Exhibit 10.2

 

 

AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT

 

by and between

 

 

ACS FUNDING TRUST I,

as the Buyer

 

 

and

 

 

AMERICAN CAPITAL STRATEGIES, LTD.,

as the Seller

 

 

Dated as of June 13, 2003

 

 

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

 

TABLE OF CONTENTS

 

ARTICLE I                                     GENERAL

Section 1.1

Certain Defined Terms

Section 1.2

Other Terms

Section 1.3

Computation of Time Periods

Section 1.4

Interpretation

Section 1.5

References

Section 1.6

Calculations

ARTICLE II                                 SALE AND CONVEYANCE

Section 2.1

Sale

Section 2.2

Assignments, Etc

Section 2.3

Lien Release Dividends

ARTICLE III                             PURCHASE PRICE AND PAYMENT; MONTHLY
REPORT

Section 3.1

Purchase Price

Section 3.2

Payment of Purchase Price

ARTICLE IV                             REPRESENTATIONS AND WARRANTIES

Section 4.1

Seller’s Representations and Warranties

Section 4.2

Seller’s Representations and Warranties Regarding the Agreement and the Loans

Section 4.3

Representations and Warranties of the Buyer

ARTICLE V                                 PERFECTION OF TRANSFER AND PROTECTION
OF SECURITY INTERESTS

Section 5.1

Custody of Loans

Section 5.2

Filing

Section 5.3

Name Change or Relocation

Section 5.4

Chief Executive Office

Section 5.5

Costs and Expenses

Section 5.6

Sale Treatment

Section 5.7

Separateness from Buyer

ARTICLE VI                             COVENANTS

Section 6.1

Seller Covenants

Section 6.2

Delivery of Loan Files

 

i

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

 

Section 6.3

Release of Released Amounts

ARTICLE VII                         REPURCHASE OBLIGATION

Section 7.1

Repurchase of Ineligible Loans

Section 7.2

Substitution of Loans

Section 7.3

Deemed Collections

ARTICLE VIII                     CONDITIONS PRECEDENT

Section 8.1

Conditions to the Buyer’s Obligations Regarding Loans

ARTICLE IX                            TERM AND TERMINATION

Section 9.1

Termination

ARTICLE X                                MISCELLANEOUS PROVISIONS

Section 10.1

Amendment

Section 10.2

Governing Law

Section 10.3

Notices

Section 10.4

Severability of Provisions

Section 10.5

Assignment

Section 10.6

Further Assurances

Section 10.7

No Waiver; Cumulative Remedies

Section 10.8

Counterparts

Section 10.9

Binding Effect; Third-Party Beneficiaries

Section 10.10

Liabilities to Obligors

Section 10.11

Merger and Integration

Section 10.12

Headings

Section 10.13

No Bankruptcy Petition; Disclaimer

Section 10.14

Schedules and Exhibits

Section 10.15

Merger or Consolidation of, or Assumption of the Obligations of, the Seller

Section 10.16

[Reserved.]

Section 10.17

Costs, Expenses and Taxes

Section 10.18

Indemnities by the Seller

Section 10.19

Recourse Against Certain Parties

Section 10.20

Sharing of Payments on Loans Subject to Retained Interest Provisions

 

ii

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

 

EXHIBITS AND SCHEDULES

Schedule I

 

Loan List

 

 

 

Exhibit A

 

Form of Sale Assignment

Exhibit B

 

Form of Notice of Sale

 

iii

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

 

AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT

 

THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT (such agreement as
amended, modified, waived, supplemented or restated from time to time, the
“Agreement”), is dated as of June 13, 2003, by and between AMERICAN CAPITAL
STRATEGIES, LTD., a Delaware corporation, as the seller (together with its
successors and assigns in such capacity, the “Seller”), and ACS FUNDING TRUST I,
a Delaware statutory trust, as the buyer (together with its successors and
assigns in such capacity the “Buyer”).

 

R E C I T A L S

 

WHEREAS, the Seller and the Buyer heretofore executed and delivered a Purchase
and Sale Agreement, dated as of March 31, 1999, as amended by Amendment No. 1,
dated as of December 20, 2000 (as amended, modified, waived or supplemented, the
“Original Purchase Agreement”), providing for the purchase by the Buyer of
certain loans originated or purchased by the Seller in the normal course of
business, together with among other things, related rights of payment thereunder
and the interest of the Seller in the related property and other interests
securing the payments to be made under such loans;

 

WHEREAS, Section 9.1 of the Original Purchase Agreement provides that the
Original Purchase Agreement shall not be amended without the written agreement
of the Seller and the Buyer (with not less than ten (10) Business Days’ prior
written notice provided to the Deal Agent);

 

WHEREAS, the Seller and the Buyer hereby desire to amend and restate the
Original Purchase Agreement to make certain changes that are necessary or in the
interests of the parties;

 

WHEREAS, each of the Seller and the Buyer consents to (and the Deal Agent
acknowledges its receipt of notice not less than ten (10) Business Days prior
to) the amendments to the Original Purchase Agreement effected by this
Agreement;

 

NOW, THEREFORE, based upon the foregoing Recitals, the mutual premises and
agreements contained herein, and other good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:

 

ARTICLE I
GENERAL

 

Section 1.1                                   Certain Defined Terms.

 

(a)                                  Certain capitalized terms used throughout
this Agreement are defined above or in this Section 1.1.  In addition,
capitalized terms used but not defined herein have the meanings given to such
terms in the Loan Funding Agreement (as defined below).

 

S-1

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

 

(b)                                 As used in this Agreement and its exhibits
and schedules, unless the context requires a different meaning, the following
terms shall have the following meanings:

 

Agreement:  Defined in the Preamble.

 

Buyer:  Defined in the Preamble.

 

Deemed Collection:  Defined in Section 7.3.

 

Indemnified Amounts:  Defined in subsection 10.18(a).

 

Indemnified Party:  Defined in subsection 10.18(a).

 

Ineligible Loan:  Defined in Section 7.1.

 

Lien Release Dividend:  Defined in subsection 2.3(a).

 

Lien Release Dividend Date:  The date specified by the Buyer, which date may be
any Business Day, provided notice is given in accordance with subsection 2.3(a).

 

Loan Funding Agreement:  The Amended and Restated Loan Funding and Servicing
Agreement, dated as of June 13, 2003, by and among ACS Funding Trust I, as the
borrower, American Capital Strategies, Ltd., as the servicer, Variable Funding
Capital Corporation, as the conduit lender, Wachovia Securities, LLC, as the
deal agent, Wachovia Bank, National Association, as the swingline lender, and
Wells Fargo Bank, National Association, as the backup servicer and the
collateral custodian, as such agreement may be amended, modified, supplemented,
waived or restated from time to time.

 

Notice of Sale:  A written notice, in the form of Exhibit B, to be used for each
transfer hereunder.

 

Obligor Account:  Defined in subsection 6.1(c).

 

Original Purchase Agreement:  Defined in the Recitals.

 

Pledge and Security Agreement:  The Amended and Restated Pledge and Security
Agreement, dated as of the date hereof, between the Seller and Buyer.

 

Purchase:  Any transfer made hereunder pursuant to Section 2.1.

 

Purchase Date:  Any Business Day on which any Purchased Asset is acquired by the
Buyer pursuant to the terms of this Agreement, including any Substitution Date,
as set forth in the related Sales Assignment.

 

Purchase Price:  Defined in Section 3.1.

 

Purchased Assets:  Defined in subsection 2.1(a).

 

Purchased Loans:  The Loans listed on Schedule I hereto.

 

2

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

 

Replaced Loan:  Defined in subsection 7.2(a).

 

Sale Assignment:  Defined in subsection 2.2(a).

 

Sale Papers:  Defined in subsection 4.1(a).

 

Schedule I:  The schedule of all Purchased Assets that are sold, transferred,
assigned and/or contributed by the Seller to the Buyer on a Purchase Date, which
schedule as to Purchased Assets identified as of the initial Purchase Date is
attached hereto and as to any Purchased Assets identified on any subsequent
Purchase Date is supplemented by “Schedule I” attached to the applicable Sale
Assignment, and incorporated herein by reference, as such schedule may be
amended, modified or supplemented from time to time in accordance with the terms
hereof.

 

Seller:  Defined in the Preamble.

 

Substitute Loan:  Defined in Section 7.2.

 

Substitution Date:  Any date on which the Seller transfers a Substitute Loan to
the Buyer.

 

Section 1.2                                   Other Terms.

 

All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles.  The symbol “$” shall
mean the lawful currency of the United States.  All terms used in Article 9 of
the UCC in the State of New York, and not specifically defined herein, are used
herein as defined in such Article 9.

 

Section 1.3                                   Computation of Time Periods.

 

Unless otherwise stated in this Agreement, in the computation of a period of
time from a specified date to a later specified date, the word “from” means
“from and including” and the words “to” and “until” each mean “to but
excluding.”

 

Section 1.4                                   Interpretation.

 

In this Agreement and the other Sale Papers, unless a contrary intention
appears:

 

(i)                                     the singular number includes the plural
number and vice versa;

 

(ii)                                  reference to any Person includes such
Person’s successors and assigns but, if applicable, only if such successors and
assigns are permitted by the Sale Papers;

 

(iii)                               reference to any gender includes each other
gender;

 

(iv)                              reference to day or days without further
qualification means calendar days;

 

(v)                                 unless otherwise stated, reference to any
time means Charlotte, North Carolina time;

 

3

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

 

(vi)                              references to “writing” include printing,
typing, lithography, electronic or other means of reproducing words in a visible
form;

 

(vii)                           reference to any agreement (including any of the
Sale Papers), document or instrument means such agreement, document or
instrument as amended, modified, waived, supplemented or restated and in effect
from time to time in accordance with the terms thereof and, if applicable, the
terms of the other Sale Papers and reference to any promissory note includes any
promissory note that is an extension or renewal thereof or a substitute or
replacement therefor; and

 

(viii)                        reference to any Applicable Law means such
Applicable Law as amended, modified, codified, replaced or reenacted, in whole
or in part, and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of any
Applicable Law means that provision of such Applicable Law from time to time in
effect and constituting the substantive amendment, modification, codification,
replacement or reenactment of such section or other provision.

 

Section 1.5                                   References.

 

All section references (including references to the Preamble), unless otherwise
indicated, shall be to Sections (and the Preamble) in this Agreement.

 

Section 1.6                                   Calculations.

 

Except as otherwise provided herein, all interest rate and basis point
calculations hereunder will be made on the basis of a 360–day year and the
actual days elapsed in the relevant period and will be carried out to at least
three decimal places.

 

ARTICLE II
SALE AND CONVEYANCE

 

Section 2.1                                   Sale.

 

(a)                                  Subject to and upon the terms and
conditions set forth herein, on each Purchase Date, the Seller hereby sells,
assigns, sets over and otherwise conveys, and the Buyer hereby purchases and
takes from the Seller, without recourse except as provided herein, all right,
title, and interest, whether now owned or hereafter acquired or arising, and
wherever located, of the Seller in all accounts, general intangibles,
instruments, chattel paper, documents, money, letters of credit, advices of
credit, deposit accounts, certificates of deposit, investment property, goods,
and other property consisting of, arising out of, or related to any of the
following property (the items in (i) – (viii) below, but in each case excluding
the Retained Interest and Excluded Amounts, being collectively referred to as
the “Purchased Assets”):

 

(i)                                     the Loans that are identified by the
Seller as of the initial Cut-off Date, which are listed on Schedule I hereto,
and the Loans that are listed on Schedule I to any Sale Assignment, and all
monies due or to become due in payment of such Loans on and after the related
Cut-Off Date, including but not limited to all Collections;

 

4

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

 

(ii)                                  any Related Property securing such Loans
(to the extent the Seller, other than solely in its capacity as collateral agent
under any loan agreement with an Obligor has been granted a Lien thereon)
including the related security interest granted by the Obligor under such Loans,
all proceeds from any sale or other disposition of such Related Property;

 

(iii)                               all security interests, liens, guaranties,
warranties, letters of credit, accounts, bank accounts, mortgages or other
encumbrances and property subject thereto from time to time purporting to secure
or support payment of such Loans, together with all UCC financing statements or
similar filings signed by an Obligor relating thereto;

 

(iv)                              all Insurance Policies;

 

(v)                                 the Loan Documents;

 

(vi)                              the Collection Account, the Excess Spread
Account, each Lock Box and all Lock Box Accounts, together with all funds held
in such accounts, and all certificates and instruments, if any, from time to
time representing or evidencing each of the foregoing or such funds (to the
extent of the Seller’s interest therein, if any);

 

(vii)                           the “Purchased Assets” under and as defined in
the Original Purchase Agreement; and

 

(viii)                        all income and proceeds of the foregoing.

 

To the extent the Purchase Price (as defined herein) paid to the Seller for any
Loan is less than the Fair Market Value of such Loan, the difference between
such Fair Market Value and the Purchase Price (as defined herein) shall be
deemed to be a capital contribution made by the Seller to the Buyer on the
applicable Purchase Date.

 

(b)                                 The Seller and the Buyer acknowledge that
the representations and warranties of the Seller in Section 4.1 and 4.2 will run
to and be for the benefit of the Deal Agent and the Secured Parties, and the
Deal Agent and the Secured Parties may enforce, directly without joinder of the
Buyer, the repurchase obligations of the Seller with respect to breaches of such
representations and warranties as set forth herein.

 

(c)                                  The sale, transfer, assignment, set–over
and conveyance of the Purchased Assets by the Seller to the Buyer pursuant to
this Agreement does not constitute and is not intended to result in a creation
or an assumption by the Buyer, the Deal Agent or the Secured Parties of any
obligation of the Seller in connection with the Purchased Assets, or any
agreement or instrument relating thereto, including, without limitation, (i) any
obligation to any Obligor, if any, not financed by, or with an unfunded
commitment from, the Seller, (ii) any taxes, fees, or other charges imposed by
any Governmental Authority and (iii) any insurance premiums that remain owing
with respect to any Loan at the time such Loan is sold hereunder.  Without
limiting the foregoing, the Buyer does not assume any obligation to purchase any
additional notes or loans under agreements governing the Purchased Assets.

 

5

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

 

(d)                                 The Seller and the Buyer intend and agree
that (i) the transfer of the Purchased Assets from the Seller to the Buyer is
intended to be a sale, conveyance and transfer of ownership of the Purchased
Assets rather than the mere granting of a security interest to secure a
borrowing and (ii) such Purchased Assets shall not be part of the Seller’s
estate upon the occurrence of an Insolvency Event or in the event of any other
action by or against such Person under any Insolvency Law.  In the event,
however, that notwithstanding such intent and agreement, such transfers are
deemed to be a grant of a mere security interest to secure indebtedness, the
Seller shall be deemed to have granted (and hereby does grant) to the Buyer a
perfected first priority security interest in such Purchased Assets, and this
Agreement shall constitute a security agreement under Applicable Law, securing
the repayment of the Purchase Price paid hereunder, and subject to the other
terms and conditions of, this Agreement together with such other obligations or
interests as may arise hereunder and thereunder in favor of the parties hereto
and thereto.

 

(e)                                  If such transfer of the Purchased Assets is
deemed to be the mere granting of a security interest to secure a borrowing, the
Buyer may, to secure the Buyer’s obligations under the Loan Funding Agreement
repledge and reassign (i) all or a portion of the Purchased Assets pledged to
the Buyer by the Seller and with respect to which the Buyer has not released its
security interest at the time of such pledge and assignment, and (ii) all
proceeds thereof.  Such repledge and reassignment may be made by the Buyer with
or without a repledge and reassignment by the Buyer of its rights under any
agreement with the Seller, and without further notice to or acknowledgment from
the Seller.  The Seller waives, to the extent permitted by Applicable Law, all
claims, causes of action and remedies, whether legal or equitable (including any
right of setoff), against the Buyer or any assignee of the Buyer relating to
such action by the Buyer in connection with the transactions contemplated by
this Agreement and the Transaction Documents.

 

(f)                                    In connection with the sale of any
Purchased Assets, the Seller agrees (i) to record and file, at its own expense,
any financing statements, assignments of financing statements (and continuation
statements with respect to such financing statements when applicable) and
Assignments of Mortgage, as the case may be, with respect to the Purchased
Assets, meeting the requirements of Applicable Law in such manner and in such
jurisdictions as are necessary to evidence the sale of the Purchased Assets and
to perfect, and maintain the perfection of, the transfer of the Purchased Assets
from the Seller to the Buyer on and after the applicable Purchase Date, (ii)
that such financing statements, assignments of financing statements and
Assignments of Mortgage, as the case may be, shall name the Seller, as
seller/debtor/assignor, and the Buyer, as purchaser/secured party/assignee, of
the Purchased Assets and (iii) to deliver a file-stamped copy of such financing
statements or other evidence of such filings (excluding continuation statements,
which shall be delivered as filed).

 

Section 2.2                                   Assignments, Etc.

 

(a)                                  Sale Assignment.  The Seller shall on or
prior to each Purchase Date, with respect to the Purchased Assets to be sold,
assigned and conveyed on such date, execute and deliver to the Buyer a written
assignment (the “Sale Assignment”) from Seller to the Buyer substantially in the
form of Exhibit A hereto.  The failure of the Seller to execute and deliver a
Sale Assignment shall not limit or otherwise affect the validity and
enforceability of the sale, assignment and

 

6

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

 

conveyance of the Purchased Assets or the status of such sale, assignment and
conveyance as an absolute sale of the Loans and other Purchased Assets.  From
and after such Purchase Date, such Purchased Assets shall be deemed to be part
of the Purchased Assets hereunder.

 

(b)                                 Covenants of the Seller In Connection With
Additions.  On or before any Purchase Date with respect to any Loans and other
Purchased Assets acquired by the Buyer, the Seller shall:

 

(i)                                     clearly indicate in its files that such
Loans and other Purchased Assets have been sold to the Buyer and deliver to the
Buyer a list that the Seller shall represent to contain a true and complete list
of such Loans and the Purchased Assets, identified by account number, which
computer file or microfiche list shall be as of such date incorporated into and
made a part of the Loan List attached as Schedule I of this Agreement; and

 

(ii)                                  provide the Buyer with an Officer’s
Certificate certifying as follows:  (A) each such Loan was, as of the related
Purchase Date, an Eligible Loan, (B) no selection procedures believed by the
Seller to be adverse to the interest of the Buyer were utilized in selecting
such Loans from the available Eligible Loans in the Seller’s portfolio, (C) such
Loans and other Purchased Assets and all proceeds thereof will be conveyed to
the Buyer free and clear of any Lien of any Person claiming through or under the
Seller or any of its Affiliates, and (D) as of the related Purchase Date, (x) no
Insolvency Event with respect to the Seller has occurred, and (y) the sale of
such Loans and other Purchased Assets to the Buyer has not been made in
contemplation of the occurrence of any Insolvency Event with respect to the
Seller.

 

Section 2.3                                   Lien Release Dividends.

 

(a)                                  Notwithstanding any provision contained in
this Agreement to the contrary, provided there is neither an Unmatured
Termination Event, a Termination Event nor a Servicer Termination Event, on a
Lien Release Dividend Date, the Buyer may dividend to the Seller a portion of
the Loans or portions thereof (the “Lien Release Dividend”), subject to the
following terms and conditions:

 

(i)                                     The Buyer and the Seller shall have
given to the Deal Agent, as the Buyer’s assignee, at least two (2) Business
Days’ prior written notice of its intent to effect an Lien Release Dividend,
unless such notice is waived or reduced by the Deal Agent;

 

(ii)                                  Any Lien Release Dividend shall be in
connection with a Permitted Securitization Transaction;

 

(iii)                               After giving effect to the Lien Release
Dividend and the dividend to the Seller of the Loans or portions thereof on the
Lien Release Dividend Date, (A) the representations and warranties contained in
Sections 4.1 and 4.2 hereof shall continue to be correct in all material
respects, except to the extent relating to an earlier date and (B) neither an
Unmatured Termination Event, a Termination Event nor a Servicer Termination
Event shall have resulted;

 

7

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

 

(iv)                              Such Lien Release Dividend must be in
compliance with Applicable Law and may not (A) be made with the intent to
hinder, delay or defraud any creditor of the Buyer or (B) leave the Buyer,
immediately after giving effect to the Lien Release Dividend, (i) insolvent,
(ii) with insufficient funds to pay its obligations as and when they become due
or (iii) with inadequate capital for its present and anticipated business and
transactions;

 

(v)                                 On or prior to the Lien Release Dividend
Date, the Buyer shall have (A) delivered to the Seller a list specifying all
Loans or portions thereof to be transferred pursuant to such Lien Release
Dividend and the Seller shall have approved same in its sole discretion and (B)
obtained all authorizations, consents and approvals required to effectuate the
Lien Release Dividend; and

 

(vi)                              A portion of a Loan may be transferred
pursuant to the Lien Release Dividend provided that (A) such transfer does not
have an adverse effect on the portion of the Loan remaining as a part of the
Collateral under the Loan Funding Agreement, any other Collateral under the Loan
Funding Agreement, the Secured Parties and the Deal Agent, (B) the Loan
Documents for such portion of the Loan remaining as a part of the Collateral
have been amended to contain pro rata sharing, intercreditor and, if applicable,
subordination, provisions substantially the same as those contained in the form
of intercreditor and subordination agreement provided to and reviewed by the
Deal Agent and is attached as Exhibit U to the Loan Funding Agreement, and (C) a
new promissory note for the portion of the Loan remaining as a part of the
Collateral under the Loan Funding Agreement has been executed by the Obligor,
and the original thereof has been endorsed to the Deal Agent and delivered to
the Collateral Custodian.

 

(b)                                 In connection with the Lien Release
Dividend, there shall be assigned to the Seller, without recourse,
representation or warranty, all of the right, title and interest of the Buyer
in, to and under the Loans or portions thereof so retransferred (together with,
in the case of the transfer of the Loans but not portions thereof, the related
Collateral) and such Loans or portions thereof so retransferred (together with,
in the case of the transfer of the Loans but not portions thereof, the related
Collateral) shall be released from the Lien of this Agreement (subject to the
requirements of clause (a)(iii) above).

 

(c)                                  The Seller hereby agrees to pay the
reasonable legal fees and expenses of the Buyer in connection with any Lien
Release Dividend hereunder and under the Loan Funding Agreement (including, but
not limited to, expenses incurred in connection with the release of the Liens of
the Deal Agent, on behalf of the Secured Parties, the Buyer and any other party
having an interest in the Loans in connection with such Lien Release Dividends).

 

(d)                                 In connection with any Lien Release
Dividend, on the related Lien Release Dividend Date, the Buyer shall, at the
expense of the Seller (1) execute such instruments of release with respect to
the Loans or portions thereof to be transferred to the Seller (together with, in
the case of the transfer of the Loans but not portions thereof, the related
Collateral), in recordable form if necessary, in favor of the Seller as the
Seller may reasonably request, (2) deliver any portion of the Loans or portions
thereof to be transferred to the Seller (together with, in the case of the
transfer of the Loans but not portions thereof, the related Collateral) in its

 

8

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

 

possession to the Seller and (3) otherwise take such actions as are necessary
and appropriate to release the Lien of the Buyer on the Loans or portions
thereof to be transferred to the Seller (together with, in the case of the
transfer of the Loans but not portions thereof, the related Collateral) and
release and deliver to the Seller such Loans or portions thereof to be
transferred to the Seller (together with, in the case of the transfer of the
Loans but not portions thereof, the related Collateral).

 

ARTICLE III
PURCHASE PRICE AND PAYMENT; MONTHLY REPORT

 

Section 3.1                                   Purchase Price.

 

The purchase price for each Purchased Asset sold to the Buyer by the Seller
under this Agreement (the “Purchase Price”) shall be a dollar amount equal to
the lesser of the Outstanding Loan Balance or the Fair Market Value of such
Loan.

 

Section 3.2                                   Payment of Purchase Price.

 

(a)                                  The Purchase Price shall be paid by the
Buyer on each related Purchase Date either (i) in cash or (ii) if the Buyer does
not have sufficient cash to pay the full amount of the Purchase Price, by means
of a capital contribution by the Seller to the Buyer.

 

(b)                                 Unless otherwise specified herein, all
payments of the Purchase Price of any Purchased Asset sold hereunder shall be
made not later than 2:00 p.m. (Charlotte, North Carolina time) on the date
specified therefor in lawful money of the United States in same day funds by
depositing such amounts in the bank account designated in writing by the Seller
to the Purchaser.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES

 

Section 4.1                                   Seller’s Representations and
Warranties.

 

The Seller hereby represents and warrants to the Buyer, as of the Closing Date
and each Purchase Date, that:

 

(a)                                  Organization and Good Standing.  The Seller
is a corporation duly organized and validly existing in good standing under the
laws of the jurisdiction of its formation and has full power, authority and
legal right to own its properties and conduct its business as such properties
are presently owned and as such business is presently conducted and to execute,
deliver and perform its obligations under this Agreement and each other document
or instrument to be delivered by the Seller hereunder (collectively, the “Sale
Papers”).

 

(b)                                 Due Qualification.  The Seller is duly
qualified to do business and is in good standing as a foreign corporation and
has obtained all necessary licenses and approvals, in each jurisdiction in which
the nature of its business requires it to be so qualified.

 

9

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

 

(c)                                  Valid Sale.  This Agreement and each Sale
Assignment shall effect a valid sale, transfer and assignment of the Purchased
Assets from the Seller to the Buyer, enforceable against the Seller in
accordance with their terms.

 

(d)                                 Due Authorization.  The execution and
delivery of this Agreement and each of the Sale Papers, and the consummation of
the transactions provided for herein and therein have been duly authorized by
the Seller by all necessary corporate action on the part of the Seller.

 

(e)                                  No Conflict.  The execution and delivery of
this Agreement and each of the Sale Papers, the performance of the transactions
contemplated hereby and thereby and the fulfillment of the terms hereof and
thereof, will not conflict with, result in any breach of any of the material
terms and provisions of, or constitute (with or without notice or lapse of time
or both) a default under the Seller’s organizational documents or any
Contractual Obligation of the Seller.

 

(f)                                    No Violation.  The execution and delivery
of this Agreement and each of the Sale Papers, the performance of the
transactions contemplated hereby and thereby and the fulfillment of the terms
hereof and thereof (including, without limitation, the sale of Purchased Assets
by the Seller or remittance of Collections in accordance with the provisions of
this Agreement), will not conflict with or violate, in any material respect, any
requirements of laws applicable to the Seller.

 

(g)                                 No Proceedings.  There are no proceedings or
investigations pending or, to the best knowledge of the Seller, threatened
against the Seller before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality (i) asserting the invalidity of
this Agreement or any of the Sale Papers, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or any of
the Sale Papers, or (iii) seeking any determination or ruling that could
reasonably be expected to be adversely determined, and if adversely determined,
would materially and adversely affect the performance by the Seller of its
obligations under this Agreement or any of the Sale Papers.

 

(h)                                 All Consents Required.  All approvals,
authorizations, consents, orders or other actions of any Person or of any
Governmental Authority required in connection with the execution and delivery of
this Agreement and the Sale Papers, the performance of the transactions
contemplated by this Agreement and the Sale Papers and the fulfillment of or
terms hereof and thereof, have been obtained.

 

(i)                                     Bulk Sales.  The execution, delivery and
performance of this Agreement do not require compliance with any “bulk sales”
law by the Seller.

 

(j)                                     Solvency.  The transactions contemplated
under this Agreement and the Sale Papers do not and will not render the Seller
insolvent.

 

(k)                                  Selection Procedures.  No selection
procedures believed by the Seller to be adverse to the interests of the Buyer
were utilized by the Seller in selecting the Loans to be sold, assigned,
transferred, set-over and otherwise conveyed hereunder.

 

(l)                                     Taxes.  The Seller has filed or caused
to be filed all tax returns that, to its knowledge, are required to be filed by
it and has paid all taxes shown to be due and payable on such returns or on any
assessments made against it or any of its property and all other taxes, fees

 

10

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

 

or other charges imposed on it or any of its property by any Governmental
Authority (other than any amount of tax due the validity of which is currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in accordance with generally accepted accounting principles have
been provided on the books of the Seller); no tax lien has been filed and, to
the Seller’s knowledge, no claim is being asserted, with respect to any such
tax, fee or other charge.

 

(m)                               Agreements Enforceable.  This Agreement and
each of the Sale Papers to which the Seller is a party constitute the legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with their respective terms, except as such enforceability may be
limited by Insolvency Laws and except as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity).

 

(n)                                 Reports Accurate.  All reports, information,
exhibits, financial statements, documents, books, records or reports, whether
written, verbal or electronic, furnished by the Seller to the Buyer in
connection with this Agreement are and were true, complete and accurate as of
the date they are or were dated or as of the date so furnished, and no such
document contains or contained any material misstatement of fact or omits or
shall omit to state a material fact or any fact necessary to make the statements
contained therein not misleading.

 

(o)                                 Location of Offices.  The Seller’s name and
location (within the meaning of Article 9 of the UCC) are set forth in Section
10.3.  The Seller has not changed its name, identity, structure, existence or
state of formation, whether by amendment of its certificate of incorporation, by
reorganization or otherwise, and has not changed its location (within the
meaning of Article 9 of the UCC) within the four (4) months preceding the
Closing Date.

 

(p)                                 Tradenames.  Seller has no trade names,
fictitious names, assumed names or “doing business as” names or other names
under which it has done or is doing business.

 

(q)                                 Purchase Agreement.  This Agreement
(together with the related Sale Assignments) is the only agreement pursuant to
which the Seller sells Purchased Assets (other than the Hedge Collateral).

 

(r)                                    Value Given.  The Purchase Price received
by the Seller for each Purchased Asset under this Agreement constitutes
reasonably equivalent value therefor and the transfer by the Seller thereof to
the Buyer was not made for or on account of an antecedent debt owed by the
Seller to the Buyer, and such transfer was not and is not voidable or subject to
avoidance under any section of the Bankruptcy Code.

 

(s)           Special Purpose Entity.  The trust agreement of the Buyer includes
substantially the provisions set forth on Exhibit C to the Loan Funding
Agreement.

 

(t)                                    Separate Entity.  The Seller is operated
as an entity with assets and liabilities distinct from those of the Buyer, and
the Seller hereby acknowledges that the Deal Agent and the Investors under the
Loan Funding Agreement are entering into the transactions contemplated by the
Loan Funding Agreement in reliance upon the Seller’s identity as a separate
legal entity from the Buyer.

 

11

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

 

(u)                                 Marking of Files.  The Seller will have, at
its own expense, prior to the close of business on the Closing Date,
(i) indicated in its Computer Records that ownership of the Loans transferred by
it to the Buyer and identified on the Loan List have been sold to the Buyer and
(ii) cause to be affixed to the original of each Underlying Note and a copy of
each loan agreement the following legend:

 

This loan agreement/note is subject to a security interest granted to Wachovia
Securities, LLC, as Deal Agent on behalf of the Secured Parties.  UCC–1
Financing Statements covering this loan agreement/note have been filed with the
Secretary of State of the State of Delaware.  Such Lien will be released only in
connection with appropriate filings in such offices. Consequently, potential
purchasers of this loan agreement/note must refer to such filings to determine
whether such Lien has been released.

 

(v)                                 Security Interest.

 

(i)                                     This Agreement creates a valid,
continuing and enforceable security interest (as defined in the applicable UCC)
in the Purchased Assets in favor of the Buyer, which security interest is prior
to all other Liens (except for Permitted Liens), and is enforceable as such
against creditors of and purchasers from the Seller;

 

(ii)                                  the Loans, along with the related Loan
Files, constitute either a “general intangible,” an “instrument,” an “account,”
“investment property,” or “chattel paper,” within the meaning of the applicable
UCC;

 

(iii)                               the Seller owns and has good and marketable
title to the Purchased Assets free and clear of any Lien of any Person (other
than Permitted Liens);

 

(iv)                              the Seller has received all consents and
approvals required by the terms of the Purchased Assets to the grant of a
security interest in the Purchased Assets hereunder to the Buyer;

 

(v)                                 the Seller has caused the filing of all
appropriate financing statements in the proper filing office in the appropriate
jurisdictions under Applicable Law in order to perfect the security interest in
such Purchased Assets granted to the Buyer;

 

(vi)                              other than the security interest granted to
the Buyer pursuant to this Agreement, the Seller has not pledged, assigned,
sold, granted a security interest in or otherwise conveyed any of such Purchased
Assets;

 

(vii)                           the Seller has not authorized the filing of and
is not aware of any financing statements against the Seller that include a
description of collateral covering such Purchased Assets other than any
financing statement (A) relating to the security interest granted to the Buyer
under this Agreement, or (B) that has been terminated;

 

(viii)                        the Seller is not aware of the filing of any
judgment or tax Lien filings against the Seller;

 

12

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

 

(ix)                                all original executed copies of each
Underlying Note that constitute or evidence any Loans included in the Purchased
Assets have been delivered to the Collateral Custodian;

 

(x)                                   the Seller has received a written
acknowledgment from the Collateral Custodian that the Collateral Custodian or
its bailee is holding the Underlying Notes that constitute or evidence the Loans
included in the Purchased Assets solely on behalf of and for the benefit of the
Buyer or its assignees provided, however, notwithstanding, the foregoing, with
respect to any Loan to be purchased with the proceeds of a Swingline Advance,
the Seller shall have received a written acknowledgment from the Collateral
Custodian (A) that the Collateral Custodian has received a faxed copy of the
Underlying Note and (B) within two (2) Business Days after such Purchase Date,
that the Collateral Custodian or its bailee is holding the Underlying Notes that
constitutes or evidence the Loans included in the Purchased Assets solely on
behalf of the Buyer or its assignees; and

 

(xi)                                none of the Underlying Notes that constitute
or evidence the Loans has any marks or notations indicating that it has been
pledged, assigned or otherwise conveyed to any Person other than the Seller and
the Buyer.

 

(w)                               ERISA.  The Seller is in compliance with ERISA
and has not incurred and does not expect to incur any liabilities (except for
premium payments arising in the ordinary course of business) payable to the
Pension Benefit Guaranty Corporation under ERISA.

 

(x)                                   No Broker.  No broker or finder acting on
behalf of the Seller was employed or utilized in connection with this Agreement
or the other Sale Papers or the transactions contemplated hereby or thereby and
the Seller has no obligation to any Person in respect of any finder’s or
brokerage fees in connection therewith.

 

(y)                                 An Investment Company.  The Seller is
properly registered as an “investment company” within the meaning, and is, and
after the consummation of the transactions contemplated by this Agreement and
the other Transaction Documents will be, in compliance with all requirements of
the 1940 Act.

 

(z)                                   Accuracy of Representations and
Warranties.  Each representation or warranty by the Seller contained herein or
in any certificate or other document furnished by the Seller pursuant hereto or
in connection herewith is true and correct.

 

(aa)                            Government Regulations.  The Seller is not
engaged in the business of extending credit for the purpose of “purchasing” or
“carrying” any “margin security,” as such terms are defined in Regulation U of
the Federal Reserve Board as now and from time to time hereafter in effect (such
securities being referred to herein as “Margin Stock”).  The Seller owns no
Margin Stock, and no portion of the proceeds of any Purchase hereunder will be
used, directly or indirectly, for the purpose of purchasing or carrying any
Margin Stock, for the purpose of reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any portion of such proceeds to be considered a
“purpose credit” within the meaning of Regulation T, U or X of the Federal
Reserve

 

13

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

 

Board.  The Seller will not take or permit to be taken any action that might
cause any Related Document to violate any regulation of the Federal Reserve
Board.

 

(bb)                          Supplemental Interests.  The Supplemental
Interests are not Margin Stock.

 

(cc)                            Environmental.  At the time of origination of
any Loan where real property that is material to the operations of the related
business serves as the Related Property for such Loan, the related mortgaged
property was free of contamination from toxic substances or hazardous wastes
requiring action under Applicable Law or is subject to ongoing environmental
rehabilitation approved by the Servicer, and, as of the related Cut-Off Date of
such Loan, the Seller has no knowledge of any such contamination from toxic
substances or hazardous waste material on any such real property unless such
items are below action levels.

 

(dd)                          Material Adverse Change.  Since the Closing Date,
there has been no Material Adverse Change with respect to the Seller.

 

(ee)                            USA PATRIOT Act.  Neither the Seller nor any
Affiliate of the Seller is (i) a country, territory, organization, person or
entity named on an OFAC list, (ii) a Person that resides or has a place of
business in a country or territory named on such lists or which is designated as
a Non-Cooperative Jurisdiction by the Financial Action Task Force on Money
Laundering (“FATF”), or whose subscription funds are transferred from or through
such a jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA
PATRIOT Act, i.e., a foreign bank that does not have a physical presence in any
country and that is not affiliated with a bank that has a physical presence and
an acceptable level of regulation and supervision; or (iv) a person or entity
that resides in or is organized under the laws of a jurisdiction designated by
the United States Secretary of the Treasury under Section 311 or 312 of the USA
PATRIOT Act as warranting special measures due to money laundering concerns.

 

The representations and warranties in Section 4.1 shall survive the termination
of this Agreement and such representations and warranties may not be waived by
any party hereto.

 

The representations and warranties set forth in this Section 4.1 shall survive
the sale, transfer and assignment of the Purchased Assets to the Buyer.  Upon
discovery by the Seller or the Buyer of a breach of any of the foregoing
representations and warranties, the party discovering such breach shall give
prompt written notice thereof to the other immediately upon obtaining knowledge
of such breach.

 

Section 4.2                                   Seller’s Representations and
Warranties Regarding the Agreement and the Loans.

 

The Seller hereby represents and warrants to the Buyer, as of each Purchase Date
that:

 

(a)                                  Binding Obligation; Valid Transfer and
Security Interest.

 

(i)                                     This Agreement and each of the Sale
Papers constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by Insolvency Laws and except as

 

14

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

 

such enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity) or by an implied covenant of good
faith and fair dealing.

 

(ii)                                  This Agreement constitutes a valid sale,
assignment and conveyance to the Buyer of all right, title and interest of the
Seller in, to and under the Purchased Assets, and such transfer is free and
clear of any Lien of any Person claiming through or under the Seller or its
Affiliates.

 

(b)                                 Eligibility of Loans.  As of each Purchase
Date, (i) the Loan List delivered in connection therewith is an accurate and
complete listing in all material respects of all the Loans and the other
Purchased Assets transferred hereunder as of such date and the information
contained therein with respect to the identity of such Loans and the other
Purchased Assets and the amounts owing thereunder is true and correct in all
material respects as of such date, (ii) each such Loan is an Eligible Loan,
(iii) each such Loan and the Seller’s interest in the Related Property and other
related Purchased Assets, has been transferred absolutely to the Buyer free and
clear of any lien of any Person and in compliance, in all material respects,
with all requirements of laws applicable to the Seller and (iv) with respect to
each such Loan and other related Purchased Assets, all consents, licenses,
approvals or authorizations of or registrations or declarations with any
Governmental Authority required to be obtained, effected or given by the Seller
in connection with the transfer of such Loan and the Related Property and other
related Purchased Assets to the Buyer have been duly obtained, effected or given
and are in full force and effect.

 

(c)                                  No Fraud.  Each Loan was originated without
any fraud or material misrepresentation by the Seller or to the best of the
Seller’s knowledge, on the part of the Obligor.

 

(d)                                 Representations; Covenants and Notice of
Breach.  The representations and warranties set forth in this Sections 4.1 and
4.2 shall be true and correct and the covenants set forth in Article VI to be
performed shall have been performed, in each case as of each Purchase Date and,
further, shall survive the transfer and assignment of the respective Loans,
Related Property and other related Purchased Assets, or interests therein, to
the Buyer.  Upon discovery by the Seller or the Buyer of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give written notice thereof to the other immediately upon obtaining
knowledge of such breach.

 

Section 4.3                                   Representations and Warranties of
the Buyer.

 

The Buyer hereby represents and warrants to the Seller, as of the Closing Date
and each Purchase Date, that:

 

(a)                                  Organization and Good Standing.  The Buyer
is a trust duly organized and validly existing in good standing under the laws
of the State of Delaware, and has full trust power, authority and legal right to
own its properties and conduct its business as such properties are presently
owned and such business is presently conducted, and to execute, deliver and
perform its obligations under this Agreement and each of the Sale Papers.

 

15

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

 

(b)                                 Due Qualification.  The Buyer is duly
qualified to do business and is in good standing as a foreign corporation (or is
exempt from such requirements), and has obtained or will obtain all necessary
licenses and approvals, in each jurisdiction in which failure to so qualify or
to obtain such licenses and approvals would have a material adverse effect on
its ability to perform its obligations hereunder or under the Sale Papers.

 

(c)                                  Due Authorization.  The execution and
delivery of this Agreement and each of the Sale Papers and the consummation of
the transactions provided for herein or therein have been duly authorized by the
Buyer by all necessary corporate action on the part of the Buyer.

 

(d)                                 Agreement Enforceable.  This Agreement
constitutes the legal, valid and binding obligation of the Buyer enforceable
against the Buyer in accordance with its terms, except as such enforceability
may be limited by Insolvency Laws and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at law or
in equity).

 

(e)                                  No Conflicts.  The execution and delivery
of this Agreement and each of the Sale Papers, the performance of the
transactions contemplated hereby or thereby and the fulfillment of the terms
hereof and thereof will not conflict with, result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or lapse
of time or both) a material default under, any material indenture, loan,
agreement, mortgage, deed of trust, or other instrument to which the Buyer is a
party or by which it or any of its property is bound.

 

(f)                                    No Violation.  The execution and delivery
of this Agreement and each of the Sale Papers, the performance of the
transactions contemplated hereby and thereby, and the fulfillment of the terms
hereof and thereof (including, without limitation, the purchase of Purchased
Assets by the Buyer in accordance with the provisions of this Agreement) will
not conflict with or violate, in any material respect, any requirements of law
applicable to the Buyer.

 

(g)                                 No Proceedings.  There are no proceedings or
investigations pending or, to the best knowledge of the Buyer, threatened
against the Buyer, before any court, regulatory body, administrative agency, or
other tribunal or governmental instrumentality (i) asserting the invalidity of
this Agreement or any of the Sale Papers, (ii) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement or any of
the Sale Papers, or (iii) seeking any determination or ruling that could
reasonably be expected to be adversely determined, and if adversely determined,
would materially and adversely affect the performance by the Buyer of its
obligations under this Agreement or any of the Sale Papers.

 

(h)                                 Separate Entity.  The Buyer is operated as
an entity with assets and liabilities distinct from those of the Seller and any
Affiliates thereof, and the Buyer hereby acknowledges that the Deal Agent, the
Conduit Lender and the Swingline Lender under the Loan Funding Agreement are
entering into the transactions contemplated by the Loan Funding Agreement in
reliance upon the Buyer’s identity as a separate legal entity from the Seller
and from each Affiliate of the Seller.

 

16

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

 

ARTICLE V

 

PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS

 

Section 5.1                                   Custody of Loans.

 

The contents of each Loan File shall be held in the custody of the Collateral
Custodian under the terms of the Loan Funding Agreement for the benefit of the
Deal Agent, as agent for the Secured Parties.

 

Section 5.2                                   Filing.

 

On or prior to the Closing Date, the Seller shall cause the UCC financing
statement(s) referred to in subsection 2.1(f) hereof to be filed.

 

Section 5.3                                   Name Change or Relocation.

 

(a)                                  During the term of this Agreement, the
Seller shall not change its name, identity, structure, existence or location (as
defined in Article 9 of the UCC) without first giving at least thirty (30) days’
prior written notice to the Buyer, the Deal Agent and the Collateral Custodian.

 

(b)                                 If any change in the Seller’s name,
identity, structure, existence, location (as defined in Article 9 of the UCC) or
other action would make any financing or continuation statement or notice of
ownership interest or Lien relating to any Purchased Asset seriously misleading
within the meaning of applicable provisions of the UCC or any title statute, the
Seller, no later than five (5) Business Days after the effective date of such
change, shall file such amendments as may be required to preserve and protect
the Buyer’s, the Deal Agent’s and the Collateral Custodian’s interests in the
Purchased Assets and the proceeds thereof.

 

Section 5.4                                   Chief Executive Office.

 

During the term of this Agreement, and subject to the other terms and provisions
herein relating to changes in location, the Seller will maintain its chief
executive office in one of the States of the United States.

 

Section 5.5                                   Costs and Expenses.

 

The Seller hereby confirms that the Servicer will pay all reasonable costs and
disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of the Buyer’s and the Secured
Parties’ right, title and interest in and to the Purchased Assets (including,
without limitation, the security interest in the Related Property related
thereto and the security interests provided for in the Loan Funding Agreement).

 

Section 5.6                                   Sale Treatment.

 

The Seller shall treat the transfer of Purchased Assets made hereunder for all
purposes (other than for federal income tax and financial accounting purposes)
as a sale and purchase on all of its relevant books, records, financial
statements and other applicable documents.

 

17

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

 

Section 5.7                                   Separateness from Buyer.

 

The Seller agrees to take or refrain from taking or engaging in with respect to
the Buyer each of the actions or activities specified in the “substantive
consolidation” opinion of Winston & Strawn (including any certificates of the
Seller attached thereto), delivered on the Closing Date, upon which the
conclusions therein are based.

 

ARTICLE VI

COVENANTS

 

Section 6.1                                   Seller Covenants.

 

The Seller hereby covenants that:

 

(a)                                  Preservation of Corporate Existence.  The
Seller will preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges in the jurisdiction of its formation, and qualify
and remain qualified in good standing in each jurisdiction where the failure to
maintain such existence, rights, franchises, privileges and qualification has
had, or could reasonably be expected to have, a Material Adverse Effect.

 

(b)                                 Security Interests.  Except for the
transfers hereunder, the Seller will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any lien on any
Loan transferred hereunder or, except for Permitted Liens, on any Related
Property or other Purchased Assets, whether now existing or hereafter
transferred hereunder, or any interest therein, and Seller will not sell,
pledge, assign or suffer to exist any lien on any Purchased Asset.  The Seller
will immediately notify the Buyer of the existence of any lien on any Loan
transferred hereunder or on any Related Property or other Purchased Asset; and
the Seller shall defend the right, title and interest of the Buyer in, to and
under the Loans transferred hereunder and the Related Property or other
Purchased Asset, against all claims of third parties.

 

(c)                                  Delivery of Collections.  Consistent with
the Buyer’s ownership of the Purchased Assets, in the event the Seller shall
receive any Collections in respect of any Purchased Assets after the Purchase
Date therefore, the Seller agrees to promptly pay to the Buyer, or an account
designated by the Buyer, (but in no event later than two (2) Business Days after
receipt) such Collections.  Further, on or before the related Purchase Date for
any Purchased Asset, the Seller shall instruct all banks or financial
institutions to which Collections received from the related Obligor are directed
to (i) change the name on all accounts at such banks or financial institutions
in which such Collections are deposited (each an “Obligor Account”) to the name
of the Buyer, to the extent any such account is in the name of the Seller or any
Affiliate of the Seller (other than the Buyer) such that such Obligor Account
shall be in the name of the Buyer and shall be a segregated account and the
funds deposited therein shall not be commingled with other funds of the Buyer,
Seller or any Affiliate thereof and (ii) Buyer shall notify each such bank or
financial institution and the Lockbox Bank to transfer all funds on deposit in
each Obligor Account to the Lockbox Account, by wire transfer in immediately
available funds two times on each day on which such bank or financial
institution is open for business.

 

(d)                                 Compliance with Law.  The Seller hereby
agrees to comply in all material respects with all requirements of laws
applicable to the Seller, the Loans and the Related Property and the related
Purchased Assets.

 

18

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

 

(e)                                  Activities of the Seller.  The Seller shall
not engage in any business or activity of any kind with the Buyer, or enter into
any transaction or indenture, mortgage, instrument, agreement, loan, lease or
other undertaking with the Buyer, which is not directly related to the
transactions contemplated and authorized by this Agreement, the other Sale
Papers, and the Trust Agreement of the Buyer.

 

(f)                                    Guarantees.  The Seller shall not become
or remain liable, directly or contingently, in connection with any Indebtedness
or other liability of the Buyer, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in the ordinary
course of business), agreement to purchase or repurchase, agreement to supply or
advance funds, or otherwise, except as contemplated by this Agreement and the
other Sale Papers.

 

(g)                                 Merger; Sales.  The Seller shall not enter
into any transaction of merger or consolidation, or liquidate or dissolve itself
(or suffer any liquidation or dissolution), or acquire or, subject to Section
10.15 be acquired by any Person, or convey, sell, lease or otherwise dispose of
all or substantially all of its property or business, except as provided for in
this Agreement.

 

(h)                                 ERISA Matters.  The Seller will not (a)
engage in any prohibited transaction for which an exemption is not available or
has not previously been obtained from the United States Department of Labor; (b)
permit to exist any accumulated funding deficiency, as defined in Section 302(a)
of ERISA and Section 412(a) of the Code, or funding deficiency with respect to
any Benefit Plan other than a Multiemployer Plan; (c) fail to make any payments
to an Multiemployer Plan that the Seller may be required to make under the
agreement relating to such Multiemployer Plan or any law pertaining thereto; (d)
terminate any Benefit Plan so as to result in any liability; or (e) permit to
exist any occurrence of any reportable event described in Title IV of ERISA that
represents a material risk of a liability of the Seller under ERISA or the Code.

 

Section 6.2                                   Delivery of Loan Files.

 

(a)                                  The Seller shall deliver, on behalf of the
Buyer, possession of all “instruments” (within the meaning of Article 9 of the
UCC) not constituting part of “chattel paper” (within the meaning of Article 9
of the UCC) that evidence any Purchased Asset set forth on a Loan List,
including all Underlying Notes, and all portions of the Loan Files to the
Collateral Custodian on behalf of the Secured Parties prior to the applicable
Purchase Dates in each case endorsed in blank without recourse; provided,
however, notwithstanding the foregoing, in connection with any Loan to be
purchased by the Seller with the proceeds of a Swingline Advance, the Seller
shall (i) have a copy of the executed Underlying Note faxed to the Collateral
Custodian on the applicable Purchase Date with the original to be received by
the Collateral Custodian within two (2) Business Days after such Purchase Date
and (ii) within ten (10) Business Days of the Purchase Date deliver all other
portions of the Loan File to the Collateral Custodian in each case endorsed in
blank without recourse.  Pursuant to Section 7.10 of the Loan Funding Agreement,
the Seller is required to deliver such instruments and Loan Files to the
Collateral Custodian for the benefit of the Secured Parties.  Accordingly, the
Seller shall deliver possession of all such instruments and Loan Files to the
Collateral Custodian on behalf of the Buyer and for the account of Deal Agent,
as agent for the Secured Parties, and agrees that such delivery shall

 

19

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

 

satisfy the condition set forth in the first sentence of this subsection
6.2(a).  The Seller shall also identify on the Loan List (including any
amendment thereof), whether by attached schedule or marking or other effective
identifying designation, all Purchased Assets that are evidenced by such
instruments.

 

(b)                                 Prior to the occurrence of a Termination
Event or Servicer Termination Event, the Collateral Custodian shall not record
the Assignments of Mortgage delivered pursuant to subsection 6.2(a) and the
definition of Loan Documents.  Upon the occurrence of a Termination Event or a
Servicer Termination Event, the Collateral Custodian shall cause to be recorded
in the appropriate offices each Assignment of Mortgage delivered to it with
respect to all Purchased Assets except those Purchased Assets covered by the
proviso to the definition of Assignment of Mortgage.  Each such recording shall
be at the expense of the Servicer; provided, however, to the extent the Servicer
does not pay such expenses, the Collateral Custodian shall be reimbursed
pursuant to the provisions of Section 2.9.

 

Section 6.3                                   Release of Released Amounts.

 

Immediately upon the release to the Buyer by the Deal Agent of the Released
Amounts, the Buyer hereby irrevocably agrees to release to the Seller such
Released Amounts, which release shall be automatic and shall require no further
act by the Buyer; provided, that, the Buyer shall execute and deliver such
instruments of release and assignment, or otherwise confirming the foregoing
release of any Released Amounts, as may be reasonably requested by the Seller.

 

ARTICLE VII
REPURCHASE OBLIGATION

 

Section 7.1                                   Repurchase of Ineligible Loans.

 

(a)                                  In the event of a breach of any
representation or warranty set forth in Section 4.2 with respect to a Loan or
other Purchased Asset transferred hereunder (each such Loan, Related Property
and other Related Purchased Asset, an “Ineligible Loan”), no later than thirty
(30) days after the earlier of (i) knowledge of such breach on the part of the
Seller and (ii) receipt by the Seller of written notice thereof given by the
Buyer, the Seller shall either (a) repurchase each such Ineligible Loan to which
such breach relates on the terms and conditions set forth below, or (b)
substitute for such Ineligible Loan a Substitute Loan; provided, however, that
no such repurchase shall be required to be made with respect to such Ineligible
Loan (and such Loan shall cease to be an Ineligible Loan) if, on or before the
expiration of such thirty (30) day period, the representations and warranties in
Section 4.2 with respect to such Ineligible Loan shall be made true and correct
in all material respects with respect to such Ineligible Loan as if such
Ineligible Loan had been transferred to the Buyer on such day.  Notwithstanding
anything contained in this Section 7.1 to the contrary, in the event a of breach
of any representation and warranty set forth in Section 4.2 with respect to each
Loan, Related Property and other related Purchased Assets having been (A)
conveyed to the Buyer free and clear of any Lien of any Person claiming through
or under the Seller and its Affiliates and (B) in compliance, in all material
respects, with all requirements of laws applicable to the Seller, immediately
upon the earlier to occur of the discovery of such breach by the Seller or
receipt by the Seller of written notice of such breach given by the Buyer, the
Seller shall repurchase and the Buyer shall convey,

 

20

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

 

free and clear of any Lien created pursuant to this Agreement or the Loan
Funding Agreement, all of the Buyer’s right, title and interest in such
Ineligible Loan, and the Buyer shall, in connection with such conveyance and
without further action, be deemed to represent and warrant that it has the
corporate authority and has taken all necessary corporate action to accomplish
such conveyance, but without any other representation or warranty, express or
implied.  In the foregoing instances, the Seller shall repurchase each such
Ineligible Loan and on and after the date of such repurchase, each Ineligible
Loan so repurchased shall not be included in the pool of Purchased Assets.  In
consideration of any such repurchase the Seller shall, on the date of repurchase
of such Ineligible Loan, remit to the Buyer in immediately available funds an
amount equal to the Retransfer Price therefore.  Upon each repurchase of such
Ineligible Loan, the Buyer shall automatically and without further action be
deemed to transfer, assign and set-over to the Seller all the right, title and
interest of the Buyer in, to and under such Ineligible Loan and all monies due
or to become due with respect thereto, all proceeds thereof and all rights to
security for any such Ineligible Loan, and all proceeds and products of the
foregoing.  The Buyer shall, at the sole expense of the Seller, execute such
documents and instruments of transfer as may be prepared by the Seller and take
such other actions as shall reasonably be requested by the Seller to effect the
transfer of such Ineligible Loan pursuant to this Section 7.1.

 

(b)                                 The Seller hereby agrees that (i) if any
real property collateral securing any Purchased Asset becomes the subject of any
claims, proceedings, Liens or encumbrances with respect to any material
violation or claimed material violation of any federal or state environmental
laws or regulations or (ii) in the event of a breach of a representation and
warranty in subsection 4.1(cc), such Purchased Assets shall for all purposes
hereunder be, at and following the time of discovery by the Seller, the Buyer,
the Deal Agent or any Secured Party of such fact, deemed an Ineligible Loan, and
the Seller shall either (1) repurchase such Ineligible Loan or (2) substitute
for such Ineligible Loan a Substitute Loan.  Such Ineligible Loan shall
otherwise be treated in accordance with subsection 7.1(a) above and shall be
subject to the same remedial and recourse provisions hereunder as other
Purchased Assets determined to be Ineligible Loans hereunder.

 

Section 7.2                                   Substitution of Loans.

 

On any day prior to the occurrence of a Termination Event (and after the
Termination Date at the discretion of the Buyer), the Seller may, subject to the
conditions set forth in this Section 7.2 and subject to the other restrictions
contained herein, replace any Loan included in the Purchased Assets with one or
more Eligible Loans (each, a “Substitute Loan”), provided that no such
replacement shall occur unless each of the following conditions is satisfied as
of the date of such replacement and substitution:

 

(a)                                  the Seller has recommended to the Buyer
(with a copy to the Deal Agent and the Collateral Custodian) in writing that the
Loan included in the Purchased Assets to be replaced should be replaced (each a
“Replaced Loan”);

 

(b)                                 each Substitute Loan is an Eligible Loan on
the date of substitution;

 

(c)                                  the aggregate Outstanding Loan Balance of
such Substitute Loans shall be equal to or greater than the aggregate
Outstanding Loan Balance of the Replaced Loans;

 

21

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

 

(d)                                 all representations and warranties of the
Seller contained in Sections 4.1 and 4.2 shall be true and correct as of the
date of substitution of any such Substitute Loan;

 

(e)                                  the substitution of any Substitute Loan
does not cause a Termination Event or Unmatured Termination Event to occur;

 

(f)                                    as of any date of determination, the sum
of the Outstanding Loan Balances of all Substitute Loans does not exceed 20% of
the highest Aggregate Outstanding Loan Balance of any month during the twelve
(12) month period immediately preceding such date of determination;

 

(g)                                 as of any date of determination, the sum of
the Outstanding Loan Balances of all Substitute Loans substituted for Defaulted
Loans, Charged-Off Loans and Loans subject to a Warranty Event shall not exceed
10% of the highest Aggregate Outstanding Loan Balance of any month during the
twelve (12) month period immediately preceding such date of determination;

 

(h)                                 the remaining maturity of the Substitute
Loan is less than or equal to the remaining maturity of the Replaced Loan;

 

(i)                                     the weighted average life of such
Substitute Loan is less than or equal to that of the Replaced Loan;

 

(j)                                     no adverse selection procedures shall
have been employed in the selection of such Substitute Loan from the Seller’s
portfolio;

 

(k)                                  all actions or additional actions (if any)
necessary to perfect the security interest and assignment of such Substitute
Loan and related Collateral to the Buyer shall have been taken as of or prior to
the Substitution Date;

 

(l)                                     the Eligible Risk Rating of the
Substitute Loan is equal to or higher than the Replaced Loan;

 

(m)                               the current interest rate on the Substitute
Loan is not less than the current interest rate on the Loan to be replaced and
reconveyed to the Originator in exchange for such Substitute Loan;

 

(n)                                 the total interest rate (inclusive of any
deferred interest component) of the Substitute Loan is greater than or equal to
the interest rate on the Loan to be replaced and reconveyed to the Originator in
exchange for such Substitute Loan; and

 

(o)                                 the Seller shall deliver to the Buyer on the
date of such substitution a certificate of a Responsible Officer certifying that
each of the foregoing is true and correct as of such date.

 

In addition, the Seller shall in connection with such substitution deliver to
the Collateral Custodian the related Loan Documents.  In connection with any
such substitution, the Buyer, shall, automatically and without further action,
be deemed to transfer to the Seller, free and clear of any Lien created in favor
of the Buyer, all of the right, title and interest of the Buyer, in, to

 

22

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

 

and under such Replaced Loan, but without any representation and warranty of any
kind, express or implied.

 

Section 7.3                                   Deemed Collections.

 

If on any day the Buyer does not own or have a valid and perfected first
priority security interest in any Loan and Related Property included in the
Purchased Assets, upon the earlier of the Seller’s receipt of notice from the
Buyer or the Deal Agent, or the Seller’s becoming aware thereof, and the
Seller’s failure to cure such breach within thirty (30) days, the Seller shall
be deemed to have received on such day a collection (a “Deemed Collection”) of
such Loan in full and shall on such day pay to the Buyer, an amount equal to the
Outstanding Loan Balance of such Loan.  In connection with any such Deemed
Collection, the Buyer, shall automatically and without further action, be deemed
to transfer to the Seller, free and clear of any Lien created by the Buyer, all
of the right, title and interest of the Buyer, in, to, and under the Loan with
respect to which the Buyer has received such Deemed Collection, but without any
recourse, representation and warranty of any kind, express or implied.

 

ARTICLE VIII
CONDITIONS PRECEDENT

 

Section 8.1                                   Conditions to the Buyer’s
Obligations Regarding Loans.

 

The obligations of the Buyer to purchase Purchased Assets from the Seller on any
Purchase Date shall be subject to the satisfaction of the following conditions:

 

(a)                                  all representations and warranties of the
Seller contained in Sections 4.1 and 4.2 shall be true and correct in all
material respects on and as of such day as though made on and as of such date;

 

(b)                                 on and as of such date, the Seller shall
have performed all obligations required to be performed by it on or prior to
such day pursuant to the provisions of this Agreement;

 

(c)                                  no event has occurred and is continuing, or
would result from such purchase that constitutes a Termination Event or
Unmatured Termination Event;

 

(d)                                 no law or regulation shall prohibit, and no
order, judgment or decree of any federal, state or local court or governmental
body, agency or instrumentality shall prohibit or enjoin, the making of any such
purchase by the Buyer in accordance with the provisions hereof; and

 

(e)                                  all corporate and legal proceedings and all
instruments in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to the Buyer, and the Buyer shall
have received from the Seller copies of all documents (including, without
limitation, records of corporate proceedings, approvals and opinions) relevant
to the transactions herein contemplated as the Buyer may reasonably have
requested.

 

23

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

 

ARTICLE IX
TERM AND TERMINATION

 

Section 9.1                                   Termination.

 

(a)                                  This Agreement shall commence as of the
date of execution and delivery hereof and shall continue in full force and
effect until the Collection Date;

 

(b)                                 Notwithstanding any provisions contained
herein to the contrary, the Seller’s representations, covenants and obligations
set forth in Article IV, V, VI, and VII create and constitute the continuing
obligation of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the Collection Date; provided, however, that the
rights and remedies with respect to any breach of any representation and
warranty made or deemed made by the Seller pursuant to Articles III and IV and
the provisions of Section 7.1, 7.2 and 7.3, the indemnification and payment
provisions of Sections 10.17 and 10.18 and the provisions of Sections 10.5,
10.6, 10.7, 10.9, 10.10, 10.13, 10.15 and 10.16 shall be continuing and shall
survive any termination of this Agreement.

 

ARTICLE X
MISCELLANEOUS PROVISIONS

 

Section 10.1                            Amendment.

 

This Agreement and the rights and obligations of the parties hereunder may not
be amended, waived or changed orally, but only by an instrument in writing
signed by the Buyer and the Seller and consented to in writing by the Deal
Agent.  The Buyer shall provide not less than ten (10) Business Days prior
written notice of any such amendment to the Deal Agent.

 

Section 10.2                            Governing Law.

 

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.  EACH OF THE PARTIES HERETO HEREBY AGREES TO THE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK.  EACH OF
THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS,
AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE
AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

 

Section 10.3                            Notices.

 

All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including telex communication and
communication by facsimile copy) and mailed, telexed, transmitted or delivered,
as to each party hereto, at its address set forth below or at such other address
as shall be designated by such party in a written notice to the other party
hereto.  All such notices and communications shall be effective upon receipt, or
in the case of (a) notice by mail, five days after being deposited in the United
States mail, first class

 

24

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

 

postage prepaid, (b) notice by telex, when telexed against receipt of answer
back, or (c) notice by facsimile copy, when verbal communication of receipt is
obtained.

 

(a)                                  In the case of notice to the Buyer, to:

 

ACS Funding Trust I
c/o American Capital Strategies, Ltd.
2 Bethesda Metro Center, 14th Floor
Bethesda, MD  20814
Attention:  Compliance Officer
Facsimile No.:  (301) 654-6714
Confirmation No.:  (301) 951-6122

 

(b)                                 In the case of notice to the Seller, to:

 

American Capital Strategies, Ltd.
2 Bethesda Metro Center, 14th Floor
Bethesda, MD  20814
Attention:  Compliance Officer
Facsimile No.:  (301) 654-6714
Confirmation No.:  (301) 951-6122

 

(c)                                  In the case of notice to the Deal Agent,
to:

 

Wachovia Securities, LLC
One Wachovia Center, Mail Code:  NC0610
Charlotte, North Carolina  28288
Attention:  Conduit Administration
Facsimile No.:  (704) 383-4012
Confirmation No.:  (704) 374-6230

 

Section 10.4                            Severability of Provisions.

 

If any one or more of the covenants, agreements, provisions or terms of this
Agreement or any of the Sale Papers shall for any reason whatsoever be held
invalid, then such covenants, agreements, provisions, or terms shall be deemed
severable from the remaining covenants, agreements, provisions, or terms of this
Agreement and the Sale Papers and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or any of the Sale
Papers.

 

Section 10.5                            Assignment.

 

(a)                                  Notwithstanding anything to the contrary
contained herein, this Agreement may not be assigned by the Buyer or the Seller
except as permitted by this Section 10.5.  Simultaneously with the execution and
delivery of this Agreement, the Buyer shall hereby assign all of its right,
title and interest herein to the Deal Agent, as agent for the Secured Parties
under the Loan Funding Agreement, as provided in the Loan Funding Agreement, to
which assignment the Seller hereby expressly consents.  The Seller agrees that
the Deal Agent, as agent for the

 

25

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

 

Secured Parties under the Loan Funding Agreement, shall be a third party
beneficiary hereof.  The Deal Agent, as agent for the Secured Parties under the
Loan Funding Agreement, may enforce the provisions of this Agreement, exercise
the rights of the Buyer and enforce the obligations of the Seller hereunder as
provided in the Loan Funding Agreement.  This Agreement may not be assigned by
the Seller except in connection with a merger or consolidation of the Seller
with or into, or disposition of the Seller’s properties and assets to, another
Person; provided, however, that any such merger, consolidation or disposition
shall satisfy the requirements of Section 10.13, and shall be upon not less than
ten (10) Business Days’ prior written notice to the Buyer and the Deal Agent.

 

(b)                                 The Seller acknowledges that, pursuant to
the Loan Funding Agreement, the Buyer shall assign its rights of indemnity
granted hereunder to the Deal Agent, the Conduit Lender, the Swingline Lender,
the other Secured Parties, the Backup Servicer and the Collateral Custodian. 
Upon such assignment, (i) the Deal Agent, the Conduit Lender, the Swingline
Lender, the other Secured Parties, the Backup Servicer and the Collateral
Custodian as applicable, shall have all rights of the Buyer hereunder and may in
turn assign such rights, and (ii) the obligations of the Seller under Section
10.18 shall inure to the Deal Agent, the Conduit Lender, the Swingline Lender,
the other Secured Parties, the Backup Servicer and the Collateral Custodian. 
The Seller agrees that, upon such assignment, the Deal Agent, the Conduit
Lender, the Swingline Lender, the other Secured Parties, the Backup Servicer and
the Collateral Custodian or the assignee of any such Person, as applicable, may
enforce directly, without joinder of the Buyer, the indemnities set forth in
Section 10.18.

 

(c)                                  In connection with any permitted assignment
of this Agreement by the Seller, the Seller shall deliver to the Buyer and the
Deal Agent an Officer’s Certificate that such assignment complies with this
Section 10.5, and shall cause such assignee  to execute an agreement
supplemental hereto, in form and substance satisfactory to the Seller, pursuant
to which such assignee shall expressly assume and agree to the performance of
every covenant and obligation of the Seller hereunder, to provide for the
delivery of an Opinion of Counsel that such supplemental agreement is legal,
valid and binding with respect to such assignee, and to take such other actions
and execute such other instruments as may reasonably be required to effectuate
such assignment.

 

Section 10.6                            Further Assurances.

 

The Buyer and the Seller agree to do and perform, from time to time, any and all
acts and to execute any and all further instruments required or reasonably
requested by the other party more fully to effect the purposes of this Agreement
and the Sale Papers, including, without limitation, the execution of any
financing statements, continuation statements, termination statements, releases
or equivalent documents relating to the Purchased Assets for filing under the
provisions of the UCC or other applicable laws of any applicable jurisdiction.

 

Section 10.7                            No Waiver; Cumulative Remedies.

 

No failure to exercise and no delay in exercising, on the part of the Buyer or
the Seller, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other

 

26

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

 

or further exercise thereof or the exercise of any other right, remedy, power or
privilege.  The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privilege
provided by law.

 

Section 10.8                            Counterparts.

 

This Agreement may be executed in two or more counterparts including telefax
transmission thereof (and by different parties on separate counterparts), each
of which shall be an original, but all of which together shall constitute one
and the same instrument.

 

Section 10.9                            Binding Effect; Third-Party
Beneficiaries.

 

Except as otherwise specifically provided herein, the parties hereto hereby
manifest their intent that no third party, other than the Deal Agent and each
Secured Party shall be deemed a third party beneficiary of this Agreement, and
specifically that the Obligors are not third party beneficiaries of this
Agreement.

 

Section 10.10                     Liabilities to Obligors.

 

No obligation or liability to any Obligor under any of the Loans is intended to
be assumed by the Buyer, the Deal Agents and the Secured Parties, under or as a
result of this Agreement and the transactions contemplated hereby.

 

Section 10.11                     Merger and Integration.

 

Except as specifically stated otherwise herein, this Agreement, together with
the Loan Funding Agreement and the other Transaction Documents, to the extent
that a party is a signatory thereto, sets forth the entire understanding of the
parties relating to the subject matter hereof, there are no other agreements
between the parties for transactions relating to or similar to the transactions
contemplated by this Agreement, and all prior understandings, written or oral,
are superseded by this Agreement.  This Agreement may not be modified, amended,
waived or supplemented except as provided herein.

 

Section 10.12                     Headings.

 

The headings of the various Articles and Sections herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.

 

Section 10.13                     No Bankruptcy Petition; Disclaimer.

 

(a)                                  Each of the Seller and the Buyer covenants
and agrees that, prior to the date that is one (1) year and one (1) day after
the Collection Date, it will not institute against the Buyer, or join any other
Person in instituting against the Buyer, any Insolvency Proceeding under the
laws of the United States or any state of the United States.  This Section 10.13
will survive the termination of this Agreement.

 

27

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

 

The provisions of this Section 10.13 shall be for the third party benefit of
those entitled to rely thereon, including the Deal Agent and the Secured
Parties, and shall survive the termination of this Agreement.

 

Section 10.14                     Schedules and Exhibits.

 

The schedules and exhibits attached hereto and referred to herein shall
constitute a part of this Agreement and are incorporated into this Agreement for
all purposes.

 

Section 10.15                     Merger or Consolidation of, or Assumption of
the Obligations of, the Seller.

 

(a)                                  Subject to Section 10.15(b), the Seller
will keep in full force and effect its existence, rights and franchises as a
Delaware corporation, and the Seller will obtain and preserve its qualification
to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and of any of the Loans and to perform its
duties under this Agreement.

 

(b)                                 The Seller shall not consolidate or merge
with or into, or sell, lease or transfer all or substantially all of its assets
to, any other Person, unless in the case of any such action (i) no Termination
Event or Material Adverse Effect would occur or be reasonably likely to occur as
a result of such transaction, (ii) the Buyer and the Deal Agent provide their
prior written consent to such transaction and (iii) such Person executes and
delivers to the Deal Agent an agreement by which such Person assumes the
obligations of the Seller hereunder and under the other Transaction Documents to
which it is a party, or confirms that such obligations remain enforceable
against it, together with such certificates and opinions of counsel as the Deal
Agent may reasonably request.

 

Section 10.16                     [Reserved.]

 

Section 10.17                     Costs, Expenses and Taxes.

 

(a)                                  The Seller agrees to pay on demand all
costs and expenses of the Buyer incurred in connection with the preparation,
execution, delivery, administration (including periodic auditing), amendment or
modification of, or any waiver or consent issued in connection with, this
Agreement and the other documents to be delivered hereunder or in connection
herewith to which the Seller is a party, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Buyer with respect
thereto and with respect to advising the Buyer as to its rights and remedies
under this Agreement and the other documents to be delivered hereunder or in
connection herewith to which the Seller is a party, and all costs and
out-of-pocket expenses, if any (including reasonable counsel fees and expenses),
incurred by the Buyer in connection with the enforcement of this Agreement and
the other documents to be delivered hereunder or in connection herewith to which
the Seller is a party.

 

(b)                                 The Seller shall pay on demand any and all
stamp, sales, excise and other taxes (excluding income and franchise taxes of
the Buyer) and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of this Agreement or any agreement or
other document delivered in connection with this Agreement.

 

28

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

 

(c)                                  The Seller shall pay on demand all other
costs, expenses and taxes (excluding income taxes) (“Other Costs”), including,
without limitation, all reasonable costs and expenses incurred by the Deal Agent
in connection with periodic audits of the Borrower’s or the Servicer’s books and
records, the cost of rating VFCC’s commercial paper by independent financial
rating agencies, which are incurred as a result of the execution of this
Agreement, and the amount of any taxes and insurance due and unpaid by an
Obligor with respect to any Transferred Loan or Related Property.

 

Section 10.18                     Indemnities by the Seller.

 

(a)                                  Without limiting any other rights that any
such Person may have hereunder or under Applicable Law, the Seller hereby agrees
to indemnify the Buyer, the Deal Agent, the Backup Servicer, the Collateral
Custodian, any Secured Party or its assignee and each of their respective
Affiliates and officers, directors, employees and agents thereof (collectively,
the “Indemnified Parties”), forthwith on demand, from and against any and all
damages, losses, claims, liabilities and related costs and expenses, including
reasonable attorneys’ fees and disbursements (all of the foregoing being
collectively referred to as “Indemnified Amounts”) awarded against or incurred
by, any such Indemnified Party or other non-monetary damages of any such
Indemnified Party any of them arising out of or as a result of this Agreement,
excluding, however, Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of any Indemnified Party.

 

(b)                                 Any amounts subject to the indemnification
provisions of this Section 10.18 shall be paid by the Seller to the Indemnified
Party within two (2) Business Days following such Person’s demand therefor.

 

(c)                                  If for any reason the indemnification
provided above in this Section 10.18 is unavailable to the Indemnified Party or
is insufficient to hold an Indemnified Party harmless, then the Seller, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by such Indemnified Party on the
one hand and the Seller, on the other hand but also the relative fault of such
Indemnified Party as well as any other relevant equitable considerations.

 

(d)                                 The obligations of the Seller under this
Section 10.18 shall survive the removal of the Deal Agent, the Backup Servicer
or the Collateral Custodian and the termination of this Agreement.

 

(e)                                  The parties hereto agree that the
provisions of Section 10.18 shall not be interpreted to provide recourse to the
Seller against loss by reason of the bankruptcy, insolvency or lack of
creditworthiness of or nonpayment by an Obligor on any Loan.

 

Section 10.19                     Recourse Against Certain Parties.

 

(a)                                  No recourse under or with respect to any
obligation, covenant or agreement (including, without limitation, the payment of
any fees or any other obligations) of the Seller as contained in this Agreement
or any other agreement, instrument or document entered into by it pursuant
hereto or in connection herewith shall be had against any administrator of the
Seller or

 

29

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

 

any incorporator, officer, employee, shareholder or director of the Seller or of
any such administrator, as such, by the enforcement of any assessment or by any
legal or equitable proceeding, by virtue of any statute or otherwise; it being
expressly agreed and understood that the agreements of the Seller contained in
this Agreement and all of the other agreements, instruments and documents
entered into by it pursuant hereto or in connection herewith are, in each case,
solely the corporate obligations of the Seller, and that no personal liability
whatsoever shall attach to or be incurred by any administrator of the Seller or
any incorporator, officer, employee, shareholder or director of the Seller or of
any such administrator, as such, or any other them, under or by reason of any of
the obligations, covenants or agreements of the Seller contained in this
Agreement or in any other such instruments, documents or agreements, or that are
implied therefrom, and that any and all personal liability of every such
administrator of the Seller and each incorporator, officer, employee or director
of the Seller or of any such administrator, or any of them, for breaches by the
Seller of any such obligations, covenants or agreements, which liability may
arise either at common law or at equity, by statute or constitution, or
otherwise, is hereby expressly waived as a condition of and in consideration for
the execution of this Agreement.  The provisions of this Section 10.19(a) shall
survive the termination of this Agreement.

 

(b)                                 No recourse under or with respect to any
obligation, covenant or agreement (including, without limitation, the payment of
any fees or any other obligations) of the Buyer as contained in this Agreement
or any other agreement, instrument or document entered into by it pursuant
hereto or in connection herewith shall be had against any administrator of the
Buyer or any incorporator, officer, employee, shareholder or director of the
Buyer or of any such administrator, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise; it being expressly agreed and understood that the agreements of the
Buyer contained in this Agreement and all of the other agreements, instruments
and documents entered into by it pursuant hereto or in connection herewith are,
in each case, solely the corporate obligations of the Buyer, and that no
personal liability whatsoever shall attach to or be incurred by any
administrator of the Buyer or any incorporator, officer, employee, shareholder
or director of the Buyer or of any such administrator, as such, or any other
them, under or by reason of any of the obligations, covenants or agreements of
the Buyer contained in this Agreement or in any other such instruments,
documents or agreements, or that are implied therefrom, and that any and all
personal liability of every such administrator of the Buyer and each
incorporator, officer, employee or director of the Buyer or of any such
administrator, or any of them, for breaches by the Buyer of any such
obligations, covenants or agreements, which liability may arise either at common
law or at equity, by statute or constitution, or otherwise, is hereby expressly
waived as a condition of and in consideration for the execution of this
Agreement.  The provisions of this Section 10.19(b) shall survive the
termination of this Agreement.

 

(c)                                  From and after the Closing Date, the Buyer
shall have the right, in its discretion, to direct all Obligors to henceforth
direct their payments to the respective Obligor Account.

 

30

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

 

Section 10.20                     Sharing of Payments on Loans Subject to
Retained Interest Provisions.

 

(a)                                  With respect to any Loan (including,
without limitation, any Revolving Loan) included in the Purchased Assets subject
to the Retained Interest provisions of this Agreement, the Buyer will own only
the principal portion of such Loans outstanding as of the applicable Cut-off
Date.  Principal Collections received by the Servicer on any such Loan will be
allocated first to the portion of such Loan owned by the Buyer, until the
principal amount of such portion is reduced to zero, and then to the portion not
owned by the Buyer; provided, however, (i) if a payment with respect to such
Loan is Delinquent beyond any applicable grace period, (ii) a Termination Event
occurs or (iii) a Servicer Termination Event occurs, then Principal Collections
received on (x) the applicable Loan (in the case of clause (i) above) or (y) all
the Loans included in the Purchased Assets subject to the Retained Interest
provisions of this Agreement (in the case of clauses (ii) or (iii) above) will
be allocated between the portion not owned by the Buyer and the portion owned by
the Buyer, pro rata based upon the outstanding principal amount of each such
portion.

 

(b)                                 With respect to any Loan (including, without
limitation, any Revolving Loan) included in the Purchased Assets subject to the
Retained Interest provisions of this Agreement, Interest Collections received by
the Servicer on those Loans will be allocated between the portion owned by the
Buyer and the portion not owned by the Buyer on a pro rata basis according to
the outstanding principal amount of each such portion.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

31

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

 

IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.

 

 

 

ACS FUNDING TRUST I, as the Buyer

 

 

 

 

 

By:

 

 

Name:  Malon Wilkus

 

Title:  Beneficiary Trustee

 

 

 

ACS Funding Trust I

 

c/o American Capital Strategies, Ltd.

 

2 Bethesda Metro Center, 14th Floor

 

Bethesda, Maryland 20814

 

Attention:  Malon Wilkus, Beneficiary Trustee

 

Facsimile No.:  (301) 654-6714

 

Confirmation No.:  (301) 951-6122

 

 

 

 

 

AMERICAN CAPITAL STRATEGIES, LTD.,

 

as the Seller

 

 

 

 

 

By:

 

 

Name:  John Erickson

 

Title:  Executive Vice President, Chief Financial Officer and Secretary

 

 

 

American Capital Strategies, Ltd.

 

2 Bethesda Metro Center, 14th Floor

 

Bethesda, Maryland 20814

 

Attention:

Compliance Officer

 

Facsimile No.:

(301) 654-6714

 

Confirmation No.:

(301) 951-6122

 

S-1

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

 

Acknowledge and Agreed to:

 

WACHOVIA SECURITIES, LLC

(f/k/a First Union Capital Markets Corp.),

as the Deal Agent

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Wachovia Securities, LLC

One Wachovia Center, Mail Code:  NC0610

Charlotte, North Carolina 28288

Attention:

Conduit Administration

Facsimile No.:

(704) 383-6036

Telephone No.:

(704) 383-9343

 

S-2

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

 

SCHEDULE I

 

LOAN LIST

 

[to be delivered for initial Purchase]

 

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

 

EXHIBIT A

 

FORM OF SALE ASSIGNMENT

 

SALE ASSIGNMENT, dated as of                                      , from
AMERICAN CAPITAL STRATEGIES, LTD., a Delaware corporation (the “Seller”), to ACS
FUNDING TRUST I, a Delaware statutory  trust (the “Buyer”).

 

1.                                       We refer to the Amended and Restated
Purchase and Sale Agreement, dated as of June 13, 2003 (as amended, modified,
supplemented or restated from time to time, the “Agreement”), by and between the
Seller and the Buyer.  All capitalized terms used herein shall have the meanings
set forth in the Agreement.

 

2.                                       On the terms and subject to the
conditions set forth in this Agreement, on each Purchase Date, the Seller hereby
sells, assigns, sets over and otherwise conveys, and the Buyer hereby purchases
and takes from the Seller all right, title, and interest, whether now owned or
hereafter acquired or arising, and wherever located, of the Seller in all
accounts, general intangibles, instruments, chattel paper, documents, money,
letters of credit, advices of credit, deposit accounts, certificates of deposit,
investment property, goods, and other property consisting of, arising out of, or
related to any of the following property (the items in (i) – (ix) below, but in
each case excluding any Retained Interest and Excluded Amounts, being
collectively referred to as the “Purchased Assets”):

 

(i)                                     the Loans that are identified by the
Seller as of the initial Cut-off Date, which are listed on Schedule I hereto,
and the Loans that are listed on Schedule I to any Assignment, and all monies
due or to become due in payment of such Loans on and after the related Cut-Off
Date, including but not limited to all Collections but excluding any Retained
Interest and any Excluded Amounts;

 

(ii)                                  any Related Property securing such Loans
(to the extent the Seller, other than solely in its capacity as collateral agent
under any loan agreement with an Obligor has been granted a Lien thereon)
including all proceeds from any sale or other disposition of such Related
Property;

 

(iii)                               all security interests, liens, guaranties,
warranties, letters of credit, accounts, bank accounts, mortgages or other
encumbrances and property subject thereto from time to time purporting to secure
or support payment of such Loans, together with all UCC financing statements or
similar filings signed by an Obligor relating thereto;

 

(iv)                              all Insurance Policies;

 

(v)                                 the Loan Documents;

 

(vi)                              the Pledge Agreement and a security interest
in all Supplemental Interests related to such Loans;

 

A-1

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

 

(vii)                           the Collection Account, the Excess Spread
Account, each Lock Box and all Lock Box Accounts, together with all funds held
in such accounts, and all certificates and instruments, if any, from time to
time representing or evidencing each of the foregoing or such funds (to the
extent of the Seller’s interest therein, if any);

 

(viii)                        the “Purchased Assets” under and as defined in the
Original Purchase Agreement; and

 

(ix)                                all income and proceeds of the foregoing.

 

3.                                       Simultaneously with the execution and
delivery hereof the Seller has delivered to or at the direction of the Buyer
such endorsements and assignments, made without recourse, of the Loan Files as
are necessary to properly complete the absolute assignment of the Purchased
Assets to the Buyer.

 

4.                                       THIS CERTIFICATE OF ASSIGNMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS CHOICE OF LAW PROVISIONS.

 

IN WITNESS WHEREOF, the Seller has caused this Assignment to be executed by its
authorized officer as of the date first above written.

 

 

AMERICAN CAPITAL STRATEGIES, LTD.,

 

as the Seller

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

A-2

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

 

EXHIBIT B

 

[FORM OF ]

 

NOTICE OF SALE

 

AMERICAN CAPITAL STRATEGIES, LTD.

 

I,                                                             ,
                                    of American Capital Strategies, Ltd., a
Delaware corporation, as the seller (together with its successors and assigns in
such capacity, the “Seller”) hereby certify that, with respect to that certain
Amended and Restated Purchase and Sale Agreement (as amended, modified,
supplemented or restated from time to time, the “Agreement”), dated as of June
13, 2003, by and between the Seller, and ACS Funding Trust I, a Delaware
statutory trust, as the buyer (together with its successors and assigns in such
capacity, the “Buyer”).

 

Seller hereby certifies as follows:

 

1.                                       The Purchase to be made will be in
accordance with the following terms:

 

(a)                                  The aggregate Purchase Price of such
Purchase shall be $                 .

 

(b)                                 The date of such Purchase shall be
                                     .

 

2.                                       The representations and warranties
contained in Sections 4.1 and 4.2 of the Agreement are true and correct as
though made on the date thereof.

 

3.                                       On and as of such day, Seller has each
performed in all material respects all of the agreements contained in the
Agreement and all other Transaction Documents to which it is a party, to be
performed by Seller at or prior to such day.

 

4.                                       No law, rule or regulation prohibits,
and no order, judgment or decree of any federal, state or local court or
governmental body, agency or instrumentality prohibits or enjoins, the making of
such Purchase.

 

IN WITNESS WHEREOF, the undersigned has caused this Purchase Notice to be duly
executed this                 day of                  ,         .

 

 

AMERICAN CAPITAL STRATEGIES, LTD.,

 

as the Seller

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

B-1

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