EXHIBIT 10.1



 Exhibit 10.1 
  
 EXECUTION COPY 
  
 THIRD AMENDMENT TO LOAN FUNDING AND SERVICING AGREEMENT  
 (Fairway Finance Company Transaction with ACS Funding Trust II) 
  
 THIS THIRD AMENDMENT TO THE LOAN FUNDING AND SERVICING AGREEMENT, dated as of April 20, 2005 (this “Third Amendment”), is entered
into by and among ACS FUNDING TRUST II, a Delaware statutory trust, as the borrower (together with its successors and assigns in such capacity, the “Borrower”), AMERICAN CAPITAL STRATEGIES, LTD., a Delaware
corporation, as the servicer (together with its successors and assigns in such capacity, the “Servicer”), FAIRWAY FINANCE COMPANY, LLC, a Delaware limited liability company, as the conduit lender (together with its successors
and assigns in such capacity, the “Conduit Lender”), HARRIS NESBITT CORP., a Delaware corporation (“Harris Nesbitt”), as the Agent (together with its successors and assigns in such capacity, the
“Agent”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, not in its individual capacity, but solely as the backup servicer (together with its successors and assigns in such capacity, the
“Backup Servicer”) and as the collateral custodian (together with its successors and assigns in such capacity, the “Collateral Custodian”). Capitalized terms used and not otherwise defined herein shall have the
meanings given to such terms in the Agreement (as defined below). 
  
 RECITALS 
  
 WHEREAS, the parties hereto
entered into that certain Loan Funding and Servicing Agreement, dated as of June 30, 2004 (such agreement as amended, modified, supplemented, waived or restated from time to time, the “Agreement”); 
  
 WHEREAS, the parties hereto desire to amend the Agreement in certain
respects as provided herein; 
  
 NOW, THEREFORE, based upon
the above Recitals, the mutual premises and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows: 
  
 SECTION 1. AMENDMENTS. 
  
 (a) The Table of Contents is hereby amended by inserting, in appropriate
numerical sequence, the following: 
  
 “SCHEDULE VI
[Reserved]” 
 “SCHEDULE VII [Reserved]”. 







 (b) The following definitions in Section 1.1 of the Agreement are hereby amended as described below:

  
 (1) The definition of “Adjusted Advance Rate” is
hereby deleted in its entirety. 
  
 (2) The definition of
“Aggregate Outstanding Loan Balance” is hereby amended by deleting the words “Delinquent Loans,”. 
  
 (3) The definition of “Aggregate Purchased Loan Balance” is hereby amended by deleting the words “Delinquent Loans,”. 
  
 (4) The definition of “Concentration Limits” is hereby amended as
follows: 
  
 (i) clause (b) thereof is amended by
replacing the words “(i) which are in the same Industry shall not exceed 10%; and (ii) which are in the same S&P Industry Classification shall not exceed 10%”, with the words “which are in the same Industry shall not exceed
10%;”. 
  
 (ii) clause (i) thereof is
amended by replacing the number “12%” with the number “11%” and by replacing the number “9%” with the number “8%”. 
  
 (iii) clause (l) thereof is amended by replacing the words “shall not exceed 65%” with the words “shall not exceed
75%.”; 
  
 (iv) clause (o) thereof is
amended by replacing the words “shall not exceed 20%” with the words “shall not exceed 40%.”; 
  
 (v) clause (p) thereof is amended by replacing the words “shall not exceed 30%” with the words “shall not exceed
50%.”; 
  
 (5) The definition of “Defaulted Loan”
is hereby amended by deleting the words “Delinquent Loan or”. 
  
 (6) The definition of “Delinquent Loan” is hereby deleted in its entirety. 
  
 (7) The definition of “Diversity Score” is hereby deleted in its entirety. 
  
 (8) The definition of “Eligible Obligor” is hereby amended by replacing, in clause (vi) thereof, the words “forty-five (45)” with the
words “thirty (30)”. 
  
 (9) The definition of
“Industry Classification Group” is hereby deleted in its entirety. 
  
 (10) The definition of “Industry Diversity Score” is hereby deleted in its entirety. 
  

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 (11) The definition of “Minimum Overcollateralization Amount” is hereby replaced in its
entirety as follows: 
  
 “Minimum Overcollateralization
Amount: As of any date of determination, an amount equal to the sum of (I) the greater of (a) the product of (i) the Borrowing Base on such date times (ii) a percentage equal to 1.00 minus the Weighted Average Advance Rate and (b)
the Required Equity Contribution, plus (II) the Aggregate Net Mark to Market Amount, as reported in the most recent Monthly Report.”. 
  
 (12) The definition of “Rating Agency” is hereby replaced in its entirety as follows: 
  
 “Rating Agency: Each rating agency, if any, that has been
requested to issue a rating with respect to the Commercial Paper Notes issued by the Issuers.”. 
  
 (13) The definition of “Ratings Confirmation” is hereby amended by replacing the words “each of S&P and Moody’s” with the
words “each Rating Agency, if any”. 
  
 (14) The
definition of “Recapitalized Loans” is hereby amended by replacing the words “unless each of S&P and the Agent, in their respective sole discretion” with the words “unless the Agent, in its sole discretion”.

  
 (15) The definition of “Required Equity
Contribution” is hereby replaced in its entirety as follows: 
  
 “Required Equity Contribution: As of any date of determination prior to the Termination Date, an Equity Contribution equal to (a) on any date on which the total number of Obligors of Loans included in the Collateral is less than
or equal to 14, the sum of the Outstanding Loan Balances of the ten largest Transferred Loans and (b) on any date on which the total number of Obligors of Loans included in the Collateral exceeds 14, $43,750,000.” 
  
 (16) The definition of “S&P Industry Classification” is hereby
deleted in its entirety. 
  
 (17) The definition of “S&P
Industry Diversification Table” is hereby deleted in its entirety. 
  
 (18) The definition of “Weighted Average Advance Rate” is hereby amended by replacing, in clause (a)(i) thereof, the number “65%” with the number “70%”. 
  
 (c) Section 2.1(d) of the Agreement is hereby amended by deleting the text
“, it being understood that the Borrower and the Agent will work with S&P, Moody’s or, at the Agent’s discretion, another Rating Agency to obtain a reconfirmation of the rating as provided in Section 3.1(e) as a Condition
Precedent to the extension of the Commitment Termination Date” from clause (ii) thereof. 
  

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 (d) Section 2.17(a) of the Agreement is hereby amended by deleting, from clause (iii) thereof, the words,
“the Diversity Score of the Aggregate Outstanding Loan Balance shall be greater than or equal to the Required Diversity Score, (F)”. 
  
 (e) Section 3.1(e) is hereby replaced in its entirety as follows: 
  
 “(e) [Reserved];”. 
  
 (f) Section 3.1(f) is hereby replaced in its entirety as follows: 
  
 “(f) [Reserved];”. 
  
 (g) Section 4.1(hh) is hereby replaced in its entirety as follows: 
  
 “(hh) [Reserved];”. 
  
 (h) Section 7.13(b)(iii) is hereby amended by deleting clause (E) thereof in its entirety and by making conforming changes to the alphabetical sequence of
the remaining items listed therein. 
  
 (i) Section 9.1(d) of the
Agreement is hereby replaced in its entirety as follows: 
  
 “(d) [Reserved]; or”. 
  
 (j) Section 9.1(p) is
hereby replaced in its entirety as follows: 
  
 “(p)
[Reserved];”. 
  
 (k) Section 12.1(c) is hereby replaced in
its entirety as follows: 
  
 “(c) [Reserved];”.

  
 (l) Schedule VI to the Agreement and Annex I thereto is hereby
replaced by Schedule VI attached hereto. 
  
 (m) Schedule VII to
the Agreement and Annex I thereto is hereby replaced by Schedule VII attached hereto. 
  
 SECTION 2. AGREEMENT IN FULL FORCE AND EFFECT AS AMENDED. 
  
 Except as specifically amended hereby, all provisions of the Agreement shall remain in full force and effect. After this Third Amendment becomes
effective, all references to the Agreement, the “Loan Funding and Servicing Agreement,” “hereof,” “herein,” or words of similar effect referring to the Agreement shall be deemed to mean the Agreement as amended hereby.
This Third Amendment shall not constitute a novation of the Agreement, but shall constitute an amendment thereof. This Third Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Agreement other than
as expressly set forth herein. 
  

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 SECTION 3. REPRESENTATIONS. 
  
 Each of the Borrower and Servicer represent and warrant as of the date of this Third Amendment as follows: 
  
 (i) it is duly incorporated or organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or organization; 
  
 (ii) the execution, delivery and performance by it of this Third Amendment are within its powers, have been duly authorized, and do not
contravene (A) its charter, by- laws, or other organizational documents, or (B) any Applicable Law; 
  
 (iii) no consent, license, permit, approval or authorization of, or registration, filing or declaration with any governmental authority,
is required in connection with the execution, delivery, performance, validity or enforceability of this Third Amendment by or against it; 
  
 (iv) this Third Amendment has been duly executed and delivered by it; 
  
 (v) this Third Amendment constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally or by general principles of equity;

  
 (vi) it is not in default under the
Agreement; and 
  
 (vii) there is no Termination
Event, Unmatured Termination Event, or Servicer Termination Event. 
  
 SECTION 4. CONDITIONS TO EFFECTIVENESS. 
  
 This Third Amendment shall become effective on the date (such date, the “Effective Date”) on which: 
  
 (a) each party hereto has delivered an executed signature page hereto to the Agent; and 
  
 (b) The Agent shall have received written confirmation from S&P that the rating assessment of the facility contemplated
by the Agreement is at least “A”. 
  

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 SECTION 5. MISCELLANEOUS. 
  
 (a) This Third Amendment may be executed in any number of counterparts (including by facsimile), and by the different
parties hereto on the same or separate counterparts, each of which shall be deemed to be an original instrument but all of which together shall constitute one and the same agreement. 
  
 (b) The descriptive headings of the various sections of this Third Amendment are inserted for convenience of reference only
and shall not be deemed to affect the meaning or construction of any of the provisions hereof. 
  
 (c) This Third Amendment may not be amended or otherwise modified except as provided in the Agreement. 
  
 (d) The failure or unenforceability of any provision hereof shall not affect the other provisions of this Third Amendment. 
  
 (e) Whenever the context and construction so require, all words used in the
singular number herein shall be deemed to have been used in the plural, and vice versa, and the masculine gender shall include the feminine and neuter and the neuter shall include the masculine and feminine. 
  
 (f) This Third Amendment represents the final agreement between the parties
only with respect to the subject matter expressly covered hereby and may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements between the parties. There are no unwritten oral agreements between the parties.

  
 (g) THIS THIRD AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 
  
 [Remainder of Page Intentionally Left Blank] 
  

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

			
	ACS FUNDING TRUST II, as the Borrower
		
	By:	 	 /s/ Malon Wilkus


	Name:	 	 Malon Wilkus


	Title:	 	 Beneficiary Trustee


	
	ACS Funding Trust II
	c/o 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
	
	AMERICAN CAPITAL STRATEGIES, LTD.,
as the Servicer
		
	By:	 	 /s/ John Erickson


	Name:	 	 John Erickson


	Title:	 	 Executive Vice President and
Chief Financial Officer


	
	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


  
 [SIGNATURES
CONTINUED ON FOLLOWING PAGE] 








			
	FAIRWAY FINANCE COMPANY, LLC,
	as the Conduit Lender
		
	By:	 	 /s/ Jill A. Gordon


	Name:	 	 Jill A. Gordon


	Title:	 	 Vice President


	
	Fairway Finance Company, LLC
	c/o Lord Securities Corporation
	48 Wall Street, 27th Floor
	New York, New York 10005
	Attention:
	Facsimile No.                (212) 346-9012
	Telephone No.               (212) 346-9000
	
	With a copy to:
	
	c/o Harris Nesbitt Corp.
	115 South LaSalle Street
	13th Floor West
	Chicago, Illinois 60603
	Attention: Kevin Gibbons
	Facsimile No.                (312) 293-4908
	Telephone No.               (312) 461-5542


  
 [SIGNATURES
CONTINUED ON FOLLOWING PAGE] 








			
	HARRIS NESBITT CORP., as the Agent
		
	By:	 	 /s/ Kevin P. Gibbons


	Name:	 	 Kevin P. Gibbons


	Title:	 	 Managing Director


		
	By:	 	 /s/ David J. Kucera


	Name:	 	 David J. Kucera


	Title:	 	 Managing Director


	
	Harris Nesbitt Corp.
	115 South LaSalle Street
	13th Floor West
	Chicago, Illinois 60603
	Attention:                      Kevin Gibbons
	Facsimile No.                (312) 293-4908
	Telephone No.               (312) 461-5542


  
 [SIGNATURES
CONTINUED ON FOLLOWING PAGE] 








			
	WELLS FARGO BANK, NATIONAL
ASSOCIATION, as the Backup Servicer and as the
Collateral Custodian
		
	By:	 	 /s/ Edna Barber


	Name:	 	 Edna Barber


	Title:	 	 Assistant Vice President


	
	Wells Fargo Bank, National Association
	MAC N9311-161
	Sixth Street and Marquette Avenue
	Minneapolis, MN 55479
	Attention:                     Corporate Trust Services
	                                      Asset-Backed
Administration
	Facsimile No.:              (612) 667-3539
	Confirmation No.:        (612) 667-8058









 Schedule VI 
 to Loan Funding 
 and Servicing Agreement 
  
 [Reserved] 







 Schedule VII 
 to Loan Funding 
 and Servicing Agreement 
  
 [Reserved]