Document:

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-1Exhibit
10.3

 

EXECUTION
COPY

 

AMENDED
AND RESTATED PLEDGE AND SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED PLEDGE AND
SECURITY AGREEMENT (such agreement as amended, modified,
waived, supplemented or restated from time to time, the “Agreement”),
dated as of June 13, 2003 by and among AMERICAN
CAPITAL STRATEGIES, LTD., as the seller (together with its
successors and assigns in such capacity, the “Seller”), a Delaware
corporation, ACS FUNDING TRUST I, as
the buyer (together with its successors and assigns in such capacity, the “Buyer”),
and WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION (“Wells Fargo”), as the escrow agent (together
with its successors and assigns in such capacity, the “Escrow Agent”).  Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Purchase Agreement
(as defined below) and the principles of interpretation set forth therein.

 

W I T N
E S S E T H

 

WHEREAS, concurrently with the execution of this
Agreement, the Seller is entering into the Amended and Restated Purchase and
Sale Agreement, dated as of June 13, 2003
by and between the Buyer and the Seller (such agreement as amended, modified,
waived, supplemented or restated from time to time, the “Purchase Agreement”),
pursuant to which the Seller has agreed to sell, transfer, assign and set over
and otherwise convey to the Buyer, from time to time, certain Loans and the
Related Property, Loan Documents, Supplemental Interests, Collections, interest
and Proceeds related thereto;

 

WHEREAS, the Seller has agreed to grant to the Buyer a
first priority perfected security interest in such Pledged Supplemental
Interests (defined below) to secure the Seller’s Secured Obligations;

 

NOW, THEREFORE, in
consideration of the premises and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the Seller hereby covenants and agrees as follows:

 

Section
1.                                          Grant
of Security.  The Seller hereby
pledges and assigns to the Buyer, as security for the Secured Obligations (as
defined below), all of the Seller’s right, title and interest in and to,
whether now existing and/or hereafter arising and/or acquired, in any
Supplemental Interests related to any Purchased Assets sold to the Buyer under
the Purchase Agreement on a Purchase Date prior to the Closing Date
(collectively, the “Pledged Supplemental Interests”), all investment
property (as such term is defined in Article 9 of the UCC) relating to or
arising out of such Pledged Supplemental Interests and all proceeds of the
foregoing (collectively, the “Collateral”).

 

Section
2.                                          Continuing
Security Interest; Pledge Termination Date.  This Agreement hereby creates a continuing security interest in
the Collateral and shall (i) remain in full force and effect until the
Collection Date under (and as defined in) the Amended and Restated Loan Funding
and Servicing Agreement, dated as of the date hereof (such agreement as
amended, modified, waived, supplemented or restated from time to time, the “Loan
Funding

 

 

Agreement”) between and among the
Buyer, as the borrower, the Seller, 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, as collateral custodian and as backup servicer; (ii) be binding upon the
Seller, its successors and assigns, and (iii) inure to the benefit of the Buyer
and its successors, transferees and assigns. 
Upon the Collection Date, the security interest granted hereby shall
terminate.

 

Section
3.                                          Secured
Obligations.  This Agreement is
made and the security interest created hereby is granted to the Buyer to secure
the full and punctual performance of all of the Seller’s Secured Obligations.  “Secured Obligations” shall mean the
obligations, representations, agreements, covenants and warranties on the part
of the Seller under the Transaction Documents.

 

Section
4.                                          Delivery
of Pledged Supplemental Interests. 
Prior to the Collection Date, such certificates or instruments shall be
held by the Escrow Agent pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Escrow Agent and the Buyer.  All such
certificate or instruments shall be indorsed only to the Escrow Agent or in
blank.  In connection with the certificates
and instruments evidencing the Pledged Supplemental Interests delivered to the
Escrow Agent:  (i) the Escrow Agent
shall act as a “securities intermediary” (as defined in Article 8 of the UCC)
for the Buyer, (ii) the Pledged Supplemental Interests and the certificates
and/or instruments evidencing the same shall be treated as “financial assets”
(as defined in and governed by Article 8 of the UCC), (iii) the Escrow Agent,
as such securities intermediary, shall establish and maintain on its records an
account in the name of the Buyer which shall be a “securities account” (as defined
in Article 8 of the UCC) to which the Escrow Agent by book entry shall credit
the Pledged Supplemental Interests delivered to the Escrow Agent as described
above, (iv) the Escrow Agent shall comply with “entitlement orders” (as defined
in Article 8 of the UCC) originated by the Buyer without further consent of the
Seller or any other party and shall not comply with entitlement orders issued
by the Buyer or any other party and (v) the Escrow Agent waives and agrees not
to assert or claim any interest, lien or other rights in or to the Collateral.

 

If and to the extent of the certificates or
instruments evidencing the Pledged Supplemental Interests are not indorsed to
the Escrow Agent or in blank and/or are not credited to a securities account
maintained by the Escrow Agent, the Escrow Agent agrees and acknowledges that
it is holding and will hold possession of such certificates and instruments for
the benefit of the Buyer as the agent of and bailee for the Buyer.

 

Section
5.                                          Representation
and Warranties.

 

The Seller hereby represents and warrants as follows:

 

(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 corporate 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.

 

2

 

(b)                                 Due
Qualification.  The Seller is duly
qualified to do business and is in good standing as a foreign corporation (or
is exempt from such requirements), and has obtained 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.

 

(c)                                  Due
Authorization.  The execution and
delivery of this Agreement, 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.

 

(d)                                 No
Conflict.  The execution and
delivery of this Agreement, the performance of the transactions contemplated
hereby and the fulfillment of the terms hereof, 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, contract, agreement, mortgage, deed of trust, or other
instrument to which the Seller is a party or by which it or any of its property
is bound.

 

(e)                                  No
Violation.  The execution and
delivery of this Agreement, the performance of the transactions contemplated
hereby and the fulfillment of the terms hereof will not conflict with or
violate, in any material respect, any Applicable Law.

 

(f)                                    No
Proceedings.  There are no proceedings
or investigations pending or, to the best knowledge of the Seller, threatened
against the Seller before any Governmental Authority (i) asserting the
invalidity of this Agreement, (ii) seeking to prevent the consummation of any
of the transactions contemplated by this Agreement, or (iii) seeking any
determination or ruling that could reasonably be expected to have a material
adverse effect on the business, condition (financial or otherwise), operations,
performance or prospects of the Seller.

 

(g)                                 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, the performance of the transactions contemplated by this
Agreement and the fulfillment of or terms hereof, have been obtained.

 

(h)                                 Not
an Investment Company.  The Seller
is an “investment company” within the meaning of the Investment Company Act of
1940, as amended (the “1940 Act”), that has elected to be regulated as a
business development company under the 1940 Act.

 

(i)                                     Other
Names.  The legal name of the Seller
is as set forth in this Agreement and within the preceding five years the
Seller has not used, and the Seller currently does not use, any tradenames,
fictitious names, assumed names or “doing business as” names.

 

(j)                                     Taxes.  The Seller has filed or caused to be filed
all tax returns which, to its knowledge, are required to be filed 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 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

 

3

 

been filed and, to the Seller’s knowledge, no claim is
being asserted, with respect to any such tax, fee or other charge.

 

(k)                                  Place
of Business.  The principal
executive offices of the Seller are at 2 Bethesda Metro Center, 14th
Floor, Bethesda, Maryland 20814.

 

(l)                                     No
Liens.  The Seller, is, and at the
time of delivery of any Pledged Supplemental Interests pursuant to this
Agreement will be, the legal and beneficial owner of such Pledged Supplemental
Interests free and clear of any lien, security interest or encumbrance
whatsoever except for the lien and security interest created by this
Agreement.  No effective financing
statement or other instrument similar in effect covering any of the Pledged
Supplemental Interests shall at any time be on file in any recording office,
except such as may be filed in favor of the Buyer, pursuant to this Agreement.

 

(m)                               Security
Interest.  Pursuant to Section 1
hereof, the Seller has granted a security interest (as defined in the UCC) to
the Buyer in the Pledged Supplemental Interests, which is enforceable in
accordance with the UCC upon execution and delivery of this Agreement.  Upon delivery of the Pledged Supplemental
Interests to the Escrow Agent and assuming the Escrow Agent obtains and
maintains “control” (within the meaning of the UCC), the Seller shall have
validly granted to the Buyer a first priority perfected security interest in
the Pledged Supplemental Interests.  All
filings (including, without limitation, such UCC filings) and other actions as
are necessary in any jurisdiction to perfect the interest of the Buyer, in the
Pledged Supplemental Interests have been (or prior to the execution of this
Agreement will be) made.

 

(n)                                 Margin
Stock.  The Pledged Supplemental
Interests are not “margin stock” (as defined in Regulation U of the Federal
Reserve Board), and the pledge of the Pledged Supplemental Interests pursuant
to this Agreement does not violate Regulation T, U or X of the Federal Reserve
Board or Section 7 of the Securities Exchange Act of 1934, as amended.

 

(o)                                 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 in all material respects.

 

(p)                                 Pledged
Supplemental Interests.  No Pledged
Supplemental Interest constitutes a “margin security,” as such term is defined
in Regulation U of the Federal Reserve Board as now and from time to time
hereafter in effect.

 

The representations and warranties set forth in this Section
5 shall survive the grant of security interest in the Pledged Supplemental
Interests to the Buyer.  Upon discovery
by the Buyer or the Seller 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
6.                                          Covenants
of the Seller.

 

(a)                                  Transfers
and other Liens.  The Seller shall
not (i) sell, assign or otherwise dispose of any of the Collateral, except to
or in favor of the Buyer and except as otherwise

 

4

 

provided herein, or (ii) create or suffer to exist any
lien upon or with respect to any of the Collateral except for the security
interest granted pursuant to this Agreement.

 

(b)                                 Further
Assurances.  The Seller agrees that
at any time and from time to time, at the expense of the Seller, it will
promptly execute and deliver all further instruments and documents, and take
all further action, that may be necessary or that the Escrow Agent or the
Buyer, may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the Escrow
Agent or the Buyer, to exercise and enforce its rights and remedies hereunder
with respect to the Collateral.

 

(c)                                  Additional
Pledged Supplemental Interests.  The
Seller further agrees that it will promptly (and in any event within five (5)
Business Days following any Purchase Date prior to the Approval Date) deliver
to the Escrow Agent all Supplemental Interests, if any, related to the
Purchased Assets sold to the Buyer under the Purchase Agreement on such
Purchase Date, and take all other actions as may be reasonably necessary or
requested by the Escrow Agent or the Buyer in order to protect and perfect the
security interest granted hereby in such Supplemental Interests to the
Buyer.  The Seller hereby agrees that
all Supplemental Interests so delivered to the Escrow Agent after the date of
this Agreement shall for all purposes hereunder be considered Pledged
Supplemental Interests.

 

Section
7.                                          Remedies.  If the Seller shall fail to perform any
Secured Obligation, the Buyer or its transferee or assignee may exercise from
time to time any and all rights and remedies available to it as a secured party
on default (under the UCC in the relevant jurisdiction(s)) with respect to the
Collateral.

 

Section
8.                                          Security
Interest Absolute.  All rights
of the Escrow Agent and the Buyer, and the security interest granted hereunder,
and all of the obligations of the Seller hereunder, shall be absolute and
unconditional, irrespective of:

 

(a)                                  any
lack of validity or enforceability of the Purchase Agreement or other agreement
or instrument relating thereto;

 

(b)                                 any
change in any term of all or any of the obligations of the Seller under the
Purchase Agreement, or any other amendment or waiver of or any consent to any
departure from any provision of the Purchase Agreement; or

 

(c)                                  any
other circumstance which might otherwise constitute a defense available to, or
a discharge of, the Seller or any third party.

 

Section
9.                                          Escrow
Agent.  The Escrow Agent shall
be obligated, and shall have the right hereunder to make demands, to give
notices, to exercise or refrain from existing any rights, and to take or
refrain from taking action solely in accordance with this Agreement.  The Escrow Agent may not resign, or be
removed, except in accordance with the provisions of Sections 7.10 and 7.21
of the Loan Funding Agreement.  Upon the
acceptance of any appointment as a Escrow Agent by a successor Escrow Agent by
execution of an instrument accepting the same and all obligations of a Escrow
Agent hereunder, that successor Escrow Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
predecessor Escrow Agent under this Agreement, and the predecessor Escrow Agent
shall thereupon be discharged

 

5

 

from its duties and obligations under this
Agreement.  After any predecessor Escrow
Agent’s resignation or removal, the provisions of this Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Escrow Agent. 
Upon its resignation, any Escrow Agent shall be entitled to payment by
the Seller of all reasonable expenses incurred by it in acting as Escrow Agent
hereunder.  The Seller agrees to execute
and deliver to any successor Escrow Agent appointed hereunder all such
documents as may be necessary to preserve and protect the rights of the
Buyer.  Any corporation into which the
Escrow Agent may be merged or with which it may be consolidated or converted,
or to which substantially all of its corporate trust business may be
transferred, shall automatically succeed to all of the rights and obligations
of its predecessor and shall become the Escrow Agent hereunder without further
action on the part of any of the parties hereto.  For the purposes of this Agreement, the “jurisdiction” of the
Escrow Agent with respect to matters governed by the UCC shall be the State of
Minnesota.

 

Section
10.                                   Indemnification.  The Seller hereby agrees to indemnify Escrow
Agent, and the Buyer (collectively, the “Indemnified Parties”) for any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the
Indemnified Parties arising out of this Agreement or the pledge of the Pledged
Supplemental Interests pursuant to the Purchase Agreement; provided, however,
that the Seller shall not be liable for any of the foregoing to the extent they
arise from the gross negligence or willful misconduct of such Indemnified
Party.

 

Section
11.                                   Directions
to Escrow Agent.  The Escrow
Agent shall take any action specified in Section 7 hereof only when so
requested in writing by the Buyer or its assignee.  In the absence of such direction, the Escrow Agent will
administer the Pledged Supplemental Interests and take such action with respect
thereto as it deems to be in the best interest of the Buyer.

 

Section
12.                                   Amendments.  This Agreement and the rights and
obligations of the parties hereunder may not be amended, waived or changed
orally, but only with written consent of the Buyer and the Deal Agent.

 

Section
13.                                   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, TO THE EXTENT PERMITTED BY APPLICABLE LAW, 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
14.                                   Notices.  All demands, notices and communications
hereunder shall be in writing and addressed or delivered to each party at its
address set forth under its name on the signature pages hereof.

 

6

 

Section
15.                                   Expenses.  The
Seller will pay upon demand to the Escrow Agent the amount of any and all
reasonable expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, that the Escrow Agent may incur in connection
with (a) the administration of this Agreement, (b) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the Pledged
Supplemental Interests, (c) the exercise or enforcement of any of the rights of
the Escrow Agent or the Buyer, or (d) the failure of the Seller to perform or
observe any of the provisions hereof.

 

Section
16.                                   No
Waiver; Cumulative Remedies.   No failure to exercise and no delay in
exercising, on the part of the Escrow Agent or the Buyer, 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 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
17.                                   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
18.                                   Binding
Effect; Assignment; Third-Party Beneficiaries.  This Agreement shall inure to the benefit of
and the obligations thereunder shall be binding upon the parties hereto and
their respective successors and permitted assigns.  This Agreement is not assignable by the Seller without the prior
written consent of the Escrow Agent, the Buyer and the Deal Agent.  Simultaneously with the execution and
delivery of this Agreement, the Buyer shall 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 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.

 

Section
19.                                   Attorney-in-Fact.  The Seller hereby irrevocably appoints the
Escrow Agent, as the Seller’s attorney-in-fact, with full authority in the
place and stead of the Seller and in the name of the Seller or otherwise, from
time to time in Escrow Agent’s discretion, to take any action and to execute
any instrument that the Escrow Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
file any claims or take any action or institute any proceedings that the Escrow
Agent may deem necessary or desirable for the collection of any of the Pledged
Supplemental Interests.  It is
understood and agreed that the appointment of the Escrow Agent as
attorney-in-fact of the Seller for the purposes set forth above is coupled with
an interest and is irrevocable.  With
respect to any action taken pursuant this Section, the Escrow Agent shall not
be liable for any acts of omission or commission nor for any misconduct other
than its gross negligence or willful misconduct.

 

7

 

Section
20.                                   Waiver
of Set-Off.  With respect to any
amounts payable by the Seller or the Buyer hereunder, Escrow Agent hereby
expressly waives any right to set-off that it may have (or to which it may
became entitled) against the Seller, the Buyer or any of their respective
assets.

 

[Remainder
of Page Intentionally Left Blank.]

 

8

 

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

 

	
   

  	
  AMERICAN CAPITAL STRATEGIES, LTD.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:  John
  Erickson

  
	
   

  	
  Title:  Executive Vice President, Chief Financial
  Officer and Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  2 Bethesda Metro Center, 14th Floor

  
	
   

  	
  Bethesda, Maryland 20814

  
	
   

  	
  Attention: 
  Compliance Officer

  
	
   

  	
  Facsimile No.: 
  (301) 654-6714

  
	
   

  	
  Confirmation No.: 
  (301) 951-6122

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ACS FUNDING TRUST I

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:  Malon
  Wilkus

  
	
   

  	
  Title: 
  Beneficiary Trustee

  
	
   

  	
   

  
	
   

  	
  2 Bethesda Metro Center, 14th Floor

  
	
   

  	
  Bethesda, Maryland 20814

  
	
   

  	
  Attention: 
  Malon Wilkus, Beneficiary Trustee

  
	
   

  	
  Facsimile No.: 
  (301) 654-6714

  
	
   

  	
  Confirmation No.: 
  (301) 951-6122

  

 

[Signatures
Continued on the Following Page.]

 

S-1

 

 

	
   

  	
  WELLS FARGO BANK MINNESOTA,

  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  Sixth and Marquette Avenue

  
	
   

  	
  Minneapolis, MN 55479-0070

  
	
   

  	
  Attention: 
  Corporate Trust Services

  
	
   

  	
  Asset-Backed Administration

  
	
   

  	
  Facsimile No.: 
  (612) 667-3539

  
	
   

  	
  Confirmation No.: 
  (612) 667-8058

  
					

 

S-2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]