Exhibit 10.23

CapitalSource Inc.

Senior Convertible Debentures due 2034

REGISTRATION RIGHTS AGREEMENT

March 19, 2004

J.P. Morgan Securities Inc.
277 Park Avenue
9th Floor
New York, New York 10172
as Representative of the Initial Purchasers

Ladies and Gentlemen:

     CapitalSource Inc., a Delaware corporation (the “Company”), proposes to
issue and sell (such issuance and sale, the “Initial Placement”) to the Initial
Purchasers (as defined below), upon the terms set forth in a purchase agreement,
dated March 16, 2004 (the “Purchase Agreement”), $225,000,000 principal amount
of its Senior Convertible Debentures due 2034 (together with the related
Guarantees (as defined below) of the Guarantors (as defined below), the “Firm
Securities”). In addition, the Company has granted to the Initial Purchasers an
option to purchase up to an additional $25,000,000 principal amount of the
Company’s Senior Convertible Debentures due 2034 (together with the related
Guarantees of the Guarantors, the “Additional Securities” and, collectively with
the Firm Securities, the “Securities”). The Securities will be fully and
unconditionally guaranteed as to due and punctual payment (the “Guarantees”) by
CapitalSource Holdings LLC and CapitalSource Finance LLC (together, the
“Guarantors”). The Securities will be convertible into shares of Common Stock
(as defined below), at the conversion price set forth in the Offering Memorandum
(as defined below), as the same may be adjusted from time to time pursuant to
the Indenture (as defined below). As an inducement to you to enter into the
Purchase Agreement and in satisfaction of a condition to your obligations
thereunder, the Company and the Guarantors agree with you, (i) for your benefit
and (ii) for the benefit of the Holders (as defined below) from time to time of
the Securities and the shares of Common Stock issuable upon conversion of the
Securities, as follows:

               1. Definitions. Capitalized terms used herein without definition
shall have the respective meanings set forth in the Purchase Agreement. As used
in this Agreement, the following capitalized terms shall have the following
meanings:

     “Additional Amounts” has the meaning set forth in Section 2(e) hereof.

     “Additional Amounts Payment Date” means each March 15 and September 15.

     “Affiliate” of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified

 

--------------------------------------------------------------------------------

 

person. For the purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling,” “controlled by” and “under common
control with”), as used with respect to any person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such person whether through the ownership of voting
securities or by agreement or otherwise.

     “Business Day” has the meaning set forth in the Indenture.

     “Closing Date” means March 19, 2004.

     “Common Stock” means the common stock, par value $0.01 per share, of the
Company, as it exists on the date of this Agreement and any other shares of
capital stock or other securities of the Company into which such Common Stock
may be reclassified or changed, together with any and all other securities which
may from time to time be issuable upon conversion of Securities.

     “Company” has the meaning set forth in the preamble hereto.

     “DTC” has the meaning set forth in the Indenture.

     “Exchange Act” means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the SEC promulgated thereunder.

     “Existing Registration Agreement” means the Amended and Restated
Registration Rights Agreement, dated as of August 30, 2002, by and among the
Company and the holders of its securities party thereto.

     “Holder” means a person who is a registered holder or beneficial owner of
any registrable Securities (including the Initial Purchasers).

     “Guarantee” has the meaning set forth in the preamble hereto.

     “Guarantors” means CapitalSource Holdings LLC and CapitalSource Finance
LLC.

     “Holder Information” with respect to any Holder means information with
respect to such Holder required to be included in any Shelf Registration
Statement or the related Prospectus pursuant to the Securities Act and which
information is included therein in reliance upon and in conformity with
information furnished to the Company and the Guarantors in writing by such
Holder for inclusion therein.

     “Indenture” means the Indenture relating to the Securities, dated March 19,
2004, among the Company, the Guarantors and U.S. Bank National Association, as
trustee, as the same may be amended from time to time in accordance with the
terms thereof.

     “Initial Placement” has the meaning set forth in the preamble hereto.

     “Initial Purchasers” mean J.P. Morgan Securities Inc. and the other initial
purchasers named in and a party to the Purchase Agreement.

2

--------------------------------------------------------------------------------

 

     “Majority Holders” means the Holders of a majority of the then outstanding
aggregate principal amount of Securities being registered under a Shelf
Registration Statement; provided that Holders of shares of Common Stock issued
upon conversion of Securities shall be deemed to be Holders of the aggregate
principal amount of Securities converted into such Common Stock; and provided
further, that Securities or shares of Common Stock which have been sold or
otherwise transferred pursuant to the Shelf Registration Statement shall not be
included in the calculation of Majority Holders.

     “NASD” has the meaning set forth in Section 3(i) hereof.

     “NASD Rules” means the rules and regulation promulgated by the NASD.

     “Notice and Questionnaire” means a Selling Securityholder Notice and
Questionnaire substantially in the form of Annex A to the Offering Memorandum.

     “Notice Holder” shall mean, on any date, any Holder of Transfer Restricted
Securities that has delivered a completed and signed Notice and Questionnaire to
the Company on or prior to such date.

     “Offering Memorandum” means the Final Memorandum as defined in the Purchase
Agreement.

     “Person” has the meaning set forth in the Indenture.

     “Prospectus” means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities or shares of Common Stock
issuable upon conversion thereof covered by such Shelf Registration Statement,
including all documents incorporated or deemed to be incorporated by reference
in such prospectus.

     “Purchase Agreement” has the meaning set forth in the preamble hereto.

     “Record Holder” means each person who is registered on the books of the
registrar as the holder of Securities at the close of business on the March 1 or
September 1 immediately preceding the relevant Additional Amounts Payment Date.

     “Registration Default” has the meaning set forth in Section 2(e) hereof.

     “Representative” means J.P. Morgan Securities Inc., as representative of
the Initial Purchasers.

     “Rule 144” means Rule 144 under the Securities Act (or any similar
provision then in force).

     “Rule 144A” means Rule 144A under the Securities Act (or any successor
provision promulgated by the SEC).

3

--------------------------------------------------------------------------------

 

     “Rule 144(k)” means Rule 144(k) under the Securities Act (or any successor
provision promulgated by the SEC).

     “Rule 415” means Rule 415 under the Securities Act (or any successor
provision promulgated by the SEC).

     “SEC” means the Securities and Exchange Commission.

     “Securities” has the meaning set forth in the preamble hereto.

     “Securities Act” means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.

     “Seller Post-Effective Amendment” has the meaning set forth in Section
2(b)(ii) hereof.

     “Shelf Registration” means a registration effected pursuant to Section 2
hereof.

     “Shelf Registration Period” has the meaning set forth in Section 2(c)
hereof.

     “Shelf Registration Statement” means any “shelf” registration statement of
the Company and the Guarantors filed pursuant to the provisions of Section 2
hereof which covers the Transfer Restricted Securities on Form S-3 or on another
appropriate form (as determined by the Company) for an offering to be made on a
delayed or continuous basis pursuant to Rule 415 and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all documents incorporated or deemed to be incorporated by reference
therein.

     “Suspension Period” has the meaning set forth in Section 2(d) hereof.

     “Transfer Restricted Securities” means each Security and each share of
Common Stock issuable upon conversion thereof until the earliest of the date on
which such Security or share of Common Stock, as the case may be, (i) has been
transferred pursuant to a Shelf Registration Statement or another registration
statement covering such Security or share of Common Stock which has been filed
with the SEC pursuant to the Securities Act, in either case after such
registration statement has become effective and while such registration
statement is effective under the Securities Act, (ii) has been transferred
pursuant to Rule 144 under circumstances in which any legend borne by such
Securities or shares of Common Stock relating to restrictions on transferability
thereof, under the Securities Act or otherwise, is removed, (iii) may be sold or
transferred pursuant to Rule 144(k) or (iv) the date on which such Security or
Common Stock ceases to be outstanding.

     “Trustee” means U.S. Bank National Association, the trustee with respect to
the Securities under the Indenture.

     All references in this Agreement to financial statements and schedules and
other information which is “contained,” “included,” or “stated” in the Shelf
Registration Statement, any preliminary Prospectus or Prospectus (and all other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information

4

--------------------------------------------------------------------------------

 

incorporated or deemed to be incorporated by reference in such Shelf
Registration Statement, preliminary Prospectus or Prospectus, as the case may
be; and all references in this Agreement to amendments or supplements to the
Shelf Registration Statement, any preliminary Prospectus or Prospectus shall be
deemed to mean and include any document filed with the SEC under the Exchange
Act, after the date of such Shelf Registration Statement, preliminary Prospectus
or Prospectus, as the case may be, which is incorporated or deemed to be
incorporated by reference therein (which shall not include, unless incorporated
therein, documents and information furnished and not filed under applicable SEC
rules).

               2. Shelf Registration Statement.

               (a) The Company and the Guarantors shall, at the Company’s
expense, prepare and file with the SEC within 195 days following the Closing
Date a Shelf Registration Statement with respect to resales of the Transfer
Restricted Securities by each Holder that is a Notice Holder from time to time
on a delayed or continuous basis pursuant to Rule 415 and in accordance with the
methods of distribution elected by such Notice Holders in a Notice and
Questionnaire and thereafter shall use its best efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act within
285 days after the Closing Date; provided that if any Additional Securities are
issued and the date on which such Additional Securities are issued occurs after
the Closing Date, the Company will take such steps, prior to the effective date
of the Shelf Registration Statement, to ensure that such Additional Securities
and the shares of Common Stock issuable upon conversion thereof are included in
the Shelf Registration Statement on the same terms as the Securities issued on
the Closing Date. The Company shall supplement or amend the Shelf Registration
Statement if required by the rules, regulations or instructions applicable to
the registration form used by the Company for the Shelf Registration Statement,
or by the Securities Act, the Exchange Act or the SEC.

          (b) (i) The Company shall take action to name each Holder that is a
Notice Holder as of the date that is 10 Business Days prior to the effectiveness
of the Shelf Registration Statement as a selling securityholder in the Shelf
Registration Statement at the time of its effectiveness so that such Holder is
permitted to deliver the Prospectus forming a part thereof as of such time to
purchasers of such Holder’s Transfer Restricted Securities in accordance with
applicable law. The Company shall be under no obligation to name any Holder that
is not a Notice Holder as a selling securityholder in the Shelf Registration
Statement.

                    (i) (A) After the Shelf Registration Statement has become
effective, the Company shall, upon the request of any Holder of Transfer
Restricted Securities, promptly send a Notice and Questionnaire to such Holder
and the Company shall, as promptly as is practicable after the date a completed
and signed Notice and Questionnaire is delivered to the Company, and in any
event (subject to clause (B) below) within 20 Business Days after such date,
prepare and file with the SEC (y) a supplement to the Prospectus or, if a
post-effective amendment to the Shelf Registration Statement is required by
applicable law in order to cause a Holder to be named as a selling
securityholder in the Shelf Registration Statement, a post-effective amendment
to the Shelf Registration Statement (a “Seller Post-Effective Amendment”) and
(z) any other document required by applicable law, so that the Holder delivering
such Notice and

5

--------------------------------------------------------------------------------

 

Questionnaire is named as a selling securityholder in the Shelf Registration
Statement and is permitted to deliver the Prospectus to purchasers of such
Holder’s Transfer Restricted Securities in accordance with applicable law. If
the Company files a Seller Post-Effective Amendment, it shall use its best
efforts to cause such post-effective amendment to become effective under the
Securities Act as promptly as is practicable and in any event within 75 days of
such filing. Notwithstanding anything contained herein to the contrary, if a
Notice and Questionnaire is delivered to the Company during a Suspension Period,
the Company shall not be obligated to take the actions set forth above until the
termination of such Suspension Period.

                    (B) Notwithstanding the requirements of clause (A) above,
the Company shall not be required to file more than one Seller Post-Effective
Amendment in any fiscal quarter, provided that this clause (B) shall not relieve
the Company of any obligations under clause (A) unless a Seller Post-Effective
Amendment is required by applicable law in order to cause a Holder to be named
as a selling securityholder in the Shelf Registration Statement.

               (c) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective, supplemented and amended under
the Securities Act in order to permit the Prospectus forming a part thereof to
be usable, subject to Section 2(d), by all Notice Holders until all Transfer
Restricted Securities (A) have been transferred pursuant to a Shelf Registration
Statement or another registration statement covering such Security or share of
Common Stock which has been filed with the SEC pursuant to the Securities Act,
in either case after such registration statement has become effective and while
such registration statement is effective under the Securities Act, (B) have been
transferred pursuant to Rule 144 under circumstances in which any legend borne
by such Securities or shares of Common Stock relating to restrictions on
transferability thereof, under the Securities Act or otherwise, is removed or
(C) have ceased to be outstanding (in any such case, such period being called
the “Shelf Registration Period”). The Company will, (x) subject to Section 2(d),
prepare and file with the SEC such amendments and post-effective amendments to
the Shelf Registration Statement as may be necessary to keep the Shelf
Registration Statement continuously effective for the Shelf Registration Period,
(y) subject to Section 2(d), cause the related Prospectus to be supplemented by
any required supplement, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act and
(z) comply in all material respects with the provisions of the Securities Act
with respect to the Shelf Registration Statement during the Shelf Registration
Period.

               (d) The Company may suspend the availability of any Shelf
Registration Statement and the use of any Prospectus (the period during which
the availability of any Shelf Registration Statement and any Prospectus may be
suspended herein referred to as the “Suspension Period”), without incurring any
obligation to pay Additional Amounts pursuant to Section 2(e), for a period not
to exceed 90 days in the aggregate during any 12-month period for valid business
reasons, to be determined by the Company in its sole judgment (which shall not
include the avoidance of the Company’s obligations hereunder), including,
without limitation, the acquisition or divestiture of assets, pending corporate
developments, public filings with the SEC and similar events; provided that the
Company promptly thereafter complies with the requirements of Section 3(j)
hereof, if applicable, and provided further that, if a Seller Post-

6

--------------------------------------------------------------------------------

 

Effective Amendment is required by applicable law in order to cause a Holder to
be named as a selling securityholder in the Shelf Registration Statement, the
period of time between the filing and effectiveness of any Seller Post-Effective
Amendment shall not be deemed to be a Suspension Period hereunder.

               (e) The Company and the Initial Purchasers agree that the Holders
of Transferred Restricted Securities will suffer damages, and it would not be
feasible to ascertain the extent of such damages with precision, if the Company
fails to fulfill its obligations under Section 2 hereof. Accordingly, if (i) the
Shelf Registration Statement is not filed with the SEC within 195 days after the
Closing Date, (ii) the Shelf Registration Statement has not been declared
effective by the SEC within 285 days after the Closing Date, (iii) the Shelf
Registration Statement is filed and declared effective but shall thereafter
cease to be effective (without being succeeded immediately by a replacement
Shelf Registration Statement filed and declared effective) or usable (including
as a result of a Suspension Period) for the offer and sale of Transfer
Restricted Securities for a period of time (including any Suspension Period and
excluding, if a Seller Post-Effective Amendment is required by applicable law in
order to cause a Holder to be named as a selling securityholder in the Shelf
Registration Statement, the period of time between the filing and effectiveness
of any Seller Post-Effective Amendment) which exceeds 90 days in the aggregate
in any 12-month period or (iv) the Company fails to perform its obligations set
forth in Section 2(b)(ii) within the time periods required therein (each such
event referred to in clauses (i) through (iv), a “Registration Default”), the
Company shall pay to each Notice Holder (who is also a Record Holder) (but only
to each affected Notice Holder under Section 2(b)(ii) in the case of clause
(iv)) during any period in which a Registration Default has occurred or is
continuing an amount (the “Additional Amounts”) equal to (i) one-quarter of one
percent (25 basis points) per annum of the outstanding principal amount of
Securities constituting Transfer Restricted Securities held by such Holder for
the period up to and including the 90th day during which such Registration
Default has occurred and is continuing and (ii) one-half of one percent (50
basis points) per annum of the outstanding principal amount of Securities
constituting Transfer Restricted Securities held by such Holder for the period
including and subsequent to the 91st day during which such Registration Default
has occurred and is continuing, it being understood that all calculations
pursuant to this sentence shall be carried out to five decimal places. Following
the cure of all Registration Defaults, Additional Amounts will cease to accrue
with respect to such Registration Defaults. All accrued Additional Amounts shall
be paid by the Company on each Additional Amounts Payment Date in cash and
Additional Amounts will be calculated on the basis of a 360-day year consisting
of twelve 30-day months. The parties hereto agree that the Additional Amounts
provided for in this Section 2(e) constitute a reasonable estimate of the
damages that may be incurred by Notice Holders by reason of a Registration
Default and that such Additional Amounts are the only monetary damages available
to Notice Holders in the event of a Registration Default.

               (f) All of the Company’s obligations (including, without
limitation, the obligation to pay Additional Amounts) set forth in the preceding
paragraph which are outstanding or exist with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
security shall have been satisfied in full. Notwithstanding the foregoing, no
Additional Amounts shall accrue as to any Transfer Restricted Security from and
after the date

7

--------------------------------------------------------------------------------

 

such security is no longer a Transfer Restricted Security. Additional Amounts
shall not accrue to more than one Notice Holder with respect to a Transfer
Restricted Security at any one time.

               (g) Immediately upon the occurrence or the cure of a Registration
Default, the Company shall give (i) the Trustee, so long as the Securities
remain outstanding, and (ii) the transfer and paying agent for the Common Stock,
in the event any Notice Holder holds Common Stock issued upon conversion of
Securities, notice of such commencement or termination of the obligation to pay
Additional Amounts with regard to the Securities or the Common Stock, as the
case may be, the amount or applicable percentage thereof and the nature of the
default giving rise to such commencement or the event giving rise to such
termination, as the case may be (such notice to be contained in an Officer’s
Certificate (as such term is defined in the Indenture)), and prior to receipt of
such Officer’s Certificate the Trustee and the transfer and paying agent shall
be entitled to assume that no such commencement or termination has occurred, as
the case may be.

               3. Registration Procedures. In connection with any Shelf
Registration Statement, the following provisions shall apply:

               (a) The Company shall (i) furnish to the Initial Purchasers,
within a reasonable period of time, but in any event within three Business Days,
prior to the filing thereof with the SEC to afford the Initial Purchasers and
their counsel a reasonable opportunity for review, a copy of each Shelf
Registration Statement, and each amendment thereof, and a copy of each
Prospectus, and each amendment or supplement thereto (excluding amendments
caused by the filing of a report under the Exchange Act), and shall reflect in
each such document, when so filed with the SEC, such comments as the Initial
Purchasers may reasonably propose, except to the extent the Company reasonably
determines, on the advice of counsel, it to be inadvisable or inappropriate to
reflect such comments therein, and (ii) include information regarding the Notice
Holders and the methods of distribution they have elected for their Transfer
Restricted Securities provided to the Company in Notice and Questionnaires as
necessary to permit such distribution by the methods specified therein. Each
Notice Holder who sells, transfers or disposes of Transfer Restricted Securities
pursuant to the Shelf Registration Statement shall, as a condition to the
obligations of the Company hereunder, do so only in accordance with the terms of
this Agreement, the methods of distribution elected by such Notice Holder, the
Securities Act and the Exchange Act.

               (b) Subject to Section 2(d), the Company shall ensure that
(i) any Shelf Registration Statement and any amendment thereto and any
Prospectus forming a part thereof and any amendment or supplement thereto comply
in all material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any Prospectus forming a
part of any Shelf Registration Statement, and any amendment or supplement to
such Prospectus, does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided
that the Company makes no representation with respect to any Holder Information.

8

--------------------------------------------------------------------------------

 

               (c) The Company, as promptly as reasonably practicable (but in
any event within two Business Days), shall notify the Initial Purchasers and
each Notice Holder and, if requested by you or any such Holder, confirm such
notice in writing:

                    (i) when a Shelf Registration Statement or any amendment
thereto or any Prospectus or any amendment or supplement thereto has been filed
with the SEC and when the Shelf Registration Statement or any post-effective
amendment thereto has become effective;

                    (ii) of any request, following effectiveness of the Shelf
Registration Statement under the Securities Act, by the SEC or any other federal
or state governmental authority for amendments or supplements to the Shelf
Registration Statement or the Prospectus or for additional information (other
than any such request relating to a review of the Company’s Exchange Act
filings);

                    (iii) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Shelf Registration Statement or of any order preventing or suspending the
use of any Prospectus or the initiation or threat of any proceedings for that
purpose;

                    (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of the Transfer Restricted Securities included in any Shelf Registration
Statement for sale in any jurisdiction or the initiation or threat of any
proceeding for that purpose;

                    (v) of the occurrence of any event or the existence of any
condition or any information becoming known that requires the making of any
changes in the Shelf Registration Statement or the Prospectus or any document
incorporated by reference therein so that, as of such date, the statements
therein are not misleading and the Shelf Registration Statement or the
Prospectus or any document incorporated by reference therein, as the case may
be, does not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading;

                    (vi) of the Company’s determination that a post-effective
amendment to the Shelf Registration Statement is necessary; and

                    (vii) of the commencement (including as a result of any of
the events or circumstances described in paragraphs (ii) through (vi) above) and
termination of any Suspension Period.

               (d) The Company shall use its best efforts to obtain (i) the
withdrawal of any order suspending the effectiveness of any Shelf Registration
Statement and the use of any related Prospectus and (ii) the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Transfer Restricted Securities for offer or sale in any jurisdiction in which
they have been qualified for sale, in each case at the earliest possible time,
and shall

9

--------------------------------------------------------------------------------

 

provide notice to each Notice Holder and the Initial Purchasers of the
withdrawal of any such orders or suspensions.

               (e) The Company shall promptly furnish to each Notice Holder and
the Initial Purchasers, without charge, at least one copy of any Shelf
Registration Statement and any post-effective amendment thereto, excluding all
documents incorporated or deemed to be incorporated therein by reference and all
exhibits thereto (unless requested by such Notice Holder).

               (f) The Company shall, during the Shelf Registration Period,
promptly deliver to the Initial Purchasers, each Notice Holder and any
broker-dealers acting on their behalf, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in any Shelf
Registration Statement, and any amendment or supplement thereto, as such person
may reasonably request, except as provided in Sections 2(d) and 3(s) hereof; and
the Company hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Notice Holders in connection with the
offering and sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto in the manner set forth
therein.

               (g) Prior to any offering of Transfer Restricted Securities
pursuant to any Shelf Registration Statement, the Company shall register or
qualify or cooperate with the Notice Holders and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Transfer Restricted Securities for offer
and sale, under the securities or blue sky laws of such jurisdictions within the
United States as any such Notice Holders reasonably request and shall maintain
such qualification in effect so long as required during the Shelf Registration
Period and do any and all other acts or things necessary or advisable to enable
the offer and sale in such jurisdictions of the Transfer Restricted Securities
covered by such Shelf Registration Statement; provided, however, that the
Company will not be required to (A) qualify generally to do business as a
foreign corporation or as a dealer in securities in any jurisdiction where it is
not then so qualified or to (B) take any action which would subject it to
service of process or taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.

               (h) The Company shall cooperate with the Notice Holders to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities (to the extent certificates for the Securities or
the Common Stock issued upon conversion of Securities are issuable under the
Indenture) sold pursuant to any Shelf Registration Statement free of any
restrictive legends and, with respect of any Securities, in such denominations
permitted by the Indenture and registered in such names as Holders may request
at least two Business Days prior to settlement of sales of Transfer Restricted
Securities pursuant to such Shelf Registration Statement.

               (i) Subject to the exceptions contained in (A) and (B) of Section
3(g) above, the Company shall use its best efforts to cause the Transfer
Restricted Securities covered by the applicable Shelf Registration Statement to
be registered with or approved by such other federal, state and local
governmental agencies or authorities, and self-regulatory organizations in the
United States as may be necessary to enable the Notice Holders to consummate the
disposition of such Transfer Restricted Securities as contemplated by the Shelf
Registration Statement; without

10

--------------------------------------------------------------------------------

 

limitation to the foregoing, the Company shall provide all such information as
may be required by the National Association of Securities Dealers, Inc. (the
“NASD”) in connection with the offering under the Shelf Registration Statement
of the Transfer Restricted Securities (including, without limitation, such as
may be required by NASD Rule 2710 or 2720), and shall cooperate with each Holder
in connection with any filings required to be made with the NASD by such Holder
in that regard.

               (j) Upon the occurrence of any event described in Section 3(c)(v)
or 3(c)(vi) hereof, the Company shall promptly prepare and file with the SEC a
post-effective amendment to any Shelf Registration Statement, or an amendment or
supplement to the related Prospectus, or any document incorporated therein by
reference, or file a document which is incorporated or deemed to be incorporated
by reference in such Shelf Registration Statement or Prospectus, as the case may
be, so that, as thereafter delivered to purchasers of the Transfer Restricted
Securities included therein, the Shelf Registration Statement and the
Prospectus, in each case as then amended or supplemented, will not include an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein (in
the case of the Prospectus, in light of the circumstances under which they were
made) not misleading and, in the case of a post-effective amendment, use its
best efforts to cause it to become effective as promptly as practicable;
provided that the Company’s obligations under this paragraph (j) shall be
suspended if the Company has suspended the use of the Prospectus in accordance
with Section 2(d) hereof and given notice of such suspension to Notice Holders,
it being understood that the Company’s obligations under this Section 3(j) shall
be automatically reinstated at the end of such Suspension Period.

               (k) The Company shall provide, prior to the effective date of any
Shelf Registration Statement hereunder (i) a CUSIP number for the Transfer
Restricted Securities registered under such Shelf Registration Statement and
(ii) global certificates for such Transfer Restricted Securities to the Trustee,
in a form eligible for deposit with DTC.

               (l) The Company shall make generally available to its security
holders an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated by the SEC thereunder (or any similar
rule promulgated under the Securities Act) for a 12-month period commencing on
the first day of the first fiscal quarter of the Company commencing after the
effective date of any Shelf Registration Statement or each post-effective
amendment to any Shelf Registration Statement, which such statements shall be
made available no later than 45 days after the end of the 12-month period or 90
days after the end of the 12-month period, if the 12-month period coincides with
the fiscal year of the Company.

               (m) The Company shall use its best efforts to cause the Indenture
to be qualified under the TIA (as defined in the Indenture) not later than the
effective date of the first Shelf Registration Statement.

               (n) The Company shall cause all shares of Common Stock issuable
upon conversion of the Securities to be approved for listing upon official
notice of issuance on each securities exchange or quotation system on which the
Common Stock is then listed no later than the date the applicable Shelf
Registration Statement is declared effective and, in connection

11

--------------------------------------------------------------------------------

 

therewith, to make such filings as may be required under the Exchange Act and to
have such filings declared effective as and when required thereunder.

               (o) The Company may require each Holder of Transfer Restricted
Securities to be sold pursuant to any Shelf Registration Statement to furnish to
the Company such information regarding the Holder and the distribution of such
Transfer Restricted Securities sought by the Notice and Questionnaire and such
additional information as may, from time to time, be required by the Securities
Act and/or the SEC or any other federal or state governmental authority, and the
obligations of the Company to any Holder under this Agreement shall be expressly
conditioned on the compliance of such Holder with such request.

               (p) The Company shall, if reasonably requested, promptly
incorporate in a Prospectus supplement or post-effective amendment to a Shelf
Registration Statement (i) such information as the Majority Holders provide and
(ii) such information as a Notice Holder may provide from time to time to the
Company in writing for inclusion in a Prospectus or any Shelf Registration
Statement concerning such Notice Holder and the distribution of such Holder’s
Transfer Restricted Securities and, in either case, shall make all required
filings of such Prospectus supplement or post-effective amendment promptly after
being notified in writing of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided that the Company shall not be
required to take any action under this Section 3(p) that is not, in the
reasonable opinion of counsel for the Company, in compliance with applicable
law.

               (q) In the case of the underwritten offering provided by
Section 7 below, take all actions necessary, or reasonably requested by the
holders of a majority of the Transfer Restricted Securities being sold in such
underwritten offering, in order to expedite or facilitate disposition of such
Transfer Restricted Securities; provided that the Company shall not be required
to take any action in connection with the underwritten offering without its
consent.

               (r) If reasonably requested in writing in connection with any
disposition of Transfer Restricted Securities pursuant to a Shelf Registration
Statement, make reasonably available for inspection during normal business hours
by a representative for the Notice Holders of such Transfer Restricted
Securities and any broker-dealers, attorneys and accountants retained by such
Notice Holders, all relevant financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
appropriate executive officers, directors and designated employees of the
Company and its subsidiaries to make reasonably available for inspection during
normal business hours all relevant information reasonably requested by such
representative for the Notice Holders or any such broker-dealers, attorneys or
accountants in connection with such disposition, in each case as is customary
for similar “due diligence” examinations; provided, however, that any
information that is designated by the Company, in good faith, as confidential at
the time of delivery of such information shall be kept confidential by such
persons, unless disclosure thereof is made in connection with a court,
administrative or regulatory proceeding or required by law, or such information
has become available to the public generally through the Company or through a
third party without an accompanying obligation of confidentiality.

               (s) Each Notice Holder agrees that, upon receipt of notice of the
happening of an event described in Sections 3(c)(ii) through and including
3(c)(vii), each Holder shall

12

--------------------------------------------------------------------------------

 

forthwith discontinue (and shall cause its agents and representatives to
discontinue) disposition of Transfer Restricted Securities and will not resume
disposition of Transfer Restricted Securities until such Holder has received
copies of an amended or supplemented Prospectus contemplated by Section 3(j)
hereof, or until such Holder is advised in writing by the Company that the use
of the Prospectus may be resumed or that the relevant Suspension Period has been
terminated, as the case may be, provided that the foregoing shall not prevent
the sale, transfer or other disposition of Transfer Restricted Securities by a
Notice Holder in a transaction which is exempt from, or not subject to, the
registration requirements of the Securities Act, so long as such Notice Holder
does not and is not required to deliver the applicable Prospectus or Shelf
Registration Statement in connection with such sale, transfer or other
disposition, as the case may be; and provided, further, that the provisions of
this Section 3(s) shall not prevent the occurrence of a Registration Default or
otherwise limit the obligation of the Company to pay Additional Amounts.

               (t) Each Notice Holder shall promptly notify the Company of any
inaccuracies or changes in the information provided in such Notice Holder’s
Notice and Questionnaire that may occur subsequent to the date thereof at any
time while the Shelf Registration Statement remains effective.

               (u) The Company will register shares of Common Stock issuable
upon conversion of the Securities to the extent necessary to permit such shares
of Common Stock to be freely tradable under the Securities Act by persons who
are not affiliates of the Company.

               4. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations under
Sections 2 and 3 hereof. Such fees and expenses shall include, without
limitation: (i) all registration and filing fees and expenses (including filings
made with the NASD); (ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all expenses of printing
(including printing of Prospectuses and certificates for the Common Stock to be
issued upon conversion of the Securities) and the Company’s expenses for
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel to the Company; (v) all application and filing fees in connection
with listing (or authorizing for quotation) the Common Stock on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company. The Company shall bear its internal expenses
(including, without limitation, all salaries and expenses of their officers and
employees performing legal, accounting or other duties), the expenses of any
annual audit and the fees and expenses of any Person, including special experts,
retained by the Company. Notwithstanding the provisions of this Section 4, each
Holder shall bear its own legal fees and expenses and the expense of any
broker’s commission, agency fee and underwriter’s discount or commission
(including, without limitation, the expenses related to the engagement of a
“qualified independent underwriter”), if any, relating to the sale or
disposition of such Holder’s Transfer Restricted Securities pursuant to a Shelf
Registration Statement.

               5. Indemnity and Contribution.

               (a) The Company and the Guarantors, jointly and severally, agree
to indemnify and hold harmless each Holder of Transfer Restricted Securities
named in any Shelf

13

--------------------------------------------------------------------------------

 

Registration Statement (including, without limitation, each Initial Purchaser),
its directors, its officers and each person, if any, who controls any such
Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (collectively referred to for purposes of this
Section 5 as a “Holder”), from and against any and all losses, claims, damages
and liabilities (including without limitation the legal fees and other expenses
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Shelf Registration Statement, or in any
Prospectus, or any amendment thereof or supplement thereto, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with information relating to any Holder
furnished to the Company in writing by such Holder expressly for use therein;
provided that the foregoing indemnity with respect to any Shelf Registration
Statement, or any Prospectus, or any amendment or supplement thereto, shall not
inure to the benefit of any Holder (or the benefit of any person controlling
such Holder) from whom the person asserting any such losses, claims, damages or
liabilities purchased the securities concerned, to the extent that any such
loss, claim, damage or liability of the Holders occurs under the circumstance
where it shall have been established that (w) the Company had previously
furnished copies of the Prospectus, and any amendments and supplements thereto,
to the Holder, (x) delivery of the Prospectus, and any amendment or supplements
thereto, was required by the Securities Act to be made to such person, (y) the
untrue statement or omission of a material fact was corrected in the Prospectus
or amendments or supplements thereto, and (z) there was not sent or given to
such person, at or prior to the written confirmation of the sale of such
securities to such person, a copy of such Prospectus or amendments or
supplements thereto.

               (b) Each Holder agrees, severally and not jointly, to indemnify
and hold harmless the Company and the Guarantors, its directors, its officers
and each person who controls the Company and the Guarantors within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company and the Guarantors to
the Holders, but only with reference to information relating to such Holder
furnished to the Company and the Guarantors in writing by such Holder expressly
for use in the Shelf Registration Statement, or in any Prospectus, or any
amendment or supplement thereto.

               (c) If any suit, action, proceeding (including any governmental
or regulatory investigation), claim or demand shall be brought or asserted
against any person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such person (the “Indemnified Person”)
shall promptly notify the person against whom such indemnity may be sought (the
“Indemnifying Person”) in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the
reasonable fees and expenses of such counsel related to such proceeding. The
Indemnifying Person shall be relieved from liability to the extent that the
Indemnified Person fails to promptly notify the Indemnifying Person of any
action commenced against it in respect of which indemnity may be sought
hereunder; provided that failure to so notify the Indemnifying Person (i) shall
not relieve the Indemnifying Person from any liability

14

--------------------------------------------------------------------------------

 

hereunder to the extent it is not materially prejudiced as a result thereof and
(ii) in any event shall not relieve the Indemnifying Person from any liability
which it may have otherwise than on account of this indemnity agreement. In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person
has failed within a reasonable time to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the Indemnifying Person and the
Indemnified Person and representation of both parties by the same counsel would
be inappropriate, in the reasonable judgment of the Indemnified Person, due to
actual or potential differing interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for the Holders and such control persons of the
Holders shall be designated in writing by the Representative and any such
separate firm for the Company and the Guarantors, their respective directors,
officers and such control persons of the Company and the Guarantors shall be
designated in writing by the Company and the Guarantors. The Indemnifying Person
shall not be liable for any settlement of any pending or threatened proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the fourth sentence of this paragraph, the Indemnifying Person
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than
30 days after receipt by such Indemnifying Person of the aforesaid request and
(ii) such Indemnifying Person shall not have reimbursed the Indemnified Person
in accordance with such request prior to the date of such settlement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Person, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding on terms
reasonably satisfactory to such Indemnified Person.

               (d) If the indemnification provided for in paragraph (a) or
(b) of this Section 5 is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Guarantors on the one hand and the
Holder on the other hand with respect to the sale by such Holder of Securities
or Common Stock or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Guarantors on the one hand and of such Holder on
the other in connection with the statements or

15

--------------------------------------------------------------------------------

 

omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. Benefits received by the Company
and the Guarantors shall be deemed to be equal to the total net proceeds from
the Initial Placement (before deducting expenses). Benefits received by the
Initial Purchasers shall be deemed to be equal to the total purchase discounts
and commissions as set forth in the Offering Memorandum, and benefits received
by any other Holders shall be deemed to be equal to the value of receiving
Securities registered under the Securities Act. Benefits received by any
underwriter shall be deemed to be equal to the total underwriting discounts and
commissions, as set forth on the cover page of the Prospectus forming a part of
the Shelf Registration Statement which resulted in such losses, claims, damages
or liabilities. The relative fault of the Company and the Guarantors on the one
hand and such Holder on the other shall be determined by reference to, among
other things, whether any untrue or any alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or either of the Guarantors or by such
Holder and the parties’ relevant intent, knowledge, information and opportunity
to correct or prevent such statement or omission.

               (e) The Company, the Guarantors and the Holders agree that it
would not be just and equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation (even if the Company and the Guarantors, on
the one hand, or the Holders, on the other hand, were treated as one entity for
such purpose) or any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) of this Section 5. The
amount paid or payable by an Indemnified Person as a result of losses, claims,
damages and liabilities referred to in paragraph (d) of this Section 5 shall be
deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses incurred by such Indemnified Person not otherwise
reimbursed in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 5, in no event shall any
Holder be required to contribute any amount in excess of the amount by which the
total amount received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Shelf Registration Statement exceeds the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.

               (f) The remedies provided for in this Section 5 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any Indemnified Party at law or in equity.

               (g) The indemnity and contribution agreements contained in this
Section 5 shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Holder or any person controlling any Holder or by or on behalf of
the Company and the Guarantors, their respective officers or directors or any
other person controlling the Company or either of the Guarantors and (iii) the
sale by a Holder of Transfer Restricted Securities covered by a Shelf
Registration Statement.

               6. Rules 144 and 144A. The Company covenants that it shall use
its best efforts to file the reports required to be filed by it under the
Securities Act and the Exchange Act

16

--------------------------------------------------------------------------------

 

in a timely manner so long as the Transfer Restricted Securities remain
outstanding. If at any time the Company is not required to file such reports, it
will, upon request of any Holder or beneficial owner of Transfer Restricted
Securities, make available such information necessary to permit sales pursuant
to Rule 144A. The Company further covenants that, for as long as any Transfer
Restricted Securities remain outstanding, it will take such further action as
any Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 and Rule 144A. Upon the
written request of any Holder of Transfer Restricted Securities, the Company
shall deliver to such Holder a written statement as to whether it has complied
with such requirements.

               7. Underwritten Offering.

               (a) If any of the Transfer Restricted Securities covered by any
Shelf Registration Statement are proposed to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the underwritten offering will be selected, subject to the
rights of the Company’s common stockholders party to the Existing Registration
Agreement to the extent exercised by them, by the Majority Holders of such
Transfer Restricted Securities included in such underwritten offering, subject
to the consent of the Company (which shall not be unreasonably withheld or
delayed), and such Holders shall be responsible for all underwriting commissions
and discounts in connection therewith and all of the fees and expenses set forth
in Section 4 hereof, including, without limitation, the Company’s reasonable and
documented internal expenses as described therein; provided, however, that if
any common stockholders party to the Existing Registration Agreement exercise
their “piggyback” rights under the Existing Registration Agreement, such common
stockholders will be responsible for their portion of the underwriting
commissions and discounts and other fees and expenses as set forth in the
Existing Registration Agreement, and any Holder hereunder will be responsible
only for its pro rata share (taking into account the participation of any common
stockholders party to the Existing Registration Agreement) of the Company’s
reasonable and documented internal expenses; provided further, that
notwithstanding anything contained in this Agreement to the contrary, the
Company shall be under no obligation to participate in any underwritten offering
with respect to the Transfer Restricted Securities and no underwritten offering
shall be effected pursuant to this Agreement without the prior consent of the
Company; and provided further that, if and to the extent the Company may consent
to an underwritten offering of the Company’s common stock in accordance with
this Section 7(a), the rights of the Holders to have their Transfer Restricted
Securities included in such underwritten offering will be subject to the
cut-back and other provisions of the Existing Registration Agreement.

               (b) No Holder may participate in any underwritten offering
hereunder unless such person (i) agrees to sell such Holder’s Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the Holders entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.

17

--------------------------------------------------------------------------------

 

               8. Miscellaneous.

               (a) No Inconsistent Agreements. Except with respect to the
Existing Registration Agreement, none of the Company or the Guarantors has, as
of the date hereof, entered into nor shall any of them, on or after the date
hereof, enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof. In addition, none of the Company or the
Guarantors shall grant to any of its securityholders the right to include any of
its securities in the Shelf Registration Statement provided for in this
Agreement other than the Transfer Restricted Securities and other than the
“registrable securities"(as defined in the Existing Registration Agreement”)
held by parties to the Existing Registration Agreement, it being expressly
understood and acknowledged that the rights of such parties to the Existing
Registration Agreement take precedence over those of the Holders hereunder.

               (b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company and the Guarantors have
obtained the written consent of at least the majority of the Holders of the then
outstanding Transfer Restricted Securities; provided that with respect to any
matter that directly or indirectly affects the rights of the Initial Purchasers
hereunder, the Company and the Guarantors shall obtain the written consent of
the Initial Purchasers against which such amendment, qualification, supplement,
waiver or consent is to be effective. Notwithstanding the foregoing (except the
foregoing proviso), a waiver or consent to departure from the provisions hereof
with respect to a matter that relates exclusively to the rights of Holders whose
Transfer Restricted Securities are being sold pursuant to a Shelf Registration
Statement and that does not directly or indirectly affect the rights of other
Holders may be given by the Majority Holders.

               (c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier, or air courier guaranteeing overnight delivery:

                    (i) if to the Initial Purchasers, initially at their address
set forth in the Purchase Agreement;

                    (ii) if to any other Holder, at the most current address of
such Holder maintained by the Registrar under the Indenture or the registrar of
the Common Stock (provided that while the Securities or the Common Stock are in
book-entry form, notice to the Trustee or transfer and paying agent, as the case
may be, shall serve as notice to the Holders), or, in the case of the Notice
Holder, the address set forth in its Notice and Questionnaire; and

                    (iii) if to the Company and the Guarantors, to:

CapitalSource Inc.
4445 Willard Avenue
12th Floor

18

--------------------------------------------------------------------------------

 

Chevy Chase, MD 20815
Facsimile: (301) 841-2380
Attn: Chief Legal Officer

With a copy to:

Hogan & Hartson L.L.P.
555 Thirteenth Street, NW
Washington, DC 20004-1109
Facsimile: (202) 637-5910
Attn: James E. Showen

     All such notices and communications shall be deemed to have been duly given
when received, if delivered by hand or air courier, and when sent, if sent by
first-class mail or telecopier.

     The Initial Purchasers or the Company and the Guarantors by notice to the
other may designate additional or different addresses for subsequent notices or
communications.

               (d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company or the Guarantors thereto, subsequent Holders. The Company and the
Guarantors hereby agree to extend the benefits of this Agreement to any Holder
and any such Holder may specifically enforce the provisions of this Agreement as
if an original party hereto. In the event that any other person shall succeed to
the Company or the Guarantors under the Indenture, then such successor shall
enter into an agreement, in form and substance reasonably satisfactory to the
Initial Purchasers, whereby such successor shall assume all of the Company’s or
such Guarantor’s obligations, as the case may be, under this Agreement.

               (e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

               (f) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

               (g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE.

               (h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected

19

--------------------------------------------------------------------------------

 

thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.

     (i) Securities Held by the Company, etc. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities or the
shares of Common Stock issuable upon conversion thereof is required hereunder,
Securities or the shares of Common Stock issued upon conversion thereof held by
the Company or its Affiliates (other than subsequent Holders of Securities or
the Common Stock issued upon conversion thereof if such subsequent Holders are
deemed to be Affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

     (j) Termination. This Agreement and the obligations of the parties
hereunder shall terminate upon the end of the Shelf Registration Period, except
for (i) any liabilities or obligations under Section 2(e) and related
liabilities or obligations under Sections 4 and 5, to the extent arising prior
to the end of the Shelf Registration Period, and (ii) the obligations under
Section 3(u) and the related liabilities or obligations under Sections 4 and 5,
which shall survive until all interests in the Securities have been redeemed,
repurchased, converted, cancelled or exchanged for Common Stock.

20

--------------------------------------------------------------------------------

 

     Please confirm that the foregoing correctly sets forth the agreement among
the Company, the Guarantors and you.

              Very truly yours,
 
            CAPITALSOURCE INC.
 
       

  By:   /s/ STEVEN A. MUSELES

--------------------------------------------------------------------------------

      Name: Steven A. Museles

      Title: Senior Vice President
 
            CAPITALSOURCE HOLDINGS LLC
 
       

  By:   /s/ STEVEN A. MUSELES

--------------------------------------------------------------------------------

      Name: Steven A. Museles

      Title: Senior Vice President
 
            CAPITALSOURCE FINANCE LLC
 
       

  By:   /s/ STEVEN A. MUSELES

--------------------------------------------------------------------------------

      Name: Steven A. Museles

      Title: Senior Vice President

The foregoing Agreement is hereby confirmed
and accepted as of the date first above written.

J.P. MORGAN SECURITIES INC.

Acting on behalf of itself and as Representative
of the Initial Purchasers

     
By:
  /s/ SANTOSH SREENIVASAN

--------------------------------------------------------------------------------

Name: Santosh Sreenivasan Title: Vice President