any meeting at a per diem rate of $1,000.  The Chair of the Fund’s Audit Committee will also receive an annual retainer fee from the Fund of $5,000.  Those directors who are “interested directors” of the Fund and officers who are employees of the Investment Manager receive no compensation from the Fund for their services as directors or officers.

The business backgrounds of the Fund’s directors and officers are as follows:

RONALD W. SWENSON is Chairman, Chief Executive Officer, and Director of the Investment Manager and his business background is set forth under “The Investment Manager”.

SALVADOR O. GUTIERREZ is the President of the Investment Manager and his business background is set forth under “The Investment Manager”.

MARTIN D. ENG is Vice President, Treasurer, Chief Financial Officer and Secretary of the Investment Manager and his business background is set forth under “The Investment Manager”.  

BRIAN R. BEST is Vice President of the Investment Manager and his business background is set forth under “The Investment Manager”.

JAY L. COHAN is Vice President of the Investment Manager and his business background is set forth under “The Investment Manager”.

MAURICE C. WERDEGAR is Vice President of the Investment Manager and his business background is set forth under “The Investment Manager”.

DAVID R. WANEK is Vice President of the Investment Manager and his business background is set forth under “The Investment Manager”.

THE INVESTMENT MANAGER

Westech Advisors, the Investment Manager, is a corporation organized by the principals of Western Technology and serves as Investment Manager to VLL IV and the Fund.  Western Technology was an independent asset-based financing organization headquartered in San Jose, California, and was founded in 1980.  Westech Advisors and Western Technology have originated more than $1.6 billion in debt and lease financing for venture capital-backed companies.  Messrs. Swenson and Gutierrez each own 50% of its voting securities.  Westech Advisors’ principal business address is 2010 North First Street, Suite 310, San Jose, California 95131.

The officers of the Fund will have primary responsibility for the Fund’s investment program.  The business backgrounds of the officers are as follows:

RONALD W. SWENSON.  Since 1993, Mr. Swenson has been the Chairman, Chief Executive Officer and a director of Westech Advisors; from 1980 through 1994, Mr. Swenson was President and a Director of Western Technology.  Mr. Swenson was the founder of Western Technology in 1980.  From 1978-1980, Mr. Swenson was Director of Marketing for Magnuson Computer Systems, with responsibility for product planning, sales support and developing financial leasing and service functions.  Before that, he was a Business Manager for Control Data Corp., responsible for P&L, engineering and

marketing for several major computer and peripheral product lines and, earlier, a Program Manager at Control Data for disk storage licensing with foreign companies.

SALVADOR O. GUTIERREZ.  Since 1993, Mr. Gutierrez has been the President and a director of, and served in other positions with, Westech Advisors; from 1987 through 1994, Mr. Gutierrez was Senior Vice President-Chief Financial Officer and a Director of Western Technology.  Before joining Western Technology in 1987, Mr. Gutierrez was head of corporate lending for Home Federal Bank of San Diego and, from 1982-1984, was a senior credit officer for Imperial Bank in Palo Alto.  In both positions, Mr. Gutierrez dealt extensively with loans to young high-technology companies.  Prior to joining Imperial Bank, Mr. Gutierrez was a corporate lending officer for Wells Fargo Bank, holding various senior lending positions over his ten-year tenure.  At Wells Fargo, Mr. Gutierrez handled major leasing companies and many high-technology companies in the Sa n Francisco Bay Area.  Mr. Gutierrez also had marketing responsibility for Latin America for Wells Fargo Leasing.

MARTIN D. ENG.  Since 2005, Mr. Eng has been Vice President, Chief Financial Officer, Treasurer and Secretary of Westech Advisors.  Prior to joining Westech Advisors in 2005, Mr. Eng served as the Vice President and Corporate Treasurer of PeopleSoft, Inc.  Mr. Eng also previously held treasury and tax positions with Con-Way Inc. (formerly CNF Inc.), Applied Materials, Inc. and Ernst & Young.  Mr. Eng did graduate work at the University of Southern California’s Marshall Graduate School of Business and holds an M.B.A. in taxation from Golden Gate University and a B.S. in Political Science from the University of California at Davis.  Mr. Eng is also a CPA.  

BRIAN R. BEST.  Since 1997, Mr. Best has been Vice President and served in other positions of Westech Advisors.  Prior to joining Westech Advisors in 1997, Mr. Best served as the Director of Finance and Administration for Decisis Corporation, a start-up software company.  He has held various finance positions at Ross Systems, Inc. and began his career at Ernst & Young.  Mr. Best holds an M.B.A. from U.C. Berkeley’s Haas School of Business, and a B.S. with honors from the University of the Pacific.

JAY L. COHAN.  Mr. Cohan is Vice President of Westech Advisors.  Prior to joining Westech Advisors in 1999, Mr. Cohan held sales positions at Puma Technology, Oracle Corporation, and SoftMagic, where he was a founder and VP of business development prior to its acquisition by Puma.  Mr. Cohan holds an M.B.A. from Harvard Business School, and B.S. and M.S. degrees in electrical engineering from the Massachusetts Institute of Technology.

MAURICE C. WERDEGAR.  Mr. Werdegar joined Westech Advisors in 2001 and is currently Vice President.  His diverse background includes his most recent position as Venture Partner at iMinds Ventures, an early stage venture firm, and his prior position as Chief Investment Officer at MetaMarkets, an online mutual fund company.  Mr. Werdegar also founded and served as CEO of Left at Albuquerque, a chain of restaurants.  Prior to business school, Mr. Werdegar worked in corporate finance at Robertson Stephens.  He holds both an M.B.A. and a B.A. from Stanford.

DAVID R. WANEK.  Mr. Wanek joined Westech Advisors in 2001 and is currently a Vice President.  Prior to joining Westech Advisors, Mr. Wanek held marketing, business development and legal positions with VeriSign, Wilson Sonsini Goodrich & Rosati, and Los Alamos National Laboratories.  Mr. Wanek holds an M.B.A. from the Anderson School of Management at the University of New Mexico, a J.D. from Santa Clara University and a B.S. from the University of Kansas.  Mr. Wanek is a member of the California State Bar.  

ITEM 6.  EXECUTIVE COMPENSATION.

The Fund will pay no compensation to its officers who are “interested persons” (as defined in the 1940 Act) of the Investment Manager or to its directors other than its disinterested directors.  The Fund’s disinterested directors will each receive an annual fee from the Fund of $10,000.  Such directors also will be reimbursed by the Fund for their expenses in attending meetings of the board of directors or any committee thereof and will receive a fee for attendance in person at any meeting at a per diem rate of $1,000.  The Chair of the Fund’s Audit Committee will also receive an annual retainer fee from the Fund of $5,000.

ITEM 7.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

(a)  Transactions With Management and Others

The Investment Manager also serves as investment manager to VLL IV.  The Fund will make investments through venture loans in companies in which VLL IV will also invest.  Under the policies adopted by the Fund’s board of directors, the Fund’s investment and VLL IV’s investment in the same transaction will be made pro rata in accordance with the committed equity capital of VLL IV and, initially, $250 million for the Fund, until such time as VLL IV is no longer able to make such investments by reason of its term or available capital committed to VLL IV.  While investing the Fund’s capital in the same companies in which VLL IV is also investing could provide the Fund with greater diversification and access to larger transactions, it could also result in a slower pace of investment than would be the case if the Fund were investing in companies by itself.

Although VLL IV and the Fund intend to invest in the same companies in the respective proportions described above, the Fund may, at any time, with the approval of its board of directors, (i) discontinue investing with VLL IV with respect to any or all future investments or (ii) choose to invest in different proportions with VLL IV than described above.  In addition, the Fund has no control over VLL IV, which is not required to invest with the Fund in any particular proportion or at all, and may choose to discontinue investing with the Fund or to invest in different proportions than described in this paragraph.  In the event that VLL IV and the Fund invest other than in the pro rata manner described above (which can occur only with board approval of each), the Investment Manager may have a conflict of interest in determining which of VLL IV and th e Fund will invest in a particular company and, if both, in what proportions.  The Fund may also engage in loan transactions with, or make equity investments in, companies that are preexisting borrowers from VLL IV or VLL IV’s predecessor funds.

To the extent that clients, other than VLL IV, advised by the Investment Manager (but in which the Investment Manager has no proprietary interest) invest in opportunities available to the Fund, the Investment Manager will allocate such opportunities among the Fund and such other clients in a manner deemed fair and equitable considering all of the circumstances in accordance with procedures approved by the Fund’s board of directors (including a majority of the disinterested directors).

Until the Fund has called and invested at least 75% of the total amounts of Committed Equity Capital, except as provided below, neither the Investment Manager nor any “Controlled Person” of the Investment Manager will, without the consent of the Fund, act as investment adviser or manager to any pooled investment vehicle other than VLLI Holdings, LLC, VLLI Holdings II, LLC, Venture Lending & Leasing III, LLC, VLL IV, the Fund or the Company, or act as investment adviser or manager to any client if the investment program of such pooled investment vehicle or client includes the provision of debt financing to venture capital-backed companies as a primary or major component.  In the event that the Company (as a shareholder) elects to irrevocably release its Members from any uncalled portion of their respective commitments as to new investments, the “ total amount of Committed Equity Capital” will be

deemed reduced to reflect such release.  The foregoing restriction will not be deemed to prohibit the Investment Manager, or any Controlled Person of the Investment Manager, from acting as investment adviser or manager with respect to any existing client of such party as of November 1, 2006; provided, however, that until the 75% investment threshold described above has occurred, such party shall not, without the consent of the Fund, accept from such existing clients any additional investment funds (other than amounts required for follow-on investments to existing investments) beyond the funds invested or committed by such existing clients as of November 1, 2006.  A “Controlled Person” of the Investment Manager as used in this paragraph means any entity (i) 50% or more of whose voting securities are beneficially owned by the Investment Manager or (ii) 50% or more of whose vo ting securities are controlled by either Ronald W. Swenson or Salvador O. Gutierrez.

The Company will have management rights with respect to the loans and equity investments made by the Fund co-extensive with such management rights of the Fund.  To the extent different persons manage the Fund, on the one hand, and the Company, on the other, the two entities may take conflicting positions with respect to such management rights.

(b)  Certain Business Transactions

All of the current directors and officers of the Fund are officers of the Investment Manager.  The board of directors of the Fund anticipates electing three or more additional disinterested directors.  See “Transactions with Promoters” below for a description of the Fund’s Investment Management Agreement with the Investment Manager (“Investment Management Agreement”).

(c)  Indebtedness of Management

None.

(d)  Transactions With Promoters

Westech Advisors may be deemed a promoter of the Fund.  The Fund will enter into a Investment Management Agreement with Westech Advisors pursuant to which Westech Advisors will, subject to the investment policies and guidelines established by the board of directors, identify, evaluate, structure and close the investments to be made by the Fund, arrange debt financing for the Fund, provide portfolio management and servicing of loans held in the Fund’s portfolio, and administer the Fund’s day-to-day affairs.  

The Fund will pay all of its operating expenses except those specifically required to be borne by the Investment Manager, including: (i) brokerage and commission expense and other transaction costs incident to the acquisition and dispositions of investments and the creation and perfection of security interests with respect thereto; (ii) federal, state and local taxes and fees, including transfer taxes and filing fees, incurred by or levied upon the Fund; (iii) interest charges and other fees in connection with borrowings; (iv) SEC fees and expenses, including the expenses of compliance with SEC rules and regulations, and any fees and expenses of state securities regulatory authorities; (v) expenses of printing and distributing reports and notices; (vi) costs of proxy solicitation; (vii) costs of meetings of shareholders and the board of directors; (viii) charges and exp enses of the Fund’s custodian, transfer and dividend disbursing agent; (ix) compensation and expenses of the Fund’s disinterested directors, and expenses of directors in attending board meetings; (x) legal and auditing expenses, including expenses incident to the documentation for, and consummation of, investment transactions and legal actions to enforce the Fund’s rights under such investments; (xi) costs of any certificates representing the Interests; (xii) costs of stationery and supplies; (xiii) the costs of membership by the Fund in any trade organizations and (xiv) expenses associated with litigation and other extraordinary or non-recurring expenses.

The operating expenses required to be borne by the Investment Manager are:  (i) all costs and fees incident to the selection and investigation of prospective Fund investments, such as travel expenses and professional fees (but excluding broker, legal and accounting fees and other costs incident to the documentation, closing or consummation of such transactions); (ii) the cost of adequate office space for the Fund and all necessary office equipment and services, including telephone service, heat, utilities and similar items; and (iii) the cost of providing the Fund with such corporate, administrative and clerical personnel (including officers and directors of the Fund who are interested persons of the Investment Manager and are acting in their respective capacities as officers and directors) as the Fund’s board of directors reasonably deems necessary or advisab le to perform the services required to be performed by the Investment Manager under the Investment Management Agreement.

As compensation for its services to the Fund, the Investment Manager will receive the Investment Management Fee from the Fund, whether before or after dissolution of Fund.  The Investment Management Fee will be paid by the Fund and computed and paid quarterly for the first 24 months following the first closing of the offering of Interests in the Company, at an annual rate of 2.5% of the amount of the Committed Equity Capital (regardless of when or if such committed capital is called) as of the last day of each such fiscal quarter.  Thereafter until the eighth anniversary of the Fund’s investment operations, the Investment Management Fee will be computed and paid quarterly, at an annual rate of the sum of (i) 2.5% of the value of the total assets of the Fund (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter and (ii) the excess of 1.5% of the amount of the Committed Equity Capital (regardless of when or if such committed capital is called), over the sum of (a) 2.5% of the value of the total assets of the Fund (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter and (b) the Company Management Fee (as defined below) payable for such quarter.  Following the eighth anniversary of the Fund’s investment operations, the Investment Management Fee will be computed and paid quarterly at an annual rate of 2.5% of the value of the total assets of the Fund (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter.  For purposes of calculating the Investment Management Fee, any capital committed to the Company at a closing of the sale of Interests in the Company subsequent to the first closing (regardless of when or if such committed capital is called) shall be deemed to have been committed as of the first closing.  It should also b e noted that the Investment Manager, as the managing Member of the Company, will be entitled to (i) a management fee with respect to the Company (the “Company Management Fee”) commencing after the first two years which is identical to the 2.5% it receives from the Fund but calculated with reference to the assets of the Company, subject to certain reductions, and (ii) a 20% profits interest, subject to the Company allocating to the Members thereof an 8% per annum cumulative, non-compounded annual return (after which a catch-up distribution will be made to the managing Member equal to one-fourth of the amount already distributed to Members with respect to their 8% return).  The 20% profits interest may align the interests of the Investment Manager with that of the Fund, but also could encourage the Investment Manager to make riskier investments than it would in the absence of such profits interest.

The Investment Management Fee is higher than those of most investment companies, although it is comparable to those of many privately-offered funds investing in venture capital investments.

If the Investment Manager or certain of its affiliates receives any compensation from a company whose securities are held in the Fund’s portfolio in connection with the provision to that company of significant managerial assistance, the compensation due to the Investment Manager under the Investment Management Agreement shall be reduced by the amount of such fee.  Such compensation could include directors’ fees paid to officers of the Investment Manager for serving on the boards of directors of borrowers or finder’s or consulting fees paid to the Investment Manager for the services such as locating acquisition candidates or additional or alternative sources of financing.

Under the Investment Management Agreement, the Investment Manager will not be liable for any error in judgment or mistake of law or for any loss suffered by the Fund in connection with the Investment Management Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Manager in the performance of its duties or from reckless disregard of its duties and obligations under the Investment Management Agreement.  The Investment Management Agreement will continue in effect for a period longer than two years from its date of execution only if such continuation is approved at least annually by the board of directors or a majority of outstanding voting securities of the Fund, and by a majority of the directors who are not parties to the Investment Management Agreement or interested persons of such parties.  The Investment Managemen t Agreement is terminable by vote of the Fund’s board of directors or by the holders of a majority of the Interests, at any time without penalty, on 60 days’ written notice to the Investment Manager.  The Investment Management Agreement may also be terminated by the Investment Manager on 60 days’ written notice to the Fund, and will terminate automatically upon its assignment.

ITEM 8.  LEGAL PROCEEDINGS

None.

ITEM 9.  MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)  Market Information

The offer and sale of the Shares will not be registered under the 1933 Act.  The offer and sale are exempt from such registration requirements as they do not constitute a public offering pursuant to Section 4(2) and Regulation D of the 1933 Act.

Because the Shares will be acquired by investors in one or more transactions “not involving a public offering,” they will be “restricted securities” and may be required to be held indefinitely.  Shares may not be sold, transferred, assigned, pledged or otherwise disposed of unless registered under applicable securities laws or specifically exempted from registration (in which case the Shareholder will, at the option of the Fund, be required to provide the Fund with a legal opinion, in form and substance satisfactory to the Fund, that registration is not required).  Accordingly, an investor must be willing to bear the economic risk of investment in the Shares until the Fund is liquidated.  No sale, transfer, assignment, pledge or other disposition, whether voluntary or involuntary, of the Shares may be made except by registration of the transfer on the Fund’s books.  Each transferee will be required to execute an instrument agreeing to be bound by these restrictions and the other restrictions imposed on the Shares, and to execute such other instruments or certifications as are reasonably required by the Fund.

(b)  Holders

The Investment Manager has contributed $25,000 to the Company, and the Company in turn has purchased 100,000 Shares at a price of $0.25 per share as the Fund’s initial capital.  Therefore, until immediately subsequent to the first call for further capital contributions to the Fund, the Manager will be deemed to “control” the Fund through its control of the Company since it is the only shareholder as of the date of this Form 10.

(c)  Dividends

The Fund intends to distribute to its shareholders substantially all of its net investment income and net realized capital gains, if any, as determined for income tax purposes.  Applicable law, including

provisions of the 1940 Act, may limit the amount of dividends and other distributions payable by the Fund.  Income dividends will generally be paid quarterly to the shareholders of record on the last day of each preceding calendar quarter end.  Substantially all of the Fund’s net capital gain (the excess of net long-term capital gain over net short-term capital loss) and net short-term capital gain, if any, will be distributed at least annually with the Fund’s final quarterly dividend distribution for the year.  The Fund also expects to make in-kind distributions to its shareholders of any warrants it receives in connection with loans and any securities acquired as a result of direct equity investments, although as a result of regulatory issues, under the 1940 Act, equity investments from time to time may be retained.

Until the fourth anniversary following the first closing of the offering of Interests by the Company, the Investment Manager will seek to reinvest the proceeds of matured, repaid or sold investments, net of required distributions to shareholders, principal payments on borrowings and expenses or other obligations of the Fund, in new loans or equity investments.  Beginning on the fourth anniversary of the Fund’s first closing, the Fund will also distribute to its shareholders all proceeds received from principal payments and sales of investments, net of reserves and expenses, principal repayments on the Fund’s borrowings, amounts required to fund financing commitments entered into before such fourth anniversary, and any amounts paid on exercise of warrants or to otherwise protect the value of existing investments (for example, follow on equity investments made pursuant to pay-to-p lay provisions or in a “down round” of equity to avoid dilution).  Distributions of such amounts are likely to cause annual distributions to exceed the earnings and profits of the Fund available for distribution, in which case such excess will be considered a tax free return of capital to a shareholder to the extent of such shareholder’s adjusted basis in his Shares, and then as capital gain.

ITEM 10.  RECENT SALES OF UNREGULATED SECURITIES

See Item 9(b).

ITEM 11.  DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED.

GENERAL.  The Members will instruct the Company, pro rata in accordance with each Member’s percentage interest in the Company, as to how to vote the Shares held by the Company, as required by Section 12(d)(1)(E) of the 1940 Act.  All Shares will participate equally in dividends and distributions and in the proceeds of any liquidation.  Shares have no preference, conversion, exchange or cumulative voting rights.  The Fund has 10,000,000 Shares authorized.

Annual meetings will be held beginning in 2007 and special meetings may be called by the Chairman of the board of directors or President, a majority of the board of directors or Members holding at least 25% of the Interests in the Company.  The Fund anticipates soliciting proxies from Members for each annual meeting.  The Fund’s Articles of Incorporation can be amended by the affirmative vote of at least a majority of the Interests in the Company.

DISSOLUTION OF THE FUND.  Until the fourth anniversary following the first closing of the offering of Interests by the Company, the Fund will, subject to market conditions, invest the proceeds of repayment, prepayment or sale of its investments, net of any principal repayments on borrowings and expenses or other obligations of the Fund, in additional venture loans and equity investments.  Thereafter, the Fund will cease to make new investments in venture loans (other than amounts required to fund financing commitments entered into before such fourth anniversary) and equity investments and will distribute to investors the proceeds of repayment, prepayment or sale of its investments, net of (i) any principal repayments on borrowings, (ii) reserves, expenses or other obligations of the Fund, (iii) amounts paid on exercise of warrants or other convertible securities and (iv) any f ollow-on investment to an existing venture loan made to increase the likelihood of ultimate realization of the investment and

determined by the board of directors to be in the best interests of the Fund, such as pay-to-play provisions and purchases of equity securities in “down rounds” to avoid dilution.

The Fund’s Articles of Incorporation provide that, on December 31, 2015, the Fund automatically will be dissolved without any action by shareholders.  From and after such dissolution, the Fund’s activities will be limited to the winding-up of its affairs, the liquidation of its remaining assets and the distribution of the net proceeds thereof to shareholders.  Although the Fund generally will not invest in any loan or lease with a maturity date later than December 31, 2015, it is possible that, due to a default by a borrower or a transaction restructuring due to a borrower’s financial difficulties, the Fund will not fully realize on a loan by the original maturity date.  Furthermore, the Fund may not be able to sell warrants it receives from borrowers, or the equity securities it receives upon exercise of such warrants, for a significant period of time due to lega l or contractual restrictions on resale or the absence of a liquid secondary market.  As a result, the liquidation process might not be completed for a significant period after the Fund’s dissolution.  In addition, it is possible that, if certain of the Fund’s assets are not liquidated within a reasonable time after the Fund’s dissolution, the Fund may elect to make a distribution in kind of all or part of such assets to shareholders.  In such case, shareholders would bear any expenses attendant to the liquidation of such assets.

TRANSFERABILITY OF SHARES.  The offer and sale of the Shares will not be registered under the 1933 Act.  The offer and sale are exempt from such registration requirements as they do not constitute a public offering pursuant to Section 4(2) and Regulation D of the 1933 Act.

Because the Shares will be acquired by investors in transactions “not involving a public offering,” they will be “restricted securities” and may be required to be held indefinitely. Shares may not be sold, transferred, assigned, pledged or otherwise disposed of unless registered under applicable securities laws or specifically exempted from registration (in which case the shareholder will, at the option of the Fund, be required to provide the Fund with a legal opinion, in form and substance satisfactory to the Fund, that registration is not required). No sale, transfer, assignment, pledge or other disposition, whether voluntary or involuntary, of the Shares may be made except by registration of the transfer on the Fund’s books.  Each transferee will be required to execute an instrument agreeing to be bound by these restrictions and the other restrictions imposed o n the Shares and to execute such other instruments or certifications as are reasonably required by the Fund.

ITEM 12.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

The articles of incorporation of the Fund provide that the Fund may elect to indemnify directors and officers of the Fund to the maximum extent permitted by the laws of the State of Maryland, the state under which the Fund is incorporated.  Additionally, the Fund’s articles of incorporation provide that no officer or director of the Fund shall be liable to the Fund for money damages.  

The corporation law of the State of Maryland permits a Maryland corporation to indemnify its directors in any proceeding against a director that relates to the director’s service as a director unless it is established that (i) the act or omission of the director that gave rise to the proceeding was committed in bad faith or was the result of active and deliberate dishonesty, or (ii) the director actually received an improper benefit in money, property or services, or (iii) in the case of a criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful.  The indemnification may be against judgments, penalties, fines, settlements and reasonable expenses (including attorneys’ fees) incurred by the director in connection with the proceeding.  Under Maryland law, the Fund may not advance expenses to a director brou ght by the director against the Fund except for a proceeding to enforce the director’s indemnification rights or unless the articles, bylaws or a resolution of the board of directors expressly provides otherwise.  To date the Fund has not elected to advance expenses to a director in such

a case.  Under Maryland law, the Fund may not indemnify a director in respect of any proceeding in which a director is adjudged to have obtained an improper personal benefit whether or not involving action by the director in his or her official capacity.  Unless the Fund’s articles of incorporation say otherwise, Maryland law requires the Fund to indemnify a director for his or her reasonable expenses (including attorneys’ fees) if the director successfully defends against any proceeding that related to the director’s service as a director.  The Fund may advance expenses to a director in any proceeding that relates to the director’s service as a director if the director delivers to the Fund a written affirmation of the director’s good faith belief that director’s conduct would permit indemnification under Maryland law and the director agrees in writing to repay such advanced expenses if it is ultimately determined that the director’s conduct does not permit indemnification under Maryland law.

Under Maryland law, the Fund may indemnify an officer or agent of the Fund only against his or her expenses to the same extent that the Fund may indemnify a director.  Maryland law permits the Fund to purchase insurance for the benefit of the Fund’s directors, officers, and agents against any liability asserted against and incurred by any of them arising out of their capacity or position, whether or not the Fund is permitted by Maryland law to indemnify that person.

The Fund’s Bylaws provide that the Fund may purchase and maintain insurance on behalf of any person who is or was a director, officer or agent of the Fund against any liability asserted against that person and incurred by that person in or arising out of his or her position, whether or not the Fund would have the power to indemnify him or her against such liability; provided no such insurance so purchased will protect or purport to protect any officer or director against liabilities for willful misfeasance, bad faith, gross negligence or reckless disregard of duty.

ITEM 13.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Fund has not commenced business and has prepared no financial statements.

ITEM 14.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

The Fund has not commenced business and has prepared no financial statements.

ITEM 15.  FINANCIAL STATEMENTS AND EXHIBITS.

(a)

Financial Statements - None

(b)

Exhibits - See Exhibit Index following signature page in this Registration Statement, which Exhibit Index is incorporated herein by reference.

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

VENTURE LENDING & LEASING V, INC.

Date: September 26, 2006

By:

/s/ RONALD W. SWENSON

Ronald W. Swenson,

Chief Executive Officer & President

VENTURE LENDING & LEASING V, INC.

(the “Fund”)

EXHIBIT INDEX

TO

FORM 10 REGISTRATION STATEMENT

Exhibit	Description
3(i)	Articles of Incorporation of the Fund filed with the Maryland Secretary of State on August 18, 2006.
3(ii)	Bylaws of the Fund.
4.1	Form of Stock Purchase Agreement between the Fund and the Company.
10.1	Form of Custodian Agreement with Union Bank of California.
10.2	Form of Intercreditor Agreement between the Fund and VLL IV.
10.3	Form of Investment Management Agreement between the Fund and the Investment Manager.

EX-3

ARTICLES OF INCORPORATION
OF
VENTURE LENDING & LEASING V, INC.

Article I
Incorporation

The undersigned, Ronald W. Swenson, whose address is 2010 North First Street, Suite 310, San Jose, California 95131, being at least eighteen years of age, does hereby form a corporation under the general laws of the State of Maryland.

Article II
Name of Corporation

The name of the Corporation is Venture Lending & Leasing V, Inc.

Article III
Corporate Purposes

The Corporation is formed for the following purpose or purposes:

A.

To conduct, operate, and carry on the business of a closed-end, management investment company that has elected to be treated as a business development company, pursuant to the Investment Company Act of 1940, as amended (“1940 Act”); provided, however, that the Corporation may cease to be treated as a business development company upon compliance with the requirements of the 1940 Act with respect thereto; and

B.

To exercise and enjoy all powers, rights and privileges granted to and conferred upon corporations by the Maryland General Corporation Law now or hereafter in force.

Article IV
Address of Principal Office

The post office address of the principal office of the Corporation in the State of Maryland is National Corporate Research, Ltd., 11 East Chase Street #9E, Baltimore, MD 21202.

Article V
Name and Address of Resident Agent

The name and address of the resident agent of the Corporation in the State of Maryland is National Corporate Research, Ltd., 11 East Chase Street #9E, Baltimore, MD 21202.

Article VI
Shares of Stock

A.

The total number of shares of all classes of stock which the Corporation has authority to issue is ten million (10,000,000) shares of Common Stock, $.001 par value per share, having an aggregate par value of $10,000.

B.

No holder of shares of stock of the Corporation shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of stock of the Corporation or any other security of the Corporation which it may issue or sell.

C.

All shares of the Corporation’s authorized stock, when issued for such consideration as the Board of Directors may determine, shall be fully paid and nonassessable.

D.

The Board of Directors of the Corporation may, by adoption of a resolution or Bylaw, impose restrictions upon the transferability by shareholders of shares of the Corporation’s stock.

E.

No shares of the Corporation’s stock shall have any conversion or exchange rights or privileges or have cumulative voting rights.

F.

Except as otherwise required under the 1940 Act, voting power for the election of directors and for all other purposes shall be vested exclusively in the holders of the Common Stock. Each holder of a full or fractional share of Common Stock shall be entitled, in the case of full shares, to one vote for each such share and, in the case of fractional shares, to a fraction of one vote corresponding to the fractional amount of each such fractional share, in each case based upon the number of shares registered in such holder’s name on the books of the Corporation on the record date fixed for such purpose.

G.

Any assets of the Corporation distributed to the stockholders shall be distributed among such stockholders, in cash or in kind at the option of the directors, in proportion to the number of full and fractional shares of Common Stock held by them and recorded on the books of the Corporation on the record date fixed for such purpose.

H.

Each holder of shares of stock shall, upon demand, disclose to the Corporation such information with respect to direct or indirect holdings of such shares as the directors or any officer or agent of the Corporation designated by the directors deem necessary to comply with provisions of the Internal Revenue Code of 1986 applicable to the Corporation, to comply with requirements of any other appropriate taxing authority, or to comply with the provisions of the 1940 Act or of the Employee Retirement Income Security Act of 1974, as any of said laws may be amended from time to time.

Article VII
Board of Directors

The number of directors of the Corporation shall be two (2), which number may be increased or decreased pursuant to the Bylaws, but shall never be less than the minimum number required by the Maryland General Corporation Law. The names of the directors who shall serve until the

next annual meeting of stockholders and until their successors are duly elected and qualify are Ronald W. Swenson and Salvador O. Gutierrez.

Article VIII
Management of the Corporation’s Affairs

A.

All corporate powers and authority of the Corporation shall be vested in and exercised by, and the business and affairs of the Corporation shall be managed under the direction of, the Board of Directors except as otherwise provided by statute, the charter, or the Bylaws of the Corporation.

B.

The Board of Directors shall have the exclusive power to adopt, alter, or repeal the Bylaws of the Corporation.

C.

Subject to the provisions of the Maryland General Corporation Law, the Board of Directors shall have the power to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation (other than the stock ledger) shall be open to inspection by stockholders. No stockholder shall have any right to inspect any account, book, or document of the Corporation except to the extent permitted by statute or the Bylaws.

D.

The determination as to any of the following matters, made in good faith by or pursuant to the direction of the Board of Directors consistent with the charter and in the absence of manifest error or actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a court, shall be final and conclusive and shall be binding upon the Corporation and every holder of shares of its stock: the amount of the net income of the Corporation for any period and the amount of assets at any time legally available for the payment of dividends, redemption of its stock or the payment of other distributions on its stock; the amount of paid-in surplus, net assets, other surplus, annual or other net profit, net assets in excess of capital, undivided profits or excess of profits over losses on sales of assets; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Corporation; any matter relating to the acquisition, holding and disposition of any assets by the Corporation; or any other matter relating to the business and affairs of the Corporation. To the extent not prohibited by law or by this charter or Bylaws, the Board of Directors may delegate the power to make such determinations to any one or more of the directors or officers of the Corporation, its investment adviser, administrator, custodian, or depositary of the Corporation’s assets, or another agent of the Corporation appointed for such purposes.

E.

Except as otherwise required under the 1940 Act, the Board of Directors shall have the power to make distributions, including dividends, from any legally available funds in such amounts, and in a manner and to the stockholders of record as of such a date, as the Board of Directors may determine.

Article IX
Stockholder Liability

The stockholders shall not be liable to any extent for the payment of any debt of the Corporation.

Article X
Majority of Votes

Except as otherwise provided in these Articles or under the 1940 Act, notwithstanding any provision of law permitting or requiring any action to be taken or approved by the affirmative vote of the holders of shares entitled to cast a greater number of votes, any such action shall be effective and valid if taken or approved by the affirmative vote of holder entitled to cast a majority of all the votes entitled to be cast on the matter.

Article XI
Special Voting Requirements—Control Shares

The Corporation shall not be governed by the provisions of Section 3-602 of the Maryland General Corporation Law.

Article XII
Limitation on Liability

A.

To the maximum extent permitted by the laws of Maryland (but not in violation of any applicable requirement or limitation of the 1940 Act), in each case as currently in effect or as may hereafter be amended:

1.

No director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages; and

2.

The Corporation shall have the power to obligate itself to indemnify and to advance expenses as provided in the Bylaws of the Corporation to its present and past directors, officers, employees and agents (including any person or firm appointed by the Corporation to serve as investment adviser or any similar function), and persons who are serving or have served at the request of the Corporation in similar capacities

B.

No amendment, alteration, or repeal of this Article or the adoption, alteration, or amendment of any other provision of these Articles or the Bylaws of the Corporation inconsistent with this Article, shall adversely affect any limitation on liability or indemnification of any person under this Article with respect to any act or failure to act which occurred prior to such amendment, alteration, repeal, or adoption.

Article XIII
Limited Term of Existence

The Corporation shall have a limited period of existence and shall cease to exist at the close of business on December 31, 2015, except that the Corporation shall continue to exist for the purpose of paying, satisfying and discharging any existing debts or obligations, collecting and

distributing its assets, and doing all other acts required to liquidate and wind up its business and affairs. After the close of business on December 31, 2015, if the Corporation has not liquidated and wound up its business and affairs, the directors shall become trustees of the Corporation’s assets for purposes of liquidation with the full powers granted to directors of a corporation which has voluntarily dissolved under subtitle 4 of Title 3 of the Maryland General Corporation Law or any successor statute as are necessary to liquidate the Corporation and wind up its affairs, but in no event with lesser power than the powers granted by such subtitle as of the date of incorporation of the Corporation.

* * * * *

Article XIV
Right of Amendment

Any provision of these Articles may be amended, altered, or repealed upon the affirmative vote of a majority of all the votes entitled to be cast on the matter.

In Witness Whereof, I have signed these Articles of Incorporation and acknowledge the same to be my act this 17^th day of August, 2006.

/s/ Ronald W. Swenson

Ronald W. Swenson

EX-3

BYLAWS
OF
VENTURE LENDING & LEASING V, INC.

ARTICLE I

NAME OF CORPORATION;
LOCATION OF OFFICES AND SEAL

Section 1.

Name.  The name of the Corporation is Venture Lending & Leasing V, Inc.

Section 2.

Principal Offices.  The principal office of the Corporation is in the City of Baltimore, Maryland. The Corporation may, in addition, establish and maintain such other offices and places of business as the Board of Directors may, from time to time, determine.

Section 3.

Seal.  The corporate seal of the Corporation shall be circular in form and shall bear the name of the Corporation, the year of its incorporation, and the word “Maryland.” The form of the seal shall be subject to alteration by the Board of Directors and the seal may be used by causing it or a facsimile to be impressed or affixed or printed or otherwise reproduced. Any officer or director of the Corporation shall have authority to affix the corporate seal of the Corporation to any document requiring the same.

ARTICLE II

SHAREHOLDERS

Section 1.

Annual Meetings.  An annual meeting of shareholders to elect directors and transact any other business within the Corporation’s powers will be held at such time as is set by the Board of Directors during the month of May of each calendar year.

Section 2.

Special Meetings.  Special meetings of shareholders may be called at any time by the Chairman of the Board, or Chief Executive Officer, or President, or by a majority of the Board of Directors, and shall be held at such time and place as may be stated in the notice of the meeting.

Special meetings of the shareholders may be called by the Secretary upon the written request of the holders of shares entitled to vote not less than twenty-five percent of all the votes entitled to be cast at such meeting, provided that (1) such request shall state the purposes of such meeting and the matters proposed to be acted on, and (2) the shareholders requesting such meeting shall have paid to the Corporation the reasonably estimated cost of preparing and mailing the notice thereof, which the Secretary shall determine and specify to such shareholders. No special meeting shall be called upon the request of shareholders to consider any matter which is substantially the same as a matter voted upon at any special meeting of the shareholders held during the preceding twelve months, unless requested by the holders of a majority of all shares entitled to be voted at such meeting.

Section 3.

Notice of Meetings.  The Secretary shall cause notice of the place, date, and hour, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, to be mailed, postage prepaid, not less than ten nor more than ninety days before the date of the meeting, to each shareholder entitled to vote at such meeting at his or her address as it appears on the records of the Corporation at the time of such mailing.  Notice shall be deemed to be given when deposited in the United States mail addressed to the shareholders as aforesaid. Notice of any shareholders’ meeting need not be given to any shareholder who shall sign a written waiver of such notice whether before or after the time of such meeting, or to any shareholder who is present at such meeting in person or by proxy.  Notice of adjournment of a shareholders’ meeting to another time o r place need not be given if such time and place are announced at the meeting.  Irregularities in the notice of any meeting to, or the nonreceipt of any such notice by, any of the shareholders shall not invalidate any action otherwise properly taken by or at any such meeting.

Section 4.

Quorum and Adjournment of Meetings.  The presence at any shareholders’ meeting, in person, by telephone conference, or by proxy, of shareholders entitled to cast a majority of the votes shall be necessary and sufficient to constitute a quorum for the transaction of business. In the absence of a quorum, the holders of a majority of shares entitled to vote at the meeting and present in person or by proxy, or, if no shareholder entitled to vote is present in person or by proxy, any officer present entitled to preside or act as secretary of such meeting may adjourn the meeting without determining the date of the new meeting or from time to time without further notice to a date not more than 120 days after the original record date. Any business that might have been transacted at the meeting originally called may be transacted at any such adjourned meeting at which a quorum is present.

Section 5.

Voting.  Except as otherwise provided in the Articles of Incorporation or by applicable law, at each shareholders’ meeting each shareholder shall be entitled to one vote for each share of stock of the Corporation validly issued and outstanding and registered in his or her name on the books of the Corporation on the record date fixed in accordance with Section 5 of Article VI hereof, either in person or by proxy appointed by instrument in writing subscribed by such shareholder or his or her duly authorized attorney, except that no shares held by the Corporation shall be entitled to a vote.

Except as otherwise provided in the Articles of Incorporation, these Bylaws, as required by provisions of the Investment Company Act of 1940, as amended (“1940 Act”) or as required under Maryland law, all matters shall be decided by a vote of the majority of the votes validly cast. The vote upon any question shall be by ballot whenever requested by any person entitled to vote, but, unless such a request is made, voting may be conducted in any way approved at the meeting.

At any meeting at which there is an election of Directors, the chairman of the meeting may, and upon the request of the holders of ten percent of the stock entitled to vote at such election shall, appoint two inspectors of election who shall first subscribe an oath or affirmation to execute faithfully the duties of inspectors at such election with strict impartiality and according to the best of their ability, and shall, after the election, make a certificate of the result of the vote taken. No candidate for the office of Director shall be appointed as an inspector.

Section 6.

Validity of Proxies.  The right to vote by proxy shall exist only if the instrument authorizing such proxy to act shall have been signed by the shareholder or by his or her duly authorized attorney. Unless a proxy provides otherwise, it shall not be valid more than eleven months after its date. All proxies shall be delivered to the Secretary of the Corporation or to the person acting as Secretary of the meeting before being voted, who shall decide all questions concerning qualification of voters, the validity of proxies, and the acceptance or rejection of votes. If inspectors of election have been appointed by the chairman of the meeting, such inspectors shall decide all such questions. A proxy with respect of stock held in the name of two or more persons shall be valid if executed by one of them unless at or prior to exercise of such proxy the Corporation r eceives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a shareholder shall be deemed valid unless challenged at or prior to its exercise.

Section 7.

Stock Ledger and List of Shareholders.  It shall be the duty of the Secretary or Assistant Secretary of the Corporation to cause an original or duplicate stock ledger to be maintained at the office of the Corporation’s transfer agent. Such stock ledger may be in written form or any other form capable of being converted into written form within a reasonable time for visual inspection.

Any one or more persons, each of whom has been a shareholder of record of the Corporation for more than six months next preceding such request, who owns in the aggregate five percent or more of the outstanding capital stock of the Corporation, may submit (unless the Corporation at the time of the request maintains a duplicate stock ledger at its principal office in Maryland) a written request to any officer of the Corporation or its resident agent in Maryland for a list of the shareholders of the Corporation. Within twenty days after such a request, there shall be prepared and filed at the Corporation’s principal office in Maryland a list containing the names and addresses of all shareholders of the Corporation and the number of shares of each class held by each shareholder, certified as correct by an officer of the Corporation, by its stock transfer agent, or by i ts registrar.

Section 8.  Action Without Meeting.  Any action required or permitted to be taken by shareholders at a meeting of shareholders may be taken without a meeting if (1) all shareholders entitled to vote on the matter sign a written consent to the action, (2) all shareholders entitled to notice of the meeting but not entitled to vote at it sign a written waiver of any right to dissent, and (3) the consents and waivers are filed with the records of the meetings of shareholders. Such consent shall be treated for all purposes as a vote at the meeting.

ARTICLE III

BOARD OF DIRECTORS

Section 1.

Powers.  Except as otherwise provided by operation of law, by the Articles of Incorporation, or by these Bylaws, the business and affairs of the Corporation shall be managed under the direction of and all the powers of the Corporation shall be exercised by or under authority of its Board of Directors.

Section 2.

Number and Term of Directors.  Except for the initial Board of Directors, the Board of Directors shall consist of not fewer than three or more than seven Directors, as specified by a resolution of a majority of the entire Board of Directors. Directors need not be shareholders of the Corporation. All acts done at any meeting of the Directors or by any person acting as a Director, so long as his or her successor shall not have been duly elected or appointed, shall, notwithstanding that it be afterwards discovered that there was some defect in the election of the Directors or of such person acting as a Director, or that they or any of them were disqualified, be as valid as if the Directors or such other person, as the case may be, had been duly elected and were or was qualified to be Directors or a Director of the Corporation. Each Director shall hold office un til his or her successor is elected and qualified or until his or her earlier death, resignation, or removal.

Section 3.

Election.  Unless otherwise required by the 1940 Act, at each annual meeting of shareholders, Directors shall be elected by vote of the holders of a majority of the shares present in person or by proxy and entitled to vote thereon. A plurality of all the votes cast at a meeting at which a quorum is present is sufficient to elect a Director.

Section 4.

Vacancies and Newly Created Directorships.  If any vacancies shall occur in the Board of Directors by reason of death, resignation, removal, or otherwise, or if the authorized number of Directors shall be increased, the Directors then in office shall continue to act, and such vacancies (if not previously filled by the shareholders) may be filled by a majority of the Directors then in office, although less than a quorum, except that a newly created Directorship may be filled only by a majority vote of the entire Board of Directors; provided, however, that if, at any time that there are shareholders of the Corporation, immediately after filling such vacancy at least two-thirds of the Directors then holding office shall have been elected to such office by the shareholders of the Corporation. In the event that at any time, other than the time preceding the first annual shareholders’ meeting, less than a majority of the Directors of the Corporation holding office at that time were elected by the shareholders, a meeting of the shareholders shall be held promptly, and in any event within sixty days, for the purpose of electing Directors to fill any existing vacancies in the Board of Directors, unless the Securities and Exchange Commission shall by order extend such period.

Section 5.

Removal.  At any shareholders’ meeting duly called, provided a quorum is present, the shareholders may remove any director from office (either with or without cause) and may elect a successor or successors to fill any resulting vacancies for the unexpired terms of the removed director or directors. A majority of all the votes entitled to be cast for the election of directors is sufficient to remove a Director.

Section 6.

Annual and Regular Meetings.  The annual meeting of the Board of Directors for choosing officers and transacting other proper business shall be held at such other time and place as the Board may determine. The Board of Directors from time to time may provide by resolution for the holding of regular meetings and fix their time and place within or outside the State of Maryland.  Except as otherwise provided in the 1940 Act, notice of such annual and regular meetings need not be given, provided that notice of any change in the time or place of such meetings shall be sent promptly to each Director not present at the meeting at which such change was made, in the manner provided for notice of special meetings. Except as otherwise provided under the 1940 Act, members of the Board of Directors or any committee designated thereby may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment that allows all persons participating in the meeting to hear each other at the same time.

Section 7.

Special Meetings.  Special meetings of the Board of Directors shall be held whenever called by the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President (or, in the absence or disability of the President, by any Vice President), the Treasurer, or by two or more Directors, at the time and place (within or without the State of Maryland) specified in the respective notice or waivers of notice of such meetings. Notice of special meetings, stating the time and place, shall be (1) mailed to each Director at his or her residence or regular place of business at least three days before the day on which a special meeting is to be held, or (2) delivered to him or her personally or transmitted to him or her by telegraph, telecopy, telex, cable, or wireless at least one day before the meeting.

Section 8.

Waiver of Notice.  No notice of any meeting need be given to any Director who is present at the meeting or who waives notice of such meeting in writing (which waiver shall be filed with the records of such meeting) either before or after the time of the meeting.

Section 9.

Quorum and Voting.  At all meetings of the Board of Directors, the presence of one half or more of the number of Directors then in office shall constitute a quorum for the transaction of business, provided that, at any time that there shall be more than one director, there shall be present at least two directors. In the absence of a quorum, a majority of the Directors present may adjourn the meeting, from time to time, until a quorum shall be present. The action of a majority of the Directors present at a meeting at which a quorum is present shall be the action of the Board of Directors, unless concurrence of a greater proportion is required for such action by law, by the Articles of Incorporation, or by these Bylaws.

Section 10.

Action Without a Meeting.  Except as otherwise provided under the 1940 Act, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent to such action is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee.

Section 11.

Compensation of Directors.  Directors shall be entitled to receive such compensation from the Corporation for their services as may from time to time be determined by resolution of the Board of Directors.

ARTICLE IIIA

ADVISORY DIRECTORS

Section 1.

Advisory Directors.  The Board of Directors may elect one or more persons (who may or may not be officers of the Corporation) to serve as Advisory Directors of the Corporation.  Advisory Directors shall attend meetings of the Board of Directors, and provide advice and assistance to the Board of Directors as requested. Advisory Directors will not be deemed members of the Board of Directors, and will not vote on any matter requiring a vote of the Board of Directors.

Section 2.

Election, Removal, Etc.  The election, tenure, qualifications, removal and resignation of Advisory Directors shall be governed by the provisions of Article V of these By-Laws dealing with the election, tenure, qualifications, removal and resignation of officers.

Section 3.

Indemnification and Insurance.  An Advisory Director shall be entitled to the same Indemnification and Insurance provided under Article IX of these Bylaws as that which would apply to an officer or director of the Corporation.

ARTICLE IV

COMMITTEES

Section 1.

Organization.  By resolution adopted by the Board of Directors, the Board may designate one or more committees of the Board of Directors, including an Executive Committee. The Chairmen of such committees shall be elected by the Board of Directors. Each committee must be comprised of one or more members, each of whom must be a Director and shall hold committee membership at the pleasure of the Board. The Board of Directors shall have the power at any time to change the members of such committees and to fill vacancies in the committees. The Board may delegate to these committees any of its powers, except the power to authorize dividends on stock, authorize the issuance of stock (except as permitted under Title 2 of the Annotated Corporations and Associations Code of Maryland (“Code”)), recommend to shareholders any action requiring shareholder s’ approval, amend these Bylaws, approve any merger or share exchange which does not require shareholder approval, approve or terminate any contract with an “investment adviser” or “principal underwriter,” as those terms are defined in the 1940 Act, or to take any other action required by the 1940 Act to be taken by the Board of Directors.

Section 2.

Executive Committee.  Unless otherwise provided by resolution of the Board of Directors, when the Board of Directors is not in session, the Executive Committee, if one is designated by the Board, shall have and may exercise all powers of the Board of Directors in the management of the business and affairs of the Corporation that may lawfully be exercised by an Executive Committee. The Chief Executive Officer, President and Chairman shall automatically be members of the Executive Committee.

Section 3.

Proceedings and Quorum.  In the absence of an appropriate resolution of the Board of Directors, each committee may adopt such rules and regulations governing its proceedings, quorum, and manner of acting as it shall deem proper and desirable. In the event any member of any committee is absent from any meeting, the members thereof present at the meeting, whether or not they constitute a quorum, may appoint a member of the Board of Directors to act in the place of such absent member.

Section 4.

Other Committees.  The Board of Directors may appoint other committees, each consisting of one or more persons, who need not be Directors. Each such committee shall have such powers and perform such duties as may be assigned to it from time to time by the Board of Directors, but shall not exercise any power which may lawfully be exercised only by the Board of Directors or a committee thereof.

ARTICLE V

OFFICERS

Section 1.

General.  The officers of the Corporation shall be a Chairman, Chief Executive Officer, President, Vice President, Treasurer, and Secretary and may include one or more Vice  Presidents, Assistant Secretaries, or Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 11 of this Article.

Section 2.

Election, Tenure and Qualifications.  The officers of the Corporation, except those appointed as provided in Section 11 of this Article V, shall be elected by the Board of Directors at its first meeting or such subsequent meetings as shall be held prior to its first annual meeting, and thereafter annually at its annual meeting. If any officers are not elected at any annual meeting, such officers may be elected at any subsequent regular or special meeting of the Board. Except as otherwise provided in this Article V, each officer elected by the Board of Directors shall hold office until the next annual meeting of the Board of Directors and until his or her successor shall have been elected and qualified. Any person may hold one or more offices of the Corporation, except that no one person may serve concurrently as both President and Vice President. A person wh o holds more than one office in the Corporation may not act in more than one capacity to execute, acknowledge, or verify an instrument required by law to be executed, acknowledged, or verified by more than one officer. No officer, other than the Chairman or [Vice Chairman], need be a Director.

Section 3.

Vacancies and Newly Created Officers.  If any vacancy shall occur in any office by reason of death, resignation, removal, disqualification, or other cause, or if any new office shall be created, such vacancies or newly created offices may be filled by the Board of Directors at any regular or special meeting or, in the case of any office created pursuant to Section 11 hereof, by any officer upon whom such power shall have been conferred by the Board of Directors.

Section 4.

Removal and Resignation.  Any officer may be removed from office by the vote of a majority of the members of the Board of Directors given at a regular meeting or any special meeting called for such purpose. Any officer may resign from office at any time by delivering a written resignation to the Board of Directors, the Chief Executive Officer, the President, the Chairman, the Secretary, or any Assistant Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery.

Section 5.

Chief Executive Officer.  The Chief Executive Officer shall preside at all shareholders’ meetings and at all meetings of the Board of Directors.  Subject to the supervision of the Board of Directors, the Chief Executive Officer shall have general charge of the business, affairs, and property of the Corporation and general supervision over its officers, employees, and agents. Except as the Board of Directors may otherwise order, the Chief Executive Officer may sign in the name and on behalf of the Corporation all deeds, bonds, contracts, or agreements. The Chief Executive Officer shall exercise such other powers and perform such other duties as from time to time may be assigned by the Board of Directors.

Section 6.

President.  The President shall actively manage the business, affairs and property of the Corporation and shall supervise its officers, employees and agents. Except as the Board of Directors may otherwise order, the President may sign in the name and on behalf of the Corporation all deeds, bonds, contracts, or agreements. The President shall exercise such other powers and perform such other duties as from time to time may be assigned by the Board of Directors.

Section 7.

Chairman.  The Chairman shall be the Chief Executive Officer of the Corporation and shall preside at all shareholders’ meetings and at all meetings of the Board of Directors, and may be ex officio a member of all committees of the Board of Directors. Except as the Board of Directors may otherwise order, the Chairman may sign in the name and on behalf of the Corporation all deeds, bonds, contracts, or agreements. The Chairman shall exercise such other powers and perform such other duties as from time to time may be assigned by the Board of Directors.

Section 8.

Vice Chairman.  The Vice Chairman shall be the President of the Corporation and, in the absence of the Chairman, shall preside at the all shareholders’ meetings and at all meetings of the Board of Directors. Except as the Board of Directors may otherwise order, the Vice Chairman may sign in the name and on behalf of the Corporation all deeds, bonds, contracts, or agreements. The Vice Chairman shall exercise such other powers and perform such other duties as from time to time may be assigned by the Board of Directors.

Section 9.

Vice President.  The Board of Directors may from time to time elect one or more Vice Presidents who shall have such powers and perform such duties as from time to time may be assigned to them by the Board of Directors or the President. The Board of Directors may establish titles among the Vice Presidents denoting their relative seniority.  At the request of, or in the absence or in the event of the disability of, the President, the Vice President (or, if there are two or more Vice Presidents, then the senior of the Vice Presidents present and able to act) may perform all the duties of the President and, when so acting, shall have all the powers of and be subject to all the restrictions upon the President.

Section 10.

Treasurer and Assistant Treasurers.  The Treasurer shall be the principal financial and accounting officer of the Corporation and shall have general charge of the finances and books of account of the Corporation. Except as otherwise provided by the Board of Directors, the Treasurer shall have general supervision of the funds and property of the Corporation and of the performance by the Custodian of its duties with respect thereto. The Treasurer shall render to the Board of Directors, whenever directed by the Board, an account of the financial condition of the Corporation and of all transactions as Treasurer; and as soon as possible after the close of each financial year the Treasurer shall make and submit to the Board of Directors a like report for such financial year. The Treasurer shall perform all acts incidental to the office of Treasurer, subject of the control of the Board of Directors.

Any Assistant Treasurer may perform such duties of the Treasurer as the Treasurer or the Board of Directors may assign, and, in the absence of the Treasurer, may perform all the duties of the Treasurer.

Section 11.

Secretary and Assistant Secretaries.  The Secretary shall attend to the giving and serving of all notices of the Corporation and shall record all proceedings of the meetings of the shareholders and Directors in books to be kept for that purpose. The Secretary shall keep in safe custody the seal of the Corporation, and shall have responsibility for the records of the Corporation, including the stock books and such other books and papers as the Board of Directors may direct and such books, reports, certificates, and other documents required by law to be kept, all of which shall at all reasonable times be open to inspection by any Director. The Secretary shall perform such other duties which appertain to this office or as may be required by the Board of Directors.  Any Assistant Secretary may perform such duties of the Secretary as the Secretary or the Boa rd of Directors may assign, and, in the absence of the Secretary, may perform all the duties of the Secretary.

Section 12.

Subordinate Officers.  The Board of Directors from time to time may appoint such other officers and agents as it may deem advisable, each of whom shall have such title, hold office for such period, have such authority, and perform such duties as the Board of Directors may determine. The Board of Directors from time to time may delegate to one or more officers or agents the power to appoint any such subordinate officers or agents and to prescribe their respective rights, terms of office, authorities, and duties. Any officer or agent appointed in accordance with the provisions of this Section 11 may be removed, either with or without cause, by any officer upon whom such power of removal shall have been conferred by the Board of Directors.

Section 13.

Remuneration.  The salaries or other compensation, if any, of the officers of the Corporation shall be fixed from time to time by resolution of the Board of Directors in the manner provided by Section 9 of Article III, except that the Board of Directors may by resolution delegate to any person or group of persons the power to fix the salaries or other compensation of any subordinate officers or agents appointed in accordance with the provisions of Section 11 of this Article V.

Section 14.

Surety Bond.  The Board of Directors may require any officer or agent of the Corporation to execute a bond (including, without limitation, any bond required by the 1940 Act and the rules and regulations of the Securities and Exchange Commission promulgated thereunder) to the Corporation in such sum and with such surety or sureties as the Board of Directors may determine, conditioned upon the faithful performance of his or her duties to the Corporation, including responsibility for negligence and for the accounting of any of the Corporation’s property, funds or securities that may come into his or her hands.

ARTICLE VI

CAPITAL STOCK

Section 1.

Certificates of Stock.  The interest of each shareholder of the Corporation may be evidenced by certificates for shares of stock in such form as the Board of Directors may from time to time authorize; provided, however, the Board of Directors may, in its discretion, authorize the issuance of non-certificated shares. No certificate shall be valid unless it is signed by the Chairman, President, or a Vice President and countersigned by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer of the Corporation and sealed with the seal of the Corporation, or bears the facsimile signatures of such officers and a facsimile of such seal. In case any officer who shall have signed any such certificate, or whose facsimile signature has been placed thereon, shall cease to be such an officer (because of death, resignation, or otherwise) before such certificate is issued, such certificate may be issued and  delivered by the Corporation with the same effect as if he or she were such officer at the date of issue.

In the event that the Board of Directors authorizes the issuance of non-certificated shares of stock, the Board of Directors may, in its discretion and at any time, discontinue the issuance of share certificates and may, by written notice to the registered owners of each certificated share, require the surrender of share certificates to the Corporation for cancellation. Such surrender and cancellation shall not affect the ownership of shares of the Corporation.

Section 2.

Transfer of Shares.  Subject to the provisions of the next sentence of this Section 2 of Article VI, Shares of the Corporation shall be transferable on the books of the Corporation by the holder of record thereof in person or by his or her duly authorized attorney or legal representative (i) upon surrender and cancellation of any certificate or certificates for the same number of shares of the same class, duly endorsed or accompanied by proper instruments of assignment and transfer, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require, or (ii) as otherwise prescribed by the Board of Directors. The Board of Directors may, from time to time, adopt limitations and rules and regulations with reference to the transfer of the shares of stock of the Corporation to comply with the requirements of the Securities Act of 1933, as amended, or other applicable laws. The Corporation shall be entitled to treat the holder of record of any share of stock as the absolute owner thereof for all purposes, and accordingly shall not be bound to recognize any legal, equitable, or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law or the statutes of the State of Maryland.

Section 3.

Stock Ledgers.  The stock ledgers of the Corporation, containing the names and addresses of the shareholders and the number of shares held by them respectively, shall be kept at the principal offices of the Corporation or, if the Corporation employs a transfer agent, at the offices of the transfer agent of the Corporation.

Section 4.

Transfer Agents and Registrars.  The Board of Directors may from time to time appoint or remove transfer agents and registrars of transfers for shares of stock of the Corporation, and it may appoint the same person as both transfer agent and registrar. Upon any such appointment being made, all certificates representing shares of capital stock thereafter issued shall be countersigned by one of such transfer agents or by one of such registrars or by both and shall not be valid unless so countersigned. If the same person shall be both transfer agent and registrar, only one countersignature by such person shall be required.

Section 5.

Fixing of Record Date.  The Board of Directors may fix in advance a date as a record date for the determination of the shareholders entitled to notice of or to vote at any shareholders’ meeting or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion, or exchange of stock, or for the purpose of any other lawful action, provided that (1) such record date shall be within ninety days prior to the date on which the particular action requiring such determination will be taken, (2) the transfer books shall not be closed for a period longer than twenty days, and (3) in the case of a meeting of shareholders, the record date shall be at least ten days before the date of t he meeting.

Section 6.

Lost, Stolen or Destroyed Certificates. Before issuing a new certificate for stock of the Corporation alleged to have been lost, stolen, or destroyed, the Board of Directors or any officer authorized by the Board may, in their discretion, require the owner of the lost, stolen, or destroyed certificate (or his or her legal representative) to give the Corporation a bond or other indemnity, in such form and in such amount as the Board or any such officer may direct and with such surety or sureties as may be satisfactory to the Board or any such officer, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft, or destruction of any such certificate or the issuance of such new certificate.

ARTICLE VII

FISCAL YEAR AND ACCOUNTANT

Section 1.

Fiscal Year.  The fiscal year of the Corporation shall, unless otherwise ordered by the Board of Directors, be twelve calendar months ending on the 31^st day of December.

Section 2.

Accountant.

A.  The Corporation shall employ an independent public accountant or a firm of independent public accountants as its Accountant to examine the accounts of the Corporation and to-sign and certify financial statements filed by the Corporation. The Accountant’s certificates and reports shall be addressed both to the Board of Directors and to the shareholders. The employment of the Accountant shall be conditioned upon the right of the Corporation to terminate the employment forthwith without any penalty by vote of a majority of the outstanding voting securities at any shareholders’ meeting called for that purpose.

B.  A majority of the members of the Board of Directors who are not “interested persons” (as defined in the 1940 Act) of the Corporation shall select the Accountant at any meeting held within thirty days before or after the beginning of the fiscal year of the Corporation or before the annual shareholders’ meeting in that year. The selection shall be submitted for ratification or rejection at the next succeeding annual shareholders’ meeting. If the selection is rejected at that meeting, the Accountant shall be selected by majority vote of the Corporation’s outstanding voting securities, either at the meeting at which the rejection occurred, or at a subsequent meeting of shareholders called for the purpose of selecting an Accountant.

C.  Any vacancy occurring between annual meetings due to the resignation of the Accountant may be filled by the vote of a majority of the members of the Board of Directors who are not interested persons.

ARTICLE VIII

CUSTODY OF SECURITIES

Section 1.

Employment of a Custodian.  The Corporation shall place and at all times maintain in the custody of a Custodian (including any sub-custodian for the Custodian) all funds, securities and similar investments owned by the Corporation. The Custodian (and any sub-custodian) shall be a bank or trust company of good standing having an aggregate capital, surplus, and undivided profits not less than fifty million dollars ($50,000,000) or such other financial institution or other entity as shall be permitted by rule or order of the Securities and Exchange Commission. The Custodian shall be appointed from time to time by the Board of Directors, which shall fix its remuneration.

Section 2.

Termination of Custodian Agreement.  Upon termination of the agreement for services with the Custodian or inability of the Custodian to continue to serve, the Board of Directors shall promptly appoint a successor Custodian, but in the event that no successor Custodian can be found who has the required qualifications and is willing to serve, the Board of Directors shall call as promptly as possible a special meeting of the shareholders to determine whether the Corporation shall function without a Custodian or shall be liquidated. If so directed by resolution of the Board of Directors, or by vote of the holders of a majority of the outstanding shares of stock of the Corporation, the Custodian shall deliver and pay over all property of the Corporation held by it as specified in such vote.

Section 3.

Other Arrangements.  The Corporation may make such other arrangements for the custody of its assets (including deposit arrangements) as may be required by any applicable law, rule, or regulation.

ARTICLE IX

INDEMNIFICATION AND INSURANCE

Section 1.

Indemnification of Officers, Directors, Employees and Agents.  The Corporation shall indemnify its present and past directors, officers, employees, and agents (including any “investment adviser” or “principal underwriter,” as those terms are defined in the 1940 Act), and any persons who are serving or have served at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or enterprise, to the full extent provided and allowed by Section 2-4 18 of the Code concerning corporations, as amended from time to time or any other applicable provisions of law. Notwithstanding anything herein to the contrary, no director, officer, investment adviser, or principal underwriter of the Corporation shall be indemnified in violation of Sections 17(h) and (i) of the 1940 Act. Expen ses incurred by any such person in defending any proceeding to which he or she is a party by reason of service in the above-referenced capacities shall be paid in advance or reimbursed by the Corporation to the full extent permitted by law, including Sections 17(h) and (i) of the 1940 Act.

Section 2.

Insurance of Officers, Directors, Employees and Agents.  The Corporation may purchase and maintain insurance on behalf of any person who is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against that person and incurred by that person in or arising out of his or her position, whether or not the Corporation would have the power to indemnify him or her against such liability. Notwithstanding the foregoing, any insurance so purchased will not protect or purport to protect any officer or director against liabilities for willful misfeasance, bad faith, gross negligence, or reckless disregard of duty.

Section 3.

Amendment.  No amendment, alternation, or repeal of this Article or the adoption, alteration, or amendment of any other provision of the Articles of Incorporation or Bylaws inconsistent with this Article shall adversely affect any right or protection of any person under this Article with respect to any act or failure to act which occurred prior to such amendment, alteration, repeal, or adoption.

ARTICLE X

AMENDMENTS

Section 1.

General.  Except as provided in Section 2 of this Article X, all Bylaws of the Corporation, whether adopted by the Board of Directors or the shareholders, shall be subject to amendment, alteration, or repeal, and new Bylaws may be made by the affirmative vote of a majority of either: (1) the holders of record of the outstanding shares of stock of the Corporation entitled to vote, at any annual or special meeting, the notice or waiver of notice of which shall have specified or summarized the proposed amendment, alteration, repeal, or new Bylaw; or (2) the Directors, at any regular or special meeting the notice or waiver of notice of which shall have specified or summarized the proposed amendment, alteration, repeal, or new Bylaw.

Section 2.

By Shareholders Only.  No amendment of any section of these Bylaws shall be made except by the shareholders of the Corporation if the Bylaws provide that such section may not be amended, altered, or repealed except by the shareholders.  From and after the issue of any shares of the capital stock of the Corporation, no amendment, alteration, or repeal of this Article X shall be made except by the affirmative vote of the holders of either (a) more than two-thirds of the Corporation’s outstanding shares present at a meeting at which the holders of more than fifty percent of the outstanding shares are present in person or by proxy, or (b) more than fifty percent of the Corporation’s outstanding shares.

EX-4

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “Agreement”), is made effective as of ___________, 2006, between Venture Lending & Leasing V, Inc., a Maryland corporation (“Seller”), and Venture Lending & Leasing V, LLC, a Delaware limited liability company (“Buyer”).

RECITALS

Seller was incorporated effective August 18, 2006 and, thus far, Seller has issued no shares of its capital stock.  Now, Seller wishes to issue and sell to Buyer, and Buyer wishes to purchase from Seller, 100,000 shares of Seller’s common stock (the “Shares”), all on the terms and conditions herein set forth, and all with the result that, after consummation of the transaction contemplated hereunder, Buyer will be the sole shareholder of Seller.  Buyer intends to hold the Shares as its primary, but not necessarily its only, asset.  Buyer also intends to offer and sell (the “Offering”) ownership interests in Buyer (“Membership Interests”) to investors (“Members”), who shall be both “qualified purchasers” within the meaning of Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended, and “accred ited investors” within the meaning of the Securities Act of 1933, as amended (the “Act”), in an offering exempt from the registration requirements of the Act pursuant to Regulation D promulgated thereunder.

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

1.

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

2.

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

3.

Capital Contributions.  Buyer, from time to time, may make contributions to Seller’s capital (“Capital Contributions”) to pay expenses (“Expenses”) or fund investments which Seller proposes to make (“Proposed Investments”).  In connection with any requested Capital Contribution, Seller shall furnish Buyer, to the extent requested by Buyer (i) in the case of an Expense, with invoices or other documentation relating to such Expense or (ii) in the case of a Proposed Investment, with such materials as are reasonably sufficient to allow Buyer to evaluate the Proposed Investment (in either case, the “Materials”).  Buyer, in a reasonably timely manner, then shall review any such Materials and may, in its sole and absolute discretion, but in no case shall it be required to, make the Capital Contribution requested by Seller.  Notwithst anding the foregoing, in no event shall Capital Contributions exceed, in the aggregate, the Members’ aggregate amount of subscription obligations for the purchase of Membership Interests in Buyer.

4.

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

4.1

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

4.2

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

4.3

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

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

4.4

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

5.

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

5.1

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

5.2

Capitalization.  Immediately prior to consummation of the transaction contemplated hereunder, the authorized capital stock of Seller consisted of 10,000,000 shares of common stock, $0.001 par value, none of which had been issued and none of which were outstanding, such that, immediately after consummation of the transaction contemplated hereunder, Buyer shall be the sole shareholder of Seller.  There are no outstanding warrants, options or conversion privileges, or other rights or agreements to purchase or otherwise acquire or issue any shares of common stock of Seller.

6.

Miscellaneous Provisions.

6.1

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

6.2

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

6.3

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

6.4

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

6.5

Counterparts.  This Agreement may be executed in one or more counterparts and by facsimile with the same effect as if the parties had all signed the same document in ink.  All counterparts shall be construed together and shall constitute one agreement.

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

“SELLER”

VENTURE LENDING & LEASING V, INC.,

a Maryland corporation

Dated:

_________, 2006

By:

Martin Eng

Its:

Chief Financial Officer

“BUYER”

VENTURE LENDING & LEASING V, LLC,

a Delaware limited liability company

By:

Westech Investment Advisors, Inc.,

a California corporation

Its:

Managing Member

Dated:

___________, 2006

By:

Ronald W. Swenson

Its:

Chief Executive Officer

EX-10

CUSTODY AGREEMENT

ACCOUNT INFORMATION

Account Number: _______________________

Account Name: Venture Lending & Leasing V, Inc. ”CLIENT”

Account Type:

T Corporation

 Public Funds

 Separate Property

 Community Property

Joint Tenants with Rights

 Tenants in Common

of Survivorship

 Other: _________________________________________

Tax ID / Social Security #: _________________

Tax Status:

 U.S. Citizen

T U.S. Corporation

 U.S. Partnership

 Non-Resident Alien

 Other: _________________________________________

Shareholder Information:

In accordance with the Shareholder Communications Act of 1985, Union Bank of California

T is authorized

 is NOT authorized

to disclose upon request to companies whose securities are held in the Account (a) Client’s and/or Agent’s name and address, and (b) holdings in the Account of securities issued by such companies.  If client does not object to such disclosure above, Bank is required by law to provide such information.

Cost Method:

T FIFO

 LIFO

 HIFO      LOFO

Custodian Fees:

 Charge Account

or

T Bill Client

T Monthly     

or

 Quarterly     

Statements:

Client:

T Monthly

or

 Quarterly

Other:

 Monthly

or

 Quarterly

Other Address: _____________________________________

__________________________________________________

__________________________________________________

__________________________________________________

TERMS AND CONDITIONS

1.

APPOINTMENT AS AGENT

Client hereby appoints Union Bank of California, N.A. ("Bank"), as agent to act as custodian of the cash, marketable securities described in Schedule A (“Property”) included herein, and other Property which may be deposited by Client  with Bank from time to time to be held in the account established by this Agreement ("Account").  Bank agrees to act as Client's agent for such Property according to the terms and conditions of this Agreement; provided however, that Bank shall have no duties or responsibilities with respect to any assets other than cash or marketable securities that may be held in this Account from time to time, unless specifically set forth in an Addendum to this Agreement and provided further that Bank in its sole discretion, may reasonably refuse to accept any assets now or hereafter delivered to it for inclusion in the Account and shall promptly so notify Client an d return the assets to Client.  Client represents and warrants that Client is authorized to enter into this Agreement and to retain Bank on the terms and conditions and for the purposes described herein.

2.

REGISTRATION

2.1 Investment Authority. Client shall have sole responsibility for the investment, review, and management of all Property held in this Account.  Bank shall make or settle all purchases, sales, exchanges, investments and reinvestments of the Property held in this Account only upon receipt of, and pursuant to, Client’s instructions.  Bank shall have no duty or obligation to review, or to make recommendations for, the investment and reinvestment of any of the Property held in this Account, including uninvested cash.

2.2 Identification of Securities. Bank shall ensure the securities are at all times properly identified as being held for the appropriate Account.  Bank shall segregate physically the securities from other securities or property held by Bank.  Bank shall not be required to segregate physically the securities from other securities or property held by Bank for third parties as custodian, but Bank shall maintain adequate records showing the true ownership of the securities.

2.3 Delivery of Securities. If Client directs Bank to deliver certificates or other physical evidence of ownership of securities to any broker or other party, other than a depository employed by Bank for purposes of maintaining the Account, Bank’s sole responsibility shall be to exercise care and diligence in effecting the delivery as instructed by Client.  Upon completion of the delivery, Bank shall be discharged completely of any further liability or responsibility with respect to the safekeeping and custody of securities so delivered.

2.4

Use of Nominees.  Bank shall have the right to hold all registered securities in the name of its nominee.

2.5

Use of Securities Depository.  Bank may, in its discretion, deposit in a securities depository any securities which, under applicable law, are eligible to be so deposited.  If Bank deposits securities with a depository, Bank shall maintain adequate records showing the identity and location of the depository, the securities held by the depository and each account to which such securities belong.

2.6  Use of Institutional Delivery System. Notwithstanding any other language in this Agreement, Bank may settle all securities transactions effected by Client through the use of an institutional delivery system.  Bank may deliver or receive securities in accordance with appropriate trade reports or statements received through an institutional delivery system without having received written direction directly from Client.

3.

TRANSACTIONS

3.1

Income.  Bank shall collect the income when paid on Property and invest it in that cash management vehicle as designated from time to time by Client upon receipt of instructions to that effect.

3.2

Principal.  Bank shall collect principal of Property when paid on maturity, redemption, sale or otherwise and invest it in that cash management vehicle designated from time to time by Client upon receipt of instructions to that effect.

3.3

Collection Obligations.   Bank shall diligently collect income and principal of which the Bank has received actual notice in accordance with normal industry practices.  However, Bank shall be under no obligation or duty to take any action to effect collection of any amount if the securities or other property upon which such amount is payable is in default, or if payment is refused after due demand.  Bank shall notify Client promptly of such default or refusal to pay.

3.4

Additions to and Withdrawals from Account.  Bank shall make all additions and withdrawals of Property to and from this Account only upon receipt of and pursuant to written instructions from Client.

3.5

Fractional Interests.  Bank shall receive and retain all stock distributed by a corporation as a dividend, stock split, or otherwise; however, in connection therewith, if a fractional share is received, Bank shall sell such fractional share.

3.6

Purchase and Sales.  Client from time to time may instruct Bank regarding the purchase or sale of securities in accordance with this paragraph 3.6:

(a)

Bank shall effect purchases by charging the Account with the amount necessary to make the purchase and effecting payment to the seller or broker for the securities or other property purchased.  Bank shall have no liability of any kind to any person, including Client, except in the case of negligent or intentional tortuous acts, or willful misconduct, if Bank effects payment on behalf of Client, and the settler or broker fails to deliver the securities or other property purchased. Bank shall exercise such ordinary care and diligence as would be employed by a reasonably prudent custodian and due diligence in examining and verifying the certificates or other indicia of ownership of the property purchased before accepting them.

(b)

Bank shall effect sales by delivering certificates or other indicia of ownership of the Property, and, as instructed, shall receive cash for such sales.  Bank shall have no liability of any kind to any person, including Client, if Bank exercises due diligence and delivers such certificates or indicia of ownership and the purchaser or broker fails to effect payment.  If a purchase or sale is effected through a depository, Bank shall exercise such ordinary care and diligence as would be employed by a reasonably prudent custodian and due diligence in verifying proper consummation of the transaction by the depository.

(c)

Client, is responsible for ensuring that Bank receives timely instructions and/or funds to enable Bank to effect settlement of any purchase or sale of securities.  If Bank does not receive such timely instructions or funds, Bank shall have no liability of any kind to any person, including Client, for failing to effect settlement.  However, Bank shall use reasonable efforts to effect settlement as soon as possible after receipt of appropriate instructions.

4.

PROXIES AND CORPORATE ACTIONS AND LITERATURE

4.1

Proxies. Bank shall forward all proxies and accompanying material issued by any company whose securities are held in the Account to Client as directed.

4.2

Corporate Literature. Bank shall have no duty to forward or to retain any other corporate material received by the Account unless required to do so by law.

4.3

Disclosure to Issuers of Securities. Unless Client directs Bank in writing to the contrary, Client agrees that Bank may disclose the name and address of the party with the authority to vote the proxies of the securities held in this Account as well as the number of shares held, to any issuer of said securities or its agents upon the written request of such issuer or agent in conformity with the provisions of the applicable law.

4.4

Corporate Actions.  Bank shall notify Client of the receipt of notices of redemptions, conversions, exchanges, calls, puts, subscription rights, and scrip certificates ("Corporate Action(s)").  Bank need not monitor financial publications for notices of Corporate Actions and shall not be obligated to take any action unless actual notice has been received by Bank.  Client shall have full responsibility for all monitoring, notices, and other actions necessary in connection with Corporate Actions and Bank shall have no duty to provide notification to Client. If a Corporate Action has a fixed expiration date, and Bank has not received written instructions (including facsimile transmissions), regarding it five business days prior to such date, Bank shall take such action as it deems appropriate in its sole discretion.

5.

STATEMENTS AND CONFIRMATIONS

5.1

Statements. Each month Bank shall send Client a statement showing all income and principal transactions and cash positions, and a list of assets, showing market values, if such values are readily available from a nationally recognized pricing service; otherwise assets will be listed at such nominal value as Bank shall determine.  Bank shall have the right to rely on the prices quoted by its pricing services, and shall have no obligation to question the accuracy of the valuation provided by any such service.  Client may approve or disapprove any such statement within sixty (60) days of its receipt, and, if no written objections are received within the sixty (60) day period, such statement of Account shall be deemed approved.

5.2

Confirmations. Bank shall have no responsibility to send confirmations of security transactions occurring in this Account to Client for security transactions at any time at no additional cost to Client, and such confirmations shall be sent to Client within the time prescribed by law.

6.

USE OF OTHER BANK SERVICES

Client may direct Bank to utilize for this Account other services or facilities provided by Bank, its subsidiaries or affiliates.  Such services shall include, but not be limited to (1) the purchase or sale of securities as principal to or from, or, (2) the placing of orders for the purchase, sale, exchange, investment or reinvestment of securities through any brokerage service conducted by, or, (3) the placing of orders for the purchase or sale of units of any investment company managed or advised by Bank, UnionBanCal Corporation, or their subsidiaries or affiliates, and for which Bank, UnionBanCal Corporation, or their subsidiaries or affiliates act as custodian or provide other services.  Client hereby acknowledges that Bank will receive additional fees for such services in accordance with Bank's standard fee schedules, which shall be delivered to Client from time to time.  Notwithstanding the above, Cli ent may direct Bank to utilize for this Account for cash management purposes the HighMark Group of mutual funds advised by Bank, and for which Bank may also act as custodian and provide other services. Client shall designate the particular HighMark Fund that Client deems appropriate for the Account.  Client hereby acknowledges that Bank will receive fees for such services, which shall be in addition to those fees charged by Bank as agent for the Client's custody Account.

7.

INSTRUCTIONS

Bank is authorized to take actions in the administration of the Account as instructed by Client in the Account Information Section of this Agreement.  Client agrees that such instructions remain in force until canceled or amended by Client in writing.

All instructions from Client  shall be in writing, and shall continue in force until changed by subsequent instructions.  Pending receipt of written authority, Bank may in its absolute discretion at any time, accept oral, wired or electronically transmitted instructions from   Client provided Bank believes in good faith that the instructions are genuine.  Client shall confirm such instructions in writing immediately thereafter.  Client shall certify or cause to be certified to Bank in writing the names and specimen signatures of all persons authorized to give instructions, notices, or other communications on behalf of Client.  The Client signatures to this agreement shall be considered to be specimen signatures. Such certification shall remain effective until Bank receives notice to the contrary.

Client and all Authorized Representatives initiating funds transfers and receiving call backs on behalf of Client must also be designated as Authorized Signers on a separate Authorized Signature List, which must provide an original specimen signature for each Authorized Representative.  Designation of Authorized Representatives will remain in force until canceled or amended in writing by Client.  Client hereby designates all individuals listed on Client’s Authorized Signature List, as amended from time to time, as Authorized Representatives of Client to initiate instructions and receive call backs for funds transfers from the Account.  As used herein Authorized Representatives means the individual(s) designated by Client to initiate funds transfer instructions in accordance with Paragraph 8 of this Agreement.

8.

Funds Transfer Instructions.  

(a) Client authorizes Bank to act upon instructions for the transfer of funds from the Account to any other account(s) of Client or to any third party when such instructions are received from Client or Client’s Authorized Representative (as designated in Paragraph 7 hereof) and have been authenticated by Bank in accordance with the securities procedures agreed to by Client as set forth in Paragraph (b) below.

(b) Client agrees to the security procedure(s) offered by Bank to authenticate, amend, and request cancellation of funds transfer instructions as set forth below. If a funds transfer instruction received by Bank purports to have been transmitted or authorized by Client, it will be deemed effective as Client’s instruction if Bank followed the security procedure(s) set forth below:

i) Authenticated Electronic Instruction. Funds transfer instructions received by Bank via secured electronic systems, e.g., Telex, Swift, etc. carry the same force as if Client or the Authorized Representative gave such instruction directly.

ii)  Standing Instruction for Funds Transfers. If Client instructs Bank in writing to initiate funds transfers to any account(s) of Client or to any designated third party beneficiary under standing instructions, Bank will perform no callback for such Bank initiated funds transfers.

iii)  Repetitive Funds Transfers. Repetitive funds transfers may be initiated via facsimile by Client or Authorized Representative after Bank has performed an initial call back to a different Authorized Representative to verify the repetitive transfer information.  Upon receiving each funds transfer request, Bank will verify that the individual whose signature appears on the funds transfer request is an Authorized Representative, and that the repetitive payment destination matches the beneficiary data on the initial authorization.

 iv)  Non-Repetitive Funds Transfers.  Non-repetitive funds transfers may be initiated via facsimile by Client or Authorized Representative after Bank has performed a call back to a different Authorized Representative and has verified that the individual whose signature appears on the funds transfer request is an Authorized Representative.  If Client selects this security procedure for non-repetitive funds transfers, Client acknowledges that Client may assume a greater risk of unauthorized transfers than with other procedures offered by Bank.

(c) Bank will use its best efforts to execute each properly authorized funds transfer instructions on the day of receipt if  Bank receives the instruction and is able to authenticate it before Bank’s cut-off time, and the day of receipt is a funds transfer business day for Bank and the transmission facility selected.  Bank may change its cutoff time without prior notice to Client.

 (d) Bank at its sole discretion may reject any funds transfer instructions which (i) exceeds the collected and available funds on deposit in the Account; (ii) is not authenticated to Bank’s satisfaction or which Bank believes may not be authorized by Client; (iii) contains incorrect, inconsistent, ambiguous, or missing information; (iv) involves funds which are subject to a lien, security interest, claim, hold, dispute, or legal process prohibiting withdrawal.  Bank shall incur no liability to Client for any loss occasioned by Bank’s refusal, with or without notice to Client, to honor any funds transfer instructions.

(e) If there are insufficient available funds in the Account to cover Client’s obligations under this Agreement, Bank may at is sole discretion choose to complete funds transfers initiated by Client, and Client agrees to immediately repay Bank the amount of any overdraft created thereby plus any overdraft charges imposed in connection therewith, without notice or demand to Client.

(f) If Client’s transfer instructions identifies the beneficiary, the beneficiary’s bank, or an intermediary bank by name and an account or other identifying number, Bank and subsequent parties to the funds transfer may act solely on the basis of such number, even if the name and number do not agree.

(g) Client shall have no right to cancel or amend a funds transfer instruction after its receipt by Bank. However, Bank shall use reasonable efforts to act on a request by Client to cancel or amend an instruction prior to executing it, but shall have no liability if cancellation or amendment is not effected.

 (h) Except as otherwise required by the California Commercial Code, Bank shall not be responsible for any loss or liability arising in connection with this Addendum from  (i) any inaccuracy, act or failure to act on the part of any person not within Bank’s reasonable control, including, without limitation, the failure of other financial institutions to provide accurate or timely information to Bank or Client;  (ii) the failure of other financial institutions to accept payment orders;  (iii) Client’s negligence or breach of this Agreement;  (iv) any ambiguity or inaccuracy in any instruction or in the information set forth in this Agreement given to Bank by Client;  (v) any error, failure or delay in execution of any funds transfer instruction, or cancellation or amendment, including without limitation, any inoperability of computer or communication faciliti es, or other circumstances beyond Bank’s reasonable control.  

(i) Authorization For Facsimile Instructions.  Client hereby authorizes Bank to accept funds transfer instructions via facsimile transmittal from Client or Client’s Authorized Representative under the procedures set forth in Section 1(b) of this Agreement.

9.

Bank Responsibilities and Liabilities

(a)

In performing its duties hereunder, Bank shall exercise no less than the same degree of care and diligence it ordinarily exercises with respect to similar property of its own.

(b)

Bank shall not be liable or responsible for any loss, damage, expense, failure to perform or delay caused by accidents, strikes, fire, flood, war, riot, electrical or mechanical or communication line or facility failures, acts of third parties (including without limitation any messenger, telephone or delivery service), acts of God, war government action, civil commotion, fire, earthquake, or other casualty or disaster or any other cause or causes which are beyond Bank'’ reasonable control.  However, Bank shall use reasonable efforts to replace securities lost or damaged due to such causes with securities of the same class and issue with all rights and privileges pertaining thereto.  In all cases, Bank’s liability for any act or failure to act under this Agreement shall be limited to the resulting direct loss, if any, of Client.  Under no circumstances shall Bank be liable for any consequential, indirect, punitive, or special damage which Client may incur or suffer in connection with this Agreement.

(c)

The parties intend that Bank shall not be considered a fiduciary of the Account.  Accordingly, Bank shall have no power to make decisions regarding any policy, interpretation, practice, or procedure with respect to the Account, but shall perform the ministerial and administrative functions described in the Agreement as provided herein and within the framework of policies, interpretations, rules, practices, and procedures made by Client, as the same shall be reflected in instructions to Bank from Client.

(d)

Bank shall not be required to appear in or defend any legal proceedings with respect to the Account or the securities unless Bank has been indemnified to its reasonable satisfaction against loss and expense (including reasonable attorney’s fees).

10.

COMPENSATION AND OTHER CHARGES

10.1

 Compensation. Bank's annual fee as agent shall be based on the fee schedule of the Bank as accepted by Client from time to time.  Fees shall be invoiced monthly in advance, and charged to Account, unless Bank is otherwise instructed.

10.2

 Charging the Account. Upon receipt of approval from Client, Bank is authorized to charge the Account for incidental expenses as well as for the funds necessary for Bank to complete any purchase or expense, to make any directed disbursement or to take any other action regarding the Account.  Bank shall have no duty to make any purchases, exchanges, or disbursements or to incur any expenses, unless the funds necessary to cover the amount of expense are available in the Account.  Client will pay back any fees or costs incurred directly if funds in the account are insufficient.

11.

COST BASES AND DATES OF ACQUISITION

Client agrees to furnish Bank with the income tax cost bases and dates of acquisition of all Property held in the Account to be carried on its records.  If Client does not furnish such information for any such Property, Bank shall carry the Property at any such nominal value it determines, such value to be for bookkeeping purposes only.  All statements and reporting of any matters requiring this information will use this nominal value.  Bank shall have no duty to verify the accuracy of the cost bases and dates of acquisition furnished by Client.  Property purchased in the Account shall be carried at cost.

12. LIMITED POWER OF ATTORNEY

Bank is hereby granted a limited power of attorney by Client to execute on Client's behalf any declarations, endorsements, assignments, stock or bond powers, affidavits, certificates of ownership or other documents required (1) to effect the sale, transfer, or other disposition of Property held in the Account, (2) to obtain payment with respect to Property held in the Account, or (3) to take any other action required with respect to the Property held in the Account, and in the Bank's own name to guarantee as Client's signature any signature so affixed.

13. INDEMNIFICATION

As additional consideration for the Bank's acceptance of this Account and its agreement to act as agent, Client agree to indemnify, and hold Bank, its officers, directors, employees, agents, successors and assigns harmless from and against any and all losses, liabilities, demands, claims, and expenses, attorney's fees and taxes (other than those based on Bank's net income) arising out of or in connection with this Agreement, or out of any actions of   Client or Client's agents which are not caused by Bank's gross negligence or willful misconduct.  This provision shall survive the termination of this Agreement and shall be binding upon each party's successors, assigns, heirs and personal representatives.

14. AMENDMENT AND TERMINATION OF AGREEMENT

14.1

  Amendment. This Agreement may be amended only by a written agreement executed by Bank and Client.

14.2  Termination. This Agreement may be terminated at any time by written notice from one party to the other.  Such termination shall be effective immediately.  Upon termination, Bank shall have a reasonable amount of time to transfer the Property held in the Account in accordance with the written instructions of Client or the person or entity legally entitled to receive such Property.  Bank's fees and costs related to termination, including without limitations, costs for shipping securities and other Property held in the Account and costs of reregistering securities, generating reports and accounting for disposition of cash shall be charged to the Account.

15. ENTIRE AGREEMENT

This Agreement and Supplement constitutes the entire Agreement among the parties.  All previous agreements, and instructions whether written or oral, between the Bank and Client are hereby superseded.  

16. SINGULAR AND PLURAL

If more than one person shall execute this Agreement, then where the context permits, singular pronouns shall be deemed to be plural personal pronouns.

17. GOVERNING LAW

This Agreement shall be governed by, and construed under, the laws of the State of California.

18. TAXATION OF ACCOUNT

18.1

 Certification.  Client agrees to provide a completed W-9 or W-8 certification, as appropriate, to Bank.

18.2 Client's responsibility for Filing Tax Returns and Paying Taxes.  Client is responsible for filing any and all tax returns and for paying the taxes on all property and income of this account.

19. NOTICES

19.1  Mailing of Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed as having been duly given on the date of service, if served personally on the party to whom notice is to be given, or on the fifth day after mailing, if mailed to the party to whom notice is to be given and properly addressed as follows:

Client Address:

Venture Lending & Leasing V, Inc.

2010 N. First Street, Suite 310

San Jose, CA 95131

ATTN: Chief Financial Officer

Bank:

Union Bank of California

Corporate Trust Department

475 Sansome Street, 12th Floor

San Francisco, CA 94111

Attn:

  Douglas J. Schlafer, Vice President

19.2

 Change of Address. Either party may change the address at which notice may be given by giving ten (10) days prior written notice of such change to the other party.

20. EFFECTIVE DATE

This Agreement shall be effective upon the date of receipt by the Bank of the Property described in the attached Schedule A.

Client:

Venture Lending & Leasing V, Inc.

By:     

__________________________________________

Name:   

Title:   

Date:

By:     

__________________________________________

Name:   

Title:   

Date:

By:     

__________________________________________

Name:   

Title:   

Date:

Accepted:          

UNION BANK OF CALIFORNIA, N.A., Agent

By:     

__________________________________________

Title:   

__________________________________________

Date:

SCHEDULE A

Bank Accounts

Bankers Acceptances

Certificates of Deposit

Collateralized Mortgage Obligations

Commercial Paper

Common Stocks

Convertible Stocks

Corporate Bonds

Foreign Listed Securities

Futures

Government Agency Issues

Government Bonds

Insurance Contracts

Lease Agreements

Limited Partnership Units - Publicly Traded

Loan Agreements

Municipal Bonds

Mutual Funds

Options

Preferred Stocks

Private Placements

Repurchase Agreements

Reverse Repurchase Agreements

Warrant

EX-10

INTERCREDITOR AGREEMENT

This Intercreditor Agreement (“Agreement”) is made effective as of the __________ __, 200_, by and between Venture Lending & Leasing IV, Inc. (“VLL4”), and Venture Lending & Leasing V, Inc. (“VLL5”), both Maryland corporations (sometimes referred to herein jointly as “Lenders”, and individually as a “Lender”).

RECITALS

[Use first alternate paragraphs A. and B. where the two Lenders are entering into simultaneous, initial loan commitments to the same borrower]

A.

Each Lender has entered into a separate Loan and Security Agreement of even date herewith (each, a "Loan Agreement") with ____________, a ________ corporation ("Borrower"), pursuant to which each Lender has agreed, severally and not jointly, to make secured, term loans to Borrower up to the amount of such Lender's Commitment.  Pursuant to the Loan Agreements, Borrower has granted to each Lender a security interest in certain now owned and hereafter acquired personal property collateral described on Exhibit "A" to this Agreement, as such Exhibit may be amended or supplemented from time to time (the “Collateral”).  Borrower has also executed or will execute one or more Uniform Commercial Code financing statements in favor of each Lender, which have been filed or will be filed with the Secretary of State of [jurisdiction of Borrower’s incorp oration] and in other jurisdictions or offices, and has executed or will execute such additional account control agreements, collateral assignments, pledge agreements, and mortgages as Lenders may request (collectively, with the Loan Agreements, the "Security Documents").  

B.

This Agreement sets forth certain rights and duties of the parties with respect to the Collateral, the parity of each Lender's security interest in the Collateral and the products and proceeds thereof, and other rights and obligations among the parties.

[Use the following alternate Recital paragraphs, modified as necessary, in cases where VLL4 has loans outstanding under a prior loan agreement with a borrower to whom VLL5 is now extending a new commitment.  The Recitals, priority listing in Section 2.2, and proceeds “waterfall” in Section 4 will vary, depending on the nature of VLL4’s prior commitment and scope of collateral, and the nature of VLL5’s new commitment and scope of collateral.]

A.

VLL5 has entered into a Loan and Security Agreement and Supplement thereto, both of even date herewith (collectively, and as the same may be supplemented, amended, extended and renewed from time to time, the “VLL5 Loan Agreement”) with _______________, Inc., a [Delaware] corporation (referred to herein as “Borrower”), pursuant to which VLL5 has agreed to make secured, term loans to Borrower up to the amount of VLL5's Commitment (as such term is defined in the VLL5 Loan Agreement).

B.

Previously, VLL4 entered into a Loan and Security Agreement and Supplement thereto, both dated as of _____________ (collectively, and as the same may be supplemented, amended, extended and renewed from time to time, the “VLL4 Loan Agreement”) with Borrower, pursuant to which VLL4 agreed to make secured, term loans to Borrower up to the amount of VLL4's Commitment (as such term

is defined in the VLL4 Loan Agreement).  The VLL5 Loan Agreement and the VLL4 Loan Agreement are each sometimes referred to herein jointly as the “Loan Agreements”, and individually as a “Loan Agreement”.

C.

Pursuant to the Loan Agreements, Borrower has granted to each Lender a security interest in substantially all of Borrower’s now owned and hereafter acquired personal property assets (the “Collateral”).  Borrower has also authorized the filing of one or more Uniform Commercial Code financing statements in favor of each Lender, which have been filed or will be filed with the Secretary of State of [Delaware], and has executed or will execute such additional documents from time to time as each Lender may reasonably request to create, perfect or maintain the perfection of each such Lender’s Liens on the Collateral (collectively, with the Loan Agreements, the “Security Documents”).

D.

The proceeds of loans to be made by VLL5 will be used to finance (i) Borrower’s acquisition of specified items of computer equipment, lab and shop equipment, test equipment, office equipment and other items of personal property approved by VLL5 not previously financed by VLL4 (all such items financed by VLL5 being referred to hereinafter as the “VLL5 Primary Collateral”), and (ii) Borrower’s general working capital purposes.  The VLL5 Primary Collateral will be described with more particularity on Exhibit “A” hereto as may be amended and supplemented from time to time; provided, however, that no delay or failure to so amend or supplement such Exhibit shall affect the characterization of any item of equipment or other personal property financed by VLL5 as VLL5 Primary Collateral, nor shall such delay or failure otherwise alter o r diminish its rights with respect to such VLL5 Primary Collateral under this Agreement, the VLL5 Loan Agreement, the VLL4 Loan Agreement or applicable law.

E.

The proceeds of loans previously made by VLL4 under the VLL4 Loan Agreement were used by Borrower to finance (i) its acquisition of specified items of computer equipment, lab and shop equipment, test equipment, office equipment and other items of personal property approved by VLL4, each of which is more particularly described on Exhibit “C” to this Agreement (all such items of financed by VLL4, as described on Exhibit “C”, being referred to hereinafter as the “VLL4 Primary Collateral”), and (ii) Borrower’s general working capital purposes. The VLL4 Loan Agreement contains covenants prohibiting Borrower from incurring additional indebtedness and granting additional Liens to third parties.  VLL4 is willing to waive such restrictions to induce VLL5 to provide Borrower the credit accommodations contemplated under the VLL5 Loan Agreement.  The VLL5 Loan Agreement contains similar restrictions on third party indebtedness and Liens, and VLL5 is willing to waive such restrictions in order to induce VLL4 to continue its credit accommodations to Borrower under the VLL4 Loan Agreement.

F.

This Agreement sets forth certain rights and duties of the Lenders with respect to the Collateral, and with respect to the portions of the Collateral comprising the VLL4 Primary Collateral and the VLL5 Primary Collateral, the parity of each Lender's security interest in such Collateral and the products and proceeds thereof, and other rights and obligations among the Lenders.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein the parties agree as follows:

1.

DEFINITIONS AND CONSTRUCTION

1.1

Definitions.  As used in this Agreement, the following terms shall have the following definitions:

“Bankruptcy Code” means the federal bankruptcy law of the United States as from time to time in effect, currently as Title 11 of the United States Code.  Section references to current sections of the Bankruptcy Code shall refer to comparable sections of any revised version thereof if section numbering is changed.

“Claim” means the VLL4 Claims and/or the VLL5 Claims, as applicable.

“Collateral” has the meaning set forth in Exhibit “A” to this Agreement.

“Enforcement Action” means, with respect to any Lender and with respect to any Claim of such Lender or any item of Collateral in which such Lender has or claims a security interest, lien or right of offset, any action, whether judicial or nonjudicial, to repossess, collect, accelerate, offset, recoup, give notification to third parties with respect to, sell, dispose of, foreclose upon, give notice of sale, disposition, or foreclosure with respect to, or obtain equitable or injunctive relief with respect to, such Claim or Collateral.  The filing by any Lender of, or the joining in the filing by any Lender of, an involuntary bankruptcy or insolvency proceeding against Borrower also is an Enforcement Action.

“Insolvency Event” has the meaning given to such term in Section 4.5.

“Lender” or “Lenders” have the meanings given to such terms in the introductory paragraph hereof.

“Lien” means a lien or security interest in the Collateral to secure a Claim of a Lender.

“Loan” means an extension of credit by a Lender under its Loan Agreement.

“Loan Agreement” has the meaning given to such term in Recital B.

“Loan Documents” means all of the “Loan Documents” as defined in the Loan Agreements except the Warrants.

“Proceeds” means “proceeds,” as such term is defined in the UCC and, in any event, shall include, without limitation, (a) any and all accounts, chattel paper, instruments, cash or other forms of money or currency or other proceeds payable to Borrower from time to time in respect of the Collateral, (b) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Borrower from time to time with respect to any of the Collateral, (c) any and all payments (in any form whatsoever) made or due and payable to Borrower from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any Person acting under color of governmental authority), (d) any claim of Borrower against third parties (i) for past, present or future infringement o f any copyright, patent or patent license or (ii) for past, present or future infringement or dilution of any trademark or trademark license or for injury to the goodwill associated with any trademark, trademark registration or trademark licensed under any trademark license and (e) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

 “VLL4 Claims” means any and all present and future “claims” (used in its broadest sense, as contemplated by and defined in Section 101(5) of the Bankruptcy Code, but without regard to whether such claim would be disallowed under the Bankruptcy Code) of VLL4 now or hereafter arising or existing under or relating to the Loan Agreement and related Loan Documents, whether joint, several, or joint and several, whether fixed or indeterminate, due or not yet due, contingent or non-contingent, matured or unmatured, liquidated or unliquidated, or disputed or undisputed, whether under a guaranty or a letter of credit, and whether arising under contract, in tort, by law, or otherwise, any interest or fees thereon (including interest or fees that accrue after the filing of a petition by or against Borrower under the Bankruptcy Code, irrespective of whether a llowable under the Bankruptcy Code), any costs of Enforcement Actions, including reasonable attorneys’ fees and costs, and any prepayment or termination premiums.

“VLL5 Claims” means any and all present and future “claims” (used in its broadest sense, as contemplated by and defined in Section 101(5) of the Bankruptcy Code, but without regard to whether such claim would be disallowed under the Bankruptcy Code) of VLL5 now or hereafter arising or existing under or relating to the Loan Agreement and related Loan Documents, whether joint, several, or joint and several, whether fixed or indeterminate, due or not yet due, contingent or non-contingent, matured or unmatured, liquidated or unliquidated, or disputed or undisputed, whether under a guaranty or a letter of credit, and whether arising under contract, in tort, by law, or otherwise, any interest or fees thereon (including interest or fees that accrue after the filing of a petition by or against Borrower under the Bankruptcy Code, irrespective of whether allowab le under the Bankruptcy Code), any costs of Enforcement Actions, including reasonable attorneys’ fees and costs, and any prepayment or termination premiums.

1.2

Other Interpretive Provisions.  References in this Agreement to “Recitals,” “Sections,” and “Exhibits” are to recitals, sections, and exhibits herein and hereto unless otherwise indicated.  References in this Agreement to any document, instrument or agreement shall include (a) all exhibits, schedules, annexes and other attachments thereto, (b) all documents, instruments or agreements issued or executed in replacement thereof, and (c) such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time.  The words “include” and “including” and words or similar import when used in this Agreement shall not be construed to be limiting or exclusive.

2.

INTERCREDITOR ARRANGEMENTS

2.1

Proportionate Interests.  Except as otherwise provided in this Agreement, all of the rights, interests and obligations of each Lender under the Loan Agreements and related Loan Documents, including security interests in the Collateral under the Loan Agreements, shall be shared by the Lenders in the ratio of (a) the aggregate outstanding principal amount of such Lender’s Loans to Borrower under the applicable Loan Agreement, to (b) the aggregate outstanding principal amount of all Loans of Lenders to Borrower under the Loan Agreements.  Any reference in this Agreement to an allocation between or sharing by the Lenders of any right, interest or obligation “ratably,” “proportionally” or in similar terms shall refer to this ratio.  The provisions hereof shall apply irrespective of the time or ord er of attachment or perfection of security interests, or the time or order of filing or recording of financing statements.

[Use following version of Section 2.2 where the two Lenders are entering into simultaneous, initial loan commitments to the same borrower]

2.2

Priority of Security Interests; Effect of Lender’s Nonperfection.  Notwithstanding any contrary priority established by (a) the filing dates of their respective financing statements, (b) the recording dates of any other security perfection documents, or (c) which Lender has possession of any of the Collateral, the parties agree that the Lien of each Lender in the Collateral perfected or to be perfected by such Lender’s Security Documents shall be of equal rank and priority to the other Lender’s Liens in the same Collateral, and the Lien of each Lender in the Collateral shall be deemed an undivided Pro Rata security interest in all items of Collateral.  The equality in priority and pari passu nature of the Lenders' Liens specified in this Agreement are applicable irrespective of:  the time or order of attachment or perfection of secu rity interests; the time or order of filing of any Security Documents; or the time of giving or failure to give notice of the acquisition or expected acquisition of purchase money or other security interests.  This Agreement applies only to Liens held by Lenders to secure Loans and other advances made under the Loan Agreements.  The agreement herein as to the equality in priority of Lenders' Liens is expressly conditioned upon the perfection and nonavoidability of the Lien of each Lender.  If the Lien of any Lender is (i) determined by a court of competent jurisdiction to be avoidable for any reason, or (ii) such Lender fails to timely perfect its Lien with respect to all or any portion of the Collateral (or such perfection is not maintained without lapse) and as a result thereof the priority of such Lender's Lien becomes subordinate or junior to a perfected Lien in favor of a third party under the Uniform Commercial Code or other applicable law, (such Lender being referred to as an "Affe cted Lender"), then all losses by Affected Lender from the Collateral (a "Loss") resulting from such failure to timely perfect or maintain perfection or from such avoidability shall be borne solely by the Affected Lender.  In the event of any dispute between the Lenders as to the amount of the Loss, the amount determined by the perfected Lender shall be presumed correct unless and until rebutted by competent evidence presented by the Affected Lender.  The Affected Lender shall bear the burden of persuasion.  Notwithstanding anything to the contrary in this Section 2.2, if both Lenders' Liens are perfected as to particular Collateral on the same day, then the agreement herein as to the equality in priority of their Liens shall apply to such Collateral.

[Use the following alternate Section 2.2, modified as necessary, in cases where VLL4 has loans outstanding under a prior loan agreement with a borrower to whom VLL5 is now extending a new commitment.]

2.2

Priority of Security Interests; Effect of Lender’s Nonperfection. Notwithstanding any contrary priority established by (i) the filing dates of their respective financing statements, (ii) the recording dates of any other security perfection documents, or (iii) which Lender has possession of any of the Collateral, the parties agree that:

(a)

the Liens of VLL4 in the VLL4 Primary Collateral shall at all times be senior in rank and order of priority to the Liens of VLL5 in the VLL4 Primary Collateral;  

(b)

the Liens of VLL5 in the VLL5 Primary Collateral shall at all times be senior in rank and order of priority to the Liens of VLL4 in the VLL5 Primary Collateral; and

(c)

the Liens of VLL4 in all Collateral, other than the VLL5 Primary Collateral, shall at all times be senior in rank and order of priority to the Liens of VLL5 in such Collateral.

The relative priority of the Liens specified in this Agreement applies only to Liens held by the Lenders to secure loans and other advances made under the Loan Agreements.  The agreement herein as to the priority of Lenders' Liens is expressly conditioned upon the perfection and nonavoidability of the Lien of each Lender.  If the Lien of any Lender is (i) determined by a court of competent jurisdiction to be avoidable for any reason, or (ii) such Lender fails to timely perfect its Lien with respect to all or any portion of the Collateral (or such perfection is not maintained without lapse) and as a result thereof the priority of such Lender's Lien becomes subordinate or junior to a perfected Lien in favor of a third party under the Uniform Commercial Code or other applicable law (such Lender being referred to as an “Affected Lender”), then all losses by Aff ected Lender from the Collateral (a “Loss”) resulting from such failure to timely perfect or maintain perfection or from such avoidability shall be borne solely by the Affected Lender.  In the event of any dispute between the Lenders as to the amount of the Loss, the amount determined by the perfected Lender shall be presumed correct unless and until rebutted by competent evidence presented by the Affected Lender.  The Affected Lender shall bear the burden of persuasion.  Notwithstanding anything to the contrary in this Section 2.2, if both Lenders' Liens are perfected as to particular Collateral on the same day, then the agreement herein as to the equality in priority of their Liens shall apply to such Collateral.

2.3

Limitation on Further Loans.  After the date hereof, except pursuant to the Loan Agreement, no Lender may make loans to or otherwise extend credit to Borrower without notice to and the consent of each other Lender, which consent will not be unreasonably withheld.

2.4

Transfer of Interest in Loans.

(a)

Consent.  No Lender may sell or otherwise transfer any of its interest in the Loan Agreement, the related Loan Documents and its Loan without the prior written consent of each other Lender, which consent shall not be unreasonably withheld; provided, however, each Lender agrees that any Lender may assign to its lender or grant a security interest in such Lender’s interests without consent and if the assignee of any Lender is a creditor of such Lender to whom such Lender has granted such a security interest, then following the occurrence of an event of default (however defined) under or with respect to the indebtedness held by such assignee or the occurrence of an event where with the giving of notice or the passage of time or both would constitute such an event of default, the written consent of such assignee, rather than of such as signor Lender, shall be required for any modification or amendment to this agreement; provided, further each Lender may sell to any other financial entity participation interests in such Lender’s rights under this Agreement, the Loan Agreement and the other Loan Documents, provided that notwithstanding the sale of participations, such Lender shall remain solely responsible for the performance of its obligations under this Agreement, the Loan Agreement and the other Loan Documents, such Lender shall remain the holder of any Loan Agreement Supplement for all purposes under this Agreement and the Loan Agreement, and Agent shall continue to deal solely and directly with such Lender in connection with this Agreement, the Loan Agreement and the other Loan Documents.

(b)

Assumption of Obligations.  The transferee shall assume all obligations of the transferring Lender with respect to the portion of the transferor’s interest under this Agreement and the Loan Agreement.

(c)

Legal Authority and Financial Ability.  The transferee shall provide to each other Lender evidence satisfactory to such Lender that the proposed transferee has the financial

ability and legal authority to assume and perform all obligations of the transferring Lender under this Agreement and the Loan Agreement.

(d)

Voidability.  Any sale or transfer of an interest in this Agreement and the Loan Agreement shall be voidable at the option of any other Lender unless the provisions of this Section 2.4 are satisfied.

2.5

Possession of Collateral; Lender as Bailee. Each Lender agrees that any time it receives or otherwise is in possession of any Collateral, whether through foreclosure, bankruptcy, insolvency proceedings or otherwise, such Collateral and any proceeds thereof shall be received or held by such Lender as a bailee for the other Lender for purposes of:  maintaining the perfection of Lenders' security interests in such Collateral; distribution between the Lenders in accordance with the terms of this Agreement; and application to their respective claims against Borrower as provided herein and in any other Loan Document.

3.

NOTICES OF RELATIVE PRIORITY. At the request of any Lender, each Security Document under the Loan Agreement naming an individual Lender as secured party, collateral assignee or mortgagee shall contain an unqualified statement in substantially the following form:

The security interests of [one Lender] and its successors and assigns described herein are subject to a certain Intercreditor Agreement dated ____________, among Borrower, Venture Lending & Leasing IV, Inc., and Venture Lending & Leasing V, Inc.

Each Lender agrees to authorize the execution of any and all financing statements, financing statement amendments, notices and other documents reasonably deemed necessary by any other Lender to establish and maintain the relative priority agreement made herein as a matter of public record.  Any financing statement in favor of an individual Lender with respect to the Collateral shall include a statement substantially as follows:

Secured Party's security interest in the collateral covered by this financing statement is subject to an Intercreditor Agreement dated __________________, between Secured Party and [other Lender].

4.

REMEDIES UPON AN EVENT OF DEFAULT

4.1

Lenders’ Standstill; Decision to Exercise Remedies. Without the prior written consent of the other Lender or its assignee, which consent shall not be withheld unreasonably (and which withholding shall be deemed unreasonable if it would prevent the other Lender or its assignee from taking action which such Lender, its assignee or its respective counsel deems commercially reasonable under the Uniform Commercial Code or other applicable law), no Lender or its assignee (the “Enforcing Lender”) shall collect, take possession of, foreclose upon, or exercise any rights or remedies with respect to the Collateral or Borrower, judicially or non-judicially, in order to satisfy or collect any Obligations owed in connection with such Lender's Loan Agreement or attempt to do any of the foregoing.  In any event, such consent shal l be deemed given if such other Lender or its assignee has not objected in writing within 30 days after receipt of notice from the Enforcing Lender of its intention to take any such action.  Except as expressly limited by this Section 4.1, each Lender (or its assignee) may unilaterally exercise any rights and remedies under its Loan Documents, including without limiting the generality of the foregoing, the

cessation of any future Loans to Borrower and the acceleration of then outstanding Loans upon the occurrence of an Event of Default. Upon default and acceleration of the Loans by an Enforcing Lender under applicable provisions of its Loan Agreement, such Lender may, with the consent of the other Lender (as required under this Section 4.1), proceed with the enforcement of such Lenders' rights against the Collateral for the benefit of Lenders under the Loan Documents.  Any repossession, sale or distribution of proceeds of Collateral shall be accomplished as required by this Agreement, the Loan Documents, and applicable law.  Effective upon receipt of such consent, the Enforcing Lender is authorized to exercise all rights and remedies of Lenders under the Loan Documents (an “Enforcement Action”).  Unless the Enforcing Lender shall request further guidance or consents, any direction by the other Lender to begin Enforcement Action shall only state that the Enforcing Lender shall begin enforcement, and shall not specify the manner in which enforcement should proceed.  Once the Enforcing Lender receives an enforcement direction from the other Lender, all decisions as to how to proceed to enforce the Lenders' rights and remedies, including, without limitation, the methods and timing of proceeding, may be made by the Enforcing Lender in its good faith business judgment, with such consultation with other Lender as Enforcing Lender in its sole discretion deems reasonable under the circumstances.  In the event of one or more foreclosure sales, Enforcing Lender shall have the right to credit bid on behalf of all Lenders in respect of their Loans and all other Obligations of Borrower under the Loan Documents.

[Use following version of Section 4.2 where the two Lenders are entering into simultaneous, initial loan commitments to the same borrower]

4.2Ratable Treatment.  If at any time after the Loans shall have been declared due and payable pursuant to the terms of the Loan Agreements, either Lender shall obtain any payment (whether voluntary, involuntary, by foreclosure, by application of setoff, or otherwise) of any principal of or interest on its Loans in excess of its ratable share of payments ("Excess Payment") received by both Lenders on principal of and interest on their Loans, then the Lender receiving such Excess Payment shall make payments ("Sharing Payments") to the other Lender as shall result in both Lenders receiving their ratable share of payments; provided, however, that if all or any portion of the Excess Payment is thereafter recovered from the Lender who received it, then the Sharing Payments theretofore made by the Lender to the other Lender shall be rescinded and returned to the extent necessary so the Lenders shall have received the ratable shares to which they are entitled under the Loan Agreements and this Agreement.


[Use the following alternate Sections 4.2 through 4.4, modified as necessary, in cases where VLL4 has loans outstanding under a prior loan agreement with a borrower to whom VLL5 is now extending a new commitment.]

4.2

Application of Proceeds of VLL4 Primary Collateral after an Event of Default. Notwithstanding anything to the contrary in the Loan Documents, as between the Lenders, the Proceeds of all VLL4 Primary Collateral shall upon receipt by any Lender after the occurrence and during the continuance of an Event of Default under the Loan Agreements be paid to and applied as follows:

(a)

First, to the payment of then outstanding out-of-pocket costs and expenses of the Lenders, including all amounts expended to preserve the value of the VLL4 Primary Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and

attorneys’ fees, incurred or made under the Loan Documents by the Lenders (in proportion to such costs and expenses theretofore incurred by each);

(b)

Second, to VLL4, in an amount up to the VLL4 Claims;

(c)

Third, to VLL5, in an amount up to the VLL5 Claims; and

(d)

Fourth, to Borrower, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same.

4.3

Application of Proceeds of VLL5 Primary Collateral after an Event of Default. Notwithstanding anything to the contrary in the Loan Documents, as between the Lenders, the Proceeds of all VLL5 Primary Collateral shall upon receipt by any Lender after the occurrence and during the continuance of an Event of Default under the Loan Agreements be paid to and applied as follows:

(a)

First, to the payment of then outstanding out-of-pocket costs and expenses of the Lenders, including all amounts expended to preserve the value of the VLL5 Primary Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made under the Loan Documents by the Lenders (in proportion to such costs and expenses theretofore incurred by each);

(b)

Second, to VLL5, in an amount up to the VLL5 Claims;

(c)

Third, to VLL4, in an amount up to the VLL4 Claims; and

(d)

Fourth, to Borrower, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same.

4.4

Application of Proceeds of Collateral after an Event of Default. Notwithstanding anything to the contrary in the Loan Documents, as between the Lenders, the Proceeds of all Collateral, or any part thereof, other than the VLL4 Primary Collateral and the VLL5 Primary Collateral, shall upon receipt by any Lender after the occurrence and during the continuance of an Event of Default under the Loan Agreements be paid to and applied as follows:  

(a)

First, to the payment of then outstanding out-of-pocket costs and expenses of the Lenders, including all amounts expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and advances, including reasonable legal expenses and attorneys’ fees, incurred or made under the Loan Documents by the Lenders (in proportion to such costs and expenses theretofore incurred by each);

(b)

Second, to VLL4, in an amount up to the VLL4 Claims;  

(c)

Third, to VLL5, in an amount up to the VLL5 Claims; and

(d)

Fourth, to Borrower, its successors and assigns, or to whomsoever may be lawfully entitled to receive the same.

4.5

Insolvency Events. In the event of any distribution, division, or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the property of Borrower or the proceeds thereof to the creditors of Borrower, or the readjustment of any of the Claims, whether by reason of liquidation, bankruptcy, arrangement, receivership, assignment for the benefit of creditors or any other action or proceeding involving the readjustment of all or any part of any of the Claims, or the application of the property of Borrower to the payment or liquidation thereof, or upon the dissolution or other winding up of Borrower’s business, or upon the sale of all or any substantial part of Borrower’s property (any of the foregoing being hereinafter referred to as an “Insolvency Event”), then , and in any such event, and subject to any subordination arrangements to which the Lenders may be subject, (a) all payments and distributions of any kind or character, whether in cash or property or securities in respect of the Lenders’ Claims shall be distributed ratably among the Lenders, subject to the provisions of Sections [2.2, 4.2, 4.3 and 4.4] hereof; (b) each Lender shall promptly file a claim or claims, on the form required in such proceeding, for the full outstanding amount of such Lender’s Claim, and shall use its best efforts to cause said claim or claims to be approved; (c) each of the Lenders hereby irrevocably agrees that, to the extent that it fails timely to do so (a “non-filing Lender”), at least 20 days before the deadline for such filing, any other Lender may in the name of the non-filing Lender, or otherwise, file and prove up any and all claims of the non-filing Lender relating to the non-filing Lender’s Claim; and (d ) in the event that, notwithstanding the foregoing, but subject to the provisions of Sections [2.2, 4.2, 4.3 and 4.4] hereof, any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lenders for application to the payments of amounts due on the other Lender’s Claims.

4.6

Return of Payments.  To the extent any payment for the account of Borrower is required to be returned as a voidable transfer or otherwise, the Lenders shall contribute to one another as is necessary to ensure that such return of payment is on a pro rata basis.

4.7

Insurance.  In the event of any loss affecting any Collateral, the Lender having a senior Lien in the Collateral under this Agreement shall, subject to the Borrower’s rights under the Loan Agreement, have the sole and exclusive right, to adjust settlement of any insurance policy applicable to such Collateral.  All proceeds of such insurance applicable to such Collateral shall (subject to the Borrower’s rights under the Loan Agreement) be applied in the same manner set forth in Sections [4.2, 4.3 and 4.4] with respect to such Collateral itself and other proceeds thereof.

4.8

Lender Cooperation. If either Lender obtains possession of any Collateral (other than cash collateral received in payment of a Loan in the ordinary course), such Lender shall hold such Collateral for the ratable benefit of both Lenders.  Each Lender agrees to cooperate with each other Lender in its efforts to realize upon Collateral and to exercise the rights of Lenders under the Security Documents, including the execution of such instruments, powers of attorney or other documents as an Enforcing Lender may require to perform in such capacity.

4.9

Acquisition of Collateral. If Collateral is acquired by a Lender by foreclosure sale or otherwise, at the option of such Lender, title may be taken in the name of such Lender or in the name of a corporation affiliated with such Lender or other nominee designated by such Lender, in any case, for the ratable benefit of both Lenders subject to the terms of this Agreement.  Each Lender shall consult with the other Lender as to the general operation and disposition of any Collateral for which title has been acquired through foreclosure or otherwise.  Neither Lender shall withhold its consent

unreasonably in matters and decisions by the other Lender relating to the management, operation, or repair of the Collateral so acquired.

4.10

Monitoring of Collateral, Risks and Standard of Care.  Whenever a Lender is acting as an Enforcing Lender it shall be acting for the other Lender for purposes of convenience in enforcing the rights and remedies of the Lenders arising after an Event of Default and, although such Enforcing Lender shall have the right, it shall have no obligation to inspect or monitor any Collateral or to determine whether any Default or Event of Default has occurred under the other Lender's Loan Documents.  The Enforcing Lender shall not be responsible for the performance or observance of any term, covenant or condition on the part of Borrower under the other Lender's Loan Documents.  Each Lender shall undertake such inspections or other monitoring of the Collateral and Borrower's observance of the terms of such Lender's Loan Documents as such L ender deems appropriate for its own purposes, and agrees that it shall not be relying upon the other Lender for the same.

4.11

Relationship of Lenders.  Neither the making of their respective Commitments to Borrower, the execution of this Agreement, the Loan Agreements or the other Loan Documents, nor any agreement to share any proceeds or Collateral, nor any Lender acting as an Enforcing Lender is intended to be, nor shall it be construed to be, the formation of a partnership or joint venture between the Lenders or the creation of any express, implied or constructive trust relationship between them.  Lenders agree that neither is acting as a trustee for the other.

5.

EXCULPATION; DELEGATION; AND INDEMNIFICATION OF LENDERS

5.1

Exculpation.  In connection with any exercise of Enforcement Actions hereunder, no Lender or any of its partners, or any of their respective directors, officers, employees, attorneys, accountants, or agents shall be liable as such for any action taken or omitted by it or them, except for its or their own gross negligence or willful misconduct with respect to its duties under this Agreement.

5.2

Delegation of Duties.  Each Lender may execute any of its powers and perform any duties hereunder either directly or by or through agents or attorneys-in-fact.  Each Lender shall be entitled to advice of counsel concerning all matters pertaining to such powers and duties.  No Lender shall  be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it, if the selection of such agents or attorneys-in-fact was done without gross negligence or willful misconduct.

5.3

Indemnification.  To the extent not reimbursed either by Borrower or from the application of Collateral proceeds pursuant to Sections [4.2, 4.3 and 4.4], a Lender (the “Indemnified Lender”) shall be indemnified by each of the other Lender (each, an “Indemnifying Lender”), and each Indemnifying Lender agrees to reimburse the Indemnified Lender for the Indemnifying Lender’s pro rata share of the following items (an “Indemnified Payment”):

(a)

all reasonable out-of-pocket costs and expenses of the Indemnified Lender incurred by the Indemnified Lender in connection with the discharge of its activities under this Agreement or the Loan Agreement, including reasonable legal expenses and attorneys’ fees; provided, that the Indemnified Lender shall consult with the other Lenders regarding the incurrence of such costs and expenses at reasonable intervals (but not more often than monthly) and any such reasonable costs and expenses shall be “Claims” hereunder notwithstanding any disagreement by the other Lenders as to their incurrence; and

(b)

from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever, which may be imposed on, incurred by or asserted against the Indemnified Lender in any way relating to or arising out of this Agreement, or any action taken or omitted by the Indemnified Lender hereunder; provided that the Indemnifying Lenders shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements, if the same results from the Indemnified Lender’s gross negligence or willful misconduct or from undertaking Enforcement Actions in violation of Section 4.1;

(c)

provided, however, the Indemnified Lender shall not be reimbursed or indemnified for an Indemnified Payment made by the Indemnified Lender to another Lender, except to the extent that the Indemnified Lender paid more than its ratable share of such payment.  All Indemnified Payments (as set forth in this Section) to an Indemnified Lender are intended to be paid ratably by the other Lenders.

6.

Demand for Satisfaction Deemed Given.  By executing this Agreement, each Lender hereby demands of the other Lender satisfaction of its indebtedness, if such demand is required under Section 9504(1)(c) of the California UCC.  The rights and duties of Lenders in any foreclosure situation not addressed in this Agreement shall be determined by the provisions of applicable California law.

7.

RIGHTS IN THE WARRANTS

Notwithstanding anything to the contrary herein, no warrant issued to the Lenders by Borrower, the stock issuable thereunder, any amounts paid thereunder, any dividends, or any other rights in connection therewith shall be subject to the terms and conditions of this Agreement.  Nothing herein shall affect any Lender’s rights under any such warrants or stock to administer, manage, transfer, assign, or exercise such warrants or stock for its own account.

8.

NO RESPONSIBILITY FOR INVESTIGATION

Each Lender represents that it has made, and agrees that it will continue to make its own independent investigation of the financial condition and affairs of Borrower in connection with the making of Loans pursuant to the Loan Agreement, and that it has made and shall continue to make its own appraisal of the creditworthiness of Borrower.  Neither the Agent nor any Lender shall have any duty or responsibility either initially or on a continuing basis to make any such investigation or any such appraisal on behalf of all Lenders or to provide the other Lenders with any credit or other information with respect thereto whether coming into its possession before the date hereof or any time or times thereafter and shall further have no responsibility with respect to the accuracy of or the completeness of the information provided to the Lenders by Borrower.

9.

REPRESENTATIONS AND WARRANTIES

9.1

Due Organization and Qualification.  VLL4 represents and warrants that it is a corporation duly existing and in good standing under the laws of its state of incorporation and it is qualified and licensed to do business in, and is in good standing in, any state in which the conduct of its business or its ownership of property requires that it be so qualified, except for such states as to which any failure so to qualify would not have a material adverse effect on VLL4.  VLL5 represents and warrants that it is a corporation duly existing and in good standing under the laws of its state of incorporation and it

is qualified and licensed to do business in, and is in good standing in, any state in which the conduct of its business or its ownership of property requires that it be so qualified, except for such states as to which any failure so to qualify would not have a material adverse effect on VLL5.  Each Lender severally, and not jointly, represent and warrant that, for the purposes of the Loan Agreement and the Loans made thereunder, it is exempt from the usury laws of the State of California.

9.2

Authority.  Each Lender represents and warrants that it has all necessary power and authority to execute, deliver and perform this Agreement in accordance with the terms hereof and that it has all requisite power and authority to own and operate its properties and to carry on its business as now conducted.

9.3

Authorization; Enforceability.  Each Lender represents and warrants that (a) the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have each been duly authorized by all necessary action on the part of such Lender and (b) this Agreement has been duly executed and delivered and constitutes a legal, valid and binding obligation of such Lender, enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors’ rights or by general principles of equity.

10.

NOTICES

Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except informal documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by certified mail, postage prepaid, return receipt requested, or by facsimile to the Lenders, at their respective addresses or fax numbers set forth below:

If to VLL4:	Venture Lending & Leasing IV, Inc. 2010 North First Street, Suite 310 San Jose, CA  95131 Attention: CFO Fax: (408) 436-8625 PH: (408) 436-8577
If to VLL5:	Venture Lending & Leasing V, Inc. 2010 North First Street, Suite 310 San Jose, CA  95131 Attention: CFO Fax: (408) 436-8625 PH: (408) 436-8577

The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other.

In addition, each Lender agrees (a) to notify the other Lenders promptly upon receipt of any notice from any Borrower and (b) at any other Lender’s request, to send a copy of any such notice to the other Lenders.

11.

NO BENEFIT TO THIRD PARTIES

The terms and provisions of this Agreement shall be for the sole benefit of Lenders and their respective successors and assigns, and no other Person (including Borrower) shall have any right, benefit, priority, or interest under, or because of this Agreement.

12.

GENERAL PROVISIONS

12.1

Successors and Assigns.  This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties; provided, however, that neither this Agreement nor any rights hereunder may be assigned, transferred or participated by any of the parties hereto without being in compliance with Section 2.4.

12.2

Severability of Provisions.  Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

12.3

Entire Agreement; Construction; Amendments and Waivers.

(a)

This Agreement constitutes and contains the entire agreement between the Lenders and supersedes any and all prior agreements, negotiations, correspondence, understandings and communications between the parties, whether written or oral, respecting the subject matter hereof.

(b)

This Agreement is the result of negotiations between and has been reviewed by each of the Lenders executing this Agreement as of the date hereof and their respective counsel; accordingly, this Agreement shall be deemed to be the product of the parties hereto, and no ambiguity shall be construed in favor of or against any Lender.  Lenders agree that they intend the literal words of this Agreement and that no parole evidence shall be necessary or appropriate to establish any Lender’s actual intentions.

(c)

This Agreement (excluding Exhibits A and B hereto which may be modified unilaterally by a Lender) may be modified or amended only by a writing signed by both Lenders and approved in writing by Borrower which approval shall not be unreasonably withheld or delayed.

12.4

Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, including counterparts transmitted by facsimile or other electronic means, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.

12.5

Termination.  This Agreement shall terminate upon irrevocable payment in full to each Lender of all amounts owing to it under the Loan Agreement.  Notwithstanding the prior termination of this Agreement, the respective obligations of Lenders to indemnify each other shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Lenders have run.

12.6

Reinstatement.  Notwithstanding any provision of this Agreement to the contrary, the rights and obligations of the parties hereunder shall be reinstated and revived if and to the extent that for any reason any payment by or on behalf of Borrower is rescinded, or must be otherwise restored by Lenders, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid.  To the extent any payment is rescinded or restored, the Obligations shall be revived in full force and effect without reduction or discharge for that payment.

12.7

Attorneys' Fees.  If the services of an attorney are engaged by any party to secure the payment or performance of this Agreement or otherwise upon the breach or default of another party to this Agreement, or if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation thereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs and other expenses, in addition to any other relief to which such party may be entitled.  The “prevailing party” shall be determined based upon an assessment by the court or arbitrator of which party's major arguments made or positions taken in the action or proceedings fairly could be said to have prevailed over the other party's major arguments or positions on major disputed is sues in the decision or award.  Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the lower of 10% per annum or the maximum amount of interest allowed by law.

12.8

Survival.  All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any obligations remain outstanding hereunder.  

13.

RELATIONSHIP OF PARTIES

The relationship among the Lenders is, and at all times shall remain solely that of co-lenders.  Lenders shall not under any circumstances be construed to be partners or joint venturers of one another; nor shall the Lenders under any circumstances be deemed to be in a relationship of confidence or trust or a fiduciary relationship with one another, or to owe any fiduciary duty to one another.  Lenders do not undertake or assume any responsibility or duty to one another to select, review, inspect, supervise, pass judgment upon or otherwise inform each other of any matter in connection with Borrower’s property, any Collateral held by any Lender or the operations of Borrower.  Each Lender shall rely entirely on its own judgment with respect to such matters, and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by any Lender in connection with such matters is solely for the protection of such Lender.

14.

CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, EACH OF THE LENDERS HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE  STATE OF CALIFORNIA.  LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.

[Use the following additional Section 15 in cases whereVLL4 has loans outstanding under a prior loan agreement with a borrower to whom VLL5 is now extending a new commitment.]

15.

CONSENT OF VLL4.  Pursuant to the VLL5 Loan Agreement, Borrower will grant to VLL5 a security interest in the Collateral.  In connection therewith, Borrower has requested that VLL4 waive the prohibitions set forth in Sections [5.9(c), 6.1 and 6.2] of the VLL4 Loan Agreement relating to the incurring by Borrower of additional Indebtedness (as such term is defined in the VLL4 Loan Agreement)  and granting of Liens to the extent contemplated under the VLL5 Loan Agreement.  In consideration of the agreements and obligations of VLL5 in this Agreement, VLL4 is willing to and does hereby grant such waiver and consents to Borrower entering into the VLL5 Loan Agreement.  In furtherance of the foregoing, VLL4 agrees that (i) the Indebtedness of Borrower to VLL5 under the VLL5 Loan Agreement and (ii) the Liens grante d to VLL5 by Borrower on the Collateral shall be permitted Indebtedness and Permitted Liens for all purposes of the VLL4 Loan Agreement and the other loan documents executed and delivered in connection with the VLL4 Loan Agreement.  The foregoing waiver applies only to the specific instance described herein, and is not a waiver of any subsequent application of the same provisions of the VLL4 Loan Agreement, nor is it a waiver of any breach of any other provision of the VLL4 Loan Agreement.  Except as expressly amended by this Agreement, the VLL4 Loan Agreement remains unamended and in full force and effect.

[Remainder of this page intentionally left blank]

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

“LENDERS”

VENTURE LENDING & LEASING IV, INC.

By:

_______________________________

Name:

_______________________________

Title:

_______________________________

VENTURE LENDING & LEASING V, INC.

By:

_______________________________

Name:

_______________________________

Title:

_______________________________

AGREED TO AND APPROVED:

[BORROWER]

By:

_______________________________

Name:

_______________________________

Title:

_______________________________

[If applicable]

Exhibit “A”

[Prospectively, VLL5 may, as provided in Section 12.3(c), attach Equipment funding schedules or UCC-1 financing statement exhibits from all loans under the VLL5 Loan Agreement, as description of VLL5 Primary Collateral]

Exhibit “B”

[attach equipment funding schedules or UCC-1 financing statement exhibits from all loans under the VLL4 Loan Agreement, as description of the VLL4 Primary Collateral]

EX-10

INVESTMENT MANAGEMENT AGREEMENT

THIS INVESTMENT MANAGEMENT AGREEMENT (this “Agreement”) is made as of _______________, 2006, between VENTURE LENDING & LEASING V, INC., a Maryland corporation (“Fund”), and WESTECH INVESTMENT ADVISORS, INC., a California corporation (“Westech Advisors”).  Westech Advisors is sometimes referred to herein as the “Manager”.

WHEREAS, the Fund is a newly organized, non-diversified closed-end management investment company that has elected status as a business development company (“BDC”) under the Investment Company Act of 1940 (“1940 Act”), whose sole shareholder is Venture Lending & Leasing V, LLC, a California limited liability company (the “LLC”);

WHEREAS, the Manager is an investment adviser registered as such under the Investment Advisers Act of 1940 (“Advisers Act”); and

WHEREAS, the Fund desires to retain the Manager to furnish certain investment advisory, portfolio management and administrative services to the Fund, and the Manager is willing to furnish such services.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties as follows:

1.

Appointment.  The Fund hereby appoints Westech Advisors as Investment Manager for the period and on the terms set forth in this Agreement.  Westech Advisors accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.

2.

Investment Duties.  Subject to the supervision of the Fund’s Board of Directors (the “Board”), the Manager will provide a continuous investment program for the Fund and will determine from time to time what securities and other investments will be purchased, retained or sold by the Fund.  Subject to investment policies and guidelines established by the Board, the Manager will identify, evaluate, structure and close the investments to be made by the Fund, arrange debt financing for the Fund, provide portfolio management and servicing of loans held in the Fund’s portfolio, and administer the Fund’s day-to-day affairs.  

3.

Administrative Duties.  The Manager will administer the affairs of the Fund under the supervision of the Board and subject to the following:

(a)

The Manager will supervise all aspects of the operations of the Fund, including oversight of transfer agency, custodial and accounting services; provided, however, that nothing contained herein shall be deemed to relieve or deprive the Board of its responsibility for and control of the conduct of the affairs of the Fund.

(b)

The Manager will arrange, but not pay, for the periodic preparation, updating, filing and dissemination (as required) of the Fund’s registration statement under the Securities Exchange Act of 1934, proxy material, tax returns and required reports to the Fund’s shareholders and the Securities and Exchange Commission (“SEC”) and other appropriate federal or state regulatory authorities.

(c)

The Manager will oversee the computation of the net asset value and the net income of the Fund in accordance with procedures adopted by the Board.

(d)

The Manager will maintain or oversee the maintenance of all books and records with respect to the Fund, and will furnish the Board with such periodic and special reports as the Board reasonably may request.  In compliance with the requirements of Rule 31a-3 under the 1940 Act, the Manager hereby agrees that all records that it maintains for the Fund are the property of the Fund, agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any records that it maintains for the Fund and that are required to be maintained by Rule 31a-1 under the 1940 Act, and further agrees, upon request by the Fund, to surrender promptly to the Fund any records that it maintains for the Fund.

(e)

All cash, securities and other assets of the Fund will be maintained in the custody of one or more banks in accordance with the provisions of Section 17(f) of the 1940 Act and the rules thereunder; the authority of the Manager to instruct the Fund’s custodian(s) to deliver and receive such cash, securities and other assets on behalf of the Fund will be governed by a custodian agreement between the Fund and each such custodian, and by resolution of the Board.

4.

Further Duties.  In all matters relating to the performance of this Agreement, the Manager will act in conformity with the Articles of Incorporation and Bylaws of the Fund and with the instructions and directions of the Board and will comply with the requirements of the 1940 Act, the rules thereunder, and all other applicable federal and state laws and regulations.

5.

Services Not Exclusive.

(a)

The services furnished by the Manager hereunder are not to be deemed exclusive and the Manager, except as otherwise expressly provided in this Section 5, shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby.  Except as otherwise expressly provided in this Section 5, nothing in this Agreement shall limit or restrict the right of any director, officer or employee of the Manager, who may also be a director, officer or employee of the Fund, to engage in any other business or to devote his or her time and attention in part to the management or other aspects of any other business, whether of a similar or dissimilar nature.

(b)

Until the Fund has called and invested at least 75% of the total amounts subscribed for by the investors in the LLC, except as provided below, neither the Manager nor any “Controlled Person” of the Manager will, without the consent of the board of directors of the Fund, sponsor, distribute or act as investment adviser or manager to any pooled investment vehicle other than VLLI Holdings, LLC, VLLI Holdings II, LLC, Venture Lending & Leasing III, LLC, Venture Lending & Leasing IV, Inc., Venture Lending & Leasing IV, LLC, the LLC or the Fund, or act as investment adviser or manager to any client if the investment program of such pooled investment vehicle or client includes, as a primary or major component, the provision of debt financing to venture capital-backed companies.  If the LLC elects irrevocably to release the M embers from any uncalled portion of their subscription obligations, then the “total amounts subscribed for” shall be deemed reduced to reflect such release.  The foregoing restriction shall not be deemed to prohibit the Manager or any Controlled Person of the Manager from acting as investment adviser or manager with respect to any existing client of such party as of November 1, 2006; provided, however, that, until the

75% investment threshold described above has occurred, such party shall not, without the consent of the Fund, accept from such existing clients any additional investment funds (other than amounts required for follow-on investments to existing investments) beyond the funds invested or committed by such existing clients as of November 1, 2006.  A “Controlled Person” of the Manager as used in this paragraph means any entity (i) 50% or more of whose voting securities are beneficially owned by the Manager or (ii) 50% or more of whose voting securities are controlled by either Ronald W. Swenson or Salvador O. Gutierrez.

6.

Expenses.

(a)

The Fund will pay all expenses (including, without limitation, accounting, legal, printing, clerical, filing and other expenses) incurred by the Fund, the Manager or its affiliates on behalf of the Fund in connection with the organization of the Fund and the initial offering of its shares.  Except as otherwise expressly provided for in Section 6(b), during the term of this Agreement, the Fund will bear all of its expenses incurred in its operations including, but not be limited to, the following:  (i) brokerage and commission expense and other transaction costs incident to the acquisition and dispositions of investments and the creation and perfection of security interests with respect thereto; (ii) federal, state and local taxes and fees, including transfer taxes and filing fees, incurred by or levied upon the Fund; (iii) interest charges and other fees in c onnection with borrowings; (iv) SEC fees and expenses, including the expenses of compliance with SEC rules and regulations, and any fees and expenses of state securities regulatory authorities; (v) expenses of printing and distributing reports and notices to shareholders; (vi) costs of proxy solicitation; (vii) costs of meetings of shareholders and the Board; (viii) charges and expenses of the Fund’s custodian, transfer and dividend disbursing agents; (ix) compensation and expenses of the Fund’s directors who are not interested persons of the Fund, the Manager or the placement agent, and of any of the Fund’s officers who are not interested persons of the Manager, and expenses of all directors in attending Board or shareholder meetings; (x) legal and auditing expenses, including expenses incident to the documentation for, and consummation of, venture lending and leasing transactions and legal actions to enforce the Fund’s rights under such loans and leases; (xi) costs of any certificates r epresenting the Shares; (xii) costs of stationery and supplies; (xiii) the costs of membership by the Fund in any trade organizations and (xiv) expenses associated with litigation and other extraordinary or non-recurring expenses.

(b)

The expenses to be borne by the Manager in connection with its duties to the Fund hereunder are limited to the following:  (i) all costs and fees incident to the selection and investigation of prospective Fund investments, such as travel expenses and professional fees (but excluding broker, legal and accounting fees and other costs incident to the closing, documentation or consummation of such transactions); (ii) the cost of adequate office space for the Fund and all necessary office equipment and services, including telephone service, heat, utilities and similar items and (iii) the cost of providing the Fund with such corporate, administrative and clerical personnel (including officers and directors of the Fund who are interested persons of the Manager and are acting in their respective capacities as officers and directors) as the Board reasonably deems necessary or advisable to perform the services required to be performed by the Manager under this Agreement.

(c)

The Fund may pay directly any expenses incurred by it in its normal operations and, if any such payment is consented to by the Manager and acknowledged as otherwise payable by

the Manager pursuant to this Agreement, the Fund may reduce the fee payable to the Manager pursuant to Section 7 hereof by such amount.  To the extent that such deductions exceed the fee payable to the Manager on any quarterly payment date, such excess shall be carried forward and deducted in the same manner from the fee payable on succeeding quarterly payment dates.

(d)

The payment or assumption by the Manager of any expense of the Fund that the Manager is not required by this Agreement to pay or assume shall not obligate the Manager to pay or assume the same or any similar expense of the Fund on any subsequent occasion.

7.

Management Fee.

(a)

For the services provided and the expenses assumed pursuant to this Agreement, the Fund or its successor trustees will pay to the Manager, whether before or after dissolution of the Fund, a management fee (the “Management Fee”), computed and paid quarterly as follows:

(i)

for the first two years following the first closing of the initial offering of the Fund’s shares, at an annual rate of 2.5% of the amount of the Member Committed Equity Capital (as defined below) (regardless of when or if such committed capital is called) as of the last day of each such fiscal quarter;

(ii)

for each quarter thereafter until the eighth anniversary of the first closing of the initial offering of the Fund’s shares, at an annual rate of the sum of (x) 2.5% of the value of the Fund’s total assets (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter and (y) the excess of 1.5% of the amount of the Member Committed Equity Capital (regardless of when or if such committed capital is called), over the sum of (A) 2.5% of the value of the Fund’s total assets (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter plus (B) the management fee payable for such quarter under the Operating Agreement, dated effective as of ___________, 2006, of the LLC (as the term “management fee” is defined therein) (the “Company Management Fee”).  

(iii)

following the eighth anniversary of the first closing of the initial offering of the Fund’s shares, at an annual rate of 2.5% of the value of the Fund’s total assets (including amounts derived from borrowed funds) as of the last day of each such fiscal quarter.  

For the avoidance of confusion, it is expressly agreed that, for the period from two years following the first closing of the initial offering of interests in the LLC until the eighth year following such closing, the sum of (i) the Management Fee paid for any such period under this Agreement plus (ii) the Company Management Fee, shall not exceed an amount equal to a fee calculated at an annual rate of the greater of (x) 2.5% of the combined total assets of the Fund and the LLC (including, in each case, amounts derived from borrowed funds) or (y) 1.5% of the amount of the Member Committed Equity Capital (regardless of when or if such committed capital is called); and that following the eighth anniversary of the first closing of the initial offering of interests in the LLC, the sum of the Management Fee and the Company Management Fee shall not exceed an amount equal to a fee calculated at an annual rate of 2.5% of the value of the combined total assets of the Fund and the Company (including, in each case, amounts derived from borrowed funds).  For purposes of calculating the Management Fee, any capital committed to the LLC at a closing

subsequent to the first closing (regardless of when or if such committed capital is called) shall be deemed to have been committed to the LLC as of the first closing.  The “Member Committed Equity Capital”, as of the end of any fiscal quarter, shall be the aggregate amount of subscription obligations for the purchase of interests in the LLC (including any amounts of such obligations that have been satisfied) as of the end of such fiscal quarter.

(b)

If this Agreement becomes effective or terminates before the end of any fiscal quarter, the Management Fee for the period from the effective day to the end of the fiscal quarter or from the beginning of such fiscal quarter to the date of termination, as the case may be, shall be prorated according to the proportion which such period bears to the full fiscal quarter in which such effectiveness or termination occurs.

(c)

If (i) the Manager, (ii) an officer, director or employee of the Manager, (iii) a company controlling, controlled by or under common control with the Manager, or (iv) an officer, director or employee of any such company receives any compensation from a company whose securities are held in the Fund’s portfolio in connection with the provision to that company of significant managerial assistance, the compensation due to the Manager hereunder shall be reduced by the amount of such fee.  If such amounts have not been fully offset at the time of termination of this Agreement, the Manager shall pay such excess amounts to the Fund upon termination.

8.

Limitation of Liability of Manager.  The Manager shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the matters to which this Agreement relates except a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from its reckless disregard of its obligations and duties under this Agreement.  Any person, even though also an officer, director, employee or agent of the Manager, who may be or become an officer, director, employee or agent of the Fund shall be deemed, when rendering services to the Fund or acting with respect to any business of the Fund, to be rendering such service to, or acting solely on behalf of, the Fund and not as an officer, director, employee or agent or one under the control or direction of the Manager eve n though paid by it.

9.

Duration and Termination.

(a)

This Agreement shall become effective upon the date hereabove written provided that this Agreement shall not take effect unless it has first been approved (i) by a vote of a majority of those directors of the Fund who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by vote of a majority of the Fund’s outstanding voting securities.

(b)

Unless sooner terminated as provided herein, this Agreement shall continue in effect for two years from the above written date.  Thereafter, regardless of the dissolution of the Fund, if not terminated, this Agreement shall continue automatically for successive periods of twelve months each, provided that such continuance is specifically approved at least annually (i) by a vote of a majority of those directors of the Fund who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by the Board or by vote of a majority of the outstanding voting securities of the Fund.

(c)

Notwithstanding the foregoing, this Agreement may be terminated:  (i) by vote of the Board or by a vote of a majority of the outstanding voting securities of the Fund at any time, without the payment of any penalty, on sixty days’ written notice to the Manager or (ii) by the Manager at any time, without the payment of any penalty, on sixty days’ written notice to the Fund.  This Agreement will automatically terminate in the event of its assignment.

10.

Amendment of this Agreement.  No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no amendment of this Agreement shall be effective until approved by vote of a majority of the Fund’s outstanding voting securities.

11.

Governing Law.  This Agreement shall be construed in accordance with the laws of the State of Maryland, without giving effect to the conflicts of laws principles thereof, and in accordance with the 1940 Act.  To the extent that the applicable laws of the State of Maryland conflict with the applicable provisions of the 1940 Act, the latter shall control.

12.

Miscellaneous.  The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.  If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors.  As used in this Agreement, the terms “majority of the outstanding voting securities”, “interested person”, “assignment”, “broker”, “investment adviser”, “security” and “significant managerial assistance” shall have the same meaning as such terms have in the 1940 Act, subject t o such exemption as may be granted by the SEC by any rule, regulation or order.  Where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is relaxed by a rule, regulation or order of the SEC, whether of special or general application, such provision shall be deemed to incorporate the effect of such rule, regulation or order.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated as of the day and year first above written.

VENTURE LENDING & LEASING V, INC.

WESTECH INVESTMENT ADVISORS, INC.

By:

By:

Martin D. Eng

Ronald W. Swenson

Chief Financial Officer

Chief Executive Officer