Exhibit 10.55
EXECUTION COPY
 
SALE AND SERVICING AGREEMENT
by and among
CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1,
as the Issuer,
CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1,
as the Trust Depositor,
CAPITALSOURCE FINANCE LLC,
as the Originator and as the Servicer,
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as the Indenture Trustee and as the Backup Servicer.
Dated as of April 11, 2006
 
CapitalSource Commercial Loan Trust 2006-1 Asset Backed Notes
Class A, Class B, Class C, Class D, Class E and Class F Notes

 

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TABLE OF CONTENTS

                              Page ARTICLE 1.   DEFINITIONS     2  
 
               
 
  Section 1.01.   Definitions     2  
 
  Section 1.02.   Usage of Terms     52  
 
  Section 1.03.   Section References     52  
 
  Section 1.04.   Calculations     52  
 
  Section 1.05.   Accounting Terms     52  
 
                ARTICLE 2.   ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS  
  52  
 
               
 
  Section 2.01.   Creation and Funding of Issuer; Transfer of Initial Loan
Assets     52  
 
  Section 2.02.   Conditions to Transfer of Initial Loan Assets to Issuer     55
 
 
  Section 2.03.   Acceptance by Owner Trustee     56  
 
  Section 2.04.   Conveyance of Substitute Loans     56  
 
  Section 2.05.   [Reserved]     60  
 
  Section 2.06.   Release of Released Amounts     60  
 
  Section 2.07.   Delivery of Documents in the Loan File; Recording of
Assignments of Mortgage     60  
 
  Section 2.08.   Optional Purchase by the Servicer of Certain Loans;
Limitations on Substitution and Repurchase     61  
 
  Section 2.09.   Certification by Indenture Trustee; Possession of Loan Files  
  61  
 
                ARTICLE 3.   REPRESENTATIONS AND WARRANTIES     63  
 
               
 
  Section 3.01.   Representations and Warranties Regarding the Trust Depositor  
  63  
 
  Section 3.02.   Representations and Warranties Regarding Each Loan and as to
Certain Loans in the Aggregate     67  
 
  Section 3.03.   Representations and Warranties Regarding the Initial Loans in
the Aggregate     68  
 
  Section 3.04.   Representations and Warranties Regarding the Loan Files     68
 
 
  Section 3.05.   [Reserved]     68  
 
  Section 3.06.   Representations and Warranties Regarding the Servicer     68  
 
  Section 3.07.   Representations and Warranties of the Backup Servicer     69  
 
                ARTICLE 4.   PERFECTION OF TRANSFER AND PROTECTION OF SECURITY
INTERESTS     71    
 
  Section 4.01.   Custody of Loans     71  
 
  Section 4.02.   Filing     71  
 
  Section 4.03.   Changes in Name, Corporate Structure or Location     71  
 
  Section 4.04.   Costs and Expenses     72  
 
  Section 4.05.   Sale Treatment     72  
 
  Section 4.06.   Separateness from Trust Depositor     72  
 
                ARTICLE 5.   SERVICING OF LOANS     72  
 
               
 
  Section 5.01.   Appointment and Acceptance     72  

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TABLE OF CONTENTS
(Continued)

                              Page
 
  Section 5.02.   Duties of the Servicer     72  
 
  Section 5.03.   Liquidation of Loans     79  
 
  Section 5.04.   Fidelity Bond     80  
 
  Section 5.05.   Maintenance of Hazard Insurance     80  
 
  Section 5.06.   Collection of Certain Loan Payments     81  
 
  Section 5.07.   Access to Certain Documentation and Information Regarding the
Loans     82  
 
  Section 5.08.   Satisfaction of Mortgages and Collateral and Release of Loan
Files     82  
 
  Section 5.09.   Scheduled Payment Advances     83  
 
  Section 5.10.   Title, Management and Disposition of Foreclosed Property    
84  
 
  Section 5.11.   Servicing Compensation     84  
 
  Section 5.12.   Assignment; Resignation     85  
 
  Section 5.13.   Merger or Consolidation of Servicer     85  
 
  Section 5.14.   Limitation on Liability of the Servicer and Others     85  
 
  Section 5.15.   The Backup Servicer     86  
 
  Section 5.16.   Covenants of the Backup Servicer     88  
 
                ARTICLE 6.   COVENANTS OF THE TRUST DEPOSITOR     89  
 
               
 
  Section 6.01.   Legal Existence     89  
 
  Section 6.02.   Loans Not to Be Evidenced by Promissory Notes     89  
 
  Section 6.03.   Security Interests     89  
 
  Section 6.04.   Delivery of Principal Collections and Interest Collections    
89  
 
  Section 6.05.   Regulatory Filings     90  
 
  Section 6.06.   Compliance with Law     90  
 
  Section 6.07.   Activities; Transfers of Notes or Certificates by Trust
Depositor     90  
 
  Section 6.08.   Indebtedness     90  
 
  Section 6.09.   Guarantees     90  
 
  Section 6.10.   Investments     90  
 
  Section 6.11.   Merger; Sales     91  
 
  Section 6.12.   Distributions     91  
 
  Section 6.13.   Other Agreements     91  
 
  Section 6.14.   Separate Legal Existence     91  
 
  Section 6.15.   Location; Records     92  
 
  Section 6.16.   Liability of Trust Depositor     92  
 
  Section 6.17.   Bankruptcy Limitations     92  
 
  Section 6.18.   Limitation on Liability of Trust Depositor and Others     93  
 
  Section 6.19.   Insurance Policies     93  
 
  Section 6.20.   Payments from Obligor Lock– Boxes and Obligor Lock– Box
Accounts     93  

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TABLE OF CONTENTS
(Continued)

                              Page ARTICLE 7.   ESTABLISHMENT OF ACCOUNTS;
DISTRIBUTIONS; RESERVE FUND     94  
 
               
 
  Section 7.01.   Note Distribution Account, Reserve Fund and Lock– Boxes     94
 
 
  Section 7.02.   Reserve Fund Deposit     95  
 
  Section 7.03.   Principal and Interest Account     95  
 
  Section 7.04.   Securityholder Distributions     98  
 
  Section 7.05.   Priority of Payments; Allocations and Distributions     98  
 
  Section 7.06.   Determination of LIBOR     104  
 
  Section 7.07.   Monthly Reconciliation     105  
 
                ARTICLE 8.   SERVICER DEFAULT; SERVICER TRANSFER     106  
 
               
 
  Section 8.01.   Servicer Default     106  
 
  Section 8.02.   Servicer Transfer     107  
 
  Section 8.03.   Appointment of Successor Servicer; Reconveyance; Successor
Servicer to Act     107  
 
  Section 8.04.   Notification to Securityholders and Hedge Counterparties    
109  
 
  Section 8.05.   Effect of Transfer     110  
 
  Section 8.06.   Database File     110  
 
  Section 8.07.   Waiver of Defaults     110  
 
  Section 8.08.   Responsibilities of the Successor Servicer     110  
 
  Section 8.09.   Rating Agency Condition for Servicer Transfer     111  
 
  Section 8.10.   Appointment of Successor Backup Servicer; Successor Backup
Servicer to Act     111  
 
                ARTICLE 9.   REPORTS     112  
 
               
 
  Section 9.01.   Monthly Reports     112  
 
  Section 9.02.   Officer’s Certificate     112  
 
  Section 9.03.   Other Data; Obligor Financial Information     112  
 
  Section 9.04.   Annual Report of Accountants     113  
 
  Section 9.05.   Annual Statement of Compliance from Servicer     114  
 
  Section 9.06.   Reports of Foreclosure and Abandonment of Mortgaged Property  
  114  
 
  Section 9.07.   Notices     114  
 
  Section 9.08.   Indenture Trustee’s Right to Examine Servicer Records and
Audit Operations     115  
 
                ARTICLE 10.   TERMINATION     115  
 
               
 
  Section 10.01.   Optional Repurchase of Offered Notes     115  
 
  Section 10.02.   Termination     116  

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TABLE OF CONTENTS
(Continued)

                              Page ARTICLE 11.   REMEDIES UPON
MISREPRESENTATION; REPURCHASE OPTION     116  
 
               
 
  Section 11.01.   Repurchases of, or Substitution for, Loans for Breach of
Representations and Warranties     116  
 
  Section 11.02.   Reassignment of Repurchased or Substituted Loans     117  
 
                ARTICLE 12.   INDEMNITIES     117  
 
               
 
  Section 12.01.   Indemnification by Servicer     117  
 
  Section 12.02.   Indemnification by Trust Depositor     118  
 
                ARTICLE 13.   MISCELLANEOUS     118  
 
               
 
  Section 13.01.   Amendment     118  
 
  Section 13.02.   Protection of Title to Issuer     119  
 
  Section 13.03.   Governing Law     119  
 
  Section 13.04.   Notices     120  
 
  Section 13.05.   Severability of Provisions     122  
 
  Section 13.06.   Third Party Beneficiaries     122  
 
  Section 13.07.   Counterparts     122  
 
  Section 13.08.   Headings     122  
 
  Section 13.09.   No Bankruptcy Petition; Disclaimer     123  
 
  Section 13.10.   Jurisdiction     124  
 
  Section 13.11.   Tax Characterization     124  
 
  Section 13.12.   Prohibited Transactions with Respect to the Issuer     124  
 
  Section 13.13.   Limitation of Liability of Owner Trustee     124  
 
  Section 13.14.   Allocation of Payments with Respect to Loans     125  
 
  Section 13.15.   No Partnership     126  
 
  Section 13.16.   Successors and Assigns     126  
 
  Section 13.17.   Acts of Holders     126  
 
  Section 13.18.   Duration of Agreement     126  
 
  Section 13.19.   Limited Recourse     126  
 
  Section 13.20.   Confidentiality     127  
 
  Section 13.21.   Non- Confidentiality of Tax Treatment     127  
 
  Section 13.22.   Alternative Exchange Listing     127  

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EXHIBITS, SCHEDULES AND APPENDIX

         
Exhibit A
  Form of Assignment   A–1
Exhibit B
  Form of Closing Certificate of Trust Depositor   B–1
Exhibit C
  Form of Closing Certificate of Servicer/Originator   C –1
Exhibit D
  Form of Liquidation Report   D–1
Exhibit E
  Form of Principal and Interest Account Letter Agreement   E–1
Exhibit F
  Form of Certificate Regarding Repurchased Loans   F –1
Exhibit G
  List of Loans   G–1
Exhibit H
  Form of Monthly Servicer Report   H–1
Exhibit I
  Form of Subsequent Transfer Agreement   I–1
Exhibit J
  Form of Subsequent Purchase Agreement   J–1
Exhibit K
  Credit and Collection Policy   K –1
Exhibit L–1
  Form of Initial Certification   L–1
Exhibit L–2
  Form of Final Certification   L–2
Exhibit M
  Form of Request For Release Of Documents   M–1
Exhibit N
  Form of Addition Notice   N –1  
Schedule I
  Lock– Box Banks and Lock–Box Accounts   Schedule–I
Schedule II
  Obligor Lock–Box Banks and Obligor Lock– Box Accounts   Schedule–II

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SALE AND SERVICING AGREEMENT
     THIS SALE AND SERVICING AGREEMENT, dated as of April 11, 2006, is by and
among:

  (1)   CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, a statutory trust created
and existing under the laws of the State of Delaware (together with its
successors and assigns, the “Issuer”);     (2)   CAPITALSOURCE COMMERCIAL LOAN
LLC, 2006-1, a Delaware limited liability company, as the trust depositor
(together with its successor and assigns, in such capacity, the “Trust
Depositor”);     (3)   CAPITALSOURCE FINANCE LLC, a Delaware limited liability
company (together with its successors and assigns, “CapitalSource”), as the
servicer (together with its successor and assigns, in such capacity, the
“Servicer”), and as the originator (together with its successor and assigns, in
such capacity, the “Originator”); and     (4)   WELLS FARGO BANK, NATIONAL
ASSOCIATION (together with its successors and assigns, “Wells Fargo ”), not in
its individual capacity but as the indenture trustee (together with its
successors and assigns, in such capacity, the “Indenture Trustee”), and not in
its individual capacity but as the backup servicer (together with its successors
and assigns, in such capacity, the
“Backup Servicer”).

R E C I T A L S
     WHEREAS, in the regular course of its business, the Originator originates
and/or otherwise acquires Loans (as defined herein);
     WHEREAS, the Trust Depositor acquired the Initial Loans from the Originator
and may acquire from time to time thereafter certain Substitute Loans (such
Initial Loans and Substitute Loans, together with certain related property as
more fully described herein, being the Loan Assets as defined herein);
     WHEREAS, it was a condition to the Trust Depositor’s acquisition of the
Initial Loans from the Originator that the Originator make certain
representations and warranties regarding the Loan Assets for the benefit of the
Trust Depositor as well as the Issuer;
     WHEREAS, on the Closing Date (as defined herein), the Trust Depositor will
fund the Issuer by selling, conveying and assigning all its right, title and
interest in the Initial Loan Assets and certain other assets to the Issuer;
     WHEREAS, the Issuer is willing to purchase and accept assignment of the
Loan Assets (as defined herein) from the Trust Depositor pursuant to the terms
hereof; and

 

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     WHEREAS, the Servicer is willing to service the Loan Assets for the benefit
and account of the Issuer pursuant to the terms hereof.
     NOW, THEREFORE, based upon the above recitals, the mutual premises and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1.
DEFINITIONS
     Section 1.01. Definitions.
     Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
“1940 Act” means the Investment Company Act of 1940, as amended.
“A/B Exchange ” means an exchange or sale of one security ( the “A Security”)
and the subsequent delivery of or reinvestment in another security (the “B
Security”) which shall be issued by the issuer or issuers of the A Security and
shall have substantially identical terms to the A Security, except that one or
more restrictions on the ability of the holder to sell or otherwise dispose of
the A Security are intended to be inapplicable to the B Security and cash or
cash equivalents in settlement of fractional or unauthorized denominations of A
Securities tendered for exchange or B Securities received in exchange.
“Accelerated Amortization Event ” means the occurrence of either of (i) the
Aggregate Outstanding Loan Balance shall be less than the Aggregate Outstanding
Principal Balance of the Notes for a period greater than 60 calendar days or
(ii) any of the Offered Notes shall be outstanding on any Payment Date after
August 20, 2013.
“Accreted Interest” means accrued interest on a Deferred Interest Loan that is
added to the principal amount of such Deferred Interest Loan instead of being
paid as it accrues.
“Acquired Loan” means a Loan that is originated by a Person other than the
Originator or an Affiliate thereof and acquired by the Originator in a “true
sale” transaction pursuant to a standard loan acquisition agreement.
“Acquisition Funding Transaction” means the Loan Certificate and Servicing
Agreement, dated as of February 28, 2003, by and among CapitalSource Acquisition
Funding Inc., the Originator, the Servicer, Variable Funding Capital Corporation
and Wells Fargo Bank, National Association, as amended, modified, restated,
waived or supplemented from time to time, and all documents executed in
connection therewith and all transactions contemplated thereby.
“Addition Notice” means, with respect to any transfer of Substitute Loans to the
Issuer in accordance with Section 2.04 (and the Trust Depositor’s corresponding
prior purchase of such Loans from the Originator), a notice in the form of
Exhibit N, which shall be given at least ten

2

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Business Days prior to the related Subsequent Transfer Date, identifying the
Substitute Loans to be transferred, the Outstanding Loan Balance of such
Substitute Loans and the related Substitution Event (with respect to an
identified Loan or Loans then in the Loan Pool) to which such Substitute Loan
relates, with such notice to be signed both by the Trust Depositor and the
Originator.
“Additional Servicing Fee” means an amount, in addition to the Servicing Fee,
necessary to induce a Successor Servicer to serve as Servicer hereunder, which
amount shall not exceed $100,000 in the aggregate per Successor Servicer.
“Affiliate” of any specified Person means any other Person controlling or
controlled by, or under common control with, such specified Person. For the
purposes of this definition, “control” (including the terms “controlling,”
“controlled by” and “under common control with”) when used with respect to any
specified Person means the possession, direct or indirect, of the power to vote
20% or more of the voting securities of such Person or to direct or cause the
direction of the management and policies of such Person whether through the
ownership of voting securities, by contract or otherwise. Each of the Indenture
Trustee and the Owner Trustee may conclusively presume that a Person is not an
Affiliate of another Person unless a Responsible Officer of such trustee has
actual knowledge to the contrary.
“Agented Loans ” means, with respect to any Loan, (a) the Loan is originated by
the Originator as a part of a syndicated loan transaction that has been fully
consummated prior to such Loan becoming part of the Loan Pool and (b) the
Issuer, as assignee of the Loan, will have all of the rights (but none of the
obligations) of the Originator with respect to such Loan and the Originator’s
right, title and interest in and to the Collateral.
“Aggregate Notional Amount” means, on any date, the aggregate notional amount in
respect of the payment obligations of the relevant Hedge Counterparty that is
outstanding on that date under all Hedge Transactions or any group thereof, as
the context requires.
“Aggregate Outstanding Loan Balance” means, as of any date of determination, the
sum of the Outstanding Loan Balance for each Loan owned by the Issuer as of such
date.
“Aggregate Outstanding Principal Balance” means, as of any date of
determination, the sum of the Outstanding Principal Balances of each Class
outstanding on such date.
“Agreement ” means this Sale and Servicing Agreement, as amended, modified,
waived, supplemented or restated from time to time in accordance with the terms
hereof.
“Alarm Service Agreement ” means an agreement between a Dealer and its customer
pursuant to which the Dealer is obligated to service and monitor the customer’s
alarm system in consideration for monthly payments by the customer.
“Amortizing Loan” means a Loan that, by its terms, provides for (or after a
period of time will provide for) a series of Scheduled Payments calculated to
amortize the principal balance of the Loan over its term so that, at the Loan’s
maturity, no more than 25% of the maximum outstanding loan balance remains
unpaid, with the remaining balance due at maturity.

3

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“Asset Based Revolver” means any Revolving Loan (other than a Loan to an SPE
Obligor) secured by accounts receivable and/or inventory.
“Assigned Loan” means a Loan originated by a Person other than the Originator in
which a constant percentage interest has been assigned to the Originator by such
Person in accordance with the Credit and Collection Policy and (a) such
transaction has been fully consummated prior to such Loan becoming part of the
Loan Pool, (b) the Originator is a party to the underlying loan documents, (c)
the Issuer, as assignee of the Loan, will have all of the rights (but none of
the obligations) of the Originator with respect to such Loan and the
Originator’s right, title and interest in and to the Collateral, and (d) the
agent bank receives payment directly from the Obligor thereof on behalf of each
lender that has been assigned a percentage interest in such Loan.
“Assigned Parties” means the Noteholders and Hedge Counterparties as well as any
other holder of a loan to or debt obligation of such Obligor arising out of the
same underlying loan agreement, including, without limitation, the Originator,
CapitalSource Commercial Loan Trust 2002-2, CapitalSource Commercial Loan Trust
2003-1, CapitalSource Commercial Loan Trust 2003-2, CapitalSource Commercial
Loan Trust 2004-1, CapitalSource Commercial Loan Trust 2004-2, CapitalSource
Commercial Loan Trust 2005-1, CapitalSource Funding Inc., CapitalSource Funding
II Trust, CapitalSource Funding III LLC and CS Funding V Trust.
“Assignment” means each Assignment, substantially in the form of Exhibit A,
relating to an assignment, transfer and conveyance of Loans and the related
Collateral by the Trust Depositor to the Issuer.
“Assignment of Mortgage ” means, with respect to each Loan that is to an SPE
Obligor that is secured by real property and improvements thereon, an assignment
of the related Mortgage, notice of transfer or equivalent instrument sufficient
under the laws of the jurisdiction wherein the related Mortgaged Property is
located to reflect or record the transfer of the Mortgage of the related Loan to
the Indenture Trustee.
“Available Principal Distributable” means, as of any Payment Date, an amount
equal to (i) the amount of funds remaining after distribution of all amounts
payable under clauses First through Tenth of Section 7.05(a) minus (ii) the
Outstanding Loan Balance of each Delinquent Loan.
“Average Life ”means, as of any date of determination, the number obtained by
dividing (a) the sum of the products, for each Loan in the Loan Pool, of (i) the
number of years (rounded to the nearest one tenth) from such Measurement Date to
the respective dates of each successive Scheduled Payment of principal of such
Loan and (ii) the respective amounts of principal of such Scheduled Payments by
(b) the sum of all future Scheduled Payments of principal on such Loan.
“Backup Servicer” means the Person acting as Backup Servicer hereunder, its
successors in interest and any Successor Backup Servicer hereunder.
“Backup Servicer Termination Notice” shall have the meaning given to such term
in Section 8.10(a).
“Backup Servicer Transfer” shall have the meaning given to such term in
Section 8.10(b).

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“Backup Servicing Fee” shall have the meaning given to such term in the fee
letter, dated as of the date hereof, among the Originator, the Trust Depositor,
the Issuer and the Backup Servicer.
“Balloon Loan” means a Loan that, by its terms, provides for (or after a period
of time will provide for) a series of Scheduled Payment installments calculated
to partially amortize the principal balance of the Loan over its term so that,
at the Loan’s maturity, more than 25% (but less than 100%) of the maximum
outstanding loan balance remains unpaid, with such remaining balance due at
maturity.
“Barclays Capital” means Barclays Capital Inc.
“BIF” means the Bank Insurance Fund, or any successor thereto.
“Blended Rate Loan” means an Election Rate Loan or a Loan which by its terms has
Loan Rates determined by reference to more than one Loan Rate Index (but does
not permit the related Obligor to change Loan Rate Indexes).
“Break—Even Default Rate” means, with respect to any class of Notes, the maximum
cumulative rate of defaults with respect to Loans in the Loan Pool that such
class of Notes can withstand, while subjected to the cash flow stresses employed
by S&P in rating such class of Notes, and still pay timely interest and ultimate
principal to the Holders of such by the Final Maturity Date.
“Bullet Loan” means a Loan that, by its terms, provides for no Scheduled
Payments of principal prior to the Loan’s maturity, and, at maturity, the entire
unpaid principal balance of the Loan is due.
“Business Day” means any day other than (a) a Saturday or Sunday, or (b) a day
on which banking institutions in the cities of New York, New York and
Minneapolis, Minnesota are authorized or obligated, by law or executive order,
to be closed; provided that if any action is required of the Ireland Paying
Agent, then, for purposes of determining when such Ireland Paying Agent action
is required Dublin, Ireland will be considered in determining “Business Day”.
“Call Period” means the period on and after the date on which the Outstanding
Principal Balance of the Class A Notes is less than or equal to 20% of the
Outstanding Principal Balance of the Class A Notes on the Closing Date.
“CapitalSource” shall have the meaning given to such term in the Preamble.
“CapitalSource LIBOR Rate” means the posted rate for one- month, two- month,
three- month or six-month, as applicable, deposits in U.S. dollars appearing on
Telerate Page 3750, as and when determined in accordance with the applicable
Required Loan Documents.
“CapitalSource Prime Rate” means the rate designated by CapitalSource from time
to time as its prime rate in the United States, such rate to change as and when
such designated rate changes; provided, however, the CapitalSource Prime Rate is
not intended to be the lowest rate of interest charged by CapitalSource in
connection with extensions of credit to debtors.

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“Certificate” means the CapitalSource Commercial Loan Trust 2006-1 Certificates
representing a beneficial equity interest in the Issuer and issued pursuant to
the Trust Agreement.
“Certificate Account ” shall have the meaning given to such term in Section 5.01
of the Trust Agreement.
“Certificate Register” shall have the meaning given to such term in the Trust
Agreement.
“Certificateholder” means the registered holder of a Certificate.
“Charged—Off Loan” means a Loan in the Loan Pool with respect to which there has
occurred one or more of the following:
     (a) the occurrence of both (i) any portion of a payment of interest on or
principal (excluding payments of principal consisting of excess cash flow
sweeps) of such Loan is not paid when due (without giving effect to any grace
period or any Scheduled Payment Advance made in respect of such payment of
interest or principal) or would be so delinquent but for any amendment or
modification made to such Loan resulting from the Obligor’s inability to pay
such Loan in accordance with its terms and (ii) within 120 days of when such
delinquent payment was first due, all delinquencies have not been cured;
     (b) an Insolvency Event has occurred with respect to the related Obligor;
     (c) the related Obligor has suffered any material adverse change that
materially affects its viability as a going concern;
     (d) the Servicer has determined, in its sole discretion, in accordance with
the Credit and Collection Policy, that all or a portion of such Loan is not
collectible;
     (e) any portion of the proceeds used to make payments of principal of or
interest on such Loan have come from a new Loan or a new loan by the Originator
or an entity controlled by the Originator to the Obligor or any of its
Affiliates; or
     (f) the related Obligor is rated “D” by-S&P.
“Citigroup ” means Citigroup Global Markets Inc.
“Class” means any of the group of Notes identified herein as, as applicable, the
Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the
Class E Notes, or the Class F Note.
“Class A Notes” means the CapitalSource Commercial Loan Trust 2006-1
Asset-Backed Notes, Class A Notes, issued pursuant to the Indenture.
“Class A Interest Amount” means, for each Interest Accrual Period, the product
of (i) the Note Interest Rate applicable to the Class A Notes as of the first
day of such Interest Accrual Period, (ii) the Outstanding Principal Balance of
the Class A Notes as of the first day of such Interest Accrual Period (after
giving effect to all distributions made on such day) and (iii) a fraction, the

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numerator of which is the number of days in such Interest Accrual Period and the
denominator of which is 360.
“Class A Note Interest Rate” means the annual rate of interest payable with
respect to the Class A Notes, which shall be equal to LIBOR plus 0.12% per
annum.
“Class A Noteholder” means each Person in whose name a Class A Note is
registered in the Note Register.
“Class B Accrued Payable” means, for any Payment Date with respect to which the
Class B Interest Amount is calculated using clause (ii)(b) of the definition
thereof, an amount equal to the excess, if any, of (a) the amount that would
have been calculated as the Class B Interest Amount on such Payment Date if the
calculation was made using clause (ii)(a) of the definition of Class B Interest
Amount and not clause (ii)(b) of such definition over (b) the amount calculated
as the Class B Interest Amount on such Payment Date, together with the unpaid
portion of any such excess from prior Payment Dates (and interest accrued
thereon at the then applicable Class B Note Interest Rate).
“Class B Interest Amount” means, for each Interest Accrual Period, an amount
equal to the product of (i) the Class B Note Interest Rate as of the first day
of such Interest Accrual Period, (ii) the lesser of (a) the Outstanding
Principal Balance of the Class B Notes as of the first day of such Interest
Accrual Period (after giving effect to all distributions made on such day) and
(b) the excess, if any, of (1) the Aggregate Outstanding Loan Balance as of the
last day of the Due Period immediately preceding the start of such Interest
Accrual Period over (2) the Outstanding Principal Balance of the Class A Notes
as of the first day of such Interest Accrual Period (after giving effect to all
distributions made on such day) and (iii) a fraction, the numerator of which is
the number of days in such Interest Accrual Period and the denominator of which
is 360.
“Class B Note Interest Rate” means the annual rate of interest payable with
respect to the Class B Notes, which shall be equal to LIBOR plus 0.25% per
annum.
“Class B Noteholder” means each Person in whose name a Class B Note is
registered in the Note Register.
“Class B Notes” means CapitalSource Commercial Loan Trust 2006-1 Asset—Backed
Notes, Class B Notes, issued pursuant to the Indenture.
“Class C Accrued Payable” means, for any Payment Date with respect to which the
Class C Interest Amount is calculated using clause (ii)(b) of the definition
thereof, an amount equal to the excess, if any, of (a) the amount that would
have been calculated as the Class C Interest Amount on such Payment Date if the
calculation was made using clause (ii)(a) of the definition of Class C Interest
Amount and not clause (ii)(b) of such definition over (b) the amount calculated
as the Class C Interest Amount on such Payment Date, together with the unpaid
portion of any such excess from prior Payment Dates (and interest accrued
thereon at the then applicable Class C Note Interest Rate).
“Class C Interest Amount” means, for each Interest Accrual Period, an amount
equal to the product of (i) the Class C Note Interest Rate as of the first day
of such Interest Accrual Period,

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(ii) the lesser of (a) the Outstanding Principal Balance of the Class C Notes as
of the first day of such Interest Accrual Period (after giving effect to all
distributions made on such day) and (b) the excess, if any, of (1) the Aggregate
Outstanding Loan Balance as of the last day of the Due Period immediately
preceding the start of such Interest Accrual Period over (2) the Outstanding
Principal Balance of the Class A Notes and the Class B Notes as of the first day
of such Interest Accrual Period (after giving effect to all distributions made
on such day) and (iii) a fraction, the numerator of which is the number of days
in such Interest Accrual Period and the denominator of which is 360.
“Class C Note Interest Rate” means the annual rate of interest payable with
respect to the Class C Notes, which shall be equal to LIBOR plus 0.55% per
annum.
“Class C Noteholder” means each Person in whose name a Class C Note is
registered in the Note Register.
“Class C Notes” means CapitalSource Commercial Loan Trust 2006-1 Asset—Backed
Notes, Class C Notes, issued pursuant to the Indenture.
“Class D Accrued Payable” means, if, for any Payment Date, the Class D Interest
Amount is calculated using clause (ii)(b) of the definition thereof, the excess,
if any, of (i) the amount that would have been calculated as the Class D
Interest Amount on such Payment Date if the calculation was made using clause
(ii)(a) of the definition of Class D Interest Amount and not clause (ii)(b) of
such definition over (ii) the amount calculated as the Class D Interest Amount
on such Payment Date, together with the unpaid portion of any such excess from
prior Payment Dates (and interest accrued thereon at the then applicable Class D
Note Interest Rate).
“Class D Interest Amount” means, for each Interest Accrual Period, the product
of (i) the Class D Note Interest Rate as of the first day of such Interest
Accrual Period, (ii) the lesser of (a) the Outstanding Principal Balance of the
Class D Notes as of the first day of such Interest Accrual Period (after giving
effect to all distributions made on such day) and (b) the excess, if any, of
(1) the Aggregate Outstanding Loan Balance as of the last day of the Due Period
immediately preceding the start of such Interest Accrual Period over (2) the
Outstanding Principal Balance of the Class A Notes, Class B Notes and Class C
Notes as of the first day of such Interest Accrual Period (after giving effect
to all distributions made on such day) and (iii) a fraction, the numerator of
which is the number of days in such Interest Accrual Period and the denominator
of which is 360.
“Class D Note Interest Rate” means the annual rate of interest payable with
respect to the Class D Notes, which shall be equal to LIBOR plus 1.30% per
annum.
“Class D Noteholder” means each Person in whose name a Class D Note is
registered in the Note Register.
“Class D Notes” means CapitalSource Commercial Loan Trust 2006-1 Asset—Backed
Notes, Class D Notes, issued pursuant to the Indenture.
“Class E Accrued Payable ” means, if, for any Payment Date, the Class E Interest
Amount is calculated using clause (ii)(b) of the definition thereof, the excess,
if any, of (i) the amount that

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would have been calculated as the Class E Interest Amount on such Payment Date
if the calculation was made using clause (ii)(a) of the definition of Class E
Interest Amount and not clause (ii)(b) of such definition over (ii) the amount
calculated as the Class E Interest Amount on such Payment Date, together with
the unpaid portion of any such excess from prior Payment Dates (and interest
accrued thereon at the then applicable Class E Note Interest Rate).
“Class E Interest Amount” means, for each Interest Accrual Period, the product
of (i) the Class E Note Interest Rate as of the first day of such Interest
Accrual Period, (ii) the lesser of (a) the Outstanding Principal Balance of the
Class E Notes as of the first day of such Interest Accrual Period (after giving
effect to all distributions made on such day) and (b) the excess, if any, of
(1) the Aggregate Outstanding Loan Balance as of the last day of the Due Period
immediately preceding the start of such Interest Accrual Period over (2) the
Outstanding Principal Balance of the Class A Notes, Class B Notes, Class C Notes
and Class D Notes as of the first day of such Interest Accrual Period (after
giving effect to all distributions made on such day) and (iii) a fraction, the
numerator of which is the number of days in such Interest Accrual Period and the
denominator of which is 360.
“Class E Note Interest Rate” means the annual rate of interest payable with
respect to the Class E Notes, which shall be equal to LIBOR plus 2.50% per
annum.
“Class E Notes” means the CapitalSource Commercial Loan Trust 2006-1
Asset—Backed Notes, Class E Notes, issued pursuant to the Indenture.
“Class E Noteholder” means each Person in whose name a Class E Note is
registered in the Note Register.
“Class F Note” means the CapitalSource Commercial Loan Trust 2006-1 Asset—Backed
Note, Class F Note, issued pursuant to the Indenture.
“Class F Noteholder” means each Person in whose name a Class F Note is
registered in the Note Register.
“Closing Date” means April 11, 2006.
“Code” means the Internal Revenue Code of 1986, as amended, or any successor
legislation thereto.
“Collateral” means the assets of an Obligor or others in which a security
interest has been granted by the Obligor or others to secure such Loan,
including, but not limited to, real estate, accounts receivable, inventory and
other tangible and intangible assets of the related Obligor.
“Collections ” means the aggregate of Interest Collections and Principal
Collections.
“Commission” means the United States Securities and Exchange Commission.
“Computer Records” means the computer records generated by the Servicer or any
subservicer that provide information relating to the Loans and that were used by
the Originator in selecting

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the Loans conveyed to the Trust Depositor pursuant to Section 2.01 (and any
Substitute Loans conveyed to the Trust Depositor pursuant to Section 2.04).
“Contractual Obligation” means, with respect to any Person, any provision of any
securities issued by such Person or any indenture, mortgage, deed of trust,
contract, undertaking, agreement, instrument or other document to which such
Person is a party or by which it or any of its property is bound or is subject.
“Corporate Trust Office” means, with respect to the Indenture Trustee or Owner
Trustee, as applicable, the office of the Indenture Trustee or Owner Trustee at
which at any particular time its corporate trust business shall be principally
administered, which offices at the date of the execution of this Agreement are
located at the addresses set forth in Section 1304(d).
“Credit and Collection Policy” means the written credit and collection policies
and procedures manual of the Originator and the Servicer in effect on the
Closing Date and attached hereto as Exhibit K, as amended or supplemented from
time to time in accordance with Section 5.02(m) of this Agreement; and with
respect to any Successor Servicer, the written collection policies and
procedures of such Person at the time such Person becomes Successor Servicer.
“Credit Support Provider” means, with respect to any Hedge Counterparty, any
Person providing credit support on behalf of such Hedge Counterparty.
“Curtailment” means, with respect to a Loan, any payment of principal received
by the Issuer during a Due Period as part of a payment allocable to a Loan that
is in excess of the principal portion of the Scheduled Payment due for such Due
Period and which is not intended to satisfy the Loan in full, nor is intended to
cure a delinquency.
“Cut—Off Date” means either or both of (as the context may require) the Initial
Cut—Off Date and any Subsequent Cut—Off Date as applicable to the Loan or Loans
in question.
“Dealer” means an alarm system dealer that has sold an Alarm Service Agreement
to the SLP Financing Originator or the Originator pursuant to an MPA.
“Deferred Interest Loan” means a Loan that requires the related Obligor to pay
only a portion of the accrued and unpaid interest on a current basis, with the
remaining interest being deferred and paid later, together with any unpaid
interest thereon, in a lump sum, which amount shall be treated as Interest
Collections at the time it is received.
“Delinquent Loan” means a Loan (that is not a Charged—Off Loan) in the Loan Pool
as to which there has occurred one or more of the following:
     (a) the occurrence of both (i) any portion of a payment of interest on or
principal (excluding payments of principal constituting excess cash flow sweeps)
of such Loan is not paid in cash on a current basis when due (without giving
effect to any grace period or any Scheduled Payment Advance made in respect of
such payment of interest or principal) or would be so delinquent but for any
amendment, modification, waiver or variance made to such Loan resulting from the
Obligor’s inability to pay such Loan in accordance with its terms and (ii) all
delinquencies have not been cured (A) with respect to Asset Based Revolvers,
within one

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business day of when such delinquent payment was first due and (B) with respect
to all other Loans, within 60 calendar days of when such delinquent payment was
first due;
     (b) consistent with the Credit and Collection Policy such Loan would be
classified as delinquent by the Servicer or the Originator; or
     (c) the cash interest rate payable by the Obligor under such Loan has been
reduced, and, either before or immediately after giving effect to such
reduction, the Weighted Average LIBOR Spread Test is not satisfied;
provided, however, if any Loan to an Obligor is a Delinquent Loan, or if any
Loan from the Originator or any entity controlled by the Originator would be a
Delinquent Loan if owned by the Issuer, then all Loans to that Obligor shall be
deemed to be Delinquent Loans; provided, further, that such Loan or Loans shall
cease to be deemed delinquent as of the date that each Loan which caused any
other Loan to be deemed delinquent in accordance with the preceding proviso has
become a performing Loan and maintained such status for a period of 12
consecutive months.
“Determination Date” means that day of each month that is the third Business Day
prior to a Payment Date.
“DIP Loan” means a loan to an Obligor that is a “debtor-in-possession” as
defined under the Bankruptcy Code.
“Dollar” and “$” means lawful currency of the United States.
“Downgrade Event” means the reduction or withdrawal of the rating issued by any
Rating Agency on the Closing Date with respect to any outstanding class of
Offered Notes.
“Due Period” means, with respect to the first Payment Date, the period from and
including the Initial Cut—Off Date to but excluding the 11th day of the calendar
month immediately preceding the first Payment Date; and thereafter, the period
from and including the 11th day of the previous calendar month to but excluding
the 11th day of the month in which such Payment Date occurs.
“Election Rate Loan” means a Loan which by its terms permits the related Obligor
to periodically elect between Loan Rates based on the CapitalSource Prime Rate
or the CapitalSource LIBOR Rate.
“Eligible Deposit Account ” means either (a) a segregated account with a
Qualified Institution, or (b) a segregated trust account with the corporate
trust department of a depository institution organized under the laws of the
United States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), and acting as a trustee for
funds deposited in such account, so long as any of the securities of such
depository institution shall have a credit rating from in the case of Fitch of
at least “F-1+”, in the case of Moody’s a short–term credit rating of “P-1” and
in the case of S&P a commercial paper short–term debt rating of “A-1+” and a
long—term unsecured debt rating of “AA-”.

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“Eligible Loan” means, on and as of the related Transfer Date, a Loan as to
which each of the following is true:
     (a) the information with respect to each Loan set forth on the List of
Loans delivered to the Indenture Trustee is true and complete;
     (b) the Loan, together with the Collateral, has been originated or acquired
by the Originator, and immediately prior to the transfer and assignment
contemplated by the Loan Sale Agreement, the Originator held, and immediately
prior to the transfer and assignment contemplated by the Sale and Servicing
Agreement, the Trust Depositor held, good and indefeasible title to, and was the
sole owner of, the Loans being transferred to the Trust Depositor and Issuer,
respectively, subject to no Liens except Liens which will be released
simultaneously with such transfer and assignment and Permitted Liens; and
immediately upon the transfer and assignment contemplated by this Agreement, the
Issuer will hold good and indefeasible title to, and be the sole owner of, each
Loan, subject to no Liens except Liens in favor of the Indenture Trustee;
     (c) (i) the Loan, together with the Collections and Collateral related
thereto, are free and clear of any Liens except Permitted Liens, and (ii) all
filings and other actions required to grant to (A) the Indenture Trustee a first
priority perfected security interest in the Originator’s, the Trust Depositor’s
and the Issuer’s interest in the Loan, the Collections and related Collateral
have been made or taken, and (B) in the case of Agented Loans and Assigned
Loans, the collateral agent, as agent for certain creditors of the related
Obligor including the Issuer as owner of the related Loan, a first priority
perfected security interest in the Collateral (except for Permitted Liens);
     (d) at the time such Loan is included in the Loan Pool, (i) the Loan is not
(and since its origination or, to the knowledge of the Originator or the Trust
Depositor (as applicable) in the case of Acquired Loans, since its acquisition,
has never been) a Charged—Off Loan, (ii) the Loan is not past due (and since its
origination or, to the knowledge of the Originator or the Trust Depositor (as
applicable) in the case of Acquired Loans, since its acquisition, has never been
more than 30 days past due) after giving effect to any grace period set forth in
the Credit and Collection Policy in determining the number of days past due,
with respect to payments of principal or interest; provided that any Loan which
would be rendered ineligible by this clause (d) shall cease to be deemed
ineligible by the operation of this clause (d) as of the date such Loan has
become a performing Loan and maintained such status for a period of 12
consecutive months;
     (e) the Loan is an “eligible asset” as defined in Rule 3a–7 under the 1940
Act;
     (f) the Loan constitutes an “account”, “chattel paper”, “instrument” or a
“general intangible” within the meaning of Article 9 of the UCC of all
applicable jurisdictions;
     (g) the Loan is to an Eligible Obligor;
     (h) the Loan is denominated and payable only in United States dollars and
does not permit the currency in which or country in which such Loan is payable
to be changed;

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     (i) the Loan is evidenced by an Underlying Note or, in the case of a
Noteless Loan, the related Loan Register, security agreement or instrument and
related loan documents that have been duly authorized and properly executed, are
in full force and effect and constitute the legal, valid, binding and absolute
and unconditional payment obligation of the related Obligor, enforceable against
such Obligor in accordance with their terms (subject to applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of creditors
generally and to general principles of equity, whether considered in a suit at
law or in equity), and there are no conditions precedent to the enforceability
or validity of the Loan that have not been satisfied or validly waived;
     (j) the Loan or any portion thereof does not contravene in any material
respect any Requirements of Law (including, without limitation, Requirements of
Law relating to predatory or abusive lending, usury, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices, licensing and privacy);
     (k) the Loan, (i) satisfies all applicable requirements of and was
originated or acquired, underwritten, closed and serviced in all material
respects in accordance with the Credit and Collection Policy (including without
limitation the execution by the Obligor of all documentation required by the
Credit and Collection Policy); (ii) does not contain a confidentiality provision
that restricts or purports to restrict the ability of the Indenture Trustee to
exercise its rights under the Transaction Documents, including, without
limitation, its rights to review the Loan, the Required Loan Documents and Loan
File; (iii) was generated in the ordinary course of the Originator’s business;
(iv) arises pursuant to loan documentation with respect to which the Originator
has performed all obligations required to be performed by it thereunder; (v) has
an original term to maturity (A) in the case of Senior Loans and Senior B-Note
Loans of not greater than six years, or (B) in the case of Subordinated Loans of
not greater than seven years; (vi) is not subject to a guaranty by the
Originator or any Affiliate thereof; and (vii) is not a loan primarily for
personal, family or household use;
     (l) the Loan is eligible to be sold, assigned or transferred to the Trust
Depositor and Issuer, respectively, and neither the sale, transfer or assignment
of the Loan under the Transfer and Servicing Agreements to the Trust Depositor
and Issuer, respectively, nor the granting of a security interest under the
Indenture to the Indenture Trustee, violates, conflicts with or contravenes any
Requirements of Law or any contractual or other restriction, limitation or
encumbrance;
     (m) the Loan (other than Loans in which the sole collateral is its accounts
receivable) requires the Obligor thereof to maintain adequate property damage
and liability insurance with respect to the real or personal property
constituting the Collateral and the same has been at all times covered by
adequate physical damage and liability insurance policies issued by generally
acceptable carriers;
     (n) the Collateral, if any, (i) is located in the United States (other than
with respect to Collateral securing two loans representing not more than 0.93%
of the Initial Aggregate Outstanding Loan Balance and with respect to Collateral
that is in addition to the primary Collateral with respect to which the Loan is
principally underwritten), (ii) has not been

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foreclosed on, or repossessed from the current Obligor, by the Servicer, and
(iii) has not suffered any material loss or damage that has not been repaired or
restored;
     (o) (i) the Loan contains a provision substantially to the effect that the
Obligor’s payment obligations are absolute and unconditional without any right
of rescission, setoff, counterclaim or defense for any reason against the
Originator or any assignee, (ii) the Loan contains a clause that has the effect
of unconditionally and irrevocably obligating the Obligor to make periodic
payments (including taxes) notwithstanding any rights the Obligor may have
against the assignor and notwithstanding any damage to, defects in or
destruction of the Collateral or any other event, including obsolescence of any
property or improvements, (iii) the Obligor has no right of deduction, offset,
netting, recoupment, counterclaim, defense or reservation of rights, and (iv)
the Issuer has no future funding obligation with respect to such Loan;
     (p) the Loan is not subject to any litigation, dispute, refund, claims of
rescission, setoff, netting, counterclaim or defense whatsoever, including but
not limited to, claims by or against the Obligor thereof or a payor to or
account debtor of such Obligor, nor will the operation of any of the terms of
the Required Loan Documents, or the exercise of any right thereunder, render any
of the Required Loan Documents unenforceable in whole or in part (subject to
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and to general principles of equity, whether
considered in a suit at law or in equity) ;
     (q) the Loan requires the Obligor to maintain the Collateral in good
condition and to bear all the costs of operating and maintaining same, including
taxes and insurance relating thereto;
     (r) the Loan provides (i) for periodic payments of interest and/or
principal in cash, which are due and payable on a monthly, quarterly,
semi-annual or annual basis, and (ii) that the Servicer (or, with respect to
Agented Loans, Assigned Loans and Senior B-Note Loans, an agent appointed
pursuant to the Required Loan Documents or at least a majority of the lenders)
may accelerate all payments on the Loan (or, with respect to any MPA, require
the Dealer to repurchase all related Alarm Service Agreements) if the Obligor is
in default under the Loan and any applicable cure period has expired (in the
case of any Subordinated Loan or Senior B-Note Loan, subject to any applicable
intercreditor or subordination agreement);
     (s) unless such Loan is a Security System Loan, the Loan provides for cash
payments that fully amortize the Outstanding Loan Balance of such Loan on or by
its maturity and does not provide for such Outstanding Loan Balance to be
discounted pursuant to a prepayment in full;
     (t) the Loan Rate for each Loan adjusts periodically to equal the then
applicable Loan Rate Index plus the margin set forth in the related Underlying
Note or the related credit agreement (other than with respect to two Loans
representing approximately 1.90% of the Initial Aggregate Outstanding Loan
Balance which bear interest at a fixed rate);

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     (u) the Loan shall not have been originated in, nor shall it be subject to
the laws of, any jurisdiction under which the sale, transfer and assignment of
such Loan under the Transfer and Servicing Agreements would be unlawful, void or
voidable;
     (v) the Loan does not permit the Obligor to defer all or any portion of the
current cash interest due thereunder;
     (w) the Loan does not permit the payment obligation of the Obligor
thereunder to be converted or exchanged for equity capital of such Obligor;
     (x) neither the Loan nor any portion of the related Collateral constitutes
Margin Stock;
     (y) the Loan is not a DIP Loan;
     (z) the Loan, together with the Required Loan Documents and Loan File
related thereto, is fully assignable and does not require the consent of or
notice to the Obligor or contain any enforceable restriction on the transfer or
the assignment of the Loan other than a consent or waiver of such restriction
that has been obtained prior to the date on which the Loan was sold to the Trust
Depositor provided, however, that the Required Loan Documents may restrict the
transfer or assignment of the related Loan so long as such Loan is freely
assignable or transferable to a Qualified Transferee;
     (aa) the Obligor of such Loan is legally responsible for all taxes relating
to the Collateral, and all payments in respect of the Loan are required to be
made free and clear of, and without deduction or withholding for or on account
of, any taxes, unless such withholding or deduction is required by Requirements
of Law in which case the Obligor thereof is required to make “gross-up” payments
that cover the full amount of any such withholding taxes on an after-tax basis;
     (bb) the Loan and the Collateral have not been sold, transferred, assigned
or pledged by the Originator, the Trust Depositor or the Issuer to any Person
other than as contemplated by the Transaction Documents;
     (cc) other than Participation Loans and Agented Loans, with respect to the
Originator’s obligation to fund and the actual funding of the Loan by the
Originator, the Originator has not assigned or granted participations to, in
whole or in part, any Person other than to the Issuer or to a special purpose
entity created in connection with one or more of the Warehouse Facilities, a
Prior Term Transaction and any future or similar credit facility;
     (dd) no selection procedure adverse to the interests of the Noteholders or
Hedge Counterparties was utilized by the Originator or Trust Depositor in the
selection of the Loan for inclusion in the Loan Pool;
     (ee) the Loan has not been compromised, adjusted, extended, satisfied,
rescinded or set–off by the Trust Depositor, the Originator or the Obligor with
respect thereto, and no Loan is subject to compromise, adjustment, extension,
satisfaction, rescission, set–off, counterclaim, defense, abatement, suspension,
deferment, deductible, reduction or termination, whether arising

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out of transactions concerning the Loan, or otherwise, by the Trust Depositor,
the Originator or the Obligor with respect thereto;
     (ff) the particular Loan is not one as to which the Originator or Trust
Depositor has knowledge that the Loan will not be paid in full;
     (gg) except with respect to Subordinated Loans or Senior B-Note Loans,
multiple Loans originated to the same Obligor (excluding any guarantor) contain
standard cross–collateralization and cross–default provisions;
     (hh) the Obligor of such Loan is not the subject of an Insolvency Event or
Insolvency Proceedings;
     (ii) the Loan does not represent capitalized interest or payment
obligations relating, in each case, to “put” rights;
     (jj) the Loan is not a Loan or extension of credit by the Originator or an
entity controlled by the Originator to the Obligor or any of its Affiliates for
the purpose of making any past due principal, interest or other payments due on
such Loan;
     (kk) the Loan is secured by a valid, perfected, first priority (other than,
solely in the case of a Senior B-Note Loan, with respect to other lenders on the
senior tranche related to such Loan) security interest in all assets that
constitute the Collateral for the Loan, subject to Permitted Liens;
     (ll) all material consents, licenses, approvals or authorizations of, or
registrations or declarations with, any Governmental Authority required to be
obtained, effected or given in connection with the making or performance of the
Loan have been duly obtained, effected or given and are in full force and
effect;
     (mm) the Originator (i) has completed to its satisfaction, in accordance
with the Credit and Collection Policy, a due diligence audit and collateral
assessment with respect to such Loan and (ii) has done nothing to impair the
rights of the Indenture Trustee, the Noteholders or the Hedge Counterparties
with respect to the Loan, the Collateral, the Scheduled Payments or any income
or proceeds therefrom;
     (nn) the Loan is a Senior Loan, Senior B-Note Loan, Subordinated Loan or
unsecured Loan;
     (oo) no provision of the Required Loan Documents has been waived, modified,
or altered in any respect, except in accordance with the Credit and Collection
Policy and by instruments duly authorized and executed and contained in the
Required Loan Documents and recorded, if necessary, to protect the interests of
the Noteholders and the Hedge Counterparties and which has been delivered to the
Indenture Trustee;
     (pp) the first priority Lien in all assets that constitute Collateral
related to any Senior Loan and Senior B-Note Loan is not subordinated to any
other loan or financing to the related Obligor;

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     (qq) other than with respect to Fully Funded Term Loans, any funding
obligation under such Loan is subject to the Retained Interest;
     (rr) the face amount of the Loan is the dollar amount thereof shown on the
books and records of the Originator;
     (ss) with respect to Subordinated Loans, the Originator has entered into an
intercreditor agreement or subordination agreement (or such provisions are
contained in the principal loan documents for such Loan) with, or provisions for
the benefit of, the senior lender, which agreement or provisions are assignable
to and have been assigned to the Trust Depositor and Issuer, and which provide
that any standstill of remedies by the Originator or its assignee is limited
(A) such that there shall be no standstill of remedies (x) until after a payment
default with respect to the senior obligation or the Originator’s or assignee’s
receipt from the senior lender of a notice of default or a payment default by
the Obligor under the senior debt and (y) unless a covenant default is also in
effect, and (B) provided that the Subordinated Loan has not been accelerated, to
no longer than 180 days in duration in the aggregate in any given year;
     (tt) with respect to any Acquired Loan, such Loan has been re–underwritten
by the Originator and satisfies all of the Originator’s underwriting criteria;
     (uu) with respect to Agented Loans and Assigned Loans, the related Required
Loan Documents (i) shall include a note purchase agreement or similar agreement
containing standard provisions relating to the appointment and duties of a
payment agent and a collateral agent and intercreditor and (if applicable)
subordination provisions, and (ii) are duly authorized, fully and properly
executed and are the valid, binding and unconditional payment obligation of the
Obligor thereof;
     (vv) with respect to Agented Loans, the Originator (or a wholly owned
subsidiary of the Originator) has been appointed the collateral agent of the
security and the paying agent for all such notes prior to such Agented Loan or
Loan becoming a part of the Loan Pool;
     (ww) with respect to Agented Loans and Assigned Loans, if the entity
serving as the collateral agent of the security for all syndicated notes of the
Obligor has or will change from the time of the origination of such notes, all
appropriate assignments of the collateral agent’s rights in and to the
collateral on behalf of the noteholders have been executed and filed or recorded
as appropriate prior to such Agented Loan or Assigned Loan becoming a part of
the Loan Pool;
     (xx) with respect to Agented Loans and Assigned Loans, all required
notifications, if any, have been given to the collateral agent, the paying agent
and any other parties required by the Required Loan Documents of, and all
required consents, if any, have been obtained with respect to, the Originator’s
assignment of such Loan and the Originator’s right, title and interest in the
Collateral to the Trust Depositor and the Issuer and the Indenture Trustee’s
security interest therein on behalf of the Noteholders and the Hedge
Counterparties;
     (yy) with respect to Agented Loans and Assigned Loans, the right to control
the actions of and replace the collateral agent and/or the paying agent of the
syndicated underlying indebtedness is to be exercised by at least a majority in
interest of all holders of such underlying indebtedness;

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     (zz) with respect to Agented Loans, Assigned Loans and any Loans which have
more than one holder of the underlying indebtedness, all syndicated underlying
indebtedness of the Obligor of the same priority is cross-defaulted, and all
holders of such underlying indebtedness (i) have an undivided interest in the
collateral securing such underlying indebtedness, (ii) share in the proceeds of
the sale or other disposition of such collateral on a pro rata basis and
(iii) may transfer or assign their right, title and interest in the collateral;
     (aaa) no portion of the proceeds used to make payments of principal of or
interest on such Loan have come from a new Loan or a new loan by the Originator
or an entity controlled by the Originator;
     (bbb) all of the original or certified Required Loan Documents required to
be delivered to the Indenture Trustee (including all material documents related
thereto) with respect to such Loan have been or will be delivered to the
Indenture Trustee on the Transfer Date or as otherwise provided in this
Agreement;
     (ccc) other than in the case of Noteless Loans, there is one or more
originally signed Underlying Notes in effect for each Loan, which in the
aggregate evidence the portion of the Loan being assigned to the Issuer and
which Underlying Notes have been delivered to the Indenture Trustee; provided,
however, if the Originator funds such a Loan in multiple installments, there may
be one originally signed Underlying Note for each installment;
     (ddd) there is no obligation on the part of the Originator or the Trust
Depositor, as the case may be, or any other party (except for any guarantor of a
Loan), to make Scheduled Payments in addition to those made by the Obligor;
     (eee) as of the related Transfer Date, there is no default, breach,
violation or event of acceleration existing under the related loan agreement or,
as applicable, the Underlying Notes and no event which, with the passage of time
or with notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration (except for such defaults,
breaches and violations that would not have a material adverse effect on the
ability of the Servicer to collect the entire principal and interest thereunder
and would not have a material adverse effect on the ability of the Servicer to
realize the value of the Collateral securing the related Loan);
     (fff) with respect to each Pooled Obligor Loan, as of the related Transfer
Date, (i) the collateral (including, but not limited to, the notes of the
Underlying Debtors and assignments of mortgage in each case where real property
secures the Underlying Debtors’ notes) of the related Underlying Debtors
securing such Loan is held by a custodian under a custodial agreement, (ii) the
custodial agreement for such Loan provides that (A) the related custodian holds
the collateral of the Underlying Debtors pro rata on behalf of the Indenture
Trustee, for the benefit of the Noteholders and the Hedge Counterparties, and
any other assignee and (B) the custodian will record and file the assignments of
mortgage in its name on behalf of the Indenture Trustee and any other assignee
upon the request of noteholders of such Obligor or SPE Obligor holding a
controlling interest and (iii) the Originator’s rights under the custodial
agreement are fully assignable and have been assigned to the Indenture Trustee;

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     (ggg) the Loan was not made in connection with (a) the construction or
development of unimproved land or (b) facilitating the trade-in or exchange of
the related Mortgaged Property;
     (hhh) with respect to MPAs, the related loan documents require the Dealer
to repurchase all Alarm Service Agreements then subject to such MPA on the
earlier of (i) a date certain or (ii) when so demanded by the purchaser (as
defined in such MPA) after a default (as defined in such MPA), as provided in
such MPA, which repurchase is required to be at a repurchase price sufficient to
pay all principal and interest outstanding on such MPA, and “Default” under such
MPA requiring the Dealer to repurchase an Alarm Service Agreement shall include,
without limitation, (w) a failure by the related customer to make a monthly
payment due under such Alarm Service Agreement and such failure shall continue
unremedied for more than 60 days, (x) the related customer shall fail to make a
monthly payment when due two or more times in any 180 day period and (y) a
default by the Dealer in any of its obligations, covenants, agreements,
representation or warranties contained in any Alarm Service Agreement or in such
MPA;
     (iii) with respect to MPAs, if such Loan is a Security System Loan, such
Loan has an original term to maturity and full amortization of not more than
84 months; and
     (jjj) with respect to MPAs, the Obligor of such Loan shall have been
directed to make all payments to one of the Lock-Boxes or directly to one of the
Lock-Box Accounts.
“Eligible Loan Rating” means, with respect to a designated Loan, a “Loan Rating
1,” a “Loan Rating 2,” or a “Loan Rating 3” in accordance with the Credit and
Collection Policy.
“Eligible Obligor” means, on any date of determination, any Obligor that (i) is
a business organization (and not a natural person) that is duly organized and
validly existing under the laws of, and has its chief executive offices in, the
United States or any political subdivision thereof, and has a billing address
within the United States, (ii) is a legal operating entity or holding company
(except with respect to a Loan to an SPE Obligor), (iii) is not a Governmental
Authority, (iv) is not an Affiliate (other than with respect to an SPE Obligor
and with respect to one Loan representing approximately 0.70% of the Initial
Aggregate Outstanding Loan Balance) of the Originator, the Servicer, the Trust
Depositor or the Issuer (v) is not in the nuclear waste or natural resources
industry (other than Obligors in the business of wholesale purchasing and
reselling of natural gas or electricity, the Loans to which have been
appropriately hedged), (vi) is not engaged in the business of conducting
proprietary research on new drug development, (vii) is not the subject of an
Insolvency Proceeding, (viii) as of the applicable Cut-Off Date, is the Obligor
with respect to a Loan having an Eligible Loan Rating (other than in the case of
Obligors of Initial Loans having a Loan Rating of 4, which represent in the
aggregate approximately 17.23% of the Initial Aggregate Outstanding Loan
Balance) and (ix) is not an Obligor of a Charged-Off Loan or Delinquent Loan;
provided, that, an Obligor with respect to a Charged-Off Loan or a Delinquent
Loan shall cease to be disqualified under this clause (ix) as of the date that
each Loan which caused such Obligor to be so disqualified has become a
performing Loan and maintained such status for a period of 12 consecutive
months.
“Eligible Repurchase Obligations ” means repurchase obligations with respect to
any security that is a direct obligation of, or fully guaranteed by, the United
States or any agency or

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instrumentality thereof the obligations of which are backed by the full faith
and credit of the United States, in either case entered into with a depository
institution or trust company (acting as principal) described in clauses (c)(ii)
and (c)(iv) of the definition of Permitted Investments.
“Event of Default” shall have the meaning specified in Section 5.01 of the
Indenture.
“Exchange Act” means the Securities Exchange Act of 1934, as amended or
supplemented from time to time.
“FDIC ” shall mean the Federal Deposit Insurance Corporation and any successor
thereto.
“Fidelity Bond ” shall have the meaning given to such term in Section 5.04.
“Final Maturity Date ” means August 22, 2016.
“Finance Charges” means, with respect to any Loan, any interest or finance
charges owing by an Obligor pursuant to or with respect to such Loan.
“Fitch” means Fitch, Inc. or any successor thereto.
“Fitch Rating” means, for any Loan, the rating assigned to such Loan by Fitch,
as updated from time to time by Fitch.
“Fixed Rate Loan” means a Loan, other than a Floating Rate Loan, where the Loan
Rate payable by the Obligor thereunder is expressed as a fixed rate of interest.
“Fixed Rate Permitted Excess Amount ” means $250,000 in the aggregate.
“Floating LIBOR Rate Loan” means an Eligible Loan where the Loan Rate payable by
the Obligor thereof is based on the CapitalSource LIBOR Rate plus some specified
percentage in addition thereto, and the Loan provides that such Loan Rate will
reset immediately upon any change in the related CapitalSource LIBOR Rate;
provided that Loans with respect to which the Loan Rate payable thereunder is
determined by reference to both the CapitalSource LIBOR Rate and the
CapitalSource Prime Rate shall be deemed to be Floating LIBOR Rate Loans under
this Agreement.
“Floating Prime Rate Loan” means a Loan where the Loan Rate payable by the
Obligor thereof is based on the CapitalSource Prime Rate plus some specified
percentage in addition thereto, and the Loan provides that such Loan Rate will
reset immediately upon any change in the related CapitalSource Prime Rate and no
Election Rate Loan shall be considered a Floating Prime Rate Loan.
“Floating Prime Rate Permitted Excess Amount ” means $250,000 in the aggregate.
“Floating Rate Loan” means a Floating Prime Rate Loan or a Floating LIBOR Rate
Loan.

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“Foreclosed Property” means Collateral acquired by the Issuer for the benefit of
the Securityholders and the Hedge Counterparties in foreclosure or by deed in
lieu of foreclosure or by other legal process.
“Foreclosed Property Disposition” means the final sale of a Foreclosed Property
or of Repossessed Collateral. The proceeds of any “Foreclosed Property
Disposition” constitute part of the definition of Liquidation Proceeds.
“Fully Funded Term Loan” means a Term Loan that is fully funded as of the
Cut–Off Date.
“Funding I Transaction” means the transactions contemplated by the Fourth
Amended and Restated Loan Certificate and Servicing Agreement, dated as of
May 28, 2004, among CapitalSource Funding LLC, as the seller, the Originator, as
the originator and the servicer, Variable Funding Capital Corporation, Harris
Nesbitt Corp., as administrative agent, each of the purchasers and purchaser
agents from time to time party thereto, and Wells Fargo Bank, National
Association, as amended, modified, restated, waived or supplemented from time to
time, and all documents executed in connection therewith and all transactions
contemplated thereby.
“Funding II Transaction” means the Note Purchase Agreement, dated as of
September 17, 2003, among CapitalSource Funding II Trust, CS Funding II
Depositor LLC, the Originator and Citigroup Global Markets Realty Corp., as
amended, modified, restated, waived or supplemented from time to time, and all
documents executed in connection therewith and all transactions contemplated
thereby.
“Funding III Transaction” means the Sale and Servicing Agreement, dated as of
April 20, 2004, by and among CapitalSource Funding III LLC, the Originator, the
Servicer, Variable Funding Capital Corporation, the other Commercial Paper
Conduits from time to time party thereto, Wachovia Capital Markets and Wells
Fargo Bank, National Association, as amended, modified, restated, waived or
supplemented from time to time, and all documents executed in connection
therewith and all transactions contemplated thereby.
“Funding IV Transaction” means the loan evidenced that certain Promissory Note,
dated as of December 16, 2004, by CapitalSource Funding IV LLC, as borrower, in
favor of Wachovia Bank, National Association, as lender, as amended, modified,
restated, waived or supplemented from time to time, and all documents executed
in connection therewith and all transactions contemplated thereby.
“Funding V Transaction” means the Credit Agreement, dated as of June 30, 2005,
among CapitalSource Funding V Trust, CS Funding V Depositor Inc., the Originator
and JPMorgan Chase Bank, N.A., as amended, modified, restated, waived or
supplemented from time to time, and all documents executed in connection
therewith and all transactions contemplated thereby.
“Funding VI Transaction” means the Note Purchase Agreement, dated as of
March 24, 2005, among CapitalSource Funding Trust VI, CS Funding Depositor VI
LLC, the Originator and Citigroup Global Markets Realty Corp., as amended,
modified, restated, waived or supplemented from time to time, and all documents
executed in connection therewith and all transactions contemplated thereby.

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“Governmental Authority” means, with respect to any Person, any nation or
government, any state or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government and any court or arbitrator having jurisdiction over
such Person.
“Gross Interest Rate” means, with respect to any Loan, the sum of the Loan Rate
with respect to such Loan plus the rate of interest, if any, that the related
Obligor may defer and pay later, together with interest thereon.
“Harris Nesbitt” means Harris Nesbitt Corp.
“Hedge Agreement” means each agreement between the Issuer and a Hedge
Counterparty that governs one or more Hedge Transactions, which agreement shall
consist of a “Master Agreement” in a form published by the International Swaps
and Derivatives Association, Inc., together with a “Schedule” and “Credit
Support Annex”, and each “Confirmation” thereunder confirming the specific terms
of each such Hedge Transaction.
“Hedge Breakage Costs” means, for any Hedge Transaction, any amount (other than
Net Trust Hedge Payments) payable by the Issuer for the early termination of
that Hedge Transaction or any portion thereof.
“Hedge Breakage Receipts” means, for any Hedge Transaction, any amount (other
than Net Trust Hedge Receipts) payable to the Issuer for the early termination
of that Hedge Transaction or any portion thereof.
“Hedge Counterparty” means any Qualified Hedge Counterparty that agrees that in
the event that it or its Credit Support Provider fails to maintain certain
ratings as provided in the applicable Hedge Agreement, then the Hedge
Counterparty shall (i) transfer all of its rights and obligations under the
Hedge Agreement to a Substitute Hedge Counterparty as provided in the Hedge
Agreement or (ii) post collateral, as applicable, as provided in the Hedge
Agreement.
“Hedge Counterparty Collateral Account ” means the segregated account
established by the Trustee at the direction of the Issuer pursuant to
Section 3.32 of the Indenture, in the name of the Indenture Trustee and for the
benefit of the Noteholders.
“Hedge Rate” means the rate of interest used to compute the amounts payable by
the Issuer to a Hedge Counterparty pursuant to a Hedge Transaction.
“Hedge Transaction” means each interest rate swap transaction between the Issuer
and a Hedge Counterparty that is governed by a Hedge Agreement.
“Highest Required Investment Category” means (a) with respect to ratings
assigned by Fitch (if such investment is rated by Fitch), “F-1+” for short-term
instruments and “AAA” for long–term instruments, (b) with respect to ratings
assigned by Moody’s, “Aa2” or “P-1” for one-month instruments, “Aa2” and “P-1”
for three-month instruments, “Aa2” and “P-1” for six-month instruments and “Aaa”
and “P-1” for instruments with a term in excess of six-months, and (c)

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with respect to rating assigned by S&P, “A-1+” for short–term instruments and
“AAA” for long-term instruments.
“Holder” means (a) with respect to a Certificate, the Person in whose name such
Certificate is registered in the Certificate Register, and (b) with respect to a
Note, the Person in whose name such Note is registered in the Note Register.
“Indebtedness” means, with respect to any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under capital leases, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, and (d) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
“Indenture” means the Indenture, dated as of April 11, 2006, between the Issuer
and the Indenture Trustee.
“Indenture Collateral” shall have the meaning given to such term in the
“granting clause” of the Indenture.
“Indenture Trustee” means the Person acting as Indenture Trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
“Indenture Trustee Fee” shall have the meaning given to such term in the fee
letter, dated as of the date hereof, among the Originator, the Trust Depositor,
the Issuer and the Indenture Trustee.
“Independent ” means, when used with respect to any specified Person, the Person
(a) is in fact independent of the Issuer, any other obligor on the Notes, the
Trust Depositor and any Affiliate of any of the foregoing Persons, (b) does not
have any direct financial interest or any material indirect financial interest
in the Issuer, any such other obligor, the Trust Depositor or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Trust Depositor or any Affiliate of any of the foregoing
Persons as an officer, employee, trustee, partner, director or person performing
similar functions.
“Independent Accountants” shall have the meaning given to such term in
Section 9.04.
“Individual Notes” shall have the meaning specified in the Indenture.
“Ineligible Loan” shall have the meaning given to such term in Section 11.01.
“Initial Aggregate Outstanding Loan Balance” means the Aggregate Outstanding
Loan Balance as of the Initial Cut–Off Date of the Loans transferred to the
Issuer on the Closing Date.
“Initial Aggregate Outstanding Principal Balance” means, collectively, the sum
of the Initial Class A Principal Balance, the Initial Class B Principal Balance,
the Initial Class C Principal

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Balance, the Initial Class D Principal Balance, the Initial Class E Principal
Balance, and the Initial Class F Principal Balance, i.e., $782,254,764.
“Initial Class A Principal Balance” means $567,134,000.
“Initial Class B Principal Balance” means $27,379,000.
“Initial Class C Principal Balance” means $68,447,000.
“Initial Class D Principal Balance” means $52,803,000.
“Initial Class E Principal Balance” means $31,290,000.
“Initial Class F Principal Balance” means $35,201,764.
“Initial Cut–Off Date” means the close of business on January 31, 2006.
“Initial Loan Assets” shall have the meaning given to such term in
Section 2.01(b).
“Initial Loans ” means those Loans conveyed to the Issuer on the Closing Date
and identified on the initial List of Loans required to be delivered pursuant to
Section 2.02(d).
“Initial Purchasers” means, collectively, Citigroup, Wachovia Capital Markets,
Harris Nesbitt, JPMorgan, SG CIB, SunTrust and Barclays Capital.
“Insolvency Event” means, with respect to a specified Person, (a) the filing of
a decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable Insolvency Law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official for such Person or for any substantial part of its property, or
ordering the winding–up or liquidation of such Person’s affairs, and such decree
or order shall remain unstayed or undismissed and in effect for a period of 60
consecutive days; or (b) the commencement by such Person of a voluntary case
under any applicable Insolvency Law now or hereafter in effect, or the consent
by such Person to the entry of an order for relief in an involuntary case under
any such law, or the consent by such Person to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official for such Person or for any substantial part of its property,
or the making by such Person of any general assignment for the benefit of
creditors, or the failure by such Person generally to pay its debts as such
debts become due, or the taking of action by such Person in furtherance of any
of the foregoing.
“Insolvency Laws” means the Bankruptcy Code of the United States and all other
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief laws from time to time in effect affecting the rights of creditors
generally.
“Insolvency Proceeding” means any case, action or proceeding before any court or
other Governmental Authority relating to any Insolvency Event.

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“Insurance Policy” means, with respect to any Loan, an insurance policy covering
physical damage to or loss of the related Collateral, including, but not limited
to, title, hazard, life, accident and/or flood insurance policies.
“Insurance Proceeds” means, depending on the context, any amounts payable or any
payments made under any Insurance Policy covering a Loan, Collateral,
Repossessed Collateral or Foreclosed Property.
“Interest Accrual Period” means the period commencing on a Payment Date and
ending on the day immediately preceding the next Payment Date (or, with respect
to the first Payment Date, the period commencing on the Closing Date and ending
on the day before the first Payment Date).
“Interest Collection Account” means a sub–account of the Principal and Interest
Account established and maintained pursuant to Section 7.03(a).
“Interest Collections ” means the aggregate of:
     (a) amounts deposited into the Principal and Interest Account in respect
of:
     (i) all payments received on or after the Closing Date on account of
interest on the Loans (including Finance Charges, fees and the deferred interest
component of a Deferred Interest Loan) and all late payment, default and waiver
charges;
     (ii) Net Liquidation Proceeds;
     (iii) Insurance Proceeds (other than amounts to be applied to the
restoration or repair of the related Collateral, or released or to be released
to the Obligor or others);
     (iv) Released Mortgaged Property Proceeds and any other proceeds from any
other Collateral securing the Loans (other than amounts released or to be
released to the Obligor or others);
     (v) Net Trust Hedge Receipts and Hedge Breakage Receipts; and
     (v) the interest portion of any amounts received (x) in connection with the
purchase or repurchase of any Loan and the amount of any adjustment for
substituted Loans and (y) any Scheduled Payment Advances that the Servicer
determines to make; plus
     (b) investment earnings on funds held in the Trust Accounts; minus
     (c) the amount of any losses incurred in connection with investments in
Permitted Investments.
“Interest Shortfall” means, with respect to the Class A Notes, the Class B
Notes, the Class C Notes, the Class D Notes or the Class E Notes, as applicable,
if the amount by which the interest paid to such Class on a Payment Date is less
than the amount due to such Class, the amount of shortfall will be carried
forward and paid on the immediately following Payment Date for which

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funds exist, together with accrued interest on such amount at the then
applicable Note Interest Rate for such Class.
“Investment Earnings” means the investment earnings (net of losses and
investment expenses) on amounts on deposit in the Principal and Interest
Account, the Note Distribution Account and the Reserve Fund, to be credited to
the Principal and Interest Account on the applicable Payment Date pursuant to
Section 7.01 and Section 7.03.
“Ireland Paying Agent ” means the Person acting as Ireland Paying Agent
hereunder and its successors in interest.
“Irish Stock Exchange” means the Irish Stock Exchange and any successor
securities exchange thereto on which the Listed Notes may be listed for trading.
“Issuer” means the trust created by the Trust Agreement and funded pursuant to
this Agreement, consisting of the Loan Assets.
“JPMorgan” means J.P. Morgan Securities Inc.
“LIBOR” shall have the meaning given to such term in Section 7.06.
“LIBOR Determination Date” shall have the meaning given to such term in
Section 7.06.
“LIBOR Spread” means, as of any date of determination:
     (a) in the case of any Floating LIBOR Rate Loan or Blended Rate Loan, the
excess, if any, of the Gross Interest Rate on such Loan over One-Month LIBOR as
of such date;
     (b) in the case of any Floating Prime Rate Loan, the excess, if any, of the
Gross Interest Rate on such Loan over the weighted average Hedge Rate under all
Hedge Transactions hedging the Floating Prime Rate Loans as of such date;
     (c) in the case of any Fixed Rate Loan, the excess, if any, of the Gross
Interest Rate on such Loan over the weighted average Hedge Rate under all Hedge
Transactions hedging the Fixed Rate Loans as of such date;
provided that for purposes of determining the LIBOR Spread with respect to any
Loan, (1) no contingent payment of interest will be included in such
calculation; and (2) any Gross Interest Rate shall exclude any portion of the
interest that is currently being deferred in violation of the terms of the
related loan documents.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever, including, without limitation, any conditional sale or other
title retention agreement, and any financing lease having substantially the same
economic effect as any of the foregoing (including any UCC financing statement
or any similar instrument filed against a Person’s assets or properties).

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“Liquidation Expenses” means, with respect to any Loan, the aggregate amount of
all out–of–pocket expenses reasonably incurred by the Servicer (including
amounts paid to any Subservicer) and any reasonably allocated costs of counsel
(if any), in each case in accordance with the Servicer’s customary procedures in
connection with the repossession, refurbishing and disposition of any Collateral
securing such Loan upon or after the expiration or earlier termination of such
Loan and other out–of–pocket costs related to the liquidation of any such
Collateral, including the attempted collection of any amount owing pursuant to
such Loan if it is a Charged–Off Loan, and, if requested by the Indenture
Trustee, the Servicer and Originator must provide to the Indenture Trustee a
breakdown of the Liquidation Expenses for any Loan along with any supporting
documentation therefor; provided, however, to the extent any such “Liquidation
Expenses” relate to any Loan with a Retained Interest, such expenses shall be
allocated pro rata to such Loan based on the Outstanding Loan Balance included
in the Loan Pool and the outstanding loan balance of the Retained Interest.
“Liquidation Proceeds” means, cash, including Insurance Proceeds, proceeds of
any Foreclosed Property Disposition, revenues received by the Servicer or the
Issuer with respect to the conservation and disposition of a Foreclosed
Property, and any other amounts received by the Servicer or Issuer in connection
with the liquidation of Charged–Off Loans, whether through trustee’s sale,
foreclosure sale or otherwise.
“Liquidation Report” shall have the meaning given to such term in
Section 5.03(c).
“List of Loans” means the list identifying each Loan constituting part of the
Loan Assets, which list shall consist of the initial List of Loans reflecting
the Initial Loans transferred to the Issuer on the Closing Date, together with
any Subsequent List of Loans amending the most current List of Loans reflecting
the Substitute Loans transferred to the Issuer on the related Subseque nt
Transfer Date (together with a deletion from such list of the related Loan or
Loans identified on the corresponding Addition Notice with respect to which a
Substitution Event has occurred), and which list in each case (a) identifies by
account number each Loan included in the Loan Pool, and (b) sets forth as to
each such Loan (i) the Outstanding Loan Balance as of the related Cut-Off Date,
and (ii) the maturity date, and which list (as in effect on the Closing Date) is
attached to this Agreement as Exhibit G.
“Listed Notes” means the Class A Notes, Class B Notes, Class C Notes and Class D
Notes.
“Loan” means, to the extent transferred by the Trust Depositor to the Issuer, an
individual loan or portion thereof made or purchased by the Originator to an
Obligor, including, as applicable, Assigned Loans, Agented Loans, MPAs,
Participation Loans and Substitute Loans.
“Loan Assets” means, collectively and as applicable, the Initial Loan Assets and
the Substitute Loan Assets.
“Loan Checklist” means the list delivered by the Trust Depositor to the
Indenture Trustee pursuant Section 2.07 of this Agreement that identifies the
items contained in the related Loan File.

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“Loan Files” means, with respect to any Loan and Collateral, each of the
Required Loan Documents and duly executed originals (to the extent required by
the Credit and Collection Policy) and copies of any other Records relating to
such Loan and Collateral.
“Loan Pool” means, as of any date of determination, all outstanding Loans
(including Initial Loans and Substitute Loans (if any) ), other than such Loans
that (a) have been reconveyed by the Issuer to the Trust Depositor, and
concurrently by the Trust Depositor to the Originator, pursuant to Section 11.02
hereof or (b) have been paid (or prepaid) in full.
“Loan Rate” means, for each Loan in a Due Period, the current cash pay interest
rate for such Loan in such period, as specified in the related Required Loan
Documents.
“Loan Rate Index” means (a) in the case of a Floating Prime Rate Loan, the
CapitalSource Prime Rate, (b) in the case of a Floating LIBOR Rate Loan, the
CapitalSource LIBOR Rate and (c) in the case of a Fixed Rate Loan, a fixed rate
of interest.
“Loan Rating” means the “loan rating” determined with respect to a Loan in
accordance with the Credit and Collection Policy under the Originator’s loan
risk rating system, which ranks loans based on the Originator’s analysis of the
credit quality of the loan, the structure of the loan or the underlying
collateral.
“Loan Register” means, with respect to each Noteless Loan, the register in which
the agent or collateral agent on such Loan will record, among other things,
(i) the amount of such Loan, (ii) the amount of any principal or interest due
and payable or to become due and payable from the Obligor thereunder, (iii) the
amount of any sum in respect of such Loan received from the Obligor and each
lender’s share thereof, (iv) the date of origination of such Loan and (v) the
maturity date of such Loan.
“Loan Sale Agreement ” means the Commercial Loan Sale Agreement, dated as of the
date hereof, between the Originator and the Trust Depositor, as such agreement
may be amended, modified, waived, supplemented or restated from time to time.
“Loan-to-Value” means, with respect to any Loan, as of any date of
determination, the percentage equivalent o f a fraction (i) the numerator of
which is equal to the maximum availability (as provided in the applicable loan
documentation) of such Loan as of the date of its origination and (ii) the
denominator of which is equal to the total discounted collateral value of the
Collateral securing such Loan.
“Lock-Box” means the post office box to which Collections are remitted for
retrieval by the Lock–Box Bank and deposited by such Lock–Box Bank into the
Lock–Box Account, the details of which are contained in Schedule I, as such
schedule may be amended from time to time.
“Lock-Box Accounts” means the accounts maintained at Bank of America, N.A. in
the name of CapitalSource Funding Inc. for the purpose of receiving Collections,
including but not limited to Collections from the Obligor Lock–Boxes, the
details of which are contained in Schedule I, as such schedule may be amended
from time to time.

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“Lock-Box Agreement” means the Fourth Amended and Restated Three Party Agreement
Relating to Lockbox Services and Control (with Activation Upon Notice), dated as
of November 25, 2003, among Wells Fargo, as the indenture trustee, Bank of
America, N.A., as the lockbox bank, Wachovia Capital Markets, LLC, as the
administrative agent thereof, CapitalSource Finance, as the originator, as the
original servicer and as the lockbox servicer, and CapitalSource Funding Inc.,
as the owner of the account and as the owner of the lockbox, as amended,
modified, waived, supplemented or restated from time to time.
“Lock-Box Bank ” means Bank of America, N.A.
“London Banking Day” means any day on which dealings in deposits in Dollars are
transacted in the London interbank market.
“Majority Noteholders” means (a) prior to the payment in full of the Offered
Notes, the Noteholders evidencing more than 50% of the aggregate Outstanding
Principal Balance of each Class of Offered Notes (with each Class voting
separately) and (b) from and after the payment in full of the Offered Notes, the
Class F Noteholder evidencing more than 50% of the aggregate Outstanding
Principal Balance of the Class F Note.
“Margin Stock” means “Margin Stock” as defined under Regulation U issued by the
Board of Governors of the Federal Reserve System.
“Mariner Funding Transaction” means the Loan Agreement, dated as of December 13,
2004, by and among CapitalSource Finance LLC, as borrower, Harris Nesbitt
Financing, as lender and Bank of Montreal, as agent, as amended, modified,
restated, waived or supplemented from time to time, and all documents executed
in connection therewith and all transactions contemplated thereby.
“Material Adverse Effect” means, with respect to any event or circumstance, a
material adverse effect on (a) the business, financial condition, operations,
performance or properties of the Originator, the Trust Depositor, the Issuer or
the Servicer, (b) the validity, enforceability or collectibility of this
Agreement or any other Transaction Document, or the validity, enforceability or
collectibility of the Loans generally or any material portion of the Loans,
(c) the rights and remedies of the Indenture Trustee on behalf of the
Securityholders and the Hedge Counterparties, (d) the ability of the Originator,
the Trust Depositor, the Issuer, the Servicer, the Backup Servicer or the
Indenture Trustee to perform in all material respects their respective
obligations under this Agreement or any Transaction Document, or (e) the status,
existence, perfection, priority or enforceability of the Indenture Trustee’s
security interest on behalf of the Securityholders and the Hedge Counterparties.
“Material Modification” means:
     (i) a termination or release (including pursuant to prepayment), or an
amendment, modification or waiver, or equivalent similar undertaking or
agreement, by the Servicer with respect to a Loan which would not otherwise be
permitted under the standards and criteria set forth in Section 5.02(e); or

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     (ii) a termination or release (including pursuant to prepayment), or an
amendment, modification or waiver, or equivalent similar undertaking or
agreement, by the Servicer with respect to a Loan which is entered into for
reasons related to the inability of the applicable Obligor to make payments of
principal (excluding payments of principal consisting of excess cash flow
sweeps) or interest under such Loan, as determined in accordance with the Credit
and Collection Policy.
“Monthly Reconciliation Date” means the last day of each Due Period.
“Monthly Report” shall have the meaning given to such term in Section 9.01.
“Moody’s” means Moody’s Investors Service or any successor thereto.
“Moody’s Rating Condition” means, with respect to any action or series of
related actions or proposed transaction or series of proposed transactions, that
Moody’s shall have notified the Trust Depositor, the Owner Trustee and the
Indenture Trustee in writing that such action or series of related actions or
the consummation of such proposed transaction or series of related transactions
will not result in a reduction or withdrawal of the rating issued by Moody’s on
the Closing Date with respect to any outstanding class of Notes as a result of
such action or series of related actions or the consummation of such proposed
transaction or series of related transactions.
“Mortgage ” means the mortgage, deed of trust or other instrument creating a
Lien on a Mortgaged Property.
“Mortgaged Property” means the underlying real property, if any, and any
improvements thereon on which a Lien is granted to secure a Loan.
“MPA” means any master purchase agreement between the SLP Financing Originator
or the Originator and a Dealer, as supplemented and/or modified by one or more
purchase statements, pursuant to which such Dealer has sold Alarm Service
Agreements to the SLP Financing Originator or the Originator. With respect to
any MPA:
     (a) references in this Agreement to “payments” due under a Loan shall mean
all payments owed by the related Dealer under such MPA and (without
duplication), to the extent not payable to the Dealer pursuant to such MPA, all
payments owed by a customer under any Alarm Service Agreement sold pursuant to
such MPA;
     (b) references in this Agreement to “principal” due on a Loan or
“principal” of a Loan shall mean the aggregate amount of all purchase prices
paid to the Dealer under such MPA for Alarm Service Agreements as reduced by any
payments previously received by the “Purchaser” under such MPA and allocable to
principal in accordance with such MPA;
     (c) references in this Agreement to “interest” on a Loan shall mean the
portion of payments due under such MPA allocable to interest in accordance with
such MPA;
     (d) references to “loan documents” or “loan documentation” shall include
the related master purchase agreement, initial purchase statements, purchase
statement, security agreement and other documents executed and delivered in
connection with such MPA;

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     (e) references in this Agreement to “maturity” or “maturity date” shall
mean the date on which the Dealer is required under the MPA to repurchase all
related Alarm Service Agreements;
     (f) references in this Agreement to “note” or “promissory note” means the
related master purchase agreement and all related purchase statements; and
     (g) references in this Agreement to “Loans” shall include MPAs.
“NAICS Code” means the North American Industry Classification System Codes by at
least four digits.
“Net Liquidation Proceeds” means Liquidation Proceeds relating to a Loan net of
(a) any Liquidation Expenses relating to such Loan reimbursed to the Servicer
therefrom pursuant to terms of this Agreement and (b) amounts required to be
released to other creditors, including any other costs, expenses and taxes, or
the related Obligor or grantor pursuant to applicable law or the governing
Required Loan Documents.
“Net Trust Hedge Payments” means, with respect to each Payment Date, the excess,
if any, of (a) the monthly payments by the Issuer to the Hedge Counterparties
and any interest accrued thereon over (b) the monthly payments by the Hedge
Counterparties to the Issuer and any interest accrued thereon.
“Net Trust Hedge Receipts” means, with respect to each Payment Date, the excess,
if any, of (a) the monthly payments by the Hedge Counterparties to the Issuer
and any interest accrued thereon over (b) the monthly payments by the Issuer to
the Hedge Counterparties and any interest accrued thereon.
“New York Business Day” means any Business Day in the city of New York, New
York.
“Note” means any one of the notes of the Issuer of any Class executed and
authenticated in accordance with the Indenture.
“Note Distribution Account ” means the interest bearing trust account so
designated and established and maintained pursuant to Section 7.01.
“Note Interest Rate” means, as the context requires, any of the Class A Note
Interest Rate, the Class B Note Interest Rate, the Class C Note Interest Rate,
the Class D Note Interest Rate or the Class E Note Interest Rate.
“Note Register” shall have the meaning given to such term in Section 2.04 of the
Indenture.
“Noteholders” means each Person in whose name a Note is registered in the Note
Register.
“Noteless Loan” means a Loan with respect to which (i) the related loan
agreement does not require the Obligor to execute and deliver an Underlying Note
to evidence the indebtedness created under such Loan and (ii) no Underlying
Notes are outstanding with respect to the portion of the Loan transferred to the
Issuer.

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“Obligor” means, with respect to any Loan, any Person or Persons obligated to
make payments pursuant to or with respect to such Loan, including any guarantor
thereof, but excluding, in each case, any such Person that is an obligor or
guarantor that is in addition to the primary obligors or guarantors with respect
to the assets, cash flows or credit of which the related Loan is principally
underwritten.
“Obligor Lock–Box” means the post office box to which Collections are remitted
with respect to certain Revolving Loans for retrieval by an Obligor Lock–Box
Bank and deposited by such Obligor Lock–Box Bank into an Obligor Lock–Box
Account, the details of which are contained in Schedule II, as such schedule may
be amended from time to time.
“Obligor Lock–Box Accounts” means the accounts maintained for the purpose of
receiving Collections on certain Revolving Loans and transferring such
Collections to the Lock–Box, the details of which are contained in Schedule II,
as such schedule may be amended from time to time.
“Obligor Lock–Box Bank” means any of the banks or other financial institutions
holding one or more Obligor Lock–Box Accounts.
“OCC” means the Office of the Comptroller of the Currency.
“Offer” means, with respect to any security, (a) any offer by the issuer of such
security or by any other Person made to all of the holders of such security to
purchase or otherwise acquire such security (other than (i) pursuant to any
redemption in accordance with the terms of the related underlying instruments or
(ii) an A/B Exchange) or to convert or exchange such security into or for cash
or for any other security or other property or (b) any solicitation by the
issuer of such security or any other Person to amend, modify or waive any
provision of such security or any related underlying instruments in any manner.
“Offered Notes” means the Class A Notes, the Class B Notes, the Class C Notes,
the Class D Notes and the Class E Notes.
“Offering Memorandum” means the Offering Memorandum, dated March 31, 2006
prepared in connection with the offer and sale of the Offered Notes.
“Officer’s Certificate” means a certificate delivered to the Indenture Trustee
signed by the Chief Executive Officer, the President, an Executive Vice
President, a Senior Vice President, the Treasurer, the Secretary, or one of the
Assistant Treasurers or Assistant Secretaries of the Trust Depositor, the
Servicer, or the Owner Trustee (or another Person) on behalf of the Issuer, as
required by this Agreement or any other Transaction Document.
“One–Month Index Maturity” shall have the meaning given to such term in
Section 7.06.
“One–Month LIBOR” means LIBOR for the One-Month Index Maturity.
“Opinion of Counsel” means a written opinion of counsel, who may be outside
counsel, or internal counsel (except with respect to federal securities law, tax
law, bankruptcy law or UCC matters), for the Trust Depositor or the Servicer,
from Patton Boggs LLP or other counsel

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reasonably acceptable to the Owner Trustee or the Indenture Trustee, as the case
may be; provided, however, if the opinion of counsel concerns or relates to any
Hedge Counterparty, such counsel shall be (i) outside counsel and
(ii) acceptable to each Hedge Counterparty.
“Optional Repurchase” means a repurchase of the Notes pursuant to Section 10.01
of the Indenture.
“Originator” shall have the meaning given to such term in the Preamble.
“Outstanding” shall have the meaning given to such term in the Indenture.
“Outstanding Loan Balance” of a Loan means the excess of (a) the principal
amount of such Loan, or portion thereof transferred to the Issuer, outstanding
as of the applicable Cut–Off Date over (b) all Principal Collections received on
such Loan, or portion thereof, transferred to the Issuer since the applicable
Cut–Off Date; provided that for all purposes other than the determination of the
Transfer Deposit Amount: (i) any Loan charged–off pursuant to clauses (a), (b),
(c), (e) and (f) of the definition of Charged–Off Loan will be deemed to have an
Outstanding Loan Balance equal to zero; and (ii) all or the portion of any Loan
charged–off pursuant to clause (d) of the definition of Charged–Off Loan will be
deemed to have an Outstanding Loan Balance equal to zero; and provided, further,
that for any Deferred Interest Loan, the Outstanding Loan Balance of such
Deferred Interest Loan shall exclude any Accreted Interest with respect thereto.
“Outstanding Principal Balance” means, as of date of determination and with
respect to any class of Notes, the original principal amount of such class of
Notes on the Closing Date, as reduced by all amounts paid by the Issuer with
respect to such principal amount up to such date.
“Overadvance” means an advance of funds by the Originator or any of its
Affiliates to an Obligor under a Loan in excess of the availability under the
facility related to such Loan at the time such advance is made.
“Owner Trustee” means the Person acting, not in its individual capacity, but
solely as Owner Trustee, under the Trust Agreement, its successors in interest
and any successor owner trustee under the Trust Agreement.
“Partially Funded Term Loan” means a Loan that is a closed–end multiple advance
Loan that has not been fully funded as of the Cut–Off Date.
“Participation Loan” means a Loan to an Obligor, originated by the Originator
and serviced by the Servicer in the ordinary course of its business, in which a
participation interest has been granted to another Person in accordance with the
Credit and Collection Policy and such transaction has been fully consummated,
pursuant to a standard participation agreement.
“Paying Agent” shall have the meaning given to such term in Section 3.03 of the
Indenture and Section 3.09 of the Trust Agreement.
“Payment Date” means the 20th day of each month, commencing April 20, 2006 or,
if such 20th day is not a Business Day, the next succeeding Business Day.

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“Permitted Investments” with respect to any Payment Date means negotiable
instruments or securities or other investments maturing on or before such
Payment Date (a) which, except in the case of demand or time deposits,
investments in money market funds and Eligible Repurchase Obligations, are
represented by instruments in bearer or registered form or ownership of which is
represented by book entries by a Clearing Agency or by a Federal Reserve Bank in
favor of depository institutions eligible to have an account with such Federal
Reserve Bank who hold such investments on behalf of their customers, (b) that,
as of any date of determination, mature by their terms on or prior to the
Payment Date immediately following such date of determination, and (c) that
evidence:
     (i) direct obligations of, and obligations fully guaranteed as to full and
timely payment by, the United States (or by any agency thereof to the extent
such obligations are backed by the full faith and credit of the United States);
     (ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies incorporated under the laws of the
United States or any state thereof and subject to supervision and examination by
federal or state banking or depository institution authorities; provided,
however, that at the time of the Issuer’s investment or contractual commitment
to invest therein, the commercial paper, if any, and short-term unsecured debt
obligations (other than such obligation whose rating is based on the credit of a
Person other than such institution or trust company) of such depository
institution or trust company shall have a credit rating from each Rating Agency
in the Highest Required Investment Category granted by such Rating Agency,
which, in the case of Fitch, shall be “F–1+”;
     (iii) commercial paper, or other short term obligations, having, at the
time of the Issuer’s investment or contractual commitment to invest therein, a
rating in the Highest Required Investment Category granted by each Rating
Agency, which, in the case of Fitch, shall be “F–1+”;
     (iv) demand deposits, time deposits or certificates of deposit that are
fully insured by the FDIC and either have a rating on their certificates of
deposit or short–term deposits from Moody’s and S&P of “P–1” and “A–1+”,
respectively, and, if rated by Fitch, from Fitch of “F–1+”;
     (v) notes that are payable on demand or bankers’ acceptances issued by any
depository institution or trust company referred to in clause (ii) above;
     (vi) investments in taxable money market funds or other regulated
investment companies having, at the time of the Issuer’s investment or
contractual commitment to invest therein, a rating of the Highest Required
Investment Category from Moody’s, S&P and Fitch (if rated by Fitch) or otherwise
subject to satisfaction of the Rating Agency Condition;
     (vii) time deposits (having maturities of not more than 90 days) by an
entity the commercial paper of which has, at the time of the Issuer’s investment
or contractual

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commitment to invest therein, a rating of the Highest Required Investment
Category granted by each Rating Agency;
     (viii) Eligible Repurchase Obligations with a rating acceptable to the
Rating Agencies, which, in the case of Fitch, shall be “F-1+” and in the case of
S&P shall be “A-1+”; or
     (ix) any negotiable instruments or securities or other investments subject
to satisfaction of the Rating Agency Condition.
Permitted Investments shall not include any instrument, security or investment
(a) which is purchased at a price (excluding accrued interest) in excess of 100%
of par, (b) which is subject to substantial non-credit risk as determined by the
Servicer in its reasonable business judgment, (c) the S&P rating of which
includes a “p”, “pi”, “q”, “r” or “t” subscript, (d) which is subject to an
Offer, or (e) if the income from such obligation or security is or will be
subject to deduction or withholding for or on account of any withholding or
similar tax, unless the issuer is required to make gross up payments equal to
the full amount of any such withholding tax, or the acquisition (including the
manner of acquisition), ownership, enforcement or disposition of such obligation
or security will subject the Issuer to net income tax in any jurisdiction other
than its jurisdiction of incorporation. Permitted Investments may not include
obligations secured by real property, including mortgage-backed securities. The
Indenture Trustee may purchase or sell to itself or an Affiliate, as principal
or agent, the Permitted Investments described above.
“Permitted Liens ” means
     (a) with respect to Loans in the Loan Pool: (i) Liens in favor of the Trust
Depositor created pursuant to the Loan Sale Agreement and transferred to the
Issuer pursuant hereto, (ii) Liens in favor of the Issuer created pursuant to
this Agreement, and (iii) Liens in favor of the Indenture Trustee created
pursuant to the Indenture and/or this Agreement; and
     (b) with respect to the interest of the Originator, the Trust Depositor and
the Issuer in the related Collateral: (i) materialmen’s, warehousemen’s,
mechanics’ and other Liens arising by operation of law in the ordinary course of
business for sums not due or sums that are being contested in good faith,
(ii) purchase money security interests in certain items of equipment,
(iii) Liens for state, municipal and other local taxes if such taxes shall not
at the time be due and payable or if the Trust Depositor shall currently be
contesting the validity thereof in good faith by appropriate proceedings,
(iv) Liens in favor of the Trust Depositor created by the Originator and
transferred by the Trust Depositor to the Issuer pursuant to this Agreement, (v)
Liens in favor of the Issuer created pursuant to this Agreement, (vi) Liens in
favor of the Indenture Trustee created pursuant to the Indenture and/or this
Agreement, (vii) Liens held by senior lenders or lenders under Senior B Note
Loans with respect to any Subordinated Loans, (viii) contractually subordinated
liens in favor of junior lenders to the same Obligor, and (ix) with respect to
Agented Loans and Assigned Loans, Liens in favor of the collateral agent on
behalf of all noteholders of such Obligor.
“Person” means any individual, corporation, estate, partnership, business or
statutory trust, limited liability company, sole proprietorship, joint venture,
association, joint stock company,

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trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof or other entity.
“Pooled Obligor Loans” means Loans to Obligors that are in turn collateralized
by loans to multiple Underlying Debtors, including, without limitation,
Underlying Debtors that are individuals, consumers and small businesses.
“Prepaid Loan” means any Loan (other than a Charged–Off Loan) that was
terminated or has been prepaid in full prior to its scheduled expiration date.
“Prepaid Loan Amount” means, with respect to each Substitute Loan being
transferred in place of a Prepaid Loan, an amount equal to the lesser of (i) the
amount deposited into the Principal Collection Account with respect to such
Prepaid Loan and (ii) the Outstanding Loan Balance of the Prepaid Loan
immediately prior to the date it was prepaid.
“Prepayments” means any and all (a) full prepayments, including prepayment
premiums, on or with respect to a Loan (including, with respect to any Loan and
any Due Period, any Scheduled Payment, Finance Charge or portion thereof that is
due in a subsequent Due Period that the Servicer has received and expressly
permitted the related Obligor to make in advance of its scheduled due date, and
that will be applied to such Scheduled Payment on such due date),
(b) Liquidation Proceeds, and (c) Insurance Proceeds.
“Principal and Interest Account” means the interest bearing trust account so
designated and established and maintained pursuant to Section 7.03.
“Principal Collection Account” means a sub–account of the Principal and Interest
Account established and maintained pursuant to Section 7.03(a).
“Principal Collections ” means amounts deposited into the Principal and Interest
Account in respect of payments received on or after the Cut–Off Date on account
of principal on the Loans, including:
     (a) the principal portion of:
     (i) any Scheduled Payments and Prepayments; and
     (ii) any amounts received (x) in connection with the purchase or repurchase
of any Loan and the amount of any adjustment for substituted Loans and (y) any
Scheduled Payment Advances that the Servicer determines to make;
     (b) Curtailments; and
     (c) amounts previously deposited in accordance with the procedures for the
substitution of Loans that have not been applied to purchase one or more
Substitute Loans within 180 days of their deposit into the Principal Collection
Account.
“Principal Distributable Shortfall” means, on each Payment Date, the amount, if
any, by which the Total Principal Distributable exceeds the Available Principal
Distributable.

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“Prior Term Transactions” means the Rule 144A/Regulation S private placements of
Notes issued by (i) CapitalSource Commercial Loan Trust 2002-2 on or about
October 30, 2002, (ii) CapitalSource Commercial Loan Trust 2003-1 on or about
April 17, 2003, (iii) CapitalSource Commercial Loan Trust 2003-2 on or about
November 25, 2003, (iv) CapitalSource Commercial Loan Trust 2004-1 on or about
June 22, 2004, (v) CapitalSource Commercial Loan Trust 2004-2 on or about
October 28, 2004 and (vi) CapitalSource Commercial Loan Trust 2005-1 on or about
April 14, 2005.
“Priority of Payments” means, collectively, the payments made on each Payment
Date in accordance with Section 7.05(a) and Section 7.05(b).
“Public Securities” means the common stock of CapitalSource Inc., a Delaware
corporation and the ultimate parent of the Originator, and any subsequent
securities issued by CapitalSource Inc. in a transaction registered under the
Securities Act.
“Purchase Agreement” means the Purchase Agreement, dated March 31, 2006 among
the Initial Purchasers, the Trust Depositor, the Issuer and CapitalSource, as
such agreement may be amended, modified, waived, supplemented or restated from
time to time.
“Qualified Hedge Counterparty” means a party that is a recognized dealer in
interest rate swaps and interest rate caps, organized under the laws of the
United States or a jurisdiction located therein (or another jurisdiction
reasonably acceptable to the Issuer and each Rating Agency), that with respect
to itself or its Credit Support Provider: (a) at the time it becomes a Hedge
Counterparty has a short–term rating of at least “A-1” or a long-term senior
unsecured debt rating of at least “A+” if such Person does not have a short-term
rating by S&P (for so long as any of the Offered Notes are deemed Outstanding
hereunder and are rated by S&P), and at least “F-1” by Fitch (for so long as any
of the Offered Notes are deemed Outstanding hereunder and are rated by Fitch)
and either a long–term senior unsecured debt rating of at least “Aa3” by Moody’s
(if such Person does not have at least a “P-1” short–term debt rating by
Moody’s) or a long–term senior unsecured debt rating of at least “A1” by Moody’s
and not subject to the qualification that the party has been placed on credit
watch with negative implications (only if the short–term debt of such Person is
rated at least “P-1” by Moody’s and not subject to the qualification that the
party has been placed on credit watch with negative implications) (for so long
as any of the Offered Notes are deemed Outstanding hereunder and are rated by
Moody’s) and thereafter maintains long-term senior unsecured debt rating of at
least “BBB- ” from S&P (for so long as any of the Offered Notes are deemed
Outstanding hereunder and are rated by S&P), and a short-term debt rating of at
least “F–2” by Fitch (for so long as any of the Offered Notes are deemed
Outstanding hereunder and are rated by Fitch) and either a long-term senior
unsecured debt rating of at least “A1” by Moody’s (if such Person does not have
at least a “P-1” short–term debt rating by Moody’s) or a long–term senior
unsecured debt rating of at least “A2” by Moody’s (only if the short–term debt
of such Person is rated at least “P-1” by Moody’s) (for so long as any of the
Offered Notes are deemed Outstanding hereunder and are rated by Moody’s);
provided, that, should a Rating Agency effect an overall downward adjustment of
its short-term or long-term debt ratings, then the rating required of that
Rating Agency under this clause (a) for a party to constitute a Qualified Hedge
Counterparty shall be downwardly adjusted accordingly; provided further, that
any adjustment to a rating shall be subject to the prior written consent of the
applicable Rating Agency (b) legally and effectively accepts the rights and

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obligations under the applicable Hedge Agreement, or, as the case may be,
alternate credit support arrangements pursuant to a written agreement reasonably
acceptable to the Issuer and (c) in connection with a Substitute Hedge
Counterparty, otherwise satisfies the Rating Agency Condition.
“Qualified Institution” means (a) the corporate trust department of the
Indenture Trustee or the corporate trust department of Citibank N.A., or (b) a
depository institution organized under the laws of the United States or any one
of the states thereof or the District of Columbia (or any domestic branch of a
foreign bank), (i)(A) that has either (1) a long-term unsecured debt rating
acceptable to the Rating Agencies, which, in the case of S&P, shall be “AA-”, in
the case of Fitch, shall be “AAA” and in the case of Moody’s, shall be “Aa3,” or
(2) a short–term unsecured debt rating or certificate of deposit rating
acceptable to the Rating Agencies, which, in the case of S&P, shall be “A-1+”,
in the case of Fitch, shall be “F-1+”, and in the case of Moody’s, shall be
“P-1,” (B) the parent corporation, if such parent corporation guarantees the
obligations of the depository institution, of which has either (1) a long–term
unsecured debt rating acceptable to the Rating Agencies, which, in the case of
S&P, shall be “AA-”, in the case of Fitch, shall be “AAA” and in the case of
Moody’s, shall be “Aa3” or (2) a short–term unsecured debt rating or certificate
of deposit rating acceptable to the Rating Agencies, which, in the case of S&P,
shall be “A-1+”, in the case of Fitch, shall be “F-1+” and in the case of
Moody’s, shall be “A-1,” or (C) otherwise satisfies the Rating Agency Condition,
and (ii) whose deposits are insured by the FDIC and satisfies the Rating Agency
Condition.
“Qualified Transferee” means:
     (a) the Trust Depositor, the Trust, the Indenture Trustee and any Affiliate
thereof; or
     (b) any other Person which:
     (i) has at least $50,000,000 in capital/statutory surplus or shareholders’
equity (except with respect to a pension advisory firm or similar fiduciary);
and
     (ii) is one of the following:
     (A) an insurance company, bank, savings and loan association, investment
bank, trust company, commercial credit corporation, pension plan, pension fund,
pension fund advisory firm, mutual fund, real estate investment trust,
governmental entity or plan;
     (B) an investment company, money management firm or a “qualified
institutional buyer” within the meaning of Rule 144A under the Securities Act,
or an “institutional accredited investor” within the meaning of Regulation D who
is a qualified purchaser for purposes of Section 3(c)(7) of the 1940 Act;
     (C) the trustee, collateral agent or administrative agent in connection
with (x) a securitization of the subject Loan through the creation of
collateralized debt or loan obligations or (y) an asset-backed commercial paper
funded transaction funded by a commercial paper conduit whose commercial paper
notes are rated at least “A-1” by S&P or at least “P-1” by Moody’s, or (z) a
repurchase

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transaction funded by a an entity which would otherwise be a Qualified
Transferee so long as the “equity interest” (other than any nominal or de
minimis equity interest) in the special purpose entity that issues notes or
certificates in connection with any such collateralized debt or loan obligation,
asset-backed commercial paper funded transaction or repurchase transaction is
owned by one or more entities that are Qualified Transferees under subclauses
(A) or (B) above; or
     (D) any entity Controlled (as defined below) by any of the entities
described in subclauses (i) or (ii) above.
For purposes of this definition only, “Control” means the ownership, directly or
indirectly, in the aggregate of more than fifty percent (50%) of the beneficial
ownership interests of an entity and the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of an
entity, whether through the ability to exercise voting power, by contract or
otherwise, and “Controlled” has the meaning correlative thereto.
“Rating Agency” means each of S&P, Moody’s and Fitch, so long as such Persons
maintain a rating on any of the Offered Notes; and if any of S&P, Moody’s or
Fitch no longer maintains a rating on any of the Offered Notes, such other
nationally recognized statistical rating organization, if any, selected by the
Trust Depositor.
“Rating Agency Condition” means, with respect to any action or series of related
actions or proposed transaction or series of related proposed transactions, that
each applicable Rating Agency shall have notified the Trust Depositor, the Owner
Trustee and the Indenture Trustee in writing that such action or series of
related actions or the consummation of such proposed transaction or series of
related transactions will not result in a Ratings Effect.
“Ratings Effect” means, with respect to any action or series of related actions
or proposed transaction or series of related proposed transactions, a reduction
or withdrawal of any then-current rating issued by a Rating Agency with respect
to any outstanding Class of Notes as a result of such action or series of
related actions or the consummation of such proposed transaction or series of
related transactions.
“Record Date” means, for book–entry Notes, the calendar day immediately
preceding the applicable Payment Date or Repurchase Date, and for the Individual
Notes, the last Business Day of the immediately preceding calendar month.
“Records” means all Loan and other documents, books, records and other
information (including without limitation, computer programs, tapes, disks,
punch cards, data processing software and related property and rights) executed
in connection with the origination or acquisition of the Loans or maintained
with respect to the Loans and the related Obligors that the Originator or the
Servicer have generated, in which the Originator, the Trust Depositor, the
Issuer, the Indenture Trustee or the Servicer have acquired an interest pursuant
to the Transfer and Servicing Agreements or in which the Originator, the Trust
Depositor, the Issuer, the Indenture Trustee or the Servicer have otherwise
obtained an interest.

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“Reducing Revolving Loans ” means a Loan that is a revolving line of credit with
a commitment that reduces over the life of the Loan.
“Reference Banks” means leading banks selected by the Indenture Trustee and
engaged in transactions in Eurodollar deposits in the international Eurocurrency
market.
“Released Amounts” means, with respect to any payment or collection received
with respect to any Loan on any Business Day (whether such payment or collection
is received by the Servicer, the Owner Trustee or the Trust Depositor), an
amount equal to that portion of such payment or collection on any Retained
Interest released from the Loan Assets pursuant to Section 2.06.
“Released Mortgage Property Proceeds” means, as to any Loan secured by a
Mortgaged Property, the proceeds received by the Servicer in connection with
(a) a taking of an entire Mortgaged Property by exercise of the power of eminent
domain or condemnation or (b) any release of part of the Mortgaged Property from
the Lien of the related Mortgage, whether by partial condemnation, sale or
otherwise, which is not released to the Obligor, the grantor or another creditor
in accordance with the Requirements of Law, the governing documents, the Credit
and Collection Policy and this Agreement.
“Repossessed Collateral” means items of Collateral taken in the name of the
Issuer as a result of legal action enforcing the Lien on the Collateral
resulting from a default on the related Loan.
“Repurchase Date” means in the case of an Optional Repurchase, the Payment Date
specified by the Issuer pursuant to Section 10.01 of the Indenture.
“Repurchase Price” means, in the case of an Optional Repurchase, an amount equal
to the then outstanding principal amount of each class of Notes to be
repurchased plus accrued and unpaid interest thereon to but excluding the
Repurchase Date plus all other amounts accrued and unpaid with respect thereto,
together with all amounts then owing to each Hedge Counterparty, including Hedge
Breakage Costs, plus, without duplication, all amounts payable to each Hedge
Counterparty upon termination of all Hedge Transactions in connection with a
Repurchase of the Notes, including Hedge Breakage Costs.
“Representative Amount” means an amount that is representative for a single
transaction in the relevant market at the relevant time.
“Required Loan Documents” means, with respect to:
     (a) all Loans in the aggregate:
     (i) a blanket assignment of all of the Originator’s and Trust Depositor’s
right, title and interest in and to all Collateral securing the Loans at any
time transferred to the Issuer including without limitation, all rights under
applicable guarantees and Insurance Policies, such assignment shall be in the
name of “Wells Fargo Bank, National Association, its successors and assigns, as
Indenture Trustee under the Indenture, dated as of April 11, 2006 relating to
CapitalSource Commercial Loan Trust 2006-1”;

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     (ii) irrevocable powers of attorney of the Originator, the Trust Depositor
and the Issuer to the Indenture Trustee to execute, deliver, file or record and
otherwise deal with the Collateral for the Loans at any time transferred to the
Issuer. The powers of attorney will be delegable by the Indenture Trustee to the
Servicer and any Successor Servicer and will permit the Indenture Trustee or its
delegate to prepare, execute and file or record UCC financing statements and
notices to insurers;
     (iii) blanket UCC–1 financing statements identifying by type all Collateral
for the Loans to be transferred to the Issuer as Collateral under the Indenture
and naming the Issuer and the Indenture Trustee, as assignee of the Issuer, as
“Secured Party” and the Trust Depositor as the “Debtor”;
     (b) for each Loan:
     (i) with the exception of Noteless Loans, the original Underlying Note,
endorsed by means of an allonge in blank or as follows: “Pay to the order of
Wells Fargo Bank, National Association, and its successors and assigns, not in
its individual capacity but solely as Indenture Trustee under that certain
Indenture, dated as of April 11, 2006 relating to CapitalSource Commercial Loan
Trust 2006-1, without recourse” and signed, by facsimile or manual signature, in
the name of the Trust Depositor by a Responsible Officer, with all prior and
intervening endorsements showing a complete chain of endorsement from the
Originator to the Trust Depositor and from the Trust Depositor to the Issuer;
     (ii) in the case of Noteless Loans, a copy of the Loan Register, certified
by a Responsible Officer of the Originator;
     (iii) a copy of the related loan agreement (which may be included in the
Underlying Note if so indicated in the Loan Checklist) or, with respect to an
MPA, the master purchase agreement and purchase statements, together with a copy
of all amendments and modifications thereto;
     (iv) a copy of any related security agreement signed by the primary
Obligor;
     (v) a copy of the Loan Checklist;
     (vi) a copy of any related guarantees then executed in connection with such
Loan;
     (vii) a copy of any UCC financing statements filed securing any related
Collateral naming the Originator, or, with respect to Assigned Loans,
Participation Loans or Agented Loans, the collateral agent named thereunder, as
“Secured Party”;
     (viii) for Assigned Loans, a copy of the assignment agreement;
     (ix) if the Originator is the only lender under the credit facility, if the
Originator is the collateral agent for a syndicate of lenders under the credit
facility, or if the Originator has not previously delivered such stock
certificate to Wells Fargo in

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connection with any of the Warehouse Facilities or any Prior Term Transaction,
and the Loan Checklist indicates that the Collateral includes a pledge of stock,
the original stock certificate serving as Collateral for such Loan, along with
an executed stock power executed in blank; and
     (x) if the Originator is the only lender under the credit facility, if the
Originator is the collateral agent for a syndicate of lenders under the credit
facility, or if the Originator has not previously delivered such items to Wells
Fargo in connection with any of the Warehouse Facilities or such Prior Term
Transaction, all other items listed in the related Loan Checklist that have not
previously been delivered, or a certificate from a Responsible Officer of the
Trust Depositor that such delivery has been waived consistent with the prudent
lending practices and the Credit and Collection Policy of the Originator and
such waiver shall not have a material adverse effect on the Noteholders or Hedge
Counterparties.
“Required Reserve Amount” means, with respect to each Payment Date, an amount
equal to the sum of (a) three times the sum of the Class A Interest Amount, the
Class B Interest Amount, the Class C Interest Amount, the Class D Interest
Amount and the Class E Interest Amount due on the next Payment Date plus (b) the
Outstanding Loan Balance of each Delinquent Loan.
“Requirements of Law” for any Person means the certificate of incorporation or
articles of association and by–laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or order or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
“Reserve Fund ” means the interest bearing trust account so designated and
established and maintained pursuant to Section 7.01.
“Reserve Fund Initial Balance” means an amount equal to $9,710,067.72 (i.e., the
product of (a) the sum of the Outstanding Principal Balance of the Offered Notes
as of the Closing Date, (b) the weighted average Note Interest Rate applicable
to each Class of Offered Notes as of the first day of the initial Interest
Accrual Period (weighted by the Outstanding Principal Balance of each Class of
Offered Notes) and (c) 0.25).
“Responsible Officer” means, when used with respect to the Owner Trustee or the
Indenture Trustee, any officer assigned to the Corporate Trust Office, including
any Chief Executive Officer, President, Executive Vice President, Vice
President, Assistant Vice President, Secretary, any Assistant Secretary, any
trust officer or any other officer of the Owner Trustee or the Indenture Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer’s knowledge of
and familiarity with the particular subject. When used with respect to the Trust
Depositor, the Issuer, the Originator or the Servicer, any Chief Executive
Officer, the President, an Executive Vice President, a Senior Vice President,
the Treasurer, the Secretary or any Assistant Secretary or Assistant Treasurer.

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“Retained Interest” means, for each Loan, the following interests, rights and
obligations in such Loan and under the related loan documents, which are being
retained by the Originator: (a) all of the obligations, if any, to provide
additional funding with respect to such Loan, (b) all of the rights and
obligations, if any, of the agent(s) under the documentation evidencing such
Loan, (c) the applicable portion of the interests, rights and obligations under
the documentation evidencing such Loan that relate to such portion(s) of the
indebtedness that is owned by another lender or is being retained by the
Originator, (d) any unused commitment fees associated with the additional
funding obligations that are not being transferred in accordance with clause
(a) above, (e) any agency or similar fees associated with the rights and
obligations of the agent that are not being transferred in accordance with
clause (b) above, (f) any advisory, consulting, audit, in–house legal expenses
or similar fees and/or expenses due from the Obligor associated with services
provided by the agent that are not being transferred in accordance with clause
(b) above, and (g) any and all warrants and equity instruments issued in the
name of the Originator or its Affiliates in connection with or relating to any
Loan.
“Revolving Loan” means a Loan that is a line of credit arising from an extension
of credit by the Originator to an Obligor with a commitment that is fixed
pursuant to the terms of the related Required Loan Documents.
“S&P” means Standard and Poor’s Inc., a division of The McGraw Hill Companies or
any successor thereto.
“S&P CDO Evaluator” means the dynamic, analytical computer program in the form
provided by S&P to the Servicer as of the Closing Date for the purpose of
estimating the default risk of Loans.
“S&P Rating Condition” means, with respect to any action or series of related
actions or proposed transaction or series of proposed transactions, that S&P
shall have notified the Trust Depositor, the Owner Trustee and the Indenture
Trustee in writing that such action or series of related actions or the
consummation of such proposed transaction or series of related transactions will
not result in a reduction or withdrawal of the then-current rating issued by S&P
with respect to any outstanding class of Notes as a result of such action or
series of related actions or the consummation of such proposed transaction or
series of related transactions.
“SAIF” means the Savings Association Insurance Fund, or any successor thereto.
“Scheduled Payment” means, with respect to any Loan, the payment of principal
and/or interest scheduled to be made by the related Obligor under the terms of
such Loan after the related Cut-Off Date, excluding any payments of principal
constituting excess cash flow sweeps, as adjusted pursuant to the terms of the
related Underlying Note or Required Loan Documents, and any such payment
received after the related Cut–Off Date.
“Scheduled Payment Advance” means, with respect to any Payment Date, the
amounts, if any, deposited by the Servicer in the Principal and Interest Account
for such Payment Date in respect of Scheduled Payments (or portions thereof)
pursuant to Section 5.09.
“Securities” means the Notes and the Certificate, or any of them.

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“Securities Act” means the Securities Act of 1933, as amended from time to time.
“Security System Loan” means a Loan with respect to which the related Obligor is
in the business classified under 2002 NAICS Code 56162 (Security Systems
Services), which is secured by Alarm Service Agreements.
“Securityholders” means the Holders of the Notes or the Certificate.
“Senior B-Note Loan” means any multilender Loan that (a) is secured by a first
priority Lien on all the Obligor’s assets constituting Collateral for the Loan,
(b) has a Loan-to-Value of less than or equal to 90%, and (c) that contains
provisions which, upon the occurrence of an event of default under the
Underlying Loan Documents or in the case of any liquidation or foreclosure on
the related Collateral, the Issuer’s portion of such Loan would be paid only
after the other lender party to such Loan (whose right to payment is
contractually senior to the Issuer) is paid in full.
“Senior Loan” means any Loan that (a) is secured by a first priority Lien on all
of the Obligor’s assets constituting Collateral for the Loan, (b) has a
Loan–to–Value of less than or equal to 90%, and (c) provides that the Payment
Obligation of the related Obligor on such Loan is either senior to, or pari
passu with, all other loans or financings to such Obligor.
“Sequential Pay Event” means, with respect to any Payment Date, that one or more
of the following has occurred;
     (a) as of the related Determination Date, the Outstanding Loan Balance of
Loans which have become Charged-Off Loans represent 8.0% or more of the Initial
Aggregate Outstanding Loan Balance;
     (b) any of the Class B Interest Amount, the Class C Interest Amount, the
Class D Interest Amount or the Class E Interest Amount is calculated using
clause (ii)(b) of the definition thereof;
     (c) an Event of Default;
     (d) a Servicer Default;
     (e) an Accelerated Amortization Event;
     (f) the Aggregate Outstanding Loan Balance is less than 45% of the Initial
Aggregate Outstanding Loan Balance; or
     (g) a Downgrade Event.
“Servicer” means initially CapitalSource, or its successor, until any Servicer
Transfer hereunder or the resignation or permitted assignment by the Servicer
and, thereafter, means the Successor Servicer appointed pursuant to ARTICLE 8
with respect to the duties and obligations required of the Servicer under this
Agreement.
“Servicer Default ” shall have the meaning specified in Section 8.01.

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“Servicer Employees” shall have the meaning specified in Section 5.04.
“Servicer Transfer” shall have the meaning specified in Section 8.02(b).
“Servicing Advances” means, all reasonable and customary “out–of–pocket” costs
and expenses incurred in the performance by the Servicer of its servicing
obligations, including, but not limited to, the cost of (a) the preservation,
restoration and protection of the Collateral, (b) any enforcement or judicial
proceedings, including foreclosures, (c) the management and liquidation of the
Foreclosed Property or Repossessed Collateral, (d) compliance with the
obligations under this Agreement, which “Servicing Advances” are reimbursable to
the Servicer to the extent provided in Section 5.10(d) of this Agreement, and
(e) in connection with the liquidation of a Loan, for all of which costs and
expenses the Servicer is entitled to reimbursement thereon up to a maximum rate
per annum equal to the related Loan Rate.
“Servicing Fee” shall have the meaning given to such term in Section 5.11.
“Servicing Fee Percentage ” means 1.0%.
“Servicing Officer” means any officer of the Servicer involved in, or
responsible for, the administration and servicing of Loans whose name appears on
a list of servicing officers appearing in an Officer’s Certificate furnished to
the Indenture Trustee by the Servicer, as the same may be amended from time to
time.
“SG CIB” means SG Americas Securities, LLC.
“SLP Financing Originator” means Security Leasing Partners, LP, a Delaware
limited partnership.
“Solvent” means, as to any Person at any time, that (a) the fair value of the
property of such Person is greater than the amount of such Person’s liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section 101(32) of the
Bankruptcy Code; (b) such Person is able to realize upon its property and pay
its debts and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (c) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay as such debts and liabilities
mature; and (d) such Person is not engaged in business or a transaction, and is
not about to engage in a business or a transaction, for which such Person’s
property would constitute unreasonably small capital.
“SPE Obligor” means an Obligor that (a) is organized as a special purpose entity
and is not an operating company and (b) has as its primary assets loans to, and
a security interest in the assets of, Underlying Debtors.
“Specified Amendment” means, with respect to any Loan, any waiver, modification,
amendment or variance of such Loan which does not constitute a Material
Modification of the type specified in clause (ii) of the definition thereof and
which effects:

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     (a) any waiver, modification amendment or variance of any term of such Loan
in a manner that would:
     (i) modify the amortization schedule with respect to such Loan to reduce
the dollar amount of any Scheduled Payment by more than 20%, or to postpone by
more than two payment periods or eliminate a Scheduled Payment with respect
thereto; provided that any such modification, postponement or elimination shall
not cause the weighted average life of the applicable Loan to increase by more
than 10%; or
     (ii) reduce or increase the cash interest rate payable by the Obligor
thereunder by more than 100 basis points (excluding any increase in an interest
rate arising by operation of a default or penalty interest clause under a Loan);
or
     (iii) forgive any of the principal amount thereof; or
     (iv) extend the stated maturity date of such Loan by more than 24 months;
provided that, any such extension shall be deemed not to have been made until
the business day following the original stated maturity date of such Loan,
except that the Servicer shall provide notice and a summary of such extension to
the Rating Agencies in accordance with the second sentence of
Section 5.02(e)(ii) as though a Specified Amendment had occurred as of the date
such extension is entered into; or
     (v) release any party from its obligations under such Loan, if such release
would have a material adverse effect on the Loan; or
     (vi) release, or permit the sharing of, the collateral included in the
borrowing base under an Asset Based Revolver such that the advance rate for such
Loan would exceed 90% based upon the remaining collateral; or
     (vii) increase the advance rate under an Asset Based Revolver to more than
90%; or
     (b) the making of an Overadvance not scheduled to be repaid within one year
of being made to the Obligor with respect to an Asset Based Revolver, where such
Overadvance results in an advance rate in excess of 90% for such Loan;
     provided that any waiver or forgiveness by the Servicer of any amount
described in Section 5.11(b) shall not constitute a Specified Amendment.
“Statutory Trust Statute” means Chapter 38 of Title 12 of the Delaware Code, 12
Del. C. §§ 3801 et seq., as the same may be amended from time to time.
“Subordinated Loan” means any Loan other than a Senior Loan, a Senior B-Note
Loan or an unsecured Loan.
“Subsequent Cut–Off Date” means the date specified as such for Substitute Loans
in the related Subsequent Transfer Agreement.

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“Subsequent List of Loans” means a list, in the form of the initial List of
Loans delivered on the Closing Date, but listing each Substitute Loan
transferred to the Issuer pursuant to the related Subsequent Transfer Agreement.
“Subsequent Purchase Agreement” means, with respect to any Substitute Loans, the
agreement between the Originator and the Trust Depositor pursuant to which the
Originator will transfer the Substitute Loans to the Trust Depositor, the form
of which is attached to hereto as Exhibit J.
“Subsequent Transfer Agreement” means the agreement described in
Section 2.04(d)(v) hereof, the form of which is attached hereto as Exhibit I.
“Subsequent Transfer Date” means any date on which Substitute Loans are
transferred to the Issuer.
“Subservicer” means any direct or indirect wholly owned subsidiary of
CapitalSource that CapitalSource has identified as a subservicer or additional
collateral agent or any other Person with whom the Servicer has entered into a
Subservicing Agreement and who satisfies the requirements set forth in
Section 5.02(a) of this Agreement in respect of the qualification of a
Subservicer.
“Subservicing Agreement” means any agreement between the Servicer and any
Subservicer relating to subservicing and/or administration of certain Loans as
provided in this Agreement, a copy of which shall be delivered, along with any
modifications thereto, to the Indenture Trustee.
“Substitute Hedge Counterparty” means any substitute or replacement Hedge
Counterparty under a Hedge Agreement.
“Substitute Loan” means one or more Eligible Loans (a) transferred to the Issuer
under and in accordance with Section 2.04 and identified in the related Addition
Notice, and (b) that become part of the Loan Pool.
“Substitute Loan Assets” shall have the meaning given to such term in
Section 2.04(b).
“Substitute Loan Qualification Conditions” means, with respect to any Substitute
Loan being transferred to the Issuer pursuant to Section 2.04, the accuracy of
each of the following statements as of the related Cut-Off Date for such Loan:
     (a) (i) if the Loan Rate of such Substitute Loan is determined by reference
to the same Loan Rate Index as the Loan being replaced, the Loan Rate of such
Substitute Loan equals or exceeds the Loan Rate of the Loan being replaced, or
(ii) if the Loan Rate of each Substitute Loan is not determined by reference to
the same Loan Rate Index as the Loan being replaced, the Weighted Average LIBOR
Spread Test is satisfied; provided that if the Weighted Average LIBOR Spread
Test is not satisfied prior to giving effect to the inclusion of any Substitute
Loans under the circumstances described in this clause (ii), the Weighted
Average LIBOR Spread Test shall be deemed satisfied if the Weighted Average
LIBOR Spread is maintained or improved by the inclusion of such Substitute
Loan(s);

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     (b) the number of Loans being replaced must be less than or equal to the
number of Substitute Loans added to the Loan Pool;
     (c) the Outstanding Loan Balance of such Substitute Loan, or, if more than
one Substitute Loan will be added in replacement of a Loan, the sum of the
Outstanding Loan Balances of the Substitute Loans, is not less than that of the
Loan identified on the related Addition Notice as the Loan to be reassigned by
the Issuer to the Trust Depositor and reconveyed to the Originator in exchange
for such Substitute Loan;
     (d) no selection procedures believed by the Originator or the Trust
Depositor to be adverse shall have been employed in the selection of such Loan
being substituted from the Originator’s portfolio;
     (e) all actions or additional actions (if any) necessary to perfect the
security interest and assignment of such Substitute Loan and related Collateral
to the Trust Depositor, the Issuer, and the Indenture Trustee shall have been
taken as of or prior to the Subsequent Transfer Date;
     (f) the Substitute Loan has a maturity date not later than 36 months prior
to the Final Maturity Date;
     (g) either: (i) the Eligible Loan Rating of each Substitute Loan is equal
to or better than the Eligible Loan Rating of the Loan being replaced at the
time of its replacement; or (ii) if the Loan Rating of each Substitute Loan is
worse than the Eligible Loan Rating of the Loan being replaced at the time of
its replacement, then after giving effect to such substitution, the weighted
average Eligible Loan Rating of the Loan Pool is equal to or better than the
weighted average Eligible Loan Rating of the Loan Pool as of the Initial Cut-Off
Date;
     (h) either: (i) the estimated Moody’s rating and estimated S&P rating of
each Substitute Loan is equal to or better than the estimated Moody’s rating and
the estimated S&P rating, as applicable, of the Loan being replaced at the time
of its replacement; (ii) if the estimated S&P rating of such Substitute Loan is
equal to or better than the estimated S&P rating of the Loan being replaced but
the estimated Moody’s rating of any Substitute Loan is worse than the estimated
Moody’s rating of the Loan being replaced, in each case at the time of its
replacement, then after giving effect to such substitution, the weighted average
estimated Moody’s rating of the Loans in the Loan Pool shall be equal to or
better than the weighted average estimated Moody’s rating of the Loans in the
Loan Pool as of the Cut-Off Date; (iii) if the estimated Moody’s rating of such
Substitute Loan is equal to or better than the estimated Moody’s rating of the
Loan being replaced but the estimated S&P rating of any Substitute Loan is worse
than the estimated S&P rating of the Loan being replaced, in each case at the
time of its replacement, then after giving effect to such substitution, the
Break-Even Default Rate with respect to the Class A Notes and the Class B Notes
determined using the S&P CDO Evaluator shall not be lower than the Break-Even
Default Rate with respect to the Class A Notes and the Class B Notes determined
using the S&P CDO Evaluator as of the Cut-Off Date; or (iv) if the estimated
Moody’s rating and estimated S&P rating of any Substitute Loan is worse than the
estimated Moody’s rating and the estimated S&P rating, as applicable, of the
Loan being replaced at the time of its replacement, then after giving effect to
such substitution, the weighted average estimated Moody’s rating of the Loans in
the Loan Pool shall be equal to or better than

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the weighted average estimated Moody’s rating of the Loans in the Loan Pool as
of the Cut-Off Date and the Break-Even Default Rate with respect to the Class A
Notes and the Class B Notes determined using the S&P CDO Evaluator shall not be
lower than the Break-Even Default Rate with respect to the Class A Notes and the
Class B Notes determined using the S&P CDO Evaluator as of the Cut-Off Date;
     (i) after giving effect to such substitution, there will be no material
adverse change in the Loan Pool;
     (j) after giving effect to such substitution, the Weighted Average Life
Test is satisfied;
     (k) the frequency of payment of each Substitute Loan is at least as
frequent as the Loan being replaced; and
     (l) the type of Collateral securing each Substitute Loan is similar to the
type of Collateral securing the Loan being replaced, and the lien position of
such Substitute Loan with respect to the related Collateral securing each
Substitute Loan is not less senior than the lien position of the Loan being
replaced with respect to the Collateral securing such replaced Loan.
“Substitution Event” shall have occurred if a Loan then held by the Issuer and
identified in the related Addition Notice is one of (a) a Prepaid Loan, (b) a
Charged–Off Loan, (c) a Loan that has a covenant default, (d) a Delinquent Loan
(other than a Loan which has been deemed to be a Delinquent Loan in accordance
with Section 5.02(e)(iii)), (e) a Loan that becomes subject to a Material
Modification, (f) a Loan that becomes subject to a Specified Amendment or
(g) the subject of a breach of a representation or warranty under this Agreement
or other provision, which breach or other provision, in the absence of a
substitution of a Substitute Loan for such Loan pursuant to Section 2.04, would
require the payment of a Transfer Deposit Amount to the Issuer in respect of
such Loan pursuant to Section 11.01; provided that the occurrence of a
Substitution Event under clauses (a)-(d) above or clause (e) above in the event
of a Material Modification contemplated by clause (ii) of the definition of such
term shall be subject to the limits set forth in Section 2.08.
“Substitution Period” shall have the meaning given to such term in
Section 2.04(a)(ii)(C).
“Successor Backup Servicer” shall have the meaning given to such term in
Section 8.10(a).
“Successor Servicer” shall have the meaning given to such term in
Section 8.02(b).
“SunTrust” means SunTrust Capital Markets, Inc.
“Tape” shall have the meaning given to such term in Section 5.15(b)(ii).
“Telerate Page 3750” means the display page currently so designated on the
Moneyline Telerate Service or such other page as may be nominated as the
information vendor (or such other page as may replace that page on that service
for the purpose of displaying comparable rates or prices).

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“Term Loan” means a loan that is a closed-end extension of credit by the
Originator to an Obligor which may be fully funded or partially funded at the
closing thereof, and which provides for full amortization of the principal
thereof prior to or upon maturity.
“Termination Notice” shall have the meaning given to such term in
Section 8.02(a).
“Total Principal Distributable” means, as of any date of determination, the
excess, if any, of the Aggregate Outstanding Principal Balance over the
Aggregate Outstanding Loan Balance.
“Traditional Revolving Loans” means a Loan that is a revolving line of credit
with a commitment that does not vary over the life of the Loan.
“Transaction Documents” means this Agreement, the Indenture, the Trust
Agreement, the Loan Sale Agreement, the Purchase Agreement, any Subsequent
Transfer Agreement, any Subsequent Purchase Agreement, any Hedge Agreement, and
any documents or agreements executed in connection with the forgoing, as the
forgoing documents and agreements are amended, modified, restated, replaced,
substituted, waived, supplemented or extended from time to time.
“Transfer and Servicing Agreements” means collectively this Agreement and the
Loan Sale Agreement.
“Transfer Date” means each date on which the Trust Depositor transfers Loans, or
portions thereof, to the Issuer.
“Transfer Deposit Amount” means, with respect to each Ineligible Loan or Loan
that is to be purchased pursuant to Section 2.08, on any date of determination,
the sum of the Outstanding Loan Balance of such Loan, together with accrued
interest thereon through such date of determination at the Loan Rate provided
for thereunder, and any outstanding Scheduled Payment Advances thereon that have
not been waived by the Servicer entitled thereto.
“Trust Account Property” means the Trust Accounts, all amounts and investments
held from time to time in any Trust Account (whether in the form of deposit
accounts, physical property, book–entry securities, uncertificated securities or
otherwise) including, without limitation, the Reserve Fund Initial Balance, and
all proceeds of the foregoing.
“Trust Accounts” means, collectively, the Principal and Interest Account
(including the Principal Collection Account and Interest Collection Account),
the Reserve Fund, the Note Distribution Account and the Certificate Account, the
Hedge Counterparty Collateral Account (if applicable), or any of them.
“Trust Agreement” means the Trust Agreement, dated on or about February 8, 2006,
between the Trust Depositor and the Owner Trustee, as such agreement may be
amended, modified, waived, supplemented or restated from time to time.
“Trust Depositor” shall have the meaning given to such term in the Preamble.
“Trust Estate” shall have the meaning given to such term in the Trust Agreement.

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“Trustees” means the Owner Trustee and the Indenture Trustee, or any of them
individually as the context may require.
“UCC” means the Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.
“Underlying Custodial Agreement” means, with respect to each Loan to an SPE
Obligor, that certain custodial agreement entered into among the Originator and
a collateral custodian under which such collateral custodian agrees to hold
certain underlying loan documents or other collateral of the Pooled Debtors with
respect to such Loan for the benefit of the Originator and its assignees.
“Underlying Custodian” means the party acting as collateral custodian under a
Custodial Agreement.
“Underlying Debtors” means each of the underlying obligors who are obligated as
debtors on a Loan from an SPE Obligor.
“Underlying Note” means the one or more promissory notes executed by an Obligor
evidencing a Loan.
“United States” means the United States of America.
“USD–LIBOR–Reference Banks” shall have the meaning given to such term in
Section 7.06(a).
“Warehouse Facilities” means Acquisition Funding Transaction, the Funding I
Transaction, the Funding II Transaction, the Funding III Transaction, the
Funding IV Transaction, the Funding V Transaction and the Mariner Funding
Transaction.
“Weighted Average LIBOR Spread” means, as of any Determination Date, a fraction
(expressed as a percentage and rounded up to the next 0.001%), (a) the numerator
of which is the sum of the products determined by multiplying the Outstanding
Loan Balance of each Loan (excluding Charged-Off Loans and Delinquent Loans)
owned by the Issuer as of such Determination Date by the LIBOR Spread with
respect to such Loan, and (b) the denominator of which is the sum of the
Outstanding Loan Balances of all Loans (excluding Charged-Off Loans and
Delinquent Loans) owned by the Issuer as of such Determination Date.
“Weighted Average LIBOR Spread Test” means a test that will be satisfied if the
Weighted Average LIBOR Spread exceeds 5.15%.
“Weighted Average Life” means, on any Cut-Off Date with respect to any
Substitute Loan, the number obtained by dividing (a) the sum, for each Loan in
the Loan Pool, of the products obtained by multiplying (i) the Average Life at
such time of each Loan by (ii) the Outstanding Loan Balance of such Loan by
(b) the Aggregate Outstanding Loan Balance as of such date.
“Weighted Average Life Test” means a test that will be satisfied as of any
Cut-Off Date with respect to any Substitute Loan if the Weighted Average Life as
of such date is less than the value set forth in the cell corresponding to such
date in the table attached hereto as Annex A.

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     Section 1.02. Usage of Terms.
     With respect to all terms in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
genders; references to “writing” include printing, typing, lithography and other
means of reproducing words in a visible form; references to agreements and other
contractual instruments include all amendments, modifications and supplements
thereto or any changes therein entered into in accordance with their respective
terms and not prohibited by this Agreement; references to Persons include their
permitted successors and assigns; and the term “including” means “including
without limitation.”
     Section 1.03. Section References.
     All Section references (including references to the Preamble), unless
otherwise indicated, shall be to Sections (and the Preamble) in this Agreement.
     Section 1.04. Calculations.
     Except as otherwise provided herein, all interest rate and basis point
calculations hereunder will be made on the basis of a 360 day year and the
actual days elapsed in the relevant period and will be carried out to at least
three decimal places.
     Section 1.05. Accounting Terms.
     All accounting terms used but not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in the
United States.
ARTICLE 2.
ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS
     Section 2.01. Creation and Funding of Issuer; Transfer of Initial Loan
Assets.
     (a) The Issuer shall be created pursuant to the terms and conditions of the
Trust Agreement, upon the execution and delivery of the Trust Agreement and the
filing by the Owner Trustee of an appropriately completed Certificate of Trust
(as defined in the Trust Agreement) under the Statutory Trust Statute. The Trust
Depositor, as settlor of the Issuer, shall fund and convey assets to the Issuer
pursuant to the terms and provisions hereof. The Issuer shall be administered
pursuant to the provisions of this Agreement and the Trust Agreement for the
benefit of the Securityholders and the Hedge Counterparties. The Owner Trustee
is hereby specifically recognized by the parties hereto as empowered to conduct
business dealings on behalf of the Issuer in accordance with the terms hereof
and of the Trust Agreement. The Servicer is hereby specifically recognized by
the parties hereto as empowered to act on behalf of the Issuer and the Owner
Trustee in accordance with Section 5.02(e) and Section 5.02(h).
     (b) Subject to and upon the terms and conditions set forth herein, the
Trust Depositor hereby sells, transfers, assigns, sets over and otherwise
conveys to the Issuer, for a purchase price consisting of $710,418,422 in cash
(less placement expenses and certain other expenses associated with the initial
offer and sale of the Offered Notes the proceeds of which represent the

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consideration paid by the Issuer herein), $31,290,000 in aggregate principal
amount of the Class E Notes, $35,201,764 in aggregate principal amount of the
Class F Note, and the Certificate, all the right, title and interest of the
Trust Depositor in and to the following, including but not limited to, all
accounts, cash and currency, chattel paper, electronic chattel paper, tangible
chattel paper, copyrights, copyright licenses, equipment, fixtures, general
intangibles, instruments, commercial tort claims, deposit accounts, inventory,
investment property, letter of credit rights, software, supporting obligations,
accessions, and other property consisting of, arising out of, or related to the
following (the Trust Depositor’s interest in items (i)–(vii) below, being
collectively referred to herein as the “Initial Loan Assets” but in each case
shall exclude any Retained Interest):
     (i) the Initial Loans, all payments paid in respect thereof and all monies
due, to become due or paid in respect thereof accruing on and after the Initial
Cut–Off Date and all Liquidation Proceeds and recoveries thereon, in each case
as they arise after the Initial Cut–Off Date, but not including the Retained
Interest or Interest Collections received prior to January 31, 2006;
     (ii) all security interests and Liens and Collateral subject thereto from
time to time purporting to secure payment by Obligors under such Loans;
     (iii) all guaranties, indemnities and warranties, and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Loans;
     (iv) the Trust Accounts, each Obligor Lock–Box, each Obligor Lock–Box
Account, each Lock–Box, each Lock–Box Account, and together with all cash and
investments in each of the foregoing;
     (v) all collections and records (including computer records) with respect
to the foregoing;
     (vi) all documents relating to the Loan Files; and
     (vii) all income, payments, proceeds and other benefits of any and all of
the foregoing.
To the extent the purchase price paid to the Trust Depositor for any Loan is
less than the fair market value of such Loan, the difference between such fair
market value and the purchase price shall be deemed to be a capital contribution
made by the Trust Depositor to the Issuer on the relevant Transfer Date.
     (c) The Originator and the Trust Depositor acknowledge that the
representations and warranties of the Trust Depositor in Section 3.01(a) through
Section 3.01(e) will run to and be for the benefit of the Issuer, the Trustees
and the Hedge Counterparties, and the Issuer and the Trustees may enforce,
directly without joinder of Trust Depositor, the repurchase obligations of the
Originator with respect to breaches of such representations and warranties as
set forth herein and in Section 11.01.

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     (d) The sale, transfer, assignment, set-over and conveyance of the Loan
Assets by the Trust Depositor to the Issuer pursuant to this Agreement does not
constitute and is not intended to result in a creation or an assumption by the
Trust Depositor or the Issuer of any obligation of the Originator in connection
with the Loan Assets, or any agreement or instrument relating thereto,
including, without limitation, any obligation to any Obligor, if any, not
financed by the Originator, or (i) any taxes, fees, or other charges imposed by
any Governmental Authority and (ii) any insurance premiums that remain owing
with respect to any Loan at the time such Loan is sold hereunder. The Trust
Depositor also hereby assigns to the Issuer all of the Trust Depositor’s right,
title and interest (but none of its obligations) under the Loan Sale Agreement,
including but not limited to the Trust Depositor’s right to exercise the
remedies created by the Loan Sale Agreement.
     (e) The Originator, Trust Depositor and Issuer intend and agree that
(i) the transfer of the Loan Assets to the Trust Depositor and the transfer of
the Loan Assets to the Issuer are intended to be a sale, conveyance and transfer
of ownership of the Loan Assets, as the case may be, rather than the mere
granting of a security interest to secure a borrowing and (ii) such Loan Assets
shall not be part of the Originator’s or the Trust Depositor’s estate in the
event of a filing of a bankruptcy petition or other action by or against such
Person under any Insolvency Law. In the event, however, that notwithstanding
such intent and agreement, such transfers are deemed to be a mere granting of a
security interest to secure indebtedness, the Originator shall be deemed to have
granted the Trust Depositor and the Trust Depositor shall be deemed to have
granted the Issuer, as the case may be, a perfected first priority security
interest in such Loan Assets respectively and this Agreement shall constitute a
security agreement under Requirements of Law, securing the repayment of the
purchase price paid hereunder, the obligations and/or interests represented by
the Notes and the obligations of the Issuer under the Hedge Transactions and the
Hedge Agreements, in the order and priorities, and subject to the other terms
and conditions of, this Agreement, the Indenture, the Trust Agreement and the
Hedge Agreements, together with such other obligations or interests as may arise
hereunder and thereunder in favor of the parties hereto and thereto.
     (f) If any such transfer of the Loan Assets is deemed to be the mere
granting of a security interest to secure a borrowing, the Trust Depositor may,
to secure the Trust Depositor’s own borrowing under this Agreement (to the
extent that the transfer of the Loan Assets thereunder is deemed to be a mere
granting of a security interest to secure a borrowing) repledge and reassign
(1) all or a portion of the Loan Assets pledged to Trust Depositor by the
Originator and with respect to which the Trust Depositor has not released its
security interest at the time of such pledge and assignment, and (2) all
proceeds thereof. Such repledge and reassignment may be made by Trust Depositor
with or without a repledge and reassignment by Trust Depositor of its rights
under any agreement with the Originator, and without further notice to or
acknowledgment from the Originator. The Originator waives, to the extent
permitted by applicable law, all claims, causes of action and remedies, whether
legal or equitable (including any right of setoff), against Trust Depositor or
any assignee of Trust Depositor relating to such action by Trust Depositor in
connection with the transactions contemplated by this Agreement.

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     Section 2.02. Conditions to Transfer of Initial Loan Assets to Issuer.
     On or before the Closing Date, the Originator or the Trust Depositor, as
applicable, shall deliver or cause to be delivered to the Owner Trustee and
Indenture Trustee each of the documents, certificates and other items as
follows:
     (a) a certificate of an officer of the Originator substantially in the form
of Exhibit C hereto;
     (b) copies of resolutions of the Manager of the Originator, the Servicer
and the member of the Trust Depositor or of the Executive Committee of the Board
of Directors of the Originator, the Servicer and the member of the Trust
Depositor approving the execution, delivery and performance of this Agreement
and the transactions contemplated hereunder, certified in each case by the
Secretary or an Assistant Secretary of the Originator, the Servicer and member
of the Trust Depositor;
     (c) officially certified evidence dated within 30 days of the Closing Date
of due formation and good standing of the Originator under the laws of the State
of Delaware;
     (d) the initial List of Loans, certified by an officer of the Trust
Depositor, together with an Assignment substantially in the form of Exhibit A
(along with the delivery of any instruments and Loan Files as required under
Section 2.07);
     (e) a certificate of an officer of the Trust Depositor substantially in the
form of Exhibit B hereto;
     (f) a letter from Ernst & Young LLP or another nationally recognized
accounting firm, addressed to the Originator and the Trust Depositor (with a
copy to Moody’s, Fitch and S&P), stating that such firm has reviewed a sample of
the Initial Loans and performed specific procedures for such sample with respect
to certain loan terms and that identifies those Initial Loans that do not
conform;
     (g) officially certified, evidence dated within 30 days of the Closing Date
of due organization and good standing of the Trust Depositor under the laws of
the State of Delaware;
     (h) evidence of proper filing with appropriate offices in the State of
Delaware of UCC financing statements listing the Originator, as debtor, naming
the Trust Depositor as secured party (and the Indenture Trustee as assignee) and
identifying the Loan Assets as collateral; and evidence of proper filing with
appropriate officer in the State of Delaware of UCC financing statements
executed by the Trust Depositor, as debtor, naming the Issuer as secured party
(and the Indenture Trustee as assignee) and identifying the Loan Assets as
collateral; and evidence of proper filing with appropriate officers in the State
of Delaware of UCC financing statements executed by the Issuer and naming the
Indenture Trustee as secured party and identifying the Indenture Collateral, as
collateral;
     (i) an Officer’s Certificate listing the Servicer’s Servicing Officers;

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     (j) evidence of deposit in the Principal and Interest Account of all funds
received with respect to the Initial Loans on and after the Initial Cut–Off Date
to the date two days preceding the Closing Date, together with an Officer’s
Certificate from the Servicer to the effect that such amount is correct;
     (k) evidence of deposit in the Reserve Fund of the Reserve Fund Initial
Balance by the Issuer; and
     (l) a fully executed copy of the Transaction Documents.
     Section 2.03. Acceptance by Owner Trustee.
     On the Closing Date, if the conditions set forth in Section 2.02 have been
satisfied, the Issuer shall issue to, or upon the order of, the Trust Depositor
the Certificate representing ownership of a beneficial interest in 100% of the
Issuer and the Issuer shall issue, and the Indenture Trustee shall authenticate,
to, or upon the order of, the Trust Depositor the Notes secured by the Indenture
Collateral. The Owner Trustee hereby acknowledges its acceptance, on behalf of
the Issuer, of the Loan Assets, and declares that it shall maintain such right,
title and interest in accordance with the terms of this Agreement and the Trust
Agreement upon the trust herein and therein set forth.
     Section 2.04. Conveyance of Substitute Loans.
     (a) (i) Subject to Sections 2.01(d) and (e) and, as applicable, the
satisfaction of the conditions set forth in Section 2.04(c), the Originator may,
at its option (but shall not be obligated to) either:
     (A) contemporaneously convey to the Trust Depositor one or more Loans as
described in Section 2.04(b); or
     (B) deposit to the Principal Collection Account an amount sufficient to
purchase the Loan as to which a Substitution Event has occurred and then, prior
to the expiry of the Substitution Period, convey to the Trust Depositor one or
more Loans as described in Section 2.04(b) in exchange for the funds so
deposited or a portion thereof.
    (ii) Any substitution pursuant to this Section 2.04 shall be initiated by
delivery of written notice (a “Notice of Substitution”) to the Indenture Trustee
that the Servicer intends to substitute a Loan pursuant to this Section 2.04 and
shall be completed prior to the earliest of:
     (A) the expiration of 180 days after delivery of such notice;
     (B) delivery of written notice to the Indenture Trustee from the Servicer
stating that it does not intend to use any remaining deposit to purchase
Substitute Loans; or

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     (C) in the case of a Loan which has become subject to a Material
Modification, the effective date set forth in such Material Modification (such
period described in clause (ii)(A), (B) or (C), as applicable, being the
“Substitution Period”).
     (iii) Each Notice of Substitution shall specify the Loan to be substituted,
the reasons for such substitution and the amount sufficient to purchase the
Loan, which shall be determined in compliance with Section 2.08. On the last day
of any Substitution Period, any amounts previously deposited in accordance with
clause (a)(i)(B) above which relate to such Substitution Period that have not
been applied to purchase one or more Substitute Loans shall be deemed to
constitute Principal Collections and shall be transferred on the next Payment
Date to the Note Distribution Account and distributed to the Securityholders in
accordance with the priority of payments set forth in Section 7.05 (a) or (b),
as applicable and prior to the expiration of the related Substitution Period any
such amounts shall not be deemed to be Principal Collections and shall remain in
the Principal Collection Account.
     (b) With respect to any Substitute Loans to be conveyed to the Trust
Depositor by the Issuer as described in Section 2.04(a), the Originator shall
sell, transfer, assign, set over and otherwise convey to the Trust Depositor (by
delivery of an executed Subsequent Purchase Agreement substantially in the form
attached as Exhibit J hereto), without recourse other than as expressly provided
herein and therein (and the Trust Depositor shall be required to purchase
through cash payment or by exchange of one or more related Loans released by the
Issuer to the Trust Depositor on the Subsequent Transfer Date), all the right,
title and interest of the Originator in and to the following, including but not
limited to, all accounts, cash and currency, chattel paper, electronic chattel
paper, tangible chattel paper, copyrights, copyright licenses, equipment,
fixtures, general intangibles, instruments, commercial tort claims, deposit
accounts, inventory, investment property, letter of credit rights, software,
supporting obligations, accessions, and other property consisting of, arising
out of, or related to the following (other than the Retained Interest) (the
Originator’s interest in property in clauses (i)-(vii) below, upon such
transfer, constituting “Substitute Loan Assets”):
     (i) the Substitute Loans listed in the related Addition Notice, all
payments paid in respect thereof and all monies due, to become due or paid in
respect thereof accruing on and after the related Subsequent Cut–Off Dates and
all Liquidation Proceeds and recoveries thereon, in each case as they arise
after the related Subsequent Cut–Off Dates, but not including the Retained
Interest or Interest Collections received prior to the Subsequent Cut–Off Date;
     (ii) all security interests and Liens and Collateral subject thereto from
time to time purporting to secure payment by Obligors under such Loans;
     (iii) all guaranties, indemnities and warranties, and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Loans;

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     (iv) the Trust Accounts, each Obligor Lock–Box, each Obligor Lock–Box
Account, each Lock–Box, each Lock–Box Account, and together with all cash and
investments in each of the foregoing;
     (v) all collections and records (including computer records) with respect
to the foregoing;
     (vi) all documents relating to the Loan Files; and
     (vii) all income, payments, proceeds and other benefits of any and all of
the foregoing.
To the extent the purchase price paid to the Originator for any Substitute Loan
is less than the fair market value of such Substitute Loan, the difference
between such fair market value and the purchase price shall be deemed to be a
capital contribution made by the Originator to the Trust Depositor on the
relevant Transfer Date.
     (c) Subject to Section 2.01(d) and Section 2.01(e) and the conditions set
forth in Section 2.04(d), the Trust Depositor shall sell, transfer, assign, set
over and otherwise convey to the Issuer, without recourse other than as
expressly provided herein and therein, (i) all the right, title and interest of
the Trust Depositor in and to the Substitute Loans purchased pursuant to
Sections 2.04(a) and (b), and (ii) all other rights and property interests
consisting of Substitute Loan Assets related to such Substitute Loans.
     (d) The Originator shall transfer to the Trust Depositor and the Trust
Depositor shall transfer to the Issuer the Substitute Loans and the other
property and rights related thereto described in Section 2.04(b) only upon the
satisfaction of each of the following conditions on or prior to the related
Subsequent Transfer Date (and the delivery of a related Addition Notice by the
Trust Depositor shall be deemed a representation and warranty by the Trust
Depositor and of the Originator that such conditions have been or will be, as of
the related Subsequent Transfer Date, satisfied):
     (i) the Trust Depositor shall have provided the Owner Trustee and the
Indenture Trustee with a timely Addition Notice complying with the definition
thereof contained herein (a copy of which shall be provided to S&P promptly
after it is delivered to the Owner Trustee), which Addition Notice shall in any
event be no later than ten Business Days prior to the date of addition;
     (ii) there shall have occurred, with respect to each such Substitute Loan,
a corresponding Substitution Event with respect to one or more Loans then in the
Loan Pool;
     (iii) the Substitute Loan being conveyed to the Issuer satisfy the
Substitute Loan Qualification Conditions (and on the date of such substitution,
the Servicer shall deliver to the Indenture Trustee a certificate stating that
such Loan satisfies each of the Substitute Loan Qualification Conditions);
provided, that, notwithstanding that a Substitute Loan shall otherwise satisfy
clause (e) of the definition of Substitute Loan Qualification Condition, a
Substitute Loan which at the time of delivery of the related

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Addition Notice has a Moody’s rating lower than “B3” shall not become part of
the Loan Pool on the proposed Subsequent Transfer Date;
     (iv) the Originator shall have delivered to the Trust Depositor a duly
executed written assignment in substantially the form of Exhibit J hereto (the
“Subsequent Purchase Agreement”), which shall include a Subsequent List of Loans
listing the Substitute Loan;
     (v) the Trust Depositor shall have delivered to the Issuer a duly executed
written assignment (including an acceptance by the Owner Trustee) in
substantially the form of Exhibit I hereto (the “Subsequent Transfer
Agreement”), which shall include a Subsequent List of Loans listing the
Substitute Loan;
     (vi) the Trust Depositor shall have deposited or caused to be deposited in
the Principal and Interest Account all Collections received with respect to the
Substitute Loan on and after the related Subsequent Cut–Off Date;
     (vii) each of the representations and warranties made by the Trust
Depositor pursuant to Sections 3.02, 3.03(i), (ii) and (v), and 3.04, applicable
to the Substitute Loan (including without limitation that each such Substitute
Loan is an Eligible Loan) shall be true and correct as of the related Subsequent
Transfer Date;
     (viii) the Originator shall bear all incidental transactions costs incurred
in connection with a substitution effected pursuant to this Agreement and shall,
at its own expense, on or prior to the Subsequent Transfer Date, indicate in its
Computer Records that ownership of the Substitute Loan identified on the
Subsequent List of Loans in the Subsequent Transfer Agreement has been sold to
the Issuer through the Trust Depositor pursuant to this Agreement; and
     (ix) prior to such substitution the Originator shall provide written notice
to each Rating Agency and shall have received written confirmation from Moody’s
and S&P (which shall respond to the Originator within 15 Business Days after
receiving written notice from the Originator of its intention to substitute a
Loan) that the proposed substitution will not result in a reduction or
withdrawal of any rating on any outstanding Class of Notes; provided, however,
that any failure by either of Moody’s and S&P to respond to the Originator shall
be deemed a non–approval by Moody’s and/or S&P, as applicable. In the case of
Fitch, only notice to, not confirmation from, Fitch shall be required in
connection with a proposed substitution, provided that Fitch shall be entitled
to receive from the Originator financial statements, credit committee papers and
such other information relating to such Substitute Loan as is reasonably
requested by Fitch in connection with the proposed substitution of a Loan.
     (e) The Servicer, the Issuer and the Indenture Trustee shall execute and
deliver such instruments, consents or other documents and perform all acts
reasonably requested by the Servicer in order to effect the transfer and release
of any of the Issuer’s interests in the Loans that are being substituted.

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     Section 2.05. [Reserved]
     Section 2.06. Release of Released Amounts.
     (a) The parties hereto acknowledge and agree that the Issuer has no
interest in the Retained Interest and Released Amounts. The Indenture Trustee
hereby agrees to release to the Issuer from the Loan Assets, and the Issuer
hereby agrees to release to the Trust Depositor, an amount equal to the Released
Amounts immediately upon identification thereof and upon receipt of an Officer’s
Certificate of the Servicer, which release shall be automatic and shall require
no further act by the Indenture Trustee or the Issuer; provided that the
Indenture Trustee and Owner Trustee shall execute and deliver such instruments
of release and assignment or other documents, or otherwise confirm the foregoing
release, as may reasonably be requested by the Trust Depositor in writing. Such
Released Amounts shall not constitute and shall not be included in the Loan
Assets.
     (b) Immediately upon the release to the Trust Depositor by the Indenture
Trustee of the Released Amounts, the Trust Depositor hereby irrevocably agrees
to release to the Originator such Released Amounts, which release shall be
automatic and shall require no further act by the Trust Depositor; provided that
the Trust Depositor shall execute and deliver such instruments of release and
assignment, or otherwise confirming the foregoing release of any Released
Amounts, as may be reasonably requested by the Originator.
     Section 2.07. Delivery of Documents in the Loan File; Recording of
Assignments of Mortgage.
     (a) Subject to the delivery requirements set forth in Section 2.07(b), the
Issuer hereby authorizes and directs the Originator and the Trust Depositor to
deliver possession of all the Loan Files to the Indenture Trustee (with copies
to be held by the Servicer) on behalf of and for the account of the
Securityholders and the Hedge Counterparties. The Originator and the Trust
Depositor shall also identify on the List of Loans (including any deemed
amendment thereof associated with any Substitute Loans), whether by attached
schedule or marking or other effective identifying designation, all Loans that
are or are evidenced by such instruments.
     (b) With respect to each Loan in the Loan Pool on or before the related
Transfer Date, the Trust Depositor will deliver or cause to be delivered to the
Indenture Trustee, to the extent not previously delivered, each of the documents
in the Loan File with respect to such Loan, except that, as applicable (i) the
original recorded Mortgage, in those instances where a copy thereof certified by
a Responsible Officer of the Originator was delivered to the Indenture Trustee,
will be delivered or caused to be delivered within ten Business Days after
receipt thereof, and in any event within one year after the related Transfer
Date, and (ii) any intervening Assignments of Mortgage, in those instances where
copies thereof certified by the Originator were delivered to the Indenture
Trustee, will be delivered or caused to be delivered within ten Business Days
after the receipt thereof, and in any event, within one year of the related
Transfer Date. Notwithstanding the foregoing in clauses (i) and (ii) of this
Section 2.07(b), in those instances where the public recording office retains
the original Mortgage or the intervening Assignments of the Mortgage after it
has been recorded, the Trust Depositor shall be deemed to have satisfied its
obligations hereunder upon delivery to the Indenture Trustee of a copy of such

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Mortgage or Assignments of Mortgage certified by the public recording office to
be a true copy of the recorded original thereof.
     (c) Prior to the occurrence of an Event of Default or a Servicer Default,
the Indenture Trustee shall not record the Assignments of Mortgage delivered
pursuant to Section 2.07(b). Upon the occurrence of an Event of Default or a
Servicer Default, the Indenture Trustee shall cause to be recorded in the
appropriate offices each Assignment of Mortgage delivered to it. Each such
recording shall be at the expense of the Servicer; provided, however, to the
extent the Servicer does not pay such expense then the Indenture Trustee shall
be reimbursed pursuant to the provisions of Section 7.05.
     Section 2.08. Optional Purchase by the Servicer of Certain Loans;
Limitations on Substitution and Repurchase.
     (a) Subject to the limitations set forth in Section 2.08(b), the Servicer
shall have the right, but not the obligation, to purchase any (i) Prepaid Loan,
(ii) Charged–Off Loan, (iii) Delinquent Loan, (iv) Loan that has a material
covenant default, (v) Loan which has become subject to a Material Modification
of the type specified in clause (ii) of the definition thereof or (vi) Loan that
has become subject to a Specified Amendment. In the event of such a purchase,
the Servicer shall deposit in the Principal and Interest Account, on the next
succeeding Determination Date, an amount equal to the Transfer Deposit Amount
for such Loan (or applicable portion thereof) as of the date of such purchase.
The Servicer, the Issuer and the Indenture Trustee shall execute and deliver
such instruments, consents or other documents and perform all acts reasonably
requested by the Servicer in order to effect the transfer and release of any of
the Issuer’s interests in the Loans that are being purchased.
     (b) In no event may the initial aggregate Outstanding Loan Balance of
(i) Prepaid Loans, (ii) Charged–Off Loans, (iii) Delinquent Loans, (iv) Loans
that have a material covenant default, and (v) Loans which have become subject
to a Material Modification of the type specified in clause (ii) of the
definition thereof (without regard to whether such Material Modification may
otherwise constitute a Material Modification of a type specified in clause (i)
of the definition thereof), purchased pursuant to Section 2.08(a) or substituted
pursuant to Section 2.04, exceed an amount equal to 20% of the Initial Aggregate
Outstanding Loan Balance.
     Section 2.09. Certification by Indenture Trustee; Possession of Loan Files.
     (a) On or prior to the applicable Transfer Date, the Indenture Trustee
shall review the portion of the Loan File required to be delivered pursuant to
Section 2.07(b) on the applicable Transfer Date and shall deliver to the
Originator, the Trust Depositor, each Hedge Counterparty and the Servicer a
certification in the form attached hereto as Exhibit L–1 on or prior to such
Transfer Date. Within two Business Days after the Indenture Trustee receives the
portion of the Loan File permitted to be delivered after the applicable Transfer
Date pursuant to Section 2.07(b), the Indenture Trustee shall deliver to the
Originator, the Trust Depositor, each Hedge Counterparty and the Servicer a
certification in the form attached hereto as Exhibit L–1. Within 360 days after
each Transfer Date (or, with respect to any Substitute Loan, within 360 days
after the assignment thereof), the Indenture Trustee shall deliver to the
Originator, the Servicer, the Trust Depositor, each Hedge Counterparty and any
Noteholder who requests a copy from the

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Indenture Trustee a final certification in the form attached hereto as
Exhibit L–2 evidencing the completeness of the Loan Files with respect to the
Loans being transferred on such Transfer Date.
     (b) If the Indenture Trustee during the process of reviewing the Loan Files
finds any document constituting a part of a Loan File which is not properly
executed, has not been received, is unrelated to a Loan identified in the List
of Loans, or does not conform in a material respect to the requirements of the
definition of Loan File, or the description thereof as set forth in the List of
Loans, the Indenture Trustee shall promptly so notify the Originator, the Trust
Depositor and the Servicer. In performing any such review, the Indenture Trustee
may conclusively rely on the Originator as to the purported genuineness of any
such document and any signature thereon. It is understood that the scope of the
Indenture Trustee’s review of the Loan Files is limited solely to confirming
that the documents listed in the definition of Loan File have been executed and
received and relate to the Loans identified in the List of Loans; provided,
however, with respect to the UCC financing statements referenced in clause
(a)(iii) of the definition of Required Loan Documents, the Indenture Trustee’s
sole responsibility will be to confirm that the Loan File contains UCC financing
statements and not to make determinations about the materiality of such UCC
financing statements. For the avoidance of doubt, the scope of the Indenture
Trustee review shall not include the verification of the Outstanding Principal
Balance of any Loan. The Originator agrees to use reasonable efforts to remedy a
material defect in a document constituting part of a Loan File of which it is so
notified by the Indenture Trustee. If, however, within 30 days after the
Indenture Trustee’s notice to it respecting such material defect the Originator
has not remedied the defect and such defect materially and adversely affects the
value of the related Loan, such Loan will be treated as an “Ineligible Loan” and
the Originator will (i) substitute in lieu of such Loan a Substitute Loan in the
manner and subject to the conditions set forth in Section 11.01 or
(ii) repurchase such Loan at a purchase price equal to the Transfer Deposit
Amount, which purchase price shall be deposited in the Principal and Interest
Account within such 30 day period.
     (c) Release of Entire Loan File Upon Substitution or Repurchase. Subject to
Section 5.08(a), upon receipt by the Indenture Trustee of a certification of a
Servicing Officer of the Servicer of such substitution or of such purchase and
the deposit of the amounts described in Section 2.08 or Section 2.09(b) in the
Principal and Interest Account (which certification shall be in the form of
Exhibit M hereto), the Indenture Trustee shall release to the Servicer for
release to the Originator the related Loan File and the Indenture Trustee and
the Issuer shall execute, without recourse, and deliver such instruments of
transfer necessary to transfer all right, title and interest in such Loan to the
Originator free and clear of any Liens created by the Transaction Documents. All
costs of any such transfer shall be borne by the Originator.
     (d) Partial Release of Loan File and/or Collateral. Subject to
Section 5.08(b), if in connection with taking any action in connection with a
Loan (including, without limitation, the amendment to documents in the Loan File
and/or a revision to Collateral) the Servicer requires any item constituting
part of the Loan File, or the release from the Lien of the related Loan of all
or part of any Collateral, the Servicer shall deliver to the Indenture Trustee a
certificate to such effect in the form attached as Exhibit M hereto. Subject to
Section 5.08(d), upon receipt of such certification, the Indenture Trustee shall
deliver to the Servicer within two Business Days of such request (if such
request was received by 2:00 p.m., central time), the requested documentation,

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and the Indenture Trustee shall execute, without recourse, and deliver such
instruments of transfer necessary to release all or the requested part of the
Collateral from the Lien of the related Loan and/or the Lien under the
Transaction Documents.
     (e) Annual Certification. On the Payment Date in April of each year,
commencing April 20, 2007, the Indenture Trustee shall deliver to the
Originator, the Trust Depositor, each Hedge Counterparty and the Servicer a
certification detailing all transactions with respect to the Loans for which the
Indenture Trustee holds the Loan Files pursuant to this Agreement during the
prior calendar year. Such certification shall list all Loan Files which were
released by or returned to the Indenture Trustee during the prior calendar year,
the date of such release or return and the reason for such release or return.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
     The Trust Depositor makes, and upon execution of each Subsequent Purchase
Agreement is deemed to make, the following representations and warranties in
Section 3.01 through Section 3.04, on which the Issuer will rely in purchasing
the Initial Loan Assets on the Closing Date (and on any Subsequent Transfer
Date), and on which the Securityholders and the Hedge Counterparties will rely.
     Such representations and warranties are given as of the execution and
delivery of this Agreement and as of the Closing Date (or Subsequent Transfer
Date, as applicable), but shall survive the sale, transfer and assignment of the
Loan Assets to the Issuer. The repurchase obligation or substitution obligation
of the Trust Depositor set forth in Section 11.01 constitutes the sole remedy
available for a breach of a representation or warranty of the Trust Depositor
set forth in Section 3.01 through Section 3.04 of this Agreement. Except as
otherwise provided in Section 2.04(d)(vii), the Trust Depositor shall not be
deemed to be remaking any of the representations set forth in Section 3.03 on a
Subsequent Transfer Date with respect to the Substitute Loans, as such
representations relate solely to the composition of the Initial Loans conveyed
on the Closing Date.

    Section 3.01. Representations and Warranties Regarding the Trust Depositor.

     By its execution of this Agreement and each Subsequent Transfer Agreement,
the Trust Depositor represents and warrants to the Issuer, the Indenture
Trustee, the Securityholders and the Hedge Counterparties that:
     (a) Organization and Good Standing. The Trust Depositor is a limited
liability company duly organized, validly existing and in good standing under
the laws of Delaware and has the power to own its assets and to transact the
business in which it is currently engaged. The Trust Depositor is duly qualified
to do business as a foreign entity and is in good standing in each jurisdiction
in which the character of the business transacted by it or properties owned or
leased by it requires such qualification and in which the failure so to qualify
would have a material adverse effect on the business, properties, assets, or
condition (financial or otherwise) of the Trust Depositor or the Issuer.

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     (b) Authorization; Valid Sale; Binding Obligations. The Trust Depositor has
the power and authority to make, execute, deliver and perform this Agreement and
the other Transaction Documents to which it is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which it is a party, and to create the Issuer and cause it to make,
execute, deliver and perform its obligations under this Agreement and the other
Transaction Documents to which it is a party and has taken all necessary limited
liability company action to authorize the execution, delivery and performance of
this Agreement and the other Transaction Documents to which it is a party and to
cause the Issuer to be created. This Agreement and each Subsequent Transfer
Agreement, if any, shall effect a valid sale, transfer and assignment of or
grant a security interest in the Loan Assets from the Trust Depositor to the
Issuer, enforceable against the Trust Depositor and creditors of and purchasers
from the Trust Depositor. This Agreement and the other Transaction Documents to
which the Trust Depositor is a party constitute the legal, valid and binding
obligation of the Trust Depositor enforceable in accordance with their terms,
except as enforcement of such terms may be limited by applicable Insolvency Laws
and general principles of equity, whether considered in a suit at law or in
equity.
     (c) No Consent Required. The Trust Depositor is not required to obtain the
consent of any other party (other than those that it has already obtained) or
any consent, license, approval or authorization from, or registration or
declaration with, any Governmental Authority (other than those that it has
already obtained) in connection with the execution, delivery, performance,
validity or enforceability of this Agreement or the other Transaction Documents
to which it is a party.
     (d) No Violations. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party by the
Trust Depositor, and the consummation of the transactions contemplated hereby
and thereby, will not violate any Requirement of Law applicable to the Trust
Depositor, or conflict with, result in a default under or constitute a breach of
the Trust Depositor’s organizational documents or Contractual Obligations to
which the Trust Depositor is a party or by which the Trust Depositor or any of
the Trust Depositor’s properties may be bound, or result in the creation or
imposition of any Lien of any kind upon any of its properties pursuant to the
terms of any such Contractual Obligations, other than as contemplated by the
Transaction Documents.
     (e) Litigation. No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the knowledge
of the Trust Depositor threatened, against the Trust Depositor or any of its
properties or with respect to this Agreement, the other Transaction Documents to
which it is a party or the Securities (i) that, if adversely determined, would
in the reasonable judgment of the Trust Depositor be expected to have a material
adverse effect on the business, properties, assets or condition (financial or
otherwise) of the Trust Depositor or the Issuer or the transactions contemplated
by this Agreement or the other Transaction Documents to which the Trust
Depositor is a party or (ii) seeking to adversely affect the federal income tax
or other federal, state or local tax attributes of the Certificate or Notes.
     (f) Solvency. The Trust Depositor, at the time of and after giving effect
to each conveyance of Loan Assets hereunder, is Solvent on and as of the date
thereof.

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     (g) Taxes. The Trust Depositor has filed or caused to be filed all tax
returns which, to its knowledge, are required to be filed and has put all taxes
shown to be due and payable on such returns or on any assessments made against
it or any of its property and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority (other than any amount
of tax due, the validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which reserves in accordance with
generally accepted accounting principles have been provided on the books of the
Trust Depositor); no tax Lien has been filed and, to the Trust Depositor’s
knowledge, no claim is being asserted, with respect to any such tax, fee or
other charge.
     (h) Place of Business; No Changes. The Trust Depositor’s location (within
the meaning of Article 9 of the UCC) is as set forth in Section 13.04. The Trust
Depositor has not changed its name, whether by amendment of its certificate of
formation, by reorganization or otherwise, and has not changed its location
within the 4-months preceding the Closing Date.
     (i) Not an Investment Company. The Trust Depositor is not and, after giving
effect to the transactions contemplated by the Transaction Documents, will not
be required to be registered as an “investment company” under the 1940 Act.
     (j) Sale Treatment. Other than for tax and accounting purposes, the Trust
Depositor has treated the transfer of Loan Assets to the Trust Depositor for all
purposes as a sale and purchase on all of its relevant books and records and
other applicable documents.
     (k) Security Interest.
     (i) This Agreement creates a valid and continuing security interest (as
defined in the applicable UCC) in the Loan Assets in favor of the Issuer, which
security interest is prior to all other Liens (except for Permitted Liens), and
is enforceable as such against creditors of and purchasers from the Trust
Depositor;
     (ii) the Loans, along with the related Loan Files, constitute either a
“general intangible,” an “instrument,” an “account,” “investment property,” or
“chattel paper,” within the meaning of the applicable UCC;
     (iii) the Issuer owns and has good and marketable title to the Loan Assets
free and clear of any Lien (other than Permitted Liens), claim or encumbrance of
any Person;
     (iv) the Trust Depositor has received all consents and approvals required
by the terms of the Loan Assets to the sale of the Loan Assets hereunder to the
Issuer;
     (v) the Trust Depositor has caused the filing of all appropriate financing
statements in the proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the security interest in such Loan Assets
granted to the Issuer under this Agreement;
     (vi) other than the security interest granted to the Issuer pursuant to
this Agreement, the Trust Depositor has not pledged, assigned, sold, granted a
security interest in or otherwise conveyed any of such Loan Assets. The Trust
Depositor has not

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authorized the filing of and is not aware of any financing statements against
the Trust Depositor that include a description of collateral covering such Loan
Assets other than any financing statement (A) relating to the security interest
granted to the Trust Depositor under the Loan Sale Agreement, or (B) that has
been terminated. The Trust Depositor is not aware of the filing of any judgment
or tax Lien filings against the Trust Depositor;
     (vii) all original executed copies of each Underlying Note (if any) that
constitute or evidence the Loan Assets have been delivered to the Indenture
Trustee, and in the case of Noteless Loans, a copy of each related Note
Register, certified by a Responsible Officer of the Originator, has been
delivered to the Indenture Trustee;
     (viii) the Trust Depositor has received a written acknowledgment from the
Indenture Trustee that the Indenture Trustee or its bailee is holding any
Underlying Notes that constitute or evidence any Loan Assets solely on behalf of
and for the benefit of the Securityholders and the Hedge Counterparties; and
     (ix) none of the Underlying Notes that constitute or evidence any Loan
Assets has any marks or notations indicating that they have been pledged,
assigned or otherwise conveyed to any Person other than the Issuer.
     (l) Value Given. The cash payments received by the Trust Depositor in
respect of the purchase price of each Loan sold hereunder constitutes the face
value of such Loan and the reasonably equivalent value in consideration for the
transfer to the Issuer of such Loan under this Agreement, such transfer was not
made for or on account of an antecedent debt owed by the Originator to the Trust
Depositor, and such transfer was not and is not voidable or subject to avoidance
under any Insolvency Law.
     (m) Investment Company. The Issuer is not and, after giving effect to the
transactions contemplated by the Transaction Documents, will not be required to
be registered as an “investment company” within the meaning of the 1940 Act.
     (n) No Defaults. The Trust Depositor is not in default with respect to any
order or decree of any court or any order, regulation or demand of any federal,
state, municipal or governmental agency, which default might have consequences
that would materially and adversely affect the condition (financial or
otherwise) or operations of the Trust Depositor or its respective properties or
might have consequences that would materially and adversely affect its
performance hereunder.
     (o) Bulk Transfer Laws. The transfer, assignment and conveyance of the
Loans by the Trust Depositor pursuant to this Agreement are not subject to the
bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.
     (p) Origination and Collection Practices. The origination and collection
practices used with respect to each Loan have been in all material respects
legal, proper and prudent and comply with the Credit and Collection Policy.
     (q) Adequacy of Consideration. The Trust Depositor will receive fair
consideration and reasonably equivalent value in exchange for the sale of the
Loans.

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     (r) Lack of Intent to Hinder, Delay or Defraud. Neither the Trust Depositor
nor any of its Affiliates sold, or will sell, any interest in any Loan with any
intent to hinder, delay or defraud any of their respective creditors.
     (s) Nonconsolidation. The Trust Depositor conducts its affairs such that
the Issuer would not be substantively consolidated in the estate of the Trust
Depositor and their respective separate existences would not be disregarded in
the event of the Trust Depositor’s bankruptcy.
     (t) Accuracy of Information. All written factual information heretofore
furnished by the Trust Depositor for purposes of or in connection with this
Agreement or the other Transaction Documents to which Trust Depositor is a
party, or any transaction contemplated hereby or thereby is, and all such
written factual information hereafter furnished by the Trust Depositor to any
such party will be, true and accurate in every material respect, on the date
such information is stated or certified.
The representations and warranties set forth in Section 3.01(k) may not be
waived by any Person and shall survive the termination of this Agreement. The
Trust Depositor and Issuer (i) shall not, without satisfaction of the S&P Rating
Condition with respect thereto, waive any breach of the representations and
warranties in Section 3.01(k), and (ii) shall provide S&P with prompt written
notice of any breach of the representations and warranties set out in
Section 3.01(k).

    Section 3.02. Representations and Warranties Regarding Each Loan and as to
Certain Loans in the Aggregate.

     The Trust Depositor represents and warrants (x) with respect to
Section 3.02(a), Section 3.02(b) and Section 3.02(d) as to each Loan as of the
execution and delivery of this Agreement and on the Closing Date, and as of each
Subsequent Transfer Date with respect to each Substitute Loan, and (y) with
respect to Section 3.02(c), as to the Loan Pool in the aggregate as of the
Initial Cut–Off Date, and as of each Subsequent Transfer Date with respect to
Substitute Loans (after giving effect to the addition of such Substitute Loans
to the Loan Pool), that:
     (a) List of Loans. The information set forth in the List of Loans attached
hereto as Exhibit G (as the same may be amended or deemed amended in respect of
a conveyance of Substitute Loans on a Subsequent Transfer Date) is true,
complete and correct as of the applicable Cut–Off Date.
     (b) Eligible Loan. Such Loan satisfies the criteria for the definition of
Eligible Loan set forth in this Agreement as of the date of its conveyance
hereunder.
     (c) Loans Secured by Real Property. Less than 40% of the Aggregate
Outstanding Loan Balance of the Loan Pool as of the Initial Cut–Off Date
consists of Loans principally secured by real property, and the Trust Depositor
will not effectuate the transfer of a Substitute Loan if such transfer would
cause more than 40% of the Aggregate Outstanding Loan Balance of the Loan Pool
as of any Subsequent Transfer Date to consist of Loans principally secured by
real property.
     (d) Underlying Custodial Agreements. With respect to each Pooled Obligor
Loan, the underlying loan documents and other collateral pledged by the
Underlying Debtors is held by

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an Underlying Custodian for the benefit of the Originator and its assignees. The
Originator’s rights under each such Underlying Custodial Agreement are fully
assignable and have been assigned by it to the Trust Depositor, and assigned by
the Trust Depositor to the Issuer in connection with the transfer of the Loan
Assets.

    Section 3.03. Representations and Warranties Regarding the Initial Loans in
the Aggregate.

     The Trust Depositor represents and warrants, on the Closing Date, that as
of the Initial Cut–Off Date, the Initial Loans have the following additional
characteristics: (i) no Loan has a remaining maturity of more than 90 months;
(ii) the date of the final Scheduled Payment on the Loan with the latest
maturity is not later than August 20, 2013; (iii) no Loan was originated after
the Initial Cut–Off Date; and (iv) none of the Initial Loans provide for
Scheduled Payments of interest due on a basis other than monthly, quarterly,
semi-annually or annually.

    Section 3.04. Representations and Warranties Regarding the Loan Files.

     The Trust Depositor represents and warrants on the Closing Date with
respect to the Initial Loans (or as of the Subsequent Transfer Date, with
respect to Substitute Loans), that (i) to the extent any such Loans were pledged
under the Funding I Transaction, the Funding II Transaction, the Funding III
Transaction, the Funding IV Transaction, the Funding V Transaction, the
Acquisition Funding Transaction or any Prior Term Transaction, immediately prior
to such date (as applicable), the Originator and/or a collateral custodian under
the Funding I Transaction, the Funding II Transaction, the Funding III
Transaction, the Funding IV Transaction, the Funding V Transaction, the
Acquisition Funding Transaction or such Prior Term Transaction had possession of
each original Underlying Note (except in the case of Noteless Loans) and the
related complete Loan File, and there were no other custodial agreements
relating to the same in effect and (ii) except as otherwise provided in
Section 2.07, the complete Loan File for each Loan is in the possession of the
Indenture Trustee.

    Section 3.05. [Reserved].       Section 3.06. Representations and Warranties
Regarding the Servicer.

     The Servicer represents and warrants to the Owner Trustee, the Indenture
Trustee, the Securityholders and the Hedge Counterparties that:
     (a) Organization and Good Standing. The Servicer is a limited liability
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and has the limited liability company power
to own its assets and to transact the business in which it is currently engaged.
The Servicer is duly qualified to do business as a foreign limited liability
company and is in good standing in each jurisdiction in which the character of
the business transacted by it or properties owned or leased by it requires such
qualification and in which the failure so to qualify would have a material
adverse effect on the business, properties, assets, or condition (financial or
otherwise) of the Servicer or the Issuer. The Servicer is properly licensed in
each jurisdiction to the extent required by the laws of such jurisdiction to
service the Loans in accordance with the terms hereof and in which the failure
to

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so qualify would have a material adverse effect on the business, properties,
assets, or condition (financial or otherwise) of the Servicer or Issuer.
     (b) Authorization; Binding Obligations. The Servicer has the power and
authority to make, execute, deliver and perform this Agreement and the other
Transaction Documents to which the Servicer is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which the Servicer is a party, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Servicer is a party.
This Agreement and the other Transaction Documents to which the Servicer is a
party constitute the legal, valid and binding obligation of the Servicer
enforceable in accordance with their terms, except as enforcement of such terms
may be limited by Insolvency Laws and general principles of equity, whether
considered in a suit at law or in equity.
     (c) No Consent Required. The Servicer is not required to obtain the consent
of any other party (other than those that it has already obtained) or any
consent, license, approval or authorization from, or registration or declaration
with, any Governmental Authority (other than those that it has already obtained)
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement and the other Transaction Documents to which
the Servicer is a party.
     (d) No Violations. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Servicer is a party
by the Servicer will not violate any Requirements of Law applicable to the
Servicer, or conflict with, result in a default under or constitute a breach of
the Servicer’s organizational documents or any Contractual Obligations to which
the Servicer is a party or by which the Servicer or any of the Servicer’s
properties may be bound, or result in the creation of or imposition of any Lien
of any kind upon any of its properties pursuant to the terms of any such
Contractual Obligations, other than as contemplated by the Transaction
Documents.
     (e) Litigation. No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the knowledge
of the Servicer threatened, against the Servicer or any of its properties or
with respect to this Agreement, or any other Transaction Document to which the
Servicer is a party that, if adversely determined, would in the reasonable
judgment of the Servicer be expected to have a material adverse effect on the
business, properties, assets or condition (financial or otherwise) of the
Servicer or the Issuer or the transactions contemplated by this Agreement or any
other Transaction Document to which the Servicer is a party.
     (f) Reports. All reports, certificates and other written information
furnished by the Servicer with respect to the Loans are correct in all material
respects.

    Section 3.07. Representations and Warranties of the Backup Servicer.

     The Backup Servicer hereby represents and warrants to the Owner Trustee,
the Indenture Trustee, the Securityholders and the Hedge Counterparties, as
follows:

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     (a) Organization. It is a national banking association duly organized,
validly existing and in good standing under the federal laws of the United
States with all requisite power and authority to own its properties and to
conduct its business as presently conducted and to enter into and perform its
obligations pursuant to this Agreement.
     (b) Good Standing. The Backup Servicer is duly qualified to do business as
a national banking association and is in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of its property and the conduct of its business requires such
qualification, licenses or approvals, except where the failure to so qualify or
have such licenses or approvals has not had, and would not be reasonably
expected to have, a material adverse effect on the interests of the
Securityholders or the Hedge Counterparties.
     (c) Authorization. It has the power and authority to execute and deliver
this Agreement and to carry out its terms. It has duly authorized the execution,
delivery and performance of this Agreement by all requisite action.
     (d) No Violations. The consummation of the transactions contemplated by,
and the fulfillment of the terms of, this Agreement by it will not violate any
Requirements of Law or conflict with, result in any breach of any of the terms
or provisions of, or constitute a default under, its organizational documents or
any Contractual Obligations by which it or any of its property is bound or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any Contractual Obligations.
     (e) No Consent Required. No consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction over it or any of its respective
properties is required to be obtained in order for it to enter into this
Agreement or perform its obligations hereunder.
     (f) Binding Obligation. This Agreement constitutes its legal, valid and
binding obligation, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable Insolvency Laws and general
principles of equity (whether considered in a suit at law or in equity).
     (g) Litigation. There are no proceedings or investigations pending or, to
the best of its knowledge, threatened, against it before any Governmental
Authority (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that might (in its
reasonable judgment) have a material adverse effect on the interests of the
Securityholders or the Hedge Counterparties.

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ARTICLE 4.
PERFECTION OF TRANSFER AND
PROTECTION OF SECURITY INTERESTS

    Section 4.01. Custody of Loans.

     The contents of each Loan File shall be held in the custody of the
Indenture Trustee under the Indenture for the benefit of, and as agent for, the
Securityholders and the Hedge Counterparties.

    Section 4.02. Filing.

     On or prior to the Closing Date, the Originator, Trust Depositor and
Servicer shall cause the UCC financing statement(s) referred to in
Section 2.02(h) hereof to be filed, and from time to time the Servicer, on
behalf of the Issuer, shall take and cause to be taken such actions and execute
such documents as are necessary or desirable or as the Owner Trustee or
Indenture Trustee (acting at the direction of the Majority Noteholders or any
Hedge Counterparty) may reasonably request to perfect and protect the Indenture
Trustee’s first priority perfected security interest in the Loan Assets against
all other Persons, including, without limitation, the filing of financing
statements, amendments thereto and continuation statements, the execution of
transfer instruments and the making of notations on or taking possession of all
records or documents of title. Notwithstanding the obligations of the
Originator, Trust Depositor and Servicer set forth in the preceding sentence,
the Issuer hereby authorizes the Servicer to prepare and file, at the expense of
the Servicer, UCC financing statements (including but not limited to renewal,
continuation or in lieu statements) and amendments or supplements thereto or
other instruments as the Servicer may from time to time deem necessary or
appropriate in order to perfect and maintain the security interest granted
hereunder in accordance with the UCC.

    Section 4.03. Changes in Name, Corporate Structure or Location.

     (a) During the term of this Agreement, none of the Originator, the
Servicer, the Trust Depositor or the Issuer shall change its name, identity,
existence, state of formation or location without first giving at least 30 days’
prior written notice to the Owner Trustee, the Indenture Trustee, each Hedge
Counterparty and S&P.
     (b) If any change in either the Servicer’s, the Originator’s or the Trust
Depositor’s name, identity, structure, existence, state of formation, location
or other action would make any financing or continuation statement or notice of
ownership interest or Lien relating to any Loan Asset seriously misleading
within the meaning of applicable provisions of the UCC or any title statute, the
Servicer, no later than five Business Days after the effective date of such
change, shall file such amendments as may be required to preserve and protect
the Indenture Trustee’s security interest in the Loan Assets and the proceeds
thereof. Promptly after taking any of the foregoing actions, the Servicer shall
deliver to the Owner Trustee and the Indenture Trustee an Opinion of Counsel
reasonably acceptable to the Owner Trustee and the Indenture Trustee stating
that, in the opinion of such counsel, all financing statements or amendments
necessary to

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preserve and protect the Indenture Trustee’s security interest in the Loan
Assets have been filed, and reciting the details of such filing.

    Section 4.04. Costs and Expenses.

     The Servicer agrees to pay all reasonable costs and disbursements in
connection with the perfection and the maintenance of perfection, as against all
third parties, of the Trustees’ and Issuer’s right, title and interest in and to
the Loan Assets (including, without limitation, the security interest in the
Collateral related thereto and the security interests provided for in the
Indenture); provided, however, to the extent permitted by the Required Loan
Documents, the Servicer may seek reimbursement for such costs and disbursements
from the related Obligors.

    Section 4.05. Sale Treatment.

     Other than for tax and accounting purposes, the Trust Depositor shall treat
the transfer of Loan Assets made hereunder for all purposes as a sale and
purchase on all of its relevant books and records.

    Section 4.06. Separateness from Trust Depositor.

     The Originator agrees to take or refrain from taking or engaging in with
respect to the Trust Depositor each of the actions or activities specified in
the “substantive consolidation” opinion of Patton Boggs LLP (including any
certificates of the Originator attached thereto) delivered on the Closing Date,
upon which the conclusions therein are based.
ARTICLE 5.
SERVICING OF LOANS

    Section 5.01. Appointment and Acceptance.

     CapitalSource is hereby appointed as Servicer pursuant to this Agreement.
CapitalSource accepts the appointment and agrees to act as the Servicer pursuant
to this Agreement.

    Section 5.02. Duties of the Servicer.

     (a) The Servicer, as an independent contract servicer, shall service and
administer the Loans and shall have full power and authority, acting alone, to
do any and all things in connection with such servicing and administration which
the Servicer may deem necessary or desirable and consistent with the terms of
this Agreement and the Credit and Collection Policy. The Servicer may enter into
Subservicing Agreements for any servicing and administration of Loans with any
entity provided the Rating Agency Condition is satisfied. The Servicer shall be
entitled to terminate any Subservicing Agreement in accordance with the terms
and conditions of such Subservicing Agreement and to either directly service the
related Loans itself or enter into a Subservicing Agreement with a successor
Subservicer which qualifies hereunder.
     (b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and a
Subservicer or

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reference to actions taken through a Subservicer or otherwise, so long as this
Agreement shall remain effective, the Servicer shall remain obligated and
primarily liable to the Indenture Trustee, for itself and on behalf of the
Securityholders and the Hedge Counterparties, for the servicing and
administering of the Loans in accordance with the provisions of this Agreement
and the Credit and Collection Policy, without diminution of such obligation or
liability by virtue of such Subservicing Agreements or arrangements or by virtue
of indemnification from the Subservicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the Loans. For purposes of this Agreement, the Servicer shall be
deemed to have received payments on Loans when any Subservicer has received such
payments. The Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Servicer by such Subservicer, and nothing
contained in this Agreement shall be deemed to limit or modify such
indemnification.
     (c) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Loans involving a Subservicer in its
capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone, and the Indenture Trustee, the
Securityholders and the Hedge Counterparties shall not be deemed parties thereto
and shall have no claims, rights, obligations, duties or liabilities with
respect to the Subservicer except as set forth in Section 5.02(d).
Notwithstanding the foregoing, the Servicer shall (i) at its expense and without
reimbursement, deliver to the Indenture Trustee a copy of each Subservicing
Agreement and (ii) provide notice of the termination of any Subservicer within a
reasonable time after such Subservicer’s termination to the Indenture Trustee.
     (d) In the event the Servicer shall for any reason no longer be the
Servicer, the Servicer at its expense and without right of reimbursement
therefor, shall, upon request of the Indenture Trustee, deliver to the Successor
Servicer all documents and records (including computer tapes and diskettes)
relating to each Subservicing Agreement and the Loans then being serviced
hereunder and an accounting of amounts collected and held by it hereunder and
otherwise use its best efforts to effect the orderly and efficient transfer of
the Subservicing Agreements to the assuming party.
     (e) Modifications and Waivers Relating to Loans.
     (i) So long as it is consistent with the Credit and Collection Policy, the
Servicer may waive, modify or vary any term of any Loan if in the Servicer’s
determination such waiver, modification or variance will not be materially
adverse to the interests of the Noteholders or the Hedge Counterparties;
provided, however, the Servicer may not:
     (A) amend, waive, modify or vary any Loan in any manner that would extend
the stated maturity date of such Loan beyond the date that is 36 months prior to
the Final Maturity Date; or
     (B) enter into any amendment, waiver, modification or variance with respect
to any loan for the purpose or with the intention of causing a Substitution
Event to occur with respect to such Loan solely in order to render such loan

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eligible for repurchase or substitution hereunder or to otherwise make such Loan
eligible for repurchase pursuant to Section 2.08.
If any Loan is amended, modified, waived or varied due to an Obligor’s inability
to pay principal (excluding payments of principal consisting of excess cash flow
sweeps) or interest, then the Loan shall be treated as a Delinquent Loan as of
the date that is one day in case of Asset Based Revolvers or 60 days in the case
of all other Loans after such delinquent payment was first due if all
delinquencies have not been cured within that one day or 60 day period, as
applicable.
     (ii) Except as expressly set forth in Section 5.02(e)(i), the Servicer may
execute any amendments, waivers, modifications or variances related to such Loan
and any documents related thereto on behalf of the Issuer. The Servicer will
provide each Rating Agency with a written summary of any such amendment, waiver,
modification or variance promptly after its execution and, promptly upon request
by any Rating Agency, a copy of any such waiver, modification or variance. Such
summary shall set forth a brief description of the reasons for, and the effect
of, such waiver, modification or variance, and shall indicate whether such
waiver, modification or variance constitutes a Specified Amendment.
     (iii) With respect to each of the modifications described in clause (a)(i),
(a)(ii), (a)(iv)-(vii) and clause (b) of the definition of Specified Amendment,
the Servicer may elect to submit the modified (or overadvanced, as applicable)
Loan to S&P to be re-rated. If the Servicer does not elect to have such Loan
re-rated by S&P, then such Loan shall be deemed to be a Delinquent Loan as of
the date that is 60 days after the effective date of the relevant Specified
Amendment; provided that such Loan shall cease to be deemed a Delinquent Loan as
of such later date as it may be submitted to S&P for re-rating. Any Loan which
is subject to a modification described in clause (a)(iii) of the definition of
Specified Amendment will be deemed to be a Delinquent Loan upon the
effectiveness of such Specified Amendment. If the Servicer elects to have such
Loan re-rated by S&P, then at any time during such process, including up to
90 days after Servicer receives the revised rating of the Loan, the Servicer may
repurchase such Loan. The provisions of this Section 5.02(e)(iii) shall not
apply to modifications, amendments or variances that do not constitute Specified
Amendments.
     (iv) No costs incurred by the Servicer or any Subservicer in respect of
Servicing Advances shall for the purposes of distributions to Noteholders or
Hedge Counterparties be added to the amount owing under the related Loan. Any
fees and costs imposed in connection therewith may be retained by the Servicer.
Without limiting the generality of the foregoing, so long as it is consistent
with the Credit and Collection Policy, the Servicer shall continue, and is
hereby authorized and empowered to execute and deliver on behalf of the
Indenture Trustee, the Owner Trustee, each Securityholder and each Hedge
Counterparty, all instruments of amendment, waiver, satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Loans and with respect to any Collateral. Such
authority shall include, but not be limited to, the authority to substitute or
release items of Collateral consistent with the Credit and Collection Policy and
sell participations or assignments in Loans

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previously transferred to the Issuer. In connection with any such sale, the
Servicer shall deposit in the Principal and Interest Account, pursuant to
Section 7.03(b), all proceeds received upon such sale. If reasonably required by
the Servicer, the Indenture Trustee, on behalf of the Issuer, shall furnish the
Servicer, within five Business Days of receipt of the Servicer’s request, with
any powers of attorney and other documents necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties under this
Agreement. Any such request to the Indenture Trustee, on behalf of the Issuer,
shall be accompanied by a certification in the form of Exhibit L attached hereto
signed by a Servicing Officer. In connection with any substitution of
Collateral, the Servicer shall deliver to the Indenture Trustee the items, and
within the time frame, set forth in Section 2.07, assuming that the date of
substitution is the relevant “Transfer Date.”
     (f) The Servicer, in servicing and administering the Loans, shall act in
good faith, exercise commercially reasonable judgment and reasonable care,
consistent with the Credit and Collection Policy, employ or cause to be employed
procedures (including collection, foreclosure, Foreclosed Property and
Repossessed Collateral management procedures), prudent lending standards and
exercise a degree of skill and attention not less than that which it customarily
employs and exercises in servicing and administering loans for its own account
and in a manner consistent with those policies and procedures as are customarily
used by reasonable and prudent servicers of national repute in connection with
servicing of assets of the nature and of the character of the Loans, giving due
consideration to the Noteholders’ and Hedge Counterparties’ reliance on the
Servicer. The Servicer shall not permit an Obligor of a Revolving Loan to
receive an Overadvance thereunder for the purpose of making payments of
principal or interest (in whole or in part) due with respect to a Term Loan,
where any portion of such Revolving Loan or Term Loan, as applicable, shall
constitute a part of the Loan Assets hereunder or an asset of any Prior Term
Transaction.
     (g) Hedge Covenants.
     (i) So long as any of the Notes are outstanding, if on any date either:
     (A) the then current Aggregate Notional Amount of all Hedge Transactions
hedging the Fixed Rate Loans exceeds the then Outstanding Loan Balance of the
Fixed Rate Loans for the corresponding Due Period by more than the Fixed Rate
Permitted Excess Amount; or
     (B) the Aggregate Notional Amount for any future calculation period of all
Hedge Transactions hedging the Fixed Rate Loans exceeds the projected
Outstanding Loan Balance of the Fixed Rate Loans for the corresponding Due
Period by more than the Fixed Rate Permitted Excess Amount;
then, not later than 1:00 p.m. (New York City time) on the Determination Date
preceding the next Payment Date, the Servicer will notify the Indenture Trustee,
the Hedge Counterparties and the Rating Agencies of such event and, with effect
on such next Payment Date, one or more of the Hedge Transactions hedging the
Fixed Rate Loans will be reduced or amended in accordance with the terms of the
applicable Hedge Agreements so that the Aggregate Notional Amount for each
calculation period of the Hedge Transactions hedging the Fixed Rate Loans will
not exceed

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the Outstanding Loan Balance of the Fixed Rate Loans at the end of the
corresponding Due Period or as projected to be outstanding at the end of the
corresponding Due Period.
     (ii)   So long as any of the Notes are outstanding, if on any date either:
     (A) the then current Aggregate Notional Amount of all Hedge Transactions
hedging the Floating Prime Rate Loans exceeds the then Outstanding Loan Balance
of the Floating Prime Rate Loans for the corresponding Due Period by more than
the Floating Prime Rate Permitted Excess Amount; or
     (B) the Aggregate Notional Amount for any future calculation period of all
Hedge Transactions hedging the Floating Prime Rate Loans exceeds the projected
Outstanding Loan Balance of the Floating Prime Rate Loans for the corresponding
Due Period by more than the Floating Prime Rate Permitted Excess Amount;
then, not later than 1:00 p.m. (New York City time) on the Determination Date
preceding the next Payment Date, the Servicer will notify the Indenture Trustee,
the Hedge Counterparties and the Rating Agencies of such event and, with effect
on such next Payment Date, one or more of the Hedge Transactions hedging the
Floating Prime Rate Loans will be reduced or amended in accordance with the
terms of the applicable Hedge Agreements so that the Aggregate Notional Amount
of the Hedge Transactions hedging the Floating Prime Rate Loans will not exceed
the Outstanding Loan Balance of the Floating Prime Rate Loans at the end of the
corresponding Due Period or as projected to be outstanding at the end of the
corresponding Due Period.
     (iii) So long as any of the Notes are outstanding, if on any date either:
     (A) the then current Aggregate Notional Amount of all Hedge Transactions
under all Hedge Agreements then in effect exceeds the then Aggregate Outstanding
Principal Balance; or
     (B) the Aggregate Notional Amount of all Hedge Transactions for any future
calculation period under all Hedge Agreements then in effect exceeds the
projected Aggregate Outstanding Principal Balance for the corresponding Interest
Accrual Period;
then, not later than 1:00 p.m. (New York City time) on the Determination Date
preceding the next Payment Date, the Servicer will notify the Indenture Trustee,
the Hedge Counterparties and the Rating Agencies of such event and, with effect
on such next Payment Date, one or more of the Hedge Transactions will be reduced
or amended in accordance with the terms of the applicable Hedge Agreements so
that the Aggregate Notional Amount of the Hedge Transactions for any future
calculation period will not exceed the Aggregate Outstanding Principal Balance
of the Notes for the corresponding Interest Accrual Period.
     (h) In accordance with the power set forth in Section 2.01(a), the Servicer
shall perform the duties of the Issuer and the Owner Trustee under the
Transaction Documents. In furtherance of the foregoing, the Servicer shall
consult with the Owner Trustee as the Servicer

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deems appropriate regarding the duties of the Issuer and the Owner Trustee under
the Transaction Documents. The Servicer shall monitor the performance of the
Issuer and the Owner Trustee and shall advise the Owner Trustee when action is
necessary to comply with the Issuer’s or the Owner Trustee’s duties under the
Transaction Documents. The Servicer shall prepare for execution by the Owner
Trustee or the Issuer or shall cause the preparation by other appropriate
Persons of all such documents, reports, filings, instruments, certificates and
opinions as it shall be the duty of the Issuer or the Owner Trustee to prepare,
file or deliver pursuant to the Transaction Documents.
     (i) In addition to the duties of the Servicer set forth in this Agreement
or any of the Transaction Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee
or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to state and
federal tax and securities laws. In accordance with the directions of the Issuer
or the Owner Trustee, the Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Issuer as are not
covered by any of the foregoing provisions and as are expressly requested by the
Issuer or the Owner Trustee and are reasonably within the capability of the
Servicer.
     (j) Notwithstanding anything in this Agreement or any of the Transaction
Documents to the contrary, the Servicer shall be responsible for promptly (upon
knowledge thereof) notifying the Owner Trustee and the Paying Agent in the event
that any withholding tax is imposed on the Issuer’s payments (or allocations of
income) to a Securityholder. Any such notice shall be in writing and specify the
amount of any withholding tax required to be withheld by the Owner Trustee or
the Paying Agent pursuant to such provision.
     (k) All tax returns will be signed by the Servicer on behalf of the Issuer.
     (l) The Servicer shall maintain appropriate books of account and records
relating to services performed under this Agreement, which books of account and
records shall be reasonably accessible for inspection by the Owner Trustee and
each Hedge Counterparty at any time during normal business hours.
     (m) Without the prior written consent of the Majority Noteholders and the
Hedge Counterparties and subject to the satisfaction of the S&P Rating Condition
and the Moody’s Rating Condition, the Servicer shall not agree or consent to, or
otherwise permit to occur, any amendment, modification, change, supplement or
rescission of or to the Credit and Collection Policy, in whole or in part, in
any manner that could have a material adverse effect on the Loans.
     (n) For so long as any of the Notes are outstanding and are “restricted
securities” within the meaning of Rule 144(a)(3) of the Securities Act, (i) the
Servicer will provide or cause to be provided to any holder of such Notes and
any prospective purchaser thereof designated by such holder, upon the request of
such a holder or prospective purchaser, the information required to be provided
to such holder or prospective purchaser by Rule 144A(d)(4) under the Securities
Act; and (ii) the Servicer shall update such information from time to time in
order to prevent such information from becoming false and misleading and will
take such other actions as are necessary to ensure that the safe harbor
exemption from the registration requirements of the

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Securities Act under Rule 144A is and will be available for resales of such
Notes conducted in accordance with Rule 144A.
     (o) The Servicer will keep in full force and effect its existence, rights
and franchise as a Delaware limited liability company, and the Servicer shall
obtain and preserve its qualification to do business as a foreign limited
liability company in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of this Agreement and of
any of the Loans and to perform its duties under this Agreement.
     (p) The Servicer shall be obligated to make the Servicing Advances (but not
Scheduled Payment Advances) incurred in the performance of its servicing duties
hereunder. The Servicer shall be entitled to reimbursement for such Servicing
Advances from the Collections received from the Loan to which such Servicing
Advances relate pursuant to Section 5.10(d) and Section 7.03(h). Notwithstanding
anything contained herein to the contrary, in no event shall the application of
Servicing Advances or Scheduled Payment Advances prevent a Loan from being or
becoming a Delinquent Loan or Charged-Off Loan, as applicable.
     (q) The Servicer shall not be responsible for any taxes on the Issuer or
any Servicing Fees to any Successor Servicer.
     (r) All payments (other than Prepayments) received on Loans will be applied
by the Servicer to amounts due by the Obligor starting with the most recent
Scheduled Payment.
     (s) The Servicer shall be responsible for any tax reporting, disclosure,
record keeping or list maintenance requirements of the Issuer under Internal
Revenue Code Sections 6011(a), 6111(d) or 6112, including, but not limited to,
the preparation of IRS Form 8886 pursuant to Federal Income Tax Regulations
Section 1.6011-4(d) or any successor provision and any required list maintenance
under Federal Income Tax Regulations Section 301.6112-1 or any successor
provision.
     (t) The Servicer shall notify the Backup Servicer of any material
modification to its servicing system.
     (u) The initial Servicer shall provide to S&P and Fitch the most recently
available financial statements for each Obligor of a Loan included in the Loan
Pool, (i) in the case of each Initial Loan, within 13 months after the Closing
Date and every 13 months thereafter, and (ii) in the case of each Substitute
Loan, within 13 months after the related Subsequent Cut-Off Date and every 13
months thereafter, until, in all cases, such time as the related Loan has been
paid in full or is no longer part of the Loan Pool. Any failure by the initial
Servicer to provide financial statements with respect to any Obligor at such
times shall result in each Loan to the applicable Obligor being deemed to have
an S&P rating of “CCC-.”
     (v) The initial Servicer shall provide to Moody’s annual financial
statements for each Obligor of a Loan included in the Loan Pool as promptly as
reasonably practicable after such financial statements are delivered to the
Servicer after the end of each Obligor’s fiscal year, until such time as the
related Loan has been paid in full or is no longer part of the Loan Pool.

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    Section 5.03. Liquidation of Loans.

     (a) In the event that any payment due under any Loan and not postponed
pursuant to Section 5.02 is not paid when the same becomes due and payable, or
in the event the Obligor fails to perform any other covenant or obligation under
the Loan, the Servicer in accordance with the Credit and Collection Policy shall
take such action as shall maximize the amount of recovery thereon and it shall
deem to be in the best interests of the Noteholders and the Hedge
Counterparties. The Servicer, consistent with its Credit and Collection Policy,
may accelerate all payments due thereunder to the extent permitted by the
Required Loan Documents and foreclose upon at a public or private sale or
otherwise comparably effect the ownership of Collateral relating to defaulted
Loans for which the related Loan is still outstanding and as to which no
satisfactory arrangements can be made for collection of delinquent payments in
accordance with the provisions of Section 5.10 and shall act as sales and
processing agent for the Collateral that is repossessed. In connection with such
foreclosure or other conversion and any other liquidation action or enforcement
of remedies, the Servicer shall exercise collection and foreclosure procedures
with the same degree of care and skill in its exercise or use as it would
exercise with respect to its own affairs, in accordance with prudent servicing
standards, and in accordance with the Credit and Collection Policy. Without
limiting the generality of the foregoing, the Servicer may not sell any such
Collateral without first using commercially reasonable efforts to obtain bids to
purchase such Collateral from at least three Persons (other than the Servicer or
any of its Affiliates). The Servicer may sell the Collateral to the highest
bidder (if any bids are received) or the Servicer or an Affiliate may purchase
the Collateral for a price equal to the highest bid, but in no event may the
Servicer sell any Collateral for less than the then fair market value of the
Collateral. If no bids are received and the Servicer has used commercially
reasonable efforts to obtain such bids, the Servicer or an Affiliate may
purchase the Collateral for a price equal to the then fair market value of such
Collateral. Any such sale of the Collateral is to be evidenced by a certificate
of a Responsible Officer of the Servicer delivered to the Indenture Trustee
setting forth the Loan, the Collateral, the sale price of the Collateral and
certifying that such sale price is the fair market value of such Collateral. In
any case in which any such Collateral has suffered damage, the Servicer will not
expend funds in connection with any repair or toward the repossession of such
Collateral unless it reasonably determines that such repair and/or repossession
will increase the Liquidation Proceeds by an amount greater than the amount of
such expenses.
     (b) Prior to undertaking foreclosure of any Loan secured by real property
and any improvements thereon including any Mortgaged Property, the Servicer must
investigate environmental conditions, including, in accordance with the Credit
and Collection Policy, the performance of a Phase I and/or Phase II
environmental site assessment, to ascertain the actual or potential presence of
any hazardous material on or under such property. For purposes of this
Agreement, the term hazardous material includes (1) any hazardous substance, as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1986, 42 U.S.C. 9601–9675, and (2) petroleum (as that term is defined at 42
U.S.C. §6991) including any derivative, fraction, byproduct, constituent or
breakdown product thereof, or additive thereto. In the event that the
environmental investigation determines the existence of any hazardous material
on or under the real property in excess of minimum action levels established by
relevant regulatory agencies, title to such property shall not be taken without
satisfaction of the Rating Agency Condition.

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     (c) After a Loan has been liquidated, the Servicer shall promptly prepare
and forward to the Indenture Trustee and upon request, any Securityholder or
Hedge Counterparty, a report (the “Liquidation Report”), in the form attached
hereto as Exhibit D, detailing the Liquidation Proceeds received from such Loan,
the Liquidation Expenses incurred with respect thereto, and any loss incurred in
connection therewith.

    Section 5.04. Fidelity Bond.

     The Servicer shall at all times maintain with a responsible company, and at
its own expense, a blanket fidelity bond (the “Fidelity Bond”) in a minimum
aggregate amount equal to $2,000,000, and a maximum deductible of $50,000, with
coverage on all employees acting in any capacity requiring such persons to
handle funds, money, documents or papers relating to the Loans or the Collateral
(“Servicer Employees”). The Fidelity Bond shall provide coverage to the
Indenture Trustee, the Owner Trustee, the Hedge Counterparties and the
Securityholders, their respective officers and employees, against losses
resulting from forgery, theft, embezzlement or fraud by such Servicer Employees.
The Fidelity Bond shall not relieve the Servicer from its duties or indemnity
obligations as set forth in this Sale and Servicing Agreement. Upon the request
of the Indenture Trustee, the Owner Trustee, any Securityholder or any Hedge
Counterparty, the Servicer shall cause to be delivered to the Indenture Trustee,
the Owner Trustee, such Securityholder or such Hedge Counterparty a certified
true copy of such Fidelity Bond.

    Section 5.05. Maintenance of Hazard Insurance.

     (a) The Servicer will use its reasonable best efforts to ensure that each
Obligor maintains an Insurance Policy with respect to any tangible, personal
property Collateral (other than accounts receivable) in amounts consistent with
the Credit and Collection Policy and as required by clause (m) of the definition
of Eligible Loan and all of the Originator’s right, title and interest therein
will be fully assigned to the Indenture Trustee. Additionally, other than with
respect to unsecured Loans and Loans in which the sole collateral is the related
Obligor’s accounts receivable, the Servicer will require that each Obligor
maintain property damage liability insurance during the term of each Loan in
compliance with the Credit and Collection Policy. If an Obligor fails to
maintain property damage insurance, the Servicer may in its discretion purchase
and maintain such insurance on behalf of, and generally at the expense of, the
Obligor to the extent entitled to do so pursuant to the Required Loan Documents.
In connection with its activities as Servicer, the Servicer agrees to present,
on behalf of the Indenture Trustee, the Securityholders and the Hedge
Counterparties, claims to the insurer under each Insurance Policy and any such
liability policy, and to settle, adjust and compromise such claims, in each
case, consistent with the terms of each Loan. The Servicer’s Insurance Policies
with respect to the Collateral will insure against liability for physical damage
relating to such Collateral in accordance with the requirements of the Credit
and Collection Policy. The Servicer hereby disclaims any and all right, title
and interest in and to any Insurance Policy and Insurance Proceeds with respect
to any Collateral, including any Insurance Policy with respect to which it is
named as loss payee and as an insured, and agrees that it has no equitable,
beneficial or other interest in the Insurance Polices and Insurance Proceeds
other than being named as loss payee and as an insured. The Servicer
acknowledges that with respect to the Insurance Policies and

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Insurance Proceeds thereof that it is acting solely in the capacity as agent for
the Indenture Trustee.
     (b) If at origination of a Loan, to the best of the Servicer’s knowledge
after reasonable investigation, the related Mortgaged Property is in an area
identified in the Federal Register by the Flood Emergency Management Agency as
having special flood hazards (and such flood insurance has been made available)
consistent with the Credit and Collection Policy, the Servicer will require the
related Obligor or other creditors to purchase a flood insurance policy covering
each piece of property that is material with a generally acceptable insurance
carrier, in an amount representing coverage not less than the least of (i) the
full insurable value of the Mortgaged Property that is material, or (ii) the
maximum amount of insurance available under the National Flood Insurance Act of
1968, as amended. The Servicer shall also maintain, to the extent such insurance
is available, and required by the Credit and Collection Policy, on Foreclosed
Property constituting real property that is material, fire and hazard insurance
in the amounts described above and liability insurance.
     (c) Any amounts collected by the Servicer under any such Insurance Policies
(other than amounts to be applied to the restoration or repair of the
Collateral, or to be released to the Obligor or other creditors in accordance
with Requirements of Law or the governing documents) shall be deposited in the
Principal and Interest Account, subject to withdrawal pursuant to Section
7.03(h). It is understood and agreed that no earthquake or other additional
insurance need be required by the Servicer of any Obligor or other creditors or
maintained on Foreclosed Property, other than pursuant to such Requirements of
Law and regulations as shall at any time be in force and as shall require such
additional insurance. All policies required hereunder (unless the Seller is a
non-agent cO-lender with respect to such Loan) shall be endorsed with standard
mortgagee clauses with losses payable to the Servicer or its Affiliates.

    Section 5.06. Collection of Certain Loan Payments.

     (a) The Servicer shall make reasonable efforts, consistent with the Credit
and Collection Policy, to collect all payments required under the terms and
provisions of the Loans. Consistent with the foregoing and the Credit and
Collection Policy, the Servicer may in its discretion waive or permit to be
waived any fee or charge which the Servicer would be entitled to retain
hereunder as servicing compensation and extend the due date for payments due on
a Loan as provided in Section 5.02(e).
     (b) The Servicer agrees not to make, or permit to be made, any change, in
the direction of, or instructions with respect to, any payments to be made by an
Obligor Lock-Box Bank from any Obligor Lock-Box or any Obligor Lock-Box Account
in any manner that would diminish, impair, delay or otherwise adversely effect
the timing or receipt of such payments by the Lock-Box Bank without the prior
written consent of the Indenture Trustee and with the consent of the Majority
Noteholders and the Hedge Counterparties. The Servicer further agrees to provide
the Indenture Trustee promptly, but in no case later than one Business Day after
the Servicer’s receipt, any notice it receives that an Obligor is changing the
direction of or instructions with respect to any payments from any Obligor
Lock-Box or any Obligor Lock-Box Account.

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    Section 5.07. Access to Certain Documentation and Information Regarding the
Loans.

     The Servicer shall provide to the Owner Trustee, the Indenture Trustee, the
FDIC, the OCC, the Federal Reserve, the Office of Thrift Supervision and the
supervisory agents and examiners of the foregoing, access to the documentation
regarding the Loans required by applicable local, state and federal regulations,
such access being afforded without charge but only upon reasonable request and
during normal business hours at the offices of the Servicer designated by it and
in a manner that does not unreasonably interfere with the Servicer’s normal
operations or customer or employee relations. The Indenture Trustee and the
Owner Trustee shall and shall cause their representatives to hold in confidence
all such information except to the extent disclosure may be required by law (and
all reasonable applications for confidential treatment are unavailing) and
except to the extent that the Indenture Trustee and the Owner Trustee may
reasonably determine that such disclosure is consistent with their obligations
hereunder.

    Section 5.08. Satisfaction of Mortgages and Collateral and Release of Loan
Files.

     (a) Upon the payment in full of any Loan, the receipt by the Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes or the deposit into the Principal and Interest Account of the
purchase price of any Loan acquired by the Trust Depositor, the Servicer or
another Person pursuant to this Agreement, or any other Transaction Document,
the Servicer will immediately notify the Indenture Trustee by a certification in
the form of Exhibit M attached hereto (which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the Principal
and Interest Account pursuant to Section 7.03(b) have been or will be so
deposited) of a Servicing Officer and shall request delivery to it of the Loan
File. Upon receipt of such certification and request, the Indenture Trustee
shall in accordance with Section 2.09(c) release, within two Business Days (if
such request was received by 2:00 p.m. central time), the related Loan File to
the Servicer. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be payable by the Servicer and shall
not be chargeable to the Principal and Interest Account or the Note Distribution
Account; provided that the Servicer may collect and retain such expenses from
the underlying Obligor.
     (b) From time to time and as appropriate for the servicing or foreclosure
of any Loan, the Indenture Trustee shall, upon request of the Servicer and
delivery to the Indenture Trustee of a certification in the form of Exhibit M
attached hereto signed by a Servicing Officer, release the related Loan File to
the Servicer within two Business Days (if such request was received by 2:00 p.m.
central time), and the Indenture Trustee shall execute such documents as shall
be necessary to the prosecution of any such proceedings. The Servicer shall
return the Loan File to the Indenture Trustee when the need therefor by the
Servicer no longer exists, unless the Loan has been liquidated and the Net
Liquidation Proceeds relating to the Loan have been deposited in the Principal
and Interest Account and remitted to the Indenture Trustee for deposit in the
Note Distribution Account or the Loan File or such document has been delivered
to an attorney, or to a public trustee or other public official as required by
law, for purposes of initiating or pursuing legal action or other proceedings
for the foreclosure or repossession of Collateral either judicially or
non-judicially, and the Servicer has delivered to the Indenture Trustee a
certificate of a

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Servicing Officer certifying as to the name and address of the Person to whom
such Loan File or such document was delivered and the purpose or purposes of
such delivery. Upon receipt of a certificate of a Servicing Officer stating that
such Loan was liquidated, the servicing receipt relating to such Loan shall be
released by the Indenture Trustee to the Servicer.
     (c) The Indenture Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee’s sale or other documents provided to it
necessary to the foreclosure or trustee’s sale in respect of Collateral or to
any legal action brought to obtain judgment against any Obligor on the related
loan agreement (including any Underlying Note or other agreement securing
Collateral) or to obtain a deficiency judgment, or to enforce any other remedies
or rights provided by the related loan agreement (including any Underlying Note
or other agreement securing Collateral) or otherwise available at law or in
equity. Together with such documents or pleadings, the Servicer shall deliver to
the Indenture Trustee a certificate of a Servicing Officer requesting that such
pleadings or documents be executed by the Indenture Trustee and certifying as to
the reason such documents or pleadings are required and that the execution and
delivery thereof by the Indenture Trustee will not invalidate or otherwise
adversely affect the Lien of the agreement securing Collateral, except for the
termination of such a Lien upon completion of the foreclosure or trustee’s sale.
The Indenture Trustee shall, upon receipt of a written request from a Servicing
Officer, execute any document provided to the Indenture Trustee by the Servicer
or take any other action requested in such request, that is, in the opinion of
the Servicer as evidenced by such request, required or appropriate by any state
or other jurisdiction to discharge the Lien securing Collateral upon the
satisfaction thereof and the Indenture Trustee will sign and post, but will not
guarantee receipt of, any such documents to the Servicer, or such other party as
the Servicer may direct, within five Business Days of the Indenture Trustee’s
receipt of such certificate or documents. Such certificate or documents shall
establish to the Indenture Trustee’s satisfaction that the related Loan has been
paid in full by or on behalf of the Obligor (or subject to a deficiency claim
against such Obligor) and that such payment has been deposited in the Principal
and Interest Account.
     (d) Notwithstanding anything contained in this Section 5.08 to the
contrary, in no event may the Servicer possess in excess of 15 Loan Files
(excluding Loan Files for Loans which have been paid in full or repurchased) at
any given time.

    Section 5.09. Scheduled Payment Advances.

     For each Due Period, if the Servicer determines that any Scheduled Payment
(or portion thereof) that was due and payable pursuant to a Loan in the Loan
Pool during such Due Period was not received prior to the end of such Due Period
or has been received in an Obligor Lock–Box Account but has not yet been
transferred to the Lock–Box Account, the Servicer has the right to elect, but is
not obligated, to make a Scheduled Payment Advance in an amount up to the amount
of such delinquent Scheduled Payment (or portion thereof) if the Servicer
believes in good faith that the advance will be reimbursed or subsequently paid
by the related Obligor. The Servicer will deposit any Scheduled Payment Advances
into the Principal and Interest Account on or prior to 11:00 a.m. (New York City
time) on the related Determination Date, in immediately available funds. The
Servicer will be entitled to be reimbursed for Scheduled Payment Advances
pursuant to Section 7.03, Section 7.05(a) and Section 7.05(b).

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    Section 5.10. Title, Management and Disposition of Foreclosed Property.

     (a) In the event that title to Collateral is acquired in foreclosure or by
deed in lieu of foreclosure or by other legal process, the deed or certificate
of sale, or the Repossessed Collateral, shall be taken in the name of the Issuer
for the benefit of the Securityholders and the Hedge Counterparties.
     (b) The Servicer, subject to the provisions of this ARTICLE 5, shall
manage, conserve, protect and operate each Foreclosed Property or other
Repossessed Collateral for the Securityholders and the Hedge Counterparties
solely for the purpose of its prudent and prompt disposition and sale. The
Servicer shall, either itself or through an agent selected by the Servicer,
manage, conserve, protect and operate the Foreclosed Property or other
Repossessed Collateral in the same manner that it manages, conserves, protects
and operates other foreclosed or repossessed property for its own account, and
in a similar manner to that of similar property in the same locality as the
Foreclosed Property or other Repossessed Collateral is managed. The Servicer
shall attempt to sell the same (and may temporarily rent the same) on such terms
and conditions as the Servicer deems to be in the best interest of the
Securityholders and the Hedge Counterparties.
     (c) The Servicer shall cause to be deposited in the Principal and Interest
Account, no later than two Business Days after the receipt thereof, all revenues
received with respect to the conservation and disposition of the related
Foreclosed Property or other Repossessed Collateral net of Servicing Advances.
     (d) The Servicer shall, subject to Section 5.02(p) and Section 7.03,
reimburse itself for any related unreimbursed Servicing Advances and unpaid
Servicing Fees, and the Servicer shall deposit in the Principal and Interest
Account the net cash proceeds of the sale of any Foreclosed Property or other
Repossessed Collateral to be distributed to the Securityholders and the Hedge
Counterparties in accordance with Section 7.05 hereof.

    Section 5.11. Servicing Compensation.

     (a) As compensation for its servicing activities hereunder and
reimbursement for its expenses, the Servicer shall be entitled to receive a
servicing fee for each month (or portion thereof) calculated and payable monthly
in arrears on each Payment Date prior to the termination of the Issuer (with
respect to each Due Period, the “Servicing Fee”) equal to the sum of the product
of: (i) the Servicing Fee Percentage, (ii) the Outstanding Loan Balance of the
Asset Based Revolvers and the Outstanding Loan Balance of all other Loans, as
applicable, as of the first day of the applicable Due Period (or, with respect
to the first Due Period, as of the Closing Date) and (iii) a fraction, the
numerator of which is equal to the number of days in the applicable Due Period
(or, with respect to the first Due Period, the number of days from the Closing
Date to the end of the first Due Period) and the denominator of which is 360.
The Servicing Fee is payable out of Collections pursuant to Section 7.05(a) and
Section 7.05(b). If the Servicer is replaced, the Originator shall be
responsible for the payment of any fee payable to a Successor Servicer in excess
of the Servicing Fee to the extent such fee is not paid pursuant to
Section 7.05(a) and Section 7.05(b).

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     (b) In addition to the Servicing Fee, the Servicer shall be entitled to
retain for itself as additional servicing compensation assumption and other
administrative fees paid or payable in connection with any Loan.

    Section 5.12. Assignment; Resignation.

     The Servicer shall not assign its rights and duties under this Agreement
(other than in connection with a subservicing arrangement) nor resign from the
obligations and duties hereby imposed on it as Servicer except (a) by mutual
consent of the Servicer, the Indenture Trustee, the Majority Noteholders and the
Hedge Counterparties, (b) in connection with a merger, conversion or
consolidation permitted pursuant to Section 5.13 (in which case the Person
resulting from the merger, conversion or consolidation shall be the successor of
the Servicer), (c) in connection with an assignment permitted pursuant to
Section 5.13 (in which case the Assignee shall be the successor of the
Servicer), or (d) upon the Servicer’s determination that its duties hereunder
are no longer permissible under Requirements of Law or administrative
determination and such incapacity cannot be cured by the Servicer. Any such
determination permitting the resignation of the Servicer shall be evidenced by a
written Opinion of Counsel (who may be counsel for the Servicer) to such effect
delivered to the Indenture Trustee, which Opinion of Counsel shall be in form
and substance reasonably acceptable to the Indenture Trustee. No such
resignation shall become effective until a successor has assumed the Servicer’s
responsibilities and obligations hereunder in accordance with Section 8.03.

    Section 5.13. Merger or Consolidation of Servicer.

     (a) Any Person into which the Servicer may be merged or consolidated, or
any Person resulting from such merger, conversion or consolidation to which the
Servicer is a party, or any Person succeeding to substantially all of the
business of the Servicer, and who shall be an established commercial loan
servicing institution that on a consolidated basis has a net worth of at least
$50,000,000, shall be the Successor Servicer hereunder without execution or
filing of any paper or any further act on the part of any of the parties hereto,
notwithstanding anything herein to the contrary; provided, however, no such
merger, conversion or consolidation of the Servicer or transfer of all or
substantially all or the Servicer assets or business shall be permitted
hereunder unless the Rating Agency Condition is satisfied with respect thereto.
     (b) Upon the occurrence of a change- in-control (including any merger or
consolidation of the Originator or transfer of substantially all of its assets
and its business), the Servicer shall (i) provide the Trust Depositor, the
Indenture Trustee, the Hedge Counterparties and the Rating Agencies with notice
of such change- in-control within 30 days after completion of the same, and
(ii) satisfy the Rating Agency Condition after completion of the same.

    Section 5.14. Limitation on Liability of the Servicer and Others.

     The Servicer and any director, officer, employee or agent of the Servicer
may rely on any document of any kind which it in good faith reasonably believes
to be genuine and to have been adopted or signed by the proper authorities or
persons respecting any matters arising hereunder. Subject to the terms of
Section 12.01 herein, the Servicer shall have no obligation to appear with
respect to, prosecute or defend any legal action which is not incidental to the
Servicer’s duty to

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service the Loans in accordance with this Agreement. The Servicer shall not be
responsible for the payment of any taxes imposed on or with respect to the
Issuer or for the fees of any Successor Servicer.

     Section 5.15. The Backup Servicer.

     (a) The Issuer, the Indenture Trustee and the Trust Depositor hereby
appoint Wells Fargo Bank, National Association to act as Backup Servicer in
accordance with the terms of this Agreement. Wells Fargo Bank, National
Association hereby accepts such appointment and agrees to perform the duties and
responsibilities with respect thereto set forth herein.
     (b) The Backup Servicer shall perform the following duties and obligations:
     (i) On or before the Closing Date, the Backup Servicer shall accept from
the Servicer delivery of the information required to be set forth in the Monthly
Reports in hard copy and in an agreed upon electronic format.
     (ii) Not later than 12:00 noon New York time four Business Days after the
end of the related Due Period, the Servicer shall provide to the Backup Servicer
and the Backup Servicer shall accept delivery of tape in an agreed upon
electronic format (the “Tape”) from the Servicer, which shall include but not be
limited to the following information: (A) for each Loan, (1) Loan number,
(2) Loan category (i.e., asset based financed, healthcare secured, senior cash
flow, subordinate cash flow or real estate) (3) state of Obligor’s primary
business, (4) NAICS Code, (5) type of Loan (i.e., Partially Funded Term Loan,
Fully Funded Term Loan, Reducing Revolving Loan or Traditional Revolving Loan),
(6) type of security interest (i.e., senior or subordinated), (7) term payment
type (i.e., Amortizing Loans, Balloon Loans or Bullet Loans), (8) origination
date, (9) maturity date, (10) benchmark for Loan Rate, (11) margin,
(12) frequency of Scheduled Payments, (13) controlling interest (i.e., whether
the Loan is syndicated and whether the Issuer holds a majority of the
outstanding indebtedness under such syndicated Loan), (14) the collection
status, (15) the Loan status, and (16) the Outstanding Loan Balance and (B) the
Aggregate Outstanding Loan Balance. With respect to its duties pursuant to this
Section 5.15(b)(ii), the Backup Servicer shall have no duty to confirm that the
Tape contains the foregoing information.
     (iii) Prior to the Payment Date, the Backup Servicer shall review the
Monthly Report to ensure that it is complete on its face and that the following
items in such Monthly Report have been accurately calculated, if applicable, and
reported: (A) the Aggregate Outstanding Loan Balance, (B) the Backup Servicing
Fee, (C) the Loans that are more than one day delinquent in the case of Asset
Based Revolvers and more than 60 days delinquent in the case of all other Loans
(other than Charged–Off Loans), (D) the Charged–Off Loans, and (E) the Priority
of Payments. The Backup Servicer shall notify the Indenture Trustee, each Hedge
Counterparty, the Initial Purchasers and the Servicer of any discrepancies with
the Monthly Report based on such review not later than the Business Day
preceding such Payment Date.

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     (iv) If the Servicer disagrees with the report provided under paragraph
(iii) above by the Backup Servicer or if the Servicer or any subservicer has not
reconciled such discrepancy, the Backup Servicer agrees to confer with the
Servicer to resolve such disagreement on or prior to the next succeeding
Determination Date and shall settle such discrepancy with the Servicer if
possible, and notify the Indenture Trustee, each Hedge Counterparty, the Initial
Purchasers and the Rating Agencies of the resolution thereof. The Servicer
hereby agrees to cooperate at its own expense with the Backup Servicer in
reconciling any discrepancies herein. If within 20 days after the delivery of
the report provided under paragraph (iii) above by the Backup Servicer, such
discrepancy is not resolved, the Backup Servicer shall promptly notify the
Servicer, Indenture Trustee, each Hedge Counterparty, the Initial Purchasers and
the Rating Agencies of the continued existence of such discrepancy. Following
receipt of such notice by the Indenture Trustee, each Hedge Counterparty, the
Initial Purchasers and the Rating Agencies, the Servicer shall deliver to the
Indenture Trustee, each Hedge Counterparty, the Initial Purchasers, the Backup
Servicer and the Rating Agencies no later than the related Payment Date a
certificate describing the nature and amount of such discrepancies and the
actions the Servicer proposes to take with respect thereto.
     With respect to the foregoing, the Backup Servicer, in the performance of
its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape, including,
but not limited to, the completeness and accuracy thereof, provided by the
Servicer.
     (c) After the termination or resignation by the Servicer in accordance with
this Agreement, all authority, power, rights and responsibilities of the
Servicer, under this Agreement, whether with respect to the Loans or otherwise,
shall pass to and be vested in the Successor Servicer or the Backup Servicer, as
applicable in accordance with Section 8.03 and such applicable party shall be
deemed the Successor Servicer, subject to and in accordance with the provisions
of Section 8.03, as long as such named Successor Servicer is not prohibited by
any Requirements of Law from fulfilling the same, as evidenced by an Opinion of
Counsel; provided, however, if Wells Fargo as Backup Servicer becomes the
Successor Servicer, it will not make any Scheduled Payment Advances.
     (d) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) that may result from any merger or consolidation to which the
Backup Servicer shall be a party, or (iii) that may succeed to the properties
and assets of the Backup Servicer substantially as a whole, which Person in any
of the foregoing cases executes an agreement of assumption to perform every
obligation of the Backup Servicer hereunder, shall be the successor to the
Backup Servicer under this Agreement without further act on the part of any of
the parties to this Agreement.
     (e) As compensation for its backup servicing activities hereunder, the
Backup Servicer shall be entitled to receive the Backup Servicing Fee from the
Servicer. The Backup Servicing Fee shall be calculated and payable monthly in
arrears on each Payment Date. The Backup Servicer’s entitlement to receive the
Backup Servicing Fee (other than due and unpaid Backup Servicing Fees owed
through such date) shall cease on the earliest to occur of: (i) it

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becoming the Successor Servicer, (ii) its removal as Backup Servicer, or
(iii) the termination of this Agreement.
     (f) The Backup Servicer may be removed with or without cause by the
Majority Noteholders by notice given in writing to the Backup Servicer. In the
event of any such removal, a replacement Backup Servicer may be appointed by
Majority Noteholders.
     (g) The Backup Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being expressly
understood by all parties hereto that there are no implied duties or obligations
of the Backup Servicer hereunder. Without limiting the generality of the
foregoing, the Backup Servicer, except as expressly set forth herein, shall have
no obligation to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer may act through its agents, attorneys and
custodians in performing any of its duties and obligations under this Agreement,
it being understood by the parties hereto that the Backup Servicer will be
responsible for any misconduct or negligence on the part of such agents,
attorneys or custodians acting for and on behalf of the Backup Servicer. Neither
the Backup Servicer nor any of its officers, directors, employees or agents
shall be liable, directly or indirectly, for any damages or expenses arising out
of the services performed under this Agreement other than damages or expenses
that result from the negligence or willful misconduct of it or them or the
failure to perform materially in accordance with this Agreement.
     (h) Limitation on Liability. The Backup Servicer shall not be liable for
any obligation of the Servicer contained in this Agreement or for any errors of
the Servicer contained in any Tape, certificate or other data or document
delivered to the Backup Servicer hereunder or on which the Backup Servicer must
rely in order to perform its obligations hereunder, and the parties hereto each
agree to look only to the Servicer to perform such obligations. The Backup
Servicer shall have no responsibility and shall not be in default hereunder or
incur any liability for any failure, error, malfunction or any delay in carrying
out any of its respective duties under this Agreement if such failure or delay
results from the Backup Servicer acting in accordance with information prepared
or supplied by a Person other than the Backup Servicer or the failure of any
such other Person to prepare or provide such information. The Backup Servicer
shall have no responsibility, shall not be in default and shall incur no
liability for (i) any act or failure to act of any third party, including the
Servicer (other than any agent, attorney or custodian acting on behalf of the
Backup Servicer), (ii) any inaccuracy or omission in a notice or communication
received by the Backup Servicer from any third party (other than any agent,
attorney or custodian acting on behalf of the Backup Servicer), (iii) the
invalidity or unenforceability of any Loan under Requirements of Law, (iv) the
breach or inaccuracy of any representation or warranty made with respect to any
Loan, or (v) the acts or omissions of any Successor Backup Servicer.

    Section 5.16. Covenants of the Backup Servicer.

     The Backup Servicer hereby covenants that:
     (a) The Backup Servicer will comply in all material respects with all
Requirements of Law.

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     (b) The Backup Servicer will preserve and maintain its existence, rights,
franchises and privileges as a national banking association in good standing
under the federal laws of the United States.
     (c) The Backup Servicer shall perform in all material respects all of its
obligations and duties under this Agreement.
ARTICLE 6.
COVENANTS OF THE TRUST DEPOSITOR

    Section 6.01. Legal Existence.

     During the term of this Agreement, the Trust Depositor will keep in full
force and effect its existence, rights and franchises as a limited liability
company under the laws of the jurisdiction of its organization and will obtain
and preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the other Transaction Documents and each other
instrument or agreement necessary or appropriate to the proper administration of
this Agreement and the transactions contemplated hereby. In addition, all
transactions and dealings between the Trust Depositor and its Affiliates will be
conducted on an arm’s–length basis.

    Section 6.02. Loans Not to Be Evidenced by Promissory Notes.

     The Trust Depositor will take no action to cause any Loan not originally
evidenced by an Underlying Note to be evidenced by an instrument (as defined in
the UCC), except in connection with the enforcement or collection of such Loan.

    Section 6.03. Security Interests.

     The Trust Depositor will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on any Loan
in the Loan Pool or its interest in any related Collateral, whether now existing
or hereafter transferred to the Issuer, or any interest therein. The Trust
Depositor will immediately notify the Owner Trustee, each Hedge Counterparty and
the Indenture Trustee of the existence of any Lien on any Loan in the Loan Pool
or its interest in any related Collateral; and the Trust Depositor shall defend
the right, title and interest of the Issuer in, to and under the Loans in the
Loan Pool and its interest in any related Collateral, against all claims of
third parties; provided, however, that nothing in this Section 6.03 shall
prevent or be deemed to prohibit the Trust Depositor from suffering to exist
Permitted Liens upon any of the Loans in the Loan Pool or its interest in any
related Collateral.

    Section 6.04. Delivery of Principal Collections and Interest Collections.

     The Trust Depositor agrees to pay to the Servicer promptly (but in no event
later than two Business Days after receipt) all Collections received by the
Trust Depositor in respect of the Loans, for application in accordance with
Section 7.05 hereof.

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    Section 6.05. Regulatory Filings.

     The Trust Depositor shall make any filings, reports, notices, applications
and registrations with, and seek any consents or authorizations from, the
Commission and any state securities authority on behalf of the Issuer as may be
necessary or that the Trust Depositor deems advisable to comply with any federal
or state securities or reporting requirements laws.

    Section 6.06. Compliance with Law.

     The Trust Depositor hereby agrees to comply in all material respects with
all Requirements of Law applicable to the Trust Depositor except where the
failure to do so would not have a material adverse effect on the Securityholders
or the Hedge Counterparties.

    Section 6.07. Activities; Transfers of Notes or Certificates by Trust
Depositor.

     Except as contemplated by this Agreement or the other Transaction
Documents, the Trust Depositor shall not engage in any business or activity of
any kind, or enter into any transaction or indenture, mortgage, instrument,
agreement, contract, lease or other undertaking, which is not directly related
to the transactions contemplated and authorized by this Agreement or the other
Transaction Documents. Notwithstanding anything to the contrary contained
herein, the Trust Depositor may assign, transfer, convey or finance all or any
portion of any Class of Notes or Certificates owned by it provided such
assignment, transfer, conveyance or financing is done in accordance with the
terms of Section 4.02 of the Indenture.

    Section 6.08. Indebtedness.

     The Trust Depositor shall not create, incur, assume or suffer to exist any
Indebtedness or other liability whatsoever, except (a) obligations incurred
under this Agreement or the other Transaction Documents or to the Originator,
(b) liabilities incident to the maintenance of its limited liability company
existence in good standing or (c) liabilities necessarily incurred to facilitate
transactions permitted by Section 6.07.

    Section 6.09. Guarantees.

     The Trust Depositor shall not become or remain liable, directly or
contingently, in connection with any Indebtedness or other liability of any
other Person, whether by guarantee, endorsement (other than endorsements of
negotiable instruments for deposit or collection in the ordinary course of
business), agreement to purchase or repurchase, agreement to supply or advance
funds, or otherwise except in connection with the transactions permitted by
Section 6.07.

    Section 6.10. Investments.

     The Trust Depositor shall not make or suffer to exist any loans or advances
to, or extend any credit to, or make any investments (by way of transfer of
property, contributions to capital, purchase of stock or securities or evidences
of indebtedness, acquisition of the business or assets, or otherwise) in, any
Person except for (a) purchases of Loans from the Originator, (b) for
investments in Permitted Investments in accordance with the terms of this
Agreement, (c) as may

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be necessary to facilitate transactions permitted by Section 6.07 or (d) the
receipt of $66,491,764 in aggregate principal amount of the Class E Note, the
Class F Note and the Certificate as consideration for the transfer of the Loan
Assets to the Issuer. Without limiting the generality of the foregoing, the
Trust Depositor shall not (i) provide credit to any Securityholder for the
purpose of enabling such Securityholder to purchase any Securities or (ii) lend
any money to the Issuer.

    Section 6.11. Merger; Sales.

     The Trust Depositor shall not enter into any transaction of merger or
consolidation, or liquidate or dissolve itself (or suffer any liquidation or
dissolution) or acquire or be acquired by any Person, or convey, sell, lease or
otherwise dispose of all or substantially all of its property or business,
except as provided for in this Agreement.

    Section 6.12. Distributions.

     The Trust Depositor shall not declare or pay, directly or indirectly, any
dividend or make any other distribution (whether in cash or other property) with
respect to the profits, assets or capital of the Trust Depositor or any Person’s
interest therein, or purchase, redeem or otherwise acquire for value any of its
members’ interests now or hereafter outstanding, except that, so long as no
Event of Default has occurred and is continuing and no Event of Default would
occur as a result thereof or after giving effect thereto and the Trust Depositor
would continue to be Solvent as a result thereof and after giving effect
thereto, the Trust Depositor may declare and pay distributions to its members.

    Section 6.13. Other Agreements.

     Except as provided in this Agreement or the other Transaction Documents,
the Trust Depositor shall not become a party to, or permit any of its properties
to be bound by, any indenture, mortgage, instrument, contract, agreement, lease
or other undertaking, except this Agreement and the other Transaction Documents
to which it is a party and any agreement relating to another transaction
permitted by Section 6.07; nor shall it amend or modify the provisions of its
organizational documents or issue any power of attorney except to the Owner
Trustee, the Indenture Trustee or the Servicer in accordance with the
Transaction Documents or in connection with another transaction permitted by
Section 6.07.

    Section 6.14. Separate Legal Existence.

     The Trust Depositor shall:
     (a) Maintain its own deposit account or accounts, separate from those of
any Affiliate, with commercial banking institutions. The funds of the Trust
Depositor will not be diverted to any other Person or for other than authorized
uses of the Trust Depositor.
     (b) Ensure that, to the extent that it shares the same officers or other
employees as any of its members or Affiliates, the salaries of and the expenses
related to providing benefits to such officers and other employees shall be
fairly allocated among such entities, and each such

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entity shall bear its fair share of the salary and benefit costs associated with
all such common officers and employees.
     (c) Ensure that, to the extent that it jointly contracts with any of its
members or Affiliates to do business with vendors or service providers or to
share overhead expenses, the costs incurred in so doing shall be allocated
fairly among such entities, and each such entity shall bear its fair share of
such costs. To the extent that the Trust Depositor contracts or does business
with vendors or service providers when the goods and services provided are
partially for the benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for whose benefit the goods
and services are provided, and each such entity shall bear its fair share of
such costs. All material transactions between Trust Depositor and any of its
Affiliates shall be only on an arm’s length basis.
     (d) To the extent that the Trust Depositor and any of its members or
Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses.
     (e) Conduct its affairs strictly in accordance with its organizational
documents and observe all necessary, appropriate and customary limited liability
company formalities, including, but not limited to, holding all regular and
special board of director meetings appropriate to authorize all limited
liability company action, keeping separate and accurate minutes of its meetings,
passing all resolutions or consents necessary to authorize actions taken or to
be taken, and maintaining accurate and separate books, records and accounts,
including, but not limited to, payroll and intercompany transaction accounts.
     (f) Take or refrain from taking, as applicable, each of the activities
specified in the “substantive consolidation” opinion of Patton Boggs LLP,
delivered on the Closing Date, upon which the conclusions expressed therein are
based.

    Section 6.15. Location; Records.

     The Trust Depositor shall (a) not move its location outside the State of
Maryland or its jurisdiction of formation outside of the State of Delaware
without 30 days’ prior written notice to the Owner Trustee and the Indenture
Trustee and (b) will promptly take all actions (if any) required (including, but
not limited to, all filings and other acts necessary or advisable under the UCC
of each relevant jurisdiction) in order to continue the first priority perfected
security interest of the Indenture Trustee in all Loans.

    Section 6.16. Liability of Trust Depositor.

     The Trust Depositor shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Trust Depositor under
this Agreement.

    Section 6.17. Bankruptcy Limitations.

     The Trust Depositor shall not, without the affirmative vote of a majority
of the managers of the Trust Depositor (which must include the affirmative vote
of at least two (2) duly appointed Independent managers) (a) dissolve or
liquidate, in whole or in part, or institute proceedings to

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be adjudicated bankrupt or insolvent, (b) consent to the institution of
bankruptcy or insolvency proceedings against it, (c) file a petition seeking or
consent to reorganization or relief under any applicable federal or state law
relating to bankruptcy, (d) consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
limited liability company or a substantial part of its property, (e) make a
general assignment for the benefit of creditors, (f) admit in writing its
inability to pay its debts generally as they become due, or (g) take any limited
liability company action in furtherance of the actions set forth in clauses (a)
through (f) above; provided, however, that no manager may be required by any
member of the Trust Depositor to consent to the institution of bankruptcy or
insolvency proceedings against the Trust Depositor so long as it is Solvent.

    Section 6.18. Limitation on Liability of Trust Depositor and Others.

     The Trust Depositor and any director or officer or employee or agent of the
Trust Depositor may rely in good faith on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder. The Trust Depositor and any director or officer or employee or agent
of the Trust Depositor shall be reimbursed by the Indenture Trustee for any
liability or expense incurred by reason of the Indenture Trustee’s willful
misfeasance, bad faith or gross negligence (except errors in judgment) in the
performance of its duties hereunder, or by reason of the Indenture Trustee’s
material breach of the obligations and duties under this Agreement or the
Transaction Documents. The Trust Depositor shall not be under any obligation to
appear in, prosecute or defend any legal action that shall not be incidental to
its obligations under this Agreement, and that in its opinion may involve it in
any expense or liability.

    Section 6.19. Insurance Policies.

     Upon and after an Event of Default or Servicer Default, at the request of
the Indenture Trustee, the Trust Depositor will cause to be performed any and
all acts reasonably required to be performed to preserve the rights and remedies
of the Indenture Trustee and the Owner Trustee in any insurance policies
applicable to the Loans including, without limitation, in each case, any
necessary notifications of insurers, assignments of policies or interests
therein, and establishments of co–insured, joint loss payee and mortgagee rights
in favor of the Indenture Trustee or the Trust Depositor, respectively.

    Section 6.20. Payments from Obligor Lock–Boxes and Obligor Lock–Box
Accounts.

     The Trust Depositor agrees not to make, or permit to be made, any change in
the direction of, or instructions with respect to, any payments to be made by an
Obligor Lock–Box Bank from any Obligor Lock–Box or any Obligor Lock–Box Account
in any manner that would diminish, impair, delay or otherwise adversely effect
the timing or receipt of such payments by the Lock–Box Bank or to change the
name in which an Obligor Lock–Box or Obligor Lock–Box Account is maintained
without the prior written consent of the Indenture Trustee and with the consent
of the Majority Noteholders and the Hedge Counterparties. The Trust Depositor
further agrees to provide the Indenture Trustee promptly, but in no case later
than one Business Day after the Trust Depositor’s receipt, any notice it
receives that an Obligor is changing the direction

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of or instructions with respect to any payments from any Obligor Lock – Box or
any Obligor Lock – Box Account or the name in which any Obligor Lock – Box or
Obligor Lock – Box Account is maintained.
ARTICLE 7.
ESTABLISHMENT OF ACCOUNTS;
DISTRIBUTIONS; RESERVE FUND
     Section 7.01. Note Distribution Account, Reserve Fund and Lock – Boxes.
     (a) On or before the Closing Date, the Servicer shall establish the Note
Distribution Account and the Reserve Fund with and in the name of the Indenture
Trustee for the benefit of the Securityholders and the Hedge Counterparties. The
Servicer and Indenture Trustee are hereby required to ensure that each of the
Note Distribution Account and Reserve Fund is established and maintained as an
Eligible Deposit Account with a Qualified Institution. If any institution with
which any of the accounts established pursuant to this Section 7.01(a) are
established ceases to be a Qualified Institution, the Servicer, or if the
Servicer fails to do so, the Indenture Trustee (as the case may be) shall within
ten Business Days establish a replacement account at a Qualified Institution
after notice of such event. In no event shall the Indenture Trustee be
responsible for monitoring whether such Eligible Institution shall remain a
Qualified Institution. Each Qualified Institution maintaining an Eligible
Deposit Account shall agree in writing to comply with all instructions
originated by the Indenture Trustee or, with respect to the Principal and
Interest Account only, the Servicer directing disposition of the funds in the
Eligible Deposit Account without the further consent of the Trust Depositor.
     (b) If the Servicer so directs (or, if the Servicer does not so direct, the
Trust Depositor has the right to direct), in writing, the Indenture Trustee
shall accept such directions as directions of the Issuer and shall invest the
amounts in the Note Distribution Account and the Reserve Fund in Permitted
Investments of the type specified in such written direction that mature or are
withdrawable not later than the next succeeding Determination Date, except for
investments in Section (vi) of the definition of Permitted Investments. Once
such funds are invested, the Indenture Trustee shall not change the investment
of such funds other than in connection with the withdrawal or liquidation of
such investments and the transfer of such funds as provided herein on or prior
to the next succeeding Determination Date. Funds in the Note Distribution
Account and Reserve Fund not so invested must be insured to the extent and the
amount permitted by law by BIF or SAIF of the FDIC. Subject to the restrictions
herein, the Servicer or Indenture Trustee may purchase a Permitted Investment
from itself or an Affiliate with respect to investment of funds in the Trust
Accounts. Subject to the other provisions hereof, the Servicer in the case of
the Principal and Interest Account and the Indenture Trustee in the case of all
other Trust Accounts shall have sole control over each such investment and the
income thereon, and any certificate or other instrument evidencing any such
investment, if any, shall be delivered directly to the Servicer or its agent or
the Indenture Trustee or its agent, as applicable, together with each document
of transfer, if any, necessary to transfer title to such investment to the
Servicer or Indenture Trustee, as applicable, in a manner which complies with
this Section 7.01. All Investment Earnings on investments of funds in the Trust
Accounts shall be deposited in the Interest Collection Account pursuant to
Section 7.01 and distributed on the next Payment Date

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pursuant to Section 7.05. The Trust Depositor and the Issuer agree and
acknowledge that the Servicer and Indenture Trustee are to have “control”
(within the meaning of the UCC) of collateral comprised of “Investment Property”
(within the meaning of the UCC) for all purposes of this Agreement. In the
absence of timely written direction from the Servicer or the Trust Depositor,
the Indenture Trustee shall invest amounts in the Note Distribution Account and
Reserve Fund Account in Permitted Investments of the type specified in clause
(vi) of the definition of Permitted Investments herein.
     (c) The Servicer and the Originator have established, or caused to be
established, and will maintain, or caused to be maintained, various Obligor Lock
– Boxes and Obligor Lock – Box Accounts, for the deposit of the amounts
representing payments sent by Obligors with respect to certain Revolving Loans.
The Servicer and the Originator have established, or caused to be established,
and will maintain, or caused to be maintained, the Lock – Box and the Lock – Box
Account, for the deposit of the amounts representing payments sent by Obligors
and Obligor Lock – Box Banks, as applicable, with respect to Loans pledged to
the Indenture Trustee as well as with respect to loans not pledged to the
Indenture Trustee. The Servicer, as agent for the Issuer, and the Originator
will cause each Obligor Lock – Box Bank to deposit within two Business Days of
receipt all Collections that have been sent to such Obligor Lock – Box Bank into
the Lock Box Account, and within two Business Days of the deposit into the Lock
– Box or the Lock Box Account, the Servicer and the Originator will cause the
Lock – Box Bank to cause the amounts in the Lock Box Account to be deposited
into the Principal and Interest Account.
     Section 7.02. Reserve Fund Deposit.
     On the Closing Date, the Owner Trustee, on behalf of the Issuer, shall
deposit the Reserve Fund Initial Balance into the Reserve Fund from the net
proceeds of the sale of the Securities.
     Section 7.03. Principal and Interest Account.
     (a) The Servicer shall cause to be established and maintained one or more
Principal and Interest Accounts (including for each such account two
subaccounts, one designated as the Interest Collection Account and the other
designated as the Principal Collection Account), in one or more Eligible Deposit
Accounts, in the form of time deposit or demand accounts, which may be interest
– bearing or such accounts may be trust accounts wherein the moneys therein are
invested in Permitted Investments, titled “CapitalSource Finance LLC, as
Servicer, in trust for the Hedge Counterparties and the registered holders of
CapitalSource Commercial Loan Trust 2006-1 Notes, Class A, Class B, Class C,
Class D, Class E Notes and Class F Notes.” All funds in such Principal and
Interest Accounts not so invested shall be insured to the extent and the amount
permitted by the BIF or SAIF of the FDIC to the maximum extent provided by law.
The creation of any Principal and Interest Account shall be evidenced by a
letter agreement in the form of Exhibit E hereto. A copy of such letter
agreement shall be furnished to the Indenture Trustee, the Owner Trustee and,
upon request, any Securityholder or Hedge Counterparty. The Servicer may, upon
written notice to the Indenture Trustee, transfer any Principal and Interest
Account to a different Eligible Deposit Account.

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     (b) The Servicer and each Subservicer shall deposit without duplication
(within two Business Days of receipt thereof) in the applicable Principal and
Interest Account and retain therein the following amounts received by the
Servicer (and shall segregate and deposit Interest Collections into the Interest
Collections Account and Principal Collections into the Principal Collection
Account):
     (i) all Principal Collections accruing and received on or after the
applicable Cut – Off Date;
     (ii) all Interest Collections accruing and received on or after the
applicable Cut – Off Date (net of the Servicing Fee with respect to each Loan
and other servicing compensation payable to the Servicer as permitted herein)
and all origination and commitment fees;
     (iii) all Net Liquidation Proceeds (other than Insurance Proceeds covered
under clause (iv) below);
     (iv) all Insurance Proceeds (other than amounts to be applied to
restoration or repair of any related Collateral or amounts in excess of the
Outstanding Loan Balance of the related Loan to be released to the Obligor in
accordance with the Credit and Collection Policy);
     (v) all Released Mortgaged Property Proceeds and any other proceeds from
any other Collateral securing the Loans (other than amounts released to the
Obligor in accordance with the Credit and Collection Policy);
     (vi) any amounts paid in connection with the purchase or repurchase of any
Loan;
     (vii) any amount required to be deposited in the Principal and Interest
Account pursuant to Section 5.10 or Section 7.03; and
     (viii) the amount of any gains and interest incurred in connection with
investments in Permitted Investments.
     (c) The Servicer shall have no obligation to deposit into the Principal and
Interest Account any Retained Interest or Released Amounts.
     (d) Not later than the close of business on each Determination Date
immediately preceding a Payment Date, the Servicer will remit to the Principal
and Interest Account any Scheduled Payment Advance that the Servicer determines
to make.
     (e) Notwithstanding Section 7.03(b), if (i) the Servicer makes a deposit
into the Principal and Interest Account in respect of a Collection of a Loan in
the Loan Pool and such Collection was received by the Servicer in the form of a
check that is not honored for any reason, or (ii) the Servicer makes a mistake
with respect to the amount of any Collection and deposits an amount that is less
than or more than the actual amount of such Collection, the Servicer shall
appropriately adjust the amount subsequently deposited into the Principal and
Interest Account to

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reflect such dishonored check or mistake. Any Scheduled Payment in respect of
which a dishonored check is received shall be deemed not to have been paid.
     (f) The foregoing requirements for deposit in the Principal and Interest
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, Liquidation Expenses may not be
deposited by the Servicer in the Principal and Interest Account.
     (g) So long as no Servicer Default shall have occurred and be continuing,
and consistent with any requirements of the Code, the Principal and Interest
Accounts shall either be maintained with an Eligible Deposit Account as an
interest – bearing account meeting the requirements set forth in
Section 7.03(a), or the funds held therein may be invested by the Servicer (to
the extent practicable) in Permitted Investments, as directed in writing by the
Servicer, and, in each case, with a stated maturity (giving effect to any
applicable grace period) no later than the fourth Business Day immediately
preceding the Payment Date next following the Due Period in which the date of
investment occurs; provided, however, that Permitted Investments shall not
include any interest-only security, any security purchased at a price in excess
of 100% of par or any security whose repayment is subject to substantial
non-credit related risk as determined by the Servicer. All Permitted Investments
must be held by or registered in the name of “CapitalSource, as Servicer, in
trust for the Hedge Counterparties and the registered holders of CapitalSource
Commercial Loan Trust 2006-1 Notes.” Any Investment Interest Earnings on funds
held in the Principal and Interest Account shall be deemed part of the Interest
Collection Account and shall be deposited therein pursuant to Section 7.03 and
distributed on the next Payment Date pursuant to Section 7.05. The amount of any
losses incurred in connection with the investment of funds in the Principal and
Interest Account in Permitted Investments shall be deposited in the Principal
and Interest Account by the Servicer from its own funds immediately as realized
without reimbursement therefor.
     (h) The Servicer may (and, for the purposes of clause (ii) below, shall),
at any time upon one Business Day’s notice to the Indenture Trustee, make
withdrawals from the Principal and Interest Account for the following purposes:
     (i) to remit to the Trust Depositor, in connection with the transfer of a
Substitute Loan to the Issuer in place of a Prepaid Loan, an amount equal to the
Prepaid Loan Amount;
     (ii) to remit to the Indenture Trustee on each Determination Date
immediately preceding a Payment Date, for deposit in the Note Distribution
Account, the Interest Collections and Principal Collections received during the
immediately preceding Due Period less any amounts remitted to the Trust
Depositor pursuant to clause (i) above prior to such Determination Date;
     (iii) prior to a Servicer Default, and subject to Section 5.02(p), to
reimburse itself for any unreimbursed Servicing Advances to the extent deposited
in the Principal and Interest Account (and not netted from Scheduled Payments
received from the related Loans);

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     (iv) to withdraw any amount received from an Obligor that is recoverable
and sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court having competent jurisdiction;
     (v) to make investments in Permitted Investments;
     (vi) to withdraw any funds deposited in the Principal and Interest Account
that were not required or permitted to be deposited therein or were deposited
therein in error;
     (vii) prior to a Servicer Default, to pay itself certain additional
servicing compensation as permitted under Section 5.11(b) of the Agreement;
     (viii) prior to (A) a payment default on the related Loan (and in the case
of Asset Based Revolvers, a payment default shall mean any failure to make a
payment on the date such payment is due and such failure continues for more than
one calendar day), (B) a Servicer Default, (C) an Event of Default, or (D) an
Accelerated Amortization Event, with respect to Revolving Loans secured by
Collateral only, to advance to an Obligor in a given Due Period prior to the
Monthly Reconciliation Date an amount not to exceed the Principal Collections
received from such Obligor during that Due Period;
     (ix) to purchase Substitute Loans as contemplated by Section 2.04(a) to the
extent funds have been deposited by the Originator for such purpose pursuant to
Section 2.04(a)(i)(B); and
     (x) to clear and terminate the Principal and Interest Account upon the
termination of this Agreement.
     Section 7.04. Securityholder Distributions.
     (a) Each Securityholder as of the related Record Date shall be paid on the
next succeeding Payment Date by check mailed to such Securityholder at the
address for such Securityholder appearing on the Note Register or Certificate
Register or by wire transfer if such Securityholder provides written
instructions to the Indenture Trustee, or Owner Trustee, respectively, at least
ten days prior to such Payment Date, which instructions may be in the form of a
standing order.
     (b) The Indenture Trustee shall serve as the Paying Agent hereunder and
shall make the payments to the Securityholder required hereunder. The Indenture
Trustee hereby agrees that all amounts held by it for payment hereunder will be
held in trust for the benefit of the Securityholder.
     Section 7.05. Priority of Payments; Allocations and Distributions.
     (a) On each Determination Date prior to the occurrence of an Event of
Default, a Servicer Default or an Accelerated Amortization Event, (i) the
Indenture Trustee shall deposit into the Note Distribution Account all funds on
deposit in the Reserve Fund and (ii) the Servicer shall instruct the Indenture
Trustee in writing to withdraw, and on the related Payment Date the

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Indenture Trustee shall withdraw from the Note Distribution Account (A) the
Collections and (B) all amounts deposited therein from the Reserve Fund to make
the following payments. The payments listed below will be made only to the
extent there are sufficient amounts available on the Payment Date. Payments will
be made in the order of priority listed below. With respect to pro rata payments
of principal as described herein, payments shall be made pro rata based on the
respective original principal amounts of the Class of Notes with respect to
which such payments are made. If on any Payment Date the Outstanding Principal
Balance of any Class of Notes has been reduced to zero, any pro rata payments of
principal on such date shall be distributed pro rata to the Classes of Notes
which then remain outstanding based on the respective original principal amounts
of such classes of Notes.
     First, pro rata, based on the amounts owed to such Persons under this
clause First, to the Hedge Counterparties, any Net Trust Hedge Payments for the
current and any prior Payment Dates owing to the Hedge Counterparties under
Hedge Agreements (other than Hedge Breakage Costs), together with interest
accrued thereon;
     Second, pro rata, based on the amounts owed under this clause Second, any
amounts due and not paid by the Originator in respect of listing the Listed
Notes on the Irish Stock Exchange and any amounts owed to the Indenture Trustee,
the Backup Servicer and the Owner Trustee under the Transaction Documents for
fees and expenses, other than for fees, expenses and other amounts related to
indemnification; provided, however, that in no event shall the amounts payable
pursuant to this clause Second:
     (i) to the Indenture Trustee and the Backup Servicer, in the aggregate,
exceed $5,000 for any 12-month period (excluding amounts paid as part of the
monthly fees to be paid to the Indenture Trustee and the Backup Servicer);
     (ii) to the Owner Trustee, exceed $5,000 for any 12-month period (excluding
amounts paid as part of its fee);
     (iii) if a Successor Servicer is being appointed, to the Indenture Trustee
for costs and expenses associated with that appointment, exceed $100,000 in the
aggregate for any given servicing transfer; and
     (iv) in payment of amounts due in respect of listing the Listed Notes on
the Irish Stock Exchange, exceed $2,000 for any 12-month period;
     Third, to the Servicer, from Interest Collections received from the
specific Loans for which such Scheduled Payment Advances of interest were made,
and from Principal Collections received from the specific Loans for which such
Scheduled Payment Advances of principal were made, reimbursement for the amount
of such Scheduled Payment Advances relating to such Loans;
     Fourth, first, to S&P, an amount equal to any fees due to S&P and second,
to the Servicer, an amount equal to the Servicing Fee minus amounts paid to S&P
pursuant to this clause Fourth;

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     Fifth, to the Holders of the Class A Notes, the Class A Interest Amount for
the related Interest Accrual Period and any related unpaid Class A Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class A Interest Shortfall at the Note Interest Rate then applicable to the
Class A Notes;
     Sixth, to the Holders of the Class B Notes, the Class B Interest Amount for
the related Interest Accrual Period and any related unpaid Class B Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class B Interest Shortfall at the Note Interest Rate then applicable to the
Class B Notes;
     Seventh, to the Holders of the Class C Notes, the Class C Interest Amount
for the related Interest Accrual Period and any related unpaid Class C Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class C Interest Shortfall at the Note Interest Rate then applicable to the
Class C Notes;
     Eighth, to the Holders of the Class D Notes, the Class D Interest Amount
for the related Interest Accrual Period and any related unpaid Class D Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class D Interest Shortfall at the Note Interest Rate then applicable to the
Class D Notes;
     Ninth, to the Holders of the Class E Notes, the Class E Interest Amount for
the related Interest Accrual Period and any related unpaid Class E Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class E Interest Shortfall at the Note Interest Rate then applicable to the
Class E Notes;
     Tenth, to the Reserve Fund, an amount, if any, which when so deposited
causes the balance of the Reserve Fund to equal (i) three times the sum of the
Class A Interest Amount, the Class B Interest Amount, the Class C Interest
Amount , the Class D Interest Amount and the Class E Interest Amount due on the
current Payment Date;
     Eleventh, (i) on each Payment Date prior to the occurrence of any
Sequential Pay Event, to the Holders of the Notes as follows:

  (a)   if on such Payment Date no Principal Distributable Shortfall exists, to
the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the
Class D Notes, the Class E Notes and the Class F Note, pro rata, in an amount up
to the Total Principal Distributable; and     (b)   if on such Payment Date a
Principal Distributable Shortfall exists, first, to the Holders of the Class A
Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E
Notes, pro rata in an amount up to the Total Principal Distributable until each
such class of Offered Notes is paid in full, and second to the Class F Note in
an amount up to the Total Principal Distributable until the Class F Note is paid
in full;

     (ii) on each Payment Date on and after the occurrence of a Sequential Pay
Event (other than an Event of Default, a Servicer Default or an Accelerated
Amortization Event), unless, solely in the case of a Sequential Pay Event of the
type specified in clause

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(f) of the definition thereof, the Rating Agency Condition shall have been
satisfied with respect to the payment of principal of the Notes being made in
accordance with subclause (i)(a) of this clause Eleventh, sequentially to the
holders of Notes as follows:

  (a)   to the Holders of the Class A Notes until paid in full, in an amount up
to the Total Principal Distributable;     (b)   to the Holders of the Class B
Notes, the Class B Accrued Payable, if any;     (c)   to the Holders of the
Class B Notes until paid in full, in an amount up to the remaining Total
Principal Distributable after payments to the Class A Notes under this clause
Eleventh;     (d)   to the Holders of the Class C Notes, the Class C Accrued
Payable, if any;     (e)   to the Holders of the Class C Notes until paid in
full, in an amount up to the remaining Total Principal Distributable after
payments to the Class A Notes and the Class B Notes under this clause Eleventh;
    (f)   to the Holders of the Class D Notes, the Class D Accrued Payable, if
any;     (g)   to the Holders of the Class D Notes until paid in full, in an
amount up to the remaining Total Principal Distributable after payments to the
Class A Notes, the Class B Notes and the Class C Notes under this clause
Eleventh;     (h)   to the Holders of the Class E Notes, the Class E Accrued
Payable, if any; and     (i)   to the Holders of the Class E Notes until paid in
full, in an amount up to the remaining Total Principal Distributable after
payments to the Class A Notes, the Class B Notes, the Class C Notes and the
Class D Notes under this clause Eleventh;

     Twelfth, to the Reserve Fund, an amount, if any, which when so deposited
causes the balance of the Reserve Fund to equal the Required Reserve Amount, and
any amounts on deposit in the Reserve Fund in excess of the Required Reserve
Amount shall be distributed in accordance with the remaining clauses of the
Priority of Payments;
     Thirteenth, to the extent not paid pursuant to clause Second above, any
amounts due in respect of listing the Listed Notes on the Irish Stock Exchange;
     Fourteenth, to the Servicer, to the extent not reimbursed pursuant to
clause Third above, reimbursement for the amount of any Scheduled Payment
Advances relating to the Loans;
     Fifteenth, pro rata, based on the amounts owed to such Persons under this
clause Fifteenth, to the Hedge Counterparties, any unpaid Hedge Breakage Costs,
together with interest accrued thereon;

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     Sixteenth, pro rata, based on the amounts owed to such Persons under this
clause Sixteenth, to the Indenture Trustee, the Backup Servicer and the Owner
Trustee, to the extent not paid pursuant to clause Second due to the limitations
set forth therein, and to the Hedge Counterparties, amounts owed to such parties
for fees and expenses and other amounts, including such amounts related to
indemnification, and, to a Successor Servicer, any Additional Servicing Fee
payable to such Successor Servicer;
     Seventeenth, to the Holder of the Class F Note until paid in full, in an
amount up to the remaining Total Principal Distributable after payments to the
Offered Notes under clause Eleventh; and
     Eighteenth, to the Owner Trustee for payment to the Certificateholder, any
remaining amounts.
     (b) On each Determination Date on and after the occurrence of an Event of
Default, a Servicer Default or an Accelerated Amortization Event, the Servicer
shall instruct the Indenture Trustee in writing to withdraw, and on the Payment
Date the Indenture Trustee will follow the instructions to withdraw, the
Collections and all other funds available for distributions on deposit in the
Note Distribution Account, to the extent there are sufficient funds, to make the
following payments, in the order of priority listed below.
     First, pro rata, based on the amounts owed to such Persons under this
clause First, to the Hedge Counterparties, any Net Trust Hedge Payments for the
current and any prior Payment Dates owing to the Hedge Counterparties under
Hedge Agreements (other than Hedge Breakage Costs), together with interest
accrued thereon; provided, however, that on each Payment Date on and after the
occurrence of an Event of Default, Hedge Breakage Costs in an aggregate amount
not to exceed $500,000 shall be payable under this clause First;
     Second, pro rata, based on the amounts owed under this clause Second, any
amounts due and not paid by the Originator in respect of listing the Listed
Notes on the Irish Stock Exchange and any amounts owed to the Indenture Trustee,
the Backup Servicer and the Owner Trustee under the Transaction Documents for
fees and expenses, other than for fees, expenses and other amounts related to
indemnification; provided, however, that in no event shall the amounts payable
pursuant to this clause Second;
     (i) to the Indenture Trustee and the Backup Servicer, in the aggregate,
exceed $5,000 for any 12-month period (excluding amounts paid as part of the
monthly fees to be paid to the Indenture Trustee and the Backup Servicer);
     (ii) to the Owner Trustee, exceed $5,000 for any 12-month period (excluding
amounts paid as part of its fee);
     (iii) if a Successor Servicer is being appointed, to the Indenture Trustee
for costs and expenses associated with that appointment, exceed $100,000 in the
aggregate for any given servicing transfer; and
     (iv) in payment of amounts due in respect of listing the Listed Notes on
the Irish Stock Exchange, exceed $2,000 in any 12-month period;

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     Third, to the Servicer, from Interest Collections received from the
specific Loans for which such Scheduled Payment Advances of interest were made,
and from Principal Collections received from the specific Loans for which such
Scheduled Payment Advances of principal were made, reimbursement for the amount
of such Scheduled Payment Advances relating to such Loans;
     Fourth, first, to S&P, an amount equal to any fees due to S&P and second,
to the Servicer, an amount equal to the Servicing Fee minus amounts paid to S&P
pursuant to this Clause Fourth;
     Fifth, to the Holders of the Class A Notes, the Class A Interest Amount for
the related Interest Accrual Period and any related unpaid Class A Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class A Interest Shortfall at the Note Interest Rate then applicable to the
Class A Notes;
     Sixth, to the Holders of the Class B Notes, the Class B Interest Amount for
the related Interest Accrual Period any related unpaid Class B Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class B Interest Shortfall at the Note Interest Rate then applicable to the
Class B Notes;
     Seventh, to the Holders of the Class C Notes, the Class C Interest Amount
for the related Interest Accrual Period and any related unpaid Class C Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class C Interest Shortfall at the Note Interest Rate then applicable to the
Class C Notes;
     Eighth, to the Holders of the Class D Notes, the Class D Interest Amount
for the related Interest Accrual Period and any related unpaid Class D Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class D Interest Shortfall at the Note Interest Rate then applicable to the
Class D Notes;
     Ninth, to the Holders of the Class E Notes, the Class E Interest Amount for
the related Interest Accrual Period and any related unpaid Class E Interest
Shortfall with respect to prior Payment Dates, together with interest on any
Class E Interest Shortfall at the Note Interest Rate then applicable to the
Class E Notes;
     Tenth, sequentially to the Holders of the Notes as follows:

  (a)   to the Holders of the Class A Notes until the Outstanding Principal
Balance of the Class A Notes is reduced to zero;     (b)   to the Holders of the
Class B Notes, the Class B Accrued Payable, if any;     (c)   to the Holders of
the Class B Notes until the Outstanding Principal Balance of the Class B Notes
is reduced to zero;     (d)   to the Holders of the Class C Notes, the Class C
Accrued Payable, if any;

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  (e)   to the Holders of the Class C Notes until the Outstanding Principal
Balance of the Class C Notes is reduced to zero;     (f)   to the Holders of the
Class D Notes, the Class D Accrued Payable, if any;     (g)   to the Holders of
the Class D Notes until the Outstanding Principal Balance of the Class D Notes
is reduced to zero;     (h)   to the Holders of the Class E Notes, the Class E
Accrued Payable, if any; and     (i)   to the Holders of the Class E Notes until
the Outstanding Principal Balance of the Class E Notes is reduced to zero;

     Eleventh, to the Servicer, to the extent not reimbursed pursuant to clause
Third above, reimbursement for the amount of any Scheduled Payment Advances
relating to the Loans;
     Twelfth, pro rata, based on the amounts owed to such Persons under this
clause Twelfth, to the Hedge Counterparties, to the extent not paid pursuant to
clause First above, any unpaid Hedge Breakage Costs, together with interest
accrued thereon;
     Thirteenth, pro rata, based on the amounts owed to such Persons under this
clause Thirteenth, to the Indenture Trustee, the Backup Servicer and the Owner
Trustee, to the extent not paid pursuant to clause Second due to the limitations
set forth therein, and to the Hedge Counterparties, amounts owed to such parties
for fees and expenses and other amounts, including such amounts related to
indemnification, and, to a Successor Servicer for any Additional Servicing Fee
payable to such Successor Servicer;
     Fourteenth, to the extent not paid previously pursuant to clause Second
above, any amounts due in respect of listing the Listed Notes on the Irish Stock
Exchange;
     Fifteenth, to the Holder of the Class F Note until the Outstanding
Principal Balance of the Class F Note is reduced to zero; and
     Sixteenth, to the Owner Trustee for payment to the Certificateholder, any
remaining Collections.
     Prior to the Final Maturity Date, amounts to be applied in reduction of the
Outstanding Principal Balance of any Note will not be due and payable, although
the failure of the Trust Depositor or Servicer to remit any amounts available
for payment on the Notes will, after the applicable grace period, constitute an
Event of Default under the Indenture.
     Section 7.06. Determination of LIBOR.
     (a) The Indenture Trustee will determine the interest rate for each
Interest Accrual Period by determining the London interbank offered rate
(“LIBOR”) for deposits in U.S. Dollars for a period of one month (the “One —
Month Index Maturity”) which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on the day that is two London Banking Days preceding that

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Interest Accrual Period (“LIBOR Determination Date”). If such rate does not
appear on Telerate Page 3750 on the related LIBOR Determination Date, the rate
for that Interest Accrual Period will be determined as if the parties had
specified “USD — LIBOR — Reference Banks” as the applicable rate. “USD — LIBOR —
Reference Banks” means that the interest rate for an Interest Accrual Period
will be determined on the basis of the rates at which deposits in U.S. Dollars
are offered by the Reference Banks at approximately 11:00 a.m., London time, on
the related LIBOR Determination Date to prime banks in the London interbank
market for the One — Month Index Maturity commencing on the beginning of that
Interest Accrual Period and in a Representative Amount. The Indenture Trustee
will request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided,
the rate for that Interest Accrual Period will be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the rate for
that Interest Accrual Period will be the arithmetic mean of the rates quoted by
major banks in New York City, selected by the Indenture Trustee, at 11:00 a.m.
New York City time, on the beginning of that Interest Accrual Period for loans
in U.S. Dollars to leading European banks for the One — Month Index Maturity
commencing at the beginning of that Interest Accrual Period and in a
Representative Amount.
     (b) The establishment of LIBOR on the applicable London Banking Day by the
Indenture Trustee and the Indenture Trustee’s subsequent calculation of the
rates of interest applicable to the Notes for the related Payment Date shall, in
the absence of manifest error, be final and binding. Each such rate of interest
may be obtained by telephoning the Indenture Trustee at (612) 667 — 8058.
     Section 7.07. Monthly Reconciliation.
     (a) Except as set forth in Section 7.07(b), on each Business Day during
each Due Period that Principal Collections are received in the Principal
Collection Account with respect to any Loan in the Loan Pool, the Servicer will
determine the Outstanding Loan Balance and the principal amount of the portion
of such Loan not owned by the Issuer (if any) with respect to such Loan.
     (b) Prior to (i) a payment default on the related Loan (and in the case of
Asset Based Revolvers, a payment default shall mean any failure to make a
payment on the date such payment is due and such failure continues for more than
one calendar day), (ii) a Servicer Default, (iii) an Event of Default or (iv) an
Accelerated Amortization Event, on each Monthly Reconciliation Date, the
Servicer will determine the Outstanding Loan Balance and principal amount of the
portion of such Loan owned by the Originator, its Affiliate special purpose
entities under the Wareho use Facilities and any co-lenders under the related
facility (if any) with respect to each Revolving Loan secured by Collateral (but
specifically excluding any Revolving Loan that is not secured by any Collateral)
in the Loan Pool, and on and as of such date will determine the net effect of
the Principal Collections received from, and payments from the Principal
Collection Account representing new advances made to, the related Obligor during
such Due Period. Notwithstanding the foregoing, the Servicer will maintain the
underlying data of all Principal Collections received and payments or advances
made with respect to any Revolving Loan secured by Collateral from the Principal
Collection Account on each day during each Due Period, and shall make such
underlying data available pursuant to and in accordance with the provisions of
Section 9.03.

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ARTICLE 8.
SERVICER DEFAULT; SERVICER TRANSFER
     Section 8.01. Servicer Default.
“Servicer Default” means the occurrence of any of the following:
     (a) any failure by the Servicer to remit when due any payment required to
be made under the terms of this Agreement or the other Transaction Documents, it
being understood that the Servicer shall not be responsible for the failure of
either the Owner Trustee or the Indenture Trustee to remit funds that were
received by the Owner Trustee or the Indenture Trustee from the Servicer in
accordance with this Agreement or the other Transaction Documents; or
     (b) failure by the Servicer duly to observe or perform, in any material
respect, any other covenants, obligations or agreements of the Servicer set
forth in this Agreement or the other Transaction Documents, or any
representation or warranty of the Servicer made in this Agreement or the other
Transaction Documents or in any certificate or other writing delivered thereto
or in connection therewith proves to have been incorrect when made, which
failure or breach has a material adverse effect on the rights of the Noteholders
or the Hedge Counterparties and continues unremedied for a period of 30 days (if
such failure or breach can be cured) after the first to occur of (i) the date on
which written notice of such failure requiring the same to be remedied shall
have been given to a Responsible Officer of the Servicer by the Indenture
Trustee, or a Responsible Officer of the Servicer and the Indenture Trustee by
any Securityholder or Hedge Counterparty, and (ii) the date on which a
Responsible Officer of the Servicer receives actual knowledge of such failure or
breach; or
     (c) a decree or order of a court or agency or supervisory authority having
jurisdiction for the appointment of a conservator or receiver or liquidator in
any Insolvency Proceedings, or for the winding — up or liquidation of its
affairs, shall have been entered against the Servicer and such decree or order
shall have remained in force, undischarged or unstayed for a period of thirty
(30) days; or
     (d) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any Insolvency Proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer’s
property; or
     (e) the Servicer shall admit in writing its inability to pay its debts as
they become due, file a petition to take advantage of any applicable Insolvency
Laws, make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; or
     (f) without the consent of the Majority Noteholders or the Hedge
Counterparties, the Servicer agrees or consents to, or otherwise permits to
occur, any amendment, modification, change, supplement or rescission of or to
the Servicer or the Credit and Collection Policy, in whole or in part, in any
manner that would have a material adverse effect on the Loans; or

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     (g) failure by the Servicer to observe or perform the Credit and Collection
Policy regarding the servicing of the Loans in any manner that would have a
material adverse effect on the Loans.
     Section 8.02. Servicer Transfer.
     (a) If a Servicer Default has occurred and is continuing, the Majority
Noteholders may, by written notice (a “Termination Notice”) delivered to the
parties hereto and each of the Hedge Counterparties, terminate all (but not less
than all) of the Servicer’s management, administrative, servicing, custodial and
collection functions; provided, however, no Termination Notice shall be required
with respect to any Servicer Default described under Section 8.01(c),
Section 8.01(d) and Section 8.01(e).
     (b) Upon delivery of the notice required by Section 8.02(a) (or, if later,
on a date designated therein), and on the date that a Successor Servicer shall
have been appointed pursuant to Section 8.03 (such appointment being herein
called a “Servicer Transfer”), all rights, benefits, fees, indemnities,
authority and power of the Servicer under this Agreement, whether with respect
to the Loans, the Loan Files or otherwise, shall pass to and be vested in such
successor (the “Successor Servicer”) pursuant to and under this Section 8.02;
and, without limitation, the Successor Servicer is authorized and empowered to
execute and deliver on behalf of the Servicer, as attorney — in — fact or
otherwise, any and all documents and other instruments, and to do any and all
acts or things necessary or appropriate to effect the purposes of such notice of
termination. The Servicer agrees to cooperate with the Successor Servicer in
effecting the termination of the responsibilities and rights of the Servicer
hereunder, including, without limitation, the transfer to the Successor Servicer
for administration by it of all cash amounts which shall at the time be held by
the Servicer for deposit, or have been deposited by the Servicer, in the
Principal and Interest Account, or for its own account in connection with its
services hereafter or thereafter received with respect to the Loans. The
Servicer shall transfer to the Successor Servicer (i) all records held by the
Servicer relating to the Loans in such electronic form as the Successor Servicer
may reasonably request and (ii) any Loan Files in the Servicer’s possession. In
addition, the Servicer shall permit access to its premises (including all
computer records and programs) to the Successor Servicer or its designee, and
shall pay the reasonable transition expenses of the Successor Servicer. Upon a
Servicer Transfer, the Successor Servicer shall also be entitled to receive the
Servicing Fee for performing the obligations of the Servicer. Any indemnities
provided in this Agreement or the other Transaction Documents in favor of the
Servicer and any fees, costs, expenses, Servicing Advances or Scheduled Payment
Advances which have accrued and/or are unpaid to the Servicer shall survive the
resignation or termination of the Servicer.
     Section 8.03. Appointment of Successor Servicer; Reconveyance; Successor
Servicer to Act.
     (a) Upon delivery of the notice required by Section 8.02(a) (or, if later,
on a date designated therein), the Servicer shall continue to perform all
servicing functions under this Agreement until the date specified in the
Termination Notice or, if no such date is specified, until a date mutually
agreed by the Servicer and the Indenture Trustee. The Indenture Trustee shall as
promptly as possible after the giving of or receipt of a Termination Notice,
appoint a Successor

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Servicer, which shall be the Backup Servicer, in accordance with
Section 5.15(c), and named Successor Servicer shall accept its appointment by a
written assumption in a form acceptable to the Indenture Trustee and Owner
Trustee; provided that no appointment of a Successor Servicer or acceptance and
assumption by a proposed Successor Servicer shall be effective without the prior
satisfaction of the Rating Agency Condition. If within 60 days of delivery of a
Termination Notice a Successor Servicer is not appointed and the Servicer shall
have yet to cure the Servicer Default, then the Indenture Trustee shall offer
the Trust Depositor, and the Trust Depositor shall offer the Originator, the
right, without obligation, to accept retransfer of all the Loan Assets, and such
parties may accept retransfer of such Loan Assets in consideration of the Trust
Depositor’s delivery to the Principal and Interest Account on or prior to the
next upcoming Payment Date of a sum equal to the Aggregate Outstanding Principal
Balance of all Securities (other than the Certificates) then outstanding,
together with accrued and unpaid interest thereon through such date of deposit
and all other amounts due and owing to any Person under the Transaction
Documents, including amounts owing to each Hedge Counterparty, including Hedge
Breakage Costs, it being a condition precedent to such retransfer that all Hedge
Transactions then outstanding under any Hedge Agreements then in effect shall be
terminated and all amounts payable to the Hedge Counterparties, including Hedge
Breakage Costs, upon such termination shall be paid in full; provided that the
Indenture Trustee, if so directed by the Majority Noteholders in writing, need
not accept and effect such reconveyance in the absence of evidence (which may
include valuations of an investment bank or similar entity) reasonably
acceptable to such Indenture Trustee or Majority Noteholders that such
retransfer would not constitute a fraudulent conveyance of the Trust Depositor
or the Originator.
     (b) The Backup Servicer may, in its discretion, or shall, if it is unable
to so act or if the Majority Noteholders request in writing to the Backup
Servicer, appoint, or petition a court of competent jurisdiction to appoint, any
established servicing institution having a net worth of not less than
$50,000,000 as the Successor Servicer in the assumption of all or any part of
the responsibilities, duties or liabilities of the Servicer.
     (c) As compensation, any Successor Servicer (including, without limitation,
the Backup Servicer) so appointed shall be entitled to receive the Servicing
Fee, together with any other servicing compensation in the form of assumption
fees, late payment charges or otherwise as provided herein that accrued prior
thereto; including, without limitation, all reasonable costs (including
reasonable attorneys’ fees) incurred in connection with transferring the
servicing obligations under the Agreement and amending the Agreement to reflect
such transfer.
     (d) In the event the Backup Servicer is required to solicit bids, the
Backup Servicer shall solicit, by public announcement, bids from banks and
mortgage servicing institutions meeting the qualifications set forth above. Such
public announcement shall specify that the Successor Servicer shall be entitled
to the full amount of the Servicing Fee as servicing compensation, together with
the other servicing compensation in the form of assumption fees, late payment
charges or otherwise that accrued prior thereto. Within 30 days after any such
public announcement, the Backup Servicer shall negotiate and effect the sale,
transfer and assignment of the servicing rights and responsibilities hereunder
to the qualified party submitting the highest qualifying bid. The Backup
Servicer shall deduct from any sum received by the Backup Servicer from the
successor to the Servicer in respect of such sale, transfer and assignment all
costs and expenses of any public announcement and of any sale, transfer and

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assignment of the servicing rights and responsibilities hereunder and the amount
of any unreimbursed Servicing Advances. After such deductions, the remainder of
such sum shall be paid by the Backup Servicer to the Servicer at the time of
such sale, transfer and assignment to the Servicer’s successor. The Backup
Servicer and such successor shall take such action, consistent with the
Agreement, as shall be necessary to effectuate any such succession. Neither the
Backup Servicer nor any other Successor Servicer shall be held liable by reason
of any failure to make, or any delay in making, any distribution hereunder or
any portion thereof caused by (i) the failure of the Servicer to deliver, or any
delay in delivering, cash, documents or records to it, or (ii) restrictions
imposed by any regulatory authority having jurisdiction over the Servicer
hereunder. No appointment of a successor to the Servicer shall be effective
until written notice of such proposed appointment shall have been provided by
the Indenture Trustee to each Securityholder and each Hedge Counterparty and the
Backup Servicer shall have consented thereto. The Backup Servicer shall not
resign as Servicer until a Successor Servicer has been appointed and accepted
such appointment.
     (e) On or after a Servicer Transfer, the Successor Servicer shall be the
successor in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, and the terminated
Servicer shall be relieved of such responsibilities, duties and liabilities
arising after such Servicer Transfer; provided, however, that (i) the Successor
Servicer will not assume any obligations of the Servicer described in
Section 8.02 and (ii) the Successor Servicer shall not be liable for any acts or
omissions of the Servicer occurring prior to such Servicer Transfer or for any
breach by the Servicer of any of its representations and warranties contained
herein or in any related document or agreement. Notwithstanding anything else
herein to the contrary, in no event shall the Indenture Trustee or the Backup
Servicer be liable for any Servicing Fee or for any differential in the amount
of the servicing fee paid hereunder and the amount necessary to induce any
Successor Servicer to act as Successor Servicer under this Agreement and the
transactions set forth or provided for herein, including any Additional
Servicing Fee. The Owner Trustee, Securityholders and the Indenture Trustee and
such successor shall take such action, consistent with this Agreement, as shall
be necessary to effectuate any such succession. To the extent the terminated
Servicer has made Servicing Advances, it shall be entitled to reimbursement of
the same notwithstanding its termination hereunder, to the same extent as if it
had continued to service the Loans hereunder.
     Section 8.04. Notification to Securityholders and Hedge Counterparties.
     (a) Promptly following the occurrence of any Servicer Default, the Servicer
shall give written notice thereof to the Trustees, the Trust Depositor and each
Rating Agency at the addresses described in Section 13.04 hereof, to the
Noteholders and Certificateholder at their respective addresses appearing on the
Note Register and the Certificate Register, respectively, and to each Hedge
Counterparty at the address set forth in the register kept by the Issuer, as
provided under the Indenture.
     (b) Within 10 days following any termination of the Servicer or appointment
of a Successor Servicer pursuant to this ARTICLE 8, the Indenture Trustee shall
give written notice thereof to each Rating Agency and the Trust Depositor at the
addresses described in Section

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13.04 hereof, to the Noteholders and Certificateholder at their respective
addresses appearing on the Note Register and the Certificate Register,
respectively, and to each Hedge Counterparty at the address set forth for such
party in the register kept by the Issuer, as provided under the Indenture.
     Section 8.05. Effect of Transfer.
     (a) After a Servicer Transfer, the terminated Servicer shall have no
further obligations with respect to the management, administration, servicing,
custody or collection of the Loans and the Successor Servicer appointed pursuant
to Section 8.03 shall have all of such obligations, except that the terminated
Servicer will transmit or cause to be transmitted directly to the Successor
Servicer for its own account, promptly on receipt and in the same form in which
received, any amounts (properly endorsed where required for the Successor
Servicer to collect them) received as payments upon or otherwise in connection
with the Loans.
     (b) A Servicer Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the Servicer)
other than those relating to the management, administration, servicing, custody
or collection of the Loans.
     Section 8.06. Database File.
     Upon reasonable request by the Indenture Trustee or the Backup Servicer,
the Servicer will provide the Successor Servicer with a magnetic tape or
Microsoft Excel or similar spreadsheet file containing the database file for
each Loan (a) as of the Cut-Off Date, (b) the Subsequent Cut-Off Dates,
(c) thereafter, as of the last day of the preceding Due Period on the
Determination Date prior to a Servicer Default and (d) on and as of the Business
Day before the actual commencement of servicing functions by the Successor
Servicer following the occurrence of a Servicer Default.
     Section 8.07. Waiver of Defaults.
     The Majority Noteholders may, on behalf of all the Securityholders, and
subject to satisfying the Rating Agency Condition, waive any events permitting
removal of the Servicer pursuant to this ARTICLE 8; provided, however, that the
Majority Noteholders may not waive a default in making a required distribution
to the Hedge Counterparties without the consent of the Hedge Counterparties or
on a Note without the consent of each holder of such Note. Upon any waiver or
cure of a past default, such default shall cease to exist, and any Servicer
Default or Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver or cure shall
extend to any subsequent or other default or impair any right consequent thereto
except to the extent expressly so waived. No such waivers shall affect any Hedge
Transaction that has been terminated in accordance with its terms.
     Section 8.08. Responsibilities of the Successor Servicer.
     (a) The Successor Servicer will not be responsible for delays attributable
to the Servicer’s failure to deliver information, defects in the information
supplied by the Servicer or other circumstances beyond the control of the
Successor Servicer.

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     (b) The Successor Servicer will make arrangements with the Servicer for the
prompt and safe transfer of, and the Servicer shall provide to the Successor
Servicer, all necessary servicing files and records, including (as deemed
necessary by the Successor Servicer at such time): (i) microfiche loan
documentation, (ii) servicing system tapes, (iii) Loan payment history, (iv)
collections history and (v) the trial balances, as of the close of business on
the day immediately preceding conversion to the Successor Servicer, reflecting
all applicable Loan information. The current Servicer shall be obligated to pay
the costs associated with the transfer of the servicing files and records to the
Successor Servicer.
     (c) The Successor Servicer shall have no responsibility and shall not be in
default hereunder nor incur any liability for any failure, error, malfunction or
any delay in carrying out any of its duties under this Agreement if any such
failure or delay results from the Successor Servicer acting in accordance with
information prepared or supplied by a Person other than the Successor Servicer
or the failure of any such Person to prepare or provide such information. The
Successor Servicer shall have no responsibility, shall not be in default and
shall incur no liability (i) for any act or failure to act by any third party,
including the Servicer, the Trust Depositor or the Trustees or for any
inaccuracy or omission in a notice or communication received by the Successor
Servicer from any third party or (ii) which is due to or results from the
invalidity, unenforceability of any Loan with applicable law or the breach or
the inaccuracy of any representation or warranty made with respect to any Loan.
     (d) If the Indenture Trustee or any other Successor Servicer assumes the
role of Successor Servicer hereunder, such Successor Servicer shall be entitled
to the benefits of (and subject to the provisions of) Section 5.02 concerning
delegation of duties to subservicers.
     Section 8.09. Rating Agency Condition for Servicer Transfer.
     Notwithstanding the foregoing provisions relating to a Servicer Transfer,
no Servicer Transfer shall be effective hereunder unless prior written notice
thereof shall have been given to the Rating Agencies, and the Rating Agency
Condition shall have been satisfied with respect thereto.
     Section 8.10. Appointment of Successor Backup Servicer; Successor Backup
Servicer to Act.
     (a) The Backup Servicer may be removed, with or without cause, by the
Majority Noteholders or the Indenture Trustee, by notice given in writing to the
Backup Servicer (the “Backup Servicer Termination Notice”), a copy of which
shall be provided to S&P promptly after it is delivered to the Backup Servicer.
The Backup Servicer shall continue to perform all backup servicing functions
under this Agreement until the date specified in the Backup Servicer Termination
Notice or, if no such date is specified, until a date mutually agreed by the
Backup Servicer and the Indenture Trustee. The Indenture Trustee shall as
promptly as possible after the giving of a Backup Servicer Termination Notice,
to appoint a Successor Backup Servicer (the “Successor Backup Servicer”) and
such Successor Backup Servicer shall accept its appointment by a written
assumption in a form acceptable to the Indenture Trustee and Owner Trustee.

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     (b) In the event that a Successor Backup Servicer has not been appointed
and has not accepted its appointment at the time when the then Backup Servicer
has ceased to act as Backup Servicer, the Indenture Trustee shall petition a
court of competent jurisdiction to appoint any established financial institution
having a net worth of at least $50,000,000 and whose regular business includes
the backup servicing of loans similar to the Loans as the Successor Backup
Servicer hereunder and the Successor Backup Servicer shall be the successor in
all respects to the Backup Servicer in its capacity as Backup Servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Backup Servicer by the terms and provisions hereof, and the
terminated Backup Servicer shall be relieved of such responsibilities, duties
and liabilities arising after such backup servicer transfer (the “Backup
Servicer Transfer”); provided, however, that the Successor Backup Servicer shall
not be liable for any acts or omissions of the Backup Servicer occurring prior
to such Backup Servicer Transfer or for any breach by the Backup Servicer of any
of its representations and warranties contained herein or in any related
document or agreement. As compensation therefor, the Successor Backup Servicer
shall be entitled to receive reasonable compensation equal to the monthly Backup
Servicing Fee. Notwithstanding anything else herein to the contrary, in no event
shall the Indenture Trustee or the Servicer be liable for any Backup Servicing
Fee or for any differential in the amount of the backup servicing fee paid
hereunder and the amount necessary to induce any Successor Backup Servicer to
act as Backup Servicer under this Agreement and the transactions set forth or
provided for herein. The Owner Trustee, Securityholders and the Indenture
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
ARTICLE 9.
REPORTS
     Section 9.01. Monthly Reports.
     With respect to each Payment Date and the related Due Period, the Servicer
will provide to each Trustee, the Backup Servicer, each Rating Agency, each
Hedge Counterparty and the Initial Purchasers, on the related Determination
Date, a monthly statement (a “Monthly Report”) substantially in the form of
Exhibit H hereto with respect to the preceding Due Period.
     Section 9.02. Officer’s Certificate.
     Each Monthly Report delivered pursuant to Section 9.01 shall be accompanied
by a certificate of a Responsible Officer of the Servicer certifying the
accuracy of the Monthly Report and that no Servicer Default or event that with
notice or lapse of time or both would become a Servicer Default has occurred, or
if such event has occurred and is continuing, specifying the event and its
status.
     Section 9.03. Other Data; Obligor Financial Information.
     (a) The Servicer shall, upon the request of any Trustees, any Hedge
Counterparty, the Backup Servicer, or any Rating Agency, furnish such Trustee,
Hedge Counterparty, Rating

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Agency or the Backup Servicer, as the case may be, such underlying data used to
generate a Monthly Report as may be reasonably requested.
     (b) The Servicer will forward to the Indenture Trustee, the Owner Trustee,
each Hedge Counterparty, each Rating Agency and Citigroup (a) within 60 days
after each calendar quarter (except the fourth calendar quarter), commencing
with the quarter beginning April 1, 2006, the unaudited quarterly financial
statements of the Servicer and (b) within 90 days after each fiscal year of the
Servicer, commencing with the fiscal year ending December 31, 2006, the audited
annual financial statements of the Servicer, together with the related report of
the independent accountants to the Servicer. On the Payment Date following the
receipt of each such financial statements and report, the Indenture Trustee will
forward to each Noteholder of record a copy of such financial statements and
report.
     (c) The Servicer will forward to Moody’s and S&P within 30 days after
receipt by the Servicer, copies of all financial statements of Obligors then
received by the Servicer with respect to the prior fiscal year of each Obligor.
     (d) The Servicer will forward to Moody’s and S&P promptly upon request any
additional financial information as Moody’s and S&P shall reasonably request
with respect to an obligor as to which any Scheduled Payment is past due for at
least 10 days.
     (e) The Servicer will forward to Moody’s and S&P promptly upon any Loan
becoming a Delinquent Loan, and without any request therefor by Moody’s and S&P,
updated financial information with respect to the related Obligor.
     (f) The Servicer will provide to the Rating Agencies such financial
information, documents and other materials as the Rating Agencies shall
reasonably request in connection with any annual review and/or re-grading of the
Loans in the Loan Pool and the related Obligors which the Rating Agencies may
undertake.
     Section 9.04. Annual Report of Accountants.
     The Servicer shall cause a firm of nationally recognized independent
certified public accountants (the “Independent Accountants”), who may also
render other services to the Servicer or its Affiliates, to deliver to the
Indenture Trustee, the Owner Trustee, each Hedge Counterparty, the Backup
Servicer and each Rating Agency, on or before March 31 of each year, beginning
on March 31, 2007, a report addressed to the Board of Managers of the Servicer,
the Indenture Trustee and the Owner Trustee indicating that (a) with respect to
the 12- months ended the immediately preceding December 31, to the effect that
such Independent Accountants have audited the financial statements of the
Servicer, that as part of that audit, nothing came to the attention of such
Independent Accountants that causes them to believe that the Servicer was not in
compliance with any of the terms, covenants, provisions or conditions of the
relevant sections of this Agreement, insofar as they relate to accounting
matters, except for such exceptions as such Independent Accountants shall
believe to be immaterial and such other exceptions as shall be set forth in such
report, (b) in connection with the Independent Accountants’ audit of the
Servicer, there were no exceptions or errors in records related to Loans
serviced by the Servicer, except for such exceptions as such Independent
Accountants shall believe to be immaterial and

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such other exceptions as shall be set forth in such report, (c) the payment
testing for Asset Based Revolvers has been reviewed and such testing is in
compliance with the terms of the related Required Loan Documents and (d) the
Independent Accountants have performed certain procedures as agreed by the
Servicer, the Indenture Trustee and the Owner Trustee, whereby the Independent
Accountants will obtain the Monthly Report for 4-months with respect to the
12 months ended the immediately preceding December 31 and, for each Monthly
Report, the Independent Accountants will agree all amounts in the Monthly Report
to the Servicer’s computer, accounting and other reports, which will include in
such report any amounts which were not in agreement. In the event such firm of
Independent Accountants requires the Indenture Trustee to agree to the
procedures performed by such firm of Independent Accountants, the Servicer shall
direct the Indenture Trustee in writing to so agree; it being understood and
agreed that the Indenture Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and the Indenture
Trustee will not make any independent inquiry or investigation as to, and shall
have no obligation or liability in respect of, the sufficiency, validity or
correctness of such procedures. The Independent Accountants’ report shall also
indicate that the firm is independent of the Servicer within the meaning of the
Code of Professional Ethics of the American Institute of Certified Public
Accountants.
     Section 9.05. Annual Statement of Compliance from Servicer.
     The Servicer will deliver to the Trustees, S&P and each Hedge Counterparty
within 90 days of the end of each fiscal year commencing with the year ending
December 31, 2006, an Officer’s Certificate stating that (a) the Servicer has
fully complied in all material respects with certain provisions of the Agreement
relating to servicing of the Loans and payments on the Notes, (b) a review of
the activities of the Servicer during the prior calendar year and of its
performance under this Agreement was made under the supervision of the officer
signing such certificate and (c) to the best of such officer’s knowledge, based
on such review, the Servicer has fully performed or caused to be performed in
all material respects all its obligations under this Agreement for such year,
or, if there has been a default in the fulfillment in all material respects any
of its obligations, specifying each such default known to such officer and the
nature and status thereof and the steps being taken or necessary to be taken to
remedy such event. A copy of such certificate may be obtained by any
Securityholder by a request in writing to the Indenture Trustee, with respect to
any Noteholder, or the Owner Trustee, with respect to any Certificateholder.
     Section 9.06. Reports of Foreclosure and Abandonment of Mortgaged Property.
     Each year the Servicer shall make the reports of foreclosures and
abandonment of any Mortgaged Property as and to the extent required by § 6050J
of the Code. Promptly after filing any such report with the Code, the Servicer
shall provide the Indenture Trustee with an Officer’s Certificate certifying
that such report has been filed.
     Section 9.07. Notices.
     (a) The Servicer shall furnish to the Indenture Trustee, S&P and each Hedge
Counterparty (i) promptly, copies of any material and adverse notices
(including, without limitation, notices of defaults, breaches, potential
defaults or potential breaches) given to or

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received from its other lenders and (ii) immediately, notice of the occurrence
of any Event of Default or Servicer Default or of any situation which the
Servicer reasonably expects to develop into an Event of Default or Servicer
Default.
     (b) The Servicer also agrees to make available on a reasonable basis to any
Noteholder, S&P or Hedge Counterparty a knowledgeable financial or accounting
officer for the purpose of answering reasonable questions respecting recent
developments affecting the Servicer or the financial statements of the Servicer
and to permit any Noteholder or Hedge Counterparty upon reasonable advance
notice and subject to reasonable confidentiality restrictions to inspect the
Servicer’s servicing facilities during normal business hours and in a manner
that does not unreasonably interfere with the Servicer’s normal operations or
customer or employee relations for the purpose of satisfying such Noteholder or
Hedge Counterparty that the Servicer has the ability to service the Loans in
accordance with this Agreement.
     Section 9.08. Indenture Trustee’s Right to Examine Servicer Records and
Audit Operations.
     The Indenture Trustee and each Hedge Counterparty shall have the right upon
reasonable prior notice, during normal business hours, in a manner that does not
unreasonably interfere with the Servicer’s normal operations or customer or
employee relations, and as often as reasonably required, to examine and audit
any and all of the books, records or other information of the Servicer, whether
held by the Servicer or by another on behalf of the Servicer, which may be
relevant to the performance or observance by the Servicer of the terms,
covenants or conditions of this Agreement. No amounts payable in respect of the
foregoing shall be paid from the Loan Assets.
ARTICLE 10.
TERMINATION
     Section 10.01. Optional Repurchase of Offered Notes.
     (a) At any time during the Call Period, the Issuer shall have the option to
repurchase for the Repurchase Price the Offered Notes then outstanding, in whole
but not in part, at the direction of the Holder of the Class F Note, on any
Payment Date after the date on which the Holder of the Class F Note provides
notice of its election to cause the repurchase of the Notes pursuant to the
Indenture and the other Transaction Documents. To exercise such option, the
Holder of the Class F Note or the Issuer shall cause the Issuer to deposit in
the Note Distribution Account, on or prior to the Payment Date upon which such
Repurchase is to occur, an amount equal to the Repurchase Price and such
repurchase shall otherwise comply with the requirements of Section 10.01 of the
Indenture.
     (b) Notice of any repurchase pursuant to Section 10.01(a) shall be given by
the Holder of the Class F Note to the Issuer, the Indenture Trustee and the
Rating Agencies.
     (c) Following the satisfaction and discharge of the Indenture, the payment
in full of the principal of and interest on the Notes, the termination of all
Hedge Transactions then outstanding under all Hedge Agreements then in effect
and the payment in full of all amounts,

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including Hedge Breakage Costs, payable to such Hedge Counterparties upon such
terminations, the Certificateholders will succeed to the rights of the
Noteholders hereunder and the Owner Trustee will succeed to the rights of the
Indenture Trustee pursuant to this Agreement.
     Section 10.02. Termination.
     (a) This Agreement shall terminate upon notice to the Indenture Trustee of
the earlier of the following events: (i) the final payment on or the disposition
or other liquidation by the Issuer of the last Loan (including, without
limitation, in connection with a purchase by the Servicer of all outstanding
Loan Assets pursuant to Section 10.01) or the disposition of all property
acquired upon foreclosure or deed in lieu of foreclosure of any Loan and the
remittance of all funds due thereunder, or (ii) mutual written consent of the
Servicer, the Trust Depositor, Indenture Trustee, the Originator, all
Securityholders and all Hedge Counterparties.
     (b) Notice of any termination, specifying the Payment Date upon which the
Issuer will terminate and that the Noteholders shall surrender their Notes to
the Indenture Trustee for payment of the final distribution and cancellation
shall be given promptly by the Servicer by letter to all Noteholders mailed
during the month of such final distribution before the Determination Date in
such month, specifying (i) the Payment Date upon which final payment of the
Notes (or Repurchase Price, as applicable) will be made upon presentation and
surrender of Notes at the office of the Indenture Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Payment Date is not applicable, payments being made
only upon presentation and surrender of the Notes at the office of the Indenture
Trustee therein specified. The Servicer shall give such notice to the Indenture
Trustee and the Hedge Counterparties at the time such notice is given to
Noteholders.
ARTICLE 11.
REMEDIES UPON MISREPRESENTATION;
REPURCHASE OPTION
     Section 11.01. Repurchases of, or Substitution for, Loans for Breach of
Representations and Warranties.
     Upon a discovery by a Responsible Officer of the Servicer or any
subservicer, a Responsible Officer of the Owner Trustee or the Indenture Trustee
of a breach of a representation or warranty as set forth in Section 3.01,
Section 3.02, Section 3.03 or Section 3.04 or as made or deemed made in any
Addition Notice or any Subsequent Purchase Agreement relating to Substitute
Loans that materially and adversely affects the value of the Loans or the
interests of the Securityholders or the Hedge Counterparties therein or which
materially and adversely affects the interests of the Securityholders or the
Hedge Counterparties in the related Loan in the case of a representation or
warranty relating to a particular Loan (notwithstanding that such representation
or warranty was made to the Originator’s or the Trust Depositor’s best
knowledge) (an “Ineligible Loan”), the party discovering the breach shall give
prompt written notice to the other parties and to each Hedge Counterparty;
provided, that, the Indenture Trustee shall have no duty or obligation to
inquire or to investigate the breach of any of such representations or
warranties. Within 30 days of the earlier of its discovery or its receipt of

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notice of any breach of a representation or warranty, the Originator or Trust
Depositor shall (a) promptly cure such breach in all material respects,
(b) repurchase each such Ineligible Loan by depositing in the Principal and
Interest Account, within such 30 day period, an amount equal to the Transfer
Deposit Amount, or (c) remove such Loan from the Issuer and effect a
substitution for such affected Loan with a Substitute Loan in accordance with
the substitution requirements set forth in Section 2.04, not later than the date
a repurchase of such affected Loan would be required hereunder; provided,
however, that with respect to a breach of a representation or warranty relating
to the Loans in the aggregate and not to any particular Loan, the Originator may
select Loans (without adverse selection) to repurchase (or substitute for) such
that had such Loans not been included as part of the Loan Assets (and, in the
case of a substitution, had such Substitute Loan been included as part of the
Loan Assets instead of the selected Loan) there would have been no breach of
such representation or warranty.
     Section 11.02. Reassignment of Repurchased or Substituted Loans.
     Upon receipt by the Indenture Trustee for deposit in the Principal and
Interest Account of the amounts described in Section 11.01 (or upon the
Subsequent Transfer Date related to a Substitute Loan described in
Section 11.01), and upon receipt of an Officer’s Certificate of the Servicer in
the form attached hereto as Exhibit F, the Indenture Trustee shall assign to the
Trust Depositor and the Trust Depositor shall assign to the Originator all of
the Issuer’s (or Trust Depositor’s, as applicable) right, title and interest in
the repurchased or substituted Loan and related Loan Assets without recourse,
representation or warranty. Such reassigned Loan shall no longer thereafter be
included in any calculations of Outstanding Loan Balances required to be made
hereunder or otherwise be deemed a part of the Issuer.
ARTICLE 12.
INDEMNITIES
     Section 12.01. Indemnification by Servicer.
     The Servicer agrees to indemnify, defend and hold the Indenture Trustee (as
such and in its individual capacity), the Owner Trustee (as such and in its
individual capacity), the Backup Servicer, the Hedge Counterparties (as such and
in their individual capacities) and each Securityholder harmless from and
against any and all claims, losses, penalties, fines, forfeitures, reasonable
legal fees and related costs, judgments, and any other reasonable costs, fees
and expenses that such Person may sustain as a result of the Servicer’s fraud or
the failure of the Servicer to perform its duties and service the Loans in
compliance in all material respects with the terms of this Agreement, except to
the extent arising from the gross negligence, willful misconduct or fraud by the
Person claiming indemnification. The Servicer shall immediately notify the
Indenture Trustee and the Owner Trustee if a claim is made by any party with
respect to this Agreement, and the Servicer shall assume (with the consent of
the indemnified party) the defense and any settlement of any such claim and pay
all expenses in connection therewith, including reasonable counsel fees, and
promptly pay, discharge and satisfy any judgment or decree which may be entered
against the indemnified party in respect of such claim.

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     Section 12.02. Indemnification by Trust Depositor.
     The Trust Depositor agrees to indemnify, defend, and hold the Indenture
Trustee (as such and in its individual capacity), the Owner Trustee (as such and
in its individual capacity), the Hedge Counterparties (as such and in their
individual capacities) and each Securityholder harmless from and against any and
all claims, losses, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments, and any other reasonable costs, fees and expenses that
such Person may sustain as a result of the Trust Depositor’s fraud or the
failure of the Trust Depositor to perform its duties in compliance with the
terms of this Agreement and in the best interests of the Securityholders and
Hedge Counterparties, except to the extent arising from the gross negligence,
willful misconduct or fraud by the Person claiming indemnification. The Trust
Depositor shall immediately notify the Indenture Trustee and the Owner Trustee
if a claim is made by a third party with respect to this Agreement, and the
Trust Depositor shall assume (with the consent of the indemnified party) the
defense and any settlement of any such claim and pay all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the indemnified
party in respect of such claim.
ARTICLE 13.
MISCELLANEOUS
     Section 13.01. Amendment.
     (a) This Agreement may be amended from time to time by the parties hereto
by written agreement, with the prior written consent of the Indenture Trustee
but without notice to or consent of the Securityholders or Hedge Counterparties,
to cure any ambiguity, to correct or supplement any provisions herein, to comply
with any changes in the Code, or to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered to the
Indenture Trustee, adversely affect the interests of any Securityholders or
Hedge Counterparties; further, provided, that, no such amendment shall amend,
modify or vary any provision of Section 5.02(g) or reduce in any manner the
amount of, or delay the timing of, any amounts received on Loans which are
required to be distributed to the Hedge Counterparties without the consent of
the Hedge Counterparties or on any Note or Certificate without the consent of
the Holder of such Note or Certificate, or change the rights or obligations of
any other party hereto without the consent of such party.
     (b) This Agreement may be amended from time to time by the parties hereto
by written agreement, with the prior written consent of the Indenture Trustee
and with the consent of the Majority Noteholders and each Hedge Counterparty,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of the Notes or Certificates; provided,
however, that (i) no such amendment shall reduce in any manner the amount of, or
delay the timing of, any amounts which are required to be distributed on any
Note or Certificate without the consent of the Holder of such Note or
Certificate or reduce the percentage of Holders of any Note or Certificate which
are required to consent to any such amendment without the consent of

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the Holders of 100% of the Notes affected thereby, (ii) no amendment affecting
only one Class shall require the approval of the Holders of any other Class and
(iii) (A) the consent of each Hedge Counterparty shall be required for any
amendment, modification or variance to Section 5.02(g) and (B) as to all other
amendments, the consent of each Hedge Counterparty shall be required unless the
Issuer obtains an Opinion of Counsel stating that such amendment does not
adversely affect in any material respect the interests of the Hedge
Counterparties.
     (c) Prior to the execution of any such amendment or consent, the Indenture
Trustee shall furnish written notification of the substance of such amendment or
consent, together with a copy of such amendment or consent, to each Rating
Agency. Prior to the execution of any amendment pursuant to Section 13.01, the
Issuer shall obtain written confirmation from Moody’s and S&P that entry into
such amendment satisfies the Moody’s Rating Condition and the S&P Rating
Condition.
     (d) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish
written notification of the substance of such amendment or consent to each
Securityholder and each Hedge Counterparty. It shall not be necessary for the
consent of the Securityholders and the Hedge Counterparties pursuant to Section
13.01(b) to approve the particular form of any proposed amendment or consent,
but it shall be sufficient if such consent shall approve the substance thereof.
The manner of obtaining such consents and of evidencing the authorization by the
Securityholders and the Hedge Counterparties of the execution thereof shall be
subject to such reasonable requirements as the Owner Trustee or the Indenture
Trustee may prescribe.
     (e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and conclusively
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized and permitted by this Agreement. Such Trustee may, but shall not be
obligated to, enter into any such amendment that affects such Trustee’s own
rights, duties, indemnities or immunities under this Agreement or otherwise.
     Section 13.02. Protection of Title to Issuer.
     The Servicer shall execute and file such financing statements and cause to
be executed and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Issuer, the Securityholders, the Hedge Counterparties, the
Indenture Trustee and the Owner Trustee in the Loans and in the proceeds
thereof. The Servicer shall deliver (or cause to be delivered) to the Owner
Trustee and the Indenture Trustee file – stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.
     Section 13.03. Governing Law.
     (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER
THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

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     (b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT. EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 13.03(b).
     Section 13.04. Notices.
     All notices, demands, certificates, requests and communications hereunder
(“notices”) shall be in writing and shall be effective (a) upon receipt when
sent through the U.S. mails, registered or certified mail, return receipt
requested, postage prepaid, with such receipt to be effective the date of
delivery indicated on the return receipt, or (b) one Business Day after delivery
to an overnight courier, or (c) on the date personally delivered to an
Responsible Officer of the party to which sent, or (d) on the date transmitted
by legible telecopier transmission with confirmation of receipt, in all cases
addressed to the recipient as follows:

         
 
  (i)   if to the Servicer or the Originator:  
 
      CapitalSource Finance LLC
 
      4445 Willard Avenue
 
      12th Floor
 
      Chevy Chase, Maryland 20815
 
      Attention: Treasurer
 
      Facsimile No.: (301) 841 – 2375
 
       
 
  (ii)   if to the Trust Depositor:  
 
      CapitalSource Commercial Loan LLC, 2006-1
 
      4445 Willard Avenue
 
      12th Floor
 
      Chevy Chase, Maryland 20815
 
      Attention: Treasurer
 
      Facsimile No.: (301) 841 – 2375
 
       
 
  (iii)   if to the Indenture Trustee:
 
       
 
      Wells Fargo Bank, National Association
 
      Sixth Street and Marquette Avenue
 
      MAC N9311 – 161
 
      Minneapolis, Minnesota 55479
 
      Attention: Corporate Trust Services/Asset Backed Administration
 
      Facsimile No.: (612) 667 – 3464

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  (iv)   if to the Owner Trustee:
 
       
 
      Wilmington Trust Company
 
      1100 North Market Street
 
      Wilmington, Delaware 19801
 
      Attention: Corporate Trust Administration
 
      Facsimile No.: (302) 636-4140
 
       
 
      with a copy to:
 
       
 
      the Originator and the Servicer as provided in clause (i) above
 
       
 
  (v)   if to the Issuer:
 
       
 
      CapitalSource Commercial Loan Trust 2006-1
 
      c/o Wilmington Trust Company
 
      1100 North Market Street
 
      Wilmington, Delaware 19801
 
      Attention: Corporate Trust Administration
 
      Facsimile No.: (302) 427 – 4749
 
       
 
      with a copy to:
 
       
 
      the Originator and the Servicer as provided in clause (i) above
 
       
 
  (vi)   if to S&P:
 
       
 
      Standard and Poor’s Inc.
 
      55 Water Street
 
      41st Floor
 
      New York, New York 10041
 
      Attention: Surveillance: Asset – Backed Services
 
      Facsimile No.: (212) 438 – 2662
 
      Email: cdo_surveillance@sandp.com (all Monthly Reports)
 
       
 
  (vii)   if to Moody’s:
 
       
 
      Moody’s Investors Service
 
      99 Church Street
 
      New York, New York 10007
 
      Attention: CDO Monitoring Department
 
      Facsimile No.: (212) 553 – 0344
 
      Email: cdomonitoring@moodys.com
 
       
 
  (viii)   if to Fitch:
 
       
 
      Fitch, Inc.
 
      One State Street Plaza

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      New York, New York 10004
 
      Attention: CDO Surveillance
 
      Facsimile No.: (212) 514 – 6501
 
       
 
  (ix)   if to the Initial Purchasers:
 
       
 
      Citigroup Global Markets Inc.
 
      390 Greenwich Street
 
      New York, NY 10013
 
      Attention: Asset-Backed Finance
 
      Facsimile No.: (212) 723-8591;
 
       
 
  (x)   if to the Hedge Counterparties:

     At the address set forth for such party in the applicable Hedge Agreement.
     Each party hereto may, by notice given in accordance herewith to each of
the other parties hereto, designate any further or different address to which
subsequent notices shall be sent.
     Section 13.05. Severability of Provisions.
     If one or more of the covenants, agreements, provisions or terms of this
Agreement shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Agreement,
the Notes or Certificates or the rights of the Securityholders or the Hedge
Counterparties, and any such prohibition, invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such covenants,
agreements, provisions or terms in any other jurisdiction.
     Section 13.06. Third Party Beneficiaries.
     Except as otherwise specifically provided herein, the parties hereto hereby
manifest their intent that no third party (other than the Owner Trustee and the
Hedge Counterparties) shall be deemed a third party beneficiary of this
Agreement, and specifically that the Obligors are not third party beneficiaries
of this Agreement.
     Section 13.07. Counterparts.
     This Agreement may be executed by facsimile signature and in several
counterparts, each of which shall be an original and all of which shall together
constitute but one and the same instrument.
     Section 13.08. Headings.
     The headings of the various Articles and Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.

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     Section 13.09. No Bankruptcy Petition; Disclaimer.
     (a) Each of the Originator, the Indenture Trustee, the Servicer, the Issuer
acting through the Owner Trustee and each Holder (by acceptance of the
applicable Securities) covenants and agrees that, prior to the date that is one
year and one day (or, if longer, the then applicable preference period and one
day) after the payment in full of all amounts owing in respect of all
outstanding Classes of Notes rated by any Rating Agency, it will not institute
against the Trust Depositor or the Issuer, or join any other Person in
instituting against the Trust Depositor or the Issuer, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States; provided, however, that nothing herein shall prohibit the
Indenture Trustee from filing proofs of claim or otherwise participating in any
such proceedings instituted by any other Person. This Section 13.09 will survive
the termination of this Agreement.
     (b) The Issuer acknowledges and agrees that the Certificates represent a
beneficial interest in the Issuer and Loan Assets only and the Securities do not
represent an interest in any assets (other than the Loan Assets) of the Trust
Depositor (including by virtue of any deficiency claim in respect of obligations
not paid or otherwise satisfied from the Loan Assets and proceeds thereof). In
furtherance of and not in derogation of the foregoing, to the extent that the
Trust Depositor enters into other transactions as contemplated in Section 6.07,
the Issuer acknowledges and agrees that it shall have no right, title or
interest in or to any assets (or interests therein), other than the Loan Assets,
conveyed or purported to be conveyed (whether by way of a sale, capital
contribution or by the granting of a Lien) by the Trust Depositor to any Person
other than the Issuer (the “Other Assets”).
     (c) To the extent that notwithstanding the agreements contained in this
Section 13.09, the Issuer, any Securityholder or any Hedge Counterparty, either
(i) asserts an interest in or claim to, or benefit from any Other Assets,
whether asserted against or through the Trust Depositor or any other Person
owned by the Trust Depositor, or (ii) is deemed to have any interest, claim or
benefit in or from any Other Assets, whether by operation of law, legal process,
pursuant to applicable provisions of Insolvency Laws or otherwise (including
without limitation pursuant to Section 1111(b) of the federal Bankruptcy Code,
as amended) and whether deemed asserted against or through the Trust Depositor
or any other Person owned by the Trust Depositor, then the Issuer, each
Securityholder by accepting a Note or Certificate and each Hedge Counterparty
further acknowledges and agrees that any such interest, claim or benefit in or
from the Other Assets is and shall be expressly subordinated to the indefeasible
payment in full of all obligations and liabilities of the Trust Depositor that,
under the terms of the documents relating to the securitization of the Other
Assets, are entitled to be paid from, entitled to the benefits of, or otherwise
secured by such Other Assets (whether or not any such entitlement or security
interest is legally perfected or otherwise entitled to a priority of
distribution under applicable law, including Insolvency Laws, and whether
asserted against the Trust Depositor or any other Person owned by the Trust
Depositor) including, without limitation, the payment of post – petition
interest on such other obligations and liabilities. This subordination agreement
shall be deemed a subordination agreement within the meaning of Section 510(a)
of the Bankruptcy Code. Each of the Issuer, the Hedge Counterparties and the
Securityholders is deemed to have acknowledged and agreed that no adequate
remedy at law exists for a breach of this Section 13.09 and that the

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terms and provisions of this Section 13.09 may be enforced by an action for
specific performance.
     (d) The provisions of this Section 13.09 shall be for the third party
benefit of those entitled to rely thereon, including the Securityholders and the
Hedge Counterparties, and shall survive the termination of this Agreement.
     Section 13.10. Jurisdiction.
     Any legal action or proceeding with respect to this Agreement may be
brought in the courts of the United States for the Southern District of New
York, and by execution and delivery of this Agreement, each party hereto
consents, for itself and in respect of its property, to the
non - Exclusive jurisdiction of those courts. Each such party irrevocably waives
any objection, including any objection to the laying of venue or based on the
grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction in respect of this
Agreement or any document related hereto.
     Section 13.11. Tax Characterization.
     Notwithstanding the provisions of Section 2.01 and Section 2.04 hereof, the
Trust Depositor and Owner Trustee agree that, pursuant to Treasury Regulations
Section 301.7701 — 3(b)(1) and for federal income tax purposes, in the event
that the Certificates and the Class F Notes are owned by more than one Holder,
the Issuer will be treated as a partnership the partners of which are the
Certificateholders and the Holders of the Class F Notes, and in the event that
the Certificates and the Class F Notes are owned by a single Holder, the Issuer
will be treated as a division of such Holder.
     Section 13.12. Prohibited Transactions with Respect to the Issuer.
     The Originator shall not:
     (a) Provide credit to any Noteholder or Certificateholder for the purpose
of enabling such Noteholder or Certificateholder to purchase Notes or
Certificates, respectively;
     (b) Purchase any Notes or Certificates in an agency or trustee capacity; or
     (c) Except in its capacity as Servicer as provided in this Agreement, lend
any money to the Issuer.
     Section 13.13. Limitation of Liability of Owner Trustee.
     Wilmington Trust Company acts on behalf of the Issuer solely as Owner
Trustee hereunder and not in its individual capacity, and all Persons having any
claim against the Issuer by reason of the transactions contemplated by this
Agreement or any other Transaction Document shall look only to the Trust Estate
under the Trust Agreement for payment or satisfaction thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement,
any other Transaction Document or the Notes, or of any Loan or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or

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with respect to the legality, validity and enforceability of any Loan, or the
perfection and priority of any security interest created by any Loan in any
Collateral or the maintenance of any such perfection and priority, or for or
with respect to the sufficiency of the Trust Estate under the Trust Agreement or
its ability to generate the payments to be distributed to the Certificateholder
under the Trust Agreement or the Noteholders under the Indenture, including,
without limitation, the existence, condition and ownership of any Collateral;
the existence and enforceability of any insurance thereon; the existence and
contents of any Loan on any computer or other record thereof; the validity of
the assignment of any Loan to the Issuer or of any intervening assignment; the
completeness of any Loan; the performance or enforcement of any Loan; the
compliance by the Issuer, the Trust Depositor or the Servicer with any covenant,
agreement or other obligation or any warranty or representation made under any
Transaction Document or in any related document or the accuracy of any such
warranty or representation; or any action of the Indenture Trustee or the
Servicer or any subservicer taken in the name of the Owner Trustee or the
Issuer.
     Section 13.14. Allocation of Payments with Respect to Loans.
     (a) With respect to any Partially Funded Term Loans and any Revolving
Loans, the Issuer will own only the principal portion of such Loans outstanding
as of the applicable Cut—Off Date. Principal Collections received by the
Servicer on any Revolving Loans (other than Loans to SPE Obligors) will be
allocated first to the portion of such Loan owned by the Originator, its
Affiliate special purpose entities under the Warehouse Facilities and any
co-lenders under the facility, until the principal amount of such portion is
reduced to zero, and then to the portion owned by the Issuer; provided, however,
if (i) a payment default occurs with respect to any of the related Loans (and in
the case of Asset Based Revolvers, a payment default shall mean any failure to
make a payment on the date such payment is due and such failure continues for
more than one calendar day), (ii) the Originator has determined in its sole
discretion that an Obligor’s credit has deteriorated or the Originator has
determined in its sole discretion to reduce its commitment to an Obligor,
(iii) an Event of Default occurs, (iv) a Servicer Default occurs, or (v) an
Accelerated Amortization Event occurs, then Principal Collections received on
(A) the applicable Loan (in the case of clause (i) or (ii) above) or (B) all the
Revolving Loans (in the case of clauses (iii), (iv) and (v) above) will be
allocated between the portion owned by the Originator, its Affiliate special
purpose entities under the Warehouse Facilities (or any similar facilities
entered into after the date hereof) and any co-lenders under the facility,
portions owned by the Issuer in a Prior Term Transaction (or any similar future
transactions entered into after the date hereof) and the portion owned by the
Issuer pro rata based upon the outstanding principal amount of each such
portion. So long as there is no (1) payment default on the related Loans (and in
the case of Asset Based Revolvers, a payment default shall mean any failure to
make a payment on the date such payment is due and such failure continues for
more than one calendar day), (2) Servicer Default, (3) Event of Default, or
(4) Accelerated Amortization Event, the Servicer will determine the Outstanding
Loan Balance, the Retained Interest (if any) and the Principal Collections
received with respect to any Revolving Loan secured by Collateral on each
Monthly Reconciliation Date, and all other Loans (including Revolving Loans not
secured by any Collateral) and in all other cases on each Business Day, pursuant
to Section 7.07.
     (b) With respect to any Revolving Loan (other than Loans to SPE Obligors),
Interest Collections received by the Servicer on those Loans will be allocated
between the portion not

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owned by the Issuer and the portion owned by the Issuer on a pro rata basis
according to the outstanding principal amount of each such portion.
     (c) With respect to any Fully Funded Term Loans, Partially Funded Term
Loans and Loans to SPE Obligors, Collections received by the Servicer will be
allocated between the portion not owned by the Issuer (if any) and the portion
owned by the Issuer on a pro rata basis according to the outstanding principal
amount of such portion.
     Section 13.15. No Partnership.
     Nothing herein contained shall be deemed or construed to create a
co—partnership or joint venture between the parties hereto, and the services of
the Servicer shall be rendered as an independent contractor and not as agent for
the Securityholders or the Hedge Counterparties.
     Section 13.16. Successors and Assigns.
     This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
     Section 13.17. Acts of Holders.
     Except as otherwise specifically provided herein, whenever Holder action,
consent or approval is required under this Agreement, such action, consent or
approval shall be deemed to have been taken or given on behalf of, and shall be
binding upon, all Holders if the Majority Noteholders agree to take such action
or give such consent or approval.
     Section 13.18. Duration of Agreement.
     This Agreement shall continue in existence and effect until terminated as
herein provided.
     Section 13.19. Limited Recourse.
     (a) The obligations of the Trust Depositor, the Originator, the Issuer and
the Servicer under this Agreement are solely the obligations of the Trust
Depositor, the Originator, the Issuer and the Servicer. No recourse shall be had
for the payment of any amount owing by the Trust Depositor, the Originator, the
Issuer or the Servicer under this Agreement or for the payment by the Trust
Depositor, the Originator, the Issuer or the Servicer of any fee in respect
hereof or any other obligation or claim of or against the Trust Depositor, the
Originator, the Issuer or the Servicer arising out of or based upon this
Agreement, against any employee, officer, director, Affiliate, shareholder,
partner or member of the Trust Depositor, the Originator, the Issuer or the
Servicer or against the employee, officer, director, shareholder, partner or
member or any Affiliate of such Person. The provisions of this Section 13.19(a)
shall survive termination of this Agreement.
     (b) Notwithstanding any other provisions of this Agreement or any other
Transaction Document, the obligations of the Issuer under this Agreement and any
other Transaction Document are limited recourse obligations of the Issuer
payable solely from the Indenture

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Collateral in accordance with the Priority of Payments and, following
realization of the Indenture Collateral and distribution in accordance with the
Priority of Payments, any claims of the Noteholders, and any other parties to
any Transaction Document shall be extinguished.
     Section 13.20. Confidentiality.
     Each of the Issuer, the Trust Depositor, the Servicer (if other than
CapitalSource), the Indenture Trustee and the Backup Servicer shall maintain and
shall cause each of its employees, officers, agents and Affiliates to maintain
the confidentiality of material non-public information concerning CapitalSource
Inc. and its Public Securities or about the Obligors (to the extent
CapitalSource Inc. has advised such Person or such Person has actual knowledge
that the Loan Documents prohibit disclosure of such information with respect to
the Obligors) obtained by it or them in connection with the structuring,
negotiating, execution and performance of the transactions contemplated by the
Transaction Documents, except that each such party and its employees, officers,
agents and Affiliates may disclose such information to other parties to the
Transaction Documents and to its external accountants, attorneys, any potential
subservicers and the agents of such Persons provided such Persons expressly
agree to maintain the confidentiality of such information, and as required by an
applicable law or order of any judicial or administrative proceeding.
     Section 13.21. Non-Confidentiality of Tax Treatment.
     All parties hereto agree that each of them and each of their employees,
representatives, and other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to any of them relating to such tax treatment and tax structure.
“Tax treatment” and “tax structure” shall have the same meaning as such terms
have for purposes of Treasury Regulation Section 1.6011-4.
     Section 13.22. Alternative Exchange Listing.
     In the event that the Issuer is required to prepare financial statements in
accordance with the International Financial Reporting Standards as a condition
of the continued listing of the Offered Notes on the Irish Stock Exchange, the
Issuer may terminate the listing of the Offered Notes on such exchange and, if
such listing is so terminated, the Issuer shall use its best commercially
reasonable efforts to obtain the listing of the Offered Notes on an exchange
that is a member of the International Federation of Stock Exchanges and is
organized or incorporated in a state that is a member of the Organization for
Economic Cooperation and Development; provided that the Issuer shall not be
required to obtain such a replacement listing if maintaining such a listing
would require the Issuer to restate its accounts or would otherwise be unduly
burdensome or costly to the Issuer.
[Remainder of Page Intentionally Left Blank]

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

                  CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, as the Issuer    
 
           
 
  By:   WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee on behalf of the Issuer    
 
           
 
  By:   /s/ Emmett R. Harmon
 
   
 
  Name:   Emmett R. Harmon    
 
  Title:   Vice President    
 
                CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, as the Trust
Depositor    
 
           
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   
 
                CAPITALSOURCE FINANCE LLC, as the         Originator and as the
Servicer    
 
           
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   

[Signatures Continued on the Following Page]
CapitalSource Commercial Loan Trust 2006-1
Sale and Servicing Agreement

 

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

                  CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, as the Issuer    
 
           
 
  By:   WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee on behalf of the Issuer    
 
           
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   
 
                CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, as the Trust
Depositor    
 
           
 
  By:   /s/ Thomas A. Fink
 
   
 
  Name:   Thomas A. Fink    
 
  Title:   Chief Financial Officer & Senior Vice President Finance    
 
                CAPITALSOURCE FINANCE LLC, as the         Originator and as the
Servicer    
 
           
 
  By:   /s/ Thomas A. Fink
 
   
 
  Name:   Thomas A. Fink    
 
  Title:   Chief Financial Officer &    
 
      Senior Vice President Finance    

[Signatures Continued on the Following Page]
CapitalSource Commercial Loan Trust 2006-1
Sale and Servicing Agreement

 

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

 

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

                  WELLS FARGO BANK, NATIONAL ASSOCIATION, not in its individual
capacity but as the Indenture Trustee and as the Backup Servicer    
 
           
 
  By:   /s/ Joe Nardi
 
   
 
  Name:   Joe Nardi    
 
  Title:   Vice President    

CapitalSource Commercial Loan Trust 2006-1
Sale and Service Agreement

 

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ANNEX A
Weighted Average Life Matrix

                                      Weighted       Weighted       Weighted
Date   Average Life   Date   Average Life   Date   Average Life
4/20/2006
    3.00     8/20/2009     1.05     12/20/2012     0.73  
5/20/2006
    2.92     9/20/2009     0.97     1/20/2013     0.64  
6/20/2006
    2.83     10/20/2009     0.98     2/20/2013     0.55  
7/20/2006
    2.76     11/20/2009     0.89     3/20/2013     0.46  
8/20/2006
    2.67     12/20/2009     0.81     4/20/2013     0.37  
9/20/2006
    2.59     1/20/2010     0.79     5/20/2013     0.27  
10/20/2006
    2.52     2/20/2010     0.74     6/20/2013     0.18  
11/20/2006
    2.43     3/20/2010     0.73     7/20/2013     0.09  
12/20/2006
    2.34     4/20/2010     0.72     8/20/2013     0.00  
1/20/2007
    2.39     5/20/2010     0.63              
2/20/2007
    2.30     6/20/2010     0.58              
3/20/2007
    2.22     7/20/2010     0.58              
4/20/2007
    2.15     8/20/2010     0.53              
5/20/2007
    2.08     9/20/2010     0.53              
6/20/2007
    1.99     10/20/2010     0.59              
7/20/2007
    1.96     11/20/2010     0.59              
8/20/2007
    1.88     12/20/2010     0.54              
9/20/2007
    1.79     1/20/2011     0.50              
10/20/2007
    1.72     2/20/2011     0.41              
11/20/2007
    1.70     3/20/2011     0.31              
12/20/2007
    1.71     4/20/2011     0.26              
1/20/2008
    1.65     5/20/2011     0.20              
2/20/2008
    1.59     6/20/2011     0.21              
3/20/2008
    1.51     7/20/2011     0.43              
4/20/2008
    1.47     8/20/2011     0.46              
5/20/2008
    1.43     9/20/2011     0.37              
6/20/2008
    1.34     10/20/2011     1.27              
7/20/2008
    1.39     11/20/2011     1.18              
8/20/2008
    1.33     12/20/2011     1.09              
9/20/2008
    1.34     1/20/2012     0.99              
10/20/2008
    1.29     2/20/2012     0.90              
11/20/2008
    1.32     3/20/2012     0.81              
12/20/2008
    1.39     4/20/2012     0.72              
1/20/2009
    1.40     5/20/2012     0.63              
2/20/2009
    1.34     6/20/2012     0.54              
3/20/2009
    1.29     7/20/2012     0.44              
4/20/2009
    1.26     8/20/2012     1.10              
5/20/2009
    1.23     9/20/2012     1.01              
6/20/2009
    1.18     10/20/2012     0.92              
7/20/2009
    1.13     11/20/2012     0.82              

CapitalSource Commercial Loan Trust 2006-1
Sale and Servicing Agreement

 

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EXHIBITS, SCHEDULES AND APPENDIX TO
SALE AND SERVICING AGREEMENT

     
EXHIBIT A
  Form of Assignment
 
   
EXHIBIT B
  Form of Closing Certificate of Trust Depositor
 
   
EXHIBIT C
  Form of Closing Certificate of Servicer/Originator
 
   
EXHIBIT D
  Form of Liquidation Report
 
   
EXHIBIT E
  Principal and Interest Account Letter Agreement
 
   
EXHIBIT F
  [Reserved]
 
   
EXHIBIT G
  List of Loans
 
   
EXHIBIT H
  Form of Monthly Servicer Report
 
   
EXHIBIT I
  Form of Subsequent Transfer Agreement
 
   
EXHIBIT J
  Form of Subsequent Purchase Agreement
 
   
EXHIBIT K
  Credit and Collection Policy
 
   
EXHIBIT L — 1
  Form of Initial Certification
 
   
EXHIBIT L — 2
  Form of Final Certification
 
   
EXHIBIT M
  Form of Request for Release of Documents
 
   
EXHIBIT N
  Form of Addition Notice
 
   
SCHEDULE I
  Lock — Box Banks and Lock — Box Accounts
 
   
SCHEDULE II
  Obligor Lock — Box Banks and Obligor Lock — Box Accounts

 

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Exhibit A
to Sale and
Servicing Agreement
FORM OF ASSIGNMENT
April 11, 2006
Pursuant to and in accordance with the Sale and Servicing Agreement (such
agreement as amended, modified, waived, supplemented or restated from time to
time, the “Agreement”), dated as of April 11, 2006 made by and among
CapitalSource Commercial Loan LLC,
2006 — 1, as the Trust Depositor, CapitalSource Finance LLC, as the Originator
and as the Servicer, Wells Fargo Bank, Natio nal Association, as the Indenture
Trustee and as the Backup Servicer, and CapitalSource Commercial Loan Trust
2006-1, as the Issuer, the undersigned does hereby sell, transfer, assign, set
over and otherwise convey to the Issuer all of its right, title and interest in
and to the following, including but not limited to, all accounts, cash and
currency, chattel paper, electronic chattel paper, tangible chattel paper,
copyrights, copyright licenses, equipment, fixtures, general intangibles,
instruments, commercial tort claims, deposit accounts, inventory, investment
property, letter of credit rights, software, supporting obligations, accessions,
and other property consisting of, arising out of, or related to the following:
     (i) the Initial Loans, all payments paid in respect thereof and all monies
due, to become due or paid in respect thereof accruing on and after the Initial
Cut — Off Date and all Liquidation Proceeds and recoveries thereon, in each case
as they arise after the Initial Cut — Off Date, but not including the Retained
Interest or Interest Collections received prior to the Initial Cut-Off Date;
     (ii) all security interests and Liens and Collateral subject thereto from
time to time purporting to secure payment by Obligors under such Loans;
     (iii) all guaranties, indemnities and warranties, and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Loans;
     (iv) the Trust Accounts, each Obligor Lock — Box, each Obligor Lock — Box
Account, each Lock — Box, each Lock — Box Account, and together with all cash
and investments in each of the foregoing;
     (v) all collections and records (including computer records) with respect
to the foregoing;
     (vi) all documents relating to the Loan Files; and
     (vii) all income, payments, proceeds and other benefits of any and all of
the foregoing, but excluding the Retained Interest.
     Capitalized terms used herein have the meaning given such terms in the
Agreement.

 

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

 

     IN WITNESS WHEREOF, the undersigned has caused this assignment to be duly
executed as of the date written above.

                  CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1    
 
           
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   

 

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Exhibit B
to Sale and
Servicing Agreement
FORM OF CLOSING CERTIFICATE OF TRUST DEPOSITOR
April 11, 2006
     The undersigned certifies that he/she is the [___] of CapitalSource
Commercial Loan LLC, 2006-1, a Delaware limited liability company, as the Trust
Depositor, and that, in the capacity as such officer, is duly authorized to
execute and deliver this certificate on behalf of the Trust Depositor in
connection with the Sale and Servicing Agreement (such agreement as amended,
modified, waived, supplemented or restated from time to time, the “Agreement”),
dated as of April 11, 2006, by and among CapitalSource Commercial Loan Trust
2006-1, as the Issuer, the Trust Depositor, Wells Fargo Bank, National
Association, as the Indenture Trustee and as the Backup Servicer, and
CapitalSource Finance LLC, as the Originator and as the Servicer (all
capitalized terms used herein without definition have the respective meanings
set forth in the Agreement), and further certifies in his/her capacity as such
officer as follows (it being understood that these certifications are being
relied upon by, among others, the Initial Purchasers and their counsel in
connection with the Initial Purchasers’ undertakings in connection with the
subject transactions):
     1. Attached hereto as Annex I is a true and correct copy of the Certificate
of Formation of the Trust Depositor, together with all amendments thereto as in
effect on the date hereof, which documents were in full force and effect on
April 11, 2006, and at all times subsequent thereto, and no other amendments
have been authorized by the members or managers of the Trust Depositor.
     2. Attached hereto as Annex II is a Certificate of the Secretary of State
of the State of Delaware, dated [___] [___], 2006, stating that the Trust
Depositor is duly formed under the laws of the State of Delaware and is in good
standing, and a Certificate of the State of Maryland, dated [___] [___], 2006
stating that the Trust Depositor is in good standing as a foreign limited
liability company in the State of Maryland.
     3. Attached hereto as Annex III is a true and correct copy of the Limited
Liability Company Operating Agreement of the Trust Depositor, together with all
amendments thereto in effect on the date hereof, which documents were in full
force and effect on April 11, 2006, and at all times subsequent thereto.
     4. Attached hereto as Annex IV is a true and correct copy of resolutions
adopted pursuant to the unanimous written consent of the sole Member of the
Trust Depositor relating to the authorization, execution, delivery and
performance of (among other things) the Agreement and the other Transaction
Documents. Said resolutions have not been amended, modified, annulled or
revoked, and the same were in full force and effect on April 11, 2006, and at
all times subsequent thereto, and said resolutions are the only resolutions
relating to these matters which have been adopted by the Board of Managers.

 

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

 

     5. Each person named on Annex V attached hereto is a duly elected,
qualified and incumbent officer of the Trust Depositor and the signature set
forth opposite his or her name on such Annex V is that person’s genuine
signature.
     6. In connection with the sale of the Offered Notes, the Company has
prepared a preliminary confidential offering memorandum dated March 28, 2006
(including any exhibits thereto and all information incorporated therein by
reference, the “Preliminary Memorandum”), as supplemented by that preliminary
confidential offering memorandum dated March 30, 2006 (including any exhibits
thereto and all information incorporated therein by reference, the “Preliminary
Memorandum Supplement ”), and all information incorporated therein by reference
and a final confidential offering memorandum dated the date hereof (including
any exhibits, amendments or supplements thereto and all information incorporated
therein by reference, the “Final Memorandum”, and each of the Preliminary
Memorandum, the Preliminary Memorandum Supplement and the Final Memorandum, a
“Memorandum”) including a description of the terms of the Offered Notes, the
terms of the offering, and a description of the Trust. It is understood and
agreed that the opening of business on March 31, 2006 constitutes the time of
the contract of sale for each purchaser of the Notes offered to the investors
for purposes of the Securities and Exchange Commission’s Rule 159 (the “Time of
Sale”) and that (i) the Preliminary Memorandum Supplement, which supplements,
amends and restates the Preliminary Memorandum, and (ii) the term sheet setting
forth the pricing terms relating to each Class of Offered Notes, constitute all
of the information conveyed to investors as of the Time of Sale (the “Time of
Sale Information”).
     7. No event with respect to the Trust Depositor has occurred and is
continuing that would constitute an Event of Default or an event that, with
notice or the passage of time or both, would become an Event of Default as
defined in the Transaction Documents. To the best of my knowledge after
reasonable investigation, there has been no material adverse change in the
condition, financial or otherwise, or the earnings, business affairs or business
prospects, of the Trust Depositor, whether or not arising in the ordinary course
of business, since the respective dates as of which information is given in the
Time of Sale Information and except as set forth therein, or since the Time of
Sale.
     8. All federal, state and local taxes of the Trust Depositor due and owing
as of the date hereof have been paid or adequate provisions for the payment
thereof have been made.
     9. All representations and warranties of the Trust Depositor contained in
the Transaction Documents or any other related documents, or in any document,
certificate or financial or other statement delivered in connection therewith,
are true and correct in all material respects as of the date hereof.
     10. There is no action, investigation or proceeding pending or, to our
knowledge, threatened against the Trust Depositor before any court,
administrative agency or other tribunal (a) asserting the invalidity of the
Transaction Documents; (b) seeking to prevent the consummation of any of the
transactions contemplated by the Transaction Documents; or (c) which is likely
to materially and adversely affect the Trust Depositor’s performance of its
obligations under, or the validity or enforceability of, the Transaction
Documents.

 

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

 

     11. No consent, approval, authorization or order of, and no notice to or
filing with, any governmental agency or body or state or federal court is
required to be obtained by the Trust Depositor for the Trust Depositor’s
consummation of the transactions contemplated by the Transaction Documents,
except such as have been obtained or made and such as may be required under the
blue sky laws of any jurisdiction in connection with the issuance and sale of
the Securities.
     12. The Trust Depositor is not a party to any agreements or instruments
evidencing or governing indebtedness for money borrowed or by which the Trust
Depositor or its property is bound (other than the Transaction Documents).
     13. Neither (a) the Originator’s transfer and assignment of the Loan Assets
to the Trust Depositor; (b) the Trust Depositor’s concurrent transfer and
assignment of the Loan Assets to the Issuer; (c) the Trust Depositor’s execution
and delivery of the Transaction Documents; nor (d) the Trust Depositor’s
consummation of any of the transactions contemplated by the Transaction
Documents, will violate or conflict with any agreement or instrument to which
the Trust Depositor is a party or by which it or its property is otherwise
bound.
     14. In connection with the transfer of Loans and related Collateral
contemplated in the Transaction Documents, the Trust Depositor (a) has not made
such transfer with the actual intent to hinder, delay or defraud any creditor of
the Trust Depositor; (b) has not received less than a reasonably equivalent
value in exchange for such transfer; (c) is not on the date thereof insolvent
(nor will it become insolvent as a result thereof); (d) is not engaged (or about
to engage) in a business or transaction for which it has unreasonably small
capital; and (e) does not intend to incur or believe it will incur debts beyond
its ability to pay when matured.
     15. Each of the agreements and conditions of the Trust Depositor to be
performed on or before the Closing Date pursuant to the Transaction Documents
have been performed in all material respects.
     16. CapitalSource Finance LLC has not authorized for filing any UCC
financing statements listing the Loan Assets as collateral other than financing
statements (a) relating to the transactions contemplated in the Agreement or
(b) filed in connection with the Funding I Transaction, the Funding II
Transaction, the Funding III Transaction, the Funding IV Transaction, the
Funding V Transaction, the Acquisition Funding Transaction and the Prior Term
Transactions, which financing statements, with respect to the Loan Assets, shall
be released on or before the Closing Date.
     17. Since the respective dates as of which information is given in the Time
of Sale Information, and since the Time of Sale, there has been no material
adverse change in the condition, financial or otherwise, or in the earnings,
results of operations, business affairs or business prospects of the Company,
whether or not arising in the ordinary course of business, or in the ability of
the Company to perform its obligations under the Purchase Agreement or under the
Transaction Documents or in the characteristics of the Loans.
     18. Nothing has come to the attention of the Trust Depositor that would
lead it to believe that (i) the Time of Sale Information (when read in its
entirety), assuming conveyance of

 

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

 

the final terms of the offer and sale of the Offered Notes at or prior to the
Time of Sale, as of the Time of Sale, or (ii) the Final Memorandum and any
amendments thereof or supplement thereto and any Additional Offering Documents,
and any oral statements made by the Company to any prospective purchaser of the
Offered Notes, each as of their respective dates or date on which such statement
was made and as of the Closing Date, included an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements in each, in light of the circumstances under which they were made,
not misleading.
* * * *
     IN WITNESS WHEREOF, I have affixed my signature hereto as of the date
written above.

             
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   

 

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

 

ANNEX I
to Closing Certificate of
Trust Depositor
CERTIFICATE OF FORMATION

 

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

 

ANNEX II
to Closing Certificate of
Trust Depositor
GOOD STANDING CERTIFICATES

 

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

 

ANNEX III
to Closing Certificate of
Trust Depositor
OPERATING AGREEMENT

 

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

 

ANNEX IV
to Closing Certificate of
Trust Depositor
RESOLUTIONS

 

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

 

ANNEX V
to Closing Certificate of
Trust Depositor
INCUMBENCY OF SIGNING OFFICERS

          Name of Officer   Title   Signature
 
       
1. John K. Delaney
  President  
 
 
       
2. Thomas A. Fink
  Chief Financial Officer/Senior    
 
  Vice President  
 
 
       
3. Steven A. Museles
  Secretary/Executive Vice President  
 
 
       
4. James M. Mozingo
  Chief Accounting Officer  
 

 

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

 

Exhibit C
to Sale and
Servicing Agreement
FORM OF CLOSING CERTIFICATE OF SERVICER/ORIGINATOR
April 11, 2006
     The undersigned certifies that he/she is the ___ of CapitalSource Finance
LLC, a Delaware limited liability company (“CapitalSource”), and that, in the
capacity as such officer, he/she is duly authorized to execute and deliver this
certificate on behalf of CapitalSource, as the Originator and as the Servicer,
in connection with the Sale and Servicing Agreement (such agreement as amended,
modified, waived, supplemented or restated from time to time, the “Agreement”),
dated as of April 11, 2006, by and among CapitalSource, as the Originator and
the Servicer, CapitalSource Commercial Loan LLC, 2006-1, as the Trust Depositor,
Wells Fargo Bank, National Association, as the Indenture Trustee and as the
Backup Servicer, and CapitalSource Commercial Loan Trust 2006-1, as the Issuer
(all capitalized terms used herein without definition having the respective
meanings set forth in the Agreement) and further certifies in his/her capacity
as such officer as follows (it being understood that these certifications are
being relied upon by, among others, the Initial Purchasers and their counsel in
connection with the Initial Purchasers’ undertakings in connection with the
subject transactions ):
     1. Attached hereto as Annex I is a true and correct copy of the Certificate
of Formation of CapitalSource, together with all amendments thereto as in effect
on the date hereof, which documents were in full force and effect on April 11,
2006, and at all times subsequent thereto, and no other amendments have been
authorized by the Board of Managers or members of CapitalSource.
     2. Attached hereto as Annex II is a Certificate of the Secretary of State
of the State of Delaware, dated [___] [___], 2006, stating that CapitalSource is
duly formed under the laws of the State of Delaware and is in good standing, and
a Certificate of the State of Maryland, dated [___] [___], 2006, stating that
CapitalSource is in good standing as a foreign limited liability company in the
State of Maryland.
     3. Attached hereto as Annex III is a true and correct copy of the Limited
Liability Company Operating Agreement of CapitalSource, together with all
amendments thereto, which were in full force and effect on April 11, 2006, and
at all times subsequent thereto.
     4. Attached hereto as Annex IV is a true and correct copy of resolutions
adopted pursuant to the unanimous written consent of the Manager of
CapitalSource relating to the authorization, execution, delivery and performance
of (among other things) the Agreement and the other Transaction Documents. Said
resolutions have not been amended, modified, annulled or revoked, and the same
were in full force and effect on April 11, 2006, and at all times subsequent
thereto, and said resolutions are the only resolutions relating to these matters
which have been adopted by the Board of Managers.

 

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

 

     5. Each person named on Annex V attached hereto is a duly elected,
qualified and incumbent officer of CapitalSource and the signature set forth
opposite his or her name on such Annex V is that person’s genuine signature.
     6. In connection with the sale of the Offered Notes, the Company has
prepared a preliminary confidential offering memorandum dated March 28, 2006
(including any exhibits thereto and all information incorporated therein by
reference, the “Preliminary Memorandum”), as supplemented by that preliminary
confidential offering memorandum dated March 30, 2006 (including any exhibits
thereto and all information incorporated therein by reference, the “Preliminary
Memorandum Supplement”), and all information incorporated therein by reference
and a final confidential offering memorandum dated the date hereof (including
any exhibits, amendments or supplements thereto and all information incorporated
therein by reference, the “Final Memorandum”, and each of the Preliminary
Memorandum, the Preliminary Memorandum Supplement and the Final Memorandum, a
“Memorandum”) including a description of the terms of the Offered Notes, the
terms of the offering, and a description of the Trust. It is understood and
agreed that the opening of business on March 31, 2006 constitutes the time of
the contract of sale for each purchaser of the Notes offered to the investors
for purposes of the Securities and Exchange Commission’s Rule 159 (the “Time of
Sale”) and that (i) the Preliminary Memorandum Supplement, which supplements,
amends and restates the Preliminary Memorandum, and (ii) the term sheet setting
forth the pricing terms relating to each Class of Offered Notes, constitute all
of the information conveyed to investors as of the Time of Sale (the “Time of
Sale Information”).
     7. No event with respect to CapitalSource has occurred and is continuing
that would constitute an Event of Default or Servicer Default or an event that,
with notice or the passage time, would constitute an Event of Default or
Servicer Default as defined in the Transaction Documents. To the best of my
knowledge after reasonable investigation, there has been material adverse change
in the condition, financial or otherwise, or the earnings, business affairs or
business prospects, of CapitalSource, whether or not arising in the ordinary
course business, since the respective dates as of which information is given in
the Time of Sale Information except as set forth therein, or since the Time of
Sale.
     8. All federal, state and local taxes of CapitalSource due and owing as of
the date hereof have been paid or adequate provisions for the payment thereof
have been made.
     9. All representations and warranties of CapitalSource contained in the
Transaction Documents or in any document, certificate or financial or other
statement delivered in connection therewith are true and correct in all material
respects as of the date hereof.
     10. There is no action, investigation or proceeding pending or, to my
knowledge, threatened against CapitalSource before any court, administrative
agency or other tribunal (a) asserting the invalidity of any Transaction
Document to which CapitalSource is a party; (b) seeking to prevent the
consummation of any of the transactions contemplated by Transaction Documents;
or (c) that is likely to materially and adversely affect CapitalSource’s
performance of its obligations under, or the validity or enforceability of, the
Transaction Documents.

 

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

 

     11. No consent, approval, authorization or order of, and no notice to or
filing with, any governmental agency or body or state or federal court is
required to be obtained by CapitalSource for its consummation of the
transactions contemplated by the Transaction Documents, except such as have been
obtained or made and such as may be required under the blue sky laws of any
jurisdiction in connection with the issuance and sale of the Securities.
     12. Neither (a) CapitalSource’s transfer and assignment of the Loan Assets
to the Trust Depositor; (b) CapitalSource’s entering into of the Transaction
Documents; nor (c) CapitalSource’s consummation of any of the transactions
contemplated in the Transaction Documents, will violate or conflict with any
agreement or instrument to which CapitalSource is a party or by which it or its
property is otherwise bound.
     13. In connection with the transfers of Loans and related Collateral
contemplated in the Transaction Documents, CapitalSource (a) has not made such
transfer with actual intent to hinder, delay or defraud any creditor of
CapitalSource; (b) has not received less than a reasonably equivalent value in
exchange for such transfer; (c) is not on the date hereof insolvent (nor will
CapitalSource become insolvent as a result thereof); (d) is not engaged (or
about to engage) in a business or transaction for which it has unreasonably
small capital; and (e) does not intend to incur or believe it will incur debts
beyond its ability to pay when matured.
     14. Each of the agreements and conditions of CapitalSource to be performed
or satisfied on or before the Closing Date under the Transaction Documents has
been performed or satisfied in all material respects.
     15. CapitalSource has not authorized for filing any UCC financing
statements listing the Loan Assets as collateral other than financing statements
(a) relating to the transactions contemplated in the Agreement or (b) filed in
connection with the Funding I Transaction, the Funding II Transaction, the
Funding III Transaction, the Funding IV Transaction, the Funding V Transaction,
the Acquisition Funding Transaction and the Prior Term Transactions, which
financing statements, with respect to the Loan Assets, shall be released on or
before the Closing Date.
     16. Since the respective dates as of which information is given in the Time
of Sale Information, and since the Time of Sale, there has been no material
adverse change in the condition, financial or otherwise, or in the earnings,
results of operations, business affairs or business prospects of CapitalSource,
whether or not arising in the ordinary course of business, or in the ability of
CapitalSource to perform its obligations under the Purchase Agreement or under
the Transaction Documents or in the characteristics of the Loans.
     17. Nothing has come to the attention of CapitalSource that would lead it
to believe that (i) the Time of Sale Information (when read in its entirety),
assuming conveyance of the final terms of the offer and sale of the Offered
Notes at or prior to the Time of Sale, as of the Time of Sale, or (ii) the Final
Memorandum, and any amendments thereof or supplement thereto and any Additional
Offering Documents, and any oral statements made by the Company to any
prospective purchaser of the Offered Notes, each as of their respective dates or
date on which such statement was made and as of the Closing Date, included an
untrue statement of a material

 

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fact or omitted to state a material fact necessary in order to make the
statements in each, in light of the circumstances under which they were made,
not misleading.
* * * * * *
     IN WITNESS WHEREOF, I have affixed my signature hereto as of the date
written above.

             
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   

 

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

 

ANNEX I
to Closing Certificate of
Servicer/Originator
CERTIFICATE OF FORMATION

 

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

 

ANNEX II
to Closing Certificate of
Servicer/Originator
GOOD STANDING CERTIFICATES

 

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

 

ANNEX III
to Closing Certificate of
Servicer/Originator
OPERATING AGREEMENT

 

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

 

ANNEX IV
to Closing Certificate of
Servicer/Originator
RESOLUTIONS

 

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

 

ANNEX V
to Closing Certificate of
Servicer/Originator
INCUMBENCY OF SIGNING OFFICERS

          Name of Officer   Title   Signature
 
       
1. John K. Delaney
  Chief Executive Officer  
 
 
       
2. Thomas A. Fink
  Chief Financial Officer/Senior
Vice President  
 
 
       
3. Steven A. Museles
  Secretary/Executive Vice
President  
 
 
       
4. James M. Mozingo
  Chief Accounting Officer  
 

 

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

 

Exhibit D
to Sale and
Servicing Agreement
FORM OF LIQUIDATION REPORT
Obligor Name:
Account number:
Original Outstanding Loan Balance:

              1.  
Liquidation Proceeds
           
 
           
Principal Prepayment
      $                        
Property Sale Proceeds
                              
Insurance Proceeds
                              
Other (Itemize)
                              
 
        2.  
Servicing Advances
  $                            
 
        3.  
Net Liquidation Proceeds
  $                            
(Line 1 minus Line 2)
           
 
        4.  
Outstanding Loan Balance of the
  $                            
Loan on date of liquidation
           
 
        5.  
Realized (Loss) or Gain
  $                            
(Line 3 minus Line 4)
       

 

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Exhibit E
to Sale and
Servicing Agreement
PRINCIPAL AND INTEREST ACCOUNT LETTER AGREEMENT
April 11, 2006

     
To:
  Wells Fargo Bank, National Association (the “Depository”)
 
  6th and Marquette
 
  MAC N9311—161
 
  Minneapolis, Minnesota 55479

     As Servicer under the Sale and Servicing Agreement, dated as of April 11,
2006, relating to CapitalSource Commercial Loan Trust 2006-1 (such agreement as
amended, modified, waived, supplemented or restated from time to time, the
“Agreement”), we hereby authorize and request you to establish an account, as a
Principal and Interest Account pursuant to Section 7.03 of the Agreement, to be
designated as “CapitalSource Finance LLC, as the Servicer, in trust for the
Hedge Counterparties and the registered holders of CapitalSource Commercial Loan
Trust 2006-1 Class A, Class B, Class C, Class D, Class E and Class F Asset
Backed Notes.” All deposits in the account shall be subject to withdrawal
therefrom by order signed by the Servicer. You may refuse any deposit which
would result in violation of the requirement that the account be fully insured
as described below. This letter is submitted to you in duplicate. Please execute
and return one original to us.

                  CAPITALSOURCE FINANCE LLC    
 
           
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   

 

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     The undersigned, as Depository, hereby (i) certifies that the above
described account has been established under Account Number [___], at the office
of the depository indicated above, (ii) agrees to honor withdrawals on such
account as provided above and (iii) agrees that it will comply with the
instructions of the Servicer directing disposition of the funds in the above —
described account without the consent of CapitalSource Commercial Loan LLC,
2006-1 or CapitalSource Commercial Loan Trust 2006-1. The amounts deposited at
any time in the account will be insured to the maximum amount provided by
applicable law by the Federal Deposit Insurance Corporation.

                  WELLS FARGO BANK, NATIONAL ASSOCIATION    
 
           
 
  By:        
 
     
 
   
 
  Name:        
 
     
 
   
 
  Title:        
 
     
 
   

 

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

 

Exhibit F
to Sale and
Servicing Agreement
[Reserved]

 

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

 

Exhibit G
to Sale and
Servicing Agreement
LIST OF LOANS
SEE ATTACHED

 

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Business     Entity                     Entity     Loan     Borrower   Unit    
Pledged     State     Commitment     Pool Balance     1726       1313    
ABP CORPORATION
  CFB   CSII   MA     27,000,000.00       1,000,000.00     1726       1314    
ABP CORPORATION
  CFB   CSII   MA     10,000,000.00       5,000,000.00     1726       1353    
ABP CORPORATION
  CFB   FUND   MA     500,000.00       500,000.00     1726       1354    
ABP CORPORATION
  CFB   FUND   MA     235,295.00       235,295.00     669       1356    
ADVANCED NUTRACEUTICAL
  CFB   CSII   NY     3,500,000.00       3,500,000.00     1157       789    
AMERICAN PACIFIC ENTERPRISES, LLC
  CFB   CSII   OH     37,500,000.00       7,064,980.20     493       335    
INTERNATIONAL LEGWEAR GROUP, INC.
  CFB   CSII   NC     23,500,000.00       9,973,686.91     1353       969    
SSHS — IDEA SPHERE INC.
  HSB   CSII   NY     30,000,000.00       7,871,942.89     1450       1090    
ALPHA PACKAGING, INC.
  CFB   CSII   MO     22,500,000.00       7,750,000.00     1110       1034    
MATRIX SECURITY GROUP, INC.
  HSB   CSII   NJ     25,000,000.00       7,481,136.61     117       630    
AMERICAN PSYCH SYSTEMS
  CFB   CSII   MD     12,000,000.00       2,700,000.00     1144       778    
THE RENTAL STORE
  SFB   CSII   AZ     18,000,000.00       6,171,146.62     1464       1110    
ANESTHESIA HEALTHCARE PARTNERS, INC.
  HSB   CSII   GA     4,000,000.00       1,873,210.36     1713       1263    
ASPEN EARTHMOVING LLC
  HSB   CSII   CO     4,000,000.00       1,528,638.38     1713       1303    
ASPEN EARTHMOVING LLC
  HSB   CSII   CO     2,700,000.00       2,700,000.00     1713       1304    
ASPEN EARTHMOVING LLC
  HSB   CSII   CO     1,800,000.02       1,800,000.02     1713       1305    
ASPEN EARTHMOVING LLC
  HSB   CSII   CO     1,470,000.00       315,250.00     1591       1169    
AUTOMOTIVE MANAGEMENT SERVICES, INCORPORATED
  SFB   CSII   NC     5,000,000.00       2,014,661.04     1842       1465    
AVAIL MEDICAL PRODUCTS, INC.
  HSB   CSII   TX     10,000,000.00       10,000,000.00     1602       1181    
BENTEK CORPORATION
  CFB   CSII   CA     5,000,000.00       2,992,062.17     1602       1182    
BENTEK CORPORATION
  CFB   CSII   CA     4,183,333.28       4,183,333.28     1602       1183    
BENTEK CORPORATION
  CFB   CSII   CA     3,000,000.00       3,000,000.00     1908       1529    
CONSOLIDATED SERVICES GROUP, INC.
  HSB   CSII   PA     4,000,000.00       4,000,000.00     1714       1265    
BEST PRACTICES, INC.
  HSB   CSII   VA     10,000,000.00       6,209,560.71     1762       1369    
BIO-KINETIC CLINICAL APPLICATIONS, INC.
  HSB   CSII   MO     7,312,500.00       7,312,500.00     1762       1375    
BIO-KINETIC CLINICAL APPLICATIONS, INC.
  HSB   CSF   MO     3,500,000.00       130,000.00     1836       1457    
BURR WOLFF, L..P.
  CFB   CSII   TX     4,800,000.00       4,800,000.00     1613       1199    
C & S FINANCE ORLANDO
  SFB   CSII   FL     7,000,000.00       5,401,676.88     1325       938    
CASE LOGIC, INC
  CFB   CSII   CO     15,000,000.00       2,523,479.20     563       373    
CASH CORP.
  SFB   CSII   GA     12,000,000.00       9,767,023.59     895       565    
CASHCO FINANCIAL SERVICES, INC.
  SFB   CSII   OR     5,000,000.00       2,869,219.91     120       48    
HEALTHSTAR COMMUNICATIONS, INC.
  CFB   CSII   NJ     63,346,497.70       30,000,000.00     1732       1326    
CORNERSTONE HEALTHCARE GROUP HOLDING, INC.
  HSB   CSII   TX     2,965,677.97       2,965,677.97     1580       1160    
CHARTER AMERIFIT ACQUISITION CORPORATION
  CFB   CSII   CT     24,200,000.00       9,471,803.53     1609       1200    
CLINTRAK PHARMACEUTICAL SERVICES
  CFB   CSII   NY     8,700,000.00       3,262,570.47     1607       1192    
CODEL ENTRY SYSTEMS, INC.
  CFB   CSII   WA     2,603,127.18       2,603,127.18  

Page 1 of 4

 

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Business     Entity                     Entity     Loan     Borrower   Unit    
Pledged     State     Commitment     Pool Balance     1607       1193    
CODEL ENTRY SYSTEMS, INC.
  CFB   CSII   WA     2,000,000.00       2,000,000.00     573       379    
CODY CLIFF CO.
  SFB   CSII   TX     3,000,000.00       2,293,138.19     1128       722    
CONSO INTERNATIONAL CORPORATION
  CFB   CSII   NJ     4,000,000.00       2,113,995.79     1324       935    
SECOR INTERNATIONAL INCORPORATED
  CFB   CSII   WA     13,000,000.00       5,985,296.29     1582       1500    
DEVCON SECURITY HOLDINGS, INC.
  HSB   CSII   FL     70,000,000.00       30,000,000.00     1763       1371    
EQUIBRAND HOLDING CORPORATION
  CFB   CSII   TX     7,594,224.30       7,594,224.30     1328       944    
MONDRIAN INVESTMENT PARTNERS
  CFB   CSII   IT     53,785,000.00       5,378,500.00     1112       711    
CORRPRO COMPANIES, INC.
  CFB   CSII   OH     4,000,000.00       97,089.43     1641       1236    
COUNTRY VILLA SERVICE CORPORATION
  HSB   CSII   CA     10,000,000.00       6,841,285.91     1485       1141    
CPC ASSOCIATES, INC.
  CFB   CSII   PA     6,093,750.00       6,093,750.00     1815       1428    
DC SAFETY SALES CO., INC.
  CFB   CSV   NY     3,000,000.00       500,000.00     1815       1429    
DC SAFETY SALES CO., INC.
  CFB   CSII   NY     7,800,000.00       7,800,000.00     1763       1372    
EQUIBRAND HOLDING CORPORATION
  CFB   CSII   TX     2,319,968.68       2,319,968.68     1883       1509    
EASTERN CAROLINA AUTO FINANCE CO., LLC
  SFB   CSII   NC     10,000,000.00       3,316,868.67     1492       1147    
EEC-CEC HOLDING LLC
  CFB   CSV   AL     13,000,000.00       1,715,303.93     1492       1148    
EEC-CEC HOLDING LLC
  CFB   CSII   AL     6,375,000.00       6,375,000.00     1750       1347    
EINSTRUCTION
  CFB   CSII   TX     10,968,750.00       10,968,750.00     437       304    
ENDURACARE, LLC
  HSB   CSII   NV     15,000,000.00       12,854,205.76     437       305    
ENDURACARE, LLC
  HSB   CSII   NV     3,056,721.98       3,056,721.98     971       622    
FIRST BROADCASTING CAPITAL PARTNERS
  CFB   CSII   TX     27,000,000.00       6,148,745.38     1794       1407    
GLADSON , LLC
  CFB   CSII   IL     12,626,250.00       12,626,250.00     1334       948    
FIREARMS TRAINING SYSTEMS, INC.
  CFB   CSII   GA     12,000,000.00       3,931,534.21     1450       1091    
ALPHA PACKAGING, INC.
  CFB   CSII   MO     17,235,000.00       4,847,343.76     1833       1453    
FLIPCHIP INTERNATIONAL, LLC
  CFB   CSII   AZ     6,000,000.00       6,000,000.00     1746       1342    
FPL FOOD LLC
  HSB   CSII   GA     15,000,000.00       4,299,850.65     1723       1321    
GAMEDAY MEDIA, INC,
  CFB   CSII   TN     4,000,000.00       4,000,000.00     1378       987    
GENEZEN HEALTHCARE, INC.
  HSB   CSII   TX     5,000,000.00       2,725,469.71     1063       1266    
INSTALLED BUILDING PRODUCTS
  CFB   CSII   OH     3,133,928.57       3,133,928.57     628       404    
SOUTHERN AUTOMOTIVE FINANCE
  SFB   CSII   FL     48,000,000.00       4,771,770.66     1914       1535    
GREYSTONE BUSINESS CREDIT II , LLC
  HSB   CSII   NY     50,000,000.00       3,661,563.15     1386       995    
CFHS HOLDINGS, INC.
  HSB   CSII   CA     29,100,000.00       29,100,000.00     1478       1132    
GTS HOLDINGS, INC.
  CFB   CSII   NJ     9,291,666.70       9,291,666.70     1478       1133    
GTS HOLDINGS, INC.
  CFB   CSII   NJ     7,500,000.00       7,500,000.00     876       560    
HAVEN HEALTH CENTER — NEW ENGLAND
  HSB   CSII   CT     5,500,000.00       3,253,497.74     946       597    
HAVEN HEALTHCARE CENTER — OMEGA
  HSB   CSII   CT     8,000,000.00       3,842,419.07     1263       889    
HEALTHCARE UNIFORM COMPANY, INC.
  CFB   CSII   MO     9,000,000.00       894,591.14     1263       1010    
HEALTHCARE UNIFORM COMPANY, INC.
  CFB   CSF   MO     270,000.00       270,000.00  

Page 2 of 4

 

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Business     Entity                     Entity     Loan     Borrower   Unit    
Pledged     State     Commitment     Pool Balance     1400       1019    
SAVA SENIOR CARE, INC.
  HSB   CSII   GA     150,000,000.00       25,000,000.00     1123       1383    
INTERFACE SECURITY SYSTEMS
  HSB   CSII   MO     75,000,000.00       30,000,000.00     1826       1444    
ITS ACQUISITION, INC
  CFB   FUND   GA     10,000,000.00       1,714,500.00     1447       1083    
K2 INDUSTRIAL
  HSB   CSII   IN     15,000,000.00       4,704,625.79     1826       1445    
ITS ACQUISITION, INC
  CFB   FUND   GA     36,075,000.00       3,894,225.00     1826       1446    
ITS ACQUISITION, INC
  CFB   CSII   GA     17,000,000.00       1,500,000.00     1838       1460    
LEVTRAN ENTERPRISES DBA DOWNTOWN LOCKER ROOM
  CFB   FUND   MD     9,500,000.00       4,750,000.00     1736       1338    
JONES RADIO HOLDINGS
  CFB   CSII   CO     7,000,000.00       7,000,000.00     239       158    
LIGHTHOUSE FINANCIAL GROUP INC
  SFB   CSII   FL     10,000,000.00       4,635,784.75     1447       1213    
K2 INDUSTRIAL
  HSB   CSII   IN     3,439,172.64       3,439,172.64     1838       1459    
LEVTRAN ENTERPRISES DBA DOWNTOWN LOCKER ROOM
  CFB   FUND   MD     10,000,000.00       2,909,274.06     1838       1461    
LEVTRAN ENTERPRISES DBA DOWNTOWN LOCKER ROOM
  CFB   CSII   MD     12,000,000.00       6,000,000.00     1624       1218    
SONITROL CORPORATION
  HSB   CSII   PA     3,980,000.00       3,980,000.00     470       961    
LIFE GENERATIONS HEALTHCARE, INC.
  HSB   CSII   CA     3,635,668.97       3,635,668.97     1011       649    
AMERICAN HOSPICE MANAGEMENT HOLDINGS, LLC
  HSB   CSII   FL     20,323,750.00       4,585,490.71     1011       651    
AMERICAN HOSPICE MANAGEMENT HOLDINGS, LLC
  HSB   CSII   FL     10,000,000.00       3,796,844.25     1252       881    
MCNEIL TECHNOLOGIES, INC.
  CFB   CSII   VA     18,000,000.00       2,582,933.10     1021       658    
STANTON INTERNATIONAL, INC.
  CFB   CSII   OR     8,000,000.00       3,768,663.41     923       584    
NEW ALBANY SURGICAL HOSPITAL, LLC
  HSB   CSII   TN     10,500,000.00       3,548,138.81     364       1412    
MULTIVEND, LLC
  CFB   CSII   NY     4,000,000.00       4,000,000.00     1146       777    
NATIONSHEALTH
  HSB   CSIII   FL     10,000,000.00       2,410,763.99     1034       669    
NAVIX DIAGNOSTIX, INC
  HSB   CSII   MA     4,000,000.00       2,283,272.66     1034       1388    
NAVIX DIAGNOSTIX, INC
  HSB   CSII   MA     2,146,666.68       2,146,666.68     1128       725    
CONSO INTERNATIONAL CORPORATION
  CFB   CSII   NJ     13,025,000.00       2,982,558.15     1761       1365    
OBLIO TELECOM, INC.
  HSB   CSF   TX     15,000,000.00       3,846,012.13     1761       1366    
OBLIO TELECOM, INC.
  HSB   CSII   TX     4,166,666.68       4,166,666.68     1761       1367    
OBLIO TELECOM, INC.
  HSB   CSV   TX     5,333,333.32       5,333,333.32     867       555    
OVERTON’S, INC
  CFB   CSII   NC     10,000,000.00       3,983,843.18     377       269    
GOLDCAR LENDING, INC.
  SFB   CSII   GA     5,000,000.00       2,979,236.80     1881       1523    
RCR PLUMBING, INC
  HSB   CSII   CA     4,916,666.67       4,916,666.67     1730       1322    
SALUS — HUDSON CROSSING SURGERY CENTER
  HSB   CSII   NJ     4,000,000.00       2,411,551.90     1728       1317    
SALUS — SHORT HILLS SURGERY CENTER
  HSB   CSII   NJ     7,000,000.00       5,011,968.87     1786       1396    
STRATEGIC FINANCIAL SOLUTIONS LLC
  CFB   CSII   NV     31,000,000.00       30,000,000.00     364       261    
MULTIVEND, LLC
  CFB   CSII   NY     3,733,333.36       2,722,222.15     1633       1230    
SELECT MANAGEMENT RESOURCES
  SFB   CSII   GA     40,000,000.00       10,332,789.49     1579       1156    
SETECH, INC.
  HSB   CSII   TN     95,000,000.00       2,091,013.95     1599       1179    
SILVERLEAF RESORTS, INC.
  SFB   CSII   TX     50,000,000.00       9,545,679.42  

Page 3 of 4

 

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Business     Entity                     Entity     Loan     Borrower   Unit    
Pledged     State     Commitment     Pool Balance     1620       1212    
TMP DIRECTIONAL MARKETING, LLC
  CFB   CSII   NY     14,500,000.00       14,500,000.00     1246       1232    
TROVER SOLUTIONS, INC.
  HSB   CSII   KY     39,200,000.00       24,500,000.00     1424       1043    
BERGENSONS PROPERTY SERVICES, INC.
  CFB   CSII   CA     3,500,000.00       2,694,941.48     1178       809    
PREMIER SALONS, INC
  CFB   FUND   IT     4,000,000.00       1,883,035.52     1922       1545    
SSHS — METALDYNE CORPORATION
  HSB   CSII   MI     10,000,000.00       5,000,000.00     1112       710    
CORRPRO COMPANIES, INC.
  CFB   CSII   OH     15,500,000.00       1,793,248.93     1703       1467    
STP — BRIGHTEN (CHATEAU REALTY)
  HSB   CSII   PA     4,250,000.00       3,366,987.32     1478       1131    
GTS HOLDINGS, INC.
  CFB   CSII   NJ     9,000,000.00       2,628,594.69     1465       1111    
SUPPLEMENT SCIENCES, INC.
  CFB   CSII   WA     5,846,135.00       5,846,135.00     1465       1112    
SUPPLEMENT SCIENCES, INC.
  CFB   CSII   WA     3,714,305.00       3,714,305.00     1474       1123    
TECHSKILLS, LLC
  HSB   CSII   TX     5,000,000.00       1,124,500.94     1721       1307    
TELTRONICS, INC.
  HSB   CSII   FL     8,000,000.00       4,032,865.07     1721       1309    
TELTRONICS, INC.
  HSB   CSII   FL     2,749,999.98       2,749,999.98     1767       1378    
TERACO HOLDINGS, INC
  CFB   CSF   TX     3,000,000.00       1,350,000.00     1767       1379    
TERACO HOLDINGS, INC
  CFB   CSII   TX     7,125,000.00       7,125,000.00     1767       1380    
TERACO HOLDINGS, INC
  CFB   CSII   TX     5,373,000.00       5,373,000.00     1138       771    
UNICO HOLDINGS, INC.
  CFB   CSII   FL     4,000,000.00       1,667,685.00     1807       1426    
TIMBUK2 DESIGNS, INC.
  CFB   CSII   CA     5,000,000.00       5,000,000.00     510       345    
WICKS BROADCAST SOLUTIONS, LLC
  CFB   CSII   OR     10,000,000.00       2,803,389.47     804       517    
TOWER CLEANING SYSTEMS, INC. D/B/A U.S. MAINTENANC
  CFB   CSII   PA     15,000,000.00       2,269,406.77     804       1233    
TOWER CLEANING SYSTEMS, INC. D/B/A U.S. MAINTENANC
  CFB   CSII   PA     20,000,000.00       13,000,000.00     1645       1308    
TOWERCO, INC.
  CFB   CSII   NC     35,000,000.00       14,189,344.81     1580       1159    
CHARTER AMERIFIT ACQUISITION CORPORATION
  CFB   CSII   CT     23,417,500.00       9,165,597.19     1877       1503    
UCN, INC.
  HSB   CSII   UT     10,000,000.00       3,129,713.32     742       474    
SSHS — ACCESS WORLDWIDE COMMUNICATIONS, INC.
  HSB   CSII   FL     10,000,000.00       1,418,002.50     1064       703    
UNITED CONSUMER FINANCE, INC.
  SFB   CSII   MA     7,500,000.00       4,289,430.97     1098       1144    
UNITED SYSTEMS
  HSB   CSII   CO     6,000,000.00       3,920,960.67     1874       1498    
US MILLS, INC
  HSB   CSII   MA     3,000,000.00       1,279,370.38     1450       1089    
ALPHA PACKAGING, INC.
  CFB   CSII   MO     8,000,000.00       1,254,969.31                  
 
                                                       
 
                            1,970,417,889.68       782,254,764.44              
   
 
                                                  139    
 
                                       

Page 4 of 4

 

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Exhibit H
to Sale and
Servicing Agreement
FORM OF MONTHLY SERVICER REPORT
[TO BE PROVIDED IN MS EXCEL FORMAT]

 

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

 

CAPITALSOURCE FINANCE LLC
SERVICER’S CERTIFICATE
CAPITALSOURCE COMMERICAL LOAN TRUST 2004-1
ASSET-BACKED NOTES SERIES 2006-1, CLASS A,
CLASS B, CLASS C, CLASS D , CLASS E, CLASS F NOTES

                 
Due Period Ending on:
               
Record Date:
               
Determination Date:
               
Remittance Date:
               
Days during Interest Accrual Period:
               
Year Basis
               
One-Month LIBOR
               
 
               
AGGREGATE OUTSTANDING LOAN BALANCE
               
Aggregate Outstanding Loan Balance, beginning of Due Period
               
Less: Scheduled Principal Payments
               
Less: Curtailments
               
Less: Payoffs
               
Less: Aggregate Outstanding Loan Balance of Loans that became Charged-Off Loans
during the current Due Period
               
Less: Repurchased or Substituted
               
Add: Aggregate Outstanding Loan Balance of Substitute Loan(s)
               
 
              Aggregate Outstanding Loan Balance, end of Due Period     0.00  
OK

 
             
 
               
AGGREGATE PRINCIPAL BALANCE OF NOTES (post distribution)
               
 
                    % of O/S Notes

Class A Principal Amount, end of Interest Accrual Period
    —       0.00 %
 
             
Class B Principal Amount, end of Interest Accrual Period
    —       0.00 %
 
             
Class C Principal Amount, end of Interest Accrual Period
    —       0.00 %
 
             
Class D Principal Amount, end of Interest Accrual Period
    —       0.00 %
 
             
Class E Principal Amount, end of Interest Accrual Period
    —       0.00 %
 
             
Class F Principal Amount, end of Interest Accrual Period
    —       0.00 %
 
             
Aggregate Outstanding Principal Balance
    —       0.00 %
 
               
 
             
ADDITIONAL PRINCIPAL AMOUNT
    —          
 
               
 
             
DELINQUENT LOANS
               
Asset Based Loans
               
1 DPD
    —          
 
               
 
             
All Other Loans
               
1-29 DPD
    —          
 
             
30-59 DPD
    —          
 
             
60-89 DPD
    —          
 
             
90-119 DPD
    —          
 
             
120+ DPD
    —          
 
               
 
             
Loans with reductin in interest rate causing breach WALS test
               
 
               
CHARGE -OFF LOANS
               
Cumulative Aggregate Outstanding Loan Balance of Charged-Off Loans, beginning of
Due Period
    —          
 
             
Aggregate Outstanding Loan Balance of Charged-Off Loans that became Charged-Off
Loans during the current Due Period
    —          
 
             
Cumulative Aggregate Outstanding Loan Balance of Charged-Off Loans, end of Due
Period
    —          
 
               
 
             
Loans Rated “D” by S&P
               
 
               
RESERVE FUND
               
Reserve Fund balance, beginning of Due Period
    —          
Required Reserve Amount — the sum of
               
(i) Three times the then current Class A, Class B, Class C, Class D and Class E
Interest Amounts
    —          
(ii) The Outstanding Loan Balance of each Delinquent Loan.
    —          
Total
    —          
Deposit from (release to) waterfall
    —          
 
             
Reserve Fund balance, end of Due Period
    —          
 
               
 
             
Servicing Fee
    —          
 
             
Unpaid Servicing Fee from prior Due Periods
    —          
 
             
Total Servicing Fee due
    —          
 
               
 
             
Servicer Principal Advances
    —          
Principal Collections
    —          
Prepayments
    —          
 
             
Total Principal Collections/Advances
    —          
 
             
 
               
Servicer Interest Advances
    —          
Interest Collections
    —          
Investment Earnings
    —          
Net Trust Hedge receipts
    —          
 
             
Total Interest Collections/Advances
    —          
 
             
 
               
Class A Outstanding Principal Balance, beginning of Interest Accrual Period
    —          
 
             
Class B Outstanding Principal Balance, beginning of Interest Accrual Period
    —          
 
             
Class C Outstanding Principal Balance, beginning of Interest Accrual Period
    —          
 
             
Class D Outstanding Principal Balance, beginning of Interest Accrual Period
    —          
 
             
Class E Outstanding Principal Balance, beginning of Interest Accrual Period
    —          
 
             
Class F Outstanding Principal Balance, beginning of Interest Accrual Period
    —          
 
             
Aggregate Outstanding Principal Balance, beginning of Interest Accrual Period
    —          
 
               
Class A Note Interest Rate
    0.00000 %        
 
             
Class B Note Interest Rate
    0.00000 %        
 
             
Class C Note Interest Rate
    0.00000 %        
 
             
Class D Note Interest Rate
    0.00000 %        
 
             
Class E Note Interest Rate
    0.00000 %        
 
             
 
               
Class A Interest Shortfall from previous Interest Accrual Period
    —          
 
             
Class B Interest Shortfall from previous Interest Accrual Period
    —          
 
             
Class C Interest Shortfall from previous Interest Accrual Period
    —          
 
             
Class D Interest Shortfall from previous Interest Accrual Period
    —          
 
             
Class E Interest Shortfall from previous Interest Accrual Period
    —          
Class A Outstanding Principal Balance as a percent of Aggregate Outstanding
Principal Balance
    0.00 %        
 
             
Class B Outstanding Principal Balance as a percent of Aggregate Outstanding
Principal Balance
    0.00 %        
 
             
Class C Outstanding Principal Balance as a percent of Aggregate Outstanding
Principal Balance
    0.00 %        
 
             
Class D Outstanding Principal Balance as a percent of Aggregate Outstanding
Principal Balance
    0.00 %        
 
             
Class E Outstanding Principal Balance as a percent of Aggregate Outstanding
Principal Balance
    0.00 %        
 
             
Class F Outstanding Principal Balance as a percent of Aggregate Outstanding
Principal Balance
    0.00 %        
 
             
 
               
PORTFOLIO RATE / YIELD CALCULATION
               
Interest Collections, balance as of end of Due Period (annualized)
    —          
Aggregate Principal Amount of Class A, Class B, Class C , Class D and Class E as
of last day of Due Period
  #REF!
       
Portfolio Rate, for current Due Period
    0.0000 %        
Weighted Average Interest Rate
    0.0000 %        
Portfolio Yield, current period
    0.0000 %        
 
               
CONCENTRATION CRITERIA
               
Sum of the Outstanding Loan Balances of Obligors in the same industry (by at
least 3 digit NAICS Code) expressed as a Percentage
    0.0 %        
 
             
Sum of the Outstanding Loan Balances of Obligors in the same State expressed as
a Percentage
    0.0 %        
 
             

 

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

 

 
                                  Wells   S&P   Capital Source   Note Holders  
              Note Holders  
PRIOR TO AN EVENT OF DEFAULT, SERVICER DEFAULT OR ACCELERATED AMORTIZATION EVENT
                                                                               
Prior to an Event of Default, a Servicer Default, an Accelerated Amortization
Event, Collections on deposit in the Principal and Interest Account, balances as
of end of Due Period
          Due   Paid                                                        
All Investment Earnings and losses on funds held in the Trust Accounts
            —       —                                                          
Reserve Account balance
            —       —                                                          
Total available for distribution
            —       —                                                          
 
                          Shortfall                                            
   
1 Amounts owed to the Hedge Counterparties (other than Hedge Breakage Cost)
            —       —       —       —       —       —       —               —  
2 Pro rata, based on the amounts owed to such Persons under this item two,
subject to certain limitations, amounts to Indenture Trustee, Backup Servicer,
Owner Trustee, Successor Servicer (if any), and Irish Stock Exchange Fees (if
applicable) (excluded amounts related to indemnification)
            —       —       —       —       —       —       —               —  
3 From the Collections received on the specific Loans for which Scheduled
Payment Advances were made, reimbursement for the amount of any Scheduled
Payment Advances relating such Loans
            —       —       —       —       —       —       —               —  
4 (1) to S&P an amount equal to any accrued and unpaid fees due to S&P
            —       —       —       —       —       —       —               —  
(2) to the Servicer an amount equal to its accrued and unpaid Servicing Fee
minus amounts paid to S&P pursuant to this clause
            —       —       —       —       —       —       —               —  
5 Class A Interest Amount plus any Class A Interest Shortfall (and any interest
thereon) and
            —       —       —       —       —       —       —               —  
6 Class B Interest Amount plus any Class B Interest Shortfall (and any interest
thereon)
            —       —       —       —       —       —       —               —  
7 Class C Interest Amount plus any Class C Interest Shortfall (and any interest
thereon)
            —       —       —       —       —       —       —               —  
8 Class D Interest Amount plus any Class D Interest Shortfall (and any interest
thereon)
            —       —       —       —       —       —       —               —  
9 Class E Interest Amount plus any Class E Interest Shortfall (and any interest
thereon)
            —       —       —       —       —       —       —               —  
10 Any amount to the Reserve Fund which will equal (3) times the sum of the
Class A, B, C, D and E Interest Amounts for current remittance date
            —       —       —       —       —       —                       —  
a) Available Principal Distributable (amount remaining after 9)
            —     #REF!   #REF!     —       —       —     #REF!           #REF!
11 (i) on each Remittance Date prior to the occurrence of any Sequential Pay
Date, to the Holders of the Notes as follows:
                          Remaining Balance                                    
           
(a) if on such Remittance Date no Principal Distributable Shortfall exists, to
the Holders of the Class A Notes, the Class B Notes, the Class C Notes the
Class D Notes, the Class E Notes and the Class F Note, pro rata, in an amount up
to the Total Principal Distributable; and
  Class A   #REF!           - #REF!                                     —      
—  
 
  Class B     —       —       —                               —               —
 
 
  Class C     —       —       —                               —               —
 
 
  Class D     —       —       —                               —               —
 
 
  Class E     —       —       —               —               —               —
 
 
  Class F     —       —       —               —                               —
 
(b) if on such Remittance Date a Principal Distributable Shortfall exists, to
the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the
Class D Notes and the Class E Notes, pro rata in an amount up to the Total
Principal Distributable until each such class of Offered Notes is paid in full,
and second to the Class F Notes in an amount up to the Total Principal
Distributable until the Class F Notes are paid in full;
                                                                               
(ii) on each Remittance Date on and after the occurrence of a Sequential Pay
Event (other than an Event of Default, a Servicer Default or an Accelerated
Amortization Event), unless, solely in the case of a Sequential Pay Event of the
type specified in clause (f) of the definition thereof, the Rating Agency
Condition shall have been satisfied with respect to the payment of principal of
the Notes being made in accordance with subclause (i)(a) under this item 10,
sequentially to the Holders of the Notes as follows
                                                                               
(a) to the Holders of the Class A Notes paid in full, in an amount up to the
Total Principal Distributable;
                                                                               
 
                                                               
(b) to the Holders of the Class B Notes, the Class B Accrued Payable if any
            —               —       —       —       —       —               —  
(c) to the Holders of the Class B Notes until paid in full, in an amount up to
the remaining Total Principal Distributable after payments to the Class A
                                                                               
Notes under this Item 11
            —       —       —       —       —       —       —               —  
(d) to the Holders of the Class C Notes, the Class C Accrued Payable if any
            —               —       —       —       —       —               —  
 
                                                                             
(e) to the Holders of the Class C Notes until paid in full, in an amount up to
the remaining Total Principal Distributable after payments to the Class A
            —       —       —       —       —       —       —               —  
Notes, and the Class B Notes aunder this Item 11
                                                                               
(f) to the Holders of the Class D Notes, the Class D Accrued Payable if any
            —               —       —       —       —       —               —  
(g) to the Holders of the Class D Notes until paid in full, in an amount up to
the remaining Principal Distributable after payments to the Class A Notes, the
Class B Notes and the Class C Notes under this Item 11
            —       —       —       —       —       —       —               —  
(h) to the Holders of the Class E Notes, the Class E Accrued Payable if any
            —               —       —       —       —       —               —  
(i) to the Holders of the Class E Notes until paid in full, in an amount up to
the remaining Principal Distributable after payments to the Class A Notes, the
Class B Notes, the Class C Notes,and the Class D Notes under this Item 11
            —       —       —       —       —       —       —               —  
12 To the Reserve Fund until the amount therein equals three (3) time s the sum
of the Class A, Class B, Class C, Class D and Class E Interest Amounts for the
next Remittance Date plus the Outstanding Loan Balance of each Delinquent Loan
            —       —       —       —       —       —       —               —  
13 To the extent not paid by the Originator, any amounts due in respect of the
listing of the Class A, the Class B Notes, the Class C Notes the Class D Notes
and the Class E Notes on the Irish Stock Exchange
            —       —       —       —       —       —       —               —  
14 To the extent not reimbursed under item three above, reimbursement for the
amount of any Scheduled Payment Advances relating to such Loans
            —       —       —       —       —       —       —               —  
15 Hedge Breakage Costs
            —       —       —       —       —       —       —               —  
 
                                                                   
16 Other amounts to the Indenture Trustee, Backup Servicer, Hedge Counterparty
and Owner Trustee plus Additional Servicing Fee
            —               —       —       —       —       —               —  
 
                                                                   
17 To the Holder of the Class F Notes, the remaining Principal Distributable
            —       —       —       —       —       —       —               —  
 
                                                                     
18 To the Owner Trustee for payment to the holdes of the Certificates, any
excess remaining after application of amounts under item 17
                    —               —       —       —       —               —  
AFTER AN EVENT of DEFAULT, SERVICER DEFAULT OR ACCELERATED AMORTIZATION EVENT
                                                                            —  
Following an Event of Default, Servicer Default, an Accelerated Amortization
Event
                                    —       —       —       —               —  
Collections on deposit in the Principal and Interest Account,
            —                                                                  
Balance as of end of Due Period
            —                                                                  
Total Available for Distribution
            —       —     Remaining                                            
   
 
                          Balance                                              
 
1 Amounts owed to Hedge Counterparties (other than Hedge Breakage Costs and
after an Event of Default, Hedge Breakage Costs not to exceed $500,000)
            —       —       —       —       —       —       —               —  
2 Pro rata, based on the amounts owed to such Persons under this item 2, subject
to applicable limitations, amounts to Indenture Trustee, Backup Service, Owner
Trustee, Successor Servicer (if any), and Irish Stock Exchange Fees (if
applicable) (excluded amounts related to indemnification)
            —       —       —       —       —       —       —               —  
3 From the Collections received on the specific loans or which Scheduled Payment
Advances were made, reimbursement for the amount of any Scheduled Payment
Advances relating to such loans
            —       —       —       —       —       —       —               —  
4 (1) to S&P an amount equal to any accrued and unpaid fees due to S&P
            —                                                                  
(2) to the Servicer an amount equal to its accrued and unpaid Servicing Fee
minus amounts paid to S&P pursuant under this item 4
            —       —       —       —       —       —       —               —  
5 Class A Interest Amount plus any Class A Interest Shortfall (and any interest
thereon)
            —       —       —       —       —       —       —               —  
6 Class B Interest Amount plus any Class B Interest Shortfall
            —       —       —       —       —       —       —               —  
7 Class C Interest Amount plus any Class C Interest Shortfall
            —       —       —       —       —       —       —               —  
8 Class D Interest Amount plus any Class D Interest Shortfall
            —       —       —       —       —       —       —               —  
9 Class E Interest Amount plus any Class E Interest Shortfall
                                    —       —       —       —               —  
10 (a) to the Holders of the Class A Notes until the Outstanding Principal
Balance of the Class A Notes is reduced to zero;
                                                                            —  
 
                                                               
(b) to the Holders of the Class B Notes, the Class B Accrued Payable if any
            —       —       —       —       —       —       —               —  
(c) to the Class B Notes until Outstanding Principal Balance is reduced to zero;
            —       —       —       —       —       —       —               —  
(d) to the Holders of the Class C Notes, the Class C Accrued Payable if any
            —       —       —       —       —       —       —               —  
(e) to the Class C Notes until Outstanding Principal Balance is reduced to zero;
            —       —       —       —       —       —       —               —  
(f) to the Holders of the Class D Notes, the Class D Accrued Payable if any
            —       —       —       —       —       —       —               —  
(g) to the Class D Notes until Outstanding Principal Balance is reduced to zero;
            —       —       —       —       —       —       —               —  
(h) to the Holders of the Class E Notes, the Class E Accrued Payable if any
                                                                               
(i) to the Class E Notes until Outstanding Principal Balance is reduced to zero;
                                                                               
11 To the extent not reimbursed under paragraph 3 above, reimbursement for the
amount of any Scheduled Payment Advances relating to interest on such Loans
            —       —       —       —       —       —       —               —  
12 Hedge Breakage Costs
            —       —       —       —       —       —       —               —  
13 Other amounts related indemnification to the Indenture Trustee, Backup
Servicer, Hedge Counterparty and Owner Trustee plus Additional Servicing Fee
            —       —       —       —       —       —       —               —  
14 To the extent not paid above, any amounts due in respect to listing on the
Irish Stock Exchange
            —       —       —       —       —       —       —               —  
15 To the Holders of the Class F Note, the Total Principal Distributable
            —       —       —       —       —       —       —               —  
16 To the Owner Trustee for payment to the holders of the Certificates, any
remaining Collections
            —       —       —       —       —       —       —               —  

         
Signature
       
 
       
 
       
Title
       
 
       

 

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

 

CAPITALSOURCE FINANCE LLC
SERVICER’S CERTIFICATE
COMMERCIAL LOAN BACKED NOTES
SERIES 2006-1 January 0, 1900
SUBSTITUTIONS TO DATE

                                                                               
              2006-1 Original     2006-1 Current                         Name  
  Close Date     Maturity Date     Amount     Amount     Collateral Type    
Period of Substitution     Reason for Substitution  
1
                                                               
2
                                                               
3
                                                               
Total
                                                               

Percentage of Original Aggregate Loan Balance 0.00%
DELINQUENT LOANS
Asset-Based Loans

                                                                               
              2006-1 Original     2006-1 Current                         Name  
  Close Date     Maturity Date     Amount     Amount     Collateral Type    
Period of Delinquency     Days Past Due  
1
                                                               
2
                                                               
3
                                                               

All Other Loan Types

                                                                               
              2006-1 Original     2006-1 Current                         Name  
  Close Date     Maturity Date     Amount     Amount     Collateral Type    
Period of Delinquency     Days Past Due  
1
                                                               
2
                                                               
3
                                                               

CHARGED-OFF LOANS

                                                                               
              2006-1 Original     2006-1 Current                     Recoveries
on Charged-Off Loans to       Name     Close Date     Maturity Date     Amount  
  Amount     Collateral Type     Period of Charge-Off     Date  
1
                                                               
2
                                                               
3
                                                               

LOANS SUBJECT TO SPECIFIED AMENDMENTS (1)

                                                                               
              2006-1 Original     2006-1 Current                         Name  
  Close Date     Maturity Date     Amount     Amount     Collateral Type    
Period of Amendment     Reason for Restructure  
1
                                                               
2
                                                               
3
                                                               

 

(1)   Provide in separate attachment in tabular format; Coupon Prior to
Amendment, Coupon Post Amendment Amortization Schedule Prior to Amendment;
Amortization Schedule Post Amendment ; Maturity Date Prior to Amendment;
Maturity Date Post Amendment

SERVICER ADVANCES

                                                  2006-1 Original   2006-1
Current                 Name   Close Date   Maturity Date   Amount   Amount  
Collateral Type   Number of Days Outstanding   Amount of Servicer Advance
1
                               
2
                               
3
                               
4
                               

OVERADVANCES

                                                                               
              2006-1 Original     2006-1 Current                         Name  
  Close Date     Maturity Date     Amount     Amount     Collateral Type    
Number of Days Outstanding     Amount of Overadvance  
1
                                                               
2
                                                               
3
                                                               

LOAN RATING CHANGES

                                                                             
2006-1 Original     2006-1 Current                     Name   Close Date    
Maturity Date     Amount     Amount     Collateral Type     Original Loan Rating
    Revised Loan Rating  
1
                                                       
2
                                                       
3
                                                       
4
                                                       
5
                                                       
6
                                                       
7
                                                       
8
                                                       
9
                                                       

As of the date hereof, there has been no change to the ratings scale or
underlying methodology of the Loan Rating system set forth in the Credit and
Collection Policy other than as has been previously provided to each Rating
Agency.

         
Signature
       
 
       
 
       
Title
       
 
       

 

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

 

          Distribution by NAICS Code   Distribution by States  
236
  AL  
311
  AZ  
313
  CA  
314
  CO  
315
  CT  
322
  DE  
323
  FL  
325
  GA  
326
  IL  
332
  IN  
336
  IT  
337
  KS  
339
  KY  
423
  MA  
424
  MD  
442
  ME  
454
  MI  
488
  MN  
511
  MO  
515
  NC  
517
  ND  
522
  NH  
524
  NJ  
531
  NV  
532
  NY  
541
  OH  
561
  OR  
562
  PA  
611
  RI  
621
  SC  
622
  SD  
623
  TN  
713
  TX  
721
  UT  
811
  VA  
 
     
812
  WA  
 
     
—
  —  
 
     

                      Prior Month     Current Month        
Asset based loans
  $ —          
Non-asset based loans
    —                
 
  $ —     $ —        

 

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

 

Total CS Portfolio

                  Risk Rating   Total Portfolio % of Obligors     % of Par
Outstanding  
       1
               
       2
               
       3
               
       4
               
       5
               
       6
               

Performing Loans
Loans Delinquent
Loan Charge-Offs

 

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

 

CapitalSource Loan Tape 2006-1

                                                                               
                                                                               
                                                                               
                                                      Original                  
                                                                               
                                                      Risk     Current Risk    
Current Risk         Loan #   Name on Note     State     NAICS     Initial Pool
Balance     Pool Balance     Obligor Balance     Loan Collateral     Lien    
Type     Loan Category     Closing     Maturity     Pricing Index     Interest
Frequency     Coupon     Industry     Rating     Rating     Rating     Status  
 
                                                                               
                                                                               

 

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

 

Asset Based
   All Other

 

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

 

SERVICER’S MONTHLY COMPUTER TAPE FORMAT
The computer tape to be delivered in electronic format shall contain the
following information for each Loan transferred to the Issuer as of the related
Transfer Date:

1.   Loan Number   2.   State   3.   Industry   4.   Loan Category (i.e., asset
based financed, healthcare secured, senior cash flow, subordinate cash flow or
Pooled Obligor)   5.   Total Commitment   6.   Principal Balance   7.   Lending
Type   8.   Loan Type   9.   Origination Date   10.   Maturity Date   11.  
Pricing Index   12.   Margin   13.   Interest Rate   14.   Any additional
information reasonably requested by the Indenture Trustee   15.   Current Loan
Rating of the Loan   16.   Original Loan Rating of the Loan   17.   Statement
Date   18.   Prior Month Risk Rating   19.   Current Month Risk Rating   20.  
Initial Month Risk Rating

 

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

 

21.   Cash & Marketable Security*   22.   Total Current Assets*   23.   Total
Intangible Assets*   24.   Total Assets*   25.   Total Current Liabilities*  
26.   Total Debt*   27.   Retained Earnings*   28.   Net Sales*   29.   Cost of
Goods Sold*   30.   EBIT*   31.   Total Interest Expense*   32.   Net Income*  
33.   Depreciation & Amortization*   34.   Electronic Excel file for the Fitch
CRS model*

For Total CS Portfolio

                  Risk Rating     Total Portfolio % of Obligors   % of Par
Outstanding          
1
               
2
               
3
               
4
               
5
       

Performing Loans
Loans Delinquent
Loan Charge-Offs
 

*   To the extent reasonably available, to be updated on a quarterly basis.

 

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

 

Exhibit I
to Sale and
Servicing Agreement
FORM OF SUBSEQUENT TRANSFER AGREEMENT
     SUBSEQUENT TRANSFER AGREEMENT (the “Agreement”), dated as of [___] [___],
20[___], by and among CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, as the Issuer
(the “Issuer”), CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, a Delaware limited
liability company, as the Trust Depositor (the “Trust Depositor”), WELLS FARGO
BANK, NATIONAL ASSOCIATION, as the Indenture Trustee (the “Indenture Trustee”)
and as the Backup Servicer (the “Backup Servicer”), and CAPITALSOURCE FINANCE
LLC, a Delaware limited liability company, as the Servicer (the “Servicer”) and
as the Originator (the “Originator”), is entered into pursuant to the Sale and
Servicing Agreement referred to below.
WITNESSETH:
     WHEREAS, the Issuer, the Trust Depositor, the Servicer, the Originator, the
Indenture Trustee, and the Backup Servicer are parties to the Sale and Servicing
Agreement, dated as April 11, 2006 (such agreement as amended, modified, waived,
supplemented or restated from time to time, the “Sale and Servicing Agreement”);
     WHEREAS, pursuant to the Sale and Servicing Agreement, the Trust Depositor
wishes to sell the Substitute Loans to the Issuer, and the Issuer wishes to
purchase the same, for the consideration described in the Sale and Servicing
Agreement; and
     WHEREAS, the Servicer has timely delivered an Addition Notice related to
such conveyance as required in the Sale and Servicing Agreement.
     NOW, THEREFORE, the parties hereto agree as follows:
Defined Terms.
     Capitalized terms used herein shall have the meanings ascribed to them in
the Sale and Servicing Agreement unless otherwise defined herein.
“Subsequent Cutoff Date” shall mean, with respect to the Substitute Loans
transferred hereby, [___] [___], 20[___].
“Substitute Loans” shall mean, for purposes of this Agreement, the Substitute
Loans listed in the Subsequent List of Loans attached hereto as Exhibit A.
“Subsequent Transfer Date” shall mean, with respect to the Substitute Loans
transferred hereby, [___] [___], 20[___].

 

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

 

Subsequent List of Loans.
     The Subsequent List of Loans attached hereto as Exhibit A is an amendment
to the initial List of Loans attached as Exhibit G to the Sale and Servicing
Agreement, as contemplated in the definition of List of Loans set forth therein.
The Subsequent List of Loans separately identifies the Substitute Loans to be
transferred pursuant to this Agreement on the Subsequent Transfer Date, and also
further separately identifies the related Loan or Loans with respect to which a
Substitution Event has occurred and which Loans are being deleted from the List
of Loans by virtue of the delivery of the Subsequent List of Loans.
Transfer of [Substitute Loans][Additional Loans].
     (a) Subject to and upon the terms and conditions set forth in Section 2.04
of the Sale and Servicing Agreement and this Agreement, the Trust Depositor
hereby sells, transfers, assigns, sets over and otherwise conveys to the Issuer
all of the Trust Depositor’s rights, title and interest in and to the following,
including but not limited to, all accounts, cash and currency, chattel paper,
electronic chattel paper, tangible chattel paper, copyrights, copyright
licenses, equipment, fixtures, general intangibles, instruments, commercial tort
claims, deposit accounts, inventory, investment property, letter of credit
rights, software, supporting obligations, accessions, and other property
consisting of, arising out of, or related to the following:
     (i) the Substitute Loans listed in the related Addition Notice, all
payments paid in respect thereof and all monies due, to become due or paid in
respect thereof accruing on and after the related Subsequent Cut–Off Date and
all Liquidation Proceeds and recoveries thereon, in each case as they arise
after the related Subsequent Cut–Off Date, but not including the Retained
Interest or Interest Collections received prior to the Subsequent Cut–Off Date;
     (ii) all security interests and liens and Collateral subject thereto from
time to time purporting to secure payment by Obligors under such Loans;
     (iii) all guaranties, indemnities and warranties, and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Loans;
     (iv) the Trust Accounts, each Obligor Lock–Box, each Obligor Lock–Box
Account, each Lock–Box, each Lock–Box Account, and together with all cash and
investments in each of the foregoing;
     (v) all collections and records (including computer records) with respect
to the foregoing;
     (vi) all documents relating to the Loan Files; and
     (vii) all income, payments, proceeds and other benefits of any and all of
the foregoing.

 

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

 

     (b) It is the intention of the Trust Depositor and Owner Trustee that the
transfer contemplated by this Agreement shall constitute an absolute assignment
and sale of the Substitute Loans from the Trust Depositor to the Issuer,
conveying good title thereto free and clear of any Liens (other than Permitted
Liens).
Representations and Warranties of the Trust Depositor.
     (a) The Trust Depositor hereby represents and warrants to the Issuer that
the representations and warranties of the Trust Depositor required by
Section 2.04 of the Sale and Servicing Agreement are true and correct as of the
date such representations and warranties are required to be made.
     (b) The Trust Depositor hereby represents and warrants that (a) the
Outstanding Loan Balance of the Substitute Loans listed on the Subsequent List
of Loans and conveyed to the Trust Depositor pursuant to this Agreement is
$[___] as of the Subsequent Cutoff Date, and (b) the conditions set forth in
Section 2.04 of the Sale and Servicing Agreement have been satisfied as of the
Subsequent Transfer Date.
Ratification of Agreement.
     As supplemented by this Agreement, the Sale and Servicing Agreement is in
all respects ratified and confirmed and, as so supplemented by this Agreement,
shall be read, taken and construed as one and the same instrument.
Counterparts.
     This Agreement may be executed by facsimile signatures and in one or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
Governing Law.
     THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Authorization of Servicer.
     Pursuant to the terms of the Sale and Servicing Agreement, the Servicer has
the power and authority to execute and deliver this Agreement on behalf of the
Issuer.
* * * * * *

 

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

 

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

              CAPITALSOURCE COMMERCIAL LOAN     LLC, 2006-1, as the Trust
Depositor
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       
 
            CAPITALSOURCE FINANCE LLC, as the     Originator and as the Servicer
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       
 
            CAPITALSOURCE COMMERCIAL LOAN
TRUST 2006-1
 
       
 
  By:   CapitalSource Finance LLC, as Servicer  
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       
 
            WELLS FARGO BANK, NATIONAL     ASSOCIATION, not in its individual
capacity but solely as the Indenture Trustee and as Backup Servicer  
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       

 

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

 

Exhibit J
to Sale and
Servicing Agreement
FORM OF SUBSEQUENT PURCHASE AGREEMENT
     SUBSEQUENT PURCHASE AGREEMENT (the “Agreement”), dated as of [___________]
[___], 20[___], by and between CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, a
Delaware limited liability company (the “Trust Depositor”), and CAPITALSOURCE
FINANCE LLC, a Delaware limited liability company (“CapitalSource” or the
“Originator”), entered into pursuant to the Loan Sale Agreement referred to
below.
WITNESSETH:
     WHEREAS, the Trust Depositor and the Originator are parties to the
Commercial Loan Sale Agreement, dated as of April 11, 2006 (such agreement as
amended, modified, waived, supplemented or restated from time to time, the “Loan
Sale Agreement”);
     WHEREAS, pursuant to the Loan Sale Agreement, the Originator wishes to sell
the Substitute Loans to the Trust Depositor, and the Trust Depositor wishes to
purchase the same, for the purchase price set forth in Section 3 below; and
     WHEREAS, the Originator has timely delivered an Addition Notice related to
such conveyance as required in the Loan Sale Agreement.
     NOW, THEREFORE, the Originator and the Trust Depositor hereby agree as
follows:
Defined Terms.
     Capitalized terms used herein shall have the meanings ascribed to them in
the Sale and Servicing Agreement unless otherwise defined herein.
     “Subsequent Cutoff Date” shall mean, with respect to the Substitute Loans
transferred hereby, [___________] [___], 20[___].
     “Substitute Loans” shall mean, for purposes of this Agreement, the
Substitute Loans listed in the Subsequent List of Loans attached hereto as
Exhibit A.
     “Subsequent Transfer Date” shall mean, with respect to the Substitute Loans
transferred hereby, [___________] [___], 20[___].
Subsequent List of Loans.
     The Subsequent List of Loans attached hereto as Exhibit A is an amendment
to the initial List of Loans attached as Exhibit G to the Sale and Servicing
Agreement, as contemplated in the definition of List of Loans set forth therein.
The Subsequent List of Loans separately identifies (by attached schedule, or
marking or other effective identifying designation) the Substitute Loans to be
transferred pursuant to this Agreement on the Subsequent Transfer Date, and also
further

 

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separately identifies (by attached schedule, or marking or other effective
identifying designation) the related Loan or Loans with respect to which a
Substitution Event has occurred and which Loans are being deleted from the List
of Loans by virtue of the delivery of the Subsequent List of Loans.
Transfer of Substitute Loans.
     (a) Subject to and upon the terms and conditions set forth in Section 2.04
of the Loan Sale Agreement and this Agreement, the Originator hereby sells,
transfers, assigns, sets over and otherwise conveys to the Trust Depositor, in
consideration of the Trust Depositor’s (x) payment of $ [___________] as the
purchase price therefor, representing the prepayment proceeds received with
respect to the related Substitution Event (if applicable) or (y) release and
redelivery to the Originator of the related Loan Assets with respect to which a
Substitution Event has occurred (if applicable), all of the Originator’s rights,
title and interests in and to the following, including but not limited to, all
accounts, cash and currency, chattel paper, electronic chattel paper, tangible
chattel paper, copyrights, copyright licenses, equipment, fixtures, general
intangibles, instruments, commercial tort claims, deposit accounts, inventory,
investment property, letter of credit rights, software, supporting obligations,
accessions, and other property consisting of, arising out of, or related to the
following:
     (i) the Substitute Loans listed in the related Addition Notice, all
payments paid in respect thereof and all monies due, to become due or paid in
respect thereof accruing on and after the related Subsequent Cut–Off Date and
all Liquidation Proceeds and recoveries thereon, in each case as they arise
after the related Subsequent Cut–Off Date, but not including the Retained
Interest or Interest Collections received prior to the Subsequent Cut–Off Date;
     (ii) all security interests and liens and Collateral subject thereto from
time to time purporting to secure payment by Obligors under such Loans;
     (iii) all guaranties, indemnities and warranties, and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Loans;
     (iv) the Trust Accounts, each Obligor Lock–Box, each Obligor Lock–Box
Account, each Lock–Box, each Lock–Box Account, and together with all cash and
investments in each of the foregoing;
     (v) all collections and records (including computer records) with respect
to the foregoing;
     (vi) all documents relating to the Loan Files; and
     (vii) all income, payments, proceeds and other benefits of any and all of
the foregoing.
     (b) It is the intention of the Originator and the Trust Depositor that the
transfer contemplated by this Agreement shall constitute a sale of the
Substitute Loans from the

 

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Originator to the Trust Depositor, conveying good title thereto free and clear
of any Liens (other than Permitted Liens), and that the Substitute Loans shall
not be part of the Originator’s estate in the event of the filing of a
bankruptcy petition by or against the Originator under any bankruptcy or similar
law.
Representations and Warranties of the Originator.
     (a) The Originator hereby represents and warrants to the Trust Depositor
that the representations and warranties of the Originator required by
[Section 2.04][Section 2.05] of the Loan Sale Agreement are true and correct as
of the date such representations and warranties are required to be made.
     (b) The Originator hereby represents and warrants that (i) the Outstanding
Loan Balance of the Substitute Loans listed on the Subsequent List of Loans and
conveyed to the Trust Depositor pursuant to this Agreement is $[___] as of the
Subsequent Cutoff Date, and (ii) the conditions set forth in Section 2.04 of the
Loan Sale Agreement have been satisfied as of the Subsequent Transfer Date.
Ratification of Agreement.
     As supplemented by this Agreement, the Loan Sale Agreement is in all
respects ratified and confirmed and, as so supplemented by this Agreement, shall
be read, taken and construed as one and the same instrument.
Counterparts.
     This Agreement may be executed by facsimile signatures and in one or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
Governing Law.
     This Agreement shall be construed in accordance with the laws of the State
of New York, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.
* * * * * *

 

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

              CAPITALSOURCE COMMERCIAL LOAN     LLC, 2006-1
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       
 
            CAPITALSOURCE FINANCE LLC
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       

 

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Exhibit K
to Sale and
Servicing Agreement
CREDIT AND COLLECTION POLICY
(SEE ATTACHED)

 

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(CAPITALSOURCE LOGO) [w19813w1981300.gif]
CapitalSource Finance LLC
CREDIT POLICY MANUAL
For Internal Use Only

 

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CREDIT POLICY MANUAL
TABLE OF CONTENTS

     
INTRODUCTION
  I
 
   
LENDING GUIDELINES
  II
 
   
ORGINATION
  III
 
   
UNDERWRITING STANDARDS
  IV
 
   
PORTFOLIO MONITORING
  V
 
   
LOAN RATING/SERVICING
  VI
 
   
FILE MAINTENANCE/RECORD KEEPING
  VII
 
   
APPENDICES
   

 

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INTRODUCTION
This Credit Policy and Procedure Manual (the “Manual”) governs the extension of
any form of credit by CapitalSource Finance LLC (“Company” or CapitalSource”).
The Manual can be updated based on recommendation of the Chief Credit Officer
and approval by the credit committee.
This manual is to be used by CapitalSource employees exclusively. Any
unauthorized use or reproduction is prohibited.

I

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OBJECTIVES
The objective of the Manual is to establish standard procedures for originating,
underwriting and monitoring assets. Creating standard credit and investment
policies helps ensure consistency in approach and documentation, which leads to
improved overall asset quality.

I-1

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EXCEPTIONS TO POLICY
Management believes that close adherence to this credit policy is conducive to
generating high asset quality. Therefore, credit decisions should be made based
on adherence to the policy.
Credits that fail to comply with policy, that is, contain material exceptions to
policy, must be so noted in the loan underwriting. The justification for the
exceptions must be fully detailed and reflect careful analysis of the mitigants
that justify the exception and must be approved by the credit committee.

I-2

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LENDING GUIDELINES

     
LOAN SIZE
  II- 1
LOAN APPROVAL AUTHORITIES
  II-3
PRICING
  II-4

II

 

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LOAN SIZE
The maximum credit limits set forth have been established as a guideline. Any
changes to the lending limits, or delegation of authority will be documented as
an amendment to policy. Please refer to loan approval policy.
Equity and Debt Hold Limits
Set forth below are proposed policies with respect to: (1) direct equity
investments, (2) fund commitments, and (3) maximum hold limits for loans:
Overall Equity Allocation:
Without the approval of a majority of the Board of Directors, management will
not cause the Company to make an equity investment or a capital commitment to
any fund that would cause the Company’s total commitment to fund investments
plus direct equity investments to exceed 10% of the then tangible book value of
the Company.
Sub limit on Fund Investments and Approval of Fund Investments:
Without the approval of a majority of the Board of Directors, management will
not cause the Company to commit to a fund investment if that commitment would
cause the total of all fund commitments to exceed 2.5% of the then tangible book
value of the Company. All fund investments will require the approval of a
majority of the Board of Directors.
Limit on any Individual Equity Investment:
Without the approval of a majority of the Board of Directors, management will
not cause the company to commit to an individual equity investment of greater
than $2.5 million.
Maximum Hold Limits for Loans:
Without the approval of a majority of the Board of Directors, the following hold
limits shall apply for the different types of loans made by the Company:

         
Asset Based Loans and First Mortgage Real Estate Loans:
  $55 Million.
 
       
Cash Flow Senior Loans:
  $40 Million.
 
       
Cash Flow Term B Loans:
  $30 Million.
 
       
Cash Flow Mezzanine Loans:
  $25 Million.
 
       
Mezzanine Real Estate Loans:
  $30 Million.

II-1

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Asset Based Loans with a “Stretch Piece” that does not exceed 10% of the Asset
Based Loan:
  $50 Million.
 
       
Cash Flow Loans with a Highly Confident Syndication Bridge (the Company needs to
be highly confident that the Maximum Hold Limit will be met within 60 days).
  $80 Million.
 
       
Asset Based Loans and Real Estate with a Highly Confident Syndication Bridge
(the Company needs to be highly confident that the Maximum Hold Limit will be
met within 60 days).
  $100 Million.

II-2

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LOAN APPROVAL AUTHORITIES FOR NEW TRANSACTIONS
All transactions must have unanimous approval by the following officers, who
together comprise the credit committee:

     
CEO
  John Delaney
 
   
President
  Jason Fish
 
   
Chief Credit Officer
  Bryan Corsini
 
   
Chief Legal Officer
  Steven Museles

CapitalSource Mortgage Finance LLC
Generally, CapitalSource Mortgage Finance underwrites and simultaneously places
HUD mortgages. In the event a mortgage needs to be warehoused for over 45 days,
approval is required by the Chief Credit Officer. Loans to be warehoused for
more than 90 days require full credit committee approval.
PrivateSource Mortgage LLC
Consumer Loans generated by PrivateSource for the purpose of providing
fractional mortgage financing. The credit committee has approved underwriting
guidelines for this product. Loans that are within these guidelines do not
require separate approval. These guidelines are included in this manual in
section IV.

II-3

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PRICING
The following sets forth guidelines in structuring pricing for transactions. If
questions arise over appropriate pricing on a particular transaction, it is
advisable to discuss the situation with the Managing Director, CEO or President
prior to moving forward with a term sheet.
PRICING GUIDELINES
The Company should price all transactions on a floating rate basis. Generally,
all senior loans are to be charged at a spread over the base rate (prime or
libor). Fixed rates may be used. The client will always be liable for any and
all hedging fees associated with fixed rate pricing.
Maximum pricing should be obtained through the combination of commitment fees,
floating base rate, servicing and monitoring fees, float days, success fees,
warrants and legal fees.
On all transactions, a fee or audit fee will be charged to offset costs. Term
sheets where this element of pricing is negotiated must be pre-approved by the
Managing Director of the respective business unit.
REVOLVING LOANS
Pricing should include either collection float days or clearance fees to enhance
our yield.
Revolving loans or other loans where all or a portion of the Company’s committed
facility remains un-drawn at closing should include an unused commitment fee.
Annual service fees or a loan-servicing fee should be part of the overall
pricing.
Up-front fees for commitments will be charged.
Finally, all out of pocket expenses such as UCC filings, legal, audit and any
other ongoing expense required to monitor the loan must be reimbursed by the
customer.
Generally, a non-refundable deposit of at least 50% of the negotiated commitment
fee should be collected upon issuing a commitment to a prospective borrower.
The Managing Directors have the discretion to adjust these guidelines as
specific situations arise.

II-4

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SENIOR TERM LOANS
Senior term loans should be priced on a floating basis. Any fixed rate
accommodation should be match funded, the costs of which should the
responsibility of our customer. This includes any break-up fees for early
termination.
Up-front fees for commitments will be charged.
Finally, all out of pocket expenses need to reimbursed such as UCC filings,
legal, audit along with any other on-going expense required to monitor the loan.
Generally, a non-refundable deposit of at least 50% of the negotiated commitment
fee should be collected upon issuing a commitment to a prospective borrower.
MEZZANINE/SUBORDINATED LOANS
For mezzanine loans, the all-in rate is comprised of up-front fees, servicing
fees, coupon, PIK, equity warrants, and/or success fees. A satisfactory yield
should be obtained assuming no incremental value is ascribed to the warrants.
If a portion of a mezzanine loan is secured by excess collateral from a
revolving loan or some other term facility, the all-in interest rate should be
adjusted to factor in the portion of the loan that is secured.

II-5

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ORIGINATION

     
GENERAL
  III-l
 
   
DEAL FLOW CHART
  III-2
 
   
NEW BUSINESS APPROVAL FORM
  III-3
 
   
TERM SHEETS
  III-5
 
   
DUE DILIGENCE PLANNING
  III-6
 
   
EVALUATION OF MANAGEMENT
  III-7
 
   
CLOSING PROCEDURES/DEVIATIONS
  III-9
 
   
DELAY BETWEEN APPROVAL AND CLOSING
  III-11

III

 

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GENERAL
This portion of the Manual summarizes the origination process. The process
begins with sourcing a transaction and ends with the ultimate funding of the
transaction. On the next page is a flow chart that summarizes the Company’s deal
process. Essentially, once a deal is originated, an Investment Officer reviews
whatever package of information is supplied, analyzes financial information and
then prepares a term sheet. Once the term sheet is approved internally (this
internal approval process is dictated by the Managing Director of each
respective business unit), it is sent to the prospective client for review. Once
any negotiation issues are resolved and a term sheet is accepted, the Investment
Officer prepares an initial client memo (see DealTracker for various examples).
When a term sheet is accepted, Underwriting is notified, and an Underwriting
Officer is assigned. Due diligence is then planned, scoped and coordinated
between Underwriting and the Investment Officer, except for certain real estate
transactions. The Underwriting Officer will perform all field due diligence and
will issue an independent report, again, except in certain real estate
transactions. The Investment Officer will perform independent analysis
simultaneously and will also complete a report. The two reports are the basis
for seeking approval from the Credit Committee.
It should be noted the content and scope of the due diligence performed by an
underwriter or investment officer can vary. In certain cases, such as in
commercial real estate transactions, it may be determined that a separate
underwriting report and/or separate due diligence is not required. The rational
for these situations must be explained to the credit committee and will be
considered in the loan approval process.
The following page illustrates this process in a process flow chart.

III-1

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(FLOW CHART) [w19813w1981302.gif]

III-2

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NEW BUSINESS APPROVAL FORM
[NAME OF BORROWER]
[$ AMOUNT]
[TYPE OF LOAN]
Approval Date:
Date of Credit Committee Memorandum:
Date of Underwriting Memorandum:
Approved By:

          Title   Name   Signature
Credit Officer
  Bryan Corsini    
General Counsel
  Steven A. Museles    
President
  Jason M. Fish    
CEO
  John K. Delaney    

We do not have the greatest risk of loss related to this loan, and, therefore,
do not consider it necessary to consolidate the operations of this loan in
accordance with FIN #46.

III-3

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Approval Conditions:

                      Condition Met     Conditions     (Y/N)
1.

         
2.

         
3.

         
4.

         

Review of Approval Conditions prior to Closing:
The loan documents accurately reflect the transaction as approved by the Credit
Committee (including all conditions set forth above), all deviations have been
duly authorized, and I have reviewed the background check(s) on the principals
of the borrower and have determined that no material issues were identified
therein.

         
 
       
 
  CS Legal    

III-4

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Term Sheet
All proposals on new business should be documented in writing with a term sheet.
The term sheet should document the negotiated aspects of the deal including, but
not limited to, pricing, length of contract, structure of various debt
traunches, advance rates, amortization, fees, responsibility for due diligence
costs, terms of warrants, or other equity. The sheet should include appropriate
disclaimers as to not bind the Company. A copy of the countersigned term sheet
should be included in the credit package that is submitted to the Credit
Committee for approval. Please refer to deal tracker for multiple examples of
term sheet formats and language.
A nonrefundable deposit should be received as part of the acceptance of the term
sheet. These fees will range from $10,000 to $75,000 to reflect the size and
scope of the transaction.

III-5

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DUE DILIGENCE PLANNING
The planning and coordination of all due diligence is the responsibility of the
Investment Officer and assigned Underwriting Officer. Scope of the due diligence
will vary depending on the deal structure, industry, and reliance on assets or
cash flow for source of repayment.
Due diligence will be conducted in accordance with the standards established by
CapitalAnalytics. Due diligence by an outside party must be pre-approved by the
Chief Credit Officer. A full due diligence report must be included in the credit
package, which is submitted to the Credit Committee for approval.

III-6

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EVALUATION OF MANAGEMENT
A critical area of the underwriting is the accurate assessment of management’s
strengths and weaknesses. Past performance of the company, past experience of
management, references, how management reacts under stress and to poor business
conditions and the quality of a company’s MIS are important indicators of the
quality of management. Management needs to be capable of making the difficult
decisions that may be necessary to get a company through difficult times.
Equally important is determining management’s commitment to the business.
The Investment Officer and Underwriter are always to be involved in this
analysis. When necessary, Senior Management of the Company should supplement
this process.
In the case of an LBO, we should evaluate not only the buying or sponsor group
but also the management who will be executing the business plan.
The qualities that should be addressed in making this evaluation are as follows:
Performance-What has been management’s track record in delivering projected
performance?
Accountability-Are key aspects of the business plan identified and assigned to
specific persons for execution?
Decisiveness-Is management capable of making timely decisions?
Industry Knowledge-Does management possess an in-depth knowledge of their
industry? Are they capable of quickly adapting to changes in the industry?
Commitment-Is management sufficiently committed (subject to non-competition
agreement) to the business so that if a downturn should occur they will remain
in place?
Communication-Does management do a good job of openly communicating with
customers, vendors, employees, lenders, etc.? Keeping all parties informed of
good and bad news?
Organization Intelligence-Does management have the MIS in place to intelligently
run its business? Is management sufficiently informed about its competitors,
customers, vendors, etc. in order to anticipate problems?

III-7

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Incentive. Is management motivated and committed to the business?
The underwriting should identify who has met with senior management of prospect
customers and the conclusions of the evaluation. When Senior Management of the
Company are involved, it is preferable for meetings to take place at the
customer’s location so those Senior Managers are seeing the operation they are
being asked to finance.
Without exception, a background check must be performed on the principals and
senior management team of all borrowers. The legal department will review the
results prior to closing of the transaction.

III-8

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CLOSING PROCEDURES
Responsibility for closing new loans rests with the assigned Loan Officer and
the Investment Officer. Consideration should be given to the location of the
Loan Officer or Investment Officer as well as his/her relative experience.
Various factors will dictate the responsibility of each in the loan
negotiation/documentation process such as timing, complexity, client
relationship, etc.
At a minimum, procedures should provide for the following:

  1.   Any changes in financial covenants on non-asset based loans require the
written approval of the Chief Credit Officer.     2.   Final documentation,
including third party agreements must be in a form acceptable to Legal Counsel.
To the extent that any documents or other matters remain open and will be
completed on a post-closing basis, Counsel is responsible for tracking any open
items.

It is legal’s responsibility to determine that the loan has been closed in
accordance with the approval. This includes completing all subject to’s. Any
material modification in the approved conditions must be communicated to the
Credit Committee and approvals, as appropriate, obtained in writing
Closing Memos
Deviations Memoranda from this point forward will be referred to as “Closing
Memoranda.” These memos must be prepared for all transactions and signed by the
relevant Managing Director. The Closing Memo must also be signed by three
members of the Credit Committee if any of the following situations occur:
1. A material change to any aspect of the transaction or the business prospects
of the borrower;
2. Any asset based deals are modified to include an “air ball” or overline in
the amount of $500,000 or more;
3. Any transactions that have material changes in lien position;
4. If the amount of equity (or capital junior to CapitalSource) proposed to be
invested in an acquisition (real estate or cash flow) is reduced by more than
10% from that set forth in the CCM; or
5. If specific Approval Conditions set forth on the New Business Approval Form
are not satisfied.
If there is any change to financial covenants on cash flow loans, the Chief
Credit Officer’s signature is required.
Materiality determinations for items 1 and 3 above shall be made by the relevant
Managing Director.

III-9

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Initial Fundings
Initial fundings require the following signatures:
1. Account Executive responsible for the transaction;
2. Two loan officers from the relevant business group; and
3. Second page of New Business Approval Form to be signed by CS internal
attorney.
The Managing Director of each business group may add further signature
requirements, in their discretion.
The CEO, President, Managing Directors and Chief Legal Officer will have the
authority to execute loan documents, amendments, etc. on behalf of the company.
This signing authority can be delegated on a deal by deal basis or in general as
evidenced in writing.
Financial performance subsequent to approval should be tracked prior to funding.
This tracking should be evidenced, and significant deviations should be
communicated to the Credit Committee prior to funding.

III-10

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DELAYS BETWEEN APPROVAL AND CLOSING
If a transaction is closed more than 90 days after approval, then the
underwriting, in the discretion of the Chief Credit Officer, must be updated.
Depending on the scope of the original due diligence and underwriting, this may
require an updated field examination. The Chief Credit Officer must approve the
scope of any update work. The results of the update should be evidenced in
writing and attached to the closing memo.
If a material deviation in the security, cashflow or other performance is
detected, a memo addressed to all key persons in the process is required. If a
review of the transaction does not note any significant issues, a memo must
still be provided by the Investment Officer and approved by the Managing
Director

III-11

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UNDERWRITING STANDARDS

     
GENERAL GUIDELINES
  IV-1
 
   
ETHICS IN LENDING
  IV-2
 
   
CONFLICTS OF INTEREST
  IV-3
 
   
UNDERWRITING OBJECTIVES
  IV-4

IV

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GENERAL GUIDELINES
All loans and other extensions of credit including, without limitation, leases
and repurchase agreements, shall be underwritten in compliance with Company and
CapitalAnalytics policy. It is the responsibility of the underwriter to insure
that appropriate policy and procedures of CapitalAnalytics have been applied to
each transaction. All underwriting is to be evidenced in writing and filed in
the credit file.
All due diligence on transactions is to be performed by CapitalAnalytics unless
it is pre-approved by the Chief Credit Officer.
All underwriting must address the quality and depth of management. In addition,
the character of management, including their personal and business dealings is
of utmost importance. Background searches are required. At a minimum management
of prospective customers will be credit checked as well as subject to a
background search. The scope of the background check must be discussed and
decided upon during the planning process. Any firm used for this purpose must be
approved by the Managing Directors of each business unit. Any reports prepared
by such firms are to be reviewed by Legal prior to closing.
All fundamental terms and conditions of a credit as well as covenants must be
included in the credit write-up for approval.
Speculative, high-tech and start-up companies should be avoided without the
presence of sufficient collateral.
Borrowers in regulated industries should be subject to in depth diligence
regarding the current regulatory environment and, if deemed appropriate, by
Legal, special regulatory counsel should be engaged.

IV-1

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ETHICS IN LENDING
CapitalSource Finance LLC places considerable trust, responsibility and
authority in management, officers and account officers. Accordingly, all
employees involved in the credit process are expected to keep the highest
ethical standards. Furthermore, the Company requires everyone to adhere to the
spirit as well as the letter of the local laws and regulations governing the
extension of credit.
Anyone who has any doubts as to the ethical or legal probity of a course of
action or situation should consult Legal.
Ethical Lending
All employees of the Company are required to place in the file and make known to
appropriate approval bodies all material information necessary to make informed
credit decisions.
It is unethical and could result in civil suit/criminal prosecution should any
employee of the Company or CapitalAnalytics withhold detrimental information
that, if known, would result in the decline or withdrawal of a credit.
Insider Trading/Loans and Kickbacks:
Insider Trading:
Employees are absolutely prohibited from buying or selling stock (or options) of
any company to which the Company lends or to which the Company is considering a
loan.
Loans and Kickbacks:
Employees are absolutely forbidden to accept any gratuity, monetary, or
otherwise, as an inducement to provide credit or conceal the status of a current
credit. Employees are prohibited from accepting any inducement by borrowers to
grant credit on more favorable terms than is warranted by the credit of the
borrower.
Any instances of “kickbacks” or (offers thereof) must be reported immediately to
Legal.

IV-2

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Conflicts of Interest:
Each employee occupies a position of trust and confidence with respect to the
Company. Each person has a fiduciary duty to act for the primary benefit of the
Company in all manners pertaining to that person’s employment. Accordingly, each
employee must conduct him or herself in such a manner as to avoid any actual or
apparent conflict of interest between such individual’s personal financial
interests and the best interest of the Company.
Confidential Information:
The Company is the recipient of much information, which must, for a variety of
reasons, be strictly confidential and used for only legitimate internal
purposes.
Information is invariably presented to the Company by customers on the basis of
confidentiality and shall not be disclosed outside the Company without the
consent of the customer, except that:
The exchange of commercial credit information (i.e. status inquiry) between
banks and other credit institutions shall be permitted, as well as information
necessary for review by outside legal and /or consultants.
Any information that might possibly be used for improper monetary gain or unfair
advantage by Company personnel or third parties shall be considered strictly
confidential and privileged. Personnel are strictly forbidden to use or disclose
information in their possession for personal gain. This injunction extends to
family, personal acquaintances, and business relationships.

IV-3

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UNDERWRITING OBJECTIVES
The purpose of underwriting is to:
     Support a transaction based on known facts, industry information, and
analysis of books and records, field examinations, thorough financial analysis,
legal opinions and evaluation of management.
Underwriting should be based on supporting collateral, supporting financial
performance, enterprise value, sound judgment and expert opinions. Time
constraints (drop dead clauses) budgetary factors or referral source pressures
should not affect a thorough underwriting. Where appropriate, the final funding
of a transaction could be postponed for the addition of current information
(e.g. year-end audited financial statements, updated budget, etc.) or the
resolution of unknown outcomes (i.e. lawsuits).

IV-4

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UNDERWRITING PROCESS
The initial underwriting process begins when a deal is sourced and entered into
the CapitalSource Deal Tracker (“DT”). The information gathered at this point
includes, but is not limited to, financial statements, management profile,
projections, need for financing, sponsor or buying group profile (if
applicable). Once a deal is sourced, either a Development Officer or Investment
Officer prepares a term sheet. See origination section for a discussion on term
sheets.
When the decision to issue a term sheet is made, Underwriting should be notified
by entering the information on the DT so that the progress of the term sheet can
be tracked. All term sheets, along with other pertinent deal flow information
should be communicated to Underwriting such that appropriate staffing decisions
and planning can be accomplished.
Once a term sheet is executed by a potential customer, the Investment Officer
and assigned Underwriting Officer should go through a planning process. This
process will include setting the expectations for timing of delivery of a
closing, and then working backwards, determine a date for approval, a date that
the credit write-up needs to be completed, date the field exam needs to be
completed, etc. Any scheduling of appraisals, outside research, background
checks etc. should be determined, and responsible parties determined at that
time.
The majority of all new transactions will require a field examination. The scope
will vary depending on whether there is a reliance on collateral, cashflow, or
both. The scope of this fieldwork would be determined in the planning process.
Obviously, as fieldwork is being performed, adjustments to the scope of the work
are often necessary. The underwriter and Investment Officer must be kept
appraised of the process so that any adjustments to the timing, structure, etc.
can be considered and communicated back to the customer as necessary.
Field examination work is to be summarized in a comprehensive document in a
standard format as determined by CapitalAnalytics. This report is to be included
in the credit package submitted to the credit committee for approval.
The accumulation of the due diligence/underwriting process will be documented in
the form of an underwriting report. An underwriter must prepare this document.
This report has a standardized format as determined by CapitalAnalytics. The
Investment Officer will prepare a separate credit memorandum with his/her
analysis of the transaction. These documents have a standardized format. The
credit committee format is dictated by the respective Managing Directors. The
underwriting report is dictated by CapitalAnalytics. In general, an underwriting
file should contain information/analysis on a company’s years in business,
company history, management team experience, industry, capital structure,
financial performance and discussion of collateral.

IV-5

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The completed credit package shall be the basis for approving each transaction.
Material omissions of information such as final year-end financial statements,
budgets, etc. will be noted as open items on the approval sheet. Any and all
conditions of approval will also be included on the approval sheet so that the
legal department administration will have a record of all approval conditions in
order to resolve them at closing.
The Credit Committee will make approvals for new loans. Meetings will take place
no less frequently than weekly either in person or via teleconference. Approval
is to be evidenced by signatures on the approval page and will be retained in
the credit file. Facsimile copies or email approvals are adequate. A verbal
approval by a Credit Committee member must be evidenced by signature
subsequently and filed in the credit file.

IV-6

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RISK ACCEPTANCE CRITERIA
The company has developed Risk Acceptance Criteria, (“RAC’s) to be used as a
guide in structuring and evaluating loan transactions. These criteria must be
considered when underwriting a transaction. The underwriting officer is
responsible for summarizing compliance with the RACs and noting exceptions. Any
and all exceptions must be considered in determining whether a transaction
should be recommended for approval.
While there are common considerations when considering loans of all types such
as credit, collateral, etc, the separate business units contain their own unique
sets of risks and credit considerations. Therefore, RAC’s have been developed
for each business unit for various types of transactions within those units.
The following pages show the current risk acceptance criteria developed for each
group. Healthcare transactions are evaluated using three sets of RACs. One for
term loans, one for revolvers and one for equipment leases. For Corporate
Finance, three sets of RACs have been developed. The RAC’s are for ABL, Senior
Term Loans and Mezzanine/Subdebt transactions. Finally, Structured Finance has
three sets of RACs, Vacation Ownership, Real Estate and Rediscount.

IV-7

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HealthCare Finance — Secured Term Deals Risk Acceptance Criteria

          Risk Acceptance Criteria   Risk Acceptance Description   Comment on
Compliance
Market Segment
  Healthcare service companies including Skilled Nursing Facilities, Assisted
Living Facilities, Congregate Care Retirement Communities, Acute Care and
Long-Term Acute Care Hospitals, Ambulatory Surgery Centers, Home Health
Providers, and Mental Health Providers      
Borrower Size
  $5MM annual revenues      
Loan Size (hold)
  Minimum SIMM, maximum $55MM      
Geographic Region
  No Restrictions      
Borrower Recourse
  Normal and customary non-recourse carve-outs      
Interest Rate
  Prime or Libor Based      
Term Loan Maturity
  Up to seven years      
Term Loan Amortization
  Negotiable; Typically 25 year with balloon      
Use of Proceeds
  Business Acquisition, Real
Estate Financing      
Collateral
  First Mortgage on Real Property and all available assets      
Loan to Value
  Loan to value should not exceed 80% of M.A.I, appraised value and also a
multiple of underwritten cash flows.      
Debt Service Coverage
  Stabilized should support Debt Service in excess of CapitalSource Facility    
 
Appraisals
  Required      
Personal Guarantees
  Negotiable      
Evaluation of Management
  Must be performed by an Investment Officer and Underwriting Officer    

IV-8

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HealthCare Finance — Asset Based Deals Risk Acceptance Criteria

          Risk Acceptance Criteria   Risk Acceptance Description   Comment on
Compliance
Market Segment
  Healthcare service companies including Skilled Nursing Facilities, Assisted
Living Facilities, Congregate Care Retirement Communities, Site Maintenance
Organizations, Contract Research Organizations, Acute Care and Long-Term Acute
Care Hospitals, Ambulatory Surgery Centers, Durable Equipment Manufacturers,
Physician Practice Management Companies, Home Health Providers, Mental Health
Providers, Healthcare Technology companies and other Healthcare Service
Companies      
Borrower Size
  $5MM annual revenues      
Loan Size (hold)
  Minimum $1MM, maximum $55MM      
Geographic Region
  No Restrictions      
Borrower Recourse
  Required      
Use of Proceeds
  Working Capital, Business
Acquisition      
Collateral
  First perfected lien on Accounts Receivable / Inventory and all available
assets, as applicable      
Advance Rates
  Advance rate, 70-85% of net collectible collateral value for accounts
receivable and 45-60% for inventory      
Eligibility Period
  Typically, Current- 180 days dependant on industry      
Loan Turn
  Industry Specific, Generally 20-90 days      
Lockbox Control
  Required      
Loan Term
  2-3 Years      
Interest Rate
  Prime or Libor Based Rate      
Debt Service Coverage
  Stabilized Debt Service Coverage
supports CapitalSource Facility      
Covenants
  Negotiable; typically include census and fixed charge coverage ratios.      
Personal Guarantee
  Negotiable      
Evaluation of Management
  Must be performed by an Investment Officer and Underwriting Officer    

IV-9

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HealthCare Finance — Equipment Leases

          Risk Acceptance Criteria   Risk Acceptance Description   Comment on
Compliance
Market Segment
  Healthcare service companies including Skilled Nursing Facilities, Assisted
Living Facilities, Congregate Care Retirement Communities, Acute Care and
Long-Term Acute Care Hospitals, Ambulatory Surgery Centers, Home Health
Providers, and Mental Health Providers      
Borrower Size
  $5MM annual revenues      
Loan Size (hold)
  Minimum $1MM, maximum $5MM      
Geographic Region
  No Restrictions      
Borrower Recourse
  Normal and customary non-recourse carve-outs      
Interest Rate
  Prime or Libor Based. Can be fixed      
Term Loan Maturity
  Up to seven years      
Term Loan Amortization
  Up to 84 months      
Use of Proceeds
  The related equipment with respect to the lease is not a fixture. Lease arises
under a contract pursuant to the installation of the equipment.      
Collateral
  Equipment securing the lease.      
Loan to Value
  Loan to value should not exceed 80% of M.A.I. appraised value and also a
multiple of underwritten cash flows,(i.e. applicable for example in an MRI
center, or other such treatment center).      
Debt Service Coverage
  Stabilized should support Debt Service in excess of CapitalSource Facility    
 
Appraisals
  Not required      
Personal Guarantees
  Negotiable      
Evaluation of Management
  Must be performed by an Investment Officer and Underwriting Officer    

IV-10

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          Senior Secured Deals         Risk Acceptance Criteria   Risk
Acceptance Description   Comment on Compliance
Market Segment
  Manufacturers, Wholesalers, Distributors, Service Organizations, Retailers,
Healthcare companies, and companies undergoing recapitalization/leveraged
buyout, turnaround, restructuring, DIP, growth, acquisitions, modernization.    
 
       
 
  Discouraged Industries:
General Contractors, Construction      
Borrower Size
  $10MM minimum annual revenues      
Loan Size (hold)
  Minimum $1MM, maximum $40MM hold.      
Geographic Region
  No Restrictions      
Term Loan Amortization
  No material term loan collateral exposure at end of contract using scheduled
amortization.    
 
       
Term Loan Maturity
  5-7 years      
Work-in-process (WIP) advances
  Limited unless supported by firm purchase orders or customer releases.      
Accounts Receivable Advances
  Limited to 90% based upon dilution.      
Principal Moratorium
  Interest only period for term loans limited to one year      
Evaluation of Management
  Must be performed by a Investment Officer and Underwriting Officer at a
minimum.    

IV-11

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Corporate Finance

          Sr. Cash Flow Term Loan         Risk Acceptance Criteria   Risk
Acceptance Description   Comment on Compliance
Market Segment
  Manufacturers, Wholesalers, Distributors, Service Organizations, Retailers,
Healthcare companies, and companies undergoing recapitalization, leveraged
buyout and acquisitions.    
 
       
 
  Discouraged Industries:
General Contractors, Construction, Hi-Tech,
Cyclical, Oil& Gas      
Borrower Size
  $20MM minimum annual revenues
$3MM minimum EBITDA      
Loan Size (hold)
  $40MM maximum loan      
Geographic Region
  No Restrictions      
Leverage — Senior Debt
  Maximum Senior debt to operating cashflow (EBITDA less maintenance capex) of
3.50x.      
Interest Coverage
  EBITDA to Senior interest of 3:1 at a minimum.      
Capitalization
  Senior debt (senior, subordinated, seller notes) limited to 60% of the capital
structure.      
Concentrations
  Sales concentrations with one customer in excess of 30% or a major single
product (in excess of 30% of sales).      
Term Loan Amortization
  Within first three years 30% of total term loans should amortize.      
Term Loan Maturity
  Maximum 10 years.    

IV-12

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Corporate Finance

          Mezzanine/Sub Debt         Risk Acceptance Criteria   Risk Acceptance
Description   Comment on Compliance
Market Segment
  Manufacturers, Wholesalers, Distributors, Service Organizations, Retailers,
Healthcare companies, and companies undergoing recapitalization, leveraged
buyout and acquisitions.    
 
       
 
  Discouraged Industries:
General Contractors, Construction,
Hi-Tech, Cyclical, Oil& Gas      
Borrower Size
  $30MM minimum annual revenues
$7.5MM minimum EBITDA      
Loan Size
  $25MM      
Loan Size
  $25MM maximum loan      
Geographic Region
  No Restrictions      
Leverage — Total Debt
  Maximum total debt to operating cashflow (EBITDA less maintenance capex) of
4.5x.      
Interest Coverage
  EBITDA to total interest of 2:1 at a minimum.      
Capitalization
  Total debt (senior, subordinated, seller notes) limited to 75% of the capital
structure.      
Concentrations
  Sales concentrations with one customer in excess of 30% or a major single
product (in excess of 30% of sales.)      
Term Loan Amortization
  Within five years 90% of senior term loans should amortize.      
Term Loan Maturity
  Maximum 7 years.    

IV-13

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VACATION OWNERSHIP
Table I — Asset Based Transaction

          Asset Secured Deals         Risk Acceptance Criteria   Risk Acceptance
Description   Comment on Compliance
Loan Size
  Maximum $55MM      
Geographic Region
  United States      
Market Segment
  Borrower shall be involved in the financing of notes receivable to consumers
associated with the purchase of vacation ownership intervals or the sale of
marketable vacation ownership intervals.      
Advance Rate
  Maximum of 90% of Eligible Accounts Receivable; maximum of 90% of Eligible
Inventory      
Eligibility Criteria
  Receivables: secured by a first mortgage lien on a timeshare interest; payable
in US dollars; carrying minimum interest rate higher than that charged by
CapitalSource; matures in no more than 84 months from origination date; current
with no more than 90 days past due on contractual basis; maintains acceptable
title insurance; maintains acceptable property insurance; properly documented
with original note in CapitalSource’s possession.    
 
         
 
  Inventory: secured by a first mortgage lien on the timeshare interval; located
in the US, Caribbean, Canada or Mexico; maintains acceptable title insurance;
maintains acceptable property insurance.      
Loan Amortization
  Amortization shall be based on the sale of assets based on a pre-determined
release price.      
Loan Term
  No longer than five (5) years      
Delinquency History
  Historical data must reflect acceptable delinquency characteristics.      
Credit Underwriting &
Asset Management
  Borrower must maintain documented credit underwriting and asset management
procedures.      
File Maintenance
  Credit and legal files should be maintained in good order and exhibit
consistent compliance with credit underwriting and asset management guidelines  
   
Evaluation of Management
  Must be performed by an Investment Officer and Underwriting Officer at a
minimum.    

IV-14

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REDISCOUNT

          Asset Secured Deals         Risk Acceptance Criteria   Risk Acceptance
Description   Comment on Compliance
Loan Size
  Maximum $55MM      
Geographic Region
  United States      
Market Segment
  Borrower shall be involved in the financing of consumer and/or commercial
notes receivable secured by a first lien on underlying collateral.      
Advance Rate
  Maximum of 90% of Eligible Accounts Receivable      
Eligibility Criteria
  Receivables: secured by a first lien on underlying collateral; payable in US
dollars; originated in a state approved by CapitalSource; carrying minimum
interest rate higher than that charged by CapitalSource; current with no more
than 90 days past due on contractual basis; properly documented with original
note and other applicable instruments in the possession of CapitalSource or a
third-party approved by CapitalSource.      
Loan Amortization
  Maintain either (i) the Borrowing Base, as certified by the Borrower or
(ii) the amortization schedule if loan is a term loan or liquidity asset pool.  
   
Loan Term
  No longer than five (5) years      
Delinquency History
  Historical data must reflect acceptable delinquency characteristics.      
Credit Underwriting
& Asset Management
  Borrower must maintain documented credit underwriting and asset management
procedures.      
File Maintenance
  Credit and legal files should be maintained in good order and exhibit
consistent compliance with credit underwriting and asset management guidelines  
   
Evaluation of Management
  Must be performed by an Investment Officer and Underwriting Officer at a
minimum.      
Financial Reporting
  To be provided monthly. Annual financial statements to be reviewed if
outstanding loan is less than $5MM and audited if greater than $5MM.    

IV-15

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REAL ESTATE

          Asset Secured Deals         Risk Acceptance Criteria   Risk Acceptance
Description   Comment on Compliance
Loan Size
  Maximum $55MM/$30MM for mezzanine      
Geographic Region
  United States      
Advance Rate
  Maximum of 90% loan-to-value      
Eligibility Criteria
  Commercial property located within the United States.      
Loan Amortization
  Loans are structured as either (i) interest only or (ii) amortizing per a
preset schedule.      
Loan Term
  No longer than five (5) years      
Delinquency History
  Historical data must reflect acceptable delinquency characteristics.      
Credit Underwriting &
Asset Management
  Borrower must maintain documented credit underwriting and asset management
procedures.      
File Maintenance
  Credit and legal files should be maintained in good order and exhibit
consistent compliance with credit underwriting and asset management guidelines  
   
Evaluation of Management
  Must be performed by an Investment Officer.      
Financial Reporting
  To be provided monthly. Annual financial statements to be reviewed.    

IV-16

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PrivateSource
PrivateSource Mortgage LLC (“PrivateSource”), a wholly-owned subsidiary of
CapitalSource Inc., has successfully obtained its California Lender’s License,
which was a prerequisite to provide fractional mortgage financing in the State
of California. As a result, PrivateSource has now begun soliciting loan
applications from individuals.. Each loan application will be evaluated
according to the following minimum underwriting criteria.

     
Minimum Credit Score (i.e. FICO)
  650
Maximum Monthly Debt Payments to Monthly Net Income Ratio
  50.00%
Minimum Down Payment
  15.00% *
Maximum Loan-to-Cost/Value
  85.00% *
Maximum Loan Length
  30 years
Minimum Loan Length
  15 years
Approved Resort
  Must be approved by PrivateSource, either through (i) an inventory financing
that has obtained separate Credit Committee approval or (ii) independent
approval by PrivateSource following, among other items, an on-site visit and a
review of Developer’s financial statements and business plan.
Approved Credit Bureau Processor
  NCO Credit Services will electronically transmit a tri-merge credit report
from all three credit agencies (i.e. Equifax, Experian and Trans Union),
complete with a “Bankruptcy Model Score” to enhance applicant screening.
Minimum Information Required from Each Prospect
  See attached Exhibit A
Appraisal
  Each funded loan for each fractional unit will require a FNMA 2065 Appraisal
Report.
Approved State
  PrivateSource has satisfied (i) the necessary state qualifications to do
business and, where applicable, (ii) the necessary state licensing requirements
to originate mortgage loans. As the need arises, PrivateSource will coordinate
with Pierrette Bradshaw to satisfy these requirements prior to initiating loan
origination activity in any new state.
Approved Legal Documentation
  PrivateSource has assembled near full loan documentation at the direction and
guidance of Pierrette Bradshaw. Each Approved State will have a tailored Deed of
Trust and Promissory Note, the content of which will be reviewed and approved by
local counsel at the direction of Pierrette Bradshaw.
Approved Custodian
  BNY Midwest Trust (or other approved third-party custodian).
Approved Servicing Agent
  Concord Servicing Corporation

IV-17

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PORTFOLIO MONITORING

     
PORTFOLIO MEETINGS
  V-l
 
   
CONTRACT EXTENSIONS/AMENDMENTS
  V-2
 
   
TERM LOAN RELOADS
  V-3
 
   
OVERADVANCES/OVERLINES
  V-4
 
   
COVENANT DEFAULTS
  V-5
 
   
FIELD EXAMINATION REPORTS
  V-6
 
   
PROBLEM LOAN REPORTING
  V-7
 
   
LOSS RESERVES
  V-9

 V

 

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PORTFOLIO MEETINGS
Portfolio meetings generally will take place once per week. During this meeting,
selected loans in the portfolio will be reviewed by the loan officers
responsible for the accounts. All members of the Credit Committee will be
present each week for these meetings. The purpose of a portfolio meeting is to
provide a status up-date of pertinent, material events and information on
applicable accounts. The responsibility for overall portfolio management and
monitoring will reside within the various business units as dictated by the
Managing Directors of those units. The frequency and scope of detailed portfolio
meetings as part of the overall objective of portfolio management will therefore
be developed and recommended by the Managing Directors and documented in their
respective servicing manuals. In addition, the credit committee will conduct
periodic portfolio meetings to encompass the entire portfolio on an as needed
basis, but no less than quarterly.

V-1

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

 

CONTRACT EXTENSIONS/AMENDMENTS
The extension/amendment of a contract and release of an obligor without
repayment requires approval by the Chief Credit Officer. A credit memorandum
prepared by the loan officer must be completed and submitted.
The following are items that would not require approval by the Chief Credit
Officer:

1.   Reductions in a line of credit.   2.   Reductions in eligible collateral.  
3.   Addition of a new entity in the borrowing base provided the information has
been audited, and the addition does not increase the overall line of credit.  
4.   Extension of an existing line of credit provided there is no deterioration
in the financial performance of the borrower or in the collateral.   5.  
Release of collateral due to sale.

The Managing Director must approve the changes listed above. Additionally, any
extension, modification, amendment or forbearance on any transactions with a
four rating or greater must be approved by the Chief Credit Officer, regardless
of aforementioned items.
Finally, all modifications, amendments, extensions, waivers, consents,
collateral releases, etc. must be approved by the legal department with copies
of executed documents promptly furnished to the legal department.

V-2

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TERM LOAN RELOADS
Term loans can be reloaded on existing contracts provided the customer’s credit
performance and collateral has not deteriorated. The contract term, pricing and
possible fees must be considered in conjunction with the request. The Credit
Committee must approve any reloads of a term facility. An approval memorandum
must be prepared and approval signatures retained for the file.

V-3

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OVERADVANCES/OVERLINES
Advances beyond the authorized credit line should be discouraged, as that
procedure would be in direct contradiction of our approval process. However, the
expectation of having all loans fall within their available collateral base or
credit line is unrealistic.
Any overadvance or overline that extends beyond 30 days and/or exceed $500,000
requires approval by either the President, Chief Credit Officer or the CEO.
Amounts under $500,000 and less than 30 days will adhere to the schedule
proposed by each Managing Director as documented in the respective servicing
guidelines for each group. These approval authorities are to be reviewed
periodically, and changes and/or additions should be approved by the CEO and/or
the Chief Credit Officer. Any overadvance to a borrower with a four rated credit
or lower must be approved by the Chief Credit Officer.
All overadvances/overlines must be approved in writing. The reasons for the
accommodation, along with a repayment schedule, financial spreadsheet and
reporting status must be attached to the approval form.

V-4

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COVENANT DEFAULTS
All material violations of loan covenant defaults should be communicated to the
credit committee.
The respective Managing Director for each group must approve any waivers of
covenant defaults. The scope of the allowable waivers shall be documented in
each group’s respective service manuals. The Legal Department should be
consulted prior to granting the waiver and their advice followed with respect to
the wording of any waiver. The Chief Credit Officer must be consulted with
respect to covenant default for four rated credits or lower.
It is important that when we become informed of covenant defaults, we promptly
address these defaults by either granting waivers, negotiating terms of
forbearance, or notifying the client that we are aware of the default and are
reserving all our rights to pursue remedies. Again, the Legal Department should
be consulted as circumstances dictate.

V-5

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FIELD EXAMINATION REPORTS
Capital Analytics must conduct field examinations. This procedure should entail
an independent impartial review of a customer’s financial/collateral position.
This assessment will be made from the company’s books and records as well as
physical observation of the business.
Standardized forms shall be used for field examinations. These forms should in
no way limit the field examiner in his/her examination. Prior to embarking on a
field examination, the field examiner must discuss the current status of the
customer he/she is about to visit with the loan officer. The loan officer should
mention any particular areas of concern during the planning phase. Fieldwork
will not be scheduled in absence of a pre-audit conference.
The Chief Credit Officer or his designee will approve all field examination
reports prior to distribution. Initials from the loan officer will evidence the
review of the field examination reports by loan administration. Any
recommendations or exceptions noted in the examination must be addressed in
writing within 15 working days from distribution of the report. Responses to the
examinations will be copied to the Chief Credit Officer, and the Managing
Director of the respective business unit. The original will be filed in the
credit file.

V-6

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PROBLEM LOAN REPORTING
Overview
Over the lifecycle of any borrower, there may be periods where operational and
financial problems may negatively affect the repayment of a loan. It is
important that we proactively manage these situations to try and preserve our
relationship with our borrower while managing the increasing level of risk in a
particular loan.
Once a loan is rated 4 or higher, it is considered a problem loan. Loans rated 3
or higher may be experiencing negative trends in financial or operational
performance, cash flow and debt service capability or collateral value. In these
cases the loan officer should consider consulting with the Problem Loan Manager
as to strategy and tactics in managing the loan before the situation
deteriorates further. When a loan is downgraded to a 4 it is the responsibility
of the loan officer to arrange a meeting with the respective MD and Problem Loan
Manager to determine:

  •   what level of supervision will be required by the Problem Loan Manager or
other representatives from Capital Analytics (CA)     •   what strategy and
tactics will be adopted to prevent further deterioration and ultimately lead to
an upgrade of the risk rating to 3 or better?

Problem Loan Manager/Capital Analytics Supervision
Loans rated 4 or higher will require the supervision of the Problem Loan Manager
or other representative from CA. The level of supervision will be determined in
a meeting between the loan officer, the respective MD and the Problem Loan
Manager. This meeting is to be held on a timely basis, but no more than 5 days
after the downgrade. The level of supervision will be determined based upon the
specific circumstance for a particular loan. Consideration will be given to the
severity and speed of the deterioration, the strength of the loan documentation,
our collateral position and the likelihood of a bankruptcy filing. The levels of
supervision are:

  •   Shadow Supervision     •   Active Involvement     •   Direct Management

Shadow Supervision: the loan officer will provide frequent, detailed updates on
the (i) progress of the company’s turnaround efforts, (ii) any deterioration in
collateral coverage, (iii) any deterioration of repayment ability, (iv) the
status of covenant or payment defaults, (v) status of pertinent negotiations,
(vi) other relevant issues.
Active Involvement: the Loan Officer will (i) include the Problem Loan Manager
or other representative from CA in all negotiations and discussions with
management, sponsor groups or other relevant third parties, (ii) provide the
Problem Loan Manager or other representative from CA with all relevant financial
analysis and financial information, (iii) consult with the Problem Loan Manager
or other representative from CA in establishing loan management strategies
and/or action plans.

V-7

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Direct Management: the Problem Loan Manager or other representatives from CA
will take full responsibility for the day to day management of a loan under
certain circumstances. In these cases the loan officer will ensure that there is
a proper transition in the management of the loan and will remain available to
provide historical perspective as needed.
Loan Administration Procedures
When a loan is downgraded to a 4, in addition to the procedures outlined in
section V-7 of the Credit Policy Manual, the Loan Officer must request an
updated field exam and updated appraisals of inventory and fixed assets.
Consideration should be given to reviewing the legal file in detail and/or
transferring the legal file to outside legal counsel, under the supervision of
in-house counsel, with a strong background in working with problem loans for a
comprehensive legal file review. The Problem Loan Manager should be consulted
for a recommendation. Please note that whenever the decision to utilize outside
counsel is considered, that the legal department must approve it.
For all loans rated 4 or lower, the Loan Officer is required to report on a
regular basis on the status of the loan. This report should focus on the root
cause problems and the corrective actions being taken. This reporting will also
address repayment capability, both current and projected, and collateral
valuation based on fully funded loan facilities. In addition, the loan officer
should track the key performance indicators (occupancy, census, payor mix,
backlog, book to billings ratio, achievement of synergies, etc.) along with the
trends. In addition, if there are guarantors, the loan officer must request
updated personal financial statements on the CA format signed by all of the
guarantors as well as copies of the signed and filed federal income tax returns
for the last two tax years. The loan officer should prepare a detailed analysis
of these documents.
When a loan is downgraded to a 5, if not already done, consideration should be
given to assigning the legal file to outside legal counsel with a strong
background in handling problem loans. If collateral includes real estate the
Loan Officer must determine if Phase I or Phase II environmental reports are
necessary. For those loans where enterprise value is the primary source of
repayment, the account officer should consider engaging an investment banker to
perform a business valuation.
The Loan Officer is responsible for recommending downgrades and upgrades of risk
ratings as well as changes to accrual status and loan loss reserves on a timely
basis.
When a loan is downgraded to a 4 or lower every effort should be made improve
our ability to manage the risk related to this loan. The following steps are
recommended:

  1.   obtain full control of cash including a lockbox and the daily sweep of
cash against revolving loans     2.   monthly financial reporting and monthly
covenant reporting     3.   daily collateral reporting     4.   eliminate any
limitations on the frequency of field exams and caps on expenses which can be
passed along

V-8

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LOSS RESERVES
Overview
CapitalSource’s most significant asset is its loan portfolio, which accounts for
approximately 90% of the total assets on the balance sheet. Accordingly, a loan
loss reserve policy has been established to record appropriate reserves based on
the risk inherent in the type of loan and the risk rating assigned to it by the
credit committee. The risk inherent in the loan is based on the seniority of
CapitalSource’s position, senior loans are less risky than subordinated loans,
and the type of collateral supporting the loan, asset based, cash flow or real
estate. Asset based loans are considered lower risk, real estate loans are
considered moderate risk, and cash flow loans are considered higher risk. These
risk factors are combined and a risk factor is assigned to every loan in each
class in order to calculate the loan loss reserve on the current loan portfolio.
Accounting Technical Literature
Generally accepted accounting principles for recognition of loan losses is
provided by Statement of Financial Accounting Standards No. 5, Accounting for
Contingencies (“SFAS No. 5”) and No. 114, Accounting by Creditors for Impairment
of a Loan (“SFAS No. 114”). SFAS 5 deals with the general reserve booked to all
loans in the portfolio and SFAS 114 deals with specific reserve, which are
applied to loans classified as a 6 or troubled debt restructurings.
General Reserve
Per paragraph 85 of SFAS 5; the conditions for accrual are not “intended to be
so rigid that they require virtual certainty before a loss is accrued. They
require only that it is probable that an asset has been impaired or a liability
has been incurred and that the amount of loss be reasonably estimable”. Applying
this statement to CapitalSource’s loan portfolio, it is probable the portfolio
will experience some loss prior to maturity although it is not certain to the
extent of the loss and to which loans. Therefore, CapitalSource will apply a
general reserve to the loans in the portfolio in which there is no measurable
impairment. These loans will be assigned a loan rating between 1 and 5,
depending on the likelihood of any future impairment. Those loans with a lower
loan rating, 1, will be assessed a lower reserve factor than those loans
assigned a higher loan rating, up to 5.
Specific Reserve-6 Rated Loans
SFAS 114 should be applied to those loans that are either assigned a 6 loan
rating, which occurs when it is likely CapitalSource will incur a loss on the
principal of the loan, or those determined as troubled debt restructurings, as
defined in Statement of Financial Accounting Standards No. 15, Accounting by
Debtors and Creditors for Troubled Debt Restructurings. Per SFAS 114, “a loan is
impaired when, based on current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the contractual
terms of the loan agreement”. Since CapitalSource rates all loans in which a
loss pf principal is likely a 6, a specific reserve is calculated in accordance
with the definition of SFAS 144 above. The impairment is calculated per

V-9

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paragraph 13, which states, “regardless of the measurement method, a creditor
shall measure impairment based on the fair value of the collateral when the
creditor determines that foreclosure is probable”. Thus, the loan is valued
based on the proceeds CapitalSource will expect to receive in a liquidation of
the business or underlying collateral. Since CapitalSource will base the value
and allocate a specific reserve based on the value of the underlying asset or
the expected proceeds from liquidation, a reserve factor is not assigned to the
6 rated loans. Therefore, the entire loss should be booked as a specific
reserve,
Specific Reserve-Troubled Debt Restructurings
Per SFAS 15, a “troubled debt restructuring may include, but is not limited to:

  1.   Transfer from the debtor to the creditor of receivables from third
parties, real estate or other assets to satisfy or partially satisfy a debt;    
2   Issuance or granting of an equity interest to the creditor by the debtor to
satisfy fully or partially a debt unless the equity interest is granted pursuant
to existing terms for converting the debt into equity interest; and     3.  
Modification of terms of the debt including a change in the interest rate,
extension of the maturity date at a lower rate of interest, a reduction in the
face amount or a reduction in accrued interest.

In the above situations, a specific reserve is calculated, “based on the present
value of the expected future cash flows discounted at the loan’s effective
interest rate, except that as a practical expedient, a creditor may measure
impairment based on a loan’s observable market price, or the fair value of the
collateral if the loan is collateral dependent”. The difference between the
present value and the carrying value of the asset, which is the face value less
any non-amortized fees, results in a specific reserve to the loan. When the
specific reserve is applied to the loan, the general reserve is first backed-out
of the impairment calculation. Since these loans are typically a 4 or 5, a
general reserve is already calculated on the outstanding principal balance and
should be considered when calculating a specific reserve.
Reserve Policy
On a current basis, CapitalSource will maintain a reserve based on the formula
applied to each loan set forth below. “Reserve Factor” is the percentage
allocation for each Loan Type as further segmented by Loan Rating. The loan loss
reserve will be calculated at the end of each month based on the reserve factors
below:

V-10

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

 

          For Senior Loans:         Loan Type   Loan Ratine   Reserve Factor
Asset Based
  1   0.00%
Asset Based
  2&3   0.25%
Asset Based
  4&5   0.50%
Asset Based
  6   Discount the loan as appropriate
 
       
Real Estate
  1   0.00%
Real Estate
  2&3   0.50%
Real Estate
  4&5   1.00%
Real Estate
  6   Discount the loan as appropriate
 
       
Cash Flow
  1   0.00%
Cash Flow
  2&3   1.00%
Cash Flow
  4&5   2.00%
Cash Flow
  6   Discount the loan as appropriate
 
        For Subordinate (Term “B” or Mezzanine Loans:
Real Estate
  1   0.00%
Real Estate
  2&3   1.00%
Real Estate
  4&5   200%
Real Estate
  6   Discount the loan as appropriate
 
       
Cash Flow
  1   0.00%
Cash Flow
  2&3   1.25%
Cash Flow
  4&5   2.50%
Cash Flow
  6   Discount the loan as appropriate

Loan Rating Process
As noted above, loans assigned a lower loan rating are assessed a lower reserve
factor and those assessed a higher loan rating receive a higher reserve factor.
As a result, CapitalSource’s ability to manage the loan rating process in a
consistent and accurate manner is important to the success of this Reserve
Policy. Accordingly, CapitalSource established the following procedures for
assessing and approving the loan rating on a monthly basis as of January 1,
2003:

  1.   Each quarter all Loan Officers will suggest a rating for each loan in
their portfolio (due by the end of the month for the prior month to allow for
the receipt of financial information from the borrower, etc).     2.   The
Portfolio Review Specialist within the Credit Services and Operation Group will
review the loan rating worksheet submitted by each Loan Officer. The Specialist
will check for data and calculation errors and review the subjective assumptions
(as applicable). The Portfolio Review Specialist reports to the Chief Credit
Officer.

V-11

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  3.   The Chief Credit Officer will review any exceptions suggested by the
Portfolio Review Specialist with the Loan Officer and approve the loan rating
accordingly.

Appropriateness of Reserve Percentages
CapitalSource was formed on September 7, 2000 and has experienced very few
losses during the relatively short operating history. As a result, it is
necessary for CapitalSource to look outside of the portfolio to determine the
loan loss reserve factors. As of December 31, 2002, CapitalSource gathered
financial data regarding the loan loss reserve and the total assets from a range
of competitors over the various lending groups. This information was utilized to
establish reserve factors for each asset class, which are used to calculate the
loan loss reserve on a monthly basis. CapitalSource has updated the analysis as
of December 31, 2003 and noted that the ranges continue to support our reserve
factor as noted below:

                  Loan Type   CapitalSource Range*   Competitor Range
Asset Based
    .25%-.50 %     .47%-2.92 %
Mortgage Debt
    .50%-2.0 %     .48%-2.68 %
Cash Flow
    1.0%-2.5 %     .72%-1.65 %

 

*   CapitalSource has a range for each loan type that is based on the loan
rating each month.

Based on the analysis above, CapitalSource will continue to utilize the same
reserve factors when calculating the monthly loan loss reserve. The analysis
will be updated annually and changes will be made when necessary.
Calculating Specific Reserves for 6 Rated Loans
Loans rated 6 are loans that considered troubled and have a reasonable
probability for loss. Each quarter, the loan officer (in consultation with the
Managing Director and Chief Credit Officer) will determine (or revise) the
appropriate specific reserve amount according to the following methodology.
The Loan Officer will then prepare and distribute a memorandum to the Credit
Committee setting forth his or her analysis and the basis for the amount of the
specific reserve. The Credit Committee will meet with the Loan Officer and the
relevant Managing Director to consider the memorandum and will determine the
amount of the specific reserve for the loan at issue.

I.   For Asset-Backed, Real Estate or other Collateral-based Loans:       The
specific reserve amount shall be determined by discounting remaining cash flows
as required by FAS 114.

V-12

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

 

II.   For Cash Flow Loans :       A “Maximum Loss Exposure” or “MLE” will be
calculated by the loan officer for each 6 rated loan. The MLE is the loan
officer’s estimate of the maximum potential loss exposure for the loan assuming
a worst-case event scenario. Generally, the MLE should be the amount of the loan
balance less the likely recovery value for the enterprise and/or collateral
securing the loan based on the current facts of the case (i.e. ignoring “upside”
surprises associated with the borrower and collateral).       Each 6 rated loan
should be classified into one of the following categories for specific reserve
purposes:

     
Category 1
  “Some loss is a reasonable possibility”
 
   
 
  The borrower is experiencing significant financial difficulties or the
collateral is impaired or a serious threat exists to the collateral. It is
extremely difficult to assess the amount of the loss based on the facts of the
case.
 
   
Category 2
  “Some loss is likely”
 
   
 
  The borrower is experiencing significant financial difficulties or the
collateral is impaired or a serious threat exists to the collateral. It is
difficult to assess the amount of the loss based on the facts of the case.
 
   
Category 3
  “Some loss is certain”
 
   
 
  The borrower is experiencing significant financial difficulties and collateral
is being liquidated and some loss is certain The exact amount of recovery is
still not precisely determinable, but is highly likely to exceed 50% of the MLE.
 
   
Category 4
  “Amount of loss is known, but probability of collection is remote”
 
   
 
  The borrower is experiencing significant financial difficulties and collateral
is being liquidated, the amount of maximum loss exposure can be precisely
determined and the probability of any greater recovery is remote.

The Specific Reserve for each 6 rated loan shall be determined by multiplying a
“loss factor” by the Loss Scenario. Set forth below are the loss factors for
each category.

         
Category 1:
    25 %
Category 2:
    50 %

V-13

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

 

         
Category 3:
    75 %
Category 4:
    100 %

V-14

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

 

LOAN RATING/SERVICING

         
LOAN SERVICING GENERAL
  VI-1
 
       
LOAN RATING MATRIX GENERAL
  VI-2
 
       
CLIENT TREND REPORTING
  VI-3
 
       
DELINQUENCY REPORTING
  VI-4

VI

 

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

 

LOAN SERVICING GENERAL
The purpose of this section is to establish a system that identifies for
Management and Loan Administration the quality of the loan and the level of
servicing required. To accomplish this, the detailed daily monitoring is
delegated to the loan-servicing department within each respective business unit.
The Managing Director for each business unit is responsible for establishing and
documenting appropriate reporting criteria based upon the risk profile of the
respective portfolios. Exceptions and delinquency should be established to
highlight areas needing immediate attention and/or action.
The objectives of the loan servicing system for each business unit are as
follows:

  1.   To establish standards, needs and priorities of loan servicing and
control, resulting in reduced loss experience and improved client
service/relationships.     2.   To maintain continuity and uniformity in client
collateral and financial reporting.     3.   To keep management informed of
credit and collateral changes.     4.   To identify trends in workloads and to
improve productivity.     5.   To notify all departments of a rating change as
it occurs so that servicing changes and modifications can be implemented on a
timely basis if appropriate.

The parts, which make up the loan servicing system, are as follows:

  1   Loan Rating Matrix — A chart designed to identify appropriate loan scoring
based on credit and collateral factors.     2.   Loan Servicing Standards — A
listing of required minimum servicing levels. This is documented in servicing
manuals as appropriate by each individual business unit.     3.   Trend Report —
A report to identify patterns and/or changes in reported information.     4.  
Delinquency report — Used to identify delinquencies in reported client
information.

VI-1

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

 

LOAN RATING MATRIX GENERAL
Management has designed a rating system to quantify the risk associated with
each loan in the portfolio. These ratings range from 1 (most creditworthy)
through 6 (least creditworthy). Ratings are calculated using various performance
criteria for each borrower, including but not limited to financial condition,
financial performance, operating characteristics and collateral performance. The
risk rating templates are located on the server.
For each performance criteria within the matrix, the loan officer should
(i) grade the borrower’s performance on a scale of 1 (best) through 5;
(ii) assign a weighting to each of the performance criteria, indicating the
relative importance of the individual criteria in evaluating the loan;
(iii) multiply the grades by the weighting to determine the rating for each
performance criteria; and (iv) sum the ratings for each criteria to arrive at an
overall rating for the loan.
Each loan must be rated at closing through the submission of a matrix to
CapitalAnalytics. Only after the matrix has been reviewed and approved by the
Chief Credit Officer can the assigned rating be entered into CAM. Loans are then
rated quarterly thereafter. Changes to a risk rating may also be recommended by
a loan officer at any time through the submission of an updated matrix to
CapitalAnalytics for review and approval by the Chief Credit Officer.
On occasion, factors not quantified within the matrix may over ride the
calculated rating. Such factors might be strong guarantors, abundant collateral,
bankruptcy, etc. These factors must be identified and explained in the Factors
for Facility Rating section of the matrix. When one of these factors is
bankruptcy, the rating for a bankrupt borrower can not exceed 5. If a bankruptcy
is a non-DIP situation, or a Ch. 7 or Ch. 11 liquidation the loan must be rated
a 6. The 5 and 6 ratings must be applied regardless of the mathematical
calculation of the rating, unless waived in writing by the Chief Credit Officer.
Upon receiving a rating of 4 or lower, the Workout Manager must be involved in
the management of the loan. See page V-8 for policy thereon.

VI-2

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

 

Client Trend Reporting
Trend Information should be updated by the loan administration areas of each
group as well as through direct interface by our clients. The trend data
captures client data on a month-to-month basis to reveal any trends, which may
impact client performance.

VI-3

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

 

Delinquency Reporting
The items noted in the standard loan servicing requirements for both ABL and
Mezzanine/Subordinated Debt loans will be tracked as part of the Company’s MIS
system. Delinquency reports will be accumulated periodically to be reviewed with
the Credit Committee..

VI-4

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

 

         
FILE MAINTENANCE/RECORD KEEPING
       
 
       
CREDIT/UNDERWRITING FILES
  VII-1
 
       
INSURANCE
  VII-2
 
       
UCC FILINGS
  VII-3
 
       
TAX PAYMENTS
  VII-4
 
       
NOTIFICATIONS LETTERS
  VII-7

VII

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

 

CREDIT/UNDERWRITING FILES
In general, two sets of files should be retained for each account. Credit files
will be retained by the loan administration areas for each business group. Legal
files will be retained by the legal department. Underwriting reports and
associated work papers are stored electronically on the LAN.
All original underwriting files are to be maintained by loan administration.
This file will contain the original approval sheet, credit write-up, etc. Please
refer to underwriting section for the contents of this file. It is important
that the original file be maintained as a reference point for closing,
amendments in the future, etc.
For each customer, a separate legal file is to be maintained. This file should
contain all of the loan agreements, (including all amendments, waivers,
extensions, consents, etc.) notes, insurance information, UCC filings, open
items lists and legal correspondence.
For each account, a separate credit file is to be maintained. This file should
be as comprehensive as possible so that a trail of activity for each customer is
recorded. The following items are to be maintained in each credit file:
Approval forms for any amendments, overadvances, overlines, forbearance
agreements, etc.
Call reports or memorandums recording client visits.
Correspondence
Any retention memos or strategy memos.
Financial statements (last thirteen monthly and latest year-end).
Personal Financial Statements of Guarantors if applicable.
Industry studies, articles, research, newspaper clippings, etc.
Latest appraisal
Credit agency report on Customer/Principals

VII-1

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

 

INSURANCE
GENERAL
Prior to closing a new loan, and on all existing loans, where real property,
inventory, equipment, machinery, furniture & fixtures and any other insurable
assets are taken as collateral on a first priority basis, the loan officer has
responsibility for determining that adequate property insurance is in force and
is maintained.
REQUIREMENTS:
The insurance policy must provide for adequate coverage.
The insurer must be satisfactory and must carry a rating by Best’s of B or
higher
The policy must contain a Lender’s Loss Payable Endorsement acceptable to CS.
In the event the policy is canceled, the policy must continue in force for the
benefit of CS for tens days after notice to CS of the cancellation.
DOCUMENTATION
A copy of the policy and all applicable riders, endorsements, etc. is to
obtained and filed in the legal file
A master insurance listing will be kept for the portfolio. A tickler will be
established to track policy expirations, annual premiums, property covered, etc.
On an annual basis, the loan officer will review the adequacy of the insurance
and will document this review in the file. Amount of coverage, carrier, proper
loss payee, etc. must be reviewed annually.
CHANGE OF INSURER
Whenever a client changes insurance carriers, a complete review of coverage,
endorsements, etc. must be performed and documented for the file.

VII-2

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

 

UCC FILINGS
All secured loan transactions will have UCC financing statements filed in the
borrower’s jurisdiction of incorporation and as otherwise required by article 9
of the UCC.. A confirmation of CapitalSource’s UCC filing and priority must
occur before funding, where practical.
TRACKING
The loan administration department in conjunction with legal will maintain a UCC
Tickler Sheet indicating the date and place of the next re-filing required under
the Uniform Commercial Code. Once new filings are made, the tickler should be
updated. UCC searches should be performed periodically to detect the presence of
any further liens.

VII-3

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

 

TAX PAYMENTS
When a field examination or other information reveals a potential tax
delinquency problem, loan administration needs to require reporting of
appropriate tax information.
In accordance with our loan and security agreements, it is incumbent upon
request that each client provides CS with proof of payment of all FICA and
Withholding Taxes. The intent of this provision is to avoid the risk of federal
tax liens, which could jeopardize the priority of Capital Source’s security
interest.
See page VII-6 for a sample schedule, which should be utilized to track proper
tax payments. Usage of this form will highlight skipped payments not readily
discernible otherwise.
It is important that tax payments be further verified by canceled checks or per
review of a bank statement. The check should be reviewed for the appropriate
teller stamp. Proof of deposit by the customer could be negated by a check being
returned due to insufficient funds.
In addition, review of tax payments should be part of ongoing field examination
work where appropriate.

VII-4

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

 

Date:
CapitalSource Finance LLC
Applicable office address
     RE: FICA Payments and Withholding Taxes
Gentlemen
Pursuant to the provisions of our loan agreement dated                      we
(Customer’s name) are enclosing a photocopy of our Federal Depository Receipt,
stamped to indicate the name and address of the Depository and the date of the
deposit.
The payment of our deposit, as shown on this receipt, was for
$                     which represents our entire liability for FICA payments
and withholding taxes for the period                      to
                    , during which time we employed a total of
                     personnel to whom we paid aggregate wages in the total
amount of $                     .
Sincerely,
Authorized Signature and Title

VII-5

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

 

                                              Client Tax Payment Summary        
                Sheet             Number         Date of   Deposit            
Payment     of     Total   Receipt   Date     Period Covered     Amount    
Employees     Wages  
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             
 
                                       
 
                             

VII-6

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

 

NOTIFICATION LETTERS
In the event it becomes necessary to put a client’s customer on notification,
the following sample letters should be used:
The first letter shown on page VII-8 is a direct notification from the
CapitalSource to our client’s customers. This should be sent certified mail.
The second letter on page VII-9 is sent directly from our client to their
customers. This should be sent at the same time as the first letter.
The third example incorporates the client’s acknowledgment of our direct
notification. This letter is preferable, as the customer is made immediately
aware that this action has the client’s consent.
Obviously, during liquidation, CapitalSource should receive all of a customer’s
mail. It is imperative to fill out a change of address card at the post office.
When a loan is called, it is often difficult to get the client’s cooperation on
this point. It is advisable to obtain a signed change of address form at closing
and maintain it in the legal file.

VII-7

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

 

(Sample — Letter of Notification)
CapitalSource Finance LLC
Sending Office Address
Date                    
Client’s Customer Address
ATTN: Accounts Payable Supervisor
Gentlemen:
All accounts receivable presently due (our client) together with all accounts
receivable represented by invoice rendered by (our client) subsequent to this
date have been assigned to CapitalSource, LLC. This assignment of our receivable
from (our client) has been perfected under law.
Our records indicate and unpaid balance of $                      per the
attached statement. Payment of all such accounts is to be made directly to:
CapitalSource
C/O P.O.
(Sending Office Address)
If a discrepancy exists in the stated amount due, please notify CapitalSource
Finance, LLC within five days of any reasons for said discrepancy.
This notification of assignment of accounts receivable is being given to you in
accordance with the provisions of the Uniform Commercial Code. Under the
provisions of the Uniform Commercial Code, if you should make payment to (our
client) instead of CapitalSource Finance, LLC, such payment will not constitute
settlement of this account, and may subject you to double liability for the
amount due on your account.
Sincerely,
CapitalSource Finance, LLC

VII-8

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

 

(Sample Confirmation Letter from Debtor)
(Placed on Debtor’s Stationary)
Date
To all customers and Accounts of (our Client)
Gentlemen:
This letter confirms that all accounts receivable of the undersigned has been
assigned by us to Capital Source, LLC. You should have received prior
notification from CapitalSource of this assignment. All payments on any and all
accounts due the undersigned must be made directly to:
CapitalSource Finance, LLC
C/O P/O
(Sending Office)
Your cooperation is appreciated.
Sincerely,
(Our Client)
By:                                         
Its:                                         

VII-9

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

 

(Sample — Letter of Notification with Acknowledgment)
Date                     
CapitalSource Finance, LLC
Sending Office Address
Date                     
Client’s Customer Address
ATTN: Accounts Payable Supervisor
Gentlemen:
All accounts receivable presently due (our client) together with all accounts
receivable represented by invoice rendered by (our client) subsequent to this
date have been assigned to CapitalSource Finance, LLC. This assignment of
receivables from (our client) has been perfected under the Uniform Commercial
Code.
Our records indicate an unpaid balance of $                      per the
attached statement. Payment of all such accounts should be made directly to:
CapitalSource Finance LLC
C/O P/O
(Sending Office)
If a discrepancy exists in the stated amount due, notification of any defense
you may claim should be furnished to CapitalSource Finance, LLC, within five
days subsequent of this letter.
This notification of assignment of accounts receivable is being given to you in
accordance with the provisions of the Uniform Commercial Code. If you should
make payment to (our client), such payment will not constitute settlement of
this account and may subject you to double liability for the amount due on your
account.
Sincerely,
CapitalSource Finance, LLC
We acknowledge the above procedure. Please make payment to CapitalSource
Finance, LLC
Client Name
President

VII-10

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

 

Exhibit L–1
to Sale and
Servicing Agreement
FORM OF INITIAL CERTIFICATION
April 11, 2006

     
CapitalSource Commercial Loan LLC, 2006-1,
  Wachovia Bank, National Association
   as the Trust Depositor
  as Hedge Counterparty
CapitalSource Finance LLC,
  301 South College Street, DC-8
   as the Originator and Servicer
  Charlotte, NC 28202-0600
4445 Willard Avenue
  Attention:      Bruce M. Young
12th Floor
                         Senior Vice President, Risk
Chevy Chase, Maryland 20815
                         Management
Attention:     Treasurer
   
 
  Citigroup Global Markets Inc.,
CapitalSource Finance LLC,
  Wachovia Capital Markets, LLC,
   as the Originator and Servicer
  Harris Nesbitt Corp.,
4445 Willard Avenue
  J.P. Morgan Securities Inc.,
12th Floor
  SunTrust Capital Markets, Inc.,
Chevy Chase, Maryland 20815
  SG Americas Securities, LLC,
Attention:     Treasurer
  Barclays Capital Inc.,
 
     as the Initial Purchasers
 
  390 Greenwich Street
 
  New York, New York 10013
 
  Facsimile No.: (212) 723-8591
 
  Attention: Asset-Backed Finance

Re:   Sale and Servicing Agreement dated April 11, 2006 – CapitalSource
Commercial Loan Trust 2006-1

Ladies and Gentlemen:
     In accordance with Section 2.09 of the above–captioned Sale and Servicing
Agreement (such agreement as amended, modified, waived, supplemented or restated
from time to time, the “Agreement ”), the undersigned, as the Indenture Trustee,
hereby certifies that, except as noted on the attachment hereto, if any (the
“Loan Exception Report”), it has received each of the documents required to be
delivered to it pursuant to Section 2.07 of the Agreement with respect to each
Loan listed in the List of Loans and the documents contained therein appear to
bear original signatures. Capitalized but undefined terms have the meanings set
forth in the Agreement.
     The Indenture Trustee has made no independent examination of any such
documents beyond the review specifically required in the
above–referenced Agreement.

 

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     The Indenture Trustee makes no representations as to: (i) the validity,
legality, sufficiency, enforceability or genuineness of any such documents or
any of the Loans identified on the List of Loans, or (ii) the collectibility,
insurability, effectiveness or suitability of any such Loan.

              WELLS FARGO BANK, NATIONAL     ASSOCIATION, as the Indenture
Trustee
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       

 

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Exhibit L–2
to Sale and
Servicing Agreement
FORM OF FINAL CERTIFICATION
[date]

     
CapitalSource Commercial Loan LLC, 2006-1,
  Wachovia Bank, National Association
  as the Trust Depositor
  as Hedge Counterparty
4445 Willard Avenue
  301 South College Street, DC-8
12th Floor
  Charlotte, NC 28202-0600
Chevy Chase, Maryland 20815
  Attention:      Bruce M. Young
Attention:     Treasurer
                         Senior Vice President, Risk
 
                         Management
CapitalSource Finance LLC,
   
  as the Originator and Servicer
  Citigroup Global Markets Inc.,
4445 Willard Avenue
  Wachovia Capital Markets, LLC,
12th Floor
  Harris Nesbitt Corp.,
Chevy Chase, Maryland 20815
  J.P. Morgan Securities Inc.,
Attention:     Treasurer
  SunTrust Capital Markets, Inc.,
 
  SG Americas Securities, LLC,
 
  Barclays Capital Inc.
 
    as the Initial Purchasers,
 
  390 Greenwich Street
 
  New York, New York 10013
 
  Facsimile No.: (212) 723-8591
 
  Attention: Asset-Backed Finance

Re:   Sale and Servicing Agreement dated April 11, 2006 – CapitalSource
Commercial Loan Trust 2006-1

Ladies Gentlemen:
     In accordance with Section 2.09 of the above–captioned Sale and Servicing
Agreement (such agreement as amended, modified, waived, supplemented or restated
from time to time, the “Agreement ”), the undersigned, as the Indenture Trustee,
hereby certifies that, except as noted on the attachment hereto, as to each Loan
listed in the List of Loans (other than any Loan paid in full or listed on the
attachment hereto), it has reviewed the documents delivered to it pursuant to
Section 2.07 of the Agreement and has determined that (i) all such documents are
in its possession, (ii) such documents have been reviewed by it and have not
been mutilated, damaged, torn or otherwise physically altered and relate to such
Loan and (iii) based on its examination, and only as to the foregoing documents,
the information set forth in the List of Loans respecting such Loan is correct.
The Indenture Trustee has made no independent examination or inquiry of such
documents beyond the review specifically required in the Agreement.

 

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     The Indenture Trustee makes no representations as to: (i) the validity,
legality, enforceability or genuineness of any such documents contained in each
or any of the Loans identified on the List of Loans, (ii) the collectibility,
insurability, effectiveness or suitability of any such Loan, or (iii) the
compliance by such documents with statutory or regulatory guidelines.

 

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              WELLS FARGO BANK, NATIONAL     ASSOCIATION, as the Indenture
Trustee
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       

 

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Exhibit M
to Sale and
Servicing Agreement
REQUEST FOR RELEASE OF DOCUMENTS

     
To:
  Wells Fargo Bank, National Association,
 
    as the Indenture Trustee
 
  Sixth Street and Marquette Avenue
 
  MAC N9311–161
 
  Minneapolis, Minnesota 55479
 
  Attention:     Corporate Trust Services/Asset Backed
 
                       Administration
 
   
Re:
  Sale and Servicing Agreement dated April 11, 2006 – CapitalSource Commercial
Loan Trust 2006-1

     In connection with the administration of the pool of Loans held by you, we
request the release, and acknowledge receipt, of the (Indenture Trustee’s
Document File/[specify document]) for the Loan described below, for the reason
indicated.
Obligor’s Name, Address & Zip Code:
Loan Number:
Reason for Requesting Documents (check one)

                    1.   Loan paid in full
(Servicer hereby certifies that all amounts received in connection therewith
have been credited to the Principal and Interest Account.)  
                    2.   Loan liquidated
(Servicer hereby certifies that all proceeds of foreclosure, insurance or other
liquidation have been finally received and credited to the Principal and
Interest Account.)                       3.   Loan in foreclosure  
                    4.   Loan repurchased or substituted pursuant to Article II
or XI of the Sale and Servicing Agreement (Servicer hereby certifies that the
repurchase price to the extent required has been credited to the Principal and
Interest Account and/or remitted to the Indenture Trustee for deposit into the
Note Distribution Account pursuant to the Sale and Servicing Agreement.)  
                    5.   Collateral being released for servicing purposes
pursuant to Sections 2.09(d) or 5.02 of the Sale and Servicing Agreement.

 

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                    6.   Loan Collateral or associated loan document being
substituted, released, revised or subordinated.

     If box 1, 2 or 4 above is checked, and if all or part of the Indenture
Trustee’s document file was previously released to us, please release to us our
previous receipt on file with you, as well as any additional documents in your
possession relating to the above specified Loan.
     If box 3, 5 or 6 above is checked, upon our return of all of the above
documents (or the appropriate substitutes therefor, if applicable) to you,
please acknowledge your receipt by signing in the space indicated below, and
returning this form.

              CAPITALSOURCE FINANCE LLC, as the Servicer
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       
 
  Date:    
 
       

          Documents returned to Indenture Trustee:    
 
        Wells Fargo Bank, National Association,       as the Indenture Trustee  
 
 
       
By:
       
 
       
Name:
       
 
       
Title
       
 
       
Date:
       
 
       

 

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Exhibit N
to Sale and
Servicing Agreement
FORM OF ADDITION NOTICE
[Date]
Wells Fargo Bank, National Association,
  as the Indenture Trustee
Sixth Street and Marquette Avenue
MAC N9311–161
Minneapolis, Minnesota 55479
Attention:      Corporate Trust Services/Asset Backed
                     Administration
Wilmington Trust Company,
  as the Owner Trustee
1100 North Market Street
Wilmington, Delaware 19801
Attention:     Corporate Trust Administration

Re:   Sale and Servicing Agreement (as amended, modified, restated, replaced,
waived, substituted, supplemented or extended from time to time, the “Agreement
”), dated April 11, 2006, by and among CapitalSource Commercial Loan Trust
2006-1, as the Issuer, CapitalSource Commercial Loan LLC, 2006-1, as the Trust
Depositor, CapitalSource Finance LLC, as the Originator and Servicer, and Wells
Fargo Bank, National Association, not in its individual capacity but as the
Indenture Trustee and the Backup Servicer (capitalized terms used but not
defined herein shall have the meanings given to such terms in the Agreement).

Pursuant to Section 2.04 of the Transfer and Servicing Agreements, we hereby
give notice of the substitution of the following Loans and the information
required in respect thereof

1.   Loan(s) to be removed by substitution:   2.   Substitute Loan(s):   3.  
The Subsequent Transfer Date:   4.   The Outstanding Loan Balance of each
Substitute Loan:   5.   The related Substitution Event for each Loan to be
removed by substitution:   6.   (a) The purchase price paid for the Substitute
Loan pursuant to Section 2.04(a)(iii) (i.e., the Transfer Deposit Amount in
respect of such Loan):

 

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(b)The remaining balance of the deposit made to the Principal Collection Account
pursuant to Section 2.04(a)(B), after subtracting purchase price in Item 5(a)
hereof:
All information set forth herein is true, correct and complete as of the date
hereof.

              CAPITALSOURCE COMMERCIAL LOAN     LLC, 2006-1, as Trust Depositor
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       
 
            CAPITALSOURCE FINANCE LLC, as the     Originator and Servicer
 
       
 
  By:    
 
       
 
  Name:    
 
       
 
  Title:    
 
       

 

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Schedule I
to Sale and
Servicing Agreement
LOCK–BOX BANKS AND LOCK–BOX ACCOUNTS

     
1.
  Bank: Bank of America, N.A.
 
  P.O. Box 409780
 
  Atlanta, GA 30384-9780
 
   
 
  Account No.: 003930559738
 
   
 
  ABA: 0260-0959-3
 
   
 
  Account Name: CapitalSource Funding LLC – HFG
 
   
2.
  Bank: Bank of America, N.A.
 
  P.O. Box 409739
 
  Atlanta, GA 30384-9739
 
   
 
  Account No.: 003938703751
 
   
 
  ABA: 0260-0959-3
 
   
 
  Account Name: CapitalSource Funding LLC – SFG
 
   
3.
  Bank: Bank of America, N.A.
 
  P.O. Box 409739
 
  Atlanta, GA 30384-9739
 
   
 
  Account No.: 003939396662
 
   
 
  ABA: 0260-0959-3
 
   
 
  Account Name: CapitalSource Funding LLC – CFG

 

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4.
  Bank: Bank of America, N.A.
 
  P.O. Box 409739
 
  Atlanta, GA 30384-9739
 
   
 
  Account No.: 003922575610
 
   
 
  ABA: 0260-0959-3
 
   
 
  Account Name: CapitalSource Funding LLC

 

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Schedule II
to Sale and
Servicing Agreement
OBLIGOR LOCK–BOX BANKS AND OBLIGOR LOCK–BOX ACCOUNTS
Fourth Amended and Restated Three Party Agreement Relating to Lockbox Services
and Control