EXHIBIT 10.1

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AMERICAN CAPITAL STRATEGIES, LTD.

 

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€14,000,000 5.177% Senior Notes, Series 2006-A, due February 9, 2011

 

£3,000,000 6.565% Senior Notes, Series 2006-B, due February 9, 2011

 

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NOTE PURCHASE AGREEMENT

 

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Dated as of February 9, 2006

 

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TABLE OF CONTENTS

 

(Not a part of the Agreement)

 

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SECTION 1.     AUTHORIZATION OF NOTES

   1

Section 1.1

   Authorization of Notes    1

Section 1.2

   Provisions Relating to the Series A Notes    1

Section 1.3

   Provisions Relating to the Series B Notes    1

SECTION 2.    SALE AND PURCHASE OF NOTES

   2

SECTION 3.    CLOSING

   2

SECTION 4.    CONDITIONS TO CLOSING

   2

Section 4.1

   Representations and Warranties    2

Section 4.2

   Performance; No Default    3

Section 4.3

   Compliance Certificates    3

Section 4.4

   Opinions of Counsel    3

Section 4.5

   Purchase Permitted by Applicable Law, Etc    3

Section 4.6

   Related Transactions    3

Section 4.7

   Payment of Special Counsel Fees    4

Section 4.8

   Private Placement Number    4

Section 4.9

   Changes in Corporate Structure    4

Section 4.10

   Funding Instructions    4

Section 4.11

   Proceedings and Documents    4

SECTION 5.     REPRESENTATIONS AND WARRANTIES OF THE COMPANY

   4

Section 5.1

   Organization; Power and Authority    4

Section 5.2

   Authorization, Etc    4

Section 5.3

   Disclosure    5

Section 5.4

   Organization and Ownership of Shares of Subsidiaries; Affiliates    5

Section 5.5

   Financial Statements    6

Section 5.6

   Compliance with Laws, Other Instruments, Etc    6

Section 5.7

   Governmental Authorizations, Etc    6

Section 5.8

   Litigation; Observance of Agreements, Statutes and Orders    6

Section 5.9

   Taxes    7

 

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TABLE OF CONTENTS

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Section 5.10

   Title to Property; Leases    7

Section 5.11

   Licenses, Permits, Etc    7

Section 5.12

   Compliance with ERISA    8

Section 5.13

   Private Offering by the Company    9

Section 5.14

   Use of Proceeds; Margin Regulations    9

Section 5.15

   Existing Debt; Future Liens    9

Section 5.16

   Foreign Assets Control Regulations, Etc    10

Section 5.17

   Status under Certain Statutes    10

Section 5.18

   Investment Company Act    10

Section 5.19

   Environmental Matters    11

Section 5.20

   Notes Rank Pari Passu    11

Section 5.21

   Credit and Collection Policy    11

SECTION 6.    REPRESENTATIONS OF THE PURCHASERS

   11

Section 6.1

   Purchase for Investment    11

Section 6.2

   Source of Funds    12

Section 6.3

   Accredited Investor    13

SECTION 7.    INFORMATION AS TO COMPANY

   13

Section 7.1

   Financial and Business Information    13

Section 7.2

   Officer’s Certificate    15

Section 7.3

   Inspection    16

SECTION 8.    PREPAYMENT OF THE NOTES

   16

Section 8.1

   Required Prepayments    16

Section 8.2

   Optional Prepayments with Make-Whole Amount    16

Section 8.3

   Prepayment for Tax Reasons    17

Section 8.4

   Allocation of Partial Prepayments    18

Section 8.5

   Maturity; Surrender, Etc    18

Section 8.6

   Purchase of Notes    18

Section 8.7

   Make-Whole Amount    18

Section 8.8

   Payments Free and Clear of Taxes    20

SECTION 9.    AFFIRMATIVE COVENANTS

   23

Section 9.1

   Compliance with Law    23

 

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TABLE OF CONTENTS

(Not a part of the Agreement)

 

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Section 9.2

   Insurance    23

Section 9.3

   Maintenance of Properties    23

Section 9.4

   Payment of Taxes and Claims    24

Section 9.5

   Corporate Existence, Etc    24

Section 9.6

   Credit and Collection Policy    24

SECTION 10.    NEGATIVE COVENANTS

   24

Section 10.1

   Minimum Consolidated Tangible Net Worth    24

Section 10.2

   Interest Charges Coverage Ratio    24

Section 10.3

   Limitation on Debt    25

Section 10.4

   Available Asset Coverage    25

Section 10.5

   Merger, Consolidation and Sale of Assets, Etc    25

Section 10.6

   Nature of Business    27

Section 10.7

   Transactions with Affiliates    27

SECTION 11.    EVENTS OF DEFAULT

   27

SECTION 12.    REMEDIES ON DEFAULT, ETC

   30

Section 12.1

   Acceleration    30

Section 12.2

   Other Remedies    30

Section 12.3

   Rescission    30

Section 12.4

   No Waivers or Election of Remedies, Expenses, Etc    31

SECTION 13.    REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES

   31

Section 13.1

   Registration of Notes    31

Section 13.2

   Transfer and Exchange of Notes    31

Section 13.3

   Replacement of Notes    32

SECTION 14.    PAYMENTS ON NOTES

   32

Section 14.1

   Place of Payment    32

Section 14.2

   Home Office Payment    32

SECTION 15.    EXPENSES, ETC

   33

Section 15.1

   Transaction Expenses    33

Section 15.2

   Survival    33

SECTION 16.    SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT

   33

 

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TABLE OF CONTENTS

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SECTION 17.    AMENDMENT AND WAIVER

   34

Section 17.1

   Requirements    34

Section 17.2

   Solicitation of Holders of Notes    34

Section 17.3

   Binding Effect, Etc    34

Section 17.4

   Notes Held by Company, Etc    35

SECTION 18.    NOTICES

   35

SECTION 19.    REPRODUCTION OF DOCUMENTS

   35

SECTION 20.    CONFIDENTIAL INFORMATION

   36

SECTION 21.    SUBSTITUTION OF PURCHASER

   37

SECTION 22.    MISCELLANEOUS

   37

Section 22.1

   Successors and Assigns    37

Section 22.2

   Payments Due on Non-Business Days    37

Section 22.3

   Severability    37

Section 22.4

   Construction    37

Section 22.5

   Counterparts    38

Section 22.6

   Governing Law    38

Section 22.7

   Currency of Payment    38

Section 22.8

   Economic and Monetary Union    39

 

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ATTACHMENTS TO NOTE PURCHASE AGREEMENT:

 

SCHEDULE A

   —    Information Relating to Purchasers

SCHEDULE B

   —    Defined Terms

SCHEDULE 4.9

   —    Changes in Corporate Structure

SCHEDULE 5.3

   —    Disclosure Materials

SCHEDULE 5.4

   —    Subsidiaries of the Company and Ownership of Subsidiary Stock

SCHEDULE 5.5

   —    Financial Statements

SCHEDULE 5.11

   —    Patents, Etc.

SCHEDULE 5.14

   —    Use of Proceeds

SCHEDULE 5.15

   —    Existing Debt; Future Liens

EXHIBIT 1(a)

   —    Form of 5.177% Senior Note, Series 2006-A, due February 9, 2011

EXHIBIT 1(b)

   —    Form of 6.565% Senior Note, Series 2006-B, due February 9, 2011

EXHIBIT 4.4(a)

   —    Form of Opinion of Special Counsel for the Company

EXHIBIT 4.4(b)

   —    Form of Opinion of Special Counsel for the Purchasers

EXHIBIT 5.21

   —    Credit and Collection Policy

 

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AMERICAN CAPITAL STRATEGIES, LTD.

2 Bethesda Metro Center, 14th Floor

Bethesda, Maryland 20814

 

5.177% Senior Notes, Series 2006-A, due February 9, 2011

6.565% Senior Notes, Series 2006-B, due February 9, 2011

 

Dated as of February 9, 2006

 

TO THE PURCHASERS LISTED IN

    THE ATTACHED SCHEDULE A:

 

Ladies and Gentlemen:

 

AMERICAN CAPITAL STRATEGIES, LTD., a Delaware corporation (the “Company”),
agrees with the purchasers listed in the attached Schedule A (the “Purchasers”)
as follows:

 

SECTION 1. AUTHORIZATION OF NOTES.

 

Section 1.1 Authorization of Notes. The Company will authorize the issue and
sale of its Senior Notes consisting of (a) €14,000,000 aggregate principal
amount of its 5.177% Senior Notes, Series 2006-A, due February 9, 2011 (the
“Series A Notes”) and (b) £3,000,000 aggregate principal amount of its 6.565%
Senior Notes, Series 2006-B, due February 9, 2011 (the “Series B Notes”). The
Series A Notes and the Series B Notes are collectively referred to as the
“Notes.” As used herein, the term “Notes” shall mean all notes (irrespective of
series unless otherwise specified) originally delivered pursuant to this
Agreement and any such notes issued in substitution therefor pursuant to
Section 13 of this Agreement. The Series A Notes and the Series B Notes shall be
substantially in the forms set out in Exhibit 1(a) and Exhibit 1(b),
respectively, with such changes therefrom, if any, as may be approved by the
Purchasers and the Company. Certain capitalized and other terms used in this
Agreement are defined in Schedule B; and references to a “Schedule” or an
“Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement.

 

Section 1.2 Provisions Relating to the Series A Notes. The Series A Notes shall
bear interest (computed on the basis of a 360-day year of twelve 30-day months)
on the unpaid principal thereof from the date of issuance at the rate of
5.177% per annum, payable annually in arrears on the ninth day of February in
each year commencing on February 9, 2007 and, to the extent permitted by law,
interest on any overdue payment (including any overdue prepayment) of principal,
any overdue payment of interest and on any overdue payment of Make-Whole Amount
at the Default Rate, until such overdue amounts shall have been paid. The
amounts of interest scheduled to be paid (exclusive of any overdue interest, if
any) shall be set forth in the schedule of payments to be provided by the
Company to each of the Purchasers on the date of the Closing.

 

Section 1.3 Provisions Relating to the Series B Notes. The Series B Notes shall
bear interest (computed on the basis of a 365-day or 366-day year, as
applicable, and paid for the actual number of days elapsed (to be calculated in
accordance with Rule 251 of the statutes, by-laws, rules and recommendations of
the International Securities Marketing Association, as published in April 1999,
as applied to straight and convertible bonds issued after December 31,

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1998)) on the unpaid principal thereof from the date of issuance at the rate of
6.565% per annum, payable semiannually in arrears on the ninth day of February
and August in each year commencing on August 9, 2006 and, to the extent
permitted by law, interest on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and on any overdue
payment of Make-Whole Amount at the Default Rate, until such overdue amounts
shall have been paid. The amounts of interest scheduled to be paid (exclusive of
any overdue interest, if any) shall be set forth in the schedule of payments to
be provided by the Company to each of the Purchasers on the date of the Closing.

 

SECTION 2. SALE AND PURCHASE OF NOTES.

 

Subject to the terms and conditions of this Agreement, the Company will issue
and sell to each Purchaser and each Purchaser will purchase from the Company, at
the Closing provided for in Section 3, Notes of the series and in the principal
amount specified opposite such Purchaser’s name in Schedule A at the purchase
price of 100% of the principal amount thereof. Each Purchaser’s obligations
hereunder are several and not joint and no Purchaser shall have any obligation
or liability to any Person for the performance or nonperformance by any other
Purchaser hereunder.

 

SECTION 3. CLOSING.

 

The sale and purchase of the Notes to be purchased by the Purchasers shall occur
at the offices of Schiff Hardin LLP, 623 Fifth Avenue, 28th Floor, New York, New
York 10022, at 7:00 a.m., New York, New York time, at a closing (the “Closing”)
on February 9, 2006 or on such other Business Day thereafter as may be agreed
upon by the Company and the Purchasers. At the Closing, the Company will deliver
to each Purchaser the Notes of each series to be purchased by such Purchaser in
the form of a single Note of such series (or such greater number of Notes of
such series in denominations of at least €100,000, in the case of the Series A
Notes, or £100,000, in the case of the Series B Notes, as such Purchaser may
request) dated the date of the Closing and registered in such Purchaser’s name
(or in the name of its nominee), against delivery by such Purchaser to the
Company or its order of immediately available funds in the amount of the
purchase price therefor by wire transfer of immediately available funds for the
account of the Company. If at the Closing the Company shall fail to tender such
Notes to any Purchaser as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to any
Purchaser’s satisfaction, such Purchaser shall, at its election, be relieved of
all further obligations under this Agreement, without thereby waiving any rights
such Purchaser may have by reason of such failure or such nonfulfillment.

 

SECTION 4. CONDITIONS TO CLOSING.

 

Each Purchaser’s obligation to purchase and pay for the Notes to be sold to such
Purchaser at the Closing is subject to the fulfillment to such Purchaser’s
satisfaction, prior to or at the Closing, of the following conditions:

 

Section 4.1 Representations and Warranties. The representations and warranties
of the Company in this Agreement shall be correct when made and at the time of
the Closing.

 

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Section 4.2 Performance; No Default. The Company shall have performed and
complied with all agreements and conditions contained in this Agreement required
to be performed or complied with by it prior to or at the Closing, and after
giving effect to the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Schedule 5.14), no Default or Event of
Default shall have occurred and be continuing. Neither the Company nor any
Consolidated Subsidiary shall have entered into any transaction since
January 10, 2006 that would have been prohibited by Section 10 had such Section
applied since such date.

 

Section 4.3 Compliance Certificates.

 

(a) Officer’s Certificate. The Company shall have delivered to such Purchaser an
Officer’s Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

 

(b) Secretary’s Certificate. The Company shall have delivered to such Purchaser
a certificate of its Secretary, dated the date of the Closing, certifying as to
the resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and this Agreement.

 

Section 4.4 Opinions of Counsel. Such Purchaser shall have received opinions in
form and substance satisfactory to such Purchaser, dated the date of the Closing
(a) from Arnold & Porter LLP, special counsel for the Company, covering the
matters set forth in Exhibit 4.4(a) and covering such other matters incident to
the transactions contemplated hereby as such Purchaser or special counsel to the
Purchasers may reasonably request (and the Company hereby instructs its special
counsel to deliver such opinion to such Purchaser) and (b) from Schiff Hardin
LLP, special counsel to the Purchasers in connection with such transactions,
substantially in the form set forth in Exhibit 4.4(b) and covering such other
matters incident to such transactions as such Purchaser may reasonably request.

 

Section 4.5 Purchase Permitted by Applicable Law, Etc. On the date of the
Closing, such Purchaser’s purchase of Notes shall (a) be permitted by the laws
and regulations of each jurisdiction to which such Purchaser is subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York Insurance
Law) permitting limited investments by insurance companies without restriction
as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation T, U or X of the
Board of Governors of the Federal Reserve System) and (c) not subject such
Purchaser to any tax, penalty or liability under or pursuant to any applicable
law or regulation. If requested by any Purchaser, such Purchaser shall have
received an Officer’s Certificate certifying as to such matters of fact as such
Purchaser may reasonably specify to enable it to determine whether such purchase
is so permitted.

 

Section 4.6 Related Transactions. The Company shall have consummated the sale of
the entire principal amount of the Notes scheduled to be sold on the date of the
Closing pursuant to this Agreement.

 

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Section 4.7 Payment of Special Counsel Fees. Without limiting the provisions of
Section 15.1, the Company shall have paid on or before the Closing the
reasonable fees, charges and disbursements of special counsel to the Purchasers
referred to in Section 4.4(b) to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the Closing.

 

Section 4.8 Private Placement Number. A private placement number issued by
Standard & Poor’s CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained for each series of the Notes.

 

Section 4.9 Changes in Corporate Structure. Except as specified in Schedule 4.9,
the Company shall not have changed its jurisdiction of incorporation or been a
party to any merger or consolidation and shall not have succeeded to all or any
substantial part of the liabilities of any other entity, at any time following
the date of the most recent financial statements referred to in Schedule 5.5.

 

Section 4.10 Funding Instructions. At least two Business Days prior to the date
of the Closing, such Purchaser shall have received written instructions executed
by an authorized financial or accounting officer of the Company on letterhead of
the Company directing the manner of the payment of funds and setting forth
(a) the name of the transferee bank, (b) such transferee bank’s ABA number,
(c) the account name and number into which the purchase price for the Notes is
to be deposited and (d) the name and telephone number of the account
representative responsible for verifying receipt of such funds.

 

Section 4.11 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory to
such Purchaser and special counsel to the Purchasers, and such Purchaser and
special counsel to the Purchasers shall have received all such counterpart
originals or certified or other copies of such documents as such Purchaser or
special counsel to the Purchasers may reasonably request.

 

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to each Purchaser that:

 

Section 5.1 Organization; Power and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified as a foreign corporation and is in good standing
in each jurisdiction in which such qualification is required by law, other than
those jurisdictions as to which the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company has the corporate power and
authority to own or hold under lease the properties it purports to own or hold
under lease, to transact the business it transacts and proposes to transact, to
execute and deliver this Agreement and the Notes and to perform the provisions
hereof and thereof.

 

Section 5.2 Authorization, Etc. This Agreement and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement

 

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constitutes, and upon execution and delivery thereof each Note will constitute,
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors’ rights generally and
(b) general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

 

Section 5.3 Disclosure. The Company, through its agent, Bear, Stearns
International Limited, has delivered to each Purchaser the information described
on Schedule 5.3 (the “Disclosure Information”). The Disclosure Information
fairly describes, in all material respects, the general nature of the business
and principal properties of the Company and its Subsidiaries. Except as
disclosed in Schedule 5.3, this Agreement, the Disclosure Information, the other
documents, certificates or other writings delivered to the Purchasers by or on
behalf of the Company in connection with the transactions contemplated hereby
and the financial statements listed in Schedule 5.5, taken as a whole, do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading in light of the
circumstances under which they were made. Except as disclosed in the Disclosure
Information or as expressly described in Schedule 5.3, or in one of the other
documents, certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since December 31, 2004, there has
been no change in the financial condition, operations, business, properties or
prospects of the Company or any Subsidiary except changes that, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect. There is no fact known to the Company that could reasonably be expected
to have a Material Adverse Effect that has not been set forth herein or in the
Disclosure Information or in the other documents, certificates and other
writings delivered to the Purchasers by or on behalf of the Company specifically
for use in connection with the transactions contemplated hereby.

 

Section 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates.

 

(a) Schedule 5.4 contains (except as noted therein) complete and correct lists
(1) of the Company’s Consolidated Subsidiaries, showing, as to each Consolidated
Subsidiary, the correct name thereof, the jurisdiction of its organization, and
the percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Consolidated
Subsidiary, (2) of the Company’s Affiliates, other than Consolidated
Subsidiaries and (3) of the Company’s directors and senior officers.

 

(b) All of the outstanding shares of capital stock or similar equity interests
of each Consolidated Subsidiary shown in Schedule 5.4 as being owned by the
Company and its Consolidated Subsidiaries have been validly issued, are fully
paid and nonassessable and are owned by the Company or another Consolidated
Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule
5.4).

 

(c) Each Consolidated Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and is duly qualified as a foreign
corporation or other legal entity and is in good standing in each jurisdiction
in which such qualification is

 

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required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each such Consolidated
Subsidiary has the corporate or other power and authority to own or hold under
lease the properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.

 

(d) No Consolidated Subsidiary is a party to, or otherwise subject to any legal
restriction or any agreement (other than this Agreement, the agreements listed
on Schedule 5.4 and customary limitations imposed by corporate law statutes)
restricting the ability of such Consolidated Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or any
of its Consolidated Subsidiaries that owns outstanding shares of capital stock
or similar equity interests of such Consolidated Subsidiary.

 

Section 5.5 Financial Statements. The Company has delivered to each Purchaser
copies of the financial statements of the Company and its Consolidated
Subsidiaries listed on Schedule 5.5. All of said financial statements (including
in each case the related schedules and notes) fairly present in all material
respects the consolidated financial position of the Company and its Consolidated
Subsidiaries as of the respective dates specified in such Schedule and the
consolidated results of their operations and cash flows for the respective
periods so specified and have been prepared in accordance with GAAP consistently
applied throughout the periods involved except as set forth in the notes thereto
(subject, in the case of any interim financial statements, to normal year-end
adjustments).

 

Section 5.6 Compliance with Laws, Other Instruments, Etc. The execution,
delivery and performance by the Company of this Agreement and the Notes will not
(a) contravene, result in any breach of, or constitute a default under, or
result in the creation of any Lien in respect of any property of the Company or
any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or
credit agreement, lease, corporate charter or by-laws or any other agreement or
instrument to which the Company or any Subsidiary is bound or by which the
Company or any Subsidiary or any of their respective properties may be bound or
affected, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or any Subsidiary
or (c) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.

 

Section 5.7 Governmental Authorizations, Etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by the Company of this Agreement or the Notes.

 

Section 5.8 Litigation; Observance of Agreements, Statutes and Orders.

 

(a) There are no actions, suits or proceedings pending or, to the knowledge of
the Company, threatened against or affecting the Company or any Consolidated
Subsidiary or any property of the Company or any Consolidated Subsidiary in any
court or before any arbitrator of any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.

 

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(b) Neither the Company nor any Consolidated Subsidiary is in default under any
term of any agreement or instrument to which it is a party or by which it is
bound, or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including, without limitation, Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

 

Section 5.9 Taxes. The Company and its Subsidiaries have filed all tax returns
that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (a) the amount
of which is not, individually or in the aggregate, Material or (b) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Company or a Subsidiary,
as the case may be, has established adequate reserves in accordance with GAAP.
The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
Federal, state or other taxes for all fiscal periods are adequate. The Federal
income tax liabilities of the Company and its Subsidiaries have been finally
determined (whether by reason of completed audits or the statute of limitations
having run) for all tax years, up to and including, the tax year ended
September 30, 2001 except to the extent of net operating losses in any such year
which are applied against any net operating income in any subsequent tax year.

 

Section 5.10 Title to Property; Leases. The Company and its Consolidated
Subsidiaries have good and sufficient title to their respective properties that,
individually or in the aggregate, are Material, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Consolidated Subsidiary
after said date (except as sold or otherwise disposed of in the ordinary course
of business), in each case free and clear of Liens prohibited by this Agreement.
All leases that, individually or in the aggregate, are Material are valid and
subsisting and are in full force and effect in all material respects.

 

Section 5.11 Licenses, Permits, Etc. Except as disclosed in Schedule 5.11,

 

(a) the Company and its Consolidated Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks, trade names and domain names or rights thereto, that, individually
or in the aggregate, are Material, without known conflict with the rights of
others;

 

(b) to the best knowledge of the Company, no product of the Company or any of
its Consolidated Subsidiaries infringes in any material respect any license,
permit, franchise, authorization, patent, copyright, service mark, trademark,
trade name, domain name or other right owned by any other Person; and

 

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(c) to the best knowledge of the Company, there is no Material violation by any
Person of any right of the Company or any of its Consolidated Subsidiaries with
respect to any patent, copyright, service mark, trademark, trade name, domain
name or other right owned or used by the Company or any of its Consolidated
Subsidiaries.

 

Section 5.12 Compliance with ERISA.

 

(a) The Company and each ERISA Affiliate have operated and administered each
Plan (other than Multiemployer Plans) in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect. Neither the
Company nor any ERISA Affiliate has incurred any liability pursuant to Title I
or IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could reasonably be
expected to result in the incurrence of any such liability by the Company or any
ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such liabilities or
Liens as would not be, individually or in the aggregate, Material.

 

(b) (1) The present value of the aggregate benefit liabilities under each of the
Plans (other than Multiemployer Plans) established or maintained by the Company
or any Consolidated Subsidiary (that is an ERISA Affiliate), determined as of
the end of such Plan’s most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan’s most recent
actuarial valuation report, did not exceed the aggregate current value of the
assets of such Plan allocable to such benefit liabilities.

 

(2) The present value of the aggregate benefit liabilities under each of the
Plans (other than Multiemployer Plans) established or maintained by ERISA
Affiliates of the Company (other than Consolidated Subsidiaries), determined as
of the end of such Plan’s most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan’s most recent
actuarial valuation report, did not, to the best knowledge of the Company,
exceed the aggregate current value of the assets of such Plan allocable to such
benefit liabilities by an amount that is, individually or in the aggregate,
Material.

 

(3) The term “benefit liabilities” has the meaning specified in Section 4001 of
ERISA and the terms “current value” and “present value” have the meanings
specified in Section 3 of ERISA.

 

(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that,
individually or in the aggregate, are Material.

 

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(d) The expected post-retirement benefit obligation (determined as of the last
day of the Company’s most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Consolidated Subsidiaries is not Material.

 

(e) The execution and delivery of this Agreement and the issuance and sale of
the Notes hereunder will not involve any transaction that is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code. The representation by
the Company to each Purchaser in the first sentence of this Section 5.12(e) is
made in reliance upon and subject to the accuracy of such Purchaser’s
representation in Section 6.2 as to the sources of the funds used to pay the
purchase price of the Notes to be purchased by such Purchaser.

 

Section 5.13 Private Offering by the Company. Neither the Company nor anyone
acting on its behalf has offered the Notes or any similar securities for sale
to, or solicited any offer to buy any of the same from, or otherwise approached
or negotiated in respect thereof with, any Person other than not more than 10
Institutional Investors of the type described in clause (c) of the definition
thereof (including the Purchasers), each of which has been offered the Notes at
a private sale for investment. Neither the Company nor anyone acting on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Notes to the registration requirements of Section 5 of the
Securities Act.

 

Section 5.14 Use of Proceeds; Margin Regulations. The Company will apply the
proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the
proceeds from the sale of the Notes hereunder will be used, directly or
indirectly, for the purpose of buying or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
(12 CFR 221), or for the purpose of buying or carrying or trading in any
securities under such circumstances as to involve the Company in a violation of
Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a
violation of Regulation T of said Board (12 CFR 220). Margin stock does not
constitute more than 5% of the value of the consolidated assets of the Company
and its Consolidated Subsidiaries and the Company does not have any present
intention that margin stock will constitute more than 25% of the value of such
assets. As used in this Section, the terms “margin stock” and “purpose of buying
or carrying” shall have the meanings assigned to them in said Regulation U.

 

Section 5.15 Existing Debt; Future Liens.

 

(a) Except as described therein, Schedule 5.15 sets forth a complete and correct
list of all outstanding Debt of the Company and its Consolidated Subsidiaries as
of January 31, 2006, since which date there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or maturities of
the Debt of the Company or its Consolidated Subsidiaries. Neither the Company
nor any Consolidated Subsidiary is in default and no waiver of default is
currently in effect, in the payment of any principal or interest on any Debt of
the Company or such Consolidated Subsidiary and no event or condition exists
with respect to any Debt of the Company or any Consolidated Subsidiary that
would permit (or that with notice or the lapse of time, or both, would permit)
one or more Persons to cause such Debt to become due and payable before its
stated maturity or before its regularly scheduled dates of payment.

 

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(b) Except as disclosed in Schedule 5.15, neither the Company nor any
Consolidated Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 10.4.

 

Section 5.16 Foreign Assets Control Regulations, Etc.

 

(a) Neither the sale of the Notes by the Company hereunder nor its use of the
proceeds thereof will violate the Trading with the Enemy Act, as amended, or any
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.

 

(b) Neither the Company nor any Subsidiary (1) is a Person described or
designated in the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control or Section 1 of the Anti-Terrorism Order or
(2) engages in any dealings or transactions, or is otherwise associated, with
any such Person. The Company and its Subsidiaries are in compliance, in all
material respects, with the USA Patriot Act.

 

(c) No part of the proceeds from the sale of the Notes hereunder will be used,
directly or indirectly, for any payments to any government official or employee,
political party, official of a political party, candidate for political office
or anyone else acting in an official capacity, in order to obtain, retain or
direct business or obtain any improper advantage, in violation of the United
States Foreign Corrupt Practices Act of 1977, as amended, assuming in all cases
that such Act applies to the Company.

 

Section 5.17 Status under Certain Statutes. Neither the Company nor any
Subsidiary is subject to regulation under the Public Utility Holding Company Act
of 2005, as amended, the ICC Termination Act of 1995, as amended, or the Federal
Power Act, as amended.

 

Section 5.18 Investment Company Act.

 

(a) The Company is an “investment company” that has elected to be regulated as a
“business development company” within the meaning of the Investment Company Act
and qualifies as a RIC.

 

(b) The Company conducts its business and other activities in compliance with
the applicable provisions of the Investment Company Act and any applicable
rules, regulations or orders issued by the Securities and Exchange Commission
thereunder.

 

(c) The business and other activities of the Company, including, but not limited
to, the issuance and sale of the Notes hereunder, the application of the
proceeds and the repayment thereof by the Company and the consummation of the
transactions contemplated by this Agreement and the Notes do not now and will
not at any time result in any violations, with respect to the Company, of the
provisions of the Investment Company Act or any rules, regulations or orders
issued by the Securities and Exchange Commission thereunder.

 

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(d) Immediately after giving effect to the issuance and sale of the Notes
hereunder, the ratio of Total Available Assets to Unsecured Debt shall not be
less than 2.0 to 1.0.

 

Section 5.19 Environmental Matters. Neither the Company nor any Consolidated
Subsidiary has knowledge of any claim or has received any notice of any claim,
and no proceeding has been instituted raising any claim against the Company or
any of its Consolidated Subsidiaries or any of their respective real properties
now or formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any Environmental Laws,
except, in each case, such as could not reasonably be expected to result in a
Material Adverse Effect. Except as otherwise disclosed to the Purchasers in
writing:

 

(a) neither the Company nor any Consolidated Subsidiary has knowledge of any
facts which would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
in any way related to real properties now or formerly owned, leased or operated
by any of them or to other assets or their use, except, in each case, such as
could not reasonably be expected to result in a Material Adverse Effect;

 

(b) neither the Company nor any of its Consolidated Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them or has disposed of any Hazardous Materials in a manner contrary
to any Environmental Laws in each case in any manner that could reasonably be
expected to result in a Material Adverse Effect; and

 

(c) to the knowledge of the Company and its Consolidated Subsidiaries, all
buildings on all real properties now owned, leased or operated by the Company or
any of its Consolidated Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.

 

Section 5.20 Notes Rank Pari Passu. The obligations of the Company under this
Agreement and the Notes rank at least pari passu in right of payment with all
other unsecured Senior Debt (actual or contingent) of the Company, including,
without limitation, all unsecured Senior Debt of the Company described in
Schedule 5.15.

 

Section 5.21 Credit and Collection Policy. Attached hereto as Exhibit 5.21 is a
complete and correct copy of the Credit and Collection Policy as of the date of
the Closing.

 

SECTION 6. REPRESENTATIONS OF THE PURCHASERS.

 

Section 6.1 Purchase for Investment. Each Purchaser severally represents that it
is purchasing the Notes for its own account or for one or more separate accounts
maintained by such Purchaser or for the account of one or more pension or trust
funds and not with a view to the distribution thereof, provided that the
disposition of such Purchaser’s or such pension or trust

 

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fund’s property shall at all times be within such Purchaser’s or such pension or
trust fund’s control. Each Purchaser understands that the Notes have not been
registered under the Securities Act and may be resold only if registered
pursuant to the provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither such
registration nor such an exemption is required by law, and that the Company is
not required to register the Notes.

 

Section 6.2 Source of Funds. Each Purchaser severally represents that at least
one of the following statements is an accurate representation as to each source
of funds (a “Source”) to be used by such Purchaser to pay the purchase price of
the Notes to be purchased by such Purchaser hereunder:

 

(a) the Source is an “insurance company general account” within the meaning of
Department of Labor Prohibited Transaction Exemption (“PTE”) 95-60 (issued
July 12, 1995) and there is no employee benefit plan, treating as a single plan,
all plans maintained by the same employer and its affiliates or employee
organization, with respect to which the amount of the general account reserves
and liabilities for all contracts held by or on behalf of such plan, exceeds 10%
of the total reserves and liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth in the National
Association of Insurance Commissioners Annual Statement filed with such
Purchaser’s state of domicile; or

 

(b) the Source is either (1) an insurance company pooled separate account,
within the meaning of PTE 90-1 (issued January 29, 1990) or (2) a bank
collective investment fund, within the meaning of the PTE 91-38 (issued July 12,
1991) and, except as such Purchaser has disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or

 

(c) the Source constitutes assets of an “investment fund” (within the meaning of
Part V of the QPAM Exemption) managed by a “qualified professional asset
manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption), no
employee benefit plan’s assets that are included in such investment fund, when
combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a Person controlling or controlled by the
QPAM (applying the definition of “control” in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (1) the identity of
such QPAM and (2) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (c); or

 

(d) the Source is a governmental plan; or

 

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(e) the Source is one or more employee benefit plans, or a separate account or
trust fund comprised of one or more employee benefit plans, each of which has
been identified to the Company in writing pursuant to this paragraph (e); or

 

(f) the Source does not include assets of any employee benefit plan, other than
a plan exempt from the coverage of ERISA.

 

As used in this Section 6.2, the terms “employee benefit plan,” “governmental
plan,” “party in interest” and “separate account” shall have the respective
meanings assigned to such terms in Section 3 of ERISA.

 

Section 6.3 Accredited Investor. Each Purchaser represents that it is an
“accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act).

 

SECTION 7. INFORMATION AS TO COMPANY.

 

Section 7.1 Financial and Business Information. The Company shall deliver to
each holder of Notes that is an Institutional Investor:

 

(a) Quarterly Statements — within 45 days after the end of each quarterly fiscal
period in each fiscal year of the Company (other than the last quarterly fiscal
period of each such fiscal year), duplicate copies of,

 

(1) a consolidated balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such quarter, and

 

(2) consolidated statements of income, changes in shareholders’ equity and cash
flows of the Company and its Consolidated Subsidiaries for such quarter and (in
the case of the second and third quarters) for the portion of the fiscal year
ending with such quarter,

 

setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in all material
respects, the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting from year-end
adjustments, provided that delivery within the time period specified above of
copies of the Company’s Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1(a);

 

(b) Annual Statements — within 90 days after the end of each fiscal year of the
Company, duplicate copies of,

 

(1) a consolidated balance sheet of the Company and its Consolidated
Subsidiaries, as at the end of such year, and

 

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(2) consolidated statements of income, changes in shareholders’ equity and cash
flows of the Company and its Consolidated Subsidiaries, for such year,

 

setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied by an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that such financial
statements present fairly, in all material respects, the financial position of
the companies being reported upon and their results of operations and cash flows
and have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, provided that
the delivery within the time period specified above of the Company’s Annual
Report on Form 10-K for such fiscal year (together with the Company’s annual
report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirements therefor and filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(b);

 

(c) SEC and Other Reports — promptly upon their becoming available, one copy of
(1) each financial statement, report, notice or proxy statement sent by the
Company or any Consolidated Subsidiary to public securities holders generally
and (2) each regular or periodic report, each registration statement (without
exhibits except as expressly requested by such holder), and each prospectus and
all amendments thereto filed by the Company or any Consolidated Subsidiary with
the Securities and Exchange Commission and of all press releases and other
statements made available generally by the Company or any Consolidated
Subsidiary to the public concerning developments that are Material;

 

(d) Notice of Default or Event of Default — promptly, and in any event within
five days after a Responsible Officer becoming aware of the existence of any
Default or Event of Default or that any Person has given any notice or taken any
action with respect to a claimed default hereunder or that any Person has given
any notice or taken any action with respect to a claimed default of the type
referred to in Section 11(f), a written notice specifying the nature and period
of existence thereof and what action the Company is taking or proposes to take
with respect thereto;

 

(e) ERISA Matters — promptly, and in any event within five days after a
Responsible Officer becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto:

 

(1) with respect to any Plan, any reportable event, as defined in
Section 4043(b) of ERISA and the regulations thereunder, for which notice
thereof has not been waived pursuant to such regulations as in effect on the
date of the Closing; or

 

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(2) the taking by the PBGC of steps to institute, or the threatening by the PBGC
of the institution of, proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or

 

(3) any event, transaction or condition that could result in the incurrence of
any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then existing, could
reasonably be expected to have a Material Adverse Effect;

 

(f) Notices from Governmental Authority — promptly, and in any event within 10
Business Days of receipt thereof, copies of any notice to the Company or any
Consolidated Subsidiary from any Governmental Authority relating to any order,
ruling, statute or other law or regulation that could reasonably be expected to
have a Material Adverse Effect; and

 

(g) Requested Information — with reasonable promptness, such other data and
information relating to the business, operations, affairs, financial condition,
assets or properties of the Company or any of its Consolidated Subsidiaries or
relating to the ability of the Company to perform its obligations hereunder and
under the Notes as from time to time may be reasonably requested by any such
holder of Notes.

 

Section 7.2 Officer’s Certificate. Each set of financial statements delivered to
a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) shall be
accompanied by a certificate of a Senior Financial Officer setting forth:

 

(a) Covenant Compliance — the information (including detailed calculations)
required in order to establish whether the Company was in compliance with the
requirements of Section 10.1 through Section 10.5, inclusive, during the
quarterly or annual period covered by the statements then being furnished
(including with respect to each such Section, where applicable, the calculations
of the maximum or minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation of the amount,
ratio or percentage then in existence); and

 

(b) Event of Default — a statement that such officer has reviewed the relevant
terms hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of the Company and its Consolidated
Subsidiaries from the beginning of the quarterly or annual period covered by the
statements then being furnished to the date of the certificate and that such
review shall not have disclosed the existence during such period of any
condition or event that constitutes a Default or an Event of Default or, if any
such condition or event existed or exists (including, without

 

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limitation, any such event or condition resulting from the failure of the
Company or any Consolidated Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and what action the
Company shall have taken or proposes to take with respect thereto.

 

Section 7.3 Inspection. The Company shall permit the representatives of each
holder of Notes that is an Institutional Investor:

 

(a) No Default — if no Default or Event of Default then exists, at the expense
of such holder and upon reasonable prior notice to the Company, but no more than
one time in any fiscal year, to visit the principal executive office of the
Company, to discuss the affairs, finances and accounts of the Company and its
Consolidated Subsidiaries with the Company’s officers, and (with the consent of
the Company, which consent will not be unreasonably withheld) its independent
public accountants, and (with the consent of the Company, which consent will not
be unreasonably withheld) to visit the other offices and properties of the
Company and each Consolidated Subsidiary; and

 

(b) Default — if a Default or Event of Default then exists, at the expense of
the Company to visit and inspect any of the offices or properties of the Company
or any Consolidated Subsidiary, to examine all their respective books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the affairs,
finances and accounts of the Company and its Consolidated Subsidiaries), all at
such times and as often as may be requested.

 

SECTION 8. PREPAYMENT OF THE NOTES.

 

Section 8.1 Required Prepayments. The Notes shall not be subject to any required
prepayment and the entire unpaid principal amount of the Notes shall be due and
payable on the stated maturity thereof.

 

Section 8.2 Optional Prepayments with Make-Whole Amount. The Company may, at its
option, upon notice as provided below, prepay at any time all, or from time to
time any part of, the Notes, in an amount not less than 5% of the aggregate
principal amount of the Notes then outstanding (determined, in the case of Notes
denominated in Euros, on the Sterling Conversion Basis) in the case of a partial
prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole
Amount, if any, determined for the prepayment date with respect to such
principal amount. The Company will give each holder of Notes written notice of
each optional prepayment under this Section 8.2 not less than 30 days and not
more than 60 days prior to the date fixed for such prepayment. Each such notice
shall specify such date, the aggregate principal amount of the Notes to be
prepaid on such date, the principal amount of each Note held by such holder to
be prepaid (determined in accordance with Section 8.4), and the interest to be
paid on the prepayment date with respect to such principal amount being prepaid,
and shall be accompanied by a certificate of a Senior Financial Officer as to
the estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days

 

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prior to such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.

 

Section 8.3 Prepayment for Tax Reasons. If the Company shall deliver to each
holder of Notes (each, an “Affected Holder”) to which additional amounts as
provided for or referred to in Section 8.8 (“Tax Reimbursement Amount”) would be
payable on the occasion of the next payment in respect of such Notes (the date
of such next payment in respect of which such Tax Reimbursement Amount will be
due is herein referred to as the “Affected Payment Date”) a written
certification from a Senior Financial Officer confirming:

 

(a) that the Tax giving rise to such Tax Reimbursement Amount is required, under
the laws of the applicable Taxing Jurisdiction in respect thereof, to be
withheld or deducted from the payment due to such Affected Holder on such
Affected Payment Date and that such payment is the first payment in respect of
which such particular Tax must be withheld by virtue of the enactment of a
statute, treaty or regulation or the amendment of an existing statute, treaty or
regulation or a change in the judicial or administrative application or
interpretation of an existing statute, treaty or regulation (it being understood
that (1) the payment immediately following and reflecting a change in a
preexisting Tax shall be deemed the first payment with respect to such Tax and
(2) if the enactment of the statute, treaty or regulation, the amendment of an
existing statute, treaty or regulation, or the change in the judicial or
administrative interpretation of an existing statue, treaty or regulation giving
rise to a Tax occurs less than 120 days prior to the due date of a payment in
respect of the Notes that is subject to such Tax, then the Company may elect
that the first payment in respect of the Notes that is due more than 120 days
after such enactment shall be such first payment); and

 

(b) that, as of the date of such certificate, such Tax would be required to be
withheld from similar future payments to such Affected Holder,

 

the Company may then elect in such certification or in any other written
notification (with respect to each incident in which a Tax is initially levied
by a Taxing Jurisdiction that would result in the payment of such a Tax
Reimbursement Amount, a “Tax Prepayment Notice”), which election shall be
irrevocable, to prepay all (but not less than all) of the Notes held by each of
such Affected Holders as more particularly set forth in the next succeeding
paragraph.

 

Such Tax Prepayment Notice shall be delivered to each Affected Holder not less
than 30 days or more than 60 days prior to the prepayment date (in respect of
each Tax Prepayment Notice, a “Tax Prepayment Date”). Such Tax Prepayment Notice
shall contain a copy of the certificate referred to above and shall state that,
unless such Affected Holder notified the Company of the waiver described below,
each of the Notes of such Affected Holder shall be prepaid on such Tax
Prepayment Date at a price equal to 100% of the principal amount of such Note,
together with interest on such principal amount then being prepaid accrued to
the Tax Prepayment Date plus the Make-Whole Amount determined for such Tax
Prepayment Date. Such Tax Prepayment Notice shall be accompanied by a
certificate of a Senior Financial Officer as to the estimated Make-Whole Amount
due in connection with such prepayment (calculated as if the date of such notice
were the date of the prepayment), setting forth the details of such

 

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computation. Such Tax Prepayment Notice having been so given to each Affected
Holder, the principal amount of the Notes of each Affected Holder specified
therein, together with accrued interest thereon and the Make-Whole Amount in
respect thereof, shall become due and payable on the specified Tax Prepayment
Date; provided that any Affected Holder may deliver a written notice to the
Company, within 15 Business Days of its receipt of such Tax Prepayment Notice,
stating that such Affected Holder is unconditionally and irrevocably waiving any
requirement that the Company pay any Tax Reimbursement Amount in respect of, but
only in respect of, the increased Tax referred to in such Tax Prepayment Notice
(which waiver shall bind subsequent holders of the relevant Notes) and, upon the
delivery of such written notice, such waiver shall become effective and the
Company shall not prepay the Notes of such Affected Holder pursuant to such Tax
Prepayment Notice. Two Business Days prior to such prepayment, the Company shall
deliver to each Affected Holder, unless such Affected Holder notified the
Company of the waiver described above, a certificate of a Senior Financial
Officer specifying the calculation of such Make-Whole Amount as of the Tax
Prepayment Date. Any Note of an Affected Holder prepaid pursuant to this
Section 8.3 shall be surrendered to the Company and cancelled and shall not be
reissued, and no Note shall be issued in lieu of any prepaid principal amount of
any such Note.

 

Section 8.4 Allocation of Partial Prepayments. In the case of each partial
prepayment of the Notes pursuant to Section 8.2, the principal amount of the
Notes to be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts (determined, in the case of Notes denominated in Euros, on the
Sterling Conversion Basis) thereof not theretofore called for prepayment. All
partial prepayments of the Notes pursuant to Section 8.3 shall be applied only
to the Notes of the Affected Holders who have not waived the requirement that
the Company pays to it the Tax Reimbursement Amount referred to in the
applicable Tax Prepayment Notice.

 

Section 8.5 Maturity; Surrender, Etc. In the case of each prepayment of Notes
pursuant to this Section 8, the principal amount of each Note to be prepaid
shall mature and become due and payable on the date fixed for such prepayment,
together with interest on such principal amount accrued to such date and the
applicable Make-Whole Amount, if any. From and after such date, unless the
Company shall fail to pay such principal amount when so due and payable,
together with the interest and Make-Whole Amount, if any, as aforesaid, interest
on such principal amount shall cease to accrue. Any Note paid or prepaid in full
shall be surrendered to the Company and cancelled and shall not be reissued, and
no Note shall be issued in lieu of any prepaid principal amount of any Note.

 

Section 8.6 Purchase of Notes. The Company will not, and will not permit any
Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except upon the payment or prepayment
of the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment, prepayment or purchase of Notes pursuant to any provision of
this Agreement and no Notes may be issued in substitution or exchange for any
such Notes.

 

Section 8.7 Make-Whole Amount. The term “Make-Whole Amount” shall mean, with
respect to any Note, an amount equal to the excess, if any, of the Discounted
Value of the

 

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Remaining Scheduled Payments with respect to the Called Principal of such Note
over the amount of such Called Principal, provided that the Make-Whole Amount
may in no event be less than zero. For the purposes of determining the
Make-Whole Amount, the following terms have the following meanings:

 

“Called Principal” shall mean, with respect to any Note, the principal of such
Note that is to be prepaid pursuant to Section 8.2 or Section 8.3 or has become
or is declared to be immediately due and payable pursuant to Section 12.1, as
the context requires.

 

“Discounted Value” shall mean, with respect to the Called Principal of any Note,
the amount obtained by discounting all Remaining Scheduled Payments with respect
to such Called Principal from their respective scheduled due dates to the
Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (applied on the same
periodic basis as that on which interest on the Notes is payable) equal to the
Reinvestment Yield with respect to such Called Principal.

 

“Reinvestment Yield” shall mean

 

(a) with respect to the Called Principal of any Series A Note, 0.50% over the
yield to maturity implied by (1) the Kassakurs published in the Boersenzeitung
on the second Business Day preceding the Settlement Date with respect to such
Called Principal, for actively traded Bundesobligationen having a maturity equal
to the Remaining Average Life of such Called Principal as of such Settlement
Date, (2) if (i) the Boersenzeitung is not published on such Business Day or
(ii) there is a manifest error in such published Kassakurs, the Kassakurs set on
such Business Day by the Frankfurt Stock Exchange at (or at approximately) 11:00
a.m. (Frankfurt time) on such Business Day for actively traded
Bundesobligationen having a maturity closest to the Remaining Average Life of
such Called Principal as of such Settlement Date or (3) if such Kassakurs are
not reported as of such time or the Kassakurs reports as of such time are not
ascertainable, by reference to the arithmetic mean of the yields to maturity
closest to the Remaining Average Life of such Called Principal as of such
Settlement Date by three market makers selected by the Company with the consent
of the holder or holders of at least a majority in aggregate principal amount of
the Series A Notes at the time outstanding. Such implied yield will be
determined, if necessary, by interpolating linearly between (A) the actively
traded Bundesobligationen with the maturity closest to and greater than the
Remaining Average Life and (B) the actively traded Bundesobligationen with the
maturity closest to and less than the Remaining Average Life; and

 

(b) with respect to the Called Principal of any Series B Note, 0.50% over the
yield to maturity implied by (1) the gross redemption yield as published in the
Financial Times (London Edition) on the second Business Day preceding the
Settlement Date with respect to such Called Principal, for the then most
actively traded on the run UK Treasury securities (the “Reference Stock”) having
a maturity closest to the Remaining Average Life of such Called Principal as of

 

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such Settlement Date, (2) if (i) the Financial Times (London Edition) is not
published on that day, (ii) there is a manifest error in the published figures
or (iii) the calculation in the Financial Times (London Edition) ceases to be in
keeping with the “Formulae for the Calculation of Redemption Yields indicated in
the United Kingdom Debt Management Office notice entitled Formulae for
Calculating Gilt Prices from Yields,” page 4, Section One: Price/Yield Formulae
“Conventional Gilts: Double-dated and Undated Gilts with assumed (or Actual)
Redemption on a Quasi-Coupon Date” published on 8 June 1998, as supplemented,
amended or replaced from time to time (the “Formulae”), the gross redemption
yield calculated on the basis of the arithmetic mean (to three decimal places,
with 0.0005 rounded down) of the mid market price for the Reference Stock on a
dealing basis by three authorized leading market makers in the gilt-edged market
as at or about 11:00 a.m. (London time) on the second Business Day preceding the
Settlement Date according to the Formulae.

 

“Remaining Average Life” shall mean, with respect to any Called Principal, the
number of years (calculated to the nearest one-twelfth year) obtained by
dividing (a) such Called Principal into (b) the sum of the products obtained by
multiplying (1) the principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (2) the number of years (calculated to the
nearest one-twelfth year) that will elapse between the Settlement Date with
respect to such Called Principal and the scheduled due date of such Remaining
Scheduled Payment.

 

“Remaining Scheduled Payments” shall mean, with respect to the Called Principal
of any Note, all payments of such Called Principal and interest thereon that
would be due after the Settlement Date with respect to such Called Principal if
no payment of such Called Principal were made prior to its scheduled due date,
provided that if such Settlement Date is not a date on which interest payments
are due to be made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount of interest
accrued to such Settlement Date and required to be paid on such Settlement Date
pursuant to Section 8.2, Section 8.3 or Section 12.1.

 

“Settlement Date” shall mean, with respect to the Called Principal of any Note,
the date on which such Called Principal is to be prepaid pursuant to Section 8.2
or Section 8.3 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.

 

Section 8.8 Payments Free and Clear of Taxes.

 

(a) All payments whatsoever under this Agreement and the Notes (whether it be
principal, interest, Make-Whole Amount or otherwise) shall be made free and
clear of, and without withholding or deduction for, any taxes, duties, imposts,
fees, assessments, levies or charges of whatsoever nature (“Taxes”) imposed,
levied, collected, withheld or assessed by the United States (including any
state or other political subdivision or authority thereof) (the “Taxing
Jurisdiction”) unless such withholding or deduction is required by law. In the
event that such withholding or deduction is required, the

 

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Company shall pay to the holder of any Note who is a United States Alien such
additional amounts as will result in the receipt by such holder of such amounts
as would have been received by it if no such withholding or deduction had been
required, except that no such additional amounts shall be payable in respect of
any Tax that:

 

(1) is imposed or withheld solely by reason of the existence of any present or
former connection (other than the mere fact of being a holder) between any
holder and the Taxing Jurisdiction, other than the mere holding of the Notes or
the receipt of payments under the Notes or this Agreement, including, without
limitation, such holder being or having been a citizen or resident of the Taxing
Jurisdiction or treated as being or having been a resident thereof;

 

(2) is imposed or withheld solely by reason of any holder (or any partnership,
trust, estate, limited liability company or other fiscally transparent entity of
which such holder is a partner, beneficiary, settlor or member) (i) being or
having been present in, or engaged in a trade or business in, the Taxing
Jurisdiction, (ii) being treated as having been present in, or engaged in a
trade or business in, the Taxing Jurisdiction or (iii) having or having had a
permanent establishment in the Taxing Jurisdiction;

 

(3) is imposed or withheld solely by reason of the holder (or any partnership,
trust, estate, limited liability company or other fiscally transparent entity of
which the holder is a partner, beneficiary, settlor or member) being or having
been with respect to the United States a personal holding company, a controlled
foreign corporation, a foreign personal holding company, a passive foreign
investment company, a foreign private foundation or other foreign tax-exempt
organization, or being a corporation that accumulates earnings to avoid United
States federal income tax;

 

(4) is an estate, inheritance, gift, sales, transfer, personal property or
excise tax or any similar tax assessment or governmental charge;

 

(5) is imposed on a beneficial owner solely by reason of such beneficial owner
actually or constructively owning 10% or more of the total combined voting power
of all of the classes of stock of the Company that are entitled to vote within
the meaning of Section 871(h)(3) of the Code or that is a bank making a loan
entered into in the ordinary course of its trade or business within the meaning
of Section 881(c)(3)(A) of the Code;

 

(6) would not have been imposed but for the failure of the beneficial owner or
any holder to comply with certification, information, documentation or other
reporting requirements concerning the nationality, residence, identity or
connection with the United States of such beneficial owner or such holder, if
such compliance is required by statute or by regulation of the United States or
of any political subdivision or taxing authority thereof or therein as a
precondition to relief or exemption from such Tax;

 

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(7) is payable otherwise than by withholding by the Company from payments on or
in respect of any Note;

 

(8) is imposed by reason of the failure of any holder or the beneficial owner to
fulfill the statement requirements of Sections 871(h) or 881(c) of the Code;

 

(9) if applicable, is required to be withheld pursuant to any law implementing
or complying with, or introduced in order to conform to, the European Union
Directive on the taxation of savings income adopted by the ECOFIN Council
meeting on 3 June 2003; or

 

(10) any combination of items (1), (2), (3), (4), (5), (6), (7), (8) and (9).

 

(b) In addition, the Company will not pay additional amounts to any holder if it
is a partnership, trust, estate, limited liability company or other fiscally
transparent entity, or to any holder if it is not the sole beneficial owner of
the Note held by it, as the case may be. This exception, however, will apply
only to the extent that a beneficiary or settlor with respect to the trust or
estate, or a beneficial owner or member of the partnership, limited liability
company or other fiscally transparent entity, would not have been entitled to
payment of an additional amount had the beneficiary, settlor, beneficial owner
or member received directly its beneficial or distributive share of the payment.

 

(c) Within five Business Days of the date of the Closing and within 30 days of
any acquisition of a Note by a holder after the date of the Closing, the holder
shall provide the Company with a properly executed original United States
Internal Revenue Service Form W-8BEN or W-8ECI, as appropriate, which forms are
available on the internet at www.irs.gov. Thereafter such holder shall provide
additional Forms W-8BEN or W-8ECI (or any successor or other form prescribed by
the United States Internal Revenue Service) (1) to the extent a form previously
provided has become inaccurate, invalid or otherwise ceases to be effective or
(2) as requested in writing by the Company, unless such holder is unable to
provide such form solely as a result of any change in, or amendment to, the
laws, regulations or rulings of the United States or any political subdivision
or any authority thereof or therein having power to tax, or any change in the
application or official interpretation of such laws, regulations or rulings
(including a holding by any court of competent jurisdiction), which change or
amendment becomes effective on or after the date of the Closing.

 

(d) The Company will furnish the holders, within the period of payment permitted
by applicable law, an official receipt, if any, issued by the relevant taxation
or other authorities involved for all amounts deducted or withheld as aforesaid.

 

(e) Any reference in this Agreement to principal, Make-Whole Amount or interest
shall be deemed to include any additional amounts in respect of principal or
interest (as the case may be) which may be payable under this Section 8.8.

 

(f) The term “United States Alien” shall mean a person that is not a United
States Person. The term “United States Person” shall mean a citizen or resident
of the

 

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United States or a corporation or partnership created or organized in or under
the laws of the United States or any political subdivision thereof, an estate
the income of which is subject to United States federal income taxation
regardless of its source, a trust subject to the supervision of a court within
the United States and the control of a United States Person as described in
section 7701(a)(30) of the Code, or a trust that existed on August 20, 1996, and
elected to continue its treatment as a domestic trust. The term “United States”
shall mean the United States of America (including the States and the District
of Columbia), its territories, its possessions and other areas subject to its
jurisdiction (including the Commonwealth of Puerto Rico).

 

SECTION 9. AFFIRMATIVE COVENANTS.

 

The Company covenants that so long as any of the Notes are outstanding:

 

Section 9.1 Compliance with Law.

 

(a) The Company will, and will cause each of its Consolidated Subsidiaries to,
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including, without limitation, Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such laws,
ordinances or governmental rules or regulations or failures to obtain or
maintain in effect such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

(b) The Company will at all times maintain its stature as a RIC and as a
“business development company” under the Investment Company Act and will conduct
its business and other activities in compliance with the applicable provisions
of the Investment Company Act and any applicable rules, regulations or orders
issued by the Securities and Exchange Commission thereunder.

 

Section 9.2 Insurance. The Company will, and will cause each of its Consolidated
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated.

 

Section 9.3 Maintenance of Properties. The Company will, and will cause each of
its Consolidated Subsidiaries to, maintain and keep, or cause to be maintained
and kept, their respective properties in good repair, working order and
condition (other than ordinary wear and tear), so that the business carried on
in connection therewith may be properly conducted at all times, provided that
this Section shall not prevent the Company or any Consolidated Subsidiary from
discontinuing the operation and the maintenance of any of its properties if such

 

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discontinuance is desirable in the conduct of its business and the Company has
concluded that such discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

Section 9.4 Payment of Taxes and Claims. The Company will, and will cause each
of its Consolidated Subsidiaries to, file all tax returns required to be filed
in any jurisdiction and to pay and discharge all taxes shown to be due and
payable on such returns and all other taxes, assessments, governmental charges
or levies imposed on them or any of their properties, assets, income or
franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties or assets of the
Company or any Consolidated Subsidiary, provided that neither the Company nor
any Consolidated Subsidiary need pay any such tax or assessment or claims if
(1) the amount, applicability or validity thereof is contested by the Company or
such Consolidated Subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Company or a Consolidated Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or such Consolidated Subsidiary or (2) the nonpayment of all such taxes and
assessments in the aggregate could not reasonably be expected to have a Material
Adverse Effect.

 

Section 9.5 Corporate Existence, Etc. The Company will at all times preserve and
keep in full force and effect its corporate existence. Subject to Section 10.5,
the Company will at all times preserve and keep in full force and effect the
corporate existence of each of its Consolidated Subsidiaries (unless merged into
the Company or a Wholly-Owned Consolidated Subsidiary) and all rights and
franchises of the Company and its Consolidated Subsidiaries unless, in the good
faith judgment of the Company, the termination of or failure to preserve and
keep in full force and effect such corporate existence, right or franchise could
not, individually or in the aggregate, have a Material Adverse Effect.

 

Section 9.6 Credit and Collection Policy. The Company will (a) comply in all
material respects with the Credit and Collection Policy and (b) furnish to each
holder of a Note, prior to its effective date, prompt notice of any changes in
the Credit and Collection Policy; provided that the Company will not modify the
Credit and Collection Policy in any manner that would have a material adverse
effect on the holders of the Notes or their investment therein, without the
prior written consent of the Required Holders (in their sole discretion).

 

SECTION 10. NEGATIVE COVENANTS.

 

The Company covenants that so long as any of the Notes are outstanding:

 

Section 10.1 Minimum Consolidated Tangible Net Worth. The Company will not, at
any time, permit Consolidated Tangible Net Worth to be less than
(a) $1,124,592,393 plus (b) 75% of the cumulative Net Proceeds of Capital
Stock/Conversion of Debt received at any time after the date of the Closing
(excluding the Net Proceeds of Capital Stock/Conversion of Debt by a
Consolidated Subsidiary to another Consolidated Subsidiary or to the Company).

 

Section 10.2 Interest Charges Coverage Ratio. The Company will not, at any time,
permit the ratio of EBIT to Interest Expense of the Company and its Consolidated
Subsidiaries, determined on a consolidated basis as of the last day of each
fiscal quarter for the period of four consecutive fiscal quarters ended on such
day, to be less than 2.0 to 1.0.

 

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Section 10.3 Limitation on Debt.

 

(a) The Company will not, on the last day of any fiscal quarter, permit the
ratio of Consolidated Debt to Consolidated Shareholder’s Equity to exceed 1.5 to
1.0.

 

(b) The Company will not, at any time, permit the Asset Coverage Ratio to be
less than 2.0 to 1.0.

 

Section 10.4 Available Asset Coverage.

 

(a) The Company will not, on the last day of any fiscal quarter, permit the
ratio of Total Available Assets to Unsecured Debt to be less than 2.0 to 1.0.

 

(b) The Company will not, on the last day of any fiscal quarter, permit the
ratio of (1) the sum of Cash and Available Non-Pledged Debt Assets to
(2) Unsecured Debt to be less than 1.0 to 1.0.

 

Section 10.5 Merger, Consolidation and Sale of Assets, Etc.

 

(a) The Company will not, and will not permit any of its Consolidated
Subsidiaries to, consolidate with or merge with any other corporation or convey,
transfer or lease all or substantially all of its assets in a single transaction
or series of transactions to any Person; provided that

 

(1) any Consolidated Subsidiary of the Company may consolidate with or merge
with, or convey, transfer or lease all or substantially all of its assets in a
single transaction or series of transactions to, the Company or a Wholly-Owned
Consolidated Subsidiary of the Company so long as (i)(A) in any merger or
consolidation involving the Company, the Company shall be the surviving or
continuing entity and (B) in any merger or consolidation involving a
Wholly-Owned Consolidated Subsidiary (and not the Company), a Wholly-Owned
Consolidated Subsidiary shall be the surviving or continuing entity and (ii) at
the time of such consolidation or merger and immediately after giving effect to
such transaction, no Default or Event of Default would exist;

 

(2) the Company may consolidate or merge with or into, or convey, transfer or
lease all or substantially all of the assets of the Company in a single
transaction or series of transactions to, any Person so long as: (i) the
successor formed by such consolidation or the survivor of such merger or the
Person that acquires by conveyance, transfer or lease all or substantially all
of the assets of the Company as an entirety, as the case may be (the “Successor
Corporation”), shall be a solvent corporation organized and existing under the
laws of the United States or any State thereof (including the District of
Columbia), (ii) if the Company is not the Successor Corporation, (A) the
Successor Corporation shall have executed and delivered to each holder of the
Notes its assumption of the due

 

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and punctual performance and observance of each covenant and condition of this
Agreement and the Notes (pursuant to such agreements and instruments as shall be
reasonably satisfactory to the Required Holders) and (B) the Successor
Corporation shall have caused to be delivered to each holder of any Notes an
opinion of nationally recognized independent counsel, or other independent
counsel reasonably satisfactory to the Required Holders, to the effect that all
agreements or instruments effecting such assumption are enforceable in
accordance with their terms and comply with the terms hereof, (iii) at the time
of such consolidation or merger and immediately after giving effect thereto and
to the incurrence of any Debt assumed or incurred in connection therewith
(A) the aggregate amount of outstanding Consolidated Debt of the surviving
entity would be permitted by the terms of Sections 10.3 and 10.4 as of the last
day of the fiscal quarter immediately preceding the date of such consolidation
or merger and (iv) immediately after giving effect to such transaction, no
Default or Event of Default would exist; and

 

(3) the Company and any Consolidated Subsidiary may sell, transfer, pledge or
otherwise dispose of all or any part of its Investments in the ordinary course
of business including, without limitation, in securitization transactions.

 

(b) The Company will not permit any Consolidated Subsidiary to issue any voting
stock of such Consolidated Subsidiary except to satisfy the rights of minority
shareholders to receive issuances of stock that are non-dilutive to the Company
and/or any Consolidated Subsidiary; provided that the foregoing restrictions do
not apply to issuances to the Company or any Wholly-Owned Consolidated
Subsidiary or the issuance of directors’ or similar qualifying shares.

 

(c) The Company will not sell, transfer or otherwise dispose of stock or Debt of
any Consolidated Subsidiary (except the issuance of directors’ or similar
qualifying shares and sales, transfers and dispositions of all of the stock of a
special purpose Consolidated Subsidiary for consideration if (x) substantially
all the assets of such Consolidated Subsidiary constitute Investments and
(y) such sale, transfer or other disposition of all of such Investments is for
substantially the same consideration as would be permitted by paragraph (a)(3)
of this Section 10.5) and shall not permit any Consolidated Subsidiary to sell,
transfer or otherwise dispose of stock (other than by purchase or redemption of
preferred stock) of a Consolidated Subsidiary or Debt of any other Consolidated
Subsidiary (except issuances to the Company or to a Wholly-Owned Consolidated
Subsidiary or issuance of directors’ or similar qualifying shares); provided
that the foregoing restrictions do not apply (I) subject to Section 10.4, to a
pledge of stock or Debt of a Consolidated Subsidiary or (II) if the foregoing
conditions are met:

 

(1) all shares of stock and all Debt of such Consolidated Subsidiary held by the
Company and its Subsidiaries shall be sold simultaneously;

 

(2) in the opinion of the Company’s Board of Directors (i) such sale or stock or
Debt is in the best interest of the Company and (ii) the consideration paid for
such stock or Debt is deemed adequate and satisfactory;

 

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(3) the Consolidated Subsidiary being disposed of shall not have any continuing
Investment in the Company or any other Consolidated Subsidiary that is not being
disposed of simultaneously; and

 

(4) such sale or other disposition does not involve a substantial part of the
assets of the Company and its Consolidated Subsidiaries.

 

As used herein, a sale of assets will be deemed a “substantial part” of the
assets of the Company and its Consolidated Subsidiaries if (A) the book value of
such assets sold in a given fiscal year (except those sold in the ordinary
course of business) exceeds 15% of Consolidated Total Assets determined at the
close of the immediately preceding fiscal year or (B) the operations of such
assets sold (except those sold in the ordinary course of business) generated 15%
or more of the consolidated operating profits of the Company and its
Consolidated Subsidiaries during the immediately preceding fiscal year;
provided, however, that for purposes of the foregoing calculation, there shall
not be included any sale of assets if a portion of the proceeds of such asset
sale equal to the aggregate book value thereof immediately prior to such sale
was or is applied within 365 days of the date of such sale of such assets to
either (1) the acquisition of assets useful and intended to be used in the
operation of the business of the Company and its Consolidated Subsidiaries and
having a fair market value (as determined in good faith by the Board of
Directors of the Company) at least equal to the book value of the assets so
disposed of or (2) the prepayment at any applicable prepayment premium, on a pro
rata basis, of Senior Debt of the Company. Any prepayment of the Notes pursuant
to this Section 10.5(c) shall be in accordance with Section 8.2, but without
regard to the minimum prepayment requirements of Section 8.2 if the allocable
amount to be prepaid on the Notes is less than such minimum.

 

Section 10.6 Nature of Business. The Company will not, and will not permit any
Consolidated Subsidiary to, engage in any business, if as a result, the general
nature of the business engaged in by the Company and its Consolidated
Subsidiaries, taken as a whole, would be substantially changed from the general
nature of the business the Company and its Consolidated Subsidiaries are engaged
in on the date of the Closing.

 

Section 10.7 Transactions with Affiliates. The Company will not, and will not
permit any Consolidated Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (other than the Company or a
Consolidated Subsidiary) (including, without limitation, the purchase from, sale
to or exchange of property with, or the rendering of any service by or for, any
Affiliate), except transactions in the ordinary course of and pursuant to the
reasonable requirements of the Company’s or such Consolidated Subsidiary’s
business and upon fair and reasonable terms no less favorable to the Company or
such Consolidated Subsidiary than would be obtained in a comparable arms-length
transaction with a Person other than an Affiliate.

 

SECTION 11. EVENTS OF DEFAULT.

 

An “Event of Default” shall exist if any of the following conditions or events
shall occur and be continuing:

 

(a) the Company defaults in the payment of any principal or Make-Whole Amount on
any Note when the same becomes due and payable, whether at maturity or at a date
fixed for prepayment or by declaration or otherwise; or

 

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(b) the Company defaults in the payment of any interest on any Note for more
than five Business Days after the same becomes due and payable; or

 

(c) the Company defaults in the performance of or compliance with any term
contained in Sections 10.1 through 10.5, inclusive; or

 

(d) the Company defaults in the performance of or compliance with any term
contained herein (other than those referred to in paragraphs (a), (b) and (c) of
this Section 11) and such default is not remedied within 30 days after the
earlier of (1) a Responsible Officer obtaining actual knowledge of such default
and (2) the Company receiving written notice of such default from any holder of
a Note (any such written notice to be identified as a “notice of default” and to
refer specifically to this paragraph (d) of Section 11); or

 

(e) any representation or warranty made in writing by or on behalf of the
Company or by any officer of the Company in this Agreement or in any writing
furnished in connection with the transactions contemplated hereby proves to have
been false or incorrect in any material respect on the date as of which made; or

 

(f) (1) the Company or any Consolidated Subsidiary is in default (as principal
or as guarantor or other surety) in the payment of any principal of or premium
or make-whole amount or interest on any Debt that is outstanding in an aggregate
principal amount of at least $15,000,000 (or its equivalent in the relevant
currency of payment) beyond any period of grace provided with respect thereto,
(2) the Company or any Consolidated Subsidiary is in default in the performance
of or compliance with any term of any evidence of any Debt in an aggregate
outstanding principal amount of at least $15,000,000 (or its equivalent in the
relevant currency of payment) or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of such
default or condition such Debt has become, or has been declared (or one or more
Persons are entitled to declare such Debt to be), due and payable before its
stated maturity or before its regularly scheduled dates of payment or (3) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder of Debt to convert such Debt
into equity interests or as a result of an Accelerated Amortization Event, an
Additional Principal Amount, or a Repurchase Obligation), (i) the Company or any
Consolidated Subsidiary has become obligated to purchase or repay Debt before
its regular maturity or before its regularly scheduled dates of payment in an
aggregate outstanding principal amount of at least $15,000,000 (or its
equivalent in the relevant currency of payment), or (ii) one or more Persons
have the right to require the Company or any Consolidated Subsidiary so to
purchase or repay such Debt; or

 

(g) the Company or any Consolidated Subsidiary (1) is generally not paying, or
admits in writing its inability to pay, its debts as they become due, (2) files,
or consents

 

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by answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (3) makes an assignment for
the benefit of its creditors, (4) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (5) is adjudicated as
insolvent or to be liquidated or (6) takes corporate action for the purpose of
any of the foregoing; or

 

(h) a court or governmental authority of competent jurisdiction enters an order
appointing, without consent by the Company or any of its Consolidated
Subsidiaries, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for relief
or reorganization or any other petition in bankruptcy or for liquidation or to
take advantage of any bankruptcy or insolvency law of any jurisdiction, or
ordering the dissolution, winding-up or liquidation of the Company or any of its
Consolidated Subsidiaries, or any such petition shall be filed against the
Company or any of its Consolidated Subsidiaries and such petition shall not be
dismissed within 60 days; or

 

(i) a final judgment or judgments for the payment of money aggregating in excess
of $15,000,000 (or its equivalent in the relevant currency of payment) are
rendered against one or more of the Company and its Consolidated Subsidiaries
and which judgments are not, within 30 days after entry thereof, bonded,
discharged or stayed pending appeal, or are not discharged within 30 days after
the expiration of such stay; or

 

(j) if (1) any Plan shall fail to satisfy the minimum funding standards of ERISA
or the Code for any plan year or part thereof or a waiver of such standards or
extension of any amortization period is sought or granted under Section 412 of
the Code, (2) a notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have instituted
proceedings under ERISA Section 4042 to terminate or appoint a trustee to
administer any Plan or the PBGC shall have notified the Company or any ERISA
Affiliate that a Plan may become a subject of any such proceedings, (3) the
aggregate “amount of unfunded benefit liabilities” (within the meaning of
Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $15,000,000 (or its equivalent in the relevant
currency of payment), (4) the Company or any ERISA Affiliate shall have incurred
or is reasonably expected to incur any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, (5) the Company or any ERISA Affiliate withdraws from any
Multiemployer Plan or (6) the Company or any ERISA Affiliate establishes or
amends any employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or any
ERISA Affiliate thereunder; and any such event or events described in clauses
(1) through (6) above, either individually or together with any other such event
or events, could reasonably be expected to have a Material Adverse Effect.

 

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As used in Section 11(j), the terms “employee benefit plan” and “employee
welfare benefit plan” shall have the respective meanings assigned to such terms
in Section 3 of ERISA.

 

SECTION 12. REMEDIES ON DEFAULT, ETC.

 

Section 12.1 Acceleration.

 

(a) If an Event of Default with respect to the Company described in paragraph
(g) or (h) of Section 11 (other than an Event of Default described in clause
(1) of paragraph (g) or described in clause (6) of paragraph (g) by virtue of
the fact that such clause encompasses clause (1) of paragraph (g)) has occurred,
all the Notes then outstanding shall automatically become immediately due and
payable.

 

(b) If any other Event of Default has occurred and is continuing, the Required
Holders may at any time at its or their option, by notice or notices to the
Company, declare all the Notes then outstanding to be immediately due and
payable.

 

(c) If any Event of Default described in paragraph (a) or (b) of Section 11 has
occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by it or
them to be immediately due and payable.

 

Upon any Note becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Note will forthwith mature and the entire
unpaid principal amount of such Note, plus (1) all accrued and unpaid interest
thereon and (2) the Make-Whole Amount, if any, determined in respect of such
principal amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided for), and that the provision for payment
of the Make-Whole Amount, if any, by the Company in the event that the Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such circumstances.

 

Section 12.2 Other Remedies. If any Default or Event of Default has occurred and
is continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1, the holder of any Note
at the time outstanding may proceed to protect and enforce the rights of such
holder by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby or by
law or otherwise.

 

Section 12.3 Rescission. At any time after any Notes have been declared due and
payable pursuant to paragraph (b) or (c) of Section 12.1, the Required Holders,
by written notice to the Company, may rescind and annul any such declaration and
its consequences if (a) the Company has paid all overdue interest on the Notes,
all principal of and Make-Whole Amount, if any, on any Notes that are due and
payable and are unpaid other than by reason of such

 

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declaration, and all interest on such overdue principal and Make-Whole Amount,
if any, and (to the extent permitted by applicable law) any overdue interest in
respect of the Notes, at the Default Rate, (b) all Events of Default and
Defaults, other than non-payment of amounts that have become due solely by
reason of such declaration, have been cured or have been waived pursuant to
Section 17 and (c) no judgment or decree has been entered for the payment of any
monies due pursuant hereto or to the Notes. No rescission and annulment under
this Section 12.3 will extend to or affect any subsequent Event of Default or
Default or impair any right consequent thereon.

 

Section 12.4 No Waivers or Election of Remedies, Expenses, Etc. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder’s rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15, the Company will pay to the holder
of each Note on demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or collection
under this Section 12, including, without limitation, reasonable attorneys’
fees, expenses and disbursements.

 

SECTION 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

 

Section 13.1 Registration of Notes. The Company shall keep at its principal
executive office a register for the registration and registration of transfers
of Notes. The name and address of each holder of one or more Notes, each
transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.

 

Section 13.2 Transfer and Exchange of Notes. Upon surrender of any Note at the
principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of transfer, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or its attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company’s expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) of the same series in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request and shall be
substantially in the form of Exhibit 1(a) or Exhibit 1(b), as applicable. Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than €100,000, in the case of the Series A
Notes, or

 

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£100,000, in the case of the Series B Notes, provided that if necessary to
enable the registration of transfer by a holder of its entire holding of Notes
of a series, one Note of such series may be in a denomination of less than
€100,000 or £100,000, as applicable. Any transferee, by its acceptance of a Note
registered in its name (or the name of its nominee), shall be deemed to have
made the representation set forth in Section 6.2.

 

Section 13.3 Replacement of Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in the case of
an Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and

 

(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a nominee
for, an original Purchaser or another holder of a Note with a minimum net worth
of at least $50,000,000 (or its equivalent in the relevant currency), such
Person’s own unsecured agreement of indemnity shall be deemed to be
satisfactory), or

 

(b) in the case of mutilation, upon surrender and cancellation thereof,

 

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.

 

SECTION 14. PAYMENTS ON NOTES.

 

Section 14.1 Place of Payment. Subject to Section 14.2, payments of principal,
Make-Whole Amount, if any, and interest becoming due and payable on the Notes
shall be made in New York, New York at the principal office of Wachovia Bank,
National Association in such jurisdiction. The Company may at any time, by
notice to each holder of a Note, change the place of payment of the Notes so
long as such place of payment shall be either the principal office of the
Company in such jurisdiction or the principal office of a bank or trust company
in such jurisdiction.

 

Section 14.2 Home Office Payment. So long as any Purchaser or its nominee shall
be the holder of any Note, and notwithstanding anything contained in
Section 14.1 or in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, and interest
by the method and at the address specified for such purpose below such
Purchaser’s name in Schedule A, or by such other method or at such other address
as such Purchaser shall have from time to time specified to the Company in
writing for such purpose, without the presentation or surrender of such Note or
the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, such Purchaser shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by any Purchaser or its nominee such Purchaser will, at its
election, either endorse thereon the amount

 

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of principal paid thereon and the last date to which interest has been paid
thereon or surrender such Note to the Company in exchange for a new Note or
Notes pursuant to Section 13.2. The Company will afford the benefits of this
Section 14.2 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by any Purchaser under this Agreement and that
has made the same agreement relating to such Note as such Purchaser has made in
this Section 14.2.

 

SECTION 15. EXPENSES, ETC.

 

Section 15.1 Transaction Expenses. Whether or not the transactions contemplated
hereby are consummated, the Company will pay all costs and expenses (including
reasonable attorneys’ fees of a special counsel and, if reasonably required,
local or other counsel) incurred by the Purchasers or any other holder of a Note
in connection with such transactions, in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective) and in connection with the
receipt and review of any agreements, instruments and opinions contemplated by
Section 10.5(a)(2), including, without limitation: (a) the costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or
defend) any rights under this Agreement or the Notes or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the Notes, or by reason of being a holder of
any Note and (b) the costs and expenses, including financial advisors’ fees,
incurred in connection with the insolvency or bankruptcy of the Company or any
Subsidiary or in connection with any work-out or restructuring of the
transactions contemplated hereby and by the Notes. The Company will pay, and
will save the Purchasers and each other holder of a Note harmless from, all
claims in respect of any fees, costs or expenses, if any, of brokers and finders
(other than those retained by such Person).

 

Section 15.2 Survival. The obligations of the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes and the termination of
this Agreement.

 

SECTION 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

 

All representations and warranties contained herein shall survive the execution
and delivery of this Agreement and the Notes, the purchase or transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any subsequent holder of a Note, regardless
of any investigation made at any time by or on behalf of any Purchaser or any
other holder of a Note. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties of the Company under this
Agreement. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between the Purchasers and the
Company and supersede all prior agreements and understandings relating to the
subject matter hereof.

 

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SECTION 17. AMENDMENT AND WAIVER.

 

Section 17.1 Requirements. This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of the
Company and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 21, or any defined term (as it
is used therein), will be effective as to any holder of a Note unless consented
to by such holder in writing and (b) no such amendment or waiver may, without
the written consent of the holder of each Note at the time outstanding affected
thereby, (1) subject to the provisions of Section 12 relating to acceleration or
rescission, change the amount or time of any prepayment or payment of principal
of, or reduce the rate or change the time of payment or method of computation of
interest or of the Make-Whole Amount on, the Notes, (2) change the percentage of
the principal amount of the Notes the holders of which are required to consent
to any such amendment or waiver or (3) amend any of Sections 8, 11(a), 11(b),
12, 17, 20 or 22.7 or the definition of “Sterling Conversion Basis.”

 

Section 17.2 Solicitation of Holders of Notes.

 

(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.

 

(b) Payment. The Company will not, directly or indirectly, pay or cause to be
paid any remuneration, whether by way of supplemental or additional interest,
fee or otherwise, or grant any security, to any holder of Notes as consideration
for or as an inducement to the entering into by any holder of Notes or any
waiver or amendment of any of the terms and provisions hereof unless such
remuneration is concurrently paid, or security is concurrently granted, on the
same terms, ratably to each holder of Notes then outstanding even if such holder
did not consent to such waiver or amendment.

 

Section 17.3 Binding Effect, Etc. Any amendment or waiver consented to as
provided in this Section 17 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon the Company
without regard to whether such Note has been marked to indicate such amendment
or waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein, the term “this Agreement” and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented.

 

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Section 17.4 Notes Held by Company, Etc. Solely for the purpose of determining
whether the holders of the requisite percentage of the aggregate principal
amount of Notes then outstanding approved or consented to any amendment, waiver
or consent to be given under this Agreement or the Notes, or have directed the
taking of any action provided herein or in the Notes to be taken upon the
direction of the holders of a specified percentage of the aggregate principal
amount of Notes then outstanding, Notes directly or indirectly owned by the
Company or any of its Affiliates shall be deemed not to be outstanding.

 

SECTION 18. NOTICES.

 

All notices and communications provided for hereunder shall be in writing and
sent (a) by facsimile if the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service (charges prepaid), (b) by
registered or certified mail with return receipt requested (postage prepaid) or
(c) by a courier or recognized overnight delivery service (charges prepaid). Any
such notice must be sent:

 

(1) if to any Purchaser or its nominee, to such Purchaser or its nominee at the
address specified for such communications in Schedule A, or at such other
address as such Purchaser or its nominee shall have specified to the Company in
writing;

 

(2) if to any other holder of any Note, to such holder at such address as such
other holder shall have specified to the Company in writing; or

 

(3) if to the Company, to the Company at its address set forth at the beginning
hereof to the attention of the Compliance Officer, or at such other address as
the Company shall have specified to the holder of each Note in writing.

 

All such notices and other communications shall, except as otherwise expressly
herein provided, be effective: (i) upon delivery if delivered by courier or a
recognized overnight delivery service; (ii) in the case of registered or
certified mail, three Business Days after the date sent; or (iii) in the case of
facsimile, when such facsimile is transmitted to the facsimile number specified
in accordance with this Agreement, the facsimile machine used by the sender
provides a written confirmation that such facsimile has been so transmitted or
receipt of such facsimile transmission is otherwise confirmed and the sender on
the same day sends a confirming copy of such notice by a recognized overnight
delivery service.

 

SECTION 19. REPRODUCTION OF DOCUMENTS.

 

This Agreement and all documents relating hereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be executed,
(b) documents received by any Purchaser at the Closing (except the Notes
themselves) and (c) financial statements, certificates and other information
previously or hereafter furnished to any holder of the Notes, may be reproduced
by such holder by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and such holder may destroy any original
document so reproduced. The Company agrees and stipulates that, to the extent
permitted by applicable law, any such reproduction shall be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or

 

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not such reproduction was made by any holder of the Notes in the regular course
of business) and any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence. This Section 19 shall not
prohibit the Company or any other holder of Notes from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.

 

SECTION 20. CONFIDENTIAL INFORMATION.

 

For the purposes of this Section 20, “Confidential Information” shall mean
information delivered to any Purchaser by or on behalf of the Company or any
Consolidated Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received by
such Purchaser as being confidential information of the Company or such
Consolidated Subsidiary, provided that such term does not include information
that (a) was publicly known or otherwise known to such Purchaser prior to the
time of such disclosure, (b) subsequently becomes publicly known through no act
or omission by such Purchaser or any Person acting on such Purchaser’s behalf,
(c) otherwise becomes known to such Purchaser other than through disclosure by
the Company or any Consolidated Subsidiary or (d) constitutes financial
statements delivered to such Purchaser under Section 7.1 that are otherwise
publicly available. Each Purchaser will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by such Purchaser
in good faith to protect confidential information of third parties delivered to
such Purchaser, provided that such Purchaser may deliver or disclose
Confidential Information to (1) its directors, officers, trustees, employees,
agents, attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by its Notes),
(2) its financial advisors and other professional advisors who agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 20, (3) any other holder of any Note, (4) any
Institutional Investor to which such Purchaser sells or offers to sell such Note
or any part thereof or any participation therein (if such Person has agreed in
writing prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20), (5) any Person from which such Purchaser offers
to purchase any security of the Company (if such Person has agreed in writing
prior to its receipt of such Confidential Information to be bound by the
provisions of this Section 20), (6) any Federal or state regulatory authority
having jurisdiction over such Purchaser, (7) the National Association of
Insurance Commissioners or any similar organization, or any nationally
recognized rating agency that requires access to information about such
Purchaser’s investment portfolio or (8) any other Person to which such delivery
or disclosure may be necessary or appropriate (i) to effect compliance with any
law, rule, regulation or order applicable to such Purchaser, (ii) in response to
any subpoena or other legal process, (iii) in connection with any litigation to
which such Purchaser is a party or (iv) if an Event of Default has occurred and
is continuing, to the extent such Purchaser may reasonably determine such
delivery and disclosure to be necessary or appropriate in the enforcement or for
the protection of the rights and remedies under such Purchaser’s Notes and this
Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to
have agreed to be bound by and to be entitled to the benefits of this Section 20
as though it were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any holder of a Note of information
required to be delivered to such holder under this Agreement or requested by
such holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Company embodying
the provisions of this Section 20.

 

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SECTION 21. SUBSTITUTION OF PURCHASER.

 

Each Purchaser shall have the right to substitute any one of its Affiliates as
the purchaser of the Notes that such Purchaser has agreed to purchase hereunder,
by written notice to the Company, which notice shall be signed by both such
Purchaser and such Affiliate, shall contain such Affiliate’s agreement to be
bound by this Agreement and shall contain a confirmation by such Affiliate of
the accuracy with respect to it of the representations set forth in Section 6.
Upon receipt of such notice, wherever the word “Purchaser” is used in this
Agreement (other than in this Section 21), such word shall be deemed to refer to
such Affiliate in lieu of such Purchaser. In the event that such Affiliate is so
substituted as a purchaser hereunder and such Affiliate thereafter transfers to
such Purchaser all of the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word “Purchaser” is used in
this Agreement (other than in this Section 21), such word shall no longer be
deemed to refer to such Affiliate, but shall refer to such Purchaser, and such
Purchaser shall have all the rights of an original holder of the Notes under
this Agreement.

 

SECTION 22. MISCELLANEOUS.

 

Section 22.1 Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.

 

Section 22.2 Payments Due on Non-Business Days. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
Make-Whole Amount, if any, or interest on any Note that is due on a date other
than a Business Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the interest payable
on such next succeeding Business Day.

 

Section 22.3 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.

 

Section 22.4 Construction.

 

(a) Each covenant contained herein shall be construed (absent express provision
to the contrary) as being independent of each other covenant contained herein,
so that compliance with any one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any other covenant.
Where any provision herein refers to action to be taken by any Person, or which
such Person is prohibited from taking, such provision shall be applicable
whether such action is taken directly or indirectly by such Person.

 

-37-

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(b) Where the character or amount of any asset or liability or item of income or
expense is required to be determined or any consolidation or other accounting
computation is required to be made by the Company for the purposes of this
Agreement, the same shall be done by the Company in accordance with GAAP, to the
extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.

 

Section 22.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.

 

Section 22.6 Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.

 

Section 22.7 Currency of Payment.

 

(a) Payments. All payments under this Agreement and the Notes shall be made in
Euros to the holders of the Series A Notes and in Sterling to the holders of the
Series B Notes. Notwithstanding the foregoing and for the avoidance of doubt:

 

(1) each payment of principal, Make-Whole Amount, if any, on any Note shall be
made in the currency in which such Note is denominated at the time of such
payment;

 

(2) each payment of interest shall be made in the currency in which such
principal or other sum in respect of which such interest is payable, is
denominated at the time of such payment; and

 

(3) each payment in respect of costs, expenses and indemnities shall be made in
Dollars, Euros or Sterling (the applicable currency in which the relevant costs,
expenses or indemnities were incurred by the payee).

 

(b) Payments Not in Currency of Account. To the fullest extent permitted by
applicable law, the obligation of the Company in respect of any amount due under
or in respect of this Agreement and the Notes, notwithstanding any payment in
any currency other than the applicable currency pursuant to paragraph (a) above,
whether as a result of (1) any judgment or order or the enforcement thereof,
(2) the realization on any security, (3) the liquidation of the Company, (4) any
voluntary payment by the Company or (5) any other reason, shall be discharged
only to the extent of the amount in the applicable currency that each holder
entitled to receive such payment may, in accordance with normal banking
procedures, purchase with the sum paid in such other currency (after any premium
and costs of exchange) on the Business Day immediately following the day on
which such holder receives such payment and if the amount in the applicable
currency that may be so purchased for any reason is (i) less than the amount
originally due, the Company shall indemnify the holder for such deficiency or
(ii) greater than the amount

 

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originally due, the holder shall pay to the Company the excess in the applicable
currency. This indemnity shall constitute an obligation separate and independent
from the other obligations contained in this Agreement and the Notes, shall give
rise to a separate and independent cause of action, shall apply irrespective of
any indulgence granted by such holder from time to time and shall continue in
full force and effect notwithstanding any judgment or order for a liquidated sum
in respect of an amount due under this Agreement or the Notes or under any
judgment or order.

 

Section 22.8 Economic and Monetary Union.

 

(a) Coming into Effect of Provisions. The provisions of paragraphs (b) to
(e) (inclusive) shall come into effect on the date when the United Kingdom has
become a participating member state.

 

(b) Redenomination and Alternative Currencies. Any obligations under this
Agreement which have been denominated in Sterling shall be redenominated into
Euros in accordance with EMU Legislation; provided that, if and to the extent
that any EMU Legislation provides that following the United Kingdom becoming a
participating member state, an amount denominated either in Euros or in Sterling
and payable within the United Kingdom by crediting an account of the creditor
can be paid by the debtor either in Euros or in Sterling, the Company shall be
entitled to pay or repay any such amount either in Euros or in Sterling.

 

(c) Payments on Notes. Sections 14 and 22.7 shall be construed so that, in
relation to the payment of any amount of Euros or Sterling, such amounts shall
be made available to each holder of the Notes in immediately available, freely
transferable, cleared funds to such account as such holder shall from time to
time nominate for this purpose in accordance with Section 14.

 

(d) Basis of Accrual. The basis of accrual of interest expressed in this
Agreement in respect of Sterling if redenominated as contemplated above into
Euros, shall be the basis of accrual of interest in respect of Euro.

 

(e) Rounding and Other Consequential Changes. Without prejudice and in addition
to any method of conversion or rounding prescribed by any EMU Legislation and
without prejudice to the respective liabilities for indebtedness of the Company
to any holder of the Notes under or pursuant to this Agreement.

 

(1) each reference in this Agreement to an amount (or an integral multiple
thereof) in Sterling to be paid by the Company shall be replaced by a reference
to such reasonably comparable and convenient amount (or an integral multiple
thereof) in the Euro unit; and

 

(2) except as expressly provided in this Section 22.8, each provision of this
Agreement shall be subject to such reasonable changes of construction as may
from time to time be necessary or appropriate to reflect the introduction of or
changeover to the Euro in the United Kingdom.

 

*    *    *    *    *

 

-39-

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The execution hereof by the Purchasers shall constitute a contract among the
Company and the Purchasers for the uses and purposes hereinabove set forth.

 

Very truly yours, AMERICAN CAPITAL STRATEGIES, LTD. By  

/s/ Samuel A. Flax

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

Name:   Samuel A. Flax Title:   Executive VP & General Counsel

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

The foregoing is hereby agreed to as of the date thereof. THE PRUDENTIAL
ASSURANCE COMPANY LIMITED (PAC) By:  

/s/ Calum Mcphail

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

    Authorized signatory PANTHER CDO III B.V. By:  

/s/ William Nicoll

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

    Authorized signatory PANTHER CDO I B.V. By:  

/s/ William Nicoll

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

    Authorized signatory

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

INFORMATION RELATING TO PURCHASERS

 

   

 

PRINCIPAL AMOUNT OF

NAME AND ADDRESS OF PURCHASER

 

THE PRUDENTIAL ASSURANCE COMPANY LIMITED (PAC)

142 Holborn Bars

London EC1N 2NH

 

NOTE TO BE PURCHASED

 

€10,000,000

 

Payments

 

All payments on or in respect of the Senior Note to be by bank wire transfer of
immediately available funds (identifying each payment as “AMERICAN CAPITAL
STRATEGIES, LTD., 5.177% Senior Note, Series 2006-A, due February 9, 2011, PPN
024937 B* 4, principal, premium or interest”) to:

 

80% of each payment of principal, premium or interest to:

Bank:

  

HSBC Plc

Branch:

  

Global Investor Services

Sort:

  

MIDLGB22

Account Name:

  

MAGIM Ltd OBMG

Account Number:

  

[reserved]

20% of each payment of principal, premium or interest to:

Bank:

  

HSBC Plc

Branch:

  

Global Investor Services

Sort:

  

MIDLGB22

Account Name:

  

MAGIM Ltd SALAS 1

Account Number:

  

[reserved]

 

SCHEDULE A

(to Note Purchase Agreement)

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

Notices

 

All notices and communications with respect to payments and written confirmation
of each such payment, to be sent to:

 

Katherine Landy/Stephen Connelly

Private Finance Group

Laurence Pountney Hill

London EC4R OHH

Telephone: 020 7548-3486/3831

Fax: 020 7548-3989/3682

 

With a duplicate copy of all notices and communications with respect to payments
and written confirmation of each such payment and compliance information to be
sent to:

 

Calum Macphail

Private Finance Group

Laurence Pountney Hill

London EC4R OHH

E-mail: calum.macphail@prumandg.co.uk

Fax: 020 7548-3989/3682

 

Name of Nominee in which Note is to be issued: None

 

Taxpayer I.D. Number: 277-11810-26840

 

A-2

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

    PRINCIPAL AMOUNT OF

NAME AND ADDRESS OF PURCHASER

 

PANTHER CDO III B.V.

 

NOTE TO BE PURCHASED

 

€4,000,000

 

With registered office:

Parnassustoren

Locatellikade 1

1076 AZ Amsterdam

The netherlands

 

Payments

 

All payments on or in respect of the Senior Note to be by bank wire transfer of
immediately available funds (identifying each payment as “AMERICAN CAPITAL
STRATEGIES, LTD., 5.177% Senior Note, Series 2006-A, due February 9, 2011, PPN
024937 B* 4, principal, premium or interest”) to:

 

Payments of Principal to:

 

JP Morgan Chase Bank - Frankfurt AG

SWIFT: CHASDEFX

Account: JP Morgan Chase Bank, London Branch

Account # [reserved]

For Further Credit: Panther CDO III B.V.

Account Number: [reserved]

 

Payments of Interest to:

 

JP Morgan Chase Bank - Frankfurt AG

SWIFT: CHASDEFX

Account: JP Morgan Chase Bank, London Branch

Account # [reserved]

For Further Credit: Panther CDO III B.V.

Account Number: [reserved]

 

Notices

 

All notices and communications with respect to payments and written confirmation
of each such payment, to be sent to:

 

Dennis Stone

Client Relationship Manager

JP Morgan Chase Bank N.A.

Phone: 44-20-7777-2098

Fax: 001 281 582 9079

Email: Dennis.Stone@chase.com

 

A-3

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

With a duplicate copy of all notices and communications with respect to payments
and written confirmation of each such payment and compliance information to be
sent to:

 

Calum Macphail

Private Finance Group

Laurence Pountney Hill

London EC4R OHH

E-mail: calum.macphail@prumandg.co.uk

Fax: 020 7548-3989/3682

 

Name of Nominee in which Note is to be issued: None

 

Taxpayer I.D. Number:

Netherlands Tax Reference 8142.86.227

 

A-4

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

    PRINCIPAL AMOUNT OF

NAME AND ADDRESS OF PURCHASER

 

PANTHER CDO I B.V.

 

NOTE TO BE PURCHASED

 

£3,000,000

 

WITH REGISTERED OFFICE:

  Parnassustoren

  Locatellikade 1

  1076 AZ Amsterdam

  THE NETHERLANDS

 

Payments

 

All payments on or in respect of the Senior Note to be by bank wire transfer of
immediately available funds (identifying each payment as “AMERICAN CAPITAL
STRATEGIES, LTD., 6.565% Senior Note, Series 2006-B, due February 9, 2011, PPN
024937 B@ 2, principal, premium or interest”) to:

 

Payments of Principal to:

 

JP Morgan Chase Bank, London branch

Sort Code 60-92-42

For the Account of: JP Morgan Chase Bank, London branch

For further credit to: Panther CDO I B.V.

Account Name: GBP Principal Proceeds Subaccount

Account Number: [reserved]

 

Payments of Interest to:

 

JP Morgan Chase Bank, London branch

Sort Code 60-92-42

For the Account of: JP Morgan Chase Bank, London branch

For further credit to: Panther CDO I B.V.

Account Name: GBP Interest Proceeds Subaccount

Account Number: [reserved]

 

Notices

 

All notices and communications with respect to payments and written confirmation
of each such payment, to be sent to:

 

Dennis Stone

Client Relationship Manager

JP Morgan Chase Bank N.A.

Phone: 44-20-7777-2098

Fax: 001 281 582 9079

Email: Dennis.Stone@chase.com

 

A-5

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

With a duplicate copy of all notices and communications with respect to payments
and written confirmation of each such payment and compliance information to be
sent to:

 

Calum Macphail

Private Finance Group

Laurence Pountney Hill

London EC4R OHH

E-mail: calum.macphail@prumandg.co.uk

Fax: 020 7548-3989/3682

 

Name of Nominee in which Note is to be issued: None

 

Taxpayer I.D. Number:

 

Netherlands Tax Reference 8097.05.096

 

A-6

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

DEFINED TERMS

 

As used herein, the following terms have the respective meanings set forth below
or set forth in the Section hereof following such term:

 

“Accelerated Amortization Event” shall have the meaning assigned to such term in
the documents evidencing the Securitization Transactions as in effect on the
date of Closing.

 

“Additional Principal Amount” shall have the assigned to such term in the
documents evidencing the Securitization Transactions as in effect on the date of
Closing.

 

“Affected Holder” is defined in Section 8.3.

 

“Affected Payment Date” is defined in Section 8.3.

 

“Affiliate” shall mean, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of such
first Person or any Person of which such first Person and its Subsidiaries
beneficially own or hold, in the aggregate, directly or indirectly, 10% or more
of any class of voting or equity interests; provided that in the case of the
Company or any Subsidiary, “Affiliate” shall not include any Person that is a
Portfolio Investment. As used in this definition, “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Unless the context
otherwise clearly requires, any reference to an “Affiliate” is a reference to an
Affiliate of the Company.

 

“Anti-Terrorism Order” shall mean Executive Order No. 13,224 66 Fed Reg. 49,079
(2001) issued by the President of the United States of America (Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism).

 

“Asset Coverage Ratio” shall mean, on a consolidated basis for the Company and
its Consolidated Subsidiaries, the ratio which the value of total assets, less
all liabilities and indebtedness not represented by senior securities (all as
determined in accordance with the Investment Company Act and any orders of the
United States Securities and Exchange Commission issued to the Company
thereunder), bears to the aggregate amount of senior securities representing
indebtedness of the Company and its Consolidated Subsidiaries.

 

“Available Non-Pledged Assets” shall mean, as of any date of determination
thereof, an amount equal to the sum of (a) 50% of each Eligible Investment
issued by a Grade 2 Obligor and (b) 100% of each Eligible Investment issued by a
Grade 3 Obligor or a Grade 4 Obligor. For purposes of determining “Available
Non-Pledged Assets,” Investments shall be valued at their Fair Market Value as
of any date of determination.

 

SCHEDULE B

(to Note Purchase Agreement)

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

“Available Non-Pledged Debt Assets” shall mean, as of any date of determination
thereof, an amount equal to the value of Available Non-Pledged Assets that are
Eligible Debt Investments.

 

“Available Pledged Assets” shall mean, as of any date of determination, 50% of
the aggregate amount of Eligible Pledged Assets in respect of all Secured Debt
Obligations in existence as of such date.

 

“Business Day” shall mean (a) for the purposes of computation of the Make-Whole
Amount for the Series A Notes only, any day on which the Trans-European
Automated Real-time Gross settlement Express Transfer (TARGET) payment system is
open for the settlement of payments in Euros, (b) for the purposes of
computation of the Make-Whole Amount for the Series B Notes only, any day on
which commercial banks are open for general business (including dealings in
foreign currencies) in London, England and (c) for the purposes of any other
provision of this Agreement, any day of the week (excluding Saturday or Sunday)
on which commercial banks are open for general business (including dealings in
foreign currency deposits) in Bethesda, Maryland, New York, New York and London,
England and on which the Trans-European Automated Real-time Gross settlement
Express Transfer (TARGET) payment system is open for the settlement of payments
in Euros.

 

“Capital Lease” shall mean, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.

 

“Cash” shall mean, at any time, the total amount of “cash and cash equivalents”
of the Company and its Consolidated Subsidiaries as set forth in or reflected on
the most recent consolidated balance sheet of the Company and its Consolidated
Subsidiaries prepared in accordance with GAAP.

 

“Closing” is defined in Section 3.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

 

“Company” shall mean American Capital Strategies, Ltd., a Delaware corporation,
or any Successor Corporation.

 

“Confidential Information” is defined in Section 20.

 

“Consolidated Debt” shall mean, as of any date of determination thereof, the
aggregate unpaid amount of all Debt of the Company and its Consolidated
Subsidiaries determined on a consolidated basis in accordance with GAAP.

 

“Consolidated Shareholders’ Equity” shall mean, at any time, the shareholders’
equity of the Company and its Consolidated Subsidiaries, as set forth in or
reflected on the most recent consolidated balance sheet of the Company and its
Consolidated Subsidiaries prepared in accordance with GAAP, but excluding any
redeemable preferred stock of the Company or any of its Consolidated
Subsidiaries. Consolidated Shareholders’ Equity would generally include, but

 

B-2

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

not be limited to, (a) the par or stated value of all outstanding capital stock,
(b) capital surplus, (c) retained earnings and (d) various deductions such as
(1) purchases of treasury stock, (2) valuation allowances, (3) receivables due
from an employee stock ownership plan, (4) employee stock ownership plan debt
guarantees and (5) translation adjustments for foreign currency translations.

 

“Consolidated Subsidiary” shall mean any Subsidiary or other entity the accounts
of which, in accordance with GAAP, would be consolidated with those of the
Company in its consolidated and consolidating financial statements as of such
date.

 

“Consolidated Tangible Net Worth” shall mean, at any time, the Consolidated
Shareholders’ Equity, less the sum of the value, as set forth or reflected on
the most recent consolidated balance sheet of the Company and its Consolidated
Subsidiaries, prepared in accordance with GAAP or the Investment Company Act, of
(a) any surplus resulting from any write-up of any assets subsequent to
December 31, 2004, provided that Consolidated Tangible Net Worth shall include
any write-ups of Portfolio Investments subsequent to December 31, 2004 to the
extent such write-ups are required under GAAP, (b) all assets that would be
treated as “intangible assets” for balance sheet presentation purposes under
GAAP including, without limitation, goodwill (whether representing the excess of
cost over book value of assets acquired, or otherwise), trademarks, tradenames,
copyrights, patents and technologies and unamortized debt discount and expense,
(c) to the extent not included in clause (b) above, any amount at which shares
of capital stock of the Company appear as an asset on the balance sheet of the
Company and its Consolidated Subsidiaries, (d) loans or advances to
stockholders, directors, officers or employees and (e) to the extent not
included in clause (b) above, deferred expenses.

 

“Consolidated Total Assets” shall mean, at any time, the total assets of the
Company and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP.

 

“Credit and Collection Policy” shall mean those credit, collection, customer
relation and service policies set forth as Exhibit 5.21 hereto, as the same may
be modified by the Company from time to time in accordance with the terms
hereof.

 

“Debt” of any Person shall mean at any date, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments;
(c) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (d) all obligations of such Person as lessee under Capital
Leases; (e) all obligations of such Person to reimburse any bank or other Person
in respect of amounts payable under a banker’s acceptance; (f) all redeemable
preferred stock of such Person (in the event such Person is a corporation);
(g) all obligations (absolute or contingent) of such Person to reimburse any
bank or other Person in respect of amounts which are available to be drawn or
have been drawn under a letter of credit or similar instrument; (h) all Debt of
others secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person; (i) all Debt of others Guaranteed by such Person;
(j) all principal amounts outstanding and owed to Persons other than such first
Person or its Subsidiaries in respect of notes, trust certificates, undivided
interests partnership interests or other interests representing the right to be
paid a specified principal amount from assets transferred by such first Person
or its Subsidiaries in

 

B-3

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

connection with securitization transactions; (k) all obligations, direct or
indirect (absolute or contingent) of such Person to repurchase property or
assets sold or otherwise transferred by such Persons and (l) the principal
portion of all obligations of such Person under any synthetic lease, tax
retention operating lease, off balance sheet loan or similar off balance sheet
financing product where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease under
GAAP.

 

“Default” shall mean an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.

 

“Default Rate” shall mean (a) with respect to the Series A Notes, that rate of
interest that is the greater of (1) 2.00% per annum above the rate of interest
stated in clause (a) of the first paragraph of the Series A Notes or (2) 2.00%
over the rate of interest publicly announced from time to time by Deutsche Bank
from time to time at its principal office in Frankfurt, Germany as its “base” or
“prime” rate for loans denominated in Euros and (b) with respect to the Series B
Notes, that rate of interest that is the greater of (1) 2.00% per annum above
the rate of interest stated in clause (a) of the first paragraph of the Series B
Notes or (2) 2.00% over the rate of interest publicly announced from time to
time by The Royal Bank of Scotland plc from time to time at its principal office
in London, England as its “base” or “prime” rate for loans denominated in
Sterling.

 

“Defaulted Investment” shall mean any Investment (a) that is 60 days (or such
shorter number of days as may be applied for determining when an Investment is
to be considered as a defaulted Investment under any Secured Debt Obligation) or
more past due with respect to any interest or principal payments or (b) that is
or otherwise should be considered a defaulted loan by the Company in connection
with its Credit and Collection Policy.

 

“Disclosure Information” is defined in Section 5.3.

 

“Dollar” or “$” shall mean the lawful currency of the United States of America.

 

“EBIT” shall mean, for any period and with respect to the Company and its
Consolidated Subsidiaries, on a consolidated basis, operating income after
deduction of all operating expenses and other proper charges other than taxes
and Interest Expense, all as determined in accordance with GAAP.

 

“Eligible Debt Investments” shall mean Investments in Senior Debt, Investments
in Subordinated Debt and Investments in Junior Subordinated Debt that have been
purchased or otherwise acquired by the Company or a Consolidated Subsidiary in
the ordinary course of business; provided that no such Investment shall be an
Eligible Investment unless (a) such Investment is evidenced by an instrument or
agreement that has been duly authorized, executed and delivered and is
enforceable against the obligor thereof, (b) such Investment, if applicable, is
denominated and payable either in (1) Dollars or (2) the currency of a
jurisdiction other than the United States of America, provided that the
aggregate amount of Investments permitted under this subclause (2) and clause
(b)(2) of the definition of Eligible Equity Investments shall not exceed
$100,000,000 (or its equivalent in the relevant currency) at any one time,
(c) such Investment is not subject to any Lien and, if such Investment is owned
by a Consolidated

 

B-4

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

Subsidiary, the Company shall not have pledged or otherwise encumbered the stock
of such Consolidated Subsidiary or any direct or indirect parent thereof, (d) no
right of rescission, set-off, counterclaim, defense or other material dispute
has been asserted with respect to such Investment and (e) the obligor in respect
of such Investment is not (1) an individual, (2) organized or incorporated under
the laws of a jurisdiction other than a Permitted Country, (3) the subject of an
Insolvency Event or (4) a party to a Defaulted Investment.

 

“Eligible Equity Investments” shall mean Investments in Common Stock,
Investments in Preferred Stock, Investments in Redeemable Preferred Stock, and
Investments in Warrants that have been purchased or otherwise acquired by the
Company or a Consolidated Subsidiary in the ordinary course of business;
provided that no such Investment shall be an Eligible Investment unless (a) such
Investment is evidenced by an instrument or agreement that has been duly
authorized, executed and delivered and is enforceable against the issuer
thereof, (b) such Investment, if applicable, is denominated and payable either
in (1) Dollars or (2) the currency of a jurisdiction other than the United
States of America, provided that the aggregate amount of Investments permitted
under this subclause (2) and clause (b)(2) of the definition of Eligible Debt
Investments shall not exceed $100,000,000 (or its equivalent in the relevant
currency) at any one time, (c) such Investment is not subject to any Lien and,
if such Investment is owned by a Consolidated Subsidiary, the Company shall not
have pledged or otherwise encumbered the stock of such Consolidated Subsidiary
or any direct or indirect parent thereof, (d) no right of rescission, set-off,
counterclaim, defense or other material dispute has been asserted with respect
to such Investment and (e) the issuer in respect of such Investment is not
(1) an individual, (2) organized or incorporated under the laws of a
jurisdiction other than a Permitted Country, (3) the subject of an Insolvency
Event or (4) in default beyond any period of grace with respect to such
Investment or any term of any agreement or instrument evidencing such
Investment.

 

“Eligible Investments” shall mean Eligible Debt Investments and Eligible Equity
Investments.

 

“Eligible Pledged Assets” in respect of each Secured Debt Obligation, shall
mean, as of any date of determination, an amount equal to the difference between
(a) the value of all Pledged Investments in respect of such Secured Debt
Obligation and (b) the principal amount of such Secured Debt Obligation. For
purposes of determining “Eligible Pledged Assets,” Pledged Investments shall be
valued at their Fair Market Value as of any date of determination.

 

“EMU” shall mean the Economic and Monetary Union as contemplated in the Treaty
on European Union.

 

“EMU Legislation” shall means legislative measures of the European Council for
the introduction of, changeover to or operation of a single or unified European
currency (whether known as the Euro or otherwise), being in part the
implementation of the third stage of EMU.

 

“Environmental Laws” shall mean any and all Federal, state, local, and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.

 

B-5

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“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.

 

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under Section 414
of the Code.

 

“Euro” or “€” shall mean the single currency of participating member states of
the European Union.

 

“Event of Default” is defined in Section 11.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” shall mean, with respect to any Investment, including,
without limitation, Pledged Investments, the fair market value of such
Investment as required by, and in accordance with, the Investment Company Act
and any orders of the Securities and Exchange Commission issued to the Company,
all as determined by the Board of Directors of the Company and its independent
auditors.

 

“GAAP” shall mean generally accepted accounting principles as in effect from
time to time in the United States of America.

 

“Governmental Authority” shall mean

 

(a) the government of

 

(1) the United Kingdom or the United States of America or any State or other
political subdivision thereof, or

 

(2) any other jurisdiction in which the Company or any Subsidiary conducts all
or any part of its business, or which asserts jurisdiction over any properties
of the Company or any Subsidiary, or

 

(b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.

 

“Grade 2 Obligor” shall mean, as of any date, any issuer or obligor in respect
of Eligible Investments that are classified, in accordance with the Credit and
Collection Policy, as “Grade 2” on such date.

 

“Grade 3 Obligor” shall mean, as of any date, any issuer or obligor in respect
of Eligible Investments that are classified, in accordance with the Credit and
Collection Policy, as “Grade 3” on such date.

 

B-6

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“Grade 4 Obligor” shall mean, as of any date, any issuer or obligor in respect
of Eligible Investments that are classified, in accordance with the Credit and
Collection Policy, as “Grade 4” on such date.

 

“Guaranty” shall mean, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt, dividend or other obligation of any other Person in any manner, whether
directly or indirectly, including, without limitation, obligations incurred
through an agreement, contingent or otherwise, by such Person:

 

(c) to purchase such Debt or obligation or any property constituting security
therefor;

 

(d) to advance or supply funds (1) for the purchase or payment of such Debt or
obligation or (2) to maintain any working capital or other balance sheet
condition or any income statement condition of any other Person or otherwise to
advance or make available funds for the purchase or payment of such Debt or
obligation;

 

(e) to lease properties or to purchase properties or services primarily for the
purpose of assuring the owner of such Debt or obligation of the ability of any
other Person to make payment of the Debt or obligation; or

 

(f) otherwise to assure the owner of such Debt or obligation against loss in
respect thereof.

 

In any computation of the Debt or other liabilities of the obligor under any
Guaranty, the Debt or other obligations that are the subject of such Guaranty
shall be assumed to be direct obligations of such obligor.

 

“Hazardous Material” shall mean any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).

 

“holder” shall mean, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to
Section 13.1.

 

“Insolvency Event” shall mean with respect to any Person, (a) the filing of a
decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under applicable Insolvency Law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation of such Person’s affairs, and such decree
or order shall remain unstayed and in effect for a period of 60 consecutive
days; or (b) the commencement by such Person of a voluntary case under any
applicable Insolvency Law now or hereinafter in effect, or the consent by such
Person to the entry of an order for relief in an involuntary case under any

 

B-7

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such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in further of the
foregoing.

 

“Insolvency Laws” shall mean the Bankruptcy Code and all other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect after the rights of creditors
generally.

 

“Institutional Investor” shall mean (a) any original purchaser of a Note,
(b) any holder of a Note holding more than the equivalent of $2,000,000 of the
aggregate principal amount of the Notes then outstanding or (c) any bank, trust
company, savings and loan association or other financial institution, any
pension plan, any investment company, any insurance company, any broker or
dealer, or any other similar financial institution or entity, regardless of
legal form.

 

“Interest Expense” shall mean, with respect to a Person and for any period, the
total consolidated interest expense (including, without limitation, capitalized
interest expense and interest expense attributable to obligations in respect of
Capital Leases, interest rate protection agreements and other hedging
agreements) of such Person and in any event shall include all interest expense
with respect to any Debt in respect of which such Person is wholly or partially
liable.

 

“Investment” shall mean any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contributions to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guaranty or assumption of any obligation of such
Person or otherwise.

 

“Investment Company Act” shall mean the Investment Company Act of 1940, as
amended, and all rules and regulations promulgated thereunder.

 

“Investments in Common Stock” shall mean each Investment owned by the Company or
any Consolidated Subsidiary in common stock, partnership interests or membership
interests of any Person and that is classified as “Common Stock,” “Partnership
Units” or “Membership Units” on the consolidated schedule of investments of the
Company for the then most recently ended fiscal quarter.

 

“Investments in Junior Subordinated Debt” shall mean each Investment owned by
the Company or any Consolidated Subsidiary in debt of any Person that is
subordinated in any manner to other subordinated debt of such Person and that is
classified as “Junior Subordinated Debt” on the consolidated schedule of
investments of the Company for the then most recently ended fiscal quarter.

 

“Investments in Preferred Stock” shall mean each Investment owned by the Company
or any Consolidated Subsidiary in preferred stock (other than redeemable
preferred stock) of any Person and that is classified as “Preferred Stock” on
the consolidated schedule of investments of the Company for the then most
recently ended fiscal quarter.

 

B-8

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“Investments in Redeemable Preferred Stock” shall mean each Investment owned by
the Company or any Consolidated Subsidiary in redeemable preferred stock of any
Person and that is classified as “Redeemable Preferred Stock” on the
consolidated schedule of investments of the Company for the then most recently
ended fiscal quarter.

 

“Investments in Senior Debt” shall mean each Investment by the Company or any
Consolidated Subsidiary in debt of any Person that is not subordinated in any
manner to any other debt of such Person and that is classified as “Senior Debt”
on the consolidated schedule of investments of the Company for the then most
recently ended fiscal quarter.

 

“Investments in Subordinated Debt” shall mean each Investment owned by the
Company or any Consolidated Subsidiary in debt of any Person that is
subordinated in any manner to other debt of such Person and that is classified
as “Subordinated Debt” on the consolidated schedule of investments of the
Company for the then most recently ended fiscal quarter; provided that
“Investments in Subordinated Debt” shall not include Investments in Junior
Subordinated Debt.

 

“Investments in Warrants” shall mean each Investment owned by the Company or any
Consolidated Subsidiary in warrants to purchase common stock, partnership
interests or membership interests of any Person and that is classified as
“Common Stock Warrants,” “Partnership Unit Warrants” or “Membership Unit
Warrants” on the consolidated schedule of investments of the Company for the
then most recently ended fiscal quarter.

 

“Lien” shall mean, with respect to any asset, any mortgage, deed to secure debt,
deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, servitude or encumbrance or any kind in
respect of such asset to secure or assure payment of a Debt or a Guaranty,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, a Person shall be deemed to own subject to a Lien
any asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, Capital Lease or other title
retention agreement relating to such asset.

 

“Make-Whole Amount” is defined in Section 8.7.

 

“Material” shall mean material in relation to the business, operations, affairs,
financial condition, assets, properties or prospects of the Company and its
Consolidated Subsidiaries, taken as a whole.

 

“Material Adverse Effect” shall mean a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Consolidated Subsidiaries, taken as a whole, (b) the ability of
the Company to perform its obligations under this Agreement and the Notes or
(c) the validity or enforceability of this Agreement or the Notes.

 

“Moody’s” shall mean Moody’s Investors Services, Inc.

 

“Multiemployer Plan” shall mean any Plan that is a “multiemployer plan” (as such
term is defined in Section 4001(a)(3) of ERISA).

 

B-9

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“Net Proceeds of Capital Stock/Conversion of Debt” shall mean any and all
proceeds (whether cash or non-cash) or other consideration received by the
Company or a Consolidated Subsidiary in respect of the issuance of capital stock
(including, without limitation, the aggregate amount of all Debt converted into
capital stock), after deducting therefrom all reasonable and customary costs and
expenses incurred by the Company or such Consolidated Subsidiary directly in
connection with the issuance of such capital stock.

 

“Notes” is defined in Section 1.

 

“Officer’s Certificate” shall mean a certificate of a Senior Financial Officer
or of any other officer of the Company whose responsibilities extend to the
subject matter of such certificate.

 

“participating member state” shall mean each state so described in any EMU
Legislation.

 

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.

 

“Permitted Country” shall mean each of Australia, Austria, Belgium, Canada,
China, the Channel Islands, Denmark, Finland, France, Germany, Hong Kong,
Ireland, Israel, Italy, Japan, Liechtenstein, Luxembourg, Portugal, Spain,
Sweden, The Netherlands, Norway, Switzerland, The United Kingdom, the United
States of America or any other member of the European Union prior to April 30,
2004 (other than Greece) having a foreign currency issuer credit rating of at
least “AA-” by S&P or “Aa2” by Moody’s.

 

“Person” shall mean an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization, or a government or
agency or political subdivision thereof.

 

“Plan” shall mean an “employee benefit plan” (as defined in Section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

 

“Pledged Investments” shall mean all Investments owned by the Company or any
Consolidated Subsidiary pledged or otherwise encumbered by the Company or such
Consolidated Subsidiary as security for a Secured Debt Obligation; provided that
if such Secured Debt Obligation shall contain any conditions precedent to such
Investments being included in any borrowing base calculation for such Secured
Debt Obligation, such Investments shall satisfy such conditions.

 

“Portfolio Investments” shall mean Investments made by the Company in the
ordinary course of business and consistent with practices existing on
December 31, 2005 in a Person that is accounted for under GAAP as a portfolio
investment of the Company.

 

B-10

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

“property” or “properties” shall mean, unless otherwise specifically limited,
real or personal property of any kind, tangible or intangible, choate or
inchoate.

 

“PTE” is defined in Section 6.2(a).

 

“QPAM Exemption” shall mean Prohibited Transaction Class Exemption 84-14 issued
by the United States Department of Labor.

 

“Repurchase Obligation” shall mean the obligation of the Company to purchase or
repay Debt of the type described in clause (k) of the definition thereof (or
clause (a) of the definition thererof, but only to extent that such Debt is also
of the type described in clause (k) of the definition thereof) pursuant to that
certain 1992 ISDA Master Agreement between the Company and Wachovia Bank,
National Association dated as of August 26, 2003, the Amended and Restated
Confirmation dated December 28, 2005 and the documents delivered in connection
therewith (as the same may be amended, supplemented, restated, increased,
refinanced, replaced or otherwise modified from time to time or any successor
thereto (herein, collectively, the “SWAP Documents”)) to the extent such
obligation to purchase or repay such Debt (a) arises from either (1) a defect in
the assets sold or transferred by the Company to the transferee pursuant to the
SWAP Documents or (2) the discretion of the transferee as expressly provided to
the transferee in the SWAP Documents and (b) does not arise from any default by
the Company under the SWAP Documents.

 

“Required Holders” shall mean, at any time, the holders of more than 50% in
principal amount (determined, in the case of Notes denominated in Euros, on the
Sterling Conversion Basis) of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Affiliates).

 

“Responsible Officer” shall mean any Senior Financial Officer and any other
officer of the Company with responsibility for the administration of the
relevant portion of this Agreement.

 

“RIC” shall mean a Person qualifying as a regulated investment company under the
Code.

 

“Secured Debt Obligations” shall mean that certain (a) Third Amended and
Restated Loan Funding and Servicing Agreement dated as of September 23, 2005 by
and among ACS Funding Trust I, as borrower, the Company, as servicer, the
Lenders and Lender Agents party thereto (as defined therein), Wachovia Capital
Markets, LLC, as the deal agent, Wells Fargo Bank, National Association, as
successor by merger to Wells Fargo Bank, Minnesota, National Association, as the
collateral custodian and as backup servicer (as amended from time to time),
(b) asset securitization evidenced by the 2002-2 Transaction Documents,
(c) asset securitization evidenced by the 2003-1 Transaction Documents,
(d) asset securitization evidenced by the 2003-2 Transaction Documents,
(e) asset securitization evidenced by the 2004-1 Transaction Documents,
(f) asset securitization evidenced by the 2005-1 Transaction Documents, (g) Loan
Funding and Servicing Agreement dated as of June 30, 2004 among ACS Funding
Trust II, as the borrower, the Company, as the servicer, Fairway Finance
Company, LLC, as the conduit lender, Harris Nesbitt Corp., as the agent, and
Wells Fargo Bank, National Association, as the collateral custodian and as
backup servicer (as amended from time to time) and (h) any other

 

B-11

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financing transaction undertaken by the Company or an Affiliate that is secured,
directly or indirectly, by assets of the Company or an Affiliate, including any
lease, asset securitization, repurchase transaction, secured loan or other
transfer, in each case, as the same may be amended, supplemented, restated,
increased, refinanced, replaced or otherwise modified from time to time or any
successor thereto.

 

“Securities Act” shall mean the Securities Act of 1933, as amended from time to
time.

 

“Securitization Transaction” shall mean any financing transaction undertaken by
the Company or an Affiliate of the Company that is secured, directly or
indirectly, by Investments in Senior Debt, Investments in Subordinated Debt and
Investments in Junior Subordinated Debt or any portion thereof or interest
therein, including any sale, lease, whole loan sale, asset securitization,
secured loan or other transfer of one or more such Investments or any portion
thereof.

 

“Senior Debt” shall mean any Debt that is not in any manner subordinated in
right of payment or security in any respect to the Debt evidenced by the Notes.

 

“Senior Financial Officer” shall mean the chief financial officer, principal
accounting officer, treasurer, comptroller or any vice president or other
officer more senior than a vice president in the accounting and finance
department of the Company.

 

“Series A Notes” is defined in Section 1.

 

“Series B Notes” is defined in Section 1.

 

“Source” is defined in Section 6.2.

 

“S&P” shall mean Standard & Poor’s Rating Group, a Division of the McGraw Hill
Companies, Inc.

 

“Sterling” or “£” shall mean the lawful currency of the United Kingdom.

 

“Sterling Conversion Basis” shall mean the conversion of each Euro of
outstanding principal amount to Sterling at a rate of £0.865 to €1.

 

“Subsidiary” shall mean, as to any Person, any corporation, association, or
other business entity in which at least a majority of the outstanding voting
securities shall be beneficially owned, directly or indirectly, by such Person;
provided that, in the case of the Company or any Subsidiary, “Subsidiary” shall
not include any Person that is a Portfolio Investment. Unless the context
otherwise clearly requires, any reference to a “Subsidiary” is a reference to a
Subsidiary of the Company.

 

“Successor Corporation” is defined in Section 10.5(a)(2).

 

“Taxes” is defined in Section 8.8.

 

“Taxing Jurisdiction” is defined in Section 8.8.

 

B-12

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“Tax Prepayment Date” is defined in Section 8.3.

 

“Tax Reimbursement Amount” is defined in Section 8.3.

 

“Total Available Assets” shall mean, as of any date of determination, the sum of
(a) Cash, (b) Available Non-Pledged Assets and (c) Available Pledged Assets.

 

“Treaty on European Union” shall mean the Treaty of Rome of 25 March 1957, as
amended by the Single European Act 1986 and the Maastricht Treaty (which was
signed at Maastricht on 7 February 1992 and came into force on 1 November 1993),
as amended from time to time.

 

“2002-2 Transaction Documents” shall mean the “Transaction Documents” as defined
in the Transfer and Servicing Agreement dated as of August 8, 2002, among ACAS
Business Loan Trust 2002-2, ACAS Business Loan LLC, 2002-2, Wells Fargo Bank,
National Association and the Company.

 

“2003-1 Transaction Documents” shall mean the “Transaction Documents” as defined
in the Transfer and Servicing Agreement dated as of May 21, 2003, among ACAS
Business Loan Trust 2003-1, ACAS Business Loan LLC, 2003-1, Wells Fargo Bank,
National Association and the Company.

 

“2003-2 Transaction Documents” shall mean the “Transaction Documents” as defined
in the Transfer and Servicing Agreement dated as of December 19, 2003, among
ACAS Business Loan Trust 2003-2, ACAS Business Loan LLC, 2003-2, Wells Fargo
Bank, National Association and the Company.

 

“2004-1 Transaction Documents” shall mean the “Transaction Documents” as defined
in the Transfer and Servicing Agreement dated as of December 2, 2004, among ACAS
Business Loan Trust 2004-1, ACAS Business Loan LLC, 2004-1, Wells Fargo Bank,
National Association and the Company.

 

“2005-1 Transaction Documents” shall mean the “Transaction Documents” as defined
in the Transfer and Servicing Agreement dated as of October 4, 2005, among ACAS
Business Loan Trust 2005-1, ACAS Business Loan LLC, 2005-1, Wells Fargo Bank,
National Association and the Company.

 

“United States Alien” is defined in Section 8.8(f).

 

“Unsecured Debt” shall mean, at any time, the aggregate unpaid principal amount
of all Debt of the Company and its Consolidated Subsidiaries other than Debt of
the Company or a Consolidated Subsidiary secured by any Lien.

 

“USA Patriot Act” shall mean United States Public Law 107-56, Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.

 

B-13

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“Wachovia Unsecured Credit Agreement” shall mean that certain Wachovia Unsecured
Credit Agreement dated as of June 17, 2005 among the Company, as borrower,
Wachovia Bank, National Association, as administrative agent, and the lenders
party thereto, as amended, waived, modified, supplemented or restated from time
to time.

 

“Wholly-Owned Consolidated Subsidiary” shall mean, at any time, any Consolidated
Subsidiary 100% of all of the equity interests (except directors’ or similar
qualifying shares) and voting interests of which are owned by any one or more of
the Company and the Company’s other Wholly-Owned Consolidated Subsidiaries at
such time.

 

B-14

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Schedule 4.9

Changes in Corporate Structure

 

 

None.

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

Schedule 5.3

Disclosure

 

1. American Capital – Debt Investor Presentation, June 2005.

 

2. 3 slides showing analysis on the total purchase multiples for ACAS-sponsored
buyouts since 1999.

 

3. 12 slides showing the ACAS investments to date along with the current
pipeline (at 30/11/2005)

 

4. 10 slides showing the debt to EBITDA multiples for ACAS portfolio at entry
from Pre-1999 (last quarter of 1997 and all of 1998) plus each year through
2004.

 

5. A press release announcing the investments of European Capital (December 2,
2005).

 

6. Spreadsheet with the Tangible Net Worth Calculation and the Interest Rate
Coverage Ratio.

 

7. Corporate presentation, July 2005.

 

8. Note Purchase Agreement by and among the Company, Merrill Lynch International
and Bear, Stearns & Co Inc., dated September 26, 2005.

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

Schedule 5.4

Organization and Ownership of Shares of Subsidiaries; Affiliates

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

5.4(a)(1) Consolidated Subsidiaries

 

1) American Capital Financial Services, Inc., a Delaware corporation (“ACFS”);
the Company owns 100% of the stock.

 

2) ACS Equities, L.P., a Delaware limited partnership. ACFS is the sole general
partner and the Company is the sole limited partner.

 

3) ACS Funding Trust I, a Delaware statutory trust. The Company is the sole
owner.

 

4) ACS Funding Trust II, a Delaware statutory trust. The Company is the sole
owner.

 

5) ACAS Business Loan LLC, 2002-2, a Delaware limited liability company (the
“2002-2 LLC”). The Company is the sole regular member.

 

6) ACAS Business Loan Trust 2002-2, a Delaware statutory trust. The 2002-2 LLC
is the sole owner.

 

7) ACAS Business Loan LLC, 2003-1, a Delaware limited liability company (the
“2003-1 LLC”). The Company is the sole regular member.

 

8) ACAS Business Loan Trust 2003-1, a Delaware statutory trust. The 2003-1 LLC
is the sole owner.

 

9) ACAS Business Loan LLC, 2003-2, a Delaware limited liability company (the
“2003-2 LLC”). The Company is the sole regular member.

 

10) ACAS Business Loan Trust 2003-2, a Delaware statutory trust. The 2003-2 LLC
is the sole owner.

 

11) ACAS Business Loan LLC, 2004-1, a Delaware limited liability company (the
“2004-1 LLC”). The Company is the sole regular member.

 

12) ACAS Business Loan Trust 2004-1, a Delaware statutory trust. The 2004-1 LLC
is the sole owner.

 

13) ACAS Business Loan LLC, 2005-1, a Delaware limited liability company (the
“2005-1 LLC”). The Company is the sole regular member.

 

14) ACAS Business Loan Trust 2005-1, a Delaware statutory trust. The 2005-1 LLC
is the sole owner.

 

15) American Capital-Asia, Ltd., a Delaware corporation; the Company owns 100%
of the stock.

 

16) European Capital Financial Services (Guernsey) Limited, a Guernsey holding
company (“ECFS Guernsey”); the Company owns 100% of the stock.

 

17) European Capital Financial Services Limited, a private limited company
incorporated in the United Kingdom; ECFS Guernsey owns 100% of the stock.

 

Note: All of the subsidiaries above are included in our consolidated financial
statements.

 

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

5.4(a)(2) Company Affiliates

 

 

None.

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

5.4(a)(3) Company’s Directors and Senior Officers

 

Name

  Title    

Malon Wilkus

  Director, President, Chairman and Chief Executive Officer    

John R. Erickson

  Executive Vice President, and Chief Financial Officer    

Ira J. Wagner

  Executive Vice President and Chief Operating Officer    

Samuel A. Flax

  Executive Vice President, General Counsel, Chief Compliance Officer and
Secretary    

Roland H. Cline

  Senior Vice President and Managing Director    

Gordon O’Brien

  Senior Vice President and Managing Director    

Darin R. Winn

  Senior Vice President and Regional Managing Director    

Brian S. Graff

  Senior Vice President and Regional Managing Director    

Mary C. Baskin

  Director    

Neil M. Hahl

  Director    

Philip R. Harper

  Director    

Stan Lundine

  Director    

Kenneth D. Peterson, Jr.

  Director    

Alvin N. Puryear

  Director

 

 

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

5.4(b) Liens on Capital Stock

 

Pursuant to that Third Amended and Restated Loan Funding and Servicing Agreement
dated as of September 23, 2005, by and among ACS Funding Trust I, as the
borrower, American Capital Strategies, Ltd., as the servicer, the Lenders and
the Lender Agents party thereto, Wachovia Capital Markets, LLC, as the Deal
Agent, and Wells Fargo Bank, National Association, as collateral custodian and
as backup servicer (as amended from time to time), Liens in favor of Wachovia
Capital Markets, LLC, as Deal Agent in the following:

 

  1. 100% of the beneficial ownership interest in ACAS Business Loan Trust
2002-2, as evidenced by ACAS Business Loan Trust 2002-2 Trust Certificate (No.
4), dated April 22, 2004; and

 

  2. 100% of the beneficial ownership interest in ACAS Business Loan Trust
2003-1, as evidenced by ACAS Business Loan Trust 2003-1 Trust Certificate (No.
2), dated April 22, 2004.

 

  3. 100% of the beneficial ownership interest in ACAS Business Loan Trust
2003-2, as evidenced by ACAS Business Loan Trust 2003-2 Trust Certificate (No.
D1), dated December 3, 2003.

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

Schedule 5.5

Financial Statements of the Company and its Consolidated Subsidiaries

 

Annual Report on Form 10-K for the year ended December 31, 2004

 

Quarterly Report on Form 10-Q for the quarter ended September 30, 2005

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

Schedule 5.11

Licenses, Permits, Etc.

 

 

None.

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

Schedule 5.14

Use of Proceeds

 

The Company will apply the proceeds of the sale of the Notes to repay
outstanding indebtedness under the Company’s revolving credit facilities and for
general corporate purposes.

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

Schedule 5.15

Existing Debt; Future Liens

 

Outstanding Debt of the Company and its Consolidated Subsidiaries

 

     Amount

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

ACAS Business Loan Trust 2003-1

   $ 5,428,644

ACAS Business Loan Trust 2003-2

   $ 32,252,266

ACAS Business Loan Trust 2004-1

   $ 409,771,976

ACAS Business Loan Trust 2005-1

   $ 830,000,000

Wachovia Unsecured Revolver

   $ 170,000,000

Unsecured Corporate Bonds (Sep ‘04)

   $ 167,000,000

Unsecured Corporate Bonds (Aug ‘05)

   $ 126,000,000

Unsecured Corporate Bonds (Sep ‘06)

   $ 75,000,000

ACS Funding Trust I

   $ 485,251,442

Total Return Swaps

   $ 110,218,681

Interest Rate Swap Liabilities as of 12/31/05

   $ 2,140,050

Total Debt (as of January 31, 2006 unless otherwise stated)

   $ 2,413,063,059

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

Schedule 5.15

Future Liens

 

 

None.

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

THIS NOTE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THIS NOTE MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM.

 

FORM OF SERIES 2006-A NOTE

 

AMERICAN CAPITAL STRATEGIES, LTD.

 

5.177% Senior Note, Series 2006-A, due February 9, 2011

 

No. RA-                            , 20     €                       PPN 024937
B* 4

 

For Value Received, the undersigned, American Capital Strategies, Ltd. (herein
called the “Company”), a corporation organized and existing under the laws of
the State of Delaware, hereby promises to pay to                     , or
registered assigns, the principal sum of                      Euros on
February 9, 2011, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of
5.177% per annum from the date hereof, payable annually in arrears, on the ninth
day of February in each year, commencing with the February 9 next succeeding the
date hereof, until the principal hereof shall have become due and payable, and
(b) to the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as such term is defined in the Note Purchase
Agreement referred to below), payable annually as aforesaid (or, at the option
of the registered holder hereof, on demand), at a rate per annum from time to
time equal to the greater of (1) 7.177% or (2) 2.00% over the rate of interest
publicly announced from time to time by Deutsche Bank from time to time at its
principal office in Frankfurt, Germany as its “base” or “prime” rate for loans
denominated in Euros.

 

Payments of principal of, interest on and any Make-Whole Amount with respect to
this Note are to be made in Euros at the principal offices of Wachovia Bank,
National Association in New York, New York or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreement referred to below.

 

This Note is one of a series of Senior Notes (herein called the “Notes”) issued
pursuant to that certain Note Purchase Agreement dated as of February 9, 2006
(as from time to time amended, the “Note Purchase Agreement”), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.

 

This Note is a registered Note and, as provided in the Note Purchase Agreement,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.

 

EXHIBIT 1(a)

(to Note Purchase Agreement)

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

This Note is subject to prepayment, in whole or from time to time in part, at
the times and on the terms specified in the Note Purchase Agreement, but not
otherwise.

 

If an Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase Agreement.

 

This Note shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the laws of the State of New York excluding
the choice of law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.

 

AMERICAN CAPITAL STRATEGIES, LTD. By  

 

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

Its  

 

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E-1(a)-2

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

THIS NOTE WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THIS NOTE MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM.

 

FORM OF SERIES 2006-B NOTE

 

AMERICAN CAPITAL STRATEGIES, LTD.

 

6.565% Senior Note, Series 2006-B, due February 9, 2011

 

No. RB-                           , 20     £                       PPN 024937 B@
2

 

FOR VALUE RECEIVED, the undersigned, AMERICAN CAPITAL STRATEGIES, LTD. (herein
called the “Company”), a corporation organized and existing under the laws of
the State of Delaware, hereby promises to pay to                     , or
registered assigns, the principal sum of                      STERLING on
February 9, 2011, with interest (computed on the basis of a 365-day or 366-day
year, as applicable and paid for the actual number of days elapsed) (a) on the
unpaid balance thereof at the rate of 6.565% per annum from the date hereof,
payable semiannually in arrears, on the ninth day of February and August in each
year, commencing with the February 9 or August 9 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and (b) to
the extent permitted by law on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Make-Whole Amount (as such term is defined in the Note Purchase
Agreement referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (1) 8.565% or (2) 2.00% over the rate of
interest publicly announced from time to time by The Royal Bank of Scotland plc
from time to time at its principal office in London, England as its “base” or
“prime” rate for loans denominated in Sterling.

 

Payments of principal of, interest on and any Make-Whole Amount with respect to
this Note are to be made in Sterling at the principal offices of Wachovia Bank,
National Association in New York, New York or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreement referred to below.

 

This Note is one of a series of Senior Notes (herein called the “Notes”) issued
pursuant to that certain Note Purchase Agreement dated as of February 9, 2006
(as from time to time amended, the “Note Purchase Agreement”), between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20 of the Note Purchase Agreement and (ii) to have made the
representation set forth in Section 6.2 of the Note Purchase Agreement.

 

This Note is a registered Note and, as provided in the Note Purchase Agreement,
upon surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder’s attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company will not be affected by any notice to the contrary.

 

EXHIBIT 1(b)

(to Note Purchase Agreement)

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

This Note is subject to prepayment, in whole or from time to time in part, at
the times and on the terms specified in the Note Purchase Agreement, but not
otherwise.

 

If an Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become due
and payable in the manner, at the price (including any applicable Make-Whole
Amount) and with the effect provided in the Note Purchase Agreement.

 

This Note shall be construed and enforced in accordance with, and the rights of
the parties shall be governed by, the laws of the State of New York excluding
the choice of law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.

 

AMERICAN CAPITAL STRATEGIES, LTD. By  

 

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

Its  

 

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

 

E-1(b)-2

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

FORM OF OPINION OF SPECIAL COUNSEL

TO THE COMPANY

 

The closing opinion of Arnold & Porter LLP, special counsel for the Company,
which is called for by Section 4.4(a) of the Agreement, shall be dated the date
of the Closing and addressed to each Purchaser, shall be satisfactory in scope
and form to each Purchaser, shall be subject to customary exceptions and
qualifications and shall be to the effect that:

 

1. The Company is a corporation, duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, has the corporate power and
the corporate authority to execute and perform the Agreement and to issue the
Notes and has the full corporate power and the corporate authority to conduct
the activities in which it is now engaged. The Company is duly qualified to do
business as a foreign corporation and is in good standing in the jurisdictions
listed on the schedule to be attached to the opinion.

 

2. ACFS is a corporation validly existing and in good standing under the laws of
the State of Delaware. Each of the LLCs is a limited liability company validly
existing and in good standing under the laws of the State of Delaware. ACFS and
each of the LLCs are duly qualified to conduct business as a foreign business
entity, and is in good standing, in the jurisdictions listed with respect to
ACFS or each such LLC (as the case may be) on a schedule to be attached to the
opinion.

 

3. Based solely upon, and in reliance upon the accuracy of the factual
information set forth in, Section 5.4(b) of the Agreement, and except as
otherwise shown on Schedule 5.4 to the Agreement, all of the outstanding shares
of capital stock or other equity interests of ACFS and each of the LLCs have
been validly issued, are fully paid and non-assessable and are owned by the
Company or another Consolidated Subsidiary.

 

4. The Agreement has been duly authorized by all necessary corporate action on
the part of the Company, has been duly executed and delivered by the Company and
constitutes the legal, valid and binding contract of the Company enforceable in
accordance with its terms.

 

5. The Notes have been duly authorized by all necessary corporate action on the
part of the Company, have been duly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company enforceable
in accordance with their terms.

 

6. No approval, consent or withholding of objection on the part of, or filing,
registration or qualification with, any Governmental Authority is necessary in
connection with (a) the execution, delivery or performance by the Company of the
Agreement or the Notes or (b) the offering and sale by any Purchaser after the
date of issue of the Notes in circumstances which do not result in an offer to
the public in the United Kingdom within the meaning of the Section 85 of the
Financial Services and Markets Act 2000 (“FMSA”).

 

EXHIBIT 4.4(a)

(to Note Purchase Agreement)

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

7. The issuance and sale of the Notes and the execution, delivery and
performance by the Company of the Agreement do not conflict with any law, rule
or regulation or conflict with or result in any breach of any of the provisions
of or constitute a default under or result in the creation or imposition of any
Lien upon any of the property of the Company pursuant to the provisions of the
Certificate of Incorporation or By-laws of the Company or any agreement or other
instrument known to such counsel to which the Company is a party or by which the
Company may be bound.

 

8. The Company is an “investment company” that has elected to be regulated as a
“business development company” within the meaning of the Investment Company Act
and qualifies as a RIC.

 

9. The issuance, sale and delivery of the Notes under the circumstances
contemplated by the Agreement do not, under existing law, require the
registration of the Notes under the Securities Act or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.

 

10. The provisions of Section 21 (restrictions on financial promotion) of FSMA
will not be contravened by reason of the communication of any invitation or
inducement to engage in investment activity (within the meaning of that Section)
in connection with the issue or sale of the Notes, provided that (a) the
communication is made by an authorized person, (b) the contents of the
communication have been approved for the purposes of Section 21 FSMA by an
authorized person or (c) the communication is otherwise made in circumstances in
which Section 21(1) of FSMA does not apply.

 

The opinion of Arnold & Porter LLP shall cover such other matters relating to
the sale of the Notes as any Purchaser may reasonably request. With respect to
matters of fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and officers of the
Company and shall provide that (i) subsequent holders of the Notes may rely upon
such opinion and (ii) such opinion may be provided to Governmental Authorities,
including, without limitation, the National Association of Insurance
Commissioners.

 

 

E-4.4(a)-2

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FORM OF OPINION OF SPECIAL COUNSEL

TO THE PURCHASERS

 

The closing opinion of Schiff Hardin LLP, special counsel to the Purchasers,
called for by Section 4.4(b) of the Agreement, shall be dated the date of the
Closing and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:

 

1. The Company is a corporation validly existing and in good standing under the
laws of the State of Delaware.

 

2. The Company has the corporate power and authority to execute and deliver the
Agreement and the Notes being delivered on the date hereof, and the execution
and delivery hereof and thereof by the Company have been duly authorized by all
necessary corporate action on the part of the Company.

 

3. The Agreement and the Notes being delivered on the date hereof have been duly
executed and delivered by the Company and constitute the legal, valid and
binding contracts of the Company, enforceable against the Company in accordance
with its terms.

 

4. The issuance, sale and delivery of the Notes being delivered on the date
hereof under the circumstances contemplated by this Agreement do not, under
existing law, require the registration of such Notes under the Securities Act or
the qualification of an indenture under the Trust Indenture Act of 1939, as
amended.

 

The opinion of Schiff Hardin LLP shall also state that the opinion of Arnold &
Porter LLP is satisfactory in scope and form to Schiff Hardin LLP and that, in
their opinion, the Purchasers are justified in relying thereon.

 

In rendering the opinion set forth in paragraph 1 above, Schiff Hardin LLP may
rely, as to matters referred to in paragraph 1, solely upon an examination of
the Certificate of Incorporation certified by, and a certificate of good
standing of the Company from, the Secretary of State of the State of Delaware,
the By-laws of the Company and the general business corporation law of the State
of Delaware. The opinion of Schiff Hardin LLP is limited to the laws of the
State of New York, the general business corporation law of the State of Delaware
and the Federal laws of the United States.

 

With respect to matters of fact upon which such opinion is based, Schiff Hardin
LLP may rely on appropriate certificates of public officials and officers of the
Company and upon representations of the Company and the Purchasers delivered in
connection with the issuance and sale of the Notes.

 

EXHIBIT 4.4(b)

(to Note Purchase Agreement)