April 19, 2007
CapitalSource Funding II Trust
c/o Wilmington Trust Company, as Owner Trustee
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Ladies and Gentlemen:
     Reference is hereby made to that certain Amended and Restated Sale and
Servicing Agreement, entered into effective as of September 17, 2003 (as
amended, supplemented and otherwise modified from time to time, the “Sale and
Servicing Agreement”), among CapitalSource Funding II Trust (the “Issuer”), CS
Funding II Depositor LLC, as Depositor (in such capacity, the “Depositor”),
CapitalSource Finance LLC (“CapitalSource”), as Loan Originator (in such
capacity, the “Loan Originator”) and as Servicer (in such capacity, the
“Servicer”), and Wells Fargo Bank, National Association, as Indenture Trustee on
behalf of the Noteholders (in such capacity, the “Indenture Trustee”), as
Collateral Custodian (the “Collateral Custodian”) and as Backup Servicer (the
“Backup Servicer”). Capitalized terms used but not defined herein have the
meanings assigned to them in the Sale and Servicing Agreement.
     In connection with the extension of the CSVII Financing Facility (defined
below) by Citigroup Global Markets Realty Corp. to CapitalSource Funding VII
Trust, an affiliate of the Issuer, Citigroup Global Markets Realty Corp. and
Transamerica Life Insurance Company, as Noteholders/Purchasers, agree that the
Issuer shall have no obligation to pay the Nonutilization Fee contemplated by
the Sale and Servicing Agreement from and after the date hereof until the
earlier of (x) October 16, 2007 and (y) the termination of the obligations of
Citigroup to make any future advances under the CSVII Financing Facility and the
repayment in full of all interest on and principal of the notes issued pursuant
to that certain Indenture, dated as of April 19, 2007 (the “CSVII Indenture”),
between CapitalSource Funding VII Trust, as issuer, and Wells Fargo Bank,
National Association, as indenture trustee, and purchased by Citigroup Global
Markets Realty Corp. pursuant to that certain Note Purchase Agreement, dated as
of April 17, 2007, among CapitalSource Funding VII Trust, as issuer, CS Funding
VII Depositor LLC, CapitalSource and Citigroup Global Markets Realty Corp., as
purchaser (the “CSVII Financing Facility”); provided that the Issuer or the
Servicer shall notify in writing the Noteholders/Purchasers of the earlier to
occur of (x) repayment in full of all interest on and principal of the notes
issued pursuant to the CSVII Indenture and the termination of the obligations of
Citigroup to make any future advances under the CSVII Financing Facility and
(y) October 16, 2007 at least ten (10) Business Days prior to the occurrence
thereof. From and after the date hereof, the Issuer agrees that until the
repayment in full of all obligations payable under the CSVII Financing Facility
and the termination of the obligations of Citigroup to make any future advances
under the CSVII Financing Facility, notwithstanding anything to the contrary in
the Basic Documents, the Issuer may not request that either Purchaser purchase
any Additional Note Principal Balances and neither Purchaser shall have any
obligation to purchase any Additional Note Principal Balances.

 

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     The parties hereto agree that while the CSVII Financing Facility is
outstanding, the Issuer owns no Loans and no interest on or principal of the
Notes remains unpaid or Outstanding, the Servicer shall not be obligated to
deliver a Monthly Servicing Report for any Payment Date occurring after the
Payment Date following the date hereof.
     Except as specifically provided in the second paragraph of this Side
Letter, no other term, condition or provision of the Credit Agreement shall be
deemed modified or amended, this Side Letter shall not be considered a novation
of the Sale and Servicing Agreement and/or any other Basic Document, and the
Sale and Servicing Agreement and the other Basic Documents shall remain in full
force and effect. This Side Letter represents the entire agreement between the
parties with respect to the subject matter hereof.
     Each of the Depositor, the Servicer, the Loan Originator and the Issuer
hereby represents and warrants that (i) it has the power and is duly authorized
to execute and deliver this Side Letter, (ii) this Side Letter has been duly
authorized, executed and delivered, (iii) it is and will continue to be duly
authorized to perform its obligations under the Basic Documents, (iv) except as
required by this Side Letter, the execution, delivery and performance by it of
this Side Letter does not and will not require any consent or approval, which
has not already been obtained, from any Governmental Authority, equityholder or
any other Person, (v) the execution, delivery and performance by it of this Side
Letter shall not result in the breach of, or constitute a default under, any
material agreement or instrument to which it is a party, (vi) this Side Letter
and each of the Basic Documents to which it is a party constitutes its legal,
valid and binding obligations, enforceable against it in accordance with their
respective terms, except as limited by bankruptcy, reorganization, insolvency,
fraudulent conveyance, moratorium and other similar laws (whether statutory,
regulatory or decisional) and general equitable principles affecting creditors’
rights and remedies regardless of whether such enforceability is considered in a
proceeding in equity or at law, and (vii) no Default, Event of Default or
Servicer Event of Default exists.
     Each of the Depositor, the Servicer, the Loan Originator and the Issuer
hereby (i) agrees to promptly reimburse the other parties hereto for any and all
fees and expenses (including, without limitation, legal fees and expenses) which
any such party hereto has incurred, incurs or will incur in connection with the
preparation, negotiation, execution and enforcement of this Side Letter or any
document, instrument or agreement delivered or to be delivered pursuant to this
Side Letter, and (ii) affirms the reimbursement and indemnification provisions
set forth in the Basic Documents, which are hereby incorporated herein by
reference.
     This Side Letter is a document executed pursuant to the Sale and Servicing
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered or applied in accordance with the terms and provisions thereof.
     This Side Letter may be executed in any number of counterparts, each of
which (including any copy hereof delivered by facsimile or PDF) shall constitute
one and the same original instrument.
     This Side Letter shall be governed by, and construed in accordance with,
the laws of the State of New York without regard to its conflict of law
principles (except for Sections 5-1401 and 5-1402 of the New York General
Obligations Law).

 

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     The Owner (as such term is defined in the Trust Agreement) hereby instructs
the Owner Trustee, pursuant to Section 6.3 of the Trust Agreement, to execute
and deliver this Side Letter.
[remainder of page intentionally left blank; signature page follows]

 

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            Very truly yours,

CITIGROUP GLOBAL MARKETS REALTY CORP.
      BY:   /s/ Gerald F. Keefe         Name:   Gerald F. Keefe        Title:  
Authorized Signatory        TRANSAMERICA LIFE INSURANCE COMPANY
as Purchasing Noteholder
      BY:   /s/ Greg A. Podhajsky         Name:   Greg A. Podhajsky       
Title:   Vice President     

 

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     ACKNOWLEDGED AND AGREED:

            CAPITALSOURCE FUNDING II TRUST,
      BY:   Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee              BY:   /s/ Ian P. Monigle      
  Name:   Ian P. Monigle        Title:   Financial Services Officer     

 

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     ACKNOWLEDGED AND AGREED:

            CS FUNDING II DEPOSITOR LLC, as Depositor
      BY:   /s/ Jeffrey Lipson         Name:   Jeffrey Lipson        Title:  
Vice President & Treasurer        CAPITALSOURCE FINANCE LLC, as Loan
Originator and Servicer
      BY:   /s/ Jeffrey Lipson         Name:   Jeffrey Lipson        Title:  
Vice President & Treasurer     

 

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     ACKNOWLEDGED AND AGREED:

            WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Indenture Trustee, Collateral
Custodian and Backup Servicer
      BY:   /s/ Jeanine C. Casey         Name:   Jeanine C. Casey       
Title:   Assistant Vice President