Exhibit 10.53
Execution Version
FIFTH AMENDMENT TO AMENDED AND RESTATED SALE AND SERVICING AGREEMENT
     This Fifth Amendment (this “Amendment”) to the Amended and Restated Sale
and Servicing Agreement referenced below is entered into as of December 29,
2005, among CapitalSource Funding II Trust, a Delaware statutory trust, as
Issuer (the “Issuer”), CS Funding II Depositor LLC, a Delaware limited liability
company and successor by merger to CS Funding II Depositor Inc., a Delaware
corporation, (as successor-in-interest to CS Funding II Depositor LLC, a
Delaware limited liability company), as Depositor (in such capacity, the
“Depositor”), CapitalSource Finance LLC, a Delaware limited liability company
(“CapitalSource”), as Loan Originator (in such capacity, the “Loan Originator”)
and as Servicer (in such capacity, the “Servicer”) and Wells Fargo Bank,
National Association, a national banking association, as Indenture Trustee on
behalf of the Noteholders (in such capacity, the “Indenture Trustee”), as Paying
Agent (in such capacity, the “Paying Agent”), as Collateral Custodian (in such
capacity, the “Collateral Custodian”) and as Backup Servicer (in such capacity,
the “Backup Servicer”).
R E C I T A L S:
     WHEREAS, the Issuer, the Depositor, CapitalSource, the Loan Originator, the
Servicer, the Indenture Trustee, the Paying Agent, the Collateral Custodian and
the Backup Servicer are parties to the Amended and Restated Sale and Servicing
Agreement, dated as of September 17, 2003 and amended and restated as of
October 7, 2004 (as amended, supplemented and otherwise modified from time to
time including by this Amendment, the “Sale and Servicing Agreement”);
     WHEREAS, the parties hereto desire to amend the Sale and Servicing
Agreement pursuant to Section 13.02(b) thereof as more specifically set forth
below;
     NOW, THEREFORE, in consideration of the mutual covenants and undertakings
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
     Section 1. Amendments to the Sale and Servicing Agreement. Upon the
execution and delivery of this Amendment by all parties hereto and satisfaction
of the conditions precedent set forth herein, the Sale and Servicing Agreement
is hereby amended as follows:
          (a) Section 1.01 of the Sale and Servicing Agreement is hereby amended
by amending and restating the following definitions contained therein in their
entirety:
          Borrowing Base:
          On any date of determination prior to the Noteholder SS Advance
Ineligible Date, the sum of:

  (i)   the product of (A) the outstanding unpaid principal balance of all
Eligible Loans included in the Loan Pool (other than the CIG Loan) prior to such
date of determination minus the amount (calculated without duplication) by which
such Eligible Loans exceed any applicable Concentration Limitations and minus,
with

 

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      respect to Charged-Off Loans, (x) 50% of the outstanding unpaid principal
balance of all Charged-Off Loans for which any Scheduled Payment is at least
ninety (90) days but less than one hundred eighty (180) days delinquent as of
such date of determination and (y) the outstanding unpaid principal balance of
all Charged-Off Loans that are Charged-Off Loans for any reason other than the
Scheduled Payment delinquency referenced in clause (x) above and (B) the
applicable Purchase Price Percentage, and     (ii)   the amount on deposit in
the Principal Collections Account on such date of determination, but only to the
extent such amount has been applied to reduce the outstanding principal balance
of the related Loans (without duplication), and     (iii)   until the CIG Loan
Ineligible Date, an amount equal to the lesser of (A) Sixty Million Dollars
($60,000,000), and (B) the product of (x) the then unpaid principal balance of
all CIG Underlying Loans, and (y) sixty percent (60%)

and, on any date of determination on or after the Noteholder SS Advance
Ineligible Date, the sum of:
(i) the product of (A) the outstanding unpaid principal balance of all Eligible
Loans included in the Loan Pool (other than the CIG Loan) prior to such date of
determination minus the amount (calculated without duplication) by which such
Eligible Loans exceed any applicable Concentration Limitations and minus, with
respect to Charged-Off Loans, (x) 50% of the outstanding unpaid principal
balance of all Charged-Off Loans for which any Scheduled Payment is at least
ninety (90) days but less than one hundred eighty (180) days delinquent as of
such date of determination and (y) the outstanding unpaid principal balance of
all Charged-Off Loans that are Charged-Off Loans for any reason other than the
Scheduled Payment delinquency referenced in clause (x) above and (B) the
applicable Purchase Price Percentages (determined on such date), and
(ii) the amount on deposit in the Principal Collections Account on such date of
determination, but only to the extent such amount has been applied to reduce the
outstanding principal balance of the related Loans (without duplication), and
(iii) until the CIG Loan Ineligible Date, an amount equal to the lesser of
(A) Sixty Million Dollars ($60,000,000), and (B) the product of (x) the then
unpaid principal balance of all CIG Underlying Loans, and (y) sixty percent
(60%).

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          Eligible Loan: With respect to any date of determination, each of the
following: (i) any Loan (other than the CIG Loan) which complies with the
representations and warranties set forth in Section 3.04 with respect to such
Loan and (ii) until the CIG Loan Ineligible Date, the CIG Loan and (iii) until
the Noteholder SS Advance Ineligible Date, each SS Underlying Loan.
          LIBOR Margin: For each day prior to the Noteholder SS Advance
Ineligible Date, 0.50% and, for each day on or after the Noteholder SS Advance
Ineligible Date, 0.75% in each case with respect to all Notes other than the
Incremental Note; provided that an additional 3.00% shall be added to the
applicable LIBOR Margin upon the occurrence of an Event of Default or a Trigger
Event.
          Purchase Price Percentage: On any Business Day prior to the Noteholder
SS Advance Ineligible Date, 90% with respect to all Eligible Loans, and on any
Business Day on or after the Noteholder SS Advance Ineligible Date, with respect
to each Loan, a percentage determined as follows:
     (a) with respect to all Senior Secured Loans assigned Loan Rating 1, Loan
Rating 2, Loan Rating 3 or Loan Rating 4, 80%;
     (b) with respect to all Subordinated Loans assigned Loan Rating 1, Loan
Rating 2, Loan Rating 3 or Loan Rating 4, 50%;
     (c) with respect to all Senior Secured Loans assigned Loan Rating 5, 50%;
     (d) with respect to all Subordinated Loans assigned Loan Rating 5, 25%; and
     (e) with respect to all Loans assigned Loan Rating 6, 0%.
          Required Overcollateralization Amount: With respect to any Business
Day prior to the Noteholder SS Advance Ineligible Date, an amount equal to the
positive difference between (i) the Pool Principal Balance on such Business Day
and (ii) the Pool Purchase Price (reduced by the amount, without duplication, of
any Loan in excess of the Concentration Limitations) and, with respect to any
Business Day on or after the Noteholder SS Advance Ineligible Date, an amount
equal to the greatest of (a) the positive difference between (i) the Pool
Principal Balance on such Business Day and (ii) the Pool Purchase Price (reduced
by the amount, without duplication, of any Loan in excess of the Concentration
Limitations); (b) an amount equal to 25% of the aggregate Principal Balance of
the Eligible Loans; and (c) the Required Equity Contribution).
          (b) Section 1.01 of the Sale and Servicing Agreement is hereby amended
by adding the following new definitions in the appropriate alphabetical order:
          Fifth Amendment Effective Date: December 29, 2005.

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          Noteholder SS Advance: Each advance of funds made by the Noteholders
to the Issuer pursuant to the terms of the Basic Documents that allow the Issuer
to fund or maintain its investment in any SS Underlying Loan.
          Noteholder SS Advance Ineligible Date: The earlier to occur of (i) the
consummation of a term loan securitization involving some or all of the SS
Underlying Loans or (ii) March 31, 2006.
          SS Underlying Loan: Each of the loans sold and transferred to the
Issuer in connection with the payment of a Noteholder SS Advance. A listing of
such loans as of the Fifth Amendment Effective Date is set forth on Exhibit M
hereto.
          (c) Section 1.01 of the Sale and Servicing Agreement is hereby amended
to add the following new clause at the end of the definition of “Concentration
Limitations” set forth therein:
     “Notwithstanding the foregoing or anything to the contrary contained
herein, at any time prior to the Noteholder SS Advance Ineligible Date the only
Concentration Limitation shall be that the aggregate Principal Balance of all
Loans made to a single Obligor shall not exceed 2.75% of the outstanding unpaid
principal balance of all Eligible Loans included in the Loan Pool and none of
the limitations, baskets or criteria otherwise listed in this definition of
“Concentration Limitations” shall be applicable for any purpose.”
          (d) Section 2.04(d) of the Sale and Servicing Agreement is hereby
amended by deleting the phrase “five (5) Business Days” contained therein and
replacing such phrase with “fifteen (15) days (if prior to the Noteholder SS
Advance Ineligible Date) and five (5) Business Days (if on or after the
Noteholder SS Advance Ineligible Date)”.
          (e) Section 3.04 of the Sale and Servicing Agreement is hereby amended
to add the following new clause “(tt)” at the end thereof:
     “(tt) with respect to each SS Underlying Loan, except as set forth in
Exhibit N hereto, the Loan Originator makes, mutatis mutandis, the applicable
representations and warranties set forth in clauses (a) through (qq) of this
Section 3.04 with respect to each SS Underlying Loan.”
          (f) Section 7.01(b) of the Sale and Servicing Agreement is hereby
amended by amending and restating said subsection in its entirety:
     “(b) CapitalSource may not exceed a maximum leverage ratio (the ratio of
total consolidated liabilities (exclusive of non-recourse debt and holding
company TRUPS securities but including, without limitation, any convertible
debt), determined in accordance with GAAP, to its consolidated Tangible Net
Worth) of 6:1 as of any date of determination.”

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          (g) The Sale and Servicing Agreement is amended to add a new Exhibit M
and Exhibit N in the form of Annex I and Annex II, respectively, attached
hereto.
     Section 2. Representations and Warranties. Each of the Issuer, the
Depositor, the Servicer and the Loan Originator hereby represents and warrants
that (i) it has the power and is duly authorized to execute and deliver this
Amendment, (ii) this Amendment has been duly authorized, executed and delivered,
(iii) it is and will continue to be duly authorized to perform its respective
obligations under the Basic Documents and this Amendment, (iv) the execution,
delivery and performance by it of this Amendment shall not (1) result in the
breach of, or constitute (alone or with notice or with the lapse of time or
both) a default under, any material agreement or instrument to which it is a
party, (2) violate (A) any provision of law, statute, rule or regulation, or
organizational documents or other constitutive documents, (B) any order of any
Governmental Authority or (C) any provision of any material indenture, agreement
or other instrument to which it is a party or by which it or any of its property
is or may be bound, or (3) result in the creation or imposition of any Lien upon
or with respect to any property or assets now owned or hereafter acquired by the
Issuer other than pursuant to the Basic Documents, (v) this Amendment and each
of the Basic Documents to which it is a party or by which it or its assets may
be or is bound constitutes its legal, valid and binding obligations, enforceable
against it (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
creditors’ rights generally and to general principles of equity), (vi) except as
publicly disclosed, there are no actions, suits, investigations (civil or
criminal) or proceedings at law or in equity or by or before any Governmental
Authority pending or, to its knowledge, threatened against or affecting it or
any of its business, property or rights (1) which involve any Basic Document or
the Loan Documents or (2) which would be materially likely to result in a
Material Adverse Effect, (vii) it is not in default or violation with respect to
any law, rule or regulation, judgment, writ, injunction or decree order of any
court, governmental authority, regulatory agency or arbitration board or
tribunal and, with respect to the Loan Originator and Depositor, the effect of
which would have a material adverse effect on its business, assets, operations
or financial condition and (viii) no Termination Event, Default or Event of
Default has occurred or is continuing. Except as expressly amended by the terms
of this Amendment, all terms and conditions of the Sale and Servicing Agreement
shall remain in full force and effect and are hereby ratified in all respects.
The Noteholder and the Certificateholder do not object to the execution of this
Amendment by Wilmington Trust Company or the Issuer.
     Section 3. No Reliance. Each of the Loan Originator, the Depositor and the
Issuer hereby acknowledges that it has not relied on the Noteholder, the Hedge
Counterparty or the Certificateholder or any of their respective officers,
directors, employees, agents and “control persons” as such term is used under
the Act and under the Securities Exchange Act of 1934, as amended, for any tax,
accounting, legal or other professional advice in connection with the
transactions contemplated by this Amendment or the Basic Documents, that each of
the Loan Originator, the Depositor and the Issuer has retained and been advised
by such tax, accounting, legal and other professionals as it has deemed
necessary in connection with the transactions contemplated by this Amendment and
the Basic Documents and that each of the Noteholder, the Hedge Counterparty and
the Certificateholder makes no representation or warranty, and shall have no
liability with respect to, the tax, accounting or legal treatment or
implications relating to the transactions contemplated by this Amendment and the
Basic Documents.

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     Section 4. Defined Terms; Headings. All capitalized terms used herein,
unless otherwise defined herein, have the same meanings provided herein or in
the Sale and Servicing Agreement. The headings of the various Sections of this
Amendment have been inserted for convenience of reference only and shall not be
deemed to be part of this Amendment.
     Section 5. Limited Amendment. This Amendment is limited precisely as
written and shall not be deemed to (a) be a consent to a waiver or any other
term or condition of the Sale and Servicing Agreement, the other Basic Documents
or any of the documents referred to therein or executed in connection therewith
or (b) prejudice any right or rights the Noteholders or the Hedge Counterparties
may now have or may have in the future under or in connection with the Sale and
Servicing Agreement, the other Basic Documents or any documents referred to
therein or executed in connection therewith. Whenever the Sale and Servicing
Agreement is referred to in the Sale and Servicing Agreement or any of the
instruments, agreements or other documents or papers executed and delivered in
connection therewith, it shall be deemed to mean the Sale and Servicing
Agreement, as the case may be, as modified by this Amendment. Except as hereby
amended, no other term, condition or provision of the Sale and Servicing
Agreement shall be deemed modified or amended, and this Amendment shall not be
considered a novation.
     Section 6. Construction; Severability. This Amendment 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. If any one or more of the
covenants, agreements, provisions or terms of this Amendment shall be held
invalid in a jurisdiction for any reason whatsoever, then, in such jurisdiction,
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Amendment and
shall in no way affect the validity or enforceability of the other covenants,
agreements, provisions or terms of this Amendment.
     Section 7. Counterparts; Facsimile Signature. This Amendment may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement. The parties may execute facsimile copies of this Amendment
and the facsimile signature of any such party shall be deemed an original and
fully binding on said party.
     Section 8. Governing Law. This Amendment shall be governed and construed in
accordance with the applicable terms and provisions of Section 13.05 (Governing
Law) of the Sale and Servicing Agreement, which terms and provisions are
incorporated herein by reference.
     Section 9. Instructions to Owner Trustee; Limitation on Liability. The
Issuer hereby instructs the Owner Trustee, pursuant to Section 6.3 of the Trust
Agreement, to execute and deliver this Amendment. It is expressly understood and
agreed by the parties hereto that (a) this Amendment is executed and delivered
by Wilmington Trust Company, not individually or personally, but solely as Owner
Trustee of CapitalSource Funding II Trust, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be

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construed as creating any liability on Wilmington Trust Company, individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under the parties hereto and (d) under
no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the
breach or failure of any obligation, representation, warranty or covenant made
or undertaken by the Issuer under this Amendment or any other related documents.
     Section 10. Recordation of Amendment. To the extent permitted by applicable
law, this Amendment, or a memorandum thereof if permitted under applicable law,
is subject to recordation in all appropriate public offices for real property
records in all of the counties or other comparable jurisdictions and in any
other appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the Securityholders’ expense on direction of the
Majority Noteholders but only when accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Securityholders or is necessary for the administration or servicing of
the Loans.
     Section 11. Successor and Assigns. This Amendment shall be governed by,
subject to and construed in accordance with the applicable terms and provisions
of Section 13.10 (Successor and Assigns) of the Sale and Servicing Agreement,
which terms and provisions are incorporated herein by reference.
[Remainder of Page Intentionally Left Blank. Signature Pages Follow.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Fifth Amendment to
the Amended and Restated Sale and Servicing Agreement to be duly executed by
their respective authorized officers as of the day and year first written above.

              CAPITALSOURCE FUNDING II TRUST,
 
  By:   Wilmington Trust Company, not in its individual capacity but solely as
Owner Trustee
 
  By:   /s/ Joann A. Rozell
 
  Name:   Joann A. Rozell
 
  Title:   Assistant Vice President
 
            CS FUNDING II DEPOSITOR LLC (as successor by merger to CS Funding II
Depositor Inc.), as Depositor
 
       
 
  By:   /s/ Thomas A. Fink
 
  Name:   Thomas A. Fink
 
  Title:   Chief Financial Officer and Senior Vice President
 
            CAPITALSOURCE FINANCE LLC,
as CapitalSource, Loan Originator and Servicer
 
       
 
  By:   /s/ Thomas A. Fink
 
  Name:   Thomas A. Fink
 
  Title:   Chief Financial Officer and Senior Vice President

[Signature Pages to Fifth Amendment to Amended and Restated Sale and Servicing
Agreement]

 

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                WELLS FARGO BANK, NATIONAL ASSOCIATION, successor-by-merger to
Wells Fargo Bank Minnesota, National Association as Indenture Trustee,
Collateral Custodian, Paying Agent and Backup Servicer
 
         
 
  By:   /s/ Joe Nardi
 
  Name:   Joe Nardi
 
  Title:   Vice President

[Signature Pages to Fifth Amendment to Amended and Restated Sale and Servicing
Agreement]

 

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        ACKNOWLEDGED AND AGREED:
 
      CITIGROUP GLOBAL MARKETS REALTY CORP., as sole Noteholder
 
     
By:
  /s/ John Eck
Name:
  John Eck
Title:
  Authorized Signer
 
    CAPITALSOURCE FINANCE LLC, as sole Certificateholder
 
   
By:
  /s/ Thomas A. Fink
Name:
  Thomas A. Fink
Title:
  Chief Financial Officer and Senior Vice President

[Signature Pages to Fifth Amendment to Amended and Restated Sale and Servicing
Agreement]