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Exhibit 10.7    
  

 
 

AMENDMENT NO. 11 TO
  LOAN FUNDING AND SERVICING AGREEMENT
  (VFCC Transaction with ACS Funding Trust I)    
  

        THIS AMENDMENT NO. 11 TO LOAN FUNDING AND SERVICING AGREEMENT, dated as of December 30, 2002 (this
"Amendment"), is entered into by and among ACS FUNDING TRUST I, as the borrower (in such capacity, the "Borrower"), AMERICAN CAPITAL
STRATEGIES, LTD., as the servicer (in such capacity, the "Servicer"), certain INVESTORS, VARIABLE FUNDING CAPITAL CORPORATION, as a lender (in such capacity, a
"Lender"), WACHOVIA SECURITIES, INC. (f/k/a First Union Securities, Inc. and successor-in-interest to First Union Capital Markets
Corp.), as the deal agent (in such capacity, the "Deal Agent"), WACHOVIA BANK, NATIONAL ASSOCIATION (f/k/a First Union National Bank)
("WBNA"), as a lender (in such capacity, a "Lender") and as the liquidity agent (in such capacity, the "Liquidity
Agent"), WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION (f/k/a Norwest Bank Minnesota, National Association), as the collateral custodian (in such capacity, the
"Collateral Custodian") and as the backup servicer (in such capacity, the "Backup Servicer"), and is acknowledged and agreed to by WACHOVIA
BANK, NATIONAL ASSOCIATION (f/k/a First Union National Bank), as the hedge counterparty (in such capacity, the "Hedge Counterparty"). Capitalized terms used and not
otherwise defined herein shall have the meanings given to such terms in the Agreement (as defined below). 

 
 

R E C I T A L S    
  

        WHEREAS, the parties hereto entered into that certain Loan Funding and Servicing Agreement, dated as of
March 31, 1999, as amended by that Amendment No. 1, dated as of June 30, 1999, Amendment No. 2, dated as of September 24, 1999, Amendment No. 3, dated as of
December 14, 1999, Amendment No. 4, dated as of June 16, 2000, Amendment No. 5, dated as of December 20, 2000, Amendment No. 6, dated as of March 29,
2001, Amendment No. 7, dated as of April 19, 2001, Amendment No. 8, dated as of January 15, 2002, Amendment No. 9, dated as of March 29, 2002 and Amendment
No. 10, dated as of June 24, 2002 (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
following definitions in Section 1.1 of the Agreement are hereby amended and restated in their entirety as follows: 

        "Borrowing Base: On any date of determination, an amount equal to (a) the sum of (i) the Aggregate Purchased Loan Balance on
such date and (ii) the Purchased Loan Balance of all Eligible Loans to become included as part of the Collateral on such date minus (b) the Hedging Agreement Valuation Differential." 

        "Facility Amount: (a) prior to the Facility Increase Expiration Date, $275,000,000; and (b) on and after the Facility
Increase Expiration Date, $225,000,000; provided, however, on and after the Termination Date, the Facility Amount shall be
zero." 

        "Facility Increase Expiration Date: January 31, 2003." 

        "Required Notional Amount: For any day, an amount equal to the product of (a)(i) from December 1, 2002 through and including
February 28, 2003, 60% and (ii) on and after March 1, 2003, 75% and (b) the Advances Outstanding on such day." 

 

        (b)  Section 1.1
of the Agreement is amended by adding the following new definition: 

        "Hedging Agreement Valuation Differential: As of each Determination Date, an amount equal to the positive difference (if any) between
(i) the negative valuation of the Hedging Agreement (from the Borrower's perspective) as of such Determination Date as determined on a "marked to market" basis by the Hedge Counterparty and set
forth in a written notice provided by such Hedge Counterparty to the Borrower and the Deal Agent, minus (ii) $3,215,200." 

        (c)  Paragraphs
(g) and (h) of the definition of "Concentration Limits" in Section 1.1 of the Agreement are hereby amended
and restated in their entirety as follows: 

        "(g) the
sum of the Outstanding Loan Balances of Eligible Loans that have at least a portion of the monthly or quarterly interest that is due under such Loans payable on a
current basis by the Obligors thereof in cash (or such Obligors shall have other Loans included as part of the Collateral that pay monthly or quarterly interest on a current basis in cash) shall not
be less than 100%; and 

        (h)  the
sum of the Outstanding Loan Balances of each Eligible Loan which is a PIK Loan and which is either (a) a Fixed Rate Loan having a Loan Rate of less than 12%
per annum or (b) a Floating Rate Loan having a Loan Rate of less than 9% per annum, shall not exceed 0%." 

        (d)  Subsection
2.1(a) of the Agreement is hereby amended by adding the following sentence to the end thereof. 

        "Notwithstanding
anything to the contrary contained herein or in the other Transaction Documents, from and during the time that the Advances Outstanding (after giving effect to any
Advance requested on a Funding Date) exceed $225,000,000, each Advance shall be made in the sole and absolute discretion of the Deal Agent." 

        (e)  Article II
of the Agreement is hereby amended by amending and restating the first sentence of
Section 2.5(a) thereof as follows: 

        "Section 2.5    The Structured Notes.    

        (a)  The
Borrower shall deliver to the Deal Agent, on behalf of the Lenders, at the applicable address set forth on the signature pages of this Agreement, a duly executed
structured note, in the form of Exhibit B-2 (the "VFCC Structured Note"), dated as of the date of this Agreement, in a face
amount prior to the Facility Increase Expiration Date equal to $275,000,000 and on and after the Facility Increase Expiration Date, $225,000,000, and otherwise duly completed in the case of VFCC
Advances and a duly executed structured note, in the form of Exhibit B-1 (the "WBNA Structured Note") dated as of the date
of this Agreement, in a face amount equal to the $30,000,000, and otherwise duly
completed in the case of WBNA Advances (the VFCC Structured Note together with the WBNA Structured Note, the "Notes"); provided,
however, that notwithstanding anything to the contrary contained herein or in any other Transaction Document, the indebtedness of the Borrower evidenced by the
Notes shall not in the aggregate exceed the Facility Amount." 

        (f)    Subsection
6.25(a)(x) of the Agreement is hereby amended and restated in its entirety as follows: 

        "(x)
the Servicer fails to maintain a minimum Net Worth of at least $500,000,000 plus seventy-five (75%) percent of any new equity and
Subordinated Debt issued after September 30, 2002; or" 

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        (g)  Subsection
7.1(c) of the Agreement is hereby amended and restated in its entirety as follows: 

        "(c)
the amount of Advances Outstanding shall exceed the lesser of (i) the product of (A) the Borrowing Base on such date and (B) 75%, or (ii) the Facility
Amount, for more than three (3) Business Days; or" 

        (h)  The
Commitment of WBNA as an Investor set forth on the signature pages of the Agreement is hereby amended and restated to be "(a) prior to the Facility Increase
Expiration Date, $275,000,000; and (b) on and after the Facility Increase Expiration Date, $225,000,000; provided,
however, that the sum of the Commitments of the Investors and the Lender shall not exceed the Facility Amount." 

        SECTION 2.    Increase in Facility Amount and Amount of VFCC Structured
Note.    

        Effective
on the date of this Amendment, the Facility Amount shall be increased to $275,000,000 until the Facility Increase Expiration Date in accordance with the definition of Facility
Amount in Section 1.1 of the Agreement; provided, that, the Deal Agent shall have first
received an executed version of the amended, restated and substituted VFCC Structured Note attached to this Amendment as Annex A (the "New
Note"). Such New Note shall replace and supersede any VFCC Structured Note previously executed by the Borrower pursuant to the Agreement (the "Replaced
Note"). Such New Note evidences the same indebtedness, and is secured by the same Collateral as the Replaced Note. The Deal Agent shall return the Replaced Note to the Borrower. 

        SECTION 3.    Waiver.    

        Pursuant
to and in accordance with the provisions of Section 11.1 of the Agreement, each of the undersigned hereby agrees to waive
non-compliance with the provisions of (i) subsection 5.3(a)(iii) of the Agreement with respect to the Required Notional Amount for the month of
November 2002, and (ii) subsection 6.25(a)(x) with respect to the minimum Net Worth of the Servicer for the months of October 2002 and
November 2002. This is a one-time waiver and shall not be construed to be (i) a waiver as to non-compliance with the any other covenants in
subsection 5.3(a) or any other Servicer Termination Event that exists, (ii) a waiver as to any future or other non-compliance with the covenants in
subsection 5.3(a)(iii) or subsection 6.25(a)(x), other than as specifically set forth in the preceding sentence, (iii) a waiver of any
other or future Unmatured Termination Event or Termination Event that may exist, other than as specifically set forth in the preceding sentence, or (iv) an amendment or modification of the
Agreement. This limited waiver is expressly subject to the terms of this Amendment. 

        SECTION 4.    Agreement in Full Force and Effect as Amended and
Waived.    

        Except
as specifically amended and waived hereby, all provisions of the Agreement shall remain in full force and effect. After this 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 Amendment
shall not constitute a novation of the Agreement, but shall constitute an amendment and waiver thereof. This 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. 

        SECTION 5.    Representations.    

        Each
of the Borrower and Servicer represent and warrant as of the date of this 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; 

3

 

        (ii)  the
execution, delivery and performance by it of this Amendment are within its powers, have been duly authorized, and do not contravene (A) its charter, bylaws,
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 Amendment by or against it; 

        (iv)  this
Amendment has been duly executed and delivered by it; 

        (v)  this
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 6.    Conditions to Effectiveness.    

        This
effectiveness of this Amendment is conditioned upon the payment by the Servicer of all fees and expenses set forth on the Facility Increase Fee Letter Agreement dated as of the date
hereof among the Borrower, the Servicer and the Deal Agent. 

        SECTION 7.    Miscellaneous.    

        (a)  This
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 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
Amendment may not be amended or otherwise modified except as provided in the Agreement. 

        (d)  WBNA
certifies by execution hereof that it is an Investor with Commitments in excess of 662/3% of the Facility Amount, and therefore is a Required
Investor pursuant to the Agreement. 

        (e)  The
failure or unenforceability of any provision hereof shall not affect the other provisions of this Amendment. 

        (f)    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. 

        (g)  This
Amendment represents the final agreement between the parties 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. 

        (h)  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS.  

[Remainder of Page Intentionally Left Blank] 

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

	THE BORROWER:	 	ACS FUNDING TRUST I
 
	 	 	By:	 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

ACS Funding Trust I

c/o American Capital Strategies, Ltd.

2 Bethesda Metro Center, 14th Floor

Bethesda, Maryland 20814

Attention: Compliance Officer

Facsimile: (301) 654-6714

Telephone: (301) 951-6122
	
THE SERVICER:	
 	

AMERICAN CAPITAL STRATEGIES, LTD.
 
	 	 	By:	 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

American Capital Strategies, Ltd.

2 Bethesda Metro Center, 10 Floor

Bethesda, Maryland 20814

Attention: Compliance Officer

Facsimile: (301) 654-6714

Telephone: (301) 951-6122

[SIGNATURES
CONTINUED ON FOLLOWING PAGE] 

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	THE INVESTORS:	 	WACHOVIA BANK, NATIONAL ASSOCIATION

(f/k/a First Union National Bank)
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

Commitment: (a) prior to the Facility Increase Expiration Date, $275,000,000; and (b) on and after the Facility Increase Expiration Date, $225,000,000; provided, however, that the sum of
the Commitments of the Investors and the Lender shall not exceed the Facility Amount.
	

 	
 	

Wachovia Bank, National Association

One Wachovia Center, Mail Code: NC0610

301 South College Street

Charlotte, North Carolina 28288

Attention: Raj Shah

Facsimile: (704) 383-4012

Telephone: (704) 374-6230

[SIGNATURES
CONTINUED ON FOLLOWING PAGE] 

6

 

	LENDER:	 	VARIABLE FUNDING CAPITAL CORPORATION
 
	

 	
 	

By Wachovia Securities, Inc. (f/k/a First Union Securities, Inc. and successor-in-interest to First Union Capital Markets Corp.), as attorney-in-fact
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

Variable Funding Capital Corporation

c/o Wachovia Securities, Inc.

One Wachovia Center, Mail Code: NC0610

301 South College Street

Charlotte, North Carolina 28288

Attention: Conduit Administration

Facsimile: (704) 383-6036

Telephone: (704) 383-9343
	

                with a copy to:	
 	

 	
 	

 
	

 	
 	

Lord Securities Corp.

2 Wall Street, 19th Floor

New York, New York 10005

Attention: Vice President

Facsimile: (212) 346-9012

Telephone: (212) 346-9008

[SIGNATURES
CONTINUED ON FOLLOWING PAGE] 

7

 

	THE BACKUP SERVICER:	 	WELLS FARGO BANK MINNESOTA,

NATIONAL ASSOCIATION (f/k/a Norwest Bank Minnesota, National Association)
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

Wells Fargo Bank Minnesota, National Association

Sixth Street and Marquette, MAC: N9311-161

Minneapolis, Minnesota 55479

Attention: Corporate Trust Services

Asset-Backed Administration

Facsimile: (612) 667-3464

Telephone: (612) 667-8058
	
THE COLLATERAL CUSTODIAN:	
 	

WELLS FARGO BANK MINNESOTA,

NATIONAL ASSOCIATION (f/k/a Norwest Bank Minnesota, National Association)
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

Wells Fargo Bank Minnesota, National Association

Sixth Street and Marquette, MAC: N9311-161

Minneapolis, Minnesota 55479

Attention: Corporate Trust Services

Asset-Backed Administration

Facsimile: (612) 667-3464

Telephone: (612) 667-8058

[SIGNATURES
CONTINUED ON THE FOLLOWING PAGE] 

8

 

	THE DEAL AGENT:	 	WACHOVIA SECURITIES, INC.
 (f/k/a First Union Securities, Inc. successor-in-interest to First Union Capital Markets Corp.)
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

Wachovia Securities, Inc.

One Wachovia Center, Mail Code: NC0610

301 South College Street

Charlotte, North Carolina 28288

Attention: Mary K. Jett

Facsimile: (704) 383-4012

Telephone: (704) 383-0906
	
LENDER AND LIQUIDITY AGENT	
 	

WACHOVIA BANK, NATIONAL ASSOCIATION (f/k/a First Union National Bank)
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

Wachovia Bank, National Association

One Wachovia Center, Mail Code: NC0610

301 South College Street

Charlotte, North Carolina 28288

Attention: Raj Shah

Facsimile: (704) 383-4012

Telephone: (704) 374-6230
	

 	
 	

Lender Commitment: $30,000,000; provided, however, that the sum of the Commitments of the Investors and the Lender shall not exceed the Facility Amount.

[SIGNATURES
CONTINUED ON THE FOLLOWING PAGE] 

9

 

	Acknowledged and Agreed to

this 27th day of December, 2002.
	
WACHOVIA BANK, NATIONAL ASSOCIATION

(f/k/a First Union National Bank), as the Hedge Counterparty
	By:	 	

	Name:	 	

	Title:	 	

	

Wachovia Bank, National Association

One Wachovia Center, Mail Code: NC0610

Charlotte, North Carolina 28288

Attention: Raj Shah

Facsimile: (704) 383-4012

Telephone: (704) 374-6230

10

 
 

ANNEX A    
  

EXHIBIT B-2

To Loan Funding

and Servicing Agreement  

(a)
Prior to the Facility Increase Expiration

Date, $275,000,000, and (b) on and after the

Facility Increase Expiration

Date, $225,000,000; provided, however,

that the sum of the Commitments of

the Investors and the Lender shall not

exceed the Facility Amount. 

March 31,
1999 

 
 

AMENDED, RESTATED AND SUBSTITUTED
  VFCC STRUCTURED NOTE    
  

        THIS AMENDED, RESTATED AND SUBSTITUTED VFCC STRUCTURED NOTE (THE "VFCC STRUCTURED NOTE") HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES LAWS AND THE BORROWER (AS DEFINED BELOW) HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"). THIS VFCC STRUCTURED NOTE MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS EXCEPT IN A TRANSACTION THAT IS EXEMPTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. 

        THIS
VFCC STRUCTURED NOTE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE LOAN FUNDING AND SERVICING
AGREEMENT REFERRED TO HEREIN. 

        IN
NO EVENT SHALL THE BORROWER (DEFINED BELOW) BE ENTITLED TO HAVE ADVANCES MADE TO IT UNDER THIS VFCC STRUCTURED NOTE AND THE WBNA STRUCTURED NOTE IN AN AGGREGATE AMOUNT IN EXCESS OF
THE FACILITY AMOUNT (AS DEFINED IN THE LOAN FUNDING AND SERVICING AGREEMENT (AS DEFINED BELOW)). 

        FOR
VALUE RECEIVED, ACS FUNDING TRUST I, a Delaware business trust (the "Borrower"), promises to pay to WACHOVIA SECURITIES, INC. (f/k/a First Union
Securities, Inc. and successor-in-interest to First Union Capital Markets Corp.), as the deal agent for the Lenders (the "Deal Agent"), or
the Lenders' assigns, the principal sum of (a) prior to the Facility Increase Expiration Date, TWO HUNDRED AND SEVENTY-FIVE MILLION DOLLARS ($275,000,000) and (b) on and
after the Facility Increase Expiration Date, TWO HUNDRED AND TWENTY-FIVE MILLION DOLLARS ($225,000,000) or, if less, the unpaid principal amount of the aggregate advances
("Advances") made by the Lenders (as defined below) to the Borrower pursuant to the Loan Funding and Servicing Agreement (as defined below), as set forth on the attached
Schedule, on the dates specified in Section 2.6 of the Loan Funding and Servicing Agreement, and to pay interest on the unpaid principal amount of each Advance on
each day that such unpaid principal amount is outstanding at the Interest Rate related to such Advance as provided in the Loan Funding and Servicing Agreement on each Payment Date and each other dates
specified in the Loan Funding and Servicing Agreement. 

 

        This
VFCC Structured Note is issued pursuant to the Loan Funding and Servicing Agreement, dated as of March 31, 1999, as amended by Amendment No. 1, dated as of
June 30, 1999, Amendment No. 2, dated as of September 24, 1999, Amendment No. 3, dated as of December 14, 1999, Amendment No. 4, dated as of June 16,
2000, Amendment No. 5, dated as of December 20, 2000, Amendment No. 6, dated as of March 29, 200 1, Amendment No. 7, dated as of April 19, 200 1, Amendment
No. 8, dated as of January 15, 2002, Amendment No. 9, dated as of March 29, 2002, Amendment No. 10, dated as of June 24, 2002 and Amendment No. 11,
dated as of December 30, 2002 (as amended, modified, waived, supplemented, or restated from time to time, the "Loan Funding and Servicing Agreement"), by and among
the Borrower, American Capital Strategies, Ltd., as servicer, Variable Funding Capital Corporation, as a lender, the Investors named therein, Wells Fargo Bank Minnesota, National Association
(f/k/a Norwest Bank Minnesota, National Association), as backup servicer and as collateral
custodian, the Deal Agent, and Wachovia Bank, National Association (f/k/a First Union National Bank), as a lender and as liquidity agent. Capitalized terms used but not defined in this VFCC Structured
Note are used with the meanings ascribed to them in the Loan Funding and Servicing Agreement. 

        Notwithstanding
any other provisions contained in this VFCC Structured Note, if at any time the Interest Rate payable by the Paying Agent on behalf of the Borrower under this VFCC
Structured Note, when combined with any and all other charges provided for in this VFCC Structured Note, in the Loan Funding and Servicing Agreement or in any other document (to the extent such other
charges would constitute interest for the purpose of any applicable law limiting interest that may be charged on this VFCC Structured Note), exceeds the highest rate of interest permissible under
applicable law (the "Maximum Lawful Rate"), then so long as the Maximum Lawful Rate would be exceeded the Interest Rate under this VFCC Structured Note shall be equal to
the Maximum Lawful Rate. If at any time thereafter the Interest Rate payable under this VFCC Structured Note is less than the Maximum Lawful Rate, the Paying Agent on behalf of the Borrower shall
continue to pay Interest under this VFCC Structured Note at the Maximum Lawful Rate until such time as the total Interest paid by the Paying Agent on behalf of the Borrower is equal to the total
Interest that would have been paid had applicable law not limited the Interest Rate payable under this VFCC Structured Note. In no event shall the total Interest received by the Lenders under this
VFCC Structured Note exceed the amount which such Lenders could lawfully have received had the Interest due under this VFCC Structured Note been calculated since the date of this VFCC Structured Note
at the Maximum Lawful Rate. 

        Payments
of the principal of, and Interest on, the Advances by the Lenders and represented by this VFCC Structured Note shall be made by the Paying Agent on behalf of the Borrower to the
holder or holders hereof by wire transfer of immediately available funds in the manner and at the address specified for such purpose as provided in the Loan Funding and Servicing Agreement, or in such
manner or at such other address as the holder or holders of this VFCC Structured Note shall have specified in writing to the Borrower for such purpose, without the presentation or surrender of this
VFCC Structured Note or the making of any notation on this VFCC Structured Note. 

        If
any payment under this VFCC Structured Note falls due on a day that is not a Business Day, then such due date shall be extended to the next succeeding Business Day and Interest shall
be payable on any principal so extended at the applicable Interest Rate. 

        If
all or a portion of (i) the principal amount hereof or (ii) any Interest payable thereon or (iii) any other amounts payable hereunder shall not be paid when due
(whether at maturity, by acceleration or otherwise), such overdue amount shall bear Interest at a rate per annum that is equal to the Base Rate plus 1.0%, in each case
from the date of such non-payment to (but excluding) the date such amount is paid in full. 

        Portions
or all of the principal amount of the VFCC Structured Note shall become due and payable at the time or times set forth in the Loan Funding and Servicing Agreement. Any portion
or 

2

 

all of the principal amount of this VFCC Structured Note may be prepaid, together with Interest thereon (and, as set forth in the Loan Funding and Servicing Agreement, certain costs and expenses of
the Lenders) at the time and in the manner set forth in, but subject to the provisions of, the Loan Funding and Servicing Agreement. 

        The
Borrower expressly waives presentment, demand, diligence, protest and all notices of any kind whatsoever with respect to this VFCC Structured Note. 

        All
amounts evidenced by this VFCC Structured Note, the Advances, Advances Outstanding and all payments and prepayments of the principal hereof and the respective dates and maturity
dates thereof shall be endorsed by the Deal Agent, as agent for the Lenders, on the Schedule attached hereto and made a part hereof or on a continuation thereof, which shall be attached hereto and
made a part hereof or otherwise recorded in its internal books or records or computer system; provided, however, that the
failure of the Deal Agent to make such a notation or recordation shall not in any way limit or otherwise affect the obligations of the Borrower under this VFCC Structured Note as provided in the Loan
Funding and Servicing Agreement. 

        The
holder or holders hereof may sell, assign, transfer, negotiate, grant participations in or otherwise dispose of all or any portion of any Advance, Advances Outstanding or the
Commitment represented by this VFCC Structured Note. All transfers and pledges of this VFCC Structured Note must be done in compliance with the Securities Act, applicable state securities laws and
Article 8 of the UCC. 

        This
VFCC Structured Note is secured by the security interests granted pursuant to Section 2.9 of the Loan Funding and Servicing Agreement. The holder
or holders of this VFCC Structured Note are entitled to the benefits of the Loan Funding and Servicing Agreement and may enforce the agreements of the Borrower contained in the Loan Funding and
Servicing Agreement and exercise the remedies provided for by, or otherwise available in respect of, the Loan Funding and Servicing Agreement, all in accordance with, and subject to the restrictions
contained in, the terms of the Loan Funding and Servicing Agreement. If a Termination Event shall occur and the Termination Date has been declared or has otherwise occurred, the unpaid balance of the
principal of all Advances, together with accrued Interest thereon, shall be accelerated and become immediately due and payable. 

        This
VFCC Structured Note is one of the "Structured Notes" referred to in Section 2.5 of the Loan Funding and Servicing
Agreement. THIS VFCC STRUCTURED NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 

        This
VFCC Structured Note is intended to be and is a replacement of the VFCC Structured Note, dated March 31, 1999, in the maximum principal amount of, prior to the Facility
Increase Expiration Date, $275,000,000, and on and after the Facility Increase Expiration Date, $225,000,000 (the
"Replaced Note"). This VFCC Structured Note evidences the same indebtedness and is secured by the same Collateral securing the Replaced Note and is not intended to
constitute a novation in any manner. 

[Remainder
of Page Intentionally Left Blank] 

3

 

        IN
WITNESS WHEREOF, the undersigned has executed this VFCC Structured Note as on the date first written above. 

	 	 	ACS FUNDING TRUST I
 
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

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Schedule
attached to Amended, Restated and Substituted VFCC Structured Note dated March 31, 1999 of ACS Funding Trust I payable to the order of Wachovia Securities, Inc., as the Deal Agent 

	Advances Outstanding as of December 30, 2002

(Date of Amendment No. 11)
 	 	$

	
Date of

Advance or

Repayment
	
 	

Principal

Amount of

Advance
	
 	

Principal

Amount of

Repayment
	
 	

Advances

Outstanding

	

	

	

	

	

	

	

	

	

	

	

	

	

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QuickLinks

Exhibit 10.7

AMENDMENT NO. 11 TO LOAN FUNDING AND SERVICING AGREEMENT (VFCC Transaction with ACS Funding Trust I)

R E C I T A L S

ANNEX A

AMENDED, RESTATED AND SUBSTITUTED VFCC STRUCTURED NOTEQuickLinks
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Exhibit 10.8    
  

(a)
Prior to the Facility Increase Expiration

Date, $275,000,000, and (b) on and after the

Facility Increase Expiration

Date, $225,000,000; provided, however,

that the sum of the Commitments of

the Investors and the Lender shall not

exceed the Facility Amount. 

March 31,
1999 

 
 

AMENDED, RESTATED AND SUBSTITUTED
  VFCC STRUCTURED NOTE    
  

        THIS AMENDED, RESTATED AND SUBSTITUTED VFCC STRUCTURED NOTE (THE "VFCC STRUCTURED NOTE") HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR UNDER ANY STATE SECURITIES LAWS AND THE BORROWER (AS DEFINED BELOW) HAS NOT BEEN REGISTERED UNDER THE INVESTMENT COMPANY
ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"). THIS VFCC STRUCTURED NOTE MAY NOT BE SOLD, OFFERED FOR SALE OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS EXCEPT IN A TRANSACTION THAT IS EXEMPTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. 

        THIS
VFCC STRUCTURED NOTE IS NOT PERMITTED TO BE TRANSFERRED, ASSIGNED, EXCHANGED OR OTHERWISE PLEDGED OR CONVEYED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE LOAN FUNDING AND SERVICING
AGREEMENT REFERRED TO HEREIN. 

        IN
NO EVENT SHALL THE BORROWER (DEFINED BELOW) BE ENTITLED TO HAVE ADVANCES MADE TO IT UNDER THIS VFCC STRUCTURED NOTE AND THE FUNB STRUCTURED NOTE IN AN AGGREGATE AMOUNT IN EXCESS OF
THE FACILITY AMOUNT (AS DEFINED IN THE LOAN FUNDING AND SERVICING AGREEMENT (AS DEFINED BELOW)). 

        FOR
VALUE RECEIVED, ACS FUNDING TRUST I, a Delaware business trust (the "Borrower"), promises to pay to WACHOVIA SECURITIES, INC. (f/k/a First Union
Securities, Inc. and successor-in-interest to First Union Capital Markets Corp.), as the deal agent for the Lenders (the "Deal Agent"), or
the Lenders' assigns, the principal sum of (a) prior to the Facility Increase Expiration Date, TWO HUNDRED AND SEVENTY-FIVE MILLION DOLLARS ($275,000,000) and (b) on and
after the Facility Increase Expiration Date, TWO HUNDRED AND TWENTY-FIVE MILLION DOLLARS ($225,000,000) or, if less, the unpaid principal amount of the aggregate advances
("Advances") made by the Lenders (as defined below) to the Borrower pursuant to the Loan Funding and Servicing Agreement (as defined below), as set forth on the attached
Schedule, on the dates specified in Section 2.6 of the Loan Funding and Servicing Agreement, and to pay interest on the unpaid principal amount of each Advance on
each day that such unpaid principal amount is outstanding at the Interest Rate related to such Advance as provided in the Loan Funding and Servicing Agreement on each Payment Date and each other dates
specified in the Loan Funding and Servicing Agreement. 

        This
VFCC Structured Note is issued pursuant to the Loan Funding and Servicing Agreement, dated as of March 31, 1999, as amended by Amendment No. 1, dated as of
June 30, 1999, Amendment No. 2, dated as of September 24, 1999, Amendment No. 3, dated as of December 14, 1999, Amendment No. 4, dated as of June 16,
2000, Amendment No. 5, dated as of December 20, 2000, Amendment No. 6, dated as of March 29, 200 1, Amendment No. 7, dated as of April 19, 200 1, 

 

Amendment No. 8, dated as of January 15, 2002, Amendment No. 9, dated as of March 29, 2002, Amendment No. 10, dated as of June 24, 2002 and Amendment
No. 11, dated as of December 30, 2002 (as amended, modified, waived, supplemented, or restated from time to time, the "Loan Funding and Servicing
Agreement"), by and among the Borrower, American Capital Strategies, Ltd., as servicer, Variable Funding Capital Corporation, as a lender, the Investors named therein, Wells
Fargo Bank Minnesota, National Association (f/k/a Norwest Bank Minnesota, National Association), as backup servicer and as collateral custodian, the Deal Agent, and Wachovia Bank, National Association
(f/k/a First Union National Bank), as a lender and as liquidity agent. Capitalized terms used but not defined in this VFCC Structured Note are used with the meanings ascribed to them in the Loan
Funding and Servicing Agreement. 

        Notwithstanding
any other provisions contained in this VFCC Structured Note, if at any time the Interest Rate payable by the Paying Agent on behalf of the Borrower under this VFCC
Structured Note, when combined with any and all other charges provided for in this VFCC Structured Note, in the
Loan Funding and Servicing Agreement or in any other document (to the extent such other charges would constitute interest for the purpose of any applicable law limiting interest that may be charged on
this VFCC Structured Note), exceeds the highest rate of interest permissible under applicable law (the "Maximum Lawful Rate"), then so long as the Maximum Lawful Rate
would be exceeded the Interest Rate under this VFCC Structured Note shall be equal to the Maximum Lawful Rate. If at any time thereafter the Interest Rate payable under this VFCC Structured Note is
less than the Maximum Lawful Rate, the Paying Agent on behalf of the Borrower shall continue to pay Interest under this VFCC Structured Note at the Maximum Lawful Rate until such time as the total
Interest paid by the Paying Agent on behalf of the Borrower is equal to the total Interest that would have been paid had applicable law not limited the Interest Rate payable under this VFCC Structured
Note. In no event shall the total Interest received by the Lenders under this VFCC Structured Note exceed the amount which such Lenders could lawfully have received had the Interest due under this
VFCC Structured Note been calculated since the date of this VFCC Structured Note at the Maximum Lawful Rate. 

        Payments
of the principal of, and Interest on, the Advances by the Lenders and represented by this VFCC Structured Note shall be made by the Paying Agent on behalf of the Borrower to the
holder or holders hereof by wire transfer of immediately available funds in the manner and at the address specified for such purpose as provided in the Loan Funding and Servicing Agreement, or in such
manner or at such other address as the holder or holders of this VFCC Structured Note shall have specified in writing to the Borrower for such purpose, without the presentation or surrender of this
VFCC Structured Note or the making of any notation on this VFCC Structured Note. 

        If
any payment under this VFCC Structured Note falls due on a day that is not a Business Day, then such due date shall be extended to the next succeeding Business Day and Interest shall
be payable on any principal so extended at the applicable Interest Rate. 

        If
all or a portion of (i) the principal amount hereof or (ii) any Interest payable thereon or (iii) any other amounts payable hereunder shall not be paid when due
(whether at maturity, by acceleration or otherwise), such overdue amount shall bear Interest at a rate per annum that is equal to the Base Rate plus 1.0%, in each case
from the date of such non-payment to (but excluding) the date such amount is paid in full. 

        Portions
or all of the principal amount of the VFCC Structured Note shall become due and payable at the time or times set forth in the Loan Funding and Servicing Agreement. Any portion
or all of the principal amount of this VFCC Structured Note may be prepaid, together with Interest thereon (and, as set forth in the Loan Funding and Servicing Agreement, certain costs and expenses of
the Lenders) at the time and in the manner set forth in, but subject to the provisions of, the Loan Funding and Servicing Agreement. 

2

 

        The
Borrower expressly waives presentment, demand, diligence, protest and all notices of any kind whatsoever with respect to this VFCC Structured Note. 

        All
amounts evidenced by this VFCC Structured Note, the Advances, Advances Outstanding and all payments and prepayments of the principal hereof and the respective dates and maturity
dates thereof shall be endorsed by the Deal Agent, as agent for the Lenders, on the Schedule attached hereto and made a part hereof or on a continuation thereof, which shall be attached hereto and
made a part hereof or otherwise recorded in its internal books or records or computer system; provided, however, that the
failure of the Deal Agent to make such a notation or recordation shall not in any way limit or otherwise affect the obligations of the Borrower under this VFCC Structured Note as provided in the Loan
Funding and Servicing Agreement. 

        The
holder or holders hereof may sell, assign, transfer, negotiate, grant participations in or otherwise dispose of all or any portion of any Advance, Advances Outstanding or the
Commitment represented by this VFCC Structured Note. All transfers and pledges of this VFCC Structured Note must be done in compliance with the Securities Act, applicable state securities laws and
Article 8 of the UCC. 

        This
VFCC Structured Note is secured by the security interests granted pursuant to Section 2.9 of the Loan Funding and Servicing Agreement. The holder
or holders of this VFCC Structured Note are entitled to the benefits of the Loan Funding and Servicing Agreement and may enforce the agreements of the Borrower contained in the Loan Funding and
Servicing Agreement and exercise the remedies provided for by, or otherwise available in respect of, the Loan Funding and Servicing Agreement, all in accordance with, and subject to the restrictions
contained in, the terms of the Loan Funding and Servicing Agreement. If a Termination Event shall occur and the Termination Date has been declared or has otherwise occurred, the unpaid balance of the
principal of all Advances, together with accrued Interest thereon, shall be declared, and become, due and payable in the manner and with the effect provided in the Loan Funding and Servicing
Agreement. 

        This
VFCC Structured Note is one of the "Structured Notes" referred to in Section 2.5 of the Loan Funding and Servicing
Agreement. THIS VFCC STRUCTURED NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 

        This
VFCC Structured Note is intended to be and is a replacement of the VFCC Structured Note, dated March 31, 1999, in the maximum principal amount of, prior to the Facility
Increase Expiration Date, $275,000,000, and on and after the Facility Increase Expiration Date, $225,000,000 (the "Replaced Note"). This VFCC Structured Note evidences the
same indebtedness and is secured by the same Collateral securing the Replaced Note and is not intended to constitute a novation in any manner. 

[Remainder
of Page Intentionally Left Blank] 

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        IN
WITNESS WHEREOF, the undersigned has executed this VFCC Structured Note as on the date first written above. 

	 	 	ACS FUNDING TRUST I
 
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

4

 

Schedule
attached to Amended, Restated and Substituted VFCC Structured Note dated March 31, 1999 of ACS Funding Trust I payable to the order of First Union Securities, Inc., as the Deal Agent 

	Advances Outstanding as of December 30, 2002

(Date of Amendment No. 11)
 	 	$                  

	
Date of

Advance or

Repayment
	
 	

Principal

Amount of

Advance
	
 	

Principal

Amount of

Repayment
	
 	

Advances

Outstanding

	

	

	

	

	

	

	

	

	

	

	

	

	

5

QuickLinks

Exhibit 10.8

AMENDED, RESTATED AND SUBSTITUTED VFCC STRUCTURED NOTE

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