exv10w65



 







Exhibit 10.65

EXECUTION COPY




 





AMENDED AND RESTATED SALE AND SERVICING AGREEMENT




by and among




CSE QRS FUNDING II LLC,

as the Seller




CSE MORTGAGE LLC,

as the Originator and as the Servicer




EACH OF THE PURCHASERS AND PURCHASER AGENTS

FROM TIME TO TIME PARTY HERETO,




CITIGROUP GLOBAL MARKETS REALTY CORP.,

as the Administrative Agent and as the Citigroup Agent




and




WELLS FARGO BANK, NATIONAL ASSOCIATION,

as the Backup Servicer and as the Collateral Custodian




Dated as of July 28, 2006




 






 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	ARTICLE I DEFINITION	 	 	2	 
	 
	 
	 	Section 1.1	 	Certain Defined Terms	 	 	2	 
	 
	 	Section 1.2	 	Other Terms	 	 	55	 
	 
	 	Section 1.3	 	Computation of Time Periods	 	 	56	 
	 
	 	Section 1.4	 	Interpretation	 	 	56	 
	 
	 	Section 1.5	 	Special Provisions Relating to Alternative Currency Loans	 	 	56	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II PURCHASE OF THE VARIABLE FUNDING CERTIFICATES	 	 	57	 
	 
	 
	 	Section 2.1	 	The Variable Funding Certificates	 	 	57	 
	 
	 	Section 2.2	 	Assignment by Citigroup to Mica	 	 	58	 
	 
	 	Section 2.3	 	Procedures for Advances by Purchasers	 	 	59	 
	 
	 	Section 2.4	 	Reduction of the Facility Amount; Mandatory and Optional Repayments 	 	 	59	 
	 
	 	Section 2.5	 	Determination of Interest	 	 	61	 
	 
	 	Section 2.6	 	Percentage Evidenced by each Variable Funding Certificate	 	 	61	 
	 
	 	Section 2.7	 	[Reserved]	 	 	61	 
	 
	 	Section 2.8	 	Notations on Variable Funding Certificates	 	 	61	 
	 
	 	Section 2.9	 	Settlement Procedures During the Revolving Period	 	 	61	 
	 
	 	Section 2.10	 	Settlement Procedures During the Amortization Period	 	 	63	 
	 
	 	Section 2.11	 	Collections and Allocations	 	 	64	 
	 
	 	Section 2.12	 	Payments, Computations, Etc	 	 	65	 
	 
	 	Section 2.13	 	Optional Repurchase	 	 	66	 
	 
	 	Section 2.14	 	Fees	 	 	66	 
	 
	 	Section 2.15	 	Increased Costs; Capital Adequacy; Illegality	 	 	66	 
	 
	 	Section 2.16	 	Taxes	 	 	68	 
	 
	 	Section 2.17	 	Assignment of the Sale Agreement	 	 	69	 
	 
	 	Section 2.18	 	Substitution of Assets	 	 	69	 
	 
	 	Section 2.19	 	Optional Sales	 	 	71	 
	 
	 	Section 2.20	 	Discretionary Sales	 	 	72	 
	 
	 	Section 2.21	 	Required Equity Requirements	 	 	74	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III CONDITIONS TO ADVANCES	 	 	74	 
	 
	 
	 	Section 3.1	 	Conditions to Closing and Initial Advance	 	 	74	 
	 
	 	Section 3.2	 	Conditions Precedent to All Advances	 	 	75	 
	 
	 	Section 3.3	 	Conditions Precedent to the Effectiveness of this Amended and Restated Sale and Servicing Agreement	 	 	78	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES	 	 	78	 
	 
	 
	 	Section 4.1	 	Representations and Warranties of the Seller	 	 	78	 
	 
	 	Section 4.2	 	Representations and Warranties of the Seller Relating to the Agreement and the Collateral	 	 	88	 
	 
	 	Section 4.3	 	Representations and Warranties of the Servicer	 	 	89	 
	 
	 	Section 4.4	 	Representations and Warranties of the Backup Servicer	 	 	92	 






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	 	 	 	 	 	 	Page	 
	 
	 	Section 4.5	 	Representations and Warranties of the Collateral Custodian	 	 	93	 
	 
	 	Section 4.6	 	Breach of Certain Representations and Warranties	 	 	93	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V GENERAL COVENANTS	 	 	94	 
	 
	 
	 	Section 5.1	 	Affirmative Covenants of the Seller	 	 	94	 
	 
	 	Section 5.2	 	Negative Covenants of the Seller	 	 	98	 
	 
	 	Section 5.3	 	Covenants of the Seller Relating to the Hedging of Assets	 	 	100	 
	 
	 	Section 5.4	 	Affirmative Covenants of the Servicer	 	 	101	 
	 
	 	Section 5.5	 	Negative Covenants of the Servicer	 	 	103	 
	 
	 	Section 5.6	 	Affirmative Covenants of the Backup Servicer	 	 	105	 
	 
	 	Section 5.7	 	Negative Covenants of the Backup Servicer	 	 	105	 
	 
	 	Section 5.8	 	Affirmative Covenants of the Collateral Custodian	 	 	105	 
	 
	 	Section 5.9	 	Negative Covenants of the Collateral Custodian	 	 	105	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI ADMINISTRATION AND SERVICING OF ASSETS	 	 	106	 
	 
	 
	 	Section 6.1	 	Designation of the Servicer	 	 	106	 
	 
	 	Section 6.2	 	Duties of the Servicer	 	 	106	 
	 
	 	Section 6.3	 	Authorization of the Servicer	 	 	108	 
	 
	 	Section 6.4	 	Collection of Payments	 	 	109	 
	 
	 	Section 6.5	 	Servicer Advances	 	 	111	 
	 
	 	Section 6.6	 	Realization Upon Charged-Off Assets	 	 	111	 
	 
	 	Section 6.7	 	Maintenance of Insurance Policies	 	 	112	 
	 
	 	Section 6.8	 	Servicing Compensation	 	 	112	 
	 
	 	Section 6.9	 	Payment of Certain Expenses by Servicer	 	 	112	 
	 
	 	Section 6.10	 	Reports	 	 	113	 
	 
	 	Section 6.11	 	Annual Statement as to Compliance	 	 	113	 
	 
	 	Section 6.12	 	Annual Independent Public Accountant’s Servicing Reports	 	 	114	 
	 
	 	Section 6.13	 	Limitation on Liability of the Servicer and Others	 	 	114	 
	 
	 	Section 6.14	 	The Servicer Not to Resign	 	 	114	 
	 
	 	Section 6.15	 	Servicer Defaults	 	 	115	 
	 
	 	Section 6.16	 	Appointment of Successor Servicer	 	 	116	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII THE BACKUP SERVICER	 	 	118	 
	 
	 
	 	Section 7.1	 	Designation of the Backup Servicer	 	 	118	 
	 
	 	Section 7.2	 	Duties of the Backup Servicer	 	 	118	 
	 
	 	Section 7.3	 	Merger or Consolidation	 	 	120	 
	 
	 	Section 7.4	 	Backup Servicing Compensation	 	 	120	 
	 
	 	Section 7.5	 	Backup Servicer Removal	 	 	120	 
	 
	 	Section 7.6	 	Limitation on Liability	 	 	120	 
	 
	 	Section 7.7	 	The Backup Servicer Not to Resign	 	 	121	 






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	 	 	 	 	 	 	Page	 
	ARTICLE VIII THE COLLATERAL CUSTODIAN	 	 	122	 
	 
	 
	 	Section 8.1	 	Designation of Collateral Custodian	 	 	122	 
	 
	 	Section 8.2	 	Duties of Collateral Custodian	 	 	122	 
	 
	 	Section 8.3	 	Merger or Consolidation	 	 	124	 
	 
	 	Section 8.4	 	Collateral Custodian Compensation	 	 	124	 
	 
	 	Section 8.5	 	Collateral Custodian Removal	 	 	124	 
	 
	 	Section 8.6	 	Limitation on Liability	 	 	124	 
	 
	 	Section 8.7	 	The Collateral Custodian Not to Resign	 	 	125	 
	 
	 	Section 8.8	 	Release of Documents	 	 	125	 
	 
	 	Section 8.9	 	Return of Required Asset Documents	 	 	126	 
	 
	 	Section 8.10	 	Access to Certain Documentation and Information Regarding the Collateral; Audits	 	 	127	 
	 
	 	Section 8.11	 	Securities Intermediary	 	 	127	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX SECURITY INTEREST	 	 	129	 
	 
	 
	 	Section 9.1	 	Grant of Security Interest	 	 	129	 
	 
	 	Section 9.2	 	Release of Lien on Collateral	 	 	129	 
	 
	 	Section 9.3	 	Further Assurances	 	 	130	 
	 
	 	Section 9.4	 	Remedies	 	 	130	 
	 
	 	Section 9.5	 	Waiver of Certain Laws	 	 	130	 
	 
	 	Section 9.6	 	Power of Attorney	 	 	130	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X TERMINATION EVENTS	 	 	131	 
	 
	 
	 	Section 10.1	 	Termination Events	 	 	131	 
	 
	 	Section 10.2	 	Remedies	 	 	133	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI INDEMNIFICATION	 	 	134	 
	 
	 
	 	Section 11.1	 	Indemnities by the Seller	 	 	134	 
	 
	 	Section 11.2	 	Indemnities by the Servicer	 	 	137	 
	 
	 	Section 11.3	 	After-Tax Basis	 	 	138	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XII THE ADMINISTRATIVE AGENT AND PURCHASER AGENTS	 	 	138	 
	 
	 
	 	Section 12.1	 	The Administrative Agent	 	 	138	 
	 
	 	Section 12.2	 	The Purchaser Agents	 	 	141	 
	 
	 	Section 12.3	 	Additional Agent	 	 	143	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIII MISCELLANEOUS	 	 	145	 
	 
	 
	 	Section 13.1	 	Amendments and Waivers	 	 	145	 
	 
	 	Section 13.2	 	Notices, Etc	 	 	145	 
	 
	 	Section 13.3	 	Ratable Payments	 	 	146	 
	 
	 	Section 13.4	 	No Waiver; Remedies	 	 	146	 






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	 	Section 13.5	 	Binding Effect; Benefit of Agreement	 	 	146	 
	 
	 	Section 13.6	 	Term of this Agreement	 	 	146	 
	 
	 	Section 13.7	 	Governing Law; Consent to Jurisdiction; Waiver of Objection to Venue	 	 	147	 
	 
	 	Section 13.8	 	Waiver of Jury Trial	 	 	147	 
	 
	 	Section 13.9	 	Costs, Expenses and Taxes	 	 	147	 
	 
	 	Section 13.10	 	No Proceedings	 	 	148	 
	 
	 	Section 13.11	 	Recourse Against Certain Parties	 	 	148	 
	 
	 	Section 13.12	 	Protection of Right, Title and Interest in  the Collateral; Further Action Evidencing Advances	 	 	150	 
	 
	 	Section 13.13	 	Confidentiality	 	 	151	 
	 
	 	Section 13.14	 	Execution in Counterparts; Severability; Integration	 	 	152	 
	 
	 	Section 13.15	 	Waiver of Set-off	 	 	152	 
	 
	 	Section 13.16	 	Assignments	 	 	153	 
	 
	 	Section 13.17	 	Heading and Exhibits	 	 	153	 
	 
	 	Section 13.18	 	Loans Subject to Retained Interest Provisions	 	 	153	 
	 
	 	Section 13.19	 	Tax Treatment of Advances	 	 	154	 






EXHIBITS




	 	 	 
	EXHIBIT A-1

	 	Form of Borrowing Notice (Advances and Reduction of Facility Amount)
	EXHIBIT A-2

	 	Form of Borrowing Notice (Reinvestments of Principal Collections)
	EXHIBIT A-3

	 	Form of Borrowing Base Certificate
	EXHIBIT B-1

	 	Form of Variable Funding Certificate (Purchasers)
	EXHIBIT B-2

	 	Form of Variable Funding Certificate (Additional Purchasers)
	EXHIBIT C

	 	Form of Monthly Report
	EXHIBIT D

	 	Form of Hedging Agreement (including Schedule and Confirmation)
	EXHIBIT E-1

	 	Form of Officer’s Certificate to Solvency (CSE QRS Funding II LLC)
	EXHIBIT E-2

	 	Form of Officer’s Certificate to Solvency (CSE Mortgage LLC)
	EXHIBIT F-1

	 	Form of Officer’s Closing Certificate (CSE QRS Funding II LLC)
	EXHIBIT F-2

	 	Form of Officer’s Closing Certificate (CSE Mortgage LLC)
	EXHIBIT G-1

	 	Form of Power of Attorney (CSE QRS Funding II LLC)
	EXHIBIT G-2

	 	Form of Power of Attorney (CSE Mortgage LLC)
	EXHIBIT H

	 	Form of Release of Required Asset Documents
	EXHIBIT I

	 	Form of Assignment of Mortgage
	EXHIBIT J

	 	Form of Servicer’s Certificate
	EXHIBIT K

	 	Form of Transferee Letter
	EXHIBIT L

	 	Form of Certificate of Outside Counsel
	EXHIBIT M

	 	Form of Assumption Agreement






SCHEDULES




	 	 	 
	SCHEDULE I

	 	Condition Precedent Documents
	SCHEDULE II

	 	List of Lock-Box Banks and Lock-Box Accounts






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	 	 	 	 	Page
	SCHEDULE III

	 	Location of Required Asset Documents and Asset Files	 	 
	SCHEDULE IV

	 	Asset List	 	 
	SCHEDULE V

	 	Residential Mortgage Policies and Procedures	 	 






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SALE AND SERVICING AGREEMENT




     THIS AMENDED AND RESTATED SALE AND SERVICING AGREEMENT (such agreement as amended, modified,
waived, supplemented, restated or replaced from time to time, the “Agreement”) is made as of this
28th day of July, 2006, by and among:



     (1) CSE QRS FUNDING II LLC, a Delaware limited liability company, as the seller (together with
its successors and assigns in such capacity, the “Seller”);



     (2) CSE MORTGAGE LLC, a Delaware limited liability company (“CSE Mortgage”), as the originator
(together with its successors and assigns in such capacity, the “Originator”), and as the servicer
(together with its successors and assigns in such capacity, the “Servicer”);



     (3) EACH OF THE PURCHASERS AND PURCHASER AGENTS FROM TIME TO TIME PARTY HERETO (together with
their respective successors and assigns in such capacities, each a “Purchaser” and a “Purchaser
Agent,” respectively);



     (4) CITIGROUP GLOBAL MARKETS REALTY CORP., a Delaware corporation (“Citigroup Global
Markets”), as the administrative agent for the Purchaser Agents hereunder (together with its
successors and assigns in such capacity, including any successor appointed pursuant to ARTICLE
XII, the “Administrative Agent”), and as the Purchaser Agent for Citigroup Global Markets
Realty Corp. (together with its successors and assigns in such capacity, the “Citigroup Agent”);
and



     (5) WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), not in its individual capacity but
as the backup servicer (together with its successors and assigns in such capacity, the “Backup
Servicer”), and not in its individual capacity but as the collateral custodian (together with its
successors and assigns in such capacity, the “Collateral Custodian”).



R E C I T A L S




     WHEREAS, the Seller has acquired, and may from time to time continue to acquire, certain
Assets (as defined below) from the Originator pursuant to the Sale Agreement (as defined below);



     WHEREAS, the Seller is prepared to transfer and assign, and grant security interests in,
certain Assets and other proceeds with respect thereto to the Purchasers from time to time;



     WHEREAS, the Purchasers may, in accordance with the terms of this Agreement, purchase such
Assets; and



     WHEREAS, on the Closing Date, the Seller will transfer and assign, and grant a security
interest in the Tandem Asset (as defined below) and the Purchaser will purchase such Asset by
making the Tandem Advance in respect thereof;



     WHEREAS, all other conditions precedent to the execution of this Agreement have been complied
with.



1









 





     NOW, THEREFORE, based upon the foregoing Recitals, the mutual premises and agreements
contained herein, and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:



ARTICLE I




DEFINITION




     Section 1.1 Certain Defined Terms.



     Certain capitalized terms used throughout this Agreement are defined above or in this
Section 1.1. As used in this Agreement and its schedules, exhibits and other attachments,
unless the context requires a different meaning, the following terms shall have the following
meanings:


“1940 Act”: Defined in Section 10.1(i).



“Accrual Period”: (a) with respect to each Advance (or portion thereof) funded at an Interest Rate
other than the CP Rate, (i) with respect to the first Payment Date, the period from and including
the Closing Date to but excluding such first Payment Date and (ii) with respect to any subsequent
Payment Date, the period from and including the previous Payment Date to but excluding such
subsequent Payment Date, and (b) with respect to each Advance (or portion thereof) funded at an
Interest Rate equal to the CP Rate, (i) with respect to the first Payment Date, the period from and
including the Closing Date to and including the last day of the calendar month in which the Closing
Date occurs and (ii) with respect to any subsequent Payment Date, the period ending on the last day
of the calendar month immediately preceding the month in which the Payment Date occurs and
commencing on the first day of such immediately preceding calendar month.



“Acquired Loan”: A Loan that is originated by a Person other than the Originator, CapitalSource
Finance LLC or any of their respective Subsidiaries and acquired by the Originator in a “true sale”
transaction pursuant to an acquisition agreement, provided that the foregoing shall exclude any
Retained Interest.



“Addition Date”: With respect to any Additional Assets, the date on which such Additional Assets
become part of the Collateral.



“Additional Agent”: Each Person (together with its successors and assigns) that becomes a party to
this Agreement as an Additional Agent, on behalf of any Additional Purchaser, pursuant to an
Additional Purchaser Agreement.



“Additional Agent Fee Letter”: Each Additional Agent Fee Letter Agreement that shall be entered
into by and among the Seller, the Servicer and such Additional Agent in connection with the
transactions contemplated by this Agreement, as amended, modified, waived, supplemented, restated
or replaced from time to time.




2









 







“Additional Agent’s Account”: A special account, designated by the Additional Agent in an
Additional Purchaser Agreement, in the name of an Additional Agent maintained with the related
Additional Purchaser.



“Additional Assets”: All Assets that become part of the Collateral after the Closing Date.



“Additional Purchaser”: Defined in Section 13.16.



“Additional Purchaser Agreement”: With respect to each Additional Purchaser, the Transferee Letter
relating to such Additional Purchaser.



“Adjusted Advances Outstanding”: On any day, the aggregate principal amount of all Advances
Outstanding minus the aggregate principal amount of the Tandem Advance outstanding.



“Adjusted Aggregate Outstanding Asset Balance”: On any date of determination, the Aggregate
Outstanding Asset Balance minus the Tandem Outstanding Asset Balance.



“Adjusted Availability”: At any time, an amount equal to the excess, if any, of (i) the lesser of
(a) the Adjusted Facility Amount and (b) the Adjusted Maximum Availability over (ii) the Adjusted
Advances Outstanding on such day; provided that during the Amortization Period, the Adjusted
Availability shall be zero.



“Adjusted Average Pool Charged-Off Ratio”: As of any Determination Date, the percentage equivalent
of a fraction (i) the numerator of which is equal to the sum of the Outstanding Asset Balance of
all Assets that became Charged-Off Assets (excluding, if applicable, the Tandem Asset) (net of
Recoveries during such Collection Period) during the Collection Period related to such
Determination Date and each of the 11 preceding Determination Dates (or such lesser number as shall
have elapsed as of such Determination Date), and (ii) the denominator of which is equal to a
fraction the numerator of which is the sum of the Adjusted Aggregate Outstanding Asset Balance as
of the first day of the Collection Period related to such Determination Date and each of the 11
preceding Determination Dates (or such lesser number as shall have elapsed as of such Determination
Date) and the denominator of which is 12 (or the corresponding lesser number of Determination Dates
included in the calculations described herein).



“Adjusted Borrowing Base”: On any date of determination, the sum of (i) the Adjusted Aggregate
Outstanding Asset Balance and (ii) (a) the Outstanding Asset Balances of all Additional Assets that
are Eligible Assets to be included as part of the Collateral on such date minus (b) the
amount (calculated without duplication) by which such Eligible Assets exceed any applicable Pool
Concentration Criteria.



“Adjusted Commitments”: With respect to each Purchaser, (a) prior to the Termination Date, such
Purchaser’s Commitment minus an amount equal to such Purchaser’s Pro Rata Share of the outstanding
principal amount of the Tandem Advance as of the applicable date of determination; provided that
the aggregate Adjusted Commitments shall be subject in all cases to a maximum of $600,000,000 (and
the Adjusted Commitments of the respective Purchasers shall be deemed to be reduced on a pro rata
basis as necessary to comply with such limit) and (b) on or after the Termination Date, such
Purchaser’s Pro Rata Share of the Adjusted Advances Outstanding.




3









 







“Adjusted Eurodollar Rate”: For any Accrual Period, an interest rate per annum equal to a
fraction, expressed as a percentage and rounded upwards (if necessary) to the nearest 1/100 of 1%,
(i) the numerator of which is equal to the offered quotation to first-class banks in the New York
interbank Eurodollar market by the Administrative Agent for Dollar deposits of amounts in same day
funds comparable to the outstanding principal amount of the Advance for which an interest rate is
then being determined with maturities comparable to the Accrual Period to be applicable to such
Advance, determined as of 10:00 a.m. (New York City, New York time) on the date which is two
Business Days prior to the commencement of such Accrual Period (and rounded upward to the next
whole multiple of 1/16 of 1%) to a fraction, expressed as a percentage and rounded upwards (if
necessary) to the nearest 1/100 of 1%, and (ii) the denominator of which is equal to 100%
minus the Eurodollar Reserve Percentage for such Accrual Period.



“Adjusted Facility Amount”: On any date of determination, the aggregate Adjusted Commitments then
in effect; provided that such amount may not at any time exceed $600,000,000 without the written
agreement of the parties hereto; provided further that, on or after the Termination Date, the
Adjusted Facility Amount shall mean the Adjusted Advances Outstanding.



“Adjusted Maximum Availability”: On any date of determination an amount equal to the least of:




     (a) the Adjusted Facility Amount;



     (b) the sum of (i) the product of the Adjusted Borrowing Base and the Adjusted Weighted
Average Advance Rate on such date plus (ii) the amount on deposit in the Principal Collections
Account received in reduction of the Outstanding Asset Balance of any Asset that is an Eligible
Asset other than the Tandem Asset; and



     (c) an amount equal to (i) the Adjusted Borrowing Base minus (ii) the Adjusted Minimum
Overcollateralization Amount plus (iii) the amount on deposit in the Principal Collections Account
received in reduction of the Outstanding Asset Balance of any Asset that is an Eligible Asset other
than the Tandem Asset;


provided that in case of each of the foregoing clauses (a)-(c), during the Amortization
Period, the Adjusted Maximum Availability shall be equal to the Adjusted Advances Outstanding.



“Adjusted Minimum Overcollateralization Amount”: As of any date of determination, an amount equal
to the product of 1.5 and the sum of the Outstanding Asset Balances of all Eligible Assets
(excluding the Tandem Asset) attributable to the Obligor having the largest aggregate Outstanding
Asset Balance of Eligible Assets included as part of the Collateral (excluding the Tandem Asset)
(excluding the amount, calculated without duplication, by which such Eligible Assets exceed any
applicable Pool Concentration Criteria).



“Adjusted Minimum Pool Yield”: An Adjusted Pool Yield equal to 2.75%.



“Adjusted Overcollateralization Amount”: As of any date of determination, an amount equal to the
product of (i) the Adjusted Overcollateralization Percentage on such date and (ii) the Adjusted
Borrowing Base on such date.




4









 







“Adjusted Overcollateralization Percentage”: As of any date of determination, the percentage
equivalent of (a) one minus (b) a fraction (i) the numerator of which is equal to the
Adjusted Advances Outstanding on such date and (ii) the denominator of which is equal to the
Adjusted Aggregate Outstanding Asset Balance as of such date.



“Adjusted Overcollateralization Shortfall”: As of any date of determination, the positive
difference, if any, of (a) the Adjusted Minimum Overcollateralization Amount on such date
minus (b) the Adjusted Overcollateralization Amount on such date.



“Adjusted Pool Charged-Off Ratio”: As of any Determination Date, the product of (i) 12 and (ii)
the percentage equivalent of a fraction, (a) the numerator of which is equal to the sum of the
Outstanding Asset Balances of all Eligible Assets (excluding the Tandem Asset) that became
Charged-Off Assets (net of Recoveries during such Collection Period) during the Collection Period
related to such Determination Date, and (b) the denominator of which is equal to the Adjusted
Aggregate Outstanding Asset Balance as of the first day of the Collection Period related to such
Determination Date.



“Adjusted Pool Rate”: As of any Determination Date, the annualized percentage equivalent of a
fraction, (a) the numerator of which is equal to all Interest Collections on Assets included in the
Adjusted Aggregate Outstanding Asset Balance as of the first day of the Collection Period related
to such Determination Date that are deposited into the Collection Account during such Collection
Period, and (b) the denominator of which is equal to the Adjusted Aggregate Outstanding Asset
Balance as of the first day of such Collection Period.



“Adjusted Pool Yield”: On any day, the excess, if any, of (a) the Adjusted Pool Rate on such day
over (b) the sum of (i) the Interest Rate, (ii) the Program Fee Rate and (iii) the
Servicing Fee Rate, in each case as of such day.



“Adjusted Required Advance Reduction Amount”: On any day, an amount equal to the excess, if any,
of (a) Adjusted Advances Outstanding on such day minus (b) the Adjusted Maximum
Availability on such day.



“Adjusted Weighted Average Advance Rate”: For any Adjusted Advances Outstanding on any day, the
weighted average of the Advance Rates applicable to the Eligible Assets (excluding the Tandem
Asset) backing such Advances on such day, weighted according to the proportion of the Adjusted
Aggregate Outstanding Asset Balance each type of such Eligible Asset represents.



“Administrative Agent”: Defined in the Preamble of this Agreement.



“Advance”: Defined in Section 2.1(b).



“Advance Rate”: 85% with respect to any Senior Secured ABLs and 80% with respect to the Tandem
Asset on any date of determination, and for all other Eligible Assets the corresponding percentage
set forth below:




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Senior Secured Loan and Sale/Leaseback Loan




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Classification	 	LTV <=65%	 	LTV <=70%	 	LTV<=75%	 	LTV <=80%	 	LTV <=85%	 	LTV <=90%
	Multifamily
	 	 	80	%	 	 	80	%	 	 	80	%	 	 	75	%	 	 	70	%	 	 	65	%
	Retail, Office,
Industrial,
Healthcare, Land
Development and
other
	 	 	80	%	 	 	80	%	 	 	80	%	 	 	75	%	 	 	65	%	 	 	60	%
	Hotel
	 	 	80	%	 	 	75	%	 	 	70	%	 	 	65	%	 	 	N/A	 	 	 	N/A	 






B-Note Loans




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Classification	 	LTV<=75%	 	LTV <=80%	 	LTV <=85%	 	LTV <=90%
	Multifamily
	 	 	65	%	 	 	65	%	 	 	65	%	 	 	55	%
	Retail, Office,
Industrial,
Healthcare, Land
Development and
other
	 	 	60	%	 	 	60	%	 	 	60	%	 	 	55	%
	Hotel
	 	 	60	%	 	 	55	%	 	 	N/A	 	 	 	N/A	 






CMBS Securities




	 	 	 	 	 	 	 	 	 	 	 
	 	 	Moody’s/S&P/Fitch Rating	 	 	 	 	 	Advance Rate
	 
	 	Aaa/AAA/AAA	 	 	 	 	 	 	97	%
	 
	 	Aa1/AA+/AA+	 	 	 	 	 	 	95	%
	 
	 	Aa2/AA/AA	 	 	 	 	 	 	95	%
	 
	 	Aa3/AA-/AA-	 	 	 	 	 	 	90	%
	 
	 	A1/A+/A+	 	 	 	 	 	 	85	%
	 
	 	A2/A/A	 	 	 	 	 	 	85	%
	 
	 	A3/A-/A-	 	 	 	 	 	 	80	%
	 
	 	Baa1/BBB+/BBB+	 	 	 	 	 	 	75	%
	 
	 	Baa2/BBB/BBB	 	 	 	 	 	 	75	%
	 
	 	Baa3/BBB-/BBB-	 	 	 	 	 	 	65	%
	 
	 	Ba1/BB+/BB+	 	 	 	 	 	 	50	%
	 
	 	Ba2/BB/BB	 	 	 	 	 	 	50	%
	 
	 	Ba3/BB-/BB-	 	 	 	 	 	 	40	%
	 
	 	B1/B+/B+	 	 	 	 	 	 	25	%
	 
	 	B2/B/B	 	 	 	 	 	 	25	%
	 
	 	B3/B-/B-	 	 	 	 	 	 	25	%
	 
	 	Below B3/B-/B-	 	 	 	 	 	 	0	%






6









 






Mezzanine Loan




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Classification	 	LTV <=80%	 	LTV <=85%	 	LTV <=90%
	Multifamily
	 	 	50	%	 	 	50	%	 	 	50	%
	Retail, Office,
Industrial, Healthcare
and other
	 	 	50	%	 	 	50	%	 	 	50	%
	Hotel
	 	 	50	%	 	 	N/A	 	 	 	N/A	 





For purposes of calculating the Advance Rate (i) with respect to any Acquired Loans, Assigned
Loans, Agented Loans and Participation Loans, the applicable Advance Rate will be determined by
reference to the type of underlying Loan being acquired, assigned, agented or participated in, as
the case may be and (ii) with respect to any CMBS Security that is split rated such that two or
more possible Advance Rates are applicable to it shall have the lowest of the two Advance Rates
specified in the above table.



“Advances Outstanding”: On any day, the aggregate principal amount of all Advances outstanding on
such day, after giving effect to all repayments of Advances and the making of new Advances on such
day.



“Affected Party”: The Administrative Agent, the Purchaser Agents, the Purchasers, each Liquidity
Bank, all assignees and participants of the Purchasers and each Liquidity Bank, any successor to
Citigroup Global Markets as Administrative Agent and any sub-agent of the Administrative Agent and
any successor to a Purchaser Agent.



“Affiliate”: With respect to a Person, means any other Person that, directly or indirectly,
controls, is controlled by or under common control with such Person, or is a director or officer of
such Person. For 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 or policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.



“Agent’s Account”: With respect to (a) Citigroup, the Citigroup Agent’s Account or (b) any
Additional Agent, any Additional Agent’s Account, in each case as applicable.



“Agented Loans”: With respect to any Loan, one or more loans by an Eligible Obligor wherein (a)
the loan(s) are originated by the Originator in accordance with the Credit and Collection Policy as
a part of a syndicated loan transaction that has been fully consummated between the Originator and
the related Obligor (without regard to any subsequent syndication of such Loan) prior to such
Agented Loans becoming part of the Collateral hereunder, (b) upon an assignment of the note under
the Sale Agreement to the Seller, any original note related thereto will be endorsed to the
Administrative Agent and held by the Collateral Custodian, on behalf of the Secured Parties, (c)
the Seller, 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
Related Property including the right to receive and collect payments directly in its own name and
to enforce its rights directly against the Obligor thereof, (d) the loan, if secured, is secured by
an undivided interest in the Related Property that also secures and is shared by, on a




7









 







pro rata
basis, all other holders of such Obligor’s loan of equal priority and (e) CapitalSource Finance LLC
or the Originator (or a wholly owned subsidiary of the Originator) is the collateral agent and
payment agent for loans to such Obligor.



“Aggregate Outstanding Asset Balance”: On any date of determination, the sum of the Outstanding
Asset Balances of all Eligible Assets included as part of the Collateral on such date,
minus the Outstanding Asset Balances of any Delinquent Assets. Notwithstanding anything to
the contrary contained herein, for purposes of determining the Aggregate Outstanding Asset Balance,
if any portion of an Asset is deemed to be “charged-off” in accordance with the provisions of the
definition of Charged-Off Asset, then the entire Asset shall be deemed to have a zero Outstanding
Asset Balance, except for purposes of calculating the Average Pool Charged-Off Ratio and the
Adjusted Average Pool Charged-Off Ratio.



“Aggregate Unpaids”: At any time, an amount equal to the sum of all unpaid Advances Outstanding,
Interest, Breakage Costs, Hedge Breakage Costs and all other amounts owed by the Seller to the
Purchasers, the Purchaser Agents, the Administrative Agent, the Backup Servicer, each Hedge
Counterparty and the Collateral Custodian hereunder (including, without limitation, all Indemnified
Amounts, other amounts payable under Article XI and amounts required under Section
2.9, Section 2.10, Section 2.14, Section 2.15 and Section 2.16
to the Affected Parties or Indemnified Parties) or under any Hedging Agreement (including, without
limitation, payments in respect of the termination of any such Hedging Agreement) or by the Seller
or any other Person under any fee letter (including, without limitation, the Purchaser Fee Letter,
any Additional Agent Fee Letter, the Backup Servicer Fee Letter and the Collateral Custodian Fee
Letter) delivered in connection with the transactions contemplated by this Agreement (whether due
or accrued).



“Allocation Adjustment Event”: With respect to each Loan included in the Collateral subject to the
Retained Interest provisions of this Agreement, the occurrence of any one or more of the following
under and as defined in any Permitted Securitization Transaction rated by the Rating Agencies, as
applicable: (i) a “Servicer Default”, (ii) an “Event of Default” or (iii) an “Accelerated
Amortization Event”.



“Alternative Currency”: At any time, any of Canadian Dollars, British Pounds Sterling or Euros.



“Alternative Rate”: An interest rate per annum equal to the Adjusted Eurodollar Rate calculated on
a daily basis; provided that the Alternative Rate shall be the Base Rate if a Eurodollar Disruption
Event occurs.



“Amended and Restated Closing Date”: July 28, 2006.



“Amortization Period”: The period beginning on the Termination Date and ending on the Collection
Date.



“Applicable Law”: For any Person or property of such Person, all existing and future applicable
laws, rules, regulations (including proposed, temporary and final income tax regulations),
statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and
interpretations by any Governmental Authority (including, without limitation, usury laws, the
Federal Truth in Lending Act, and Regulation Z and Regulation B of the Board of Governors of




8









 







the
Federal Reserve System), and applicable judgments, decrees, injunctions, writs, awards or orders of
any court, arbitrator or other administrative, judicial, or quasi-judicial tribunal or agency of
competent jurisdiction.



“Appraisal”: With respect to any Mortgaged Property as to which an appraisal is required or
permitted to be performed pursuant to the terms of this Agreement, an appraisal performed in
conformance with the guidelines of the Appraisal Institute.



“Appraisal Institute”: The international membership association of professional real estate
appraisers.



“Asset Checklist”: The list of loan documents attached as Schedule 5 to the Sale Agreement or an
electronic list delivered by or on behalf of the Seller to the Collateral Custodian that identifies
each of the items contained in the related Asset File, as amended from time to time.



“Asset Files”: With respect to any Asset, as applicable, and Related Security, copies of each of
the Required Asset Documents and duly executed originals (to the extent required by the Credit and
Collection Policy) and copies of any other Records relating to such Asset and Related Security.



“Asset List”: The Asset List provided by or on behalf of the Seller to the Administrative Agent,
each Purchaser Agent and the Collateral Custodian, in the form of Schedule IV hereto, as
such list may be amended, supplemented or modified from time to time in accordance with this
Agreement.



“Assets”: Loans, CMBS Securities and the Tandem Asset, individually or collectively, as the
context requires.



“Assigned Loan”: 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 (i) the transaction has been fully consummated prior to such Loan
becoming part of the Collateral hereunder, (ii) the Originator is a party to a credit agreement
and/or an assignment agreement with the Obligor with respect to such Loan, and (iii) 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; provided that any such Loan shall exclude any Retained
Interest.



“Assignment of Leases and Rents”: With respect to any Mortgaged Property, any assignment of
leases, rents and profits or similar instrument executed by the Obligor, assigning to the mortgagee
all of the income, rents and profits derived from the ownership, operation, leasing or disposition
of all or a portion of such Mortgaged Property, whether contained in the Mortgage or in a document
separate from the Mortgage, in the form that was duly executed, acknowledged and delivered, as
amended, modified, renewed or extended through the date hereof and from time to time hereafter in
accordance with the Credit and Collection Policy.



“Assignment of Mortgage”: As to each Loan secured by an Interest in Real Property, one or more
assignments, notices of transfer or equivalent instruments, each in recordable form and sufficient
under the laws of the relevant jurisdiction to reflect the transfer of the related Mortgage





9









 







or
similar security instrument and all other documents related to such Loan and to the Seller and to
grant a perfected lien thereon by the Seller in favor of the Administrative Agent, on behalf of the
Secured Parties, each such Assignment of Mortgage to be substantially in the form of Exhibit
I hereto.



“Assumption Agreement”: Defined in Section 13.16(b).



“Availability”: At any time, an amount equal to the excess, if any, of (i) the lesser of (a) the
Facility Amount and (b) the Maximum Availability over (ii) the Advances Outstanding on such day;
provided that during the Amortization Period, the Availability shall be zero.



“Available Funds”: With respect to any Payment Date, all amounts received in the Collection
Account (including, without limitation, any Collections on the Assets included in the Collateral
and earnings from Permitted Investments in the Collection Account) during the Collection Period
that ended on the last day of the calendar month immediately preceding the calendar month in which
such Payment Date occurs.



“Average Pool Charged-Off Ratio”: As of any Determination Date, the percentage equivalent of a
fraction (i) the numerator of which is equal to the sum of the Outstanding Asset Balance of all
Assets that became Charged-Off Assets (net of Recoveries during such Collection Period) during the
Collection Period related to such Determination Date and each of the 11 preceding Determination
Dates (or such lesser number as shall have elapsed as of such Determination Date), and (ii) the
denominator of which is equal to a fraction the numerator of which is the sum of the Aggregate
Outstanding Asset Balance as of the first day of the Collection Period related to such
Determination Date and each of the 11 preceding Determination Dates (or such lesser number as shall
have elapsed as of such Determination Date) and the denominator of which is 12 (or the
corresponding lesser number of Determination Dates included in the calculations described herein).



“Average Portfolio Charged-Off Ratio”: As of any Determination Date, the percentage equivalent of
a fraction (i) the numerator of which is equal to the sum of the Portfolio Outstanding Asset
Balance of all Portfolio Assets (excluding equity investments) that became Charged-Off Portfolio
Assets (net of Recoveries during such Collection Period) during the Collection Period related to
such Determination Date and each of the 11 preceding Determination Dates (or such lesser number as
shall have elapsed as of such Determination Date), and (ii) the denominator of which is equal to a
fraction the numerator of which is the sum of the Portfolio Outstanding Asset Balance (excluding
equity investments) as of the first day of the Collection Period related to such Determination Date
and each of the 11 preceding Determination Dates (or such lesser number as shall have elapsed as of
such Determination Date) and the denominator of which is 12 (or the corresponding lesser number of
Determination Dates included in the calculations described herein); provided that such calculation
shall exclude the effects of any Liquid Real Estate Assets that are acquired and levered by the
Originator solely to satisfy REIT asset and income tests.



“Average Portfolio Delinquency Ratio”: As of any Determination Date, the percentage equivalent of
a fraction the numerator of which is equal to the sum of the Portfolio Delinquency Ratio on such
Determination Date and each of the two preceding Determination Dates (or such





10









 







lesser number as
shall have elapsed as of such Determination Date) and the denominator of which is equal to three
(or the corresponding lesser number of Determination Dates included in the calculations described
herein); provided that such calculation shall exclude the effects of any Liquid Real Estate Assets
that are acquired and levered by the Originator solely to satisfy REIT asset and income tests.



“Backup Servicer”: Wells Fargo Bank, National Association, not in its individual capacity, but
solely as Backup Servicer, its successor in interest pursuant to Section 7.3 or such Person
as shall have been appointed as Backup Servicer pursuant to Section 7.5.



“Backup Servicer Fee Letter”: The Backup Servicer Fee Letter, dated as of the date hereof, by and
among the Servicer, the Administrative Agent, and the Backup Servicer, as such letter may be
amended, modified, supplemented, restated or replaced from time to time.



“Backup Servicer Fee Rate”: The rate per annum set forth in the Backup Servicer Fee Letter as the
“Backup Servicer Fee Rate.”



“Backup Servicer Termination Notice”: Defined in Section 7.5.



“Backup Servicing Fee”: Defined in the Backup Servicer Fee Letter.



“Banded Floating Rate Loan”: A Loan where the interest rate payable by the Obligor thereof
fluctuates between a minimum interest rate and a maximum interest rate allowable under its
Underlying Instruments.



“Bankruptcy Code”: The United States Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq.), as
amended from time to time.



“Base Rate”: On any date, a fluctuating interest rate per annum equal to the higher of (a) the
Prime Rate or (b) the Federal Funds Rate plus 1.5%.



“Benefit Plan”: Any employee benefit plan as defined in Section 3(3) of ERISA in respect
of which the Seller or any ERISA Affiliate of the Seller is, or at any time during the immediately
preceding six years was, an “employer” as defined in Section 3(5) of ERISA.



“B-Note Loan”: Any Term Loan that (i) is a multilender loan, (ii) is secured by a first or second
priority Lien on all of the Obligor’s assets constituting Related Property for the Loan, (iii) has
a “first dollar” at risk not to exceed 65% of the Loan to Value Ratio and a “last dollar” at risk
not to exceed 90% of the Loan to Value Ratio, and (iv) contains terms which, upon the occurrence of
an event of default under the Underlying Instruments or in the case of any liquidation or
foreclosure on the Related Property, provide that the principal of the Seller’s portion of such
Loan would be paid only after the other lenders parties on the senior tranche related to such Loan
are paid in full.



“Borrowing Base”: On any date of determination, the sum of (i) the Aggregate Outstanding Asset
Balance and (ii) (a) the Outstanding Asset Balances of all Additional Assets that are Eligible
Assets to be included as part of the Collateral on such date minus (b) the amount




11









 







(calculated without duplication) by which such Eligible Assets exceed any applicable Pool
Concentration Criteria.



“Borrowing Base Certificate”: Each certificate, in the form of Exhibit A-3, required to be
delivered by the Seller along with each Borrowing Notice.



“Borrowing Notice”: Each notice, in the form of Exhibit A-1 or A-2 (as
applicable), required to be delivered by the Seller (i) in respect of (a) the Initial Advance and
each incremental Advance (as applicable), (b) any reduction of the Facility Amount or repayment of
the Advances Outstanding, or (c) any reinvestment of Principal Collections under Section
2.9(b); and (ii) on each Determination Date.



“Breakage Costs”: Any amount or amounts as shall compensate a Purchaser for any loss, cost or
expense incurred by such Purchaser (as determined by such Purchaser’s Purchaser Agent in such
Purchaser Agent’s sole discretion) as a result of (i) a prepayment by the Seller of Advances
Outstanding or Interest or (ii) any difference between the CP Rate and the Adjusted Eurodollar
Rate. All Breakage Costs shall be due and payable hereunder upon demand.



“British Pound Sterling”: The lawful currency of the United Kingdom.



“Business Day”: Any day other than a Saturday or a Sunday on which (a) banks are not required or
authorized to be closed in Minneapolis, Minnesota or New York City, New York, and (b) if the term
“Business Day” is used in connection with the determination of the LIBOR Rate, dealings in United
States dollar deposits are carried on in the London interbank market.



“Canadian Dollars”: The lawful currency of Canada.



“Capital Stock”: Any capital stock or membership interests (in the case of a limited liability
company) or equivalent equity interests of CapitalSource Inc. or any Consolidated Subsidiary (to
the extent issued to a Person other than CapitalSource Inc.), whether common or preferred.



“Change-in-Control”: Any of the following:




     (a) any Person or two or more Persons acting in concert shall have acquired “beneficial
ownership,” directly or indirectly, of, or shall have acquired by contract or otherwise, or shall
have entered into a contract or arrangement that, upon consummation, will result in its or their
acquisition of, or control over, Voting Stock of any Credit Party (or other securities convertible
into such Voting Stock) representing 33-1/3% or more of the combined voting power of all Voting
Stock of such Credit Party;



     (b) the replacement of greater than 50% of the board of directors of any Credit Party over a
two year period from the directors who constituted the board of directors at the beginning of such
period, and such replacements shall not have been approved or nominated by a vote of at least a
majority of the board of directors of such Credit Party then still in office who were either
members of such board of directors at the beginning of such period or whose election as a member of
such board of directors was previously so approved;



12









 





     (c) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or substantially all of the
assets of any Credit Party and its Subsidiaries taken as a whole to any “person” (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act);



     (d) the failure of CapitalSource Inc. to own (directly or through wholly owned subsidiaries),
free and clear of all Liens, 99.9% of the outstanding Voting Stock of the Originator;



     (e) the creation or imposition of any Lien on any limited liability company membership
interests in the Seller;



     (f) the failure by the Originator to own all of the limited liability company membership
interests in the Seller;



     (g) the CSE Management Agreement shall fail to be in full force and effect; or



     (h) CapitalSource Finance LLC shall fail to be the sub-servicer.


Notwithstanding the foregoing, solely for the purpose of determining whether there has been a
Change-in-Control pursuant to clause (a) above, any purchase by one or more Excluded Persons which
increases any of such Excluded Persons’ direct or indirect ownership interest (whether individually
or in the aggregate) in the Voting Stock of any Credit Party shall not constitute a
Change-in-Control even if the amount of Voting Stock acquired or controlled by such Excluded
Person(s) exceeds (whether individually or in the aggregate) 33-1/3% of the combined voting power
of all Voting Stock of the Originator or CapitalSource Inc., as applicable; provided that for so
long as any of such Excluded Persons’ direct or indirect ownership interest in the Voting Stock of
the Originator or CapitalSource Inc. exceeds (individually or in the aggregate) 33-1/3% of the
combined voting power of all Voting Stock of the Originator or CapitalSource Inc, as applicable,
the initiation by the Originator or CapitalSource Inc. of any action intended to terminate or
having the effect of terminating the registration of its securities under Section 12(g) of the
Exchange Act or intended to suspend or having the effect of suspending its obligation to file
reports with the U.S. Securities and Exchange Commission under Sections 13 and 15(d) of the
Exchange Act, shall constitute a Change-in-Control. “Excluded Person” shall mean each of John
Delaney, Jason Fish, Farallon Capital Management, LLC, Madison Dearborn Partners, LLC and each of
their Affiliates. As used herein, “beneficial ownership” shall have the meaning provided in Rule
13d-3 of the Securities and Exchange Commission under the Exchange Act.



“Charged-Off Asset”: An Asset the Servicer has deemed to be “charged-off” pursuant to the criteria
set forth in the Credit and Collection Policy, excluding the balance of any Asset for which a loss
was specifically provided as of June 30, 2006.



“Charged-Off Portfolio Asset”: A Portfolio Asset the Servicer has deemed to be “charged-off”
pursuant to the criteria set forth in the Credit and Collection Policy, excluding the balance of
any Portfolio Asset for which a loss was specifically provided as of June 30, 2006.



“Citigroup”: Citigroup Global Markets Realty Corp., in its capacity as a Purchaser.




13









 







“Citigroup Agent”: Defined in the Preamble of this Agreement.



“Citigroup Agent’s Account”: A special account (account number 066-612187) in the name of the
Citigroup Agent maintained at Citibank, N.A.



“Clearing Agency”: An organization registered as a “clearing agency” pursuant to Section 17A of
the Exchange Act.



“Closing Date”: June 30, 2006.



“CMBS Securities”: Securities that entitle the holders thereof to receive payments that depend
(except for rights or other assets designed to assure the servicing or timely distribution of
proceeds to holders of the securities) on the cash flow from a pool of commercial mortgage loans
made to finance the acquisition, construction and improvement of properties. They generally have
the following characteristics: (i) the commercial mortgage loans have varying contractual
maturities; (ii) the commercial mortgage loans are secured by Interests in Real Property purchased
or improved with the proceeds thereof (or to refinance an outstanding loan the proceeds of which
were so used); (iii) the commercial mortgage loans are obligations of a relatively limited number
of obligors and accordingly represent a relatively undiversified pool of obligor credit risk; (iv)
repayment thereof can vary substantially from the contractual payment schedule (if any), with early
prepayment of individual loans depending on numerous factors specific to the particular obligors
and upon whether, in the case of loans bearing interest at a fixed rate, such loans or securities
include an effective prepayment premium; and (v) the valuation of individual properties securing
the commercial mortgage loans is the primary factor in any decision to invest in these securities.



“Code”: The Internal Revenue Code of 1986, as amended from time to time.



“Collateral”: All right, title, and interest (whether now owned or hereafter acquired or arising,
and wherever located) of the Seller in all accounts, cash and currency, chattel paper, tangible
chattel paper, electronic chattel paper, copyrights, copyright licenses, equipment, fixtures,
general intangibles, instruments, commercial tort claims, deposit accounts, securities accounts,
inventory, investment property, letter-of-credit rights, software, supporting obligations,
accessions, and other property consisting of, arising out of, or related to any of the following
(in each case excluding the Retained Interest and the Excluded Amounts): (i) the Existing Assets
and the Additional Assets, and all monies due or to become due in payment under such Existing
Assets and the Additional Assets on and after the related Cut-Off Date, including but not limited
to all Collections, but excluding any Excluded Amounts; and (ii) all Related Security with respect
to the Existing Assets and the Additional Assets, and (iii) all income and Proceeds of the
foregoing.



“Collateral Custodian”: Wells Fargo Bank, National Association, not in its individual capacity,
but solely as Collateral Custodian, its successor in interest pursuant to Section 8.3 or
such Person as shall have been appointed Collateral Custodian pursuant to Section 8.5.



“Collateral Custodian Fee”: Defined in the Collateral Custodian Fee Letter.





14









 







“Collateral Custodian Fee Letter”: The Collateral Custodian Fee Letter, dated as of the date
hereof, by and among the Originator, the Administrative Agent and the Collateral Custodian, as such
letter may be amended, modified, supplemented, restated or replaced from time to time.



“Collateral Custodian Termination Notice”: Defined in Section 8.5.



“Collection Account”: Defined in Section 6.4(f).



“Collection Date”: The date following the Termination Date on which the Aggregate Unpaids have
been reduced to zero and indefeasibly paid in full.



“Collection Period”: Each calendar month.



“Collections”: (a) All cash collections and other cash proceeds of any Asset, including, without
limitation, Scheduled Payments, Finance Charges, Prepayments, Insurance Proceeds, all Recoveries or
other amounts received in respect thereof but excluding any Excluded Amounts, (b) any cash proceeds
or other funds received by the Seller or the Servicer with respect to any Related Security, (c) all
payments received pursuant to any Hedging Agreement or Hedge Transaction and (d) all Deemed
Collections.



“Commercial Paper Notes”: On any day, any short-term promissory notes of any Purchaser issued by
such Purchaser in the commercial paper market.



“Commitment”: With respect to each Purchaser the commitment of such Purchaser to make Advances in
accordance herewith in an amount not to exceed (a) prior to the Termination Date, the dollar amount
set forth opposite such Purchaser’s signature on the signature pages hereto or the signature pages
of the Additional Purchaser Agreement relating to such Purchaser, as applicable, under the heading
“Commitment” and (b) on or after the Termination Date, such Purchaser’s Pro Rata Share of the
aggregate Advances Outstanding.



“Commitment Fee”: (a) With respect to any Purchaser, as defined in such Purchaser’s Purchaser Fee
Letter and (b) with respect to any Additional Purchaser, as defined in such Additional Purchaser’s
Additional Purchaser Fee Letter.



“Concentrations Effective Date”: The earlier of:




     (i) the date that is three months following the closing of a Permitted Securitization
Transaction after the Closing Date; or



     (ii) the date on which the Adjusted Aggregate Outstanding Asset Balance first equals or
exceeds $100,000,000 following the more recent of (a) the Closing Date and (b) the closing
of a Permitted Securitization Transaction after the Closing Date.


“Consolidated Funded Indebtedness”: As of any date of determination, all outstanding Indebtedness
of the Originator and its Subsidiaries determined on a consolidated basis in accordance with GAAP.




15









 







“Consolidated Subsidiary”: At any date any Subsidiary the accounts of which, in accordance with
GAAP, would be consolidated with those of CapitalSource Inc. in its consolidated and consolidating
financial statements as of such date.



“Consolidated Tangible Net Worth”: As of any date of determination, the assets less the
liabilities of any Person and its Subsidiaries on a consolidated basis, less intangible assets
(including goodwill), all determined in accordance with GAAP.



“Contractual Obligation”: 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”: With respect to Wells Fargo, the office at which any particular time its
corporate trust business shall be principally administered, which office at the date of the
execution of this Agreement is located at the address set forth under the signature of Wells Fargo
on the applicable signature page hereto.



“CP Rate”: For any day during any Accrual Period, the per annum rate equivalent to the weighted
average of the per annum rates paid or payable by a Purchaser from time to time as interest on or
otherwise (by means of interest rate hedges or otherwise taking into consideration any incremental
carrying costs associated with short-term promissory notes issued by such Purchaser maturing on
dates other than those certain dates on which such Purchaser is to receive funds) in respect of the
promissory notes issued by such Purchaser that are allocated, in whole or in part, by such
Purchaser or such Purchaser’s Purchaser Agent (on its behalf) to fund or maintain the Advances
Outstanding funded by such Purchaser during such period, as determined by such Purchaser’s
Purchaser Agent (on its behalf) and reported to the Seller and the Servicer, which rates shall
reflect and give effect to (i) the commissions of placement agents and dealers in respect of such
promissory notes, to the extent such commissions are allocated, in whole or in part, to such
promissory notes by such Purchaser’s Purchaser Agent (on its behalf) and (ii) other borrowings by
such Purchaser, including, without limitation, borrowings to fund small or odd dollar amounts that
are not easily accommodated in the commercial paper market; provided that if any component of such
rate is a discount rate, in calculating the CP Rate, such Purchaser’s Purchaser Agent shall for
such component use the rate resulting from converting such discount rate to an interest bearing
equivalent rate per annum.



“Credit and Collection Policy”: The written credit policies and procedures manual of the
Originator and the Servicer (which policies shall include without limitation policies on a risk
rating system, due diligence format, underwriting parameters and credit approval procedures) in the
form provided to the Administrative Agent prior to the Closing Date, as it may be as amended or
supplemented from time to time in accordance with Section 5.1(h) and Section
5.4(f).



“Credit Party”: Any of CapitalSource Inc., CapitalSource TRS Inc., the Originator and any other
Subsidiary of CapitalSource Inc. that becomes a party to that certain Credit Agreement, dated as of
March 14, 2006, among CapitalSource Inc., as borrower, the guarantors named therein, the lender
parties thereto, Wachovia Bank, National Association, as administrative agent





16









 







for the lenders, as
swingline lender, and issuing lender, and Bank of America, N.A., as issuing lender, as such
agreement is amended, modified, waived, supplemented or restated from time to time; and “Credit
Parties” shall mean the foregoing collectively..



“CSE Management Agreement”: The management agreement, dated as of January 1, 2006, by and among
CapitalSource Inc., CSE Mortgage and CapitalSource Finance LLC, as the same may be amended,
restated, modified or supplemented from time to time.



“CSE Prime Rate”: The rate designated by CSE Mortgage (or the originator of an Assigned Loan) from
time to time and/or pursuant to the related Underlying Instruments as its prime rate in the United
States, such rate to change as and when the designated rate changes; provided that the CSE Prime
Rate is not intended to be the lowest rate of interest charged by CSE Mortgage (or such originator)
in connection with extensions of credit to debtors.



“CSE LIBOR Rate”: The posted rate for 30, 60 or 90 day, as applicable, deposits in Dollars
appearing on Telerate Page 3750, as and when determined in accordance with the applicable Required
Asset Documents.



“Cut-Off Date”: With respect to each Asset and Additional Asset, the related Funding Date
therefor.



“Currency”: Dollars or any Alternative Currency.



“Deemed Collection”: Defined in Section 2.4(c).



“Delayed-Draw Term Loan”: A Loan that is fully committed on the closing date thereof and is
required by its terms to be fully funded in one or more installments on draw dates to occur within
three years after the closing date thereof but which, once fully funded, has the characteristics of
a Term Loan.



“Delinquent Asset”: An Asset (that is not a Charged-Off Asset) as to which either of the following
first occurs: (a) all or any portion of one or more principal or interest payments (other than in
respect of default rate interest) remain unpaid for at least 60 days from the original due date for
such payment (without giving effect to any Servicer Advance thereon) or (b) consistent with the
Credit and Collection Policy such Asset would be classified as delinquent by the Servicer.



“Delinquent Portfolio Asset”: A Portfolio Asset (that is not a Charged-Off Portfolio Asset)
(excluding equity investments) as to which either of the following first occurs: (a) all or any
portion of one or more principal or interest payments (other than in respect of default rate
interest) remain unpaid for at least 60 days from the original due date for such payment (without
giving effect to any Servicer Advance thereon) or (b) consistent with the Credit and Collection
Policy (or such similar policies and procedures utilized by the Servicer in servicing such
Portfolio Asset) such Portfolio Asset would be classified as delinquent by the Servicer.



“Derivatives”: Any exchange-traded or over-the-counter (i) forward, future, option, swap, cap,
collar, floor or foreign exchange contract or any combination thereof, whether for physical
delivery or cash settlement, relating to any interest rate, interest rate index, currency, currency





17









 







exchange rate, currency exchange rate index, debt instrument, debt price, debt index, depository
instrument, depository price, depository index, equity instrument, equity price, equity index,
commodity, commodity price or commodity index, (ii) any similar transaction, contract, instrument,
undertaking or security, or (iii) any transaction, contract, instrument, undertaking or security
containing any of the foregoing.



“Determination Date”: The last day of each Collection Period.



“Development Properties”: An existing property that is undergoing renovation or redevelopment that
either (i) disrupts at least 30% of the occupancy of the property, or (ii) temporarily reduces the
NOI of the property by more than 30%; provided that a property will not be considered a Development
Property after it has an occupancy rate of at least 80%.



“DIP Loan”: A loan to an Obligor that is a “debtor-in-possession” as defined under the Bankruptcy
Code.



“Discretionary Sale”: Defined in Section 2.20.



“Discretionary Sale Date”: The Business Day identified by the Seller to the Administrative Agent
and each Purchaser Agent in a Discretionary Sale Notice as the proposed date of a Discretionary
Sale.



“Discretionary Sale Notice”: Defined in Section 2.20(a).



“Dollar Equivalent”: On any day, with respect to the amount of any Alternative Currency, the
amount of Dollars that would be required to purchase such amount of Alternative Currency on such
day, based on the spot selling rate from the prior Business Day as determined by the Servicer
reported on Wall Street Journal to sell such Alternative Currency for Dollars in the London foreign
exchange market.



“Dollars”: Means, and the conventional “$” signifies, the lawful currency of the United States.



“Eligible Asset”: On any date of determination, each Asset (A) for which the Administrative Agent,
Collateral Custodian and Backup Servicer have received the following no later than 2:00 p.m. (New
York City, New York time) on the day prior to the related Funding Date: (1) a faxed copy of the
duly executed original promissory note, master purchase agreement and purchase statements, Loan
Register and Asset Checklist, as applicable, in a form and substance satisfactory to the
Administrative Agent and, with respect to any Loans closed in escrow, a certificate (in the form of
Exhibit L) from the counsel to the Originator or the Obligor of such Loans certifying the
possession of the Required Asset Documents; provided that notwithstanding the foregoing, the
Required Asset Documents (including any UCCs included in the Required Asset Documents) shall be in
the possession of the Collateral Custodian within two Business Days of any related Funding Date as
to any Additional Assets; (2) a Borrowing Notice delivered by the Seller to the Collateral
Custodian, each Purchaser Agent and the Administrative Agent as part of the Borrowing Notice or
Monthly Report delivered by the Servicer, (3) a Borrowing Base Certificate, and (4) a Certificate
of Assignment (Exhibit A to the Sale Agreement, including Schedule I thereto); provided that if
such Asset is part of a capital contribution to the Seller the Collateral Custodian shall have
received the Required Asset Documents within three Business




18









 







Days of receipt of the Certificate of
Assignment and (B) that satisfies each of the following eligibility requirements, as applicable:



(1) With respect to any Asset:




     (a) the Asset, together with the Related Security, has been originated or acquired by the
Originator, sold to the Seller pursuant to (and in accordance with) the Sale Agreement and
the Seller has good title, free and clear of all Liens (other than Permitted Liens), on such
Asset and Related Security;



     (b) the Asset, (i) (together with the Collections and Related Security related thereto) has
been the subject of a grant by the Seller in favor of the Administrative Agent on behalf of the
Secured Parties, of a first priority perfected security interest, and (ii) with respect to which,
at the time of the sale of such Asset to the Seller, the Originator had a first priority (other
than in the case of B-Note Loans or Mezzanine Loans) perfected security interest in the Related
Property (other than additional or “boot” collateral) relating to such Loan;



     (c) at the time such Asset is included in the Collateral, the Asset (i) is not (and since its
origination by the Originator or, in the case of Acquired Loans, acquisition by the Originator has
never been) a Charged-Off Asset (either in whole or in part), (ii) is not past due in the case of a
Loan or the Tandem Asset, with respect to payments of principal or interest (provided that if such
Asset is past due at the time it is included in the Collateral but not more than ten days past due,
the Originator and the Servicer must reasonably believe that such Asset will promptly and in no
event later than the date of the next Scheduled Payment due on such Asset, be brought current with
respect to all payments due thereunder), and (iii) has never been more than 60 days past due, with
respect to payments of principal or interest, or, in the case of Acquired Loans, to the best of the
Originator’s knowledge after due inquiry, has never been more than 60 days past due in the 12
months prior to acquisition;



     (d) the Asset is an “eligible asset” as defined in Rule 3a-7 under the 1940 Act;



     (e) the Asset is an “account”, “chattel paper”, “instrument” or a “general intangible” within
the meaning of Article 9 of the UCC of all applicable jurisdictions;



     (f) the Obligor with respect to such Asset is an Eligible Obligor and such Asset is payable
only in Dollars and does not permit the currency in which or the country in which such Asset is
payable to be changed; provided that notwithstanding the foregoing, any such Asset denominated in
an Alternative Currency shall be deemed to satisfy the requirements in this clause that it be
payable in Dollars if such Asset is subject to appropriate currency hedging as determined by the
Administrative Agent and each Purchaser Agent in their sole discretion;



     (g) the Asset is evidenced by a promissory note, Loan Register, security agreement, loan or
note purchase agreement or other Underlying Instruments that have been duly authorized and
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,



19









 




whether considered in a suit at law or in equity), and there are no conditions precedent to the
enforceability or validity of the Asset that have not been satisfied or validly waived;




     (h) the Asset does not contravene in any material respect any Applicable Laws (including,
without limitation all applicable predatory and abusive lending laws and all laws, rules and
regulations relating to usury, truth in lending, fair credit billing, fair credit reporting,
equal credit opportunity, fair debt collection practices, licensing and privacy) and with
respect to which no part thereof is in violation of any Applicable Law in any material respect;



     (i) neither the assignment of the Asset under the Sale Agreement by the Originator, the sale
of the Asset hereunder or the granting of a security interest hereunder by the Seller violates,
conflicts with or contravenes any Applicable Laws or any contractual or other restriction,
limitation or encumbrance;



     (j) on or before the applicable Cut-Off Date, the Obligor of such Asset shall have been
directed to make all payments to the Lock-Box or directly to the Lock-Box Account;



     (k) the Asset requires the Obligor thereof to maintain reasonable and customary property
damage and loss insurance with respect to the real or personal property constituting the Related
Property (if any) if such Related Property is of a type customarily so insured;



     (l) the Related Property (if any) (i) has not been foreclosed on or repossessed from the
current Obligor by the Servicer, and (ii) has not suffered any material loss or damage that has not
been repaired or restored or for which insurance proceeds are not available;



     (m) the Asset provides by its terms 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 and the Asset contains a clause that has the effect of unconditionally and
irrevocably obligating the Obligor to make periodic payments (including taxes) notwithstanding any
damage to, defects in, or destruction of the Related Property (if any) or any other event,
including obsolescence of any property or improvements;



     (n) the Asset 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;



     (o) the Asset requires the Obligor to maintain the Related Property in good condition and to
bear all the costs of operating and maintaining same, including taxes and insurance relating
thereto;



     (p) the Asset 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 Asset under the Transaction
Documents would be unlawful, void or voidable;



     (q) the Asset, together with the Required Asset Documents and Asset File related thereto, is
assignable and does not require the consent of or notice to the Obligor to consummate the
transactions
contemplated by the Transaction Documents or contain any other restriction on the
transfer or the assignment of the Asset for the purpose of consummating the transactions



20









 




contemplated by the Transaction Documents other than a consent or waiver of such restriction that
has been obtained prior to the date on which the Asset was sold to the Seller; provided that with
respect to Loans which are secured by an interest in commercial real estate, the Required Asset
Documents may restrict the transfer or the assignment of the related Loan so long as such Loan is
freely assignable or transferable to a Qualified Transferee;




     (r) the Obligor of such Asset is legally responsible for all taxes relating to the Related
Security or other security relating to such Asset, and all payments in respect of the Asset 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 Applicable 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;



     (s) the Asset complies with the representations and warranties made by the Seller and Servicer
hereunder and all information provided by the Seller or the Servicer with respect to the Asset is
true and correct in all material respects;



     (t) the Asset and the Related Security have not been sold, transferred, assigned or pledged by
the Seller to any Person;



     (u) no selection procedure adverse to the interests of the Administrative Agent, the Purchaser
Agents or the Secured Parties was utilized by the Seller or Originator in the selection of Assets
for inclusion in the Collateral; it being understood that selection procedures used by the Seller
or Originator for the inclusion of Assets in one or more of its various securitizations or other
financing facilities and which are solely intended to obtain the most beneficial advance rates
thereunder and/or otherwise maximize the efficiency of such facilities, shall not be deemed to be
adverse procedures for purposes of this paragraph;



     (v) the Asset has not been compromised, adjusted, extended, satisfied, rescinded, set-off or
modified by the Seller, the Originator or the Obligor with respect thereto, and no Asset is subject
to compromise, adjustment, extension, satisfaction, rescission, set-off, counterclaim, defense,
abatement, suspension, deferment, deductible, reduction, termination or modification, whether
arising out of transactions concerning the Asset, or otherwise, by the Seller, the Originator or
the Obligor with respect thereto except as otherwise permitted under Section 6.4(a) of this
Agreement and in accordance with the Credit and Collection Policy;



     (w) the particular Asset is not one as to which the Seller or the Servicer has knowledge which
should lead it to expect such Asset will not be paid in full;



     (x) the Obligor of such Asset is not the subject of an Insolvency Event or Insolvency
Proceedings;



     (y) the Asset is secured by a valid, perfected, first priority (other than with respect to
B-Note Loans and Mezzanine Loans) security interest in all assets that constitute the collateral
for the Asset (subject to Liens expressly permitted by the Underlying Instruments);



     (z) all material consents, licenses, approvals or authorizations of, or registrations or
declarations with, any Governmental Authority required to be obtained, effected or given in



21









 




connection with the making or performance of the Asset have been duly obtained, effected or given
and are in full force and effect;




     (aa) the Asset satisfies all applicable requirements of and was originated or acquired,
underwritten and closed 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);



     (bb) the Asset was originated or acquired in the ordinary course of the Originator’s business;



     (cc) the Asset arises pursuant to documentation with respect to which the Originator has
performed all obligations required to be performed by it thereunder;



     (dd) the Asset is not Margin Stock;



     (ee) the acquisition of the Asset by the Seller will not cause the Seller or the pool of
Collateral to be required to be registered as an investment company under the 1940 Act;



     (ff) the Asset is not subject to a guaranty by the Originator or any Affiliate thereof; and



     (gg) the proceeds of the Asset will not be used to finance “ground-up” construction
activities; provided that financing for purposes of Land Development shall not be considered a
“ground-up” construction activity.



(2) With respect to any Loan and the Tandem Asset:




     (a) the Loan provides (i) for periodic payments of interest and/or principal in cash, which
are due and payable on a monthly, quarterly or semi-annual basis unless otherwise consented to in
writing by the Administrative Agent, and (ii) that the Servicer (or, with respect to Assigned
Loans, that the agent bank or a majority of the related lenders) may accelerate all payments if the
Obligor is in default under the Loan and any applicable grace period has expired (in the case of
any B-Note Loan or Mezzanine Loan, subject to any applicable intercreditor or subordination
agreement); provided that Sale/Leaseback Loans shall provide for payments of interest and/or
principal in cash, no less frequently than on a quarterly basis;



     (b) the Loan is underwritten as (i) a rediscount loan, (ii) a commercial real estate loan, or
(iii) a Sale/Leaseback Loan, in each case pursuant to and in accordance with the Credit and
Collection Policy;



     (c) the Loan is a Sale/Leaseback Loan, Senior Secured ABL Loan, Senior Secured Loan, B-Note
Loan or Mezzanine Loan;



     (d) the Loan has an original term to maturity of not more than 25 years;



22









 





     (e) the Loan provides for cash payments that fully amortize the Outstanding Asset Balance of
such Loan on or by its maturity and does not provide for such Outstanding Asset Balance to be
discounted pursuant to a prepayment in full;



     (f) the Loan does not permit the Obligor to defer all or any portion of the current cash
interest due thereunder;



     (g) the Loan does not permit the payment obligation of the Obligor thereunder to be converted
or exchanged for equity capital of such Obligor;



     (h) other than Participation Loans, Agented Loans and Assigned 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;



     (i) except with respect to B-Note Loans, Mezzanine Loans and certain Loans that, in the
Originator’s reasonable judgment cannot be cross-collateralized or cross-defaulted because of REIT
eligibility criteria, if the Obligor of such Loan is the Obligor of more than one Loan, all such
Loans are cross-collateralized and cross-defaulted;



     (j) the Loan does not represent capitalized interest or payment obligations relating to “put”
rights;



     (k) the Loan is not a Loan or extension of credit by the Originator to the Obligor for the
purpose of making any past due principal, interest or other payments due on such Loan;



     (l) 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 Administrative Agent, the Purchaser Agents or the
Secured Parties with respect to the Loan, the Related Security, the Scheduled Payments or any
income or Proceeds therefrom;



     (m) except with respect to B-Note Loans and Mezzanine Loans and, to the extent set forth in
the definition thereof, the Loan is not subordinated to any other loan or financing to the related
Obligor;



     (n) if the Loan is a Revolving Loan, either it provides by its terms that any future funding
thereunder is in the Originator’s sole and absolute discretion or it is subject to the Retained
Interest provision of this Agreement;



     (o) the Face Amount of the Loan is the dollar amount thereof shown on the books and records of
the Originator and Seller;



     (p) with respect to B-Note Loans or Mezzanine Loans, the Originator has entered into an
intercreditor agreement or subordination agreement (or such provisions are contained in the
principal Underlying Instruments) with, or provisions for the benefit of, the senior lender, which
agreement or provisions are assignable to and have been assigned to the Seller, and which provide
that any standstill of remedies by the Originator or its assignee is limited (A) such that no
standstill of remedies may be imposed unless (x) a default with respect to the senior



23









 




obligation
has occurred and is continuing and (y) in the case of such a default, other than a payment default,
the Originator’s or assignee’s receipt from the senior lender or Obligor of a notice of default by
the Obligor under the senior debt, and (B) to no longer than 180 days in duration in the aggregate
in any given year;




     (q) with respect to any Acquired Loan or Assigned Loan, such Loan has been re-underwritten by
the Originator and satisfies all of the Originator’s underwriting criteria;



     (r) with respect to any Acquired Loan acquired from an Affiliate of the Originator, the
Administrative Agent and each Purchaser Agent has received a satisfactory legal opinion concerning
the acquisition of such Loan by the Originator in a true sale transaction;



     (s) with respect to any Acquired Loan that was acquired in a pool by the Originator along with
one or more other Acquired Loans, the Administrative Agent has approved in writing such Loan for
inclusion in the Collateral and has completed its own due diligence with respect to such Loan;



     (t) with respect to Agented Loans, the related Underlying Instruments (a) shall include a note
purchase or similar agreement containing provisions relating to the appointment and duties of a
payment agent and a collateral agent and intercreditor and (if applicable) subordination
provisions, and (b) are duly authorized, fully and properly executed and are the valid, binding and
unconditional payment obligation of the Obligor thereof;



     (u) with respect to Agented Loans, CapitalSource Finance LLC or the Originator (or a wholly
owned subsidiary of the Originator) has been appointed the collateral agent of the security and the
payment agent for all such notes prior to such Agented Loan becoming a part of the Collateral;



     (v) with respect to Agented 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 the notes, all appropriate assignments of the collateral agent’s rights in and to
the collateral on behalf of the noteholders have been or will be executed and filed or recorded as
appropriate prior to such Agented Loan becoming a part of the Collateral;



     (w) with respect to any Agented Loan, all required notifications, if any, have been given to
the collateral agent, the payment agent and any other parties required by the Required Asset
Documents of, and all required consents, if any, have been obtained with respect to, the
Originator’s assignment of such Agented Loan and the Originator’s right, title and interest in the
Related Property to the Seller and the Administrative Agent’s security interest therein on behalf
of the secured parties;



     (x) with respect to Agented Loans, the right to control the actions of and replace the
collateral agent and/or the paying agent of the syndicated notes is to be exercised by at least a
majority in interest of all holders of such Agented Loans;



     (y) with respect to Agented Loans, all syndicated notes of the Obligor of the same priority
are cross-defaulted, the Related Property securing such notes is held by the collateral agent for
the benefit of all holders of the syndicated notes and all holders of such notes (a) have



24









 




an
undivided interest in the collateral securing such notes and (b) share in the proceeds of the sale
or other disposition of such collateral on a pro rata basis;




     (z) no portion of the proceeds used to make payments of principal or interest on such Loan
have come from a new loan by the Originator;



     (aa) does not contain a confidentiality provision that restricts or purports to restrict the
ability of the Administrative Agent or any Secured Party to exercise their rights under this
Agreement, including, without limitation, their rights to review the Loan, the Required Asset
Documents and Asset File;



     (bb) is not a consumer loan;



     (cc) is not a DIP loan; and



     (dd) none of the Loans secured by a Mortgage are high-cost loans as defined by applicable
predatory and abusive-lending laws.


(3) In addition to the criteria set forth in clauses (1) and (2) above, with
respect to any Sale/Leaseback Loan, the following additional criteria:




     (a) the Originator or CapitalSource Finance LLC shall be the lender of record for such Loan;
provided that with respect to any Sale/Leaseback Loan for which CapitalSource Finance LLC is the
lender of record prior to such Sale/Leaseback Loan becoming part of the Collateral the Seller shall
deliver a true sale opinion in form and substance acceptable to the Administrative Agent and each
Purchaser Agent;



     (b) (i) the Collateral Custodian or an escrow agent (pursuant to an escrow agreement in form
and substance acceptable to the Administrative Agent in its sole discretion) shall hold a Mortgage
in blank for the benefit of each Purchaser with respect to all real property assets of the SPE
Obligor and (ii) the Administrative Agent shall have the right to cause the Collateral Custodian
(at the expense of the Originator) to file the Mortgage(s) for the benefit of the Administrative
Agent and the Purchasers upon (A) the occurrence of a Termination Event or an Unmatured Termination
Event or (B) a default or event of default (however defined or described) in the Underlying
Instruments for such Sale/Leaseback Loan;



     (c) the Originator shall provide an indemnity to the Purchasers to cover any losses suffered
by the Purchasers as a result of any Lien against any of the SPE Obligor’s assets that is pari
passu or takes priority over the Liens granted pursuant to the Transaction Documents;



     (d) the Underlying Lessee is not an Affiliate of CapitalSource Inc. or its Subsidiaries;



     (e) the SPE Obligor owns the fee simple or ground lease interest in the underlying property
and shall not grant a Lien on such underlying property to any Person other than the Originator;



     (f) in no event shall the payments on the Lease abate or diminish, except:



25









 






          (I) upon a purchase by the Underlying Lessee of the underlying Property (the “Leased
Property”) following (A) a condemnation with respect to the Leased Property, in which such a
material part of the Leased Property is taken, or all points of ingress and/or egress to
public roadways servicing the underlying property are materially impaired by a taking, so as
to have a material adverse effect on Underlying Lessee’s business, and (B) the making of a
rejectable offer (the “Rejectable Offer”) by the Underlying Lessee to SPE Obligor to
purchase the Leased Property, together with all condemnation awards at a purchase price
equal to the fair market value thereof as
determined by an Appraisal on an as-is basis but disregarding the related condemnation
but in no event shall such purchase price be less than the outstanding principal of and
accrued interest on the related Sale/Leaseback Loan,




     (II) upon the making of a Rejectable Offer following such condemnation and its
rejection by SPE Obligor, such rejection to be conditioned upon (i) the prepayment by SPE
Obligor of the Sale/Leaseback Loan at par plus any accrued interest or (ii) SPE Obligor
providing assurances of such prepayment which are acceptable to the Administrative Agent,




     (III) upon the termination of the Underlying Lease following a casualty with respect to
the Leased Property which renders the Leased Property unsuitable for its primary intended
use, such termination to be conditioned upon (i) the prepayment by SPE Obligor of the
Sale/Leaseback Loan at par plus any accrued interest or (ii) SPE Obligor providing
assurances of such prepayment which are acceptable to the Administrative Agent, or



     (IV) in the event a condemnation or casualty described in clauses (I)(A) and (III)
above, respectively, occurs in the final 12 months of the term of the Underlying Lease, the
Underlying Lessee shall have the right to terminate the Underlying Lease with no further
obligations thereunder other than the satisfaction of all accrued and unpaid obligations to
the date of termination.


In the event that SPE Obligor accepts the Rejectable Offer, SPE Obligor shall convey title to the
Leased Property by deed (or, in the case of a ground lease, assignment of its rights and
obligations under such ground to the Underlying Lessee) and assign its rights and interests in the
related condemnation awards to the Underlying Lessee upon payment of the purchase price therefor.
In the event that the SPE Obligor rejects the Rejectable Offer, then subject to the Underlying
Lessee’s satisfaction of all accrued and unpaid obligations to the date of termination, the
Underlying Lessee shall have the right to terminate the Underlying Lease upon notice thereof;




     (g) the terms of the Lease shall provide periodic payments (which shall not be subject to
defense, set-off or counterclaim) from Underlying Lessee to SPE Obligor no less frequently than on
a quarterly basis to at least equal the interest and principal payments on the related Loan,
including with an appropriate rate of return to SPE Obligor which shall be similar to interest
rates charged by Originator to other third parties on loans with a similar risk profile;



     (h) the term of the Lease shall be at least equal to the term of the related Loan;




26









 







     (i) the Underlying Lessee shall not be in default under the Lease at the time of
contribution and thereafter shall not be in payment default;



     (j) any extraordinary payments by Underlying Lessee to SPE Obligor, including, but not limited
to, default, bankruptcy and early lease termination payments (but excluding late payment fees)
shall be applied to effectuate a reduction in the principal to the related Loan;



     (k) (i) the Underlying Lessee or SPE Obligor shall maintain risk property insurance in an
amount at least equal to the full replacement cost of the underlying property, (ii) shall maintain
general liability, business interruption and any other insurance agreed upon in the Lease and (iii)
all such insurance policies shall name the Originator and each Purchaser as additional insured;



     (l) either the rights of the SPE Obligor under the Lease are freely assignable by the SPE
Obligor or the Underlying Lessee has consented to the assignment of such rights to the Originator
and its assignees;



     (m) the Loan shall contain customary representations, warranties, indemnities, events of
default and remedies (including liquidated damages) similar to other transactions that Originator
would make to a third party in an arms-length transaction; and



     (n) the Seller shall have a pledge of the SPE Obligor’s equity interest.


(4) In addition to the criteria set forth in clause (1) above, with respect to any CMBS
Security (such CMBS Security to be approved by the Administrative Agent in its sole discretion),
the following additional criteria:




     (a) the CMBS Security shall have an S&P Rating of not lower than “B-,” and if such CMBS
Security is rated by either of Moody’s or Fitch, such CMBS Security shall have a rating of not
lower than “B3” or “B-,” respectively;



     (b) the servicer designated under the Underlying Instruments and the underlying pool of assets
serving as collateral for such CMBS Security are each located in the United States or any other
country approved by the Administrative Agent in its sole discretion, upon receipt and review of
satisfactory information or due diligence conducted by the Originator;



     (c) the CMBS Security has an expected remaining maturity that does not exceed 180 months;



     (d) the CMBS Security is not delinquent in payment and, since its origination, such CMBS
Security has never been 30 or more days delinquent in payment of either principal or interest
(unless otherwise approved by the Administrative Agent);



     (e) if any commercial mortgage loan contributed to an underlying pool of assets serving as
collateral for the CMBS Security accounts for more than 10% of the aggregate principal balance of
the underlying pool of assets for such CMBS Security, such CMBS Security shall have received (i) a
rating by two of any of Moody’s, S&P or Fitch and (ii) such rating by Moody’s, S&P and Fitch shall
be not lower than “Baa3”, “BBB-” or “BBB-”, respectively;



27









 





     (f) the CMBS Security was purchased and re-underwritten by the Originator and the
documentation and closing included, without limitation, delivery of relevant and customary opinions
and assignments, in each case in accordance with the Credit and Collection Policy;



     (g) the CMBS Security is secured by a valid and perfected first priority security interest in
the related underlying pool of assets that constitutes the primary collateral for the CMBS
Security;



     (h) the Underlying Instruments for such CMBS Security do not prohibit the transfer of such
CMBS Security to a foreign entity or otherwise prohibit the transfer of the CMBS Security to the
underlying collateral pool of a Permitted Securitization Transaction;



     (i) the CMBS Security is not known by the Originator, the Seller or the Servicer to be in
default;



     (j) the CMBS Security is not a financing executed in connection with an Insolvency Proceeding;



     (k) the CMBS Security shall provide for payments of interest and/or principal in cash, no less
frequently than on a quarterly basis;



     (l) the CMBS Security is not a Zero-Coupon Bond; and



     (m) the CMBS Security has not been acquired by the Originator or by the Seller at a purchase
price less than 65% of the outstanding principal balance of such CMBS Security unless otherwise
agreed by the Administrative Agent.


“Eligible Obligor”: On any date of determination, any Obligor that:





     (i) is a business organization (and not a natural person) duly organized and validly
existing under the laws of its jurisdiction of organization,




     (ii) is a legal operating entity or holding company,




     (iii) has not entered into the Loan primarily for personal, family or household
purposes,




     (iv) is not a Governmental Authority,




     (v) except with respect to Sale/Leaseback Loans to SPE Obligors, the Obligor is not an
Affiliate of the Originator or Seller,




     (vi) is not in the gaming (other than Obligors in the business of providing services to
the gaming industry), nuclear waste or natural resource exploration/production and oil field
service industries,




     (vii) is not engaged in the business of conducting proprietary research on new drug
development,



28









 






     (viii) is not the subject of an Insolvency Proceeding,




     (ix) as of the applicable Cut-Off Date, has an Eligible Risk Rating, and




     (x) is not an Obligor of a Charged-Off Asset or Delinquent Asset.


“Eligible Repurchase Obligations”: Repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States or any agency or 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.



“Eligible Risk Rating”: With respect to a designated Obligor, a “Rating 1,” “Rating 2,” “Rating
3,” or, solely in the case of Assets originated or acquired by CapitalSource Inc. or its Affiliates
longer than six months before the Asset becomes part of the Collateral, “Rating 4” each as
determined in accordance with the Credit and Collection Policy.



“Environmental Laws”: Any and all foreign, federal, state and local laws, statutes, ordinances,
rules, regulations, permits, licenses, approvals, interpretations and orders of courts or
Governmental Authorities, relating to the protection of human health or the environment, including,
but not limited to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing, permitting,
investigation or remediation of hazardous materials. Environmental Laws include, without
limitation, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §
9601 et seq.), the Hazardous Material Transportation Act (49 U.S.C. § 331 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401
et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Safe
Drinking Water Act (42 U.S.C. § 300, et seq.), the Environmental Protection Agency’s
regulations relating to underground storage tanks (40 C.F.R. Parts 280 and 281), and the
Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), and the rules and regulations
thereunder, each as amended or supplemented from time to time.



“ERISA”: The United States Employee Retirement Income Security Act of 1974, as amended from time
to time, and the regulations promulgated and rulings issued thereunder.



“ERISA Affiliate”: (a) Any corporation that is a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as the Seller, (b) a trade or
business (whether or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with the Seller, or (c) a member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as the Seller, any corporation described in clause (a) above
or any trade or business described in clause (b) above.



“Euro”: The lawful currency of the Participating Member States.



“Eurocurrency Liabilities”: Defined in Regulation D of the Board of Governors of the Federal
Reserve System, as in effect from time to time.




29









 







“Eurodollar Disruption Event”: The occurrence of any of the following: (a) any Liquidity Bank
shall have notified the Administrative Agent of a determination by such Liquidity Bank or any of
its assignees or participants that it would be contrary to law or to the directive of any central
bank or other governmental authority (whether or not having the force of law) to obtain Dollars in
the London interbank market to fund any Advance, (b) any Liquidity Bank shall have notified the
Administrative Agent of the inability, for any reason, of such Liquidity Bank or any of its
assignees or participants to determine the Adjusted Eurodollar Rate, (c) any Liquidity Bank shall
have notified the Administrative Agent of a determination by such Liquidity Bank or any of its
assignees or participants that the rate at which deposits of Dollars are being offered to such
Liquidity Bank or any of its assignees or participants in the London interbank market does not
accurately reflect the cost to such Liquidity Bank, such assignee or such participant of making,
funding or maintaining any Advance or (d) any Liquidity Bank shall have notified the Administrative
Agent of the inability of such Liquidity Bank or any of its assignees or participants to obtain
Dollars in the London interbank market to make, fund or maintain any Advance.



“Eurodollar Reserve Percentage”: For any period means the percentage, if any, applicable during
such period (or, if more than one such percentage shall be so applicable, the daily average of such
percentages for those days in such period during which any such percentage shall be so applicable)
under regulations issued from time to time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement (including, without limitation,
any basic, emergency, supplemental, marginal or other reserve requirements) with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities having a term of one
month.



“Excepted Person”: Defined in Section 13.13(a).



“Excess Spread Account”: Defined in Section 6.4(g).



“Exchange Act”: The United States Securities Exchange Act of 1934, as amended.



“Excluded Amounts”: (a) Any amount received in the Lock-Box by, on or with respect to any Asset
included as part of the Collateral, which amount is attributable to the payment of any tax, fee or
other charge imposed by any Governmental Authority on such Asset, (b) any amount representing a
reimbursement of insurance premiums and (c) any amount with respect to any Asset retransferred or
substituted for upon the occurrence of a Warranty Event (if the Seller has decided that such Asset
is no longer to be included in the Collateral) or that is otherwise replaced by a Substitute Asset
(if the Seller has decided that such Asset is no longer to be included in the Collateral), to the
extent such amount is attributable to a time after the effective date of such replacement.



“Existing Assets”: Each Asset purchased by the Seller under the Sale Agreement and owned by the
Seller on the Closing Date.



“Face Amount”: With respect to any Asset, the Outstanding Asset Balance thereof, or, in the case
of the Tandem Asset, the Tandem Outstanding Asset Balance thereof, in each case as shown on the
applicable Asset List.




30









 







“Facility Amount”: The aggregate Commitments then in effect; provided that such amount may not at
any time exceed $900,000,000 without the written agreement of the parties hereto; provided further
that, on or after the Termination Date, the Facility Amount shall mean the Advances Outstanding.



“Facility Termination Date”: June 27, 2009, or such later date as the Administrative Agent and
each Purchaser Agent, in its sole discretion, shall notify the Seller of in writing.



“FDIC”: The Federal Deposit Insurance Corporation, and any successor thereto.



“Federal Funds Rate”: For any period, a fluctuating interest rate per annum equal for each day
during such period to the weighted average of the overnight federal funds rates as in Federal
Reserve Board Statistical Release H.15(519) or any successor or substitute publication selected by
the Administrative Agent (or, if such day is not a Business Day, for the next preceding Business
Day), or, if, for any reason, such rate is not available on any day, the rate determined, in the
sole opinion of the Administrative Agent, to be the rate at which overnight federal funds are being
offered in the national federal funds market at 9:00 a.m. (New York City, New York time).



“Finance Charges”: With respect to any Asset, any interest or finance charges owing by an Obligor
pursuant to or with respect to such Asset.



“Financial Sponsor”: Any Person, including any Subsidiary of another Person, whose principal
business activity is acquiring, holding, and selling investments (including controlling interests)
in otherwise unrelated companies that each are distinct legal entities with separate management,
books and records and bank accounts, whose operations are not integrated one with another and whose
financial condition and creditworthiness are independent of the other companies so owned by such
Person.



“Fitch”: Fitch, Inc. or any successor thereto.



“Fixed Rate Asset”: A Loan that is an Eligible Asset other than a Floating Rate Asset.



“Fixed Rate Asset Percentage”: As of any date of determination, the percentage equivalent of a
fraction (a) the numerator of which is equal to the sum of the Outstanding Asset Balances of all
Fixed Rate Assets and Banded Floating Rate Loans that are within 0.50% of the maximum interest rate
allowable under their Required Asset Documents as of such date, and (b) the denominator of which is
equal to the Aggregate Outstanding Asset Balance as of such date.



“Floating Rate Asset”: A Loan that is an Eligible Asset where the interest rate payable by the
Obligor thereof is based on the CSE Prime Rate or CSE LIBOR Rate, plus some specified interest
percentage in addition thereto, and the Loan provides that such interest rate will reset
immediately upon any change in the related CSE Prime Rate or CSE LIBOR Rate.



“Funding Date”: With respect to the initial Funding Date, the third Business Day following the
Closing Date, and as to any incremental Advance, any Business Day that is one Business Day
immediately following the receipt by the Administrative Agent and each Purchaser Agent of a
Borrowing Notice (along with a Borrowing Base Certificate) in accordance with Section 2.3.




31









 







“GAAP”: Generally accepted accounting principles as in effect from time to time in the United
States.



“Governmental Authority”: 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 body or entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any court or arbitrator having
jurisdiction over such Person.



“H.15”: Federal Reserve Statistical Release H.15.



“Hedge Amount”: On any day, an amount equal to the product of (a) the Borrowing Base and (b) the
Fixed Rate Asset Percentage on such day.



“Hedge Collateral”: Defined in Section 5.3(b).



“Hedge Breakage Costs”: For any Hedge Transaction, any amount payable by the Seller for the early
termination of that Hedge Transaction or any portion thereof.



“Hedge Counterparty”: Means (a) Citibank, N.A. and its successors and assigns, and (b) any entity
that (i) on the date of entering into a Hedging Agreement (x) is an interest rate swap dealer that
has been approved in writing by the Administrative Agent (which approval shall not be unreasonably
withheld), and (y) has a long-term unsecured debt rating of not less than “A” by S&P, not less than
“A2” by Moody’s and not less than “A” by Fitch (if such entity is rated by Fitch) (“Long-term
Rating Requirement”) and a short-term unsecured debt rating of not less than “A-1” by S&P, not less
than “P-1” by Moody’s and not less than “F-1” by Fitch (if such entity is rated by Fitch)
(“Short-term Rating Requirement”), and (ii) in a Hedging Agreement (x) consents to the assignment
of the Seller’s rights under each Hedging Agreement to the Administrative Agent for the benefit of
the Secured Parties pursuant to Section 5.3(b) and (y) agrees that in the event that
Moody’s, S&P or Fitch reduces its long-term unsecured debt rating below the Long-term Rating
Requirement, or reduces its short-term unsecured debt rating below the Short-term Rating
Requirement, it shall transfer its rights and obligations under each Hedge Transaction to another
entity that meets the requirements of clause (i) and (ii) hereof and has entered into a Hedging
Agreement with the Seller on or prior to the date of such transfer.



“Hedge Guaranty”: The Guaranty, dated as of June 30, 2006, by and between CSE Mortgage in favor of
the applicable Hedge Counterparty, as amended, modified, waived, supplemented, restated or replaced
from time to time.



“Hedge Notional Amount”: For any Advance, the aggregate notional amount in effect on any day under
all Hedge Transactions entered into pursuant to Section 5.3(a) for that Advance.



“Hedge Percentage”: With respect to:




     (a) Fixed Rate Assets is, on any day that (i) the Aggregate Outstanding Asset Balance exceeds
$150,000,000, an amount equal to 100% if the sum of the Outstanding Asset Balances of all Fixed
Rate Assets exceeds $50,000,000, (ii) the Aggregate Outstanding Asset Balance exceeds $150,000,000,
an amount equal to 0% if the sum of the Outstanding Asset Balances of



32









 







all Fixed Rate Assets is less than or equal to $50,000,000, (iii) the Aggregate Outstanding
Asset Balance is less than or equal to $150,000,000, an amount equal to 100% if the sum of the
Outstanding Asset Balances of all Fixed Rate Assets exceeds $20,000,000 or (iv) the Aggregate
Outstanding Asset Balance is less than or equal to $150,000,000, an amount equal to 0% if the sum
of the Outstanding Asset Balances of all Fixed Rate Assets is less than or equal to $20,000,000;



     (b) Floating Rate Assets is 0%;



     (c) Banded Floating Rate Loans that are within 0.50% of the maximum interest rate allowable
under their Required Asset Documents, on any day, is an amount equal to 100%.


“Hedge Transaction”: Each interest rate or index rate swap transaction between the Seller and a
Hedge Counterparty that is entered into pursuant to Section 5.3(a) and is governed by a
Hedging Agreement.



“Hedged Rate”: For any Advance, the interest rate payable to a Hedge Counterparty under the Hedge
Transaction related to such Advance computed as of the Cut-Off Date under or with respect to the
Asset to which that Advance relates.



“Hedging Agreement”: Each agreement between the Seller and a Hedge Counterparty that governs one
or more Hedge Transactions entered into pursuant to Section 5.3(a), which agreement shall
consist of a “Master Agreement” in a form published by the International Swaps and Derivatives
Association, Inc., together with a “Schedule” thereto substantially in the form of Exhibit
D hereto or such other form as the Administrative Agent shall approve in writing, detailing the
specific terms of each such Hedge Transaction.



“Highest Required Investment Category”: (i) With respect to ratings assigned by Moody’s, “Aa2” or
“P-1” for one month instruments, “Aa2” and “P-1” for three month instruments, “Aa3” and “P-1” for
six month instruments and “Aa2” and “P-1” for instruments with a term in excess of six months, (ii)
with respect to rating assigned by S&P, “A-1” for short-term instruments and “A” for long-term
instruments, and (iii) with respect to rating assigned by Fitch (if such investment is rated by
Fitch), “F-1+” for short-term instruments and “AAA” for long-term instruments.



“Increased Costs”: Any amounts required to be paid by the Seller to an Affected Party pursuant to
Section 2.15.



“Indebtedness”: 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 that is evidenced by a note, bond, debenture or similar instrument or other
evidence of indebtedness customary for indebtedness of that type, (b) all obligations of such
Person under leases that shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (c) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (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, (e) all indebtedness, obligations or liabilities of


33









 






that Person in respect of Derivatives, and (f) obligations under direct or indirect guaranties in
respect of obligations (contingent or otherwise) to purchase or otherwise acquire, or to otherwise
assure a creditor against loss in respect of, indebtedness or obligations of others of the kind
referred to in clauses (a) through (e) above.



“Indemnified Amounts”: Defined in Section 11.1.



“Indemnified Parties”: Defined in Section 11.1.



“Independent Director”: Defined in Section 4.1(u).



“Industry”: The industry of an Obligor as determined by reference to the two digit standard
industry classification or North American Industry Classification System codes.



“Initial Advance”: The first Advance.



“Insolvency Event”: 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 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”: The Bankruptcy Code 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”: Any case, action or proceeding before any court or other Governmental
Authority relating to any Insolvency Event.



“Instrument”: Any “instrument” (as defined in Article 9 of the UCC), other than an instrument that
constitutes part of chattel paper.



“Insurance Policy”: With respect to any Asset an insurance policy covering liability and physical
damage to or loss of the Related Property.



“Insurance Proceeds”: Any amounts payable or any payments made on or with respect to an Asset
under any Insurance Policy.




34









 







“Intercreditor Agreement”: The Fourth Amended and Restated Intercreditor and Lockbox
Administration Agreement, dated as of June 30, 2005, by and among each of the financing agents from
time to time party thereto, Bank of America, N.A., as the lockbox bank, CapitalSource Finance LLC,
as the originator, as the original servicer and as the lockbox servicer, and CapitalSource Funding
LLC, as the owner of the account and as the owner of the lockbox, as amended, modified, waived,
supplemented, restated or replaced from time to time.



“Interest”: For each Accrual Period and each Advance outstanding, the sum of the products of:




	 	 	 	 	 
	 

	 	IR x P x
	 	1
	 

	 	 	 	D






	 	 	 	 	 	 	 
	 

	 	where:	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	IR
	 	=
	 	the Interest Rate applicable on such day;
	 
	 	 	 	 	 	 
	 

	 	P
	 	=
	 	the principal amount of such Advance on such day; and
	 
	 	 	 	 	 	 
	 

	 	D
	 	=
	 	360 or, to the extent the Interest Rate is based on the Base Rate, 365 or 366 days, as
applicable.





provided that (i) no provision of this Agreement shall require the payment or permit the collection
of Interest in excess of the maximum permitted by Applicable Law and (ii) Interest shall not be
considered paid by any distribution if at any time such distribution is rescinded or must otherwise
be returned for any reason.



“Interest Collections”: Any and all amounts received in respect of any interest, fees or other
similar charges (including any Finance Charges) from or on behalf of any Obligor that are deposited
into the Collection Account, or received by or on behalf of the Seller by the Servicer or
Originator in respect of an Asset, in the form of cash, checks, wire transfers, electronic
transfers or any other form of cash payment (net of any payment owed by the Seller to, and
including any receipts from, any Hedge Counterparties).



“Interests in Real Property”: A fee simple interest, a financeable estate for years or a leasehold
interest, in each case in real property.



“Interest Rate”: For any Accrual Period and for each Advance outstanding for each day during such
Accrual Period:





     (i) to the extent the applicable Purchaser has funded the applicable Advance through
the issuance of commercial paper, a rate equal to the applicable CP Rate; or




     (ii) to the extent the applicable Purchaser did not fund the applicable Advance through
the issuance of commercial paper, a rate equal to the Alternative Rate;


provided that the Interest Rate shall be the Base Rate for any Accrual Period for any Advance as to
which a Purchaser has funded the making or maintenance thereof by a sale of an interest


35









 






therein to any Liquidity Bank under the applicable Liquidity Agreement on any day other than the
first day of such Accrual Period without giving such Liquidity Bank(s) at least two Business Days’
prior notice of such assignment; and provided further that the Interest Rate for an Advance made by
a Purchaser for which Swiss Re is the Purchaser Agent shall be the Alternative Rate, regardless of
the source of funding for such Advance.



“ISDA Definitions”: The 2000 ISDA Definitions as published by the International Swaps and
Derivatives Association, Inc.



“Issuer”: Mica and any other any Purchaser whose principal business consists of issuing commercial
paper or other securities to fund its acquisition or maintenance of receivables, accounts,
instruments, chattel paper, general intangibles and other similar assets.



“Land Development”: Financing to an entity engaged in the business of purchasing land for the
purposes of resale to a developer.



“Lease”: The underlying triple-net lease between SPE Obligor and any Underlying Lessee pursuant to
which the Underlying Lessee is responsible for all expenses arising from the use or operation of
the underlying property, including, without limitation, taxes, insurance premiums, alterations, and
repairs and maintenance costs.



“Leased Property”: Defined in clause 3(f) of the definition of Eligible Asset.



“LIBOR Rate”: For any day during any Accrual Period and any Advance or portion thereof, an
interest rate per annum equal to:





     (1) the posted rate for 30 day deposits in Dollars appearing on Telerate page 3750 as
of 11:00 a.m. (London time) on the Business Day which is the second Business Day
immediately preceding the applicable Funding Date (with respect to the initial Accrual
Period for such Advance) and as of the second Business Day immediately preceding the first
day of the applicable Accrual Period (with respect to all subsequent Accrual Periods for
such Advance); or




     (2) if no such rate appears on Telerate page 3750 at such time and day, then the
LIBOR Rate shall be determined by Citigroup Global Realty at its principal office in New
York, New York as its rate (each such determination, absent manifest error, to be
conclusive and binding on all parties hereto and their assignees) at which 30 day deposits
in Dollars are being, have been, or would be offered or quoted by Wachovia to major banks
in the applicable interbank market for Eurodollar deposits at or about 11:00 a.m. (New
York, New York time) on such day.


“Lien”: Any mortgage, lien, pledge, charge, right, claim, security interest or encumbrance of any
kind of or on any Person’s assets or properties in favor of any other Person (including any UCC
financing statement or any similar instrument filed against such Person’s assets or properties).



“Liquid Real Estate Assets”: (a) Residential mortgage-backed securities that (i) have a rating of
not less than “AA” by S&P/Fitch and “Aa2” by Moody’s, (ii) are purchased by CapitalSource Inc. or
its Consolidated Subsidiaries solely to meet REIT asset and income tests, and (iii) are


36









 






leveraged through debt facilities utilizing leverage greater than 12 times the amount of equity
investment in such Liquid Real Estate Assets and (b) residential mortgage whole loan purchases made
by CapitalSource Inc. or its Consolidated Subsidiaries solely to meet REIT asset and income tests,
all in accordance with the Residential Mortgage Policies and Procedures.



“Liquidation Expenses”: With respect to (a) any Asset, 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
related assets securing such Asset upon or after the expiration or earlier termination of such
Asset and other out-of-pocket costs related to the liquidation of any such assets, including the
attempted collection of any amount owing pursuant to such Asset if it is a Charged-Off Asset, and
if requested by the Administrative Agent, the Servicer and Originator must provide to the
Administrative Agent a breakdown of the Liquidation Expenses for any Asset along with any
supporting documentation therefor, and (b) any Portfolio Asset, 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 related assets securing such Portfolio Asset upon or after the expiration or
earlier termination of such Portfolio Asset and other out-of-pocket costs related to the
liquidation of any such assets, including the attempted collection of any amount owing pursuant to
such Portfolio Asset if it is a Charged-Off Portfolio Asset, and if requested by the Administrative
Agent, the Servicer and Originator must provide to the Administrative Agent a breakdown of the
Liquidation Expenses for any Portfolio Asset along with any supporting documentation therefor.



“Liquidity Agreement”: (a) with respect to each Purchaser which is an Issuer, the Liquidity
Purchase Agreement, by and among such Purchaser, the Liquidity Banks named therein, and the related
Purchaser Agent, as such agreement may be amended, modified, waived, supplemented, restated or
replaced from time to time, and (b) with respect to each Additional Purchaser which is an Issuer,
the liquidity purchase agreement, swap agreement or other liquidity support arrangement by and
among such Additional Purchaser, the Liquidity Banks named therein and the related Additional
Agent, as such agreement may be amended, modified, waived, supplemented, restated or replaced from
time to time.



“Liquidity Bank”: The Person or Persons who provide liquidity support to any Purchaser which is an
Issuer or Additional Purchaser which is an Issuer pursuant to a Liquidity Agreement in connection
with the issuance by such Purchaser of Commercial Paper Notes.



“Liquidity Factor Reduction Event”: With respect to each Asset included as part of the Collateral
subject to the Retained Interest provisions of this Agreement, a “Liquidity Factor Reduction Event”
under and as defined in any Permitted Securitization Transaction rated by the Rating Agencies.



“Loan”: Any loan originated by the Originator or, in the case of an Assigned Loan or an Acquired
Loan, otherwise acquired by the Originator, that is identified on an Asset List and sold or
contributed to the Seller hereunder and included as part of the Collateral, which loan includes,


37









 






without limitation, (i) the Required Asset Documents and Asset File, and (ii) all right, title and
interest of the Originator in and to the loan and any Related Property.



“Loan Register”: Defined in Section 5.4(n).



“Loan-to-Liquidation Value” or “LLV”: With respect to any Loan, as of the date of origination, the
percentage equivalent of a fraction (i) the numerator of which is equal to the maximum availability
(as provided in the applicable Underlying Instruments) of such Loan as of the date of its
origination and (ii) the denominator of which is equal to the liquidation value of the Related
Property securing such Loan that is subject to a first priority lien in favor of the Originator (as
determined by the Servicer in accordance with the Credit and Collection Policy and in a
commercially reasonable manner).



“Loan-to-Value Ratio” or “LTV”: With respect to any Loan, as of any date of determination, the
percentage equivalent of a fraction (a) the numerator of which is equal to the total commitment
amount of such Loan as of the date of its origination (as provided in the related Underlying
Instruments) (or the Outstanding Asset Balance with respect to Delayed-Draw Term Loans as
determined on the last day of each calendar month) plus the total commitment amount or principal
amount, as the case may be, as of the applicable date of origination or incurrence, of all loans
and other indebtedness which is senior to or pari passu with such Loan in the “capital structure”
of the related Obligor (as defined in, and as determined by the Servicer in accordance with, the
Credit and Collection Policy and in a commercially reasonable manner), and (b) the denominator of
which is equal to the lower of the Obligor’s cost to acquire the Related Property or the current
value (determined by means of an Appraisal) of the Related Property.



“Lock-Box”: The post office box to which Collections are remitted for retrieval by a Lock-Box Bank
and deposited by such Lock-Box Bank into a Lock-Box Account, the details of which are contained in
Schedule II.



“Lock-Box Account”: The account maintained at the Lock-Box Bank for the purpose of receiving
Collections, the details of which are contained in Schedule II, as such schedule may be
amended from time to time.



“Lock-Box Agreement”: The Fifth Amended and Restated Three Party Agreement Relating to Lockbox
Services and Control (with Activation Upon Notice), dated as of June 30, 2005, by and among certain
financing agents party thereto, Bank of America, N.A., as the lockbox bank, CapitalSource Finance
LLC, as the originator, as the original servicer and as the lockbox servicer, and CapitalSource
Funding LLC, as the owner of the account and as the owner of the lockbox, as amended, modified,
waived, supplemented, restated or replaced from time to time.



“Lock-Box Bank”: Bank of America, N.A., or any of the banks or other financial institutions
holding one or more Lock-Box Accounts.



“Majority Purchaser Agents”: As defined in Section 6.1.



“Margin Stock”: Margin Stock as defined under Regulation U.




38









 







“Material Adverse Effect”: With respect to any event or circumstance, means a material adverse
effect on (a) the business, condition (financial or otherwise), operations, performance, properties
or prospects of the Servicer or the Seller, (b) the validity, enforceability or collectibility of
this Agreement or any other Transaction Document or the validity, enforceability or collectibility
of the Assets generally or any material portion of the Assets, (c) the rights and remedies of the
Administrative Agent, the Purchasers, the Purchaser Agents and the Secured Parties under the
Transaction Documents, (d) the ability of the Seller, the Servicer, the Backup Servicer or the
Collateral Custodian to perform its obligations under this Agreement or any Transaction Document,
or (e) the status, existence, perfection, priority or enforceability of the Administrative Agent’s,
the Purchaser Agents’, or the Secured Parties’ interest in the Collateral.



“Material Mortgage Loan”: Any Loan for which the underlying Related Property consisting of real
property owned by the Obligor (i) represents 25% or more (measured by the book value of the three
most valuable parcels of real property as of the date of such Loan) of (a) the original commitment
for such Loan and (b) the fair value of the underlying Obligor and Related Property as a whole and
(ii) is material to the operations of the related business of such Obligor; provided that a
Material Mortgage Loan shall not include certain parcels of real property which the Obligor is in
the process of disposing.



“Materials of Environmental Concern”: Any gasoline or petroleum (including crude oil or any
fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes,
defined or regulated as such in or under any Environmental Laws, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.



“Maximum Availability”: On any date of determination an amount equal to the least of:




     (a) the Facility Amount;



     (b) the sum of (i) the product of the Borrowing Base and the Weighted Average Advance Rate on
such date plus (ii) the amount on deposit in the Principal Collections Account received in
reduction of the Outstanding Asset Balance of any Asset that is an Eligible Asset; and



     (c) an amount equal to (i) the Borrowing Base minus (ii) the Minimum Overcollateralization
Amount plus (iii) the amount on deposit in the Principal Collections Account received in reduction
of the Outstanding Asset Balance of any Asset that is an Eligible Asset;


provided that in case of each of the foregoing clauses (a)-(c), during the Amortization
Period, the Maximum Availability shall be equal to the Advances Outstanding.



“Mezzanine Loan”: Any Term Loan (i) that is subordinate to a B-Note Loan, if any, in terms of
priority of payment obligations, (ii) the payment of which may contain a form of equity
participation in the issuer or Obligor and is secured by a pledge from the parent of the Obligor of
the equity in such Obligor, and (iii) that does not share in the same collateral package as the
Obligor’s senior loans.




39









 







“Mica”: Mica Funding, LLC, together with its successors and assigns, each as permitted pursuant to
this Agreement.



“Minimum Overcollateralization Amount”: As of any date of determination, an amount equal to the
product of 1.5 and the sum of the Outstanding Asset Balances of all Eligible Assets attributable to
the Obligor having the largest aggregate Outstanding Asset Balance of Eligible Assets included as
part of the Collateral (excluding the amount, calculated without duplication, by which such
Eligible Assets exceed any applicable Pool Concentration Criteria).



“Minimum Pool Yield”: A Pool Yield equal to 2.75%.



“Monthly Report”: Defined in Section 6.10(b).



“Moody’s”: Moody’s Investors Service, Inc., and any successor thereto.



“Mortgage”: The mortgage, deed of trust or other instrument creating a first or second Lien on an
Interest in Real Property securing a Loan subject to this Agreement, including the Assignment of
Leases and Rents related thereto.



“Mortgaged Property”: The underlying Interests in Real Property which are subject to the Lien of a
Mortgage that secures a Loan, consisting of Interests in Real Property in a parcel or parcels of
land, at least one of which parcels is improved by a commercial building or facility, together with
Interests in Real Property in such commercial building or facility and any personal property,
fixtures, leases and other property or rights pertaining to such land, commercial building or
facility which are subject to the related Mortgage.



“Multiemployer Plan”: A “multiemployer plan” as defined in Section 4001(a)(3) of ERISA that is or
was at any time during the current year or the immediately preceding five years contributed to by
the Seller or any ERISA Affiliate on behalf of its employees.



“NAICS Code” means the North American Industry Classification System Codes by at least four digits.



“Net Proceeds of Capital Stock/Conversion of Debt”: Any and all proceeds (whether cash or
non-cash) or other consideration received by CapitalSource Inc. and its Consolidated Subsidiaries,
on a consolidated basis, in respect of the issuance of Capital Stock (including, without
limitation, the aggregate amount of any and all Indebtedness converted into Capital Stock), after
deducting therefrom all reasonable and customary costs and expenses incurred by CapitalSource Inc.
and such Consolidated Subsidiary in connection with the issuance of such Capital Stock in each case
to the extent classified as equity on the consolidated balance sheet of CapitalSource Inc. and its
Consolidated Subsidiaries.



“NOI”: With respect to any Mortgaged Property, as of the last day of any fiscal quarter, the
amount determined for the period consisting of such fiscal quarter and each of the three
immediately preceding fiscal quarters of the sum of all rents and other revenues received in the
ordinary course from such Mortgaged Property minus all expenses paid related to the
ownership, operation and maintenance of such Mortgaged Property.




40









 







“Noteless Loan”: A Loan with respect to which the Underlying Instruments do not require the
Obligor to execute and deliver a promissory note to evidence the indebtedness created under such
Loan.



“Obligor”: With respect to any Asset, as applicable, any Person or Persons obligated to make
payments pursuant to or with respect to such Asset, including any guarantor thereof. For purposes
of calculating any of the Pool Concentration Criteria only, all Assets included as part of the
Collateral or to be transferred to the Collateral the Obligor of which is an Affiliate of another
Obligor (excluding any Financial Sponsor or Obligors that are Affiliates solely because of common
ownership or control by a Financial Sponsor) shall be aggregated with all Assets of such other
Obligor; for example, if Corporation A is an Affiliate (other than because of a
common Financial Sponsor) of Corporation B, and the sum of the Outstanding Asset Balances of all of
Corporation A’s Loans included as part of the Collateral constitutes 10% of the Aggregate
Outstanding Asset Balance and the sum of the Outstanding Asset Balances all of Corporation B’s
Loans included as part of the Collateral constitutes 10% of the Aggregate Outstanding Asset
Balance, the combined Obligor concentration for Corporation A and Corporation B would be 20%.



“Officer’s Certificate”: A certificate signed by a Responsible Officer of the Seller or the
Servicer, as the case may be, and delivered to the Collateral Custodian.



“Opinion of Counsel”: A written opinion of counsel, which opinion and counsel are acceptable to
the Administrative Agent and each Purchaser Agent in its sole discretion.



“Optional Sale”: Defined in Section 2.19(a).



“Optional Sale Date”: Any Business Day, provided 45 days written notice is given in accordance
with Section 2.19(a).



“Originator”: Defined in the Preamble of this Agreement.



“Other Costs”: Defined in Section 13.09(c).



“Outstanding Asset Balance”: With respect to any Asset at any time, the sum of (a) all future
Scheduled Payments becoming due under or with respect to such Asset plus (b) any past due Scheduled
Payments with respect to such Asset (other than with respect to those payments to the extent a
Servicer Advance is outstanding with respect thereto); provided that notwithstanding anything to
the contrary contained herein, for purposes of determining the Aggregate Outstanding Asset Balance,
if any portion of an Asset is deemed to be “charged-off” in accordance with the provisions of the
definition of Charged-Off Asset, then the entire Asset shall be deemed to have an Outstanding Asset
Balance of zero, except for purposes of calculating the Average Pool Charged-Off Ratio or the
Adjusted Pool Charged-Off Ratio.



“Overcollateralization Amount”: As of any date of determination, an amount equal to the product of
(i) the Overcollateralization Percentage on such date and (ii) the Borrowing Base on such date.




41









 







“Overcollateralization Percentage”: As of any date of determination, the percentage equivalent of
(a) one minus (b) a fraction (i) the numerator of which is equal to the Advances
Outstanding on such date and (ii) the denominator of which is equal to the Aggregate Outstanding
Asset Balance as of such date.



“Overcollateralization Shortfall”: As of any date of determination, the positive difference, if
any, of (a) the Minimum Overcollateralization Amount on such date minus (b) the
Overcollateralization Amount on such date.



“Participating Member State”: A member of the European Community that adopts or has adopted the
Euro as its lawful currency in accordance with legislation of the European Economic Community
relating to the Economic and Monetary Union.



“Participation Loan”: 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 (i) such transaction has
been fully consummated, pursuant to a participation agreement, (ii) such Loan (other than in the
case of a Noteless Loan) is represented by a separate promissory note, and (iii) the Originator has
the right to receive and collect payments directly in its own name, and to enforce its rights
directly against the Obligor thereof including the right to proceed against collateral; provided
that any such Loan shall exclude any Retained Interest.



“Payment Date”: The 15th day of each calendar month or, if such day is not a Business Day, the
next succeeding Business Day.



“Payment Duties”: Defined in Section 8.2(b).



“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 Business Day immediately preceding the next Payment Date immediately
following such date of determination, and (c) that evidence:





     (1) 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);




     (2) 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 that at the time of the Seller’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



42









 







institution or trust company shall have a credit rating from Fitch and each Rating
Agency in the Highest Required Investment Category granted by Fitch and such Rating
Agency, which in the case of Fitch, shall be “F-1+”;




     (3) commercial paper, or other short term obligations, having, at the time of the
Seller’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+”;




     (4) 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+”;




     (5) notes that are payable on demand or bankers’ acceptances issued by any depository
institution or trust company referred to in clause (ii) above;




     (6) investments in taxable money market funds or other regulated investment companies
having, at the time of the Seller’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);




     (7) time deposits (having maturities of not more than 90 days) by an entity the
commercial paper of which has, at the time of the Seller’s investment or contractual
commitment to invest therein, a rating of the Highest Required Investment Category granted
by Fitch and each Rating Agency; or




     (8) 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”.


The Collateral Custodian may pursuant to the direction of the Servicer or Administrative Agent, as
applicable, purchase or sell to itself or an Affiliate, as principal or agent, the Permitted
Investments described above.



“Permitted Liens”: Any of the following as to which no enforcement, collection, execution, levy or
foreclosure proceeding shall have been commenced: (a) Liens for state, municipal or other local
taxes if such taxes shall not at the time be due and payable, (b) Liens imposed by law, such as
materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s Liens and other similar Liens,
arising in the ordinary course of business securing obligations that are not overdue for a period
of more than 30 days, and (c) Liens granted pursuant to or by the Transaction Documents.



“Permitted Securitization Transaction”: Any financing transaction undertaken by the Seller or an
Affiliate of the Seller that is secured, directly or indirectly, by the Collateral or any portion
thereof or any interest therein, including any sale, lease, whole loan sale, asset securitization,
secured loan or other transfer.




43









 







“Person”: An individual, partnership, corporation (including a business trust), limited liability
company, joint stock company, trust, unincorporated association, sole proprietorship, joint
venture, government (or any agency or political subdivision thereof) or other entity.



“Pool Charged-Off Ratio”: As of any Determination Date, the product of (i) 12 and (ii) the
percentage equivalent of a fraction, (a) the numerator of which is equal to the sum of the
Outstanding Asset Balances of all Eligible Assets that became Charged-Off Assets (net of Recoveries
during such Collection Period) during the Collection Period related to such Determination Date, and
(b) the denominator of which is equal to the Aggregate Outstanding Asset Balance as of the first
day of the Collection Period related to such Determination Date.



“Pool Concentration Criteria”: With respect to items (9), (10) and (13) below, on any day, and
with respect to all other items below, on any day on and after the Concentrations Effective Date,
each of the concentration limitations as set forth below, which concentration limitations (unless
otherwise indicated) shall be measured on the basis of a percentage of the Adjusted Aggregate
Outstanding Asset Balance and shall exclude from all calculations the Tandem Asset and the Obligor
with respect to the Tandem Asset:





     (1) the sum of the Outstanding Asset Balance of all Eligible Assets the Obligors of
which are resident of the same state shall not exceed 20%, with the exception of the State
of Florida, the State of California and the State of New York, which shall not exceed 30%;




     (2) the sum of the Outstanding Asset Balances of all Eligible Assets that are Loans
secured by Development Properties shall not exceed 20%; provided that condominium
conversions shall not exceed 15%;




     (3) the sum of the Outstanding Asset Balances of all Eligible Assets that are Senior
Secured ABLs shall not exceed 35%;




     (4) the sum of the Outstanding Asset Balances of all Eligible Assets that are B-Note
Loans or Mezzanine Loans shall not exceed 20%;




     (5) the sum of the Outstanding Asset Balances of all Eligible Assets that are CMBS
Securities shall not exceed 15%




     (6) the sum of the Outstanding Asset Balances of all Eligible Assets that are Loans
secured by the same classification of Mortgaged Property shall not exceed 30% with the
exception of Loans secured by Mortgaged Property classified as hotel property, which shall
not exceed 20%;




     (7) the sum of the Outstanding Asset Balances of all Eligible Assets that are Loans
used to finance Land Development activities shall not exceed 10%;




     (8) the sum of the Outstanding Asset Balances of all Eligible Assets that are
Sale/Leaseback Loans shall not exceed 20%;



44









 






     (9) the sum of the Outstanding Asset Balances of all Eligible Assets with a “Risk
Rating 4”, a “Risk Rating 5” and a “Risk Rating 6” shall not exceed 20%, 10% and 0%,
respectively;




     (10) the sum of the Outstanding Asset Balances of all Eligible Assets to a single
Obligor shall not exceed $50,000,000;




     (11) the Adjusted Aggregate Outstanding Asset Balances of all Eligible Assets divided
by the number of Obligors excluding the Obligor with respect to the Tandem Asset,
(including Affiliates thereof) shall not exceed the greater of (a) 1.75% or (b) $15
million;




     (12) the sum of the Outstanding Asset Balances of all Eligible Assets that are
Acquired Loans shall not exceed 25%;




     (13) the sum of the Outstanding Asset Balances of all Eligible Assets which have been
included as part of the Collateral for 18 months or more shall not exceed 20%;




     (14) the sum of the Outstanding Asset Balances of all Eligible Assets where all or
any portion of the Related Property is located outside of the United States and its
territories and protectorates shall not exceed 15%;




     (15) subject to the requirements of (1)(f) of the definition of Eligible Asset, the
sum of the Outstanding Asset Balances of all Eligible Assets which provide for interest
and principal payments in British Pounds Sterling, Euros or Canadian Dollars shall not
exceed 10%; and




     (16) the sum of the Outstanding Asset Balances of all Loans which provide for
payments of interest on a semi-annual basis shall not exceed the lesser of (a) 5% and (b)
$20,000,000.


“Pool Rate”: As of any Determination Date, the annualized percentage equivalent of a fraction, (a)
the numerator of which is equal to all Interest Collections on Assets included in the Aggregate
Outstanding Asset Balance as of the first day of the Collection Period related to such
Determination Date that are deposited into the Collection Account during such Collection Period,
and (b) the denominator of which is equal to the Aggregate Outstanding Asset Balance as of the
first day of such Collection Period.



“Pool Yield”: On any day, the excess, if any, of (a) the Pool Rate on such day over (b)
the sum of (i) the Interest Rate, (ii) the Program Fee Rate and (iii) the Servicing Fee Rate, in
each case as of such day.



“Portfolio Aggregate Outstanding Asset Balance”: With respect to all Portfolio Assets, on any day,
the sum of the Portfolio Outstanding Asset Balances of such Portfolio Assets on such date.
Notwithstanding anything to the contrary contained herein, for purposes of determining the
Portfolio Aggregate Outstanding Asset Balance, if any portion of a Portfolio Asset is deemed to be
“charged-off” in accordance with the provisions of the definition of Charged-Off Portfolio


45









 






Asset, then the entire Portfolio Asset shall have a zero Outstanding Asset Balance, except for
purposes of calculating the Average Portfolio Charged-Off Ratio.



“Portfolio Asset”: Any asset owned or serviced by the Originator (including each Asset). For the
avoidance of doubt, the term Portfolio Asset shall not include any asset owned and/or serviced
solely by one or more Affiliates of the Originator (but not by the Originator); provided that (i)
such asset shall not have been originated or acquired by the Originator and (ii) such asset shall
not be included in the consolidated financial statements of the Originator.



“Portfolio Charged-Off Ratio”: As of any Determination Date, the product of (i) 12 and (ii) the
percentage equivalent of a fraction, (a) the numerator of which is equal to the sum of the
Portfolio Outstanding Asset Balances of all Portfolio Assets (excluding equity and preferred stock
investments) that became Charged-Off Portfolio Asset (net of Recoveries during such Collection
Period) during the Collection Period related to such Determination Date and (b) the denominator of
which is equal to the Portfolio Aggregate Outstanding Asset Balance (excluding equity and preferred
stock investments) as of the first day of the Collection Period related to such Determination Date;
provided that such calculation shall exclude the effects of any Liquid Real Estate Assets that are
acquired and levered by the Originator solely to satisfy REIT asset and income tests.



“Portfolio Delinquency Ratio”: As of any Determination Date, the percentage equivalent of a
fraction, (i) the numerator of which is equal to the sum of the Portfolio Outstanding Asset
Balances of all Delinquent Portfolio Assets on such date and (ii) the denominator of which is equal
to the Portfolio Aggregate Outstanding Asset Balance on such date; provided that, such calculation
shall exclude the effects of any Liquid Real Estate Assets that are acquired and levered by the
Originator solely to satisfy REIT asset and income tests.



“Portfolio Outstanding Asset Balance”: With respect to any Portfolio Asset, the sum of (i) the
portion of all future Scheduled Payments becoming due under or with respect to such Portfolio Asset
plus (ii) any past due Scheduled Payments with respect to such Portfolio Asset.



“Prepaid Asset”: Any Asset (other than a Charged-Off Asset) that was terminated or has been
prepaid in full or in part prior to its scheduled expiration date.



“Prepayment Amount”: Defined in Section 6.4(b).



“Prepayments”: Any and all (i) partial or full prepayments on or with respect to an Asset
(including, with respect to any Asset and any Collection Period, any Scheduled Payment, Finance
Charge or portion thereof that is due in a subsequent Collection Period that the Servicer has
received, and pursuant to the terms of Section 6.4(b) 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), (ii) Recoveries, and (iii) Insurance Proceeds.



“Prime Rate”: (a) The rate announced by Citigroup Global Markets from time to time as its prime
rate in the United States, such rate to change as and when such designated rate changes, or (b)
with respect to any Additional Purchaser, as otherwise specified by or on behalf of such Additional
Purchaser in the applicable Additional Purchaser Agreement. The Prime Rate is not


46









 






intended to be the lowest rate of interest charged by Citigroup Global Markets or any other
specified financial institution in connection with extensions of credit to debtors.



“Principal Collections”: Any and all amounts received in respect of any principal due and payable
from or on behalf of Obligors that are deposited into the Principal Collections Account, or
received by or on behalf of the Seller by the Servicer or Originator in respect of Assets, in the
form of cash, checks, wire transfers, electronic transfers or any other form of cash payment.



“Principal Collections Account”: Defined in Section 6.4(f).



“Proceeds”: With respect to any Collateral, whatever is receivable or received when such
Collateral is sold, liquidated, foreclosed, exchanged, or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes all rights to payment with respect to any
insurance relating to such Collateral.



“Program Fee”: (a) With respect to any Purchaser, as defined in the applicable Purchaser Fee
Letter and (b) with respect to any Additional Purchaser, as defined in the applicable Additional
Purchaser Fee Letter.



“Program Fee Rate”: (a) With respect to any Purchaser, the rate set forth in such Purchaser’s
Purchaser Fee Letter and (b) with respect to any Additional Purchaser, the rate set forth in the
applicable Additional Agent Fee Letter as the “Program Fee Rate.”



“Pro Rata Share”: (i) the percentage obtained by dividing each Purchaser’s, as applicable,
Commitment (as determined under subsection (i)(a) of the definition of Commitment) by the
aggregate Commitments of all the Purchasers (as determined under subsection (i)(a) of the
definition of Commitment).



“Purchaser”: (i) Citigroup, (ii) Mica and (iii) any Additional Purchaser, as the context requires;
and “Purchasers” means collectively (a) Citigroup, (b) Mica and (c) the Additional Purchasers.



“Purchaser Affiliate”: With respect to a Purchaser or Purchaser Agent, means any other Person
that, directly or indirectly, controls, is controlled by or under common control with such Person.
For 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 50% or more of the voting securities of such Person or to
direct or cause the direction of the management or policies of such Person, whether through the
ownership of voting securities, by contract or otherwise



“Purchaser Agent”: The Citigroup Agent, Swiss Re or any Additional Agent, as the context requires;
and “Purchaser Agents” means collectively the Citigroup Agent and the Additional Agents.



“Purchaser Fee Letter”: Each Fee Letter Agreement, dated as of the date hereof, by and among the
Seller, the Servicer, and the applicable Purchaser Agent, as amended, modified, waived,
supplemented, restated or replaced from time to time.



“Qualified Institution”: Defined in Section 6.4(f).




47









 







“Qualified Transferee”:




     (a) The Seller, each Purchaser Agent, the Administrative Agent or any of their Affiliates; 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 regularly engaged in the business of making or owning commercial real estate
loans or operating commercial real estate properties; and




     (iii) is one of the following: (I) 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; (II) an investment company, money management firm or a
“qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of
1933, as amended, or an “institutional accredited investor” within the meaning of
Regulation D under the Securities Act of 1933, as amended; or (III) the trustee, collateral
agent or administrative agent in connection with (x) a securitization of the subject Asset
through the creation of collateralized debt or loan obligations or (y) an asset-backed
commercial paper 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
transaction funded by 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 (IV) any entity Controlled (as defined below) by any of the entities
described in subclauses (i), (ii) or (iii) above.


For purposes of this definition only, “Control” means the ownership, directly or indirectly, in the
aggregate of more than 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.



“Quarterly Determination Date”: March 31, June 30, September 30 and December 31 of each calendar
year.



“Rating Agency”: Each of S&P, Moody’s and any other rating agency that has been requested to issue
a rating with respect to a Permitted Securitization Transaction.



“Records”: All documents relating to the Assets, including 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 Collateral or maintained with respect to the Collateral and the related Obligors


48









 






that the Seller, the Originator or the Servicer have generated, in which the Seller, the Originator
or the Servicer have acquired an interest pursuant to the Sale Agreement or in which the Seller,
the Originator or the Servicer have otherwise obtained an interest.



“Recoveries”: As of the time any Related Property or any other related property is sold, discarded
(after a determination by the Servicer that such Related Property or any other related property has
little or no remaining value) or otherwise determined to be fully liquidated by the Servicer in
accordance with the Credit and Collection Policy (or such similar policies and procedures utilized
by the Servicer in servicing the Portfolio Assets) with respect to any Charged-Off Asset or
Charged-Off Portfolio Asset, the proceeds from the sale of the Related Property or any other
related property, the proceeds of any related Insurance Policy, any other recoveries with respect
to such Charged-Off Asset or Charged-Off Portfolio Asset, the Related Property, any other related
property, and amounts representing late fees and penalties, net of Liquidation Expenses and
amounts, if any, received that are required under such Asset or Portfolio Asset, as applicable, to
be refunded to the related Obligor.



“Regulation U”: Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R.
§221, or any successor regulation.



“REIT”: A “real estate investment trust” as defined in Section 856(c)(5)(B) of the Code.



“Rejectable Offer”: Defined in clause 3(f) of the definition of Eligible Asset.



“Related Property”: With respect to an Asset, any property or other assets pledged as collateral
to the Originator to secure repayment of such Asset including all Proceeds from any sale or other
disposition of such property or other assets.



“Related Security”: All of the Seller’s right, title and interest in and to:




     (a) any Related Property securing an Asset and all Recoveries related thereto;



     (b) all Required Asset Documents, Asset Files related to any Asset, Records, and the
documents, agreements, and instruments included in the Asset File or Records, including without
limitation, rights of recovery of the Seller against the Originator;



     (c) all Insurance Policies with respect to any Asset;



     (d) all security interests, liens, guaranties, warranties, letters of credit, accounts, bank
accounts, mortgages or other encumbrances and property subject thereto from time to time purporting
to secure or support payment of any Asset, together with all UCC financing statements or similar
filings signed by an Obligor relating thereto;



     (e) the Collection Account, the Excess Spread Account, each Lock Box and all Lock Box
Accounts, the Securities Account together with all cash and investments in each of the foregoing
other than amounts earned on investments therein;



     (f) any Hedging Agreement and any payment from time to time due thereunder;



49









 





     (g) the Sale Agreement and the assignment to the Administrative Agent of all UCC financing
statements filed by the Seller against the Originator under or in connection with the Sale
Agreement; and



     (h) the proceeds of each of the foregoing.


“Replaced Asset”: Defined in Section 2.18(a).



“Reporting Date”: The date that is two Business Days prior to each Payment Date.



“Required Advance Reduction Amount”: On any day, an amount equal to the positive difference, if
any, of (a) Advances Outstanding on such day minus (b) the Maximum Availability on such
day.



“Required Asset Documents”: With respect to (i) any Noteless Loan identified as a Noteless Loan on
the Asset Checklist, a copy of the related Loan Register (together with a certificate of a
Responsible Officer of the Servicer certifying to the accuracy of such Loan Register as of the date
such Loan is included as a part of the Collateral), (ii) all Loans other than Noteless Loans, the
duly executed original of the promissory note and an assignment (which may be by endorsement or
allonge) of each such promissory note to the Seller and then the Administrative Agent, signed by an
officer of the Originator and the Seller, respectively, (iii) any Loan, any related loan agreement
and the Asset Checklist together with, to the extent set forth on the Asset Checklist, duly
executed (if applicable) originals or copies of each of any related participation agreement,
acquisition agreement, subordination agreement, intercreditor agreement, security agreements or
similar instruments, UCC financing statements, guarantee, or Insurance Policy (iv) for each Loan
secured by real property, an Assignment of Mortgage and (v) for any Loan identified as an Assigned
Loan on the Asset Checklist, the duly executed original assignment agreement; provided that with
respect to any Assigned Loan, any of the foregoing documents, other than any related promissory
notes in the case of Assigned Loans only, may be copies.



“Required Equity Contribution”: An amount equal to ten percent of the Aggregate Outstanding Asset
Balance as of the date the Required Equity Contribution Notice is delivered.



“Required Equity Contribution Notice”: A written demand by the Administrative Agent to the
Originator on any day on or after the occurrence of the Termination Dates for all Purchasers but
prior to the Collection Date specifying an amount equal to any payment obligation of the Seller
then due and owing under this Agreement or any other Transaction Document, whether arising in
respect of the Seller’s obligation to make payment of Advances Outstanding, Required Equity
Shortfall, Interest, indemnification, fees, expenses or otherwise.



“Required Equity Shortfall”: On any day, the excess, if any, of the Required Equity Contribution
over an amount equal to the excess, if any, of (a) the sum of (i) the Adjusted Borrowing
Base on such day plus (ii) all Principal Collections on deposit in the Principal
Collections Account (excluding principal collections received in respect of the Tandem Asset) and
all deposits in the Excess Spread Account on such day, over (b) the Adjusted Advances
Outstanding on such day.



“Required Reports”: Collectively, the Monthly Report, the Servicer’s Certificate required pursuant
to Section 6.10(c), the financial statements of the Servicer required pursuant to
Section 




50









 







6.10(d), the annual statements as to compliance required pursuant to Section 6.11,
and the annual independent public accountant’s report required pursuant to Section 6.12.



“Residential Mortgage Policies and Procedures”: The written residential mortgage policies and
procedures manual of CapitalSource Inc. attached hereto as Schedule V as it may be amended
or supplemented from time to time.



“Responsible Officer”: With respect to any Person, any duly authorized officer of such Person with
direct responsibility for the administration of this Agreement and also, with respect to a
particular matter, any other duly authorized officer to whom such matter is referred because of
such officer’s knowledge of and familiarity with the particular subject.



“Restricted Junior Payment”: (i) any dividend or other distribution, direct or indirect, on
account of any class of membership interests of the Seller now or hereafter outstanding, except a
dividend payment solely in interests of that class of membership interests or in any junior class
of membership interests of the Seller; (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any class of membership
interest of the Seller now or hereafter outstanding, (iii) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other
rights to acquire membership interests of Seller now or hereafter outstanding, and (iv) any payment
of management fees by the Seller (except for reasonable management fees to the Originator or its
Affiliates in reimbursement of actual management services performed).



“Retained Interest”: (A) With respect to any Revolving Loan or any Loan with an unfunded
commitment on the part of the Originator that does not provide by its terms that funding thereunder
is in Originator’s sole and absolute discretion and that is transferred by the Originator to the
Seller and/or by the Seller to the Purchasers, all of the obligations, if any, to provide
additional funding with respect to such Revolving Loan, and (B) with respect to any Assigned Loan,
any Participation Loan or any Agented Loan that is transferred by the Originator to the Seller
and/or by the Seller to the Purchasers, (i) all of the obligations, if any, of the agent(s) under
the documentation evidencing such Assigned Loan, Participation Loan, or Agented Loan and (ii) the
applicable portion of the interests, rights and obligations under the documentation evidencing such
Assigned Loan, Participation Loan, or Agented Loan that relate to such portion(s) of the
indebtedness that is owned by another lender or is being retained by the Originator pursuant to
clause (A) of this definition.



“Retransfer Date”: Defined in Section 4.6.



“Revolving Loan”: A Loan that is a line of credit or contains an unfunded commitment arising from
an extension of credit by the Originator to an Obligor, pursuant to the terms of which amounts
borrowed may be repaid and subsequently reborrowed; provided that any such Loan shall exclude any
Retained Interest.



“Revolving Period”: The period commencing on the Closing Date and ending on the day immediately
preceding the Termination Date.



“S&P”: Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor
thereto.




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“Sale Agreement”: The Sale and Contribution Agreement, dated as of the date hereof, between the
Originator and the Seller, as amended, modified, waived, supplemented, restated or replaced from
time to time.



“Sale/Leaseback Loan”: Any Loan by the Originator to an SPE Obligor that is collateralized by real
estate and the SPE Obligor’s rights under a Lease with an Underlying Lessee.



“Scheduled Payments”: With respect to any Asset, each monthly, quarterly, or annual payment of
principal required to be made by the Obligor thereof under the terms of such Asset; in all cases,
excluding any payment in the nature of, or constituting, interest.



“Secured Party”: (i) each Purchaser, (ii) the Administrative Agent and each Purchaser Agent, and
(iii) each Hedge Counterparty that is either a Purchaser or an Affiliate of the Citigroup Agent if
that Affiliate is a Hedge Counterparty that executes a counterpart of this Agreement agreeing to be
bound by the terms of this Agreement applicable to a Secured Party.



“Securities Account”: Defined in Section 6.4(h).



“Securities Intermediary”: Defined in Section 8.11(a).



“Seller”: Defined in the Preamble of this Agreement.



“Senior Secured ABL Loan”: Any Revolving Loan that (i) is secured by a first priority Lien on all
of the Obligor’s assets constituting Related Property for the Loan, (ii) provides the related
Obligor with the option to receive additional borrowings thereunder based on the value of its
eligible accounts receivable, residential mortgage receivables, inventory (other than real estate
property or land) or equipment, (iii) has a Loan-to-Liquidation Value of less than or equal to (a)
85% with respect to the Related Property which constitutes accounts receivable, (b) 90% with
respect to the Related Property which constitutes residential mortgage receivables, (c) 50% with
respect to the Related Property which constitutes inventory (other than real estate property or
land), and (d) 80% with respect to the Related Property which constitutes equipment, and (iii)
provides that the payment obligation of the Obligor on such Loan is either senior to, or pari passu
with, all other loans or financings to such Obligor.



“Senior Secured Loan”: Any Loan that (i) is secured by a first priority Lien on all of the
Obligor’s assets constituting Related Property for the Loan, (ii) has a Loan-to-Value of not
greater than 90%, and (iii) provides that the payment obligation of the Obligor on such Loan is
either senior to, or pari passu with, all other loans or financings to such Obligor.



“Servicer”: CSE Mortgage, and each successor (in the same capacity) appointed as Successor Servicer
pursuant to Section 6.16(a).



“Servicer Advance”: An advance of Scheduled Payments made by the Servicer pursuant to Section
6.5.



“Servicer Default”: Defined in Section 6.15.



“Servicer Termination Notice”: Defined in Section 6.15.




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“Servicer’s Certificate”: Defined in Section 6.10(c).



“Servicing Fee”: Defined in Section 2.14(b).



“Servicing Fee Rate”: 0.50% per annum for Eligible Assets which are not Workout Assets and 0.75%
per annum for Workout Assets, without duplication.



“Solvent”: As to any Person at any time, having a state of affairs such that all of the following
conditions are met: (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) the present fair salable value of the property of such Person in an orderly liquidation
of such Person is not less than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured; (c) 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; (d) 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 (e) such Person is not engaged in a
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”: An Obligor that (a) is organized as a bankruptcy remote, special purpose entity (as
evidenced by an Opinion of Counsel in form and substance satisfactory to the Administrative Agent)
and is not an operating company and (b) has as its primary assets real property and rights under a
Lease.



“Subsidiary”: As to any Person, a corporation, partnership or other entity of which shares of
stock or other ownership interests having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation, partnership or other
entity are at the time owned, or the management of which is otherwise controlled, directly or
indirectly, through one or more intermediaries, or both, by such Person; provided that any joint
ventures in which each party to the joint venture possesses 50% of the voting stock of such entity
shall be expressly excluded from this definition.



“Substitute Asset”: On any day, an Eligible Asset that meets each of the conditions for
substitution set forth in Section 2.18.



“Successor Servicer”: Defined in Section 6.16(a).



“Swiss Re”: Swiss Re Financial Products Corporation, together with its successors and assigns
permitted pursuant to this Agreement.



“Tandem Advance”: Defined in Section 2.1(c).



“Tandem Asset”: The Term Loan evidenced by the Term Loan and Security Agreement dated as of June
30, 2006 by and between Tandem Health Care Inc., FC-THC Acquisition LLC, the other parties
identified on Exhibit C attached thereto, CSE Mortgage LLC as lender and CapitalSource


53









 






Finance LLC, as administrative, payment and collateral agent (as amended, modified, supplemented,
or restated from time to time).



“Tandem Outstanding Asset Balance”: As of any date of determination, the Outstanding Asset Balance
of the Tandem Asset.



“Tape”: Defined in Section 7.2(b)(ii).



“Taxes”: Any present or future taxes, levies, imposts, duties, charges, assessments or fees of any
nature (including interest, penalties, and additions thereto) that are imposed by any Governmental
Authority.



“Termination Date”: The earliest of (a) the date of the termination of the Facility Amount or the
Adjusted Facility Amount pursuant to Section 2.4, (b) the Business Day designated by the
Seller to the Administrative Agent and each Purchaser Agent as the Termination Date at any time
following two Business Days’ prior written notice thereof to the Administrative Agent and each
Purchaser Agent, (c) June 29, 2007, (d) with respect to any Purchaser who is an Issuer the date any
Liquidity Agreement shall cease to be in full force and effect, (d) the date of the declaration of
the Termination Date pursuant to Section 10.2(a) or the date of the automatic occurrence of
the Termination Date pursuant to Section 10.2(b), and (e) the second Business Day prior to
the Facility Termination Date



“Termination Event”: Defined in Section 10.1.



“Term Loan”: A Loan that is a term loan that has been fully funded and does not contain any
unfunded commitment on the part of the Originator arising from an extension of credit by the
Originator to an Obligor.



“Transaction”: Defined in Section 3.2.



“Transaction Documents”: The Agreement, the Sale Agreement, each Hedging Agreement, the Hedge
Guaranty, the Lock-Box Agreement, the Intercreditor Agreement, each Variable Funding Certificate,
each Purchaser Fee Letter, any Additional Agent Fee Letters, any Additional Purchaser Agreements,
the Backup Servicer Fee Letter, the Collateral Custodian Fee Letter, any UCC financing statements
filed pursuant to the terms of this Agreement, and any additional document the execution of which
is necessary or incidental to carrying out the terms of the foregoing documents.



“Transferee Letter”: Defined in Section 13.16(a).



“Transition Expenses”: The reasonable costs (including reasonable attorneys’ fees) of the Backup
Servicer incurred in connection with the transferring the servicing obligations under this
Agreement and amending this Agreement to reflect such transfer in an amount not to exceed $100,000.



“UCC”: The Uniform Commercial Code as from time to time in effect in the applicable jurisdiction
or jurisdictions.




54









 







“Underlying Instruments”: The indenture, loan agreement, credit agreement or other agreement
pursuant to which a Loan has been issued or created and each other agreement that governs the terms
of or secures the obligations represented by such Loan or of which the holders of such Loan are the
beneficiaries related thereto.



“Underlying Lessee”: A lessee that is obligated on a Lease with an SPE Obligor.



“United States”: The United States of America.



“Unmatured Termination Event”: Any event that, with the giving of notice or the lapse of time, or
both, would become a Termination Event.



“Variable Funding Certificate”: Defined in Section 2.1.



“Voting Stock”: With respect to any Person, capital stock or membership interests (in the case of
a limited liability company) issued by such Person the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of directors (or persons performing
similar functions) of such Person, even though the right so to vote has been suspended by the
happening of such contingency.



“Warranty Asset”: Any Asset that fails to satisfy any criteria of the definition of Eligible
Asset; provided that notwithstanding the foregoing, for purposes of determining what is a Warranty
Asset, the criteria set forth in clauses (1)(c), (1)(d), 1(l)(i),
1(s) (but solely to the extent the criteria in such clause 1(s) relates to any
express representation and warranty that an Asset is an Eligible Asset), 1(w),
1(x), (1)(y) and clauses (2)(e) and 2(f) (but solely to the extent
that the criteria in such clauses 2(e) and 2(f) would not be satisfied as a result
of the operation of law or an effective court order in connection with an Insolvency Event) and
clause (3)(i) of the definition of Eligible Asset and clauses (viii) and
(x) in the definition of Eligible Obligor shall apply only as of the applicable Cut-Off
Date of such Asset.



“Warranty Event”: As to any Asset, the discovery that as of the related Cut-Off Date or Funding
Date there had existed a breach of any representation or warranty relating to such Asset and the
continuance of such breach through any applicable determination date or beyond any applicable cure
period.



“Weighted Average Advance Rate”: For any Advances Outstanding on any day, the weighted average of
the Advance Rates applicable to the Eligible Assets backing such Advances on such day, weighted
according to the proportion of the Aggregate Outstanding Asset Balance each type of Asset
represents.



“Workout Asset”: A Delinquent Asset or a Charged-Off Asset.



“Zero-Coupon Bond”: A bond that, at the time of determination, does not make periodic payments of
interest.




55









 








     Section 1.2 Other Terms.



     All accounting terms used but not specifically defined herein shall be construed in accordance
with GAAP. All terms used in Article 9 of the UCC in the State of New York, and used but not
specifically defined herein, are used herein as defined in such Article 9.



     Section 1.3 Computation of Time Periods.



     Unless otherwise stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word “from” means “from and including” and the words
“to” and “until” each mean “to but excluding.”



     Section 1.4 Interpretation.



     In each Transaction Document, unless a contrary intention appears:




     (i) the singular number includes the plural number and vice versa;




       (ii) reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are permitted by the Transaction Documents;




     (iii) reference to any gender includes each other gender;




     (iv) reference to day or days without further qualification means calendar days;




     (v) reference to any time means New York, New York time;




       (vi) reference to any agreement (including any Transaction Document), document or
instrument means such agreement, document or instrument as amended, modified, waived,
supplemented, restated or replaced and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms of the other Transaction Documents, and
reference to any promissory note includes any promissory note that is an extension or
renewal thereof or a substitute or replacement therefor; and




       (vii) reference to any Applicable Law means such Applicable Law as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect from time to time,
including rules and regulations promulgated thereunder and reference to any Section or other
provision of any Applicable Law means that provision of such Applicable Law from time to
time in effect and constituting the substantive amendment, modification, codification,
replacement or reenactment of such Section or other provision.



     Section 1.5 Special Provisions Relating to Alternative Currency Loans.



     For purposes of (a) complying with any requirement of this Agreement stated in Dollars and (b)
calculating any ratio or other test set forth in this Agreement, the amount of any Asset



56









 







that is denominated in an Alternative Currency shall be deemed to be the Dollar Equivalent of
such amount of Alternative Currency determined as of the date of such calculation including,
without limitation, the following (together with any defined terms in which such defined terms are
used): “Aggregate Outstanding Asset Balance”, “Borrowing Base”, “Pool Concentration Criteria”,
“Hedge Percentage”, “Interest Collections”, “Outstanding Asset Balance”, “Permitted Investments”,
“Portfolio Aggregate Outstanding Asset Balance”, “Portfolio Outstanding Asset Balance”, “Principal
Collections”, “Scheduled Payment” and “Servicing Fee”.



ARTICLE II




PURCHASE OF THE VARIABLE FUNDING CERTIFICATES




     Section 2.1 The Variable Funding Certificates.



     (a) On the terms and conditions hereinafter set forth, Seller shall deliver a duly executed
variable funding certificate (each such certificate, a “Variable Funding Certificate” or “VFC”), in
substantially the form of Exhibit B-1 or B-2, as applicable, (i) on the Closing
Date, to each Purchaser Agent at its address set forth on the signature pages of this Agreement,
and (ii) on each date on which an Additional Purchaser purchases a Variable Funding Certificate, to
the related Additional Agent at the address designated by such Additional Agent. Each Variable
Funding Certificate shall evidence an undivided ownership interest (and the Seller does hereby
sell, transfer, assign and convey such undivided ownership interest to the Purchasers) in the
Collateral purchased by a Purchaser in an amount equal, at any time, to the percentage equivalent
of a fraction (i) the numerator of which is the Advances outstanding under the applicable VFC on
such day, and (ii) the denominator of which is the total aggregate Advances Outstanding on such
day. Interest shall accrue, and each VFC shall be payable, as described herein; provided that (1)
the aggregate amount outstanding under all VFCs at any one time shall not exceed the Facility
Amount and (2) the aggregate amount outstanding under all VFCs at any one time, excluding the
Tandem Advance, shall not exceed the Adjusted Facility Amount.



     (b) On the terms and conditions hereinafter set forth, from the Closing Date to, but excluding
the Termination Date, the Seller may, at its option, request the Purchasers to make advances of
funds under the VFCs (each, an “Advance”) and the Purchasers shall make such Advance in an amount
equal to their Pro Rata Share of such requested Advance; provided that in no event shall the
Purchasers make any Advance if, after giving effect to such Advance either: (i) the aggregate
Advances Outstanding hereunder would exceed the lesser of (x) the Facility Amount or (y) the
Maximum Availability, or (ii) the aggregate Adjusted Advances Outstanding hereunder would exceed
the lesser of (x) the Adjusted Facility Amount or (y) the Adjusted Maximum Availability.
Notwithstanding anything contained in this Section 2.1 or elsewhere in this Agreement to
the contrary, no Purchaser shall be obligated to provide its Purchaser Agent or the Seller with
aggregate funds in connection with an Advance that would exceed such Purchaser’s unused Commitment
then in effect. Each Advance made by the Purchasers hereunder is subject to the interests of the
Hedge Counterparties under Section 2.9(a)(1) and Section 2.10(a)(2) of this
Agreement.



     (c) On the terms and conditions hereinafter set forth, on the Closing Date the Seller shall
request the Purchasers to make a one-time advance of funds under the VFCs in an amount



57









 







not to exceed $308,000,000, the proceeds of which will be applied by the Seller to acquire the
Tandem Asset (such Advance, the “Tandem Advance”), and the Purchasers shall make such Tandem
Advance in an amount equal to their Pro Rata Share of such requested Tandem Advance; provided that
the Tandem Asset shall be deemed an Eligible Asset so long as it was acquired with the proceeds of
the Tandem Advance on the Closing Date.



     (d) The Seller may, within 60 days but not less than 45 days prior to the expiration of any
Liquidity Agreement or this Agreement, by written notice to each applicable Purchaser Agent and the
Administrative Agent, make a request (i) for each applicable Liquidity Bank to extend the term of
such Liquidity Agreement for an additional period of 364 days and (ii) for each applicable
Purchaser Agent to extend the date set forth in clause (c) of the definition of Termination
Date for an additional period of 364 days. Each applicable Purchaser Agent will give prompt notice
to the applicable Purchaser and each applicable Liquidity Bank of its receipt of such request, and
each Purchaser and each Liquidity Bank shall make a determination, in their sole discretion, not
less than 45 days prior to the expiration of the date set forth in clause (c) of the
definition of Termination Date or the expiration of any Liquidity Agreement (as applicable) as to
whether or not it will agree to the extension requested. The failure of a Purchaser Agent or a
Liquidity Bank to provide timely notice of its decision to the Seller shall be deemed to constitute
a refusal by such Purchaser or such Liquidity Bank (as applicable) to extend the date set forth in
clause (c) of the definition of Termination Date or the term of the Liquidity Agreement,
respectively. The Seller confirms that each Liquidity Bank and each Purchaser, in their sole and
absolute discretion, without regard to the value or performance of the Collateral or any other
factor, may elect not to extend any Liquidity Agreement or the date set forth in clause (c)
of the definition of Termination Date (as applicable).



     (e) The Seller may, with the written consent of the Administrative Agent, request that an
existing Purchaser increase its Commitment in connection with a corresponding increase in the
Adjusted Facility Amount or, with the written consent of the Administrative Agent, add additional
Persons as Purchasers; provided that: (i) if the addition of any Purchaser or the increase of any
Purchaser’s Commitment would cause the aggregate Commitments of the Purchasers to exceed
$900,000,000, such addition or increase may be effected only with the consent of the Administrative
Agent and each Purchaser Agent and (ii) the Commitment of any Purchaser may only be increased with
the prior written consent of such Purchaser and its related Purchaser Agent. Each new Purchaser
and Purchaser Agent shall become a party hereto by executing and delivering to the Administrative
Agent and the Seller an Additional Purchaser Agreement.



     (f) Notwithstanding anything to the contrary contained herein, this Agreement and the VFCs to
be issued thereunder shall constitute a single revolving debt facility with a single maturity and
in no event shall Seller effect a sale of any VFC to an existing Purchaser (or to an additional
Purchaser) or take any other action under the Agreement that would cause Seller to have outstanding
one or more debt obligations with two or more maturities hereunder. For purposes of this section,
debt obligations have “two or more maturities” if they have different stated maturities or if the
holders of the debt obligations possess different rights concerning the acceleration of or delay in
the maturities of the obligations.



58









 





     Section 2.2 Assignment by Citigroup to Mica.



     On the Amended and Restated Closing Date, Citigroup hereby assigns and sells to Mica, and Mica
hereby purchases from Citigroup, $172,444,444 of Advances Outstanding on such date and the
rights related thereto, $136,888,888 of which shall be in respect of the Tandem Advance. Citigroup
(i) represents and warrants that it is the legal and beneficial owner of the interest being
assigned and sold by it hereunder and that such interest is free and clear of any lien and (ii)
makes no representation or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any
other instrument or document furnished pursuant thereto.



     Section 2.3 Procedures for Advances by Purchasers.



     (a) Each Advance from a Purchaser hereunder shall be effected by the Seller (or the Servicer
on its behalf) delivering to the Administrative Agent and each Purchaser Agent (with a copy to the
Collateral Custodian and the Backup Servicer) a duly completed Borrowing Notice (along with a
Borrowing Base Certificate) no later than 2:00 p.m. (New York City, New York time) at least one
Business Day prior to the proposed Funding Date. Each Borrowing Notice (along with a Borrowing
Base Certificate) shall (i) specify the desired amount of such Advance, which amount must be at
least equal to $250,000, (ii) specify the date of such Advance, (iii) specify the Assets to be
financed on such Funding Date (including the appropriate file number and Outstanding Asset Balance
for each Asset (or, in the case of the Tandem Asset, the Tandem Outstanding Asset Balance), and
identifying each CMBS Security or Loan by type and whether such Loan is a Senior Secured ABL Loan,
Senior Secured Loan, B-Note Loan, Mezzanine Loan, Acquired Loan, Assigned Loan, or Participation
Loan) and (iv) include a representation that all conditions precedent for an Advance described in
Article III hereof have been met. Each Borrowing Notice shall be irrevocable.



     (b) On the date of each Advance, each Purchaser shall, upon satisfaction of the applicable
conditions set forth in Article III, make available to the Seller in same day funds, at
such bank or other location reasonably designated by Seller in its Borrowing Notice given pursuant
to this Section 2.3, an amount equal to its Pro Rata Share of, the least of (i) the amount
requested by the Seller for such Advance, (ii) an amount equal to, in the case of the initial
Funding Date, the Availability and on any Funding Date thereafter, the Adjusted Availability on
such Funding Date or (iii) in the case of the initial Funding Date, the Facility Amount and on any
Funding Date thereafter, the Adjusted Facility Amount.



     (c) On each Funding Date, the obligation of each Purchaser to remit its Pro Rata Share of each
Advance shall be several from that of each other Purchaser and the failure of any Purchaser to so
make such amount available to the Seller shall not relieve any other Purchaser of its obligation
hereunder.




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     Section 2.4 Reduction of the Facility Amount; Mandatory and Optional
Repayments.



     (a) The Seller may, upon at least 20 Business Days’ prior written notice (such notice to be
received by the Administrative Agent and each Purchaser Agent no later than 5:00 p.m. (New York
City, New York time) on such day) to the Administrative Agent and each Purchaser Agent, terminate
in whole or reduce in part the portion of the Facility Amount that exceeds the sum of the Advances
Outstanding, accrued Interest, Breakage Costs and Hedge Breakage Costs; provided that each partial
reduction of the Facility Amount shall be in an aggregate amount equal to at least $1,000,000.
Each notice of reduction or termination pursuant to this Section 2.4(a) shall be
irrevocable.



     (b) The Seller may, upon one Business Days’ prior written notice (such notice to be received
by the Administrative Agent, each Hedge Counterparty and each Purchaser Agent no later than 2:00
p.m. (New York City, New York time) on such day) to the Administrative Agent and each Purchaser
Agent, reduce the Advances Outstanding by remitting, in accordance with their Pro Rata Share, to
each Purchaser Agent, for payment to the respective Purchasers, (i) cash and (ii) instructions to
reduce such Advances Outstanding, related accrued Interest, Breakage Costs and Hedge Breakage
Costs; provided that no such reduction shall be given effect (1) unless the Seller has complied
with the terms of any Hedging Agreement requiring that one or more Hedge Transactions be terminated
in whole or in part as the result of any such reduction of the Advances Outstanding, and Seller has
paid all Hedge Breakage Costs and any payments owing to the relevant Hedge Counterparty for any
such termination (2) if a Termination Event or Unmatured Termination Event has occurred, is
continuing or would result from such reduction. Any reduction of the Advances Outstanding shall be
in a minimum amount of $250,000. Any such reduction will occur only if sufficient funds have been
remitted to pay all such amounts in the succeeding sentence in full. Upon receipt of such amounts,
the Purchaser Agents shall apply such amounts first to the pro rata reduction of the
Advances Outstanding, second to the payment of related accrued Interest on the amount of
the Advances Outstanding to be repaid by paying such amounts to the respective Purchasers, and
third to the payment of any Breakage Costs and Hedge Breakage Costs and any other payments
owing to the applicable Hedge Counterparty in respect of the termination of any Hedge Transaction.
Any notice relating to any prepayment pursuant to this Section 2.4(b) shall be irrevocable.



     (c) If on any day (i) the Administrative Agent, as agent for the Secured Parties, does not own
or have a valid and perfected first priority security interest in any of the Collateral or (ii) any
Asset which has been represented by the Seller to be an Eligible Asset is later determined not to
have been an Eligible Asset as of the related Cut-Off Date, upon the earlier of the Seller’s
receipt of notice from the Administrative Agent or the Seller becoming aware thereof and the
Seller’s failure to cure such breach within 30 days, the Seller shall be deemed to have received on
such day a collection (a “Deemed Collection”) of such Asset in full and shall on such day pay to
the Administrative Agent, on behalf of the Purchasers and each Hedge Counterparty, an amount equal
to (x) (1) the Outstanding Asset Balance of the Asset (or, in the case of the Tandem Asset, the
Tandem Outstanding Asset Balance) to be applied to the pro rata reduction of the principal of each
VFC plus (y) any Breakage Costs and Hedge Breakage Costs and any other payments owing to the
applicable Hedge Counterparty in respect of the termination of any Hedge Transaction required as a
result of the Deemed Collection and retransfer of the related Asset



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contemplated by this Section 2.4(c). In connection with any such Deemed Collection,
the Administrative Agent, as agent for the Secured Parties, shall automatically and without further
action, be deemed to transfer to the Seller, free and clear of any Lien created by the
Administrative Agent, all of the right, title and interest of the Administrative Agent, as agent
for the Secured Parties, in, to, and under the Asset with respect to which the Administrative Agent
has received such Deemed Collection, but without any other representation and warranty of any kind,
express or implied.




     Section 2.5 Determination of Interest.



     (a) To the extent any Purchaser’s Interest Rate is determined by reference to the CP Rate,
each Purchaser Agent shall determine such Purchaser’s CP Rate and the Interest (including unpaid
Interest, if any, due and payable on a prior Payment Date) to be paid by the Seller with respect to
each Advance, as applicable, on each Payment Date for the related Accrual Period and shall advise
the Servicer thereof on or before the third Business Day prior to such Payment Date.



     (b) Each Additional Agent shall determine such Additional Purchaser’s CP Rate and Interest
(including unpaid Interest related to such CP Rate, if any, due and payable to a prior Payment
Date) to be paid by the Seller with respect to each Advance on each Payment Date for the related
Accrual Period and shall advise the Servicer thereof on or before the third Business Day prior to
such Payment Date.



     Section 2.6 Percentage Evidenced by each Variable Funding Certificate.



     The variable percentage ownership interest in the Collateral represented by each VFC shall be
initially computed on its date of purchase. Thereafter, until the Termination Date, each VFC shall
be automatically recomputed (or deemed to be recomputed) on each day prior to the Termination Date.
The variable percentage ownership interest in the Collateral represented by each VFC as computed
(or deemed to be recomputed) as of the close of business on the day immediately preceding the
Termination Date shall remain constant at all times on and after the Termination Date. The
variable percentage ownership interest in the Collateral represented by each VFC shall become zero
when its Advances and Interest have been indefeasibly paid in full.



     Section 2.7 [Reserved].



     Section 2.8 Notations on Variable Funding Certificates.



     Each Purchaser Agent is hereby authorized to enter on a schedule attached to the VFC a
notation (which may be computer generated) with respect to each Advance under the VFC made by the
related Purchaser of: (a) the date and principal amount thereof, and (b) each repayment of
principal thereof, and any such recordation shall constitute prima facie evidence of the accuracy
of the information so recorded. The failure of any Purchaser Agent to make any such notation on
the schedule attached to the VFC shall not limit or otherwise affect the obligation of the Seller
to repay the Advances in accordance with their respective terms as set forth herein.



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     Section 2.9 Settlement Procedures During the Revolving Period.



     (a) On each Payment Date during the Revolving Period, the Servicer shall direct the Collateral
Custodian to pay pursuant to the Monthly Report to the following Persons, from (1) the Collection
Account, to the extent of Available Funds, and (2) Servicer Advances received with respect to the
immediately preceding Collection Period that ended on the last day of the calendar month
immediately preceding the calendar month in which such Payment Date occurs, the following amounts
in the following order of priority:




     (1) pro rata to each Hedge Counterparty, any amounts, (other than any Hedge Breakage
Costs and any payments due in respect of the termination of any Hedging Transaction),
owing to that Hedge Counterparty under its respective Hedging Agreement in respect of any
Hedge Transaction(s), for the payment thereof;




     (2) to the Servicer, in an amount equal to any unreimbursed Servicer Advances, for
the payment thereof;




     (3) to the Servicer, in an amount equal to any accrued and unpaid Servicing Fees to
the end of the preceding Collection Period, for the payment thereof;




     (4) to the extent not paid for by the Originator, pro rata to the Backup Servicer and
the Collateral Custodian, in an amount equal to any accrued and unpaid Backup Servicing
Fees, Collateral Custodian Fees and Transition Expenses, for the payment thereof;




     (5) to each Purchaser Agent, pro rata in accordance with the amount of Advances
Outstanding hereunder for the account of the applicable Purchaser, in an amount equal to
any accrued and unpaid Interest, Program Fee, Commitment Fee and Breakage Costs, for the
payment thereof;




     (6) to each Purchaser Agent, if either the Required Advance Reduction Amount or
Adjusted Required Advance Reduction Amount is greater than zero, an amount necessary to
reduce the Required Advance Reduction Amount or Adjusted Required Advance Reduction
Amount, as applicable, to zero, pro rata in accordance with the amount of Adjusted
Advances Outstanding hereunder for the account of the applicable Purchaser, for the
payment thereof;




     (7) pro rata to each Hedge Counterparty, any Hedge Breakage Costs and payments due in
termination of any Hedge Transaction, owing to that Hedge Counterparty under its
respective Hedging Agreement, for the payment thereof;




     (8) to the Administrative Agent, each Purchaser Agent, the applicable Purchaser, the
Backup Servicer, the Collateral Custodian, the Affected Parties, the Indemnified Parties
or the Secured Parties, pro rata in accordance with the amount owed to such Person under
this clause (8), all other amounts, including Increased Costs but other than
Advances Outstanding, then due under this Agreement, for the payment thereof; and



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       (9) any remaining amount shall be distributed to the Seller.



     (b) On the terms and conditions hereinafter set forth, from time to time during the Revolving
Period, the Servicer may, to the extent of any Principal Collections on deposit in the Principal
Collections Account, withdraw such funds for the purpose of reinvesting in additional Eligible
Assets, provided the following conditions are satisfied:




     (i) all conditions precedent set forth in Section 3.2(b) have been satisfied;




       (ii) the Servicer provides same day written notice to the Administrative Agent and
Collateral Custodian by facsimile (to be received no later than 2:00 p.m. (New York City,
New York time) on such day) of the request to withdraw Principal Collections and the amount
thereof;




       (iii) the notice required in clause (ii) above shall be accompanied by a Borrowing
Notice in the form of Exhibit A-2 and a Borrowing Base Certificate and the same are
executed by the Seller and at least one Responsible Officer of the Servicer;




       (iv) the Collateral Custodian provides to the Administrative Agent by facsimile (to be
received no later than 2:00 p.m. (New York City, New York time) on that same date) a
statement reflecting the total amount on deposit on such day in the Principal Collections
Account; and




       (v) upon the satisfaction of the conditions set forth in clauses (i) through (iv)
above, and the Administrative Agent’s confirmation of available funds, the Administrative
Agent will instruct the Collateral Custodian by facsimile on such day to release funds from
the Principal Collections Account to the Servicer in an amount not to exceed the lesser of
(A) the amount requested by the Servicer and (B) the amount on deposit in the Principal
Collections Account on such day.



     Section 2.10 Settlement Procedures During the Amortization Period.



     (a) On each Payment Date during the Amortization Period, the Servicer shall direct the
Collateral Custodian to pay pursuant to the Monthly Report to the following Persons, (i) from the
Collection Account, to the extent of Available Funds, (ii) in the case of payments solely for
purposes of clause (6), from the Excess Spread Account to the extent of any amounts on
deposit therein, and (iii) from Servicer Advances received with respect to the immediately
preceding Collection Period, the following amounts in the following order of priority:




       (1) pro rata to each Hedge Counterparty, any amounts, (including any Hedge Breakage
Costs and any payments due in respect of the termination of any Hedge Transaction in an
amount not to exceed $250,000 in the aggregate for all Hedging Agreements), owing to that
Hedge Counterparty under its respective Hedging Agreement in respect of any Hedge
Transaction(s), for the payment thereof;




       (2) to the Servicer, in an amount equal to any unreimbursed Servicer Advances, for
the payment thereof;



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     (3) to the Servicer, in an amount equal to any accrued and unpaid Servicing Fees to
the end of the preceding Collection Period, for the payment thereof;




     (4) to the extent not paid for by the Originator, pro rata to the Backup Servicer and
the Collateral Custodian, in an amount equal to any accrued and unpaid Backup Servicing
Fees, Collateral Custodian Fees and Transition Expenses, for the payment thereof;




     (5) to each Purchaser Agent, pro rata in accordance with the amount of Advances
Outstanding hereunder for the account of the applicable Purchaser, in an amount equal to
any accrued and unpaid Interest, Program Fee, Commitment Fee and Breakage Costs, for the
payment thereof;




     (6) to each Purchaser Agent, pro rata in accordance with the amount of Advances
Outstanding hereunder for the account of the applicable Purchaser, in an amount necessary
to reduce the Advances Outstanding and all other Aggregate Unpaids to zero, for the
payment thereof;




     (7) pro rata to each Hedge Counterparty, any Hedge Breakage Costs and payments due in
termination of any Hedge Transaction, owing to that Hedge Counterparty under its
respective Hedging Agreement to the extent not reimbursed pursuant to clause (1)
above, for the payment thereof;




     (8) to the Administrative Agent, each Purchaser Agent, the applicable Purchaser, the
Backup Servicer, the Collateral Custodian, the Affected Parties, the Indemnified Parties
or the Secured Parties, pro rata in accordance with the amount owed to such Person under
this clause (8), all other amounts, including Increased Costs but other than
Advances Outstanding, then due under this Agreement, for the payment thereof; and




     (9) any remaining amount shall be distributed to the Seller.



     Section 2.11 Collections and Allocations.



     (a) Collections. The Servicer shall promptly identify any collections received as
being on account of Interest Collections, Principal Collections or other Collections and shall
transfer, or cause to be transferred, all Collections received directly by it or on deposit in the
form of available funds in the Lock-Box Accounts to the Collection Account by the close of business
on the second Business Day after such Collections are received. In transferring Collections to the
Collection Account, the Servicer shall segregate Principal Collections and transfer the same to the
corresponding Principal Collections Account. The Servicer shall make such deposits or payments on
the date indicated therein by wire transfer, in immediately available funds. The Servicer shall
further include a statement as to the amount of Principal Collections and Interest Collections on
deposit in the Collection Account on each Reporting Date in the Monthly Report delivered pursuant
to Section 6.10(b).



     (b) Initial Deposits. On the Closing Date and on each Addition Date thereafter, the
Servicer will deposit (in immediately available funds) into the Collection Account all Collections



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received after the applicable Cut-Off Date and through and including the Closing Date or
Addition Date, as the case may be, in respect of Eligible Assets being transferred to and included
as part of the Collateral on such date.




     (c) Excluded Amounts. With the prior written consent of the Administrative Agent and
each Purchaser Agent, which consent shall not be unreasonably withheld (a copy of which will be
provided by the Servicer to the Backup Servicer), the Servicer may withdraw from the Collection
Account any deposits thereto constituting Excluded Amounts if the Servicer has, prior to such
withdrawal and consent, delivered to the Administrative Agent and each Purchaser Agent a report
setting forth the calculation of such Excluded Amounts in a format satisfactory to the
Administrative Agent and each Purchaser Agent in their sole discretion.



     (d) Investment of Funds. Until the occurrence of a Termination Event, to the extent
there are uninvested amounts deposited in the Collection Account, all amounts shall be invested in
Permitted Investments selected by the Servicer that mature no later than the Business Day
immediately preceding the next Payment Date; from and after the occurrence of a Termination Event,
to the extent there are uninvested amounts in the Collection Account (net of losses and investment
expenses), all amounts may be invested in Permitted Investments selected by the Administrative
Agent that mature no later than the Business Day immediately preceding the next Payment Date. All
earnings (net of losses and investment expenses) thereon shall be retained or deposited into the
Collection Account and shall be applied pursuant to the provisions of Section 2.9 and
Section 2.10.



     Section 2.12 Payments, Computations, Etc.



     (a) Unless otherwise expressly provided herein, all amounts to be paid or deposited by the
Seller or the Servicer hereunder shall be paid or deposited in accordance with the terms hereof no
later than 2:00 p.m. (New York City, New York time) on the day when due in lawful money of the
United States in immediately available funds to the applicable Purchaser Agent’s Account and if not
received before such time shall be deemed received on the next Business Day. The Seller shall, to
the extent permitted by law, pay to the Secured Parties interest on all amounts not paid or
deposited when due hereunder at 2.0% per annum above the Base Rate, payable on demand; provided
that such interest rate shall not at any time exceed the maximum rate permitted by Applicable Law.
Such interest shall be for the account of, and distributed to, each applicable Purchaser. All
computations of interest and all computations of Interest and other fees hereunder shall be made on
the basis of a year consisting of 360 days (other than calculations with respect to the Base Rate
which shall be based on a year consisting of 365 or 366 days, as applicable) for the actual number
of days (including the first but excluding the last day) elapsed.



     (b) Whenever any payment hereunder shall be stated to be due on a day other than a Business
Day, such payment shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of the payment of Interest or any fee payable
hereunder, as the case may be. For avoidance of doubt, to the extent that Available Funds are
insufficient on any Payment Date to satisfy the full amount of any Increased Costs pursuant to
Section 2.9(a)(8) or Section 2.10(a)(8), such unpaid amounts shall remain due and
owing and shall accrue Interest until repaid in full.



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     (c) If any Advance requested by the Seller and approved by the applicable Purchaser and the
Purchaser Agents, pursuant to Section 2.3 is not, for any reason made or effectuated, as
the case may be, on the date specified therefor, the Seller shall indemnify the applicable
Purchaser against any reasonable loss, cost or expense incurred by the applicable Purchaser
including, without limitation, any loss (including loss of anticipated profits, net of anticipated
profits in the reemployment of such funds in the manner determined by each Purchaser), cost or
expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired
by the applicable Purchaser to fund or maintain such Advance.



     Section 2.13 Optional Repurchase.



     At any time following the Termination Date when the Borrowing Base is less than 15% percent of
the Borrowing Base as of the Termination Date, the Seller may notify the Administrative Agent and
each Purchaser Agent in writing of its intention to purchase all remaining Collateral; provided
that all Hedge Transactions have been terminated in accordance with their terms. On the Payment
Date next succeeding any such notice, the Seller shall purchase all such Collateral for a price
equal to the Aggregate Unpaids and the proceeds of such purchase will be deposited into the
Collection Account and paid in accordance with Section 2.10.



     Section 2.14 Fees.



     (a) The Servicer on behalf of the Seller shall pay in accordance with Section
2.9(a)(5) and Section 2.10(a)(5), as applicable, to the applicable Purchaser Agent from
the Collection Account to the extent funds are available on each Payment Date, monthly in arrears,
the applicable Program Fee and the applicable Commitment Fee agreed to between the Seller and such
Purchaser Agent in the relevant Purchaser Fee Letter and the relevant Additional Agent Fee Letter,
as applicable.



     (b) The Servicer shall be entitled to receive a fee (the “Servicing Fee”), monthly in arrears
in accordance with Section 2.9(a)(3) and Section 2.10(a)(3), as applicable, which
fee shall be equal to the sum of (a) the product of (i) the Servicing Fee Rate applicable to
Eligible Assets which are not Workout Assets, (ii) the Aggregate Outstanding Asset Balance
(excluding Workout Assets), as of the first day of the immediately preceding Collection Period and
(iii) the actual number of days in such Collection Period divided by 360, and (b) the product of
(i) the Servicing Fee Rate applicable to Workout Assets, (ii) the sum of the Outstanding Asset
Balances of all Workout Assets, as of the first day of the immediately preceding Collection Period
and (iii) the actual number of days in such Collection Period divided by 360.



     (c) The Backup Servicer shall be entitled to receive the Backup Servicing Fee in accordance
with Section 2.9(a)(4) and Section 2.10(a)(4), as applicable.



     (d) The Collateral Custodian shall be entitled to receive the Collateral Custodian Fee in
accordance with Section 2.9(a)(4) and Section 2.10(a)(4), as applicable.



     (e) The Seller shall pay to Dechert LLP as counsel to the Administrative Agent, on the Closing
Date, its reasonable estimated fees and out-of-pocket expenses in immediately available funds and
shall pay all additional reasonable fees and out-of-pocket expenses of Dechert LLP within 30
Business Days after receiving an invoice for such amounts.



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     Section 2.15 Increased Costs; Capital Adequacy; Illegality.



     (a) If either (i) the introduction of or any change (including, without limitation, any change
by way of imposition or increase of reserve requirements) in or in the interpretation of any law or
regulation or (ii) the compliance by an Affected Party with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of law), shall (a)
subject an Affected Party to any Tax (except for Taxes on the overall net income of such Affected
Party), duty or other charge with respect to any ownership interest in the Collateral, or any right
to make Advances hereunder, or on any payment made hereunder, (b) impose, modify or deem applicable
any reserve requirement (including, without limitation, any reserve requirement imposed by the
Board of Governors of the Federal Reserve System, but excluding any reserve requirement, if any,
included in the determination of Interest), special deposit or similar requirement against assets
of, deposits with or for the amount of, or credit extended by, any Affected Party or (c) impose any
other condition affecting the ownership interest in the Collateral conveyed to the Purchasers
hereunder or the Purchasers’ rights hereunder, the result of which is to increase the cost to any
Affected Party or to reduce the amount of any sum received or receivable by an Affected Party under
this Agreement, then within ten days after demand by such Affected Party (which demand shall be
accompanied by a statement setting forth the basis for such demand), the Servicer shall pay (and to
the extent the Servicer does not make such payment the Seller shall pay) directly to such Affected
Party such additional amount or amounts as will compensate such Affected Party for such additional
or increased cost incurred or such reduction suffered.



     (b) If either (i) the introduction of or any change in or in the interpretation of any law,
guideline, rule, regulation, directive or request or (ii) compliance by any Affected Party with any
law, guideline, rule, regulation, directive or request from any central bank or other governmental
authority or agency (whether or not having the force of law), including, without limitation,
compliance by an Affected Party with any request or directive regarding capital adequacy, has or
would have the effect of reducing the rate of return on the capital of any Affected Party as a
consequence of its obligations hereunder or arising in connection herewith to a level below that
which any such Affected Party could have achieved but for such introduction, change or compliance
(taking into consideration the policies of such Affected Party with respect to capital adequacy) by
an amount deemed by such Affected Party to be material, then from time to time, within ten days
after demand by such Affected Party (which demand shall be accompanied by a statement setting forth
the basis for such demand), the Servicer shall pay (and to the extent the Servicer does not make
such payment the Seller shall pay) directly to such Affected Party such additional amount or
amounts as will compensate such Affected Party for such reduction. For the avoidance of doubt, if
the issuance of Interpretation No. 46 by the Financial Accounting Standards Board or any other
change in accounting standards or the issuance of any other pronouncement, release or
interpretation, causes or requires the consolidation of all or a portion of the assets and
liabilities of the Originator or Seller with the assets and liabilities of the Administrative
Agent, any Purchaser Agent, any Purchaser or any Liquidity Bank, such event shall constitute a
circumstance on which such Affected Party may base a claim for reimbursement under this Section
2.15.



     (c) If as a result of any event or circumstance similar to those described in clause
(a) or (b) of this Section 2.15, any Affected Party is required to compensate a
bank or other financial



67









 




institution providing liquidity support, credit enhancement or other similar support to such
Affected Party in connection with this Agreement or the funding or maintenance of Advances
hereunder, then within ten days after demand by such Affected Party, the Servicer shall pay (or to
the extent the Servicer does not make such payment the Seller shall pay) to such Affected Party
such additional amount or amounts as may be necessary to reimburse such Affected Party for any
amounts payable or paid by it.




     (d) In determining any amount provided for in this Section 2.15, the Affected Party
may use any reasonable averaging and attribution methods. Any Affected Party making a claim under
this Section 2.15 shall submit to the Servicer a written description as to such additional
or increased cost or reduction and the calculation thereof, which written description shall be
conclusive absent demonstrable error.



     (e) If the applicable Purchaser shall notify their respective Purchaser Agent that a
Eurodollar Disruption Event as described in clause (a) of the definition of “Eurodollar
Disruption Event” has occurred, the applicable Purchaser Agent shall in turn so notify the Seller,
whereupon all Advances Outstanding of the affected Purchaser in respect of which Interest accrues
at the Adjusted Eurodollar Rate shall immediately be converted into Advances Outstanding in respect
of which Interest accrues at the Base Rate.



     Section 2.16 Taxes.



     (a) All payments made by an Obligor in respect of an Asset and all payments made by the Seller
or the Servicer under this Agreement will be made free and clear of and without deduction or
withholding for or on account of any Taxes. If any Taxes are required to be withheld from any
amounts payable to the Administrative Agent, the Purchaser Agents, any Affected Party or any
Secured Party, then the amount payable to such Person will be increased (such increase, the
“Additional Amount”) such that every net payment made under this Agreement after withholding for or
on account of any Taxes (including, without limitation, any Taxes on such increase) is not less
than the amount that would have been paid had no such deduction or withholding been deducted or
withheld. The foregoing obligation to pay Additional Amounts, however, will not apply with respect
to net income or franchise taxes imposed on the Purchasers, any Affected Party, the Administrative
Agent or the Purchaser Agents, respectively, with respect to payments required to be made by the
Seller or Servicer under this Agreement, by a taxing jurisdiction in which the Purchasers, any
Affected Party, the Administrative Agent or the Purchaser Agents, are organized, conducts business
or is paying taxes (as the case may be).



     (b) The Servicer will indemnify (and to the extent the indemnification provided by the
Servicer is insufficient the Seller will indemnify) each Affected Party for the full amount of
Taxes payable by such Person in respect of Additional Amounts and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto. All payments in
respect of this indemnification shall be made within ten days from the date a written invoice
therefor is delivered to the Seller.



     (c) Within 30 days after the date of any payment by the Seller and the Servicer of any Taxes,
the Seller and the Servicer will furnish to the Administrative Agent and each of the



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Purchaser Agents at its address set forth under its name on the signature pages hereof,
appropriate evidence of payment thereof.




     (d) If a Purchaser is not created or organized under the laws of the United States or a
political subdivision thereof, such Purchaser shall deliver to the Seller, with a copy to the
Administrative Agent, (i) within 15 days after the date hereof, two (or such other number as may
from time to time be prescribed by Applicable Laws) duly completed copies of IRS Form W-8BEN or
Form W-8ECI (or any successor forms or other certificates or statements that may be required from
time to time by the relevant United States taxing authorities or Applicable Laws), as appropriate,
to permit the Seller to make payments hereunder for the account of such Purchaser without deduction
or withholding of United States federal income or similar Taxes and (ii) upon the obsolescence of
or after the occurrence of any event requiring a change in, any form or certificate previously
delivered pursuant to this Section 2.16(d), copies (in such numbers as may from time to
time be prescribed by Applicable Laws or regulations) of such additional, amended or successor
forms, certificates or statements as may be required under Applicable Laws or regulations to permit
the Seller and the Servicer to make payments hereunder for the account of such Purchaser without
deduction or withholding of United States federal income or similar Taxes.



     (e) If, in connection with an agreement or other document providing liquidity support, credit
enhancement or other similar support to the Purchasers in connection with this Agreement or the
funding or maintenance of Advances hereunder, the Purchasers are required to compensate a bank or
other financial institution in respect of Taxes under circumstances similar to those described in
this Section 2.16, then, within ten days after demand by the Purchasers, the Servicer shall
pay (or to the extent the Servicer does not make such payment the Seller shall pay) to the
Purchasers such additional amount or amounts as may be necessary to reimburse the Purchasers for
any amounts paid by them.



     (f) Without prejudice to the survival of any other agreement of the Seller and the Servicer
hereunder, the agreements and obligations of the Seller and the Servicer contained in this
Section 2.16 shall survive the termination of this Agreement.



     Section 2.17 Assignment of the Sale Agreement.



     The Seller hereby assigns to the Administrative Agent, for the ratable benefit of the Secured
Parties hereunder, all of the Seller’s right, title and interest in and to, but none of its
obligations under, the Sale Agreement and any UCC financing statements filed under or in connection
therewith. In furtherance and not in limitation of the foregoing, the Seller hereby assigns to the
Administrative Agent for the benefit of the Secured Parties its right to indemnification under
Article VIII of the Sale Agreement. The Seller confirms that the Administrative Agent on
behalf of the Secured Parties shall have the sole right to enforce the Seller’s rights and remedies
under the Sale Agreement and any UCC financing statements filed under or in connection therewith
for the benefit of the Secured Parties.



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     Section 2.18 Substitution of Assets.



     On any day prior to the occurrence of a Termination Event (and after the Termination Date at
the discretion of the Administrative Agent with the consent of the Purchaser Agents), the Seller
may, subject to the conditions set forth in this Section 2.18 and subject to the other
restrictions contained herein, replace any Asset other than the Tandem Asset with one or more
Eligible Assets (each, a “Substitute Asset”); provided that no such replacement shall occur unless
each of the following conditions is satisfied as of the date of such replacement and substitution:



     (a) the Seller has recommended to the Administrative Agent (with a copy to the Collateral
Custodian) in writing that the Asset to be replaced should be replaced (each a “Replaced Asset”);



     (b) each Substitute Asset is an Eligible Asset on the date of substitution;



     (c) after giving effect to any such substitution, the Adjusted Advances Outstanding do not
exceed the lesser of (i) the Adjusted Facility Amount and (ii) the Adjusted Maximum Availability;



     (d) for purposes only of substitutions pursuant to Section 4.6 undertaken because an
Asset has become a Warranty Asset, the aggregate Outstanding Asset Balance of such Substitute
Assets shall be equal to or greater than the aggregate Outstanding Asset Balances of the Replaced
Assets;



     (e) for purposes only of substitutions pursuant to Section 4.6 undertaken because an
Asset has become a Warranty Asset, such Substitute Assets, at the time of substitution by the
Seller, shall have no greater weighted average life than the Replaced Asset;



     (f) all representations and warranties of the Seller contained in Section 4.1 and
Section 4.2 shall be true and correct as of the date of substitution of any such Substitute
Asset;



     (g) the substitution of any Substitute Asset does not cause a Termination Event or Unmatured
Termination Event to occur;



     (h) the sum of the Outstanding Asset Balance of all Assets that are Substitute Assets does not
exceed 20% of the Adjusted Facility Amount, calculated on an annualized basis commencing with the
Closing Date;



     (i) the sum of the Outstanding Asset Balance of all Substitute Assets substituted for
Delinquent Assets, Charged-Off Assets and Warranty Assets shall not exceed 10% of the Adjusted
Facility Amount, calculated on an annualized basis commencing with the Closing Date; and



     (j) the Seller shall deliver to the Administrative Agent on the date of such substitution a
certificate of a Responsible Officer certifying that each of the foregoing is true and correct as
of such date.



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     In addition, the Seller shall in connection with such substitution deliver to the Collateral
Custodian the related Required Asset Documents. In connection with any such substitution, the
Administrative Agent, as agent for the Secured Parties, shall, automatically and without further
action, be deemed to transfer to the Seller, free and clear of any Lien created pursuant to this
Agreement, all of the right, title and interest of the Administrative Agent, as agent for the
Secured Parties, in, to and under such Replaced Asset, but without any representation and warranty
of any kind, express or implied.



     Section 2.19 Optional Sales.



     (a) On any Optional Sale Date, the Seller shall have the right to prepay all or a portion of
the Advances Outstanding in connection with the sale and assignment to the Seller by the
Administrative Agent, on behalf of the Secured Parties, of the Collateral (each, an “Optional
Sale”), subject to the following terms and conditions:




     (i) The Seller shall have given the Administrative Agent and each Purchaser Agent at
least ten Business Days’ prior written notice of its intent to effect an Optional Sale,
unless such notice is waived or reduced by the Administrative Agent and each Purchaser
Agent;




     (ii) Any Optional Sale shall be in connection with a Permitted Securitization
Transaction;




     (iii) Unless an Optional Sale is to be effected on a Payment Date (in which case the
relevant calculations with respect to such Optional Sale shall be reflected on the
applicable Monthly Report), the Servicer shall deliver to the Administrative Agent a
certificate and evidence to the reasonable satisfaction of the Administrative Agent (which
evidence may consist solely of a certificate from the Servicer) that the Seller shall have
sufficient funds on the related Optional Sale Date to effect the contemplated Optional Sale
in accordance with this Agreement. In effecting an Optional Sale, the Seller may use the
Proceeds of sales of the Collateral;




     (iv) After giving effect to the Optional Sale and the assignment to the Seller of the
Collateral on any Optional Sale Date, (a) the remaining Advances Outstanding shall not
exceed the lesser of the Facility Amount and the Maximum Availability, (b) the remaining
Adjusted Advances Outstanding shall not exceed the lesser of the Adjusted Facility Amount
and the Adjusted Maximum Availability, (c) the representations and warranties contained in
Section 4.1 hereof shall continue to be correct in all material respects, except to
the extent relating to an earlier date, (d) the eligibility of any Asset remaining as part
of the Collateral after the Optional Sale will be redetermined as of the Optional Sale Date,
(e) the Pool Concentration Criteria will be redetermined as of the Optional Sale Date, and
(f) neither an Unmatured Termination Event nor a Termination Event shall have resulted;




     (v) On the related Optional Sale Date, the Administrative Agent, each Purchaser Agent,
on behalf of the applicable Purchaser and the Hedge Counterparties, shall have received, as
applicable, in immediately available funds, an amount equal to the



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sum of (a) the portion of the Advances Outstanding, to be prepaid plus (b) an amount
equal to all unpaid Interest to the extent reasonably determined by the Administrative Agent
and the Purchaser Agents to be attributable to that portion of the Advances Outstanding, to
be paid in connection with the Optional Sale plus (c) an aggregate amount equal to the sum
of all other amounts due and owing to the Administrative Agent, the Collateral Custodian,
the Backup Servicer, the Purchaser Agents, the applicable Purchaser, the Affected Parties
and the Hedge Counterparties, as applicable, under this Agreement and the other Transaction
Documents, to the extent accrued to such date and to accrue thereafter (including, without
limitation, Breakage Costs, Hedge Breakage Costs and any other payments owing to the
applicable Hedge Counterparty in respect of the termination of any Hedge Transaction);
provided that the Administrative Agent and each Purchaser Agent shall have the right to
determine whether the amount paid (or proposed to be paid) by the Seller on the Optional
Sale Date is sufficient to satisfy the requirements of clauses (iii), (iv)
and (v) and is sufficient to reduce the Advances Outstanding, to the extent
requested by the Seller in connection with the Optional Sale; and




       (vi) On or prior to each Optional Sale Date, the Seller shall have delivered to the
Administrative Agent and each Purchaser Agent a list specifying all Assets to be sold and
assigned pursuant to such Optional Sale.



     (b) In connection with any Optional Sale, following receipt by the Purchaser Agents of the
amounts referred to in clause (v) above, there shall be sold and assigned to the Seller
without recourse, representation or warranty all of the right, title and interest of the
Administrative Agent, the Purchaser Agents, the Purchasers and the Secured Parties in, to and under
the portion of the Collateral so retransferred and such portion of the Collateral so retransferred
shall be released from the Lien of this Agreement (subject to the requirements of clause
(iv) above).



     (c) The Seller hereby agrees to pay the reasonable legal fees and expenses of the
Administrative Agent, each Purchaser Agent and the Secured Parties in connection with any Optional
Sale (including, but not limited to, expenses incurred in connection with the release of the Lien
of the Administrative Agent, the Secured Parties and any other party having an interest in the
Collateral in connection with such Optional Sale).



     (d) In connection with any Optional Sale, on the related Optional Sale Date, the
Administrative Agent, on behalf of the Secured Parties, shall, at the expense of the Seller (i)
execute such instruments of release with respect to the portion of the Collateral to be
retransferred to the Seller, in recordable form if necessary, in favor of the Seller as the Seller
may reasonably request, (ii) deliver any portion of the Collateral to be retransferred to the
Seller in its possession to the Seller and (iii) otherwise take such actions, and cause or permit
the Collateral Custodian to take such actions, as are necessary and appropriate to release the Lien
of the Administrative Agent and the Secured Parties on the portion of the Collateral to be
retransferred to the Seller and release and deliver to the Seller such portion of the Collateral to
be retransferred to the Seller.



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     Section 2.20 Discretionary Sales.



     Prior to the occurrence of an Unmatured Termination Event or a Termination Event, on any
Discretionary Sale Date, the Seller shall have the right to prepay all or a portion of the Advances
Outstanding, in connection with the transfer and assignment to the Seller by the Administrative
Agent, on behalf of the Secured Parties, of the Collateral (each, a “Discretionary Sale”), subject
to the following terms and conditions:



     (a) At least one Business Day prior to each Discretionary Sale Date, the Servicer, on behalf
of the Seller, shall have given the Administrative Agent, each Purchaser Agent and each Hedge
Counterparty written notice of its intent to effect a Discretionary Sale (each such notice a
“Discretionary Sale Notice”), specifying the Discretionary Sale Date and including a list of all
Assets to be sold and assigned pursuant to such Discretionary Sale, and a revised Borrowing Base
Certificate;



     (b) Any Discretionary Sale shall be made by the Servicer, on behalf of the Seller, to an
unaffiliated third party purchaser in a transaction (i) reflecting arms-length market terms and
(ii) in which the Seller makes no representations, warranties or covenants for the benefit of any
other party to the Discretionary Sale and provides no indemnification for the benefit of any other
party to the Discretionary Sale;



     (c) After giving effect to the Discretionary Sale and the assignment to the Seller of the
Collateral on any Discretionary Sale Date, (a) the Availability is greater than or equal to zero,
(b) the representations and warranties contained in Section 4.1 hereof shall continue to be
correct in all material respects, except to the extent relating to an earlier date and (c) neither
an Unmatured Termination Event nor a Termination Event shall have resulted;



     (d) On the related Discretionary Sale Date, the Administrative Agent, each Purchaser Agent, on
behalf of the applicable Purchaser, the Hedge Counterparties, the Collateral Custodian and the
Backup Servicer, as applicable, shall have received, as applicable, in immediately available funds,
an amount equal to the sum of (a) an amount sufficient to reduce the Advances Outstanding such
that, after giving effect to the transfer of the Assets that are the subject of such Discretionary
Sale, each of the Availability and the Adjusted Availability will be equal to or greater than $0
plus (b) an amount equal to all unpaid Interest to the extent reasonably determined by the
Administrative Agent and the Purchaser Agents to be attributable to that portion of the Advances
Outstanding or Adjusted Advances Outstanding to be repaid in connection with the Discretionary Sale
plus (c) an aggregate amount equal to the sum of all other Aggregate Unpaids due and owing to the
Administrative Agent, the Purchaser Agents, each applicable Purchaser, the Affected Parties, the
Indemnified Parties and the Hedge Counterparties, as applicable, under this Agreement and the other
Transaction Documents, to the extent accrued to such date; provided that the Administrative Agent
and each Purchaser Agent shall have the right to determine whether the amount paid (or proposed to
be paid) by the Seller on the Discretionary Sale Date is sufficient to satisfy the requirements of
clauses (a) through (c) and is sufficient to reduce the Advances Outstanding to the
extent requested by the Seller in connection with the Discretionary Sale;



73









 





     (e) The Outstanding Asset Balance of the Asset(s) which are the subject of the proposed
Discretionary Sale, together with the Outstanding Asset Balance of the Asset(s) sold in all other
Discretionary Sales made in the preceding 12 month period, shall not exceed 20% of the Adjusted
Facility Amount;



     (f) On the related Discretionary Sale Date, the proceeds from such Discretionary Sale have
been sent directly into the Collection Account;



     (g) The Seller hereby agrees to pay the reasonable legal fees and expenses of the
Administrative Agent, each Purchaser Agent and the Secured Parties in connection with any
Discretionary Sale (including, but not limited to, expenses incurred in connection with the release
of the Lien of the Administrative Agent, the Secured Parties and any other party having an interest
in the Collateral in connection with such Discretionary Sale); and



     (h) In connection with any Discretionary Sale, on the related Discretionary Sale Date, the
Administrative Agent, on behalf of the Secured Parties, shall, at the expense of the Seller (i)
execute such instruments of release with respect to the portion of the Collateral to be
retransferred to the Seller, in recordable form if necessary, in favor of the Seller as the Seller
may reasonably request, (ii) deliver any portion of the Collateral to be retransferred to the
Seller in its possession to the Seller and (iii) otherwise take such actions, and cause or permit
the Collateral Custodian to take such actions, as are necessary and appropriate to release the Lien
of the Administrative Agent and the Secured Parties on the portion of the Collateral to be
retransferred to the Seller and release and deliver to the Seller such portion of the Collateral to
be retransferred to the Seller.



     Section 2.21 Required Equity Requirements.



     The Originator hereby agrees, upon receipt of a Required Equity Contribution Notice delivered
pursuant to and in accordance with the terms of this Agreement, to deposit into the Excess Spread
Account or to otherwise cure within two Business Days the related Required Equity Shortfall as
provided in the Required Equity Contribution Notice after giving effect to any deposits to the
Excess Spread Account made by the Seller pursuant to Section 6.4(g). The Originator
further agrees to pay any and all reasonable expenses (including reasonable counsel fees and
expenses) incurred by the Administrative Agent, the Purchaser Agents and the Secured Parties in
enforcing any rights under this Section 2.21. In the event that the Originator shall fail
to pay the Required Equity Shortfall when required to be paid pursuant to the terms hereof, the
Originator shall indemnify and hold harmless the Administrative Agent, the Purchaser Agents and
each Secured Party from and against any and all damages, losses, claims, liabilities and related
costs and expenses, including attorney’s fees and disbursements awarded against or incurred by them
or any of them as a result of such failure of the Originator. Notwithstanding anything herein to
the contrary, the maximum amount of payments (other than indemnification ) made by the Originator
pursuant to this Section 2.21 shall not exceed ten percent of the Aggregate Outstanding
Asset Balance in the aggregate regardless of the number of such payments made hereunder.



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ARTICLE III




CONDITIONS TO ADVANCES




     Section 3.1 Conditions to Closing and Initial Advance.



     The Purchasers shall not be obligated to make any Advance hereunder on the occasion of the
Initial Advance, nor shall any Purchaser, Administrative Agent, the Purchaser Agents, the Backup
Servicer and the Collateral Custodian be obligated to take, fulfill or perform any other action
hereunder, until the following conditions have been satisfied, in the sole discretion of, or waived
in writing by, the Administrative Agent and each Purchaser Agent:



     (a) Each Transaction Document (excluding any Hedge Agreement) shall have been duly executed
by, and delivered to, the parties thereto, and the Administrative Agent and each Purchaser Agent
shall have received such other documents, instruments, agreements and legal opinions as the
Administrative Agent and each Purchaser Agent shall reasonably request in connection with the
transactions contemplated by this Agreement, including, without limitation, all those specified in
the Schedule of Documents attached hereto as Schedule I, each in form and substance
satisfactory to the Administrative Agent and each Purchaser Agent;



     (b) The Administrative Agent and each Purchaser Agent shall have received (i) satisfactory
evidence that the Seller and the Servicer have obtained all required consents and approvals of all
Persons, including all requisite Governmental Authorities, to the execution, delivery and
performance of this Agreement and the other Transaction Documents to which each is a party and the
consummation of the transactions contemplated hereby or thereby or (ii) an Officer’s Certificate
from each of the Seller and the Servicer in form and substance reasonably satisfactory to the
Administrative Agent and each Purchaser Agent affirming that no such consents or approvals are
required; it being understood that the acceptance of such evidence or officer’s certificate shall
in no way limit the recourse of the Administrative Agent, each Purchaser Agent or any Secured Party
against the Originator or the Seller for a breach of the Originator’s and the Seller’s
representation or warranty that all such consents and approvals have, in fact, been obtained;



     (c) The Seller, the Servicer and the Originator shall each be in compliance in all material
respects with all Applicable Laws and shall have delivered to the Administrative Agent and each
Purchaser Agent as to this and other closing matters certification in the form of Exhibits
F-1 and F-2;



     (d) The Seller and the Servicer shall have delivered to the Administrative Agent and each
Purchaser Agent duly executed Powers of Attorney in the form of Exhibits G-1 and
G-2; and



     (e) The Seller and the Servicer shall each have delivered to the Administrative Agent and each
Purchaser Agent a certificate as to Solvency in the form of Exhibits E-1 and E-2
and a perfection certificate in form reasonably acceptable to the Administrative Agent.



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     Section 3.2 Conditions Precedent to All Advances.



     Each Advance to the Seller by the applicable Purchaser (each, a “Transaction”) shall be
subject to the further conditions precedent that:



     (a) (i) With respect to any Advance (including the Initial Advance), the Servicer shall have
delivered to the Administrative Agent and each Purchaser Agent (with a copy to the Collateral
Custodian and the Backup Servicer), in the case of an Advance, no later than 2:00 p.m. (New York
City, New York time), one Business Day prior to the related Funding Date in a form and substance
satisfactory to the Administrative Agent and each Purchaser Agent, (1) a Borrowing Notice
(Exhibit A-1), Borrowing Base Certificate (Exhibit A-3), Asset List and Monthly
Report, if applicable, and (2) a Certificate of Assignment (Exhibit A to the Sale Agreement
including Schedule I, thereto) and containing such additional information as may be
reasonably requested by the Administrative Agent and each Purchaser Agent, and (ii) with respect to
any reduction in Advances Outstanding pursuant to Section 2.4(b) or any reinvestment of
Principal Collections permitted by Section 2.9(b), the Servicer shall have delivered to the
Administrative Agent and each Purchaser Agent (with a copy to the Backup Servicer) at least one
Business Day prior to any reduction of Advances Outstanding or same day notice no later than 2:00
p.m. (New York City, New York time) on such day for any reinvestment of Principal Collections a
Borrowing Notice (Exhibit A-2) and a Borrowing Base Certificate (Exhibit A-3)
executed by the Servicer and the Seller;



     (b) On the date of such Transaction the following statements shall be true, and the Seller
shall be deemed to have certified that:




     (i) The representations and warranties contained in Section 4.1, Section
4.2 and Section 4.3 are true and correct on and as of such day as though made on
and as of such day and shall be deemed to have been made on such day;




     (ii) No event has occurred and is continuing, or would result from such Transaction,
that constitutes a Termination Event or Unmatured Termination Event;




     (iii) On and as of such day, after giving effect to such Transaction, (1) the Advances
Outstanding shall not exceed the lesser of (x) the Facility Amount and (y) the Maximum
Availability and (2) the Adjusted Advances Outstanding shall not exceed the lesser of (x)
the Adjusted Facility Amount and (y) the Adjusted Maximum Availability;




     (iv) On and as of such day, the Seller and the Servicer each has performed all of the
covenants and agreements contained in this Agreement to be performed by such person at or
prior to such day; and




     (v) No law or regulation shall prohibit, and no order, judgment or decree of any
federal, state or local court or governmental body, agency or instrumentality shall prohibit
or enjoin, the making of such Advance or incremental Advance by the Purchaser in accordance
with the provisions hereof, the reduction of Advances Outstanding, the reinvestment of
Principal Collections or any other transaction contemplated herein;



76









 





     (c) The Seller shall have delivered to the Collateral Custodian (with a copy to the Backup
Servicer and the Administrative Agent) in the case of an Advance, no later than 2:00 p.m. (New York
City, New York time) one Business Day prior to any Funding Date a faxed copy of the duly executed
original promissory notes, master purchase agreement and purchase statements or a copy of the Loan
Register, as applicable, for the Loans, and, if any Assets are closed in escrow, a certificate (in
the form of Exhibit L) from the counsel to the Originator or the Obligor of such Assets
certifying the possession of the Required Asset Documents, provided that notwithstanding the
foregoing, the Required Asset Documents (including any UCCs included in the Required Asset
Documents) shall be in the possession of the Collateral Custodian within two Business Days of any
related Funding Date as to any Additional Assets;



     (d) The Seller shall have delivered such information as is required by the Collateral
Custodian to facilitate a trade of any CMBS Securities in book-entry form no later than 5:00 p.m.
(New York City, New York time) on the Business Day prior to the applicable Funding Date;



     (e) The Seller shall have delivered to the Collateral Custodian, no later than 5:00 p.m. (New
York City, New York time) the Business Day following the applicable Funding Date, any CMBS
Securities constituting certificated securities indorsed in blank; provided that the Seller shall
deliver to the Collateral Custodian no later than 5:00 p.m. the Business Day prior to the
applicable Funding Date a faxed copy of such certificated security, to the extent available;



     (f) The Seller shall not have requested the Termination Date to occur;



     (g) The Facility Termination Date shall not have occurred;



     (h) On the date of such Transaction, the Administrative Agent and each Purchaser Agent shall
have received such other approvals, opinions or documents as the Administrative Agent and each
Purchaser Agent may reasonably require;



     (i) The Required Equity Contribution, if any, shall have been made to the Seller;



     (j) The Administrative Agent shall have received from the Seller any required Hedging
Agreement and related hedging confirms required in connection with the Transaction;



     (k) The Seller and Servicer shall have delivered to the Administrative Agent and each
Purchaser Agent all reports required to be delivered as of the date of such Transaction including,
without limitation, all deliveries required by Section 2.3;



     (l) With respect to any Acquired Loan acquired from an Affiliate of the Originator, the
Administrative Agent and each Purchaser Agent has received a satisfactory legal opinion concerning
the acquisition of such Loan by the Originator in a true sale transaction;



     (m) The Seller shall have paid all fees required to be paid, including all fees required
hereunder and under the Purchaser Fee Letters and any Additional Agent Fee Letter and shall have
reimbursed the Purchasers, the Administrative Agent and each Purchaser Agent for all fees, costs
and expenses of closing the transactions contemplated hereunder and under the other Transaction
Documents, including the reasonable attorney fees and any other legal and document



77









 




preparation costs incurred by the Purchasers, the Administrative Agent and each Purchaser
Agent; and




     (n) The Seller shall have delivered to the Administrative Agent and each Purchaser Agent an
Officer’s Certificate (which may be part of the Borrowing Notice) in form and substance reasonably
satisfactory to the Administrative Agent and each Purchaser Agent certifying that each of the
foregoing conditions precedent has been satisfied.



     The failure of the Seller to satisfy any of the foregoing conditions precedent in respect of
any Advance shall give rise to a right of the Administrative Agent and the applicable Purchaser
Agent, which right may be exercised at any time on the demand of the applicable Purchaser Agent, to
rescind the related Advance and direct the Seller to pay to the Administrative Agent for the
benefit of the applicable Purchaser an amount equal to the Advances made during any such time that
any of the foregoing conditions precedent were not satisfied.



     Section 3.3 Conditions Precedent to the Effectiveness of this Amended and Restated Sale
and Servicing Agreement



     The effectiveness of this Amended and Restated Sale and Servicing Agreement shall be subject
to the occurrence and/or satisfaction of the following conditions on the Amended and Restated
Closing Date:



     (a) The Amended and Restated Sale and Servicing Agreement and the Mica Purchaser Fee Letter
shall have been duly executed by, and delivered to, the parties hereto, and the Administrative
Agent and each Purchaser Agent shall have received such other documents, instruments, agreements
and legal opinions as the Administrative Agent and each Purchaser Agent shall reasonably request in
connection with the transactions contemplated by this Agreement, each in form and substance
satisfactory to the Administrative Agent and each Purchaser Agent;



     (b) The Seller shall deliver a duly executed VFC to Mica in the amount of $400,000,000;



     (c) The Seller shall deliver reliance letters to Mica with respect to each of the opinions
given by Patton Boggs LLP on the Closing Date;



     (d) Pursuant to Section 2.2 Citigroup shall assign to Mica $172,444,444 of Advances
Outstanding; and



     (e) No event has occurred and is continuing, or would result from such transaction, that
constitutes a Termination Event or Unmatured Termination Event.



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ARTICLE IV




REPRESENTATIONS AND WARRANTIES




     Section 4.1 Representations and Warranties of the Seller.



     The Seller represents and warrants as follows:



     (a) Organization and Good Standing. The Seller has been duly organized, and is
validly existing as a limited liability company in good standing, under the laws of the State of
Delaware, with all requisite company power and authority to own or lease its properties and conduct
its business as such business is presently conducted, and had at all relevant times, and now has
all necessary power, authority and legal right to acquire, own and sell the Collateral.



     (b) Due Qualification. The Seller is duly qualified to do business and is in good
standing as a limited liability company, and has obtained all necessary licenses and approvals, in
all jurisdictions in which the ownership or lease of property or the conduct of its business
requires such qualification, licenses or approvals.



     (c) Power and Authority; Due Authorization; Execution and Delivery. The Seller (i)
has all necessary power, authority and legal right to (a) execute and deliver this Agreement and
the other Transaction Documents to which it is a party, (b) carry out the terms of the Transaction
Documents to which it is a party, (c) sell and assign an ownership interest in the Collateral, and
(d) receive Advances and sell the Collateral on the terms and conditions provided herein and (ii)
has duly authorized by all necessary company action the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and the sale and assignment of
an ownership interest in the Collateral on the terms and conditions herein provided. This
Agreement and each other Transaction Document to which the Seller is a party have been duly
executed and delivered by the Seller.



     (d) Binding Obligation. This Agreement and each other Transaction Document to which
the Seller is a party constitutes a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its respective terms, except as such enforceability may be
limited by Insolvency Laws and by general principles of equity (whether considered in a suit at law
or in equity).



     (e) No Violation. The consummation of the transactions contemplated by this Agreement
and the other Transaction Documents to which it is a party and the fulfillment of the terms hereof
and thereof will not (i) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under, the Seller’s
operating agreement or any Contractual Obligation of the Seller, (ii) result in the creation or
imposition of any Lien (other than Permitted Liens) upon any of the Seller’s properties pursuant to
the terms of any such Contractual Obligation, other than this Agreement, or (iii) violate any
Applicable Law.



     (f) No Proceedings. There is no litigation, proceeding or investigation pending or,
to the best knowledge of the Seller, threatened against the Seller, before any Governmental
Authority (i) asserting the legality, invalidity or enforceability of this Agreement or any other



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Transaction Document to which the Seller is a party, (ii) seeking to prevent the consummation
of any of the transactions contemplated by this Agreement or any other Transaction Document to
which the Seller is a party or (iii) seeking any determination or ruling that could reasonably be
expected to have Material Adverse Effect.




     (g) All Consents Required. All approvals, authorizations, consents, orders or other
actions of any Person or of any Governmental Authority (if any) required for the due execution,
delivery and performance by the Seller of this Agreement and any other Transaction Document to
which the Seller is a party have been obtained.



     (h) Bulk Sales. The execution, delivery and performance of this Agreement and the
transactions contemplated hereby do not require compliance with any “bulk sales” act or similar law
by Seller.



     (i) Solvency. The Seller is not the subject of any Insolvency Proceedings or
Insolvency Event. The transactions under this Agreement and any other Transaction Document to
which the Seller is a party do not and will not render the Seller not Solvent and the Seller shall
deliver to the Administrative Agent and each Purchaser Agent on the Closing Date a certification in
the form of Exhibit E-1.



     (j) Selection Procedures. No procedures believed by the Seller to be adverse to the
interests of the Purchaser were utilized by the Seller in identifying and/or selecting the Assets
in the Collateral. In addition, each Asset shall have been underwritten in accordance with and
satisfy the standards of any Credit and Collection Policy that has been established by the Seller
or the Originator and is then in effect.



     (k) Taxes. The Seller has filed or caused to be filed all tax returns that are
required to be filed by it. The Seller has paid or made adequate provisions for the payment of all
Taxes and all assessments made against it or any of its property (other than any amount of Tax the
validity of which is currently being contested in good faith by appropriate proceedings and with
respect to which reserves in accordance with GAAP have been provided on the books of the Seller),
and no tax lien has been filed and, to the Seller’s knowledge, no claim is being asserted, with
respect to any such Tax, fee or other charge.



     (l) Exchange Act Compliance; Regulations T, U and X. None of the transactions
contemplated herein (including, without limitation, the use of the proceeds from the sale of the
Collateral) will violate or result in a violation of Section 7 of the Securities Exchange Act, or
any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Seller does not
own or intend to carry or purchase, and no proceeds from the Advances will be used to carry or
purchase, any “margin stock” within the meaning of Regulation U or to extend “purpose credit”
within the meaning of Regulation U.



     (m) Security Interest.




     (i) This Agreement creates a valid and continuing security interest (as defined in the
applicable UCC) in the Collateral in favor of the Administrative Agent, on behalf of the
Secured Parties, which security interest is prior to all other Liens (except for



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Permitted Liens), and is enforceable as such against creditors of and purchasers from
the Seller;




     (ii) each of the Assets, along with the related Asset Files, constitutes a “general
intangible,” an “instrument,” an “account,” or “chattel paper,” within the meaning of the
applicable UCC;




     (iii) the Seller owns and has good and marketable title to the Collateral free and
clear of any Lien (other than Permitted Liens), claim or encumbrance of any Person;




     (iv) the Seller has received all consents and approvals required by the terms of any
Asset to the sale and granting of a security interest in the Assets hereunder to the
Administrative Agent, on behalf of the Secured Parties;




     (v) the Seller has caused the filing of all appropriate financing statements in the
proper filing office in the appropriate jurisdictions under Applicable Law in order to
perfect the security interest in the Collateral granted to the Administrative Agent, on
behalf of the Secured Parties, under this Agreement;




     (vi) other than the security interest granted to the Administrative Agent, on behalf of
the Secured Parties, pursuant to this Agreement, the Seller has not pledged, assigned, sold,
granted a security interest in or otherwise conveyed any of the Collateral. The Seller has
not authorized the filing of and is not aware of any financing statements against the Seller
that include a description of collateral covering the Collateral other than any financing
statement (A) relating to the security interest granted to the Seller under the Sale
Agreement, or (B) that have been terminated. The Seller is not aware of the filing of any
judgment or tax lien filings against the Seller;




     (vii) all original executed copies of each underlying promissory note or copies of each
Loan Register, as applicable, that constitute or evidence each Loan has been, or subject to
the delivery requirements contained herein, will be delivered to the Collateral Custodian;




     (viii) the Seller has received a written acknowledgment from the Collateral Custodian
that the Collateral Custodian or its bailee is holding the underlying promissory notes (if
any), the copies of the Loan Registers that constitute or evidence the Assets solely on
behalf of and for the benefit of the Secured Parties;




     (ix) none of the underlying promissory notes or Loan Registers, as applicable, that
constitute or evidence the Assets has any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other than the Administrative Agent,
on behalf of the Secured Parties;




     (x) none of the Collateral has been pledged or otherwise made subject to a Lien; and




     (xi) with respect to (1) any Asset comprising “financial assets” within the meaning of
the UCC, such Assets have been delivered to and are being held in a



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“securities account” within the meaning of the UCC that is maintained in the name of,
and under the control and direction of the Collateral Custodian or another institution that
for the purposes of the UCC is a “securities intermediary” whose “jurisdiction” with respect
to the Collateral is the State of New York, the terms of which account treat the Collateral
Custodian as entitled to exercise the rights that comprise any financial assets credited to
such account solely on behalf of and for the benefit of the Secured Parties and (2) any
Asset comprising certificated securities within the meaning of the UCC, such Assets have
been delivered to the Collateral Custodian and indorsed in blank to the Collateral Custodian
solely on behalf of and for the benefit of the Secured Parties.



     (n) Reports Accurate. All Monthly Reports (if prepared by the Seller, or to the
extent that information contained therein is supplied by the Seller), information, exhibits,
financial statements, documents, books, records or reports furnished or to be furnished by the
Seller to the Administrative Agent, each Purchaser Agent or any Purchaser in connection with this
Agreement are true, complete and correct.



     (o) Location of Offices. The Seller’s location (within the meaning of Article 9 of
the UCC) is Delaware. The office where the Seller keeps all the Records is at the address of the
Seller referred to in Section 13.2 hereof (or at such other locations as to which the
notice and other requirements specified in Section 5.2(g) shall have been satisfied). The
Seller’s Federal Employee Identification Number is 20-3991764. The Seller 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 four months preceding the Closing Date.



     (p) Lock-Boxes. The names and addresses of all the Lock-Box Banks, together with the
account numbers of the Lock-Box Accounts of the Seller at such Lock-Box Banks and the names,
addresses and account numbers of all accounts to which Collections of the Collateral outstanding
before the Initial Advance hereunder have been sent, are specified in Schedule II (which
shall be deemed to be amended in respect of terminating or adding any Lock-Box Account or Lock-Box
Bank upon satisfaction of the notice and other requirements specified in Section 5.2(k)).
The Seller has not granted any Person other than the Administrative Agent and Collateral Custodian
an interest in any Lock-Box Account at a future time or upon the occurrence of a future event
subject to the Intercreditor Agreement.



     (q) Tradenames. The Seller has no trade names, fictitious names, assumed names or
“doing business as” names or other names under which it has done or is doing business.



     (r) Sale Agreement. The Sale Agreement is the only agreement pursuant to which the
Seller purchases Collateral.



     (s) Value Given. The Seller shall have given reasonably equivalent value to the
Originator in consideration for the transfer to the Seller of the Collateral under the Sale
Agreement, no such transfer shall have been made for or on account of an antecedent debt owed by
the Originator to the Seller, and no such transfer is or may be voidable or subject to avoidance
under any section of the Bankruptcy Code.



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     (t) Accounting. The Seller accounts for the transfers to it from the Originator of
interests in Collateral under the Sale Agreement as financings of such Collateral for consolidated
accounting purposes (with a notation that it is treating the transfers as a sale for legal and all
other purposes on its books, records and financial statements, in each case consistent with GAAP
and with the requirements set forth herein).



     (u) Special Purpose Entity. The Seller has not and shall not:




     (i) engage in any business or activity other than the purchase and receipt of
Collateral and related assets from the Originator under the Sale Agreement, the sale of
Collateral under the Transaction Documents, and such other activities as are incidental
thereto;




     (ii) acquire or own any material assets other than (a) the Collateral and related
assets from the Originator under the Sale Agreement and (b) incidental property as may be
necessary for the operation of the Seller;




     (iii) merge into or consolidate with any Person or dissolve, terminate or liquidate in
whole or in part, transfer or otherwise dispose of all or substantially all of its assets or
change its legal structure, without in each case first obtaining the consent of the
Administrative Agent and each Purchaser Agent;




     (iv) fail to preserve its existence as an entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization or formation, or
without the prior written consent of the Administrative Agent and each Purchaser Agent,
amend, modify, terminate or fail to comply with the provisions of its operating agreement,
or fail to observe limited liability company formalities;




     (v) own any Subsidiary or make any investment in any Person without the consent of the
Administrative Agent and each Purchaser Agent;




     (vi) except as permitted by this Agreement and the Lock-Box Agreement, commingle its
assets with the assets of any of its Affiliates, or of any other Person;




     (vii) incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than indebtedness to the Secured Parties hereunder or in
conjunction with a repayment of all Advances owed to the Purchasers, except for trade
payables in the ordinary course of its business; provided that such debt is not evidenced by
a note and is paid when due;




     (viii) become insolvent or fail to pay its debts and liabilities from its assets as the
same shall become due;




     (ix) fail to maintain its records, books of account and bank accounts separate and
apart from those of any other Person;




     (x) enter into any contract or agreement with any Person, except upon terms and
conditions that are commercially reasonable and intrinsically fair and substantially



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similar to those that would be available on an arms-length basis with third parties
other than such Person;




     (xi) seek its dissolution or winding up in whole or in part;




     (xii) fail to correct any known misunderstandings regarding the separate identity of
Seller and the Originator or any principal or Affiliate thereof or any other Person;




     (xiii) guarantee, become obligated for, or hold itself out to be responsible for the
indebtedness of another Person;




     (xiv) make any loan or advances to any third party, including any principal or
Affiliate, or hold evidence of indebtedness issued by any other Person (other than cash and
investment-grade securities);




     (xv) fail to file its own separate tax return, or file a consolidated federal income
tax return with any other Person, except as may be required by the Internal Revenue Code and
regulations;




     (xvi) fail either to hold itself out to the public as a legal entity separate and
distinct from any other Person or to conduct its business solely in its own name in order
not (a) to mislead others as to the identity with which such other party is transacting
business, or (b) to suggest that it is responsible for the indebtedness of any third party
(including any of its principals or Affiliates);




     (xvii) fail to maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its contemplated
business operations;




     (xviii) file or consent to the filing of any petition, either voluntary or involuntary,
to take advantage of any applicable insolvency, bankruptcy, liquidation or reorganization
statute, or make an assignment for the benefit of creditors;




     (xix) except as may be required by the Internal Revenue Code and regulations, share any
common logo with or hold itself out as or be considered as a department or division of (a)
any of its principals or affiliates, (b) any Affiliate of a principal or (c) any other
Person;




     (xx) permit any transfer (whether in one or more transactions) of any direct or
indirect ownership interest in the Seller to the extent it has the ability to control the
same, unless the Seller delivers to the Administrative Agent and each Purchaser Agent an
acceptable non-consolidation opinion and the Administrative Agent and each Purchaser Agent
consents to such transfer;




     (xxi) fail to maintain separate financial statements, showing its assets and
liabilities separate and apart from those of any other Person;



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     (xxii) fail to pay its own liabilities and expenses only out of its own funds;




     (xxiii) fail to pay the salaries of its own employees in light of its contemplated
business operations;




     (xxiv) acquire the obligations or securities of its Affiliates or stockholders;




     (xxv) fail to allocate fairly and reasonably any overhead expenses that are shared with
an Affiliate, including paying for office space and services performed by any employee of an
Affiliate;




     (xxvi) fail to use separate invoices and checks bearing its own name;




     (xxvii) pledge its assets for the benefit of any other Person, other than with respect
to payment of the indebtedness to the Secured Parties hereunder;




     (xxviii) fail at any time to have at least one independent director who is not and has
not been for at least five years a director, officer, employee, trade credit or shareholder
(or spouse, parent, sibling or child of the foregoing) of (a) the Servicer, (b) the Seller,
(c) any principal of the Servicer, (d) any Affiliate of the Servicer, or (e) any Affiliate
of any principal of the Servicer (an “Independent Director”); provided that such Independent
Director may be an independent director of another special purpose entity affiliated with
the Servicer or its Affiliates or fail to ensure that all limited liability company action
relating to the selection, maintenance or replacement of the Independent Director are duly
authorized by the unanimous vote of the board of directors (including the Independent
Director);




     (xxix) to provide that the unanimous consent of all directors (including the consent of
the Independent Director) is required for the Seller to (a) dissolve or liquidate, in whole
or part, or institute proceedings to be adjudicated bankrupt or insolvent, (b) institute or
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 or insolvency, (d) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for
the Seller, (e) make any assignment for the benefit of the Seller’s creditors, (f) admit in
writing its inability to pay its debts generally as they become due, or (g) take any action
in furtherance of any of the foregoing; and




     (xxx) take or refrain from taking, as applicable, each of the activities specified in
the non-consolidation opinion of Patton Boggs LLP, dated as of the date hereof.



       (v) Confirmation from the Originator. The Seller has received in writing from the
Originator confirmation that the Originator will not cause the Seller to file a voluntary petition
under the Bankruptcy Code or Insolvency Laws. Each of the Seller and the Originator is aware that
in light of the circumstances described in the preceding sentence and other relevant facts, the
filing of a voluntary petition under the Bankruptcy Code for the purpose of making any Collateral
or any other assets of the Seller available to satisfy claims of the creditors of the



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Originator would not result in making such assets available to satisfy such creditors under
the Bankruptcy Code.




     (w) Investment Company Act. The Seller is not, and is not controlled by, an
“investment company” within the meaning of the 1940 Act, as amended, or is exempt from the
provisions of the 1940 Act.



     (x) ERISA. The present value of all benefits vested under all “employee pension
benefit plans,” as such term is defined in Section 3 of ERISA, maintained by the Seller, or
in which employees of the Seller are entitled to participate, as from time to time in effect
(herein called the “Pension Plans”), does not exceed the value of the assets of the Pension Plan
allocable to such vested benefits (based on the value of such assets as of the last annual
valuation date). No prohibited transactions, accumulated funding deficiencies, withdrawals or
reportable events have occurred with respect to any Pension Plans that, in the aggregate, could
subject the Seller to any material tax, penalty or other liability. No notice of intent to
terminate a Pension Plan has been billed, nor has any Pension Plan been terminated under Section
4041(f) of ERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to
terminate, or appoint a trustee to administer a Pension Plan and no event has occurred or condition
exists that might constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan.



     (y) Compliance with Law. The Seller has complied in all respects with all Applicable
Laws to which it may be subject, and no item of Collateral contravenes any Applicable Laws
(including, without limitation, all applicable predatory and abusive lending laws and all laws,
rules and regulations relating to licensing, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices, and privacy).



     (z) Credit and Collection Policy. The Seller has complied in all material respects
with the Credit and Collection Policy with respect to all of the Collateral.



     (aa) Collections. The Seller acknowledges that all Collections received by it or its
Affiliates with respect to the Collateral sold hereunder are held and shall be held in trust for
the benefit of the Secured Parties until deposited into the Collection Account within two Business
Days from receipt as required herein.



     (bb) Set-Off, etc. Other than B-Note Loans or Mezzanine Loans, no Collateral has been
compromised, adjusted, extended, satisfied, subordinated, rescinded, set-off or modified by the
Seller, the Originator or the Obligor thereof, and no Collateral is subject to compromise,
adjustment, extension, satisfaction, subordination, rescission, set-off, counterclaim, defense,
abatement, suspension, deferment, deduction, reduction, termination or modification, whether
arising out of transactions concerning the Collateral or otherwise, by the Seller, the Originator
or the Obligor with respect thereto, except as otherwise permitted under Section 6.4(a) of
this Agreement and in accordance with the Credit and Collection Policy.



     (cc) Full Payment. The Seller has no knowledge of any fact which should lead it to
expect that any Collateral will not be paid in full.



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     (dd) Accuracy of Representations and Warranties. Each representation or warranty by
the Seller contained herein or in any certificate or other document furnished by the Seller
pursuant hereto or in connection herewith is true and correct in all material respects.



     (ee) Representations and Warranties in Sale Agreement. The representations and
warranties made by the Originator to the Seller in the Sale Agreement are hereby remade by the
Seller on each date to which they speak in the Sale Agreement as if such representations and
warranties were set forth herein. For purposes of this Section 4.1(ff), such
representations and warranties are incorporated herein by reference as if made by the Seller to the
Administrative Agent, each Purchaser Agent and each of the Secured Parties under the terms hereof
mutatis mutandis.



     (ff) Reaffirmation of Representations and Warranties by the Seller. On each day that
any Advance is made hereunder, the Seller shall be deemed to have certified that all
representations and warranties described in Section 4.1 hereof are correct on and as of
such day as though made on and as of such day.



     (gg) Participation, Acquired and Assigned Loans. The participations created with
respect to the Participation Loans and the sale to the Originator with respect to the Acquired and
Assigned Loans do not violate any provisions of the underlying Required Asset Documents and such
documents do not contain any express or implied prohibitions on participations or sales of such
Loans.



     (hh) Environmental.




     (i) Each item of the Related Property is in compliance with all applicable
Environmental Laws, and there is no violation of any Environmental Law with respect to such
Related Property and there are no conditions relating to such Related Property that could
give rise to liability under any applicable Environmental Laws.




     (ii) None of the Related Property contains, or has previously contained, any Materials
of Environmental Concern at, on or under the Related Property in amounts or concentrations
that constitute or constituted a violation of, or could give rise to liability under,
Environmental Laws.




     (iii) None of the Seller, the Originator nor the Servicer has received any written or
verbal notice of, or inquiry from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to any of the Related Property,
nor does any such Person have knowledge or reason to believe that any such notice will be
received or is being threatened.




     (iv) Materials of Environmental Concern have not been transported or disposed of from
the Related Property, or generated, treated, stored or disposed of at, on or under any of
the Related Property or any other location, in each case by or on behalf of the Seller, the
Originator and/or the Servicer in violation of, or in a manner that would be reasonably
likely to give rise to liability under, any applicable Environmental Law.



87









 






       (v) No judicial proceeding or governmental or administrative action is pending or, to
the best knowledge of the Seller, the Originator and/or the Servicer, threatened, under any
Environmental Law to which any of the Seller, the Originator and/or the Servicer is or will
be named as a party, nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial requirements,
outstanding under any Environmental Law with respect to any of the Seller, the Originator,
the Servicer or the Related Property.




       (vi) There has been no release or threat of release of Materials of Environmental
Concern at or from any of the Related Property, or arising from or related to the operations
(including, without limitation, disposal) of any of the Seller, the Originator and/or the
Servicer in connection with the Related Property in violation of or in amounts or in a
manner that could give rise to liability under Environmental Laws.



     (ii) USA PATRIOT Act. Neither the Seller nor any Affiliate of the Seller is (i) a
country, territory, organization, person or entity named on an Office of Foreign Asset Control
(OFAC) list, (ii) a Person that resides or has a place of business in a country or territory named
on such lists or which is designated as a “Non-Cooperative Jurisdiction” by the Financial Action
Task Force on Money Laundering, or whose subscription funds are transferred from or through such a
jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a
foreign bank that does not have a physical presence in any country and that is not affiliated with
a bank that has a physical presence and an acceptable level of regulation and supervision; or (iv)
a person or entity that resides in or is organized under the laws of a jurisdiction designated by
the United States Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as
warranting special measures due to money laundering concerns.



     (jj) Material Adverse Effect. The Seller represents and warrants that (i) since March
31, 2006 and (ii) as of the most recent Addition Date there has been no Material Adverse Effect.



     The representations and warranties in Section 4.1(m) shall survive the termination of
this Agreement.



     Section 4.2 Representations and Warranties of the Seller Relating to the Agreement and
the Collateral.



     The Seller hereby represents and warrants, (i) with respect to clauses (a) through
(c) below, as of the Closing Date and as of each Addition Date and (ii) with respect to
clause (d) below, since March 31, 2006 and as of the most recent Addition Date:



     (a) Binding Obligation, Valid Transfer and Security Interest.




     (i) This Agreement and each other Transaction Document to which the Seller is a party
each constitute a legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its respective terms, except as such enforceability may be limited
by Insolvency Laws and except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).



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       (ii) This Agreement constitutes a valid transfer to the Administrative Agent, as agent
for the Secured Parties, of all right, title and interest of the Seller in, to and under all
of the Collateral, free and clear of any Lien of any Person claiming through or under the
Seller or its Affiliates, except for Permitted Liens. If the conveyances contemplated by
this Agreement are determined to be transfer for security, then this Agreement constitutes a
grant of a security interest in all of the Collateral to the Administrative Agent, as agent
for the Secured Parties, which upon the delivery of the Required Asset Documents to the
Collateral Custodian and the filing of the financing statements described in Section
4.1(m) and, in the case of Additional Assets on the applicable Addition Date, shall be a
first priority perfected security interest in all Collateral, subject only to Permitted
Liens. Neither the Seller nor any Person claiming through or under Seller shall have any
claim to or interest in the Collection Account and, if this Agreement constitutes the grant
of a security interest in such property, except for the interest of Seller in such property
as a debtor for purposes of the UCC.



     (b) Eligibility of Collateral. As of the Closing Date and each Addition Date, (i) the
Asset List and the information contained in the Borrowing Notice delivered pursuant to Section
2.3 is an accurate and complete listing in all material respects of all Collateral as of the
Cut-Off Date and the information contained therein with respect to the identity of such Collateral
and the amounts owing thereunder is true and correct in all material respects as of the related
Cut-Off Date, (ii) each such Asset that is part of the Borrowing Base is an Eligible Asset as of
such date, (iii) each such item of Collateral is free and clear of any Lien of any Person (other
than Permitted Liens) and in compliance with all Applicable Laws, (iv) with respect to each such
item of Collateral, all consents, licenses, approvals or authorizations of or registrations or
declarations of any Governmental Authority required to be obtained, effected or given by the Seller
in connection with the transfer of an ownership interest in such Collateral to the Administrative
Agent as agent for the Secured Parties have been duly obtained, effected or given and are in full
force and effect, and (v) the representations and warranties set forth in Section 4.2(a)
are true and correct with respect to each item of Collateral.



     (c) No Fraud. Each Asset was originated without any fraud or material
misrepresentation by the Originator or, to the best of the Seller’s knowledge, on the part of the
Obligor.



     (d) Material Adverse Effect. There has been no Material Adverse Effect.



     Section 4.3 Representations and Warranties of the Servicer.



     The Servicer represents and warrants as follows:



     (a) Organization and Good Standing. The Servicer has been duly organized and is
validly existing as a limited liability company in good standing under the laws of the State of
Delaware, with all requisite company power and authority to own or lease its properties and to
conduct its business as such business is presently conducted and to enter into and perform its
obligations pursuant to this Agreement.



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     (b) Due Qualification. The Servicer is duly qualified to do business as a limited
liability company and is in good standing as a limited liability company, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or lease of its
property and or the conduct of its business requires such qualification, licenses or approvals.



     (c) Power and Authority; Due Authorization; Execution and Delivery. The Servicer (i)
has all necessary power, authority and legal right to (a) execute and deliver this Agreement and
the other Transaction Documents to which it is a party, (b) carry out the terms of the Transaction
Documents to which it is a party, and (ii) has duly authorized by all necessary company action the
execution, delivery and performance of this Agreement and the other Transaction Documents to which
it is a party. This Agreement and each other Transaction Document to which the Servicer is a party
have been duly executed and delivered by the Servicer.



     (d) Binding Obligation. This Agreement and each other Transaction Document to which
the Servicer is a party constitutes a legal, valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with its respective terms, except as such
enforceability may be limited by Insolvency Laws and general principles of equity (whether
considered in a suit at law or in equity).



     (e) No Violation. The consummation of the transactions contemplated by this Agreement
and the other Transaction Documents to which it is a party and the fulfillment of the terms hereof
and thereof will not (i) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under, the Servicer’s
operating agreement or any Contractual Obligation of the Servicer, (ii) result in the creation or
imposition of any Lien upon any of the Servicer’s properties pursuant to the terms of any such
Contractual Obligation, other than this Agreement, or (iii) violate any Applicable Law.



     (f) No Proceedings. There is no litigation, proceedings or investigations pending or,
to the best knowledge of the Servicer, threatened against the Servicer, before any Governmental
Authority (i) asserting the legality, invalidity or enforceability of this Agreement or any other
Transaction Document to which the Servicer is a party, (ii) seeking to prevent the consummation of
any of the transactions contemplated by this Agreement or any other Transaction Document to which
the Servicer is a party or (iii) seeking any determination or ruling that could reasonably be
expected to have Material Adverse Effect.



     (g) All Consents Required. All approvals, authorizations, consents, orders, licenses
or other actions of any Person or of any Governmental Authority (if any) required for the due
execution, delivery and performance by the Servicer of this Agreement and any other Transaction
Document to which the Servicer is a party have been obtained.



     (h) Reports Accurate. All Servicer Certificates and other written and electronic
information, exhibits, financial statements, documents, books, records or reports furnished by the
Servicer to the Administrative Agent, each Purchaser Agent or any Purchaser in connection with this
Agreement are accurate, true and correct.




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     (i) Credit and Collection Policy. The Servicer has complied in all material respects
with the Credit and Collection Policy with regard to the origination, underwriting and servicing of
the Assets.



     (j) Collections. The Servicer acknowledges that all Collections received by it or its
Affiliates with respect to the Collateral sold hereunder are held and shall be held in trust for
the benefit of the Secured Parties until deposited into the Collection Account within two Business
Days from receipt as required herein.



     (k) Bulk Sales. The execution, delivery and performance of this Agreement do not
require compliance with any “bulk sales” act or similar law by the Servicer.



     (l) Solvency. The Servicer is not the subject of any Insolvency Proceedings or
Insolvency Event. The transactions under this Agreement and any other Transaction Document to
which the Servicer is a party do not and will not render the Servicer not Solvent and the Servicer
shall deliver to the Administrative Agent and each Purchaser Agent on the Closing Date a
certification in the form of Exhibit E-2.



     (m) Taxes. The Servicer has filed or caused to be filed all tax returns that are
required to be filed by it. The Servicer has paid or made adequate provisions for the payment of
all Taxes and all assessments made against it or any of its property (other than any amount of Tax
the validity of which is currently being contested in good faith by appropriate proceedings and
with respect to which reserves in accordance with GAAP have been provided on the books of the
Servicer), and no tax lien has been filed and, to the Servicer’s knowledge, no claim is being
asserted, with respect to any such Tax, fee or other charge.



     (n) Exchange Act Compliance; Regulations T, U and X. None of the transactions
contemplated herein (including, without limitation, the use of the Proceeds from the sale of the
Collateral) will violate or result in a violation of Section 7 of the Securities Exchange Act, or
any regulations issued pursuant thereto, including, without limitation, Regulations T, U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Servicer does not
own or intend to carry or purchase, and no proceeds from the Advances will be used to carry or
purchase, any “margin stock” within the meaning of Regulation U or to extend “purpose credit”
within the meaning of Regulation U.



     (o) Security Interest. The Servicer will take all steps necessary to ensure that the
Seller has granted a security interest (as defined in the UCC) to the Administrative Agent, as
agent for the Secured Parties, in the Collateral, which is enforceable in accordance with
Applicable Law upon execution and delivery of this Agreement. Upon the filing of UCC-1 financing
statements naming the Administrative Agent as secured party and the Seller as debtor, the
Administrative Agent, as agent for the Secured Parties, shall have a first priority perfected
security interest in the Collateral (except for any Permitted Liens). All filings (including,
without limitation, such UCC filings) as are necessary for the perfection of the Secured Parties’
security interest in the Collateral have been (or prior to the date of the applicable will be)
made.



     (p) ERISA. The present value of all benefits vested under all “employee pension
benefit plans,” as such term is defined in Section 3 of ERISA, maintained by the Servicer,
or in



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which employees of the Servicer are entitled to participate, as from time to time in effect
(herein called the “Pension Plans”), does not exceed the value of the assets of the Pension Plan
allocable to such vested benefits (based on the value of such assets as of the last annual
valuation date). No prohibited transactions, accumulated funding deficiencies, withdrawals or
reportable events have occurred with respect to any Pension Plans that, in the aggregate, could
subject the Servicer to any material tax, penalty or other liability. No notice of intent to
terminate a Pension Plan has been billed, nor has any Pension Plan been terminated under Section
4041(f) of ERISA, nor has the Pension Benefit Guaranty Corporation instituted proceedings to
terminate, or appoint a trustee to administer, a Pension Plan and no event has occurred or
condition exists that might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan.



     (q) Investment Company Act. The Servicer is not, and is not controlled by, an
“investment company” within the meaning of the 1940 Act, as amended, or is exempt from the
provisions of the 1940 Act.



     (r) USA PATRIOT Act. Neither the Servicer nor any Affiliate of the Servicer is (i) a
country, territory, organization, person or entity named on an OFAC list, (ii) a Person that
resides or has a place of business in a country or territory named on such lists or which is
designated as a “Non-Cooperative Jurisdiction” by the Financial Action Task Force on Money
Laundering, or whose subscription funds are transferred from or through such a jurisdiction; (iii) a “Foreign Shell Bank” within the meaning of the USA PATRIOT Act, i.e., a foreign bank
that does not have a physical presence in any country and that is not affiliated with a bank that
has a physical presence and an acceptable level of regulation and supervision; or (iv) a person or
entity that resides in or is organized under the laws of a jurisdiction designated by the United
States Secretary of the Treasury under Sections 311 or 312 of the USA PATRIOT Act as warranting
special measures due to money laundering concerns.



     (s) Material Adverse Effect. The Servicer represents and warrants that (i) since
March 31, 2006 there has been no Material Adverse Effect.



     Section 4.4 Representations and Warranties of the Backup Servicer.



     The Backup Servicer in its individual capacity and as Backup Servicer represents and warrants
as follows:



     (a) Organization and Corporate Power. It is a duly organized and validly existing
national banking association in good standing under the laws of the United States. It has full
corporate power, authority and legal right to execute, deliver and perform its obligations as
Backup Servicer under this Agreement.



     (b) Due Authorization. The execution and delivery of this Agreement and the
consummation of the transactions provided for herein have been duly authorized by all necessary
association action on its part, either in its individual capacity or as Backup Servicer, as the
case may be.



     (c) No Conflict. The execution and delivery of this Agreement, the performance of the
transactions contemplated hereby and the fulfillment of the terms hereof will not conflict



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with, result in any breach of any of the material terms and provisions of, or constitute (with
or without notice or lapse of time or both) a default under any indenture, contract, agreement,
mortgage, deed of trust, or other instrument to which the Backup Servicer is a party or by which it
or any of its property is bound.



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



     (e) All Consents Required. All approvals, authorizations, consents, orders or other
actions of any Person or Governmental Authority applicable to the Backup Servicer, required in
connection with the execution and delivery of this Agreement, the performance by the Backup
Servicer of the transactions contemplated hereby and the fulfillment by the Backup Servicer of the
terms hereof have been obtained.



     (f) Validity, Etc. This Agreement constitutes the legal, valid and binding obligation
of the Backup Servicer, enforceable against the Backup Servicer in accordance with its terms,
except as such enforceability may be limited by applicable Insolvency Laws or general principles of
equity (whether considered in a suit at law or in equity).



     Section 4.5 Representations and Warranties of the Collateral Custodian.



     The Collateral Custodian in its individual capacity and as Collateral Custodian represents and
warrants as follows:



     (a) Organization and Corporate Power. It is a duly organized and validly existing
national banking association in good standing under the laws of the United States. It has full
corporate power, authority and legal right to execute, deliver and perform its obligations as
Collateral Custodian under this Agreement.



     (b) Due Authorization. The execution and delivery of this Agreement and the
consummation of the transactions provided for herein have been duly authorized by all necessary
association action on its part, either in its individual capacity or as Collateral Custodian, as
the case may be.



     (c) No Conflict. The execution and delivery of this Agreement, the performance of the
transactions contemplated hereby and the fulfillment of the terms hereof will not conflict with,
result in any breach of any of the material terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under any indenture, contract, agreement, mortgage, deed
of trust, or other instrument to which the Collateral Custodian is a party or by which it or any of
its property is bound.



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



     (e) All Consents Required. All approvals, authorizations, consents, orders or other
actions of any Person or Governmental Authority applicable to the Collateral Custodian, required



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in connection with the execution and delivery of this Agreement, the performance by the
Collateral Custodian of the transactions contemplated hereby and the fulfillment by the Collateral
Custodian of the terms hereof have been obtained.



     (f) Validity, Etc. The Agreement constitutes the legal, valid and binding obligation
of the Collateral Custodian, enforceable against the Collateral Custodian 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).



     Section 4.6 Breach of Certain Representations and Warranties.



     If on any day an Asset is (or becomes) a Warranty Asset, no later than two Business Days
following the earlier of knowledge by the Seller of such Asset becoming a Warranty Asset or receipt
by the Seller from the Administrative Agent, any Purchaser Agent or the Servicer of written notice
thereof, the Seller shall either: (a) make a deposit to the Collection Account (for allocation
pursuant to Section 2.9 or Section 2.10, as applicable) in immediately available
funds in an amount equal to the sum of (i) the amount which, if deposited to the Collection Account
on such date, would cause the Availability as of such date (after giving effect to such Warranty
Asset) to be greater than or equal to zero, (ii) any outstanding Servicer Advances thereon, (iii)
any accrued and unpaid interest, (iv) all Hedge Breakage Costs owed to the relevant Hedge
Counterparty for any termination of one or more Hedge Transactions, in whole or in part, as
required by the terms of any Hedging Agreement and (v) in the case of a Loan, any costs and damages
incurred in connection with any violation by such Loan of any predatory- or abusive-lending law; or
(b) subject to the satisfaction of the conditions in Section 2.18, substitute for such
Warranty Asset a Substitute Asset. In either of the foregoing instances, the Seller may (in its
discretion) accept retransfer of each such Warranty Asset and any Related Security and the
Borrowing Base shall be reduced by the Outstanding Asset Balance of each such Warranty Asset and,
if applicable, increased by the Outstanding Asset Balance of each Substitute Asset. Upon
confirmation of the deposit of such Retransfer Price into the Collection Account or the delivery by
the Seller of a Substitute Asset for each Warranty Asset (the “Retransfer Date”), such Warranty
Asset shall not be included in the Borrowing Base (and, if and when the Seller elects to accept the
retransfer of such Warranty Asset, the Collateral) and, as applicable, the Substitute Asset shall
be included in the Collateral. Upon the Retransfer Date of each Warranty Asset, the Administrative
Agent, as agent for the Secured Parties, shall (if and when the Seller elects to accept the
retransfer of such Warranty Asset) automatically and without further action be deemed to transfer,
assign and set-over to the Seller, without recourse, representation or warranty, all the right,
title and interest of the Administrative Agent, as agent for the Secured Parties in, to and under
such Warranty Asset and all future monies due or to become due with respect thereto, the Related
Security, all Proceeds of such Warranty Asset, Recoveries and Insurance Proceeds relating thereto,
all rights to security for any such Warranty Asset, and all Proceeds and products of the foregoing.
The Administrative Agent, as agent for the Secured Parties, shall (if and when the Seller elects
to accept the retransfer of such Warranty Asset), at the sole expense of the Servicer, execute such
documents and instruments of transfer as may be prepared by the Servicer on behalf of the Seller
and take other such actions as shall reasonably be requested by the Seller to effect the transfer
of such Warranty Asset pursuant to this Section 4.6.



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ARTICLE V




GENERAL COVENANTS




     Section 5.1 Affirmative Covenants of the Seller.



     From the date hereof until the Collection Date:



     (a) Compliance with Laws. The Seller will comply in all material respects with all
Applicable Laws, including those with respect to the Collateral or any part thereof.



     (b) Preservation of Company Existence. The Seller will preserve and maintain its
company existence, rights, franchises and privileges in the jurisdiction of its formation, and
qualify and remain qualified in good standing as a limited liability company in each jurisdiction
where the failure to preserve and maintain such existence, rights, franchises, privileges and
qualification has had, or could reasonably be expected to have, a Material Adverse Effect.



     (c) Performance and Compliance with Collateral. The Seller will, at its expense,
timely and fully perform and comply (or direct the Originator to perform and comply pursuant to the
Sale Agreement) with all provisions, covenants and other promises required to be observed by it
under the Collateral and all other agreements related to such Collateral.



     (d) Keeping of Records and Books of Account. The Seller will maintain and implement
administrative and operating procedures (including, without limitation, an ability to recreate
records evidencing the Collateral in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records and other information reasonably necessary or
advisable for the collection of all or any portion of the Collateral.



     (e) Originator’s Collateral. With respect to the Collateral acquired by the Seller,
the Seller will (i) acquire such Collateral pursuant to and in accordance with the terms of the
Sale Agreement, (ii) (at the Servicer’s expense) take all action necessary to perfect, protect and
more fully evidence the Seller’s ownership of such Collateral free and clear of any Lien other than
the Lien created hereunder and Permitted Liens, including, without limitation, (a) filing and
maintaining (at the Servicer’s expense), effective financing statements against the Originator in
all necessary or appropriate filing offices, and filing continuation statements, amendments or
assignments with respect thereto in such filing offices, and (b) executing or causing to be
executed such other instruments or notices as may be necessary or appropriate, (iii) permit the
Administrative Agent, each Purchaser Agent or their respective agents or representatives to visit
the offices of the Seller during normal office hours and upon reasonable notice examine and make
copies of all documents, books, records and other information concerning the Collateral and discuss
matters related thereto with any of the officers or employees of the Seller having knowledge of
such matters, and (iv) take all additional action that the Administrative Agent or any Purchaser
Agent may reasonably request to perfect, protect and more fully evidence the respective interests
of the parties to this Agreement in the Collateral.



     (f) Delivery of Collections. The Seller will pay to the Servicer promptly (but in no
event later than two Business Days after receipt) all Collections received by Seller in respect of



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the Collateral and cause the same to be promptly deposited into the Collection Account by the
Servicer in accordance with Section 5.4(l).



     (g) Separate Limited Liability Company Existence. The Seller shall be in compliance
with the Special Purpose Entity requirements set forth in Section 4.1(u).



     (h) Credit and Collection Policy. The Seller will (a) comply in all material respects
with the Credit and Collection Policy in regard to the Collateral, and (b) furnish to the
Administrative Agent and each Purchaser Agent, prior to its effective date, prompt notice of any
material changes in the Credit and Collection Policy. The Seller will not agree to or otherwise
permit to occur any material change in the Credit and Collection Policy, which change would impair
the collectibility of any of the Collateral or otherwise adversely affect the interests or remedies
of the Administrative Agent, each Purchaser Agent or the Secured Parties under this Agreement or
any other Transaction Document, without the prior consent of the Administrative Agent and each
Purchaser Agent (which consent shall not be unreasonably withheld).



     (i) Termination Events. The Seller will provide the Administrative Agent and each
Purchaser Agent with immediate written notice of the occurrence of each Termination Event and each
Unmatured Termination Event of which the Seller has knowledge or has received notice. In addition,
no later than two Business Days following the Seller’s knowledge or notice of the occurrence of any
Termination Event or Unmatured Termination Event, the Seller will provide to the Administrative
Agent and each Purchaser Agent a written statement of the chief financial officer or chief
accounting officer of Seller setting forth the details of such event and the action that the Seller
proposes to take with respect thereto.



     (j) Taxes. The Seller will file and pay any and all Taxes required to meet the
obligations of the Transaction Documents.



     (k) Use of Proceeds. The Seller will use the proceeds of the Advances only to acquire
Collateral or to make distributions to its members in accordance with the terms hereof.



     (l) Obligor Notification Forms. The Seller shall furnish the Administrative Agent
with an appropriate power of attorney to send (at the Administrative Agent’s discretion after the
occurrence of a Termination Event or an Unmatured Termination Event) Obligor notification forms to
give notice to the Obligors of the Secured Parties’ interest in the Collateral and the obligation
to make payments as directed by the Administrative Agent.



     (m) Adverse Claims. The Seller will not create, or participate in the creation of, or
permit to exist, any Liens in relation to each Lock-Box Account other than as disclosed to the
Administrative Agent and each Purchaser Agent.



     (n) Seller’s Collateral. With respect to each item of Collateral acquired by the
Secured Parties, the Seller will (i) take all action necessary to perfect, protect and more fully
evidence the Secured Parties’ ownership of such Collateral, including, without limitation, (a)
filing and maintaining (at the Servicer’s expense), effective financing statements against the
Seller in all necessary or appropriate filing offices, and filing continuation statements,
amendments or assignments with respect thereto in such filing offices, and (b) executing or causing
to be executed such other instruments or notices as may be necessary or appropriate and



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(ii) take all additional action that the Administrative Agent may reasonably request to
perfect, protect and more fully evidence the respective interests of the parties to this Agreement
in such Collateral.




     (o) Notices. The Seller will furnish to the Administrative Agent and each Purchaser
Agent:




     (i) Income Tax Liability. Within ten Business Days after the receipt of
revenue agent reports or other written proposals, determinations or assessments of the
Internal Revenue Service or any other taxing authority which propose, determine or otherwise
set forth positive adjustments to the Tax liability of any Affiliated group (within the
meaning of Section 1504(a)(l) of the Internal Revenue Code of 1986 (as amended from time to
time)) which equal or exceed $1,000,000 in the aggregate, telephonic, telex or telecopy
notice (confirmed in writing within five Business Days) specifying the nature of the items
giving rise to such adjustments and the amounts thereof;




     (ii) Auditors’ Management Letters. Promptly after the receipt thereof, any
auditors’ management letters that are received by the Seller or by its accountants;




     (iii) Representations. Forthwith upon receiving knowledge of same, the Seller
shall notify the Administrative Agent and each Purchaser Agent if any representation or
warranty set forth in Section 4.1 was incorrect at the time it was given or deemed
to have been given and at the same time deliver to the Administrative Agent and each
Purchaser Agent a written notice setting forth in reasonable detail the nature of such facts
and circumstances. In particular, but without limiting the foregoing, the Seller shall
notify the Administrative Agent and each Purchaser Agent in the manner set forth in the
preceding sentence before any Funding Date of any facts or circumstances within the
knowledge of the Seller which would render any of the said representations and warranties
untrue at the date when such representations and warranties were made or deemed to have been
made;




     (iv) ERISA. Promptly after receiving notice of any “reportable event” (as
defined in Title IV of ERISA) with respect to the Seller (or any ERISA Affiliate thereof), a
copy of such notice;




     (v) Proceedings. As soon as possible and in any event within three Business
Days after any executive officer of the Seller receives notice or obtains knowledge thereof,
of any settlement of, material judgment (including a material judgment with respect to the
liability phase of a bifurcated trial) in or commencement of any material labor controversy,
material litigation, material action, material suit or material proceeding before any court
or governmental department, commission, board, bureau, agency or instrumentality, domestic
or foreign, affecting the Collateral, the Transaction Documents, the Secured Parties’
interest in the Collateral, or the Seller, the Servicer or the Originator or any other
Subsidiary of CapitalSource Inc.; provided that notwithstanding the foregoing, any
settlement, judgment, labor controversy, litigation, action, suit or proceeding affecting
the Collateral, the Transaction Documents, the Secured Parties’



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interest in the Collateral, or the Seller, the Servicer or the Originator or any other
Subsidiary of CapitalSource Inc. in excess of $2,500,000 or more shall be deemed to be
material for purposes of this Section 5.1(o); and




     (vi) Notice of Material Events. Promptly upon becoming aware thereof, notice
of any other event or circumstances that, in the reasonable judgment of the Seller, is
likely to have a Material Adverse Effect.



     (p) Other. The Seller will furnish to the Administrative Agent and each Purchaser
Agent promptly, from time to time, such other information, documents, records or reports respecting
the Collateral or the condition or operations, financial or otherwise, of Seller or Originator as
the Administrative Agent and each Purchaser Agent may from time to time reasonably request in order
to protect the interests of the Administrative Agent, each Purchaser Agent or the Secured Parties
under or as contemplated by this Agreement.



     Section 5.2 Negative Covenants of the Seller.



     From the date hereof until the Collection Date:



     (a) Other Business. Seller will not (i) engage in any business other than the
transactions contemplated by the Transaction Documents, (ii) incur any Indebtedness, obligation,
liability or contingent obligation of any kind other than pursuant to this Agreement or under any
Hedging Agreement required by Section 5.3(a), or (iii) form any Subsidiary or make any
Investments in any other Person.



     (b) Collateral Not to be Evidenced by Instruments. The Seller will take no action to
cause any Collateral that is not, as of the Closing Date or the related Addition Date, as the case
may be, evidenced by an Instrument, to be so evidenced except in connection with the enforcement or
collection of such Collateral.



     (c) Security Interests. Except as otherwise permitted herein and in respect of any
Optional Sale, Discretionary Sale and Permitted Securitization Transaction, the Seller will not
sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to
exist any Lien on any Collateral, whether now existing or hereafter transferred hereunder, or any
interest therein, and the Seller will not sell, pledge, assign or suffer to exist any Lien on its
interest, if any, hereunder. The Seller will promptly notify the Administrative Agent and each
Purchaser Agent of the existence of any Lien on any Collateral and the Seller shall defend the
right, title and interest of the Administrative Agent as agent for the Secured Parties in, to and
under the Collateral against all claims of third parties; provided that nothing in this Section
5.2(c) shall prevent or be deemed to prohibit the Seller from suffering to exist Permitted
Liens upon any of the Collateral.



     (d) Mergers, Acquisitions, Sales, etc. The Seller will not be a party to any merger
or consolidation, or purchase or otherwise acquire any of the assets or any stock of any class of,
or any partnership or joint venture interest in, any other Person, or sell, transfer, convey or
lease any of its assets, or sell or assign with or without recourse any Collateral or any interest
therein (other than pursuant hereto or to the Sale Agreement).



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     (e) Deposits to Special Accounts. Except as otherwise provided in the Lock-Box
Agreement, the Seller will not deposit or otherwise credit, or cause or permit to be so deposited
or credited, to any Lock-Box Account cash or cash proceeds other than Collections in respect of the
Collateral.



     (f) Restricted Payments. The Seller shall not make any Restricted Junior Payment,
except that, so long as no Termination Event or Unmatured Termination Event has occurred and is
continuing or would result therefrom, the Seller may declare and make distributions to its members
on their membership interests.



     (g) Change of Name or Location of Loan Files. The Seller shall not (x) change its
name, move the location of its principal place of business and chief executive office, change the
offices where it keeps the records from the location referred to in Section 13.2, or change
the jurisdiction of its formation, or (y) move, or consent to the Collateral Custodian or Servicer
moving, the Required Asset Documents and the Asset Files from the location thereof on the Closing
Date, unless the Seller has given at least 30 days’ written notice to the Administrative Agent and
has taken all actions required under the UCC of each relevant jurisdiction in order to continue the
first priority perfected security interest of the Administrative Agent, as agent for the Secured
Parties, in the Collateral.



     (h) Accounting of Purchases. Other than for tax and consolidated accounting purposes,
the Seller will not account for or treat (whether in financial statements or otherwise) the
transactions contemplated hereby in any manner other than as a sale of the Collateral by the Seller
to the Secured Parties. Other than for consolidated tax and accounting purposes, the Seller will
not account for or treat (whether in financial statements or otherwise) the transactions
contemplated by the Sale Agreement in any manner other than as a sale of the Collateral by the
Originator to the Seller.



     (i) ERISA Matters. The Seller will not (a) engage or permit any ERISA Affiliate to
engage in any prohibited transaction for which an exemption is not available or has not previously
been obtained from the United States Department of Labor, (b) permit to exist any accumulated
funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of the Code, or
funding deficiency with respect to any Benefit Plan other than a Multiemployer Plan, (c) fail to
make any payments to a Multiemployer Plan that the Seller or any ERISA Affiliate may be required to
make under the agreement relating to such Multiemployer Plan or any law pertaining thereto, (d)
terminate any Benefit Plan so as to result in any liability, or (e) permit to exist any occurrence
of any reportable event described in Title IV of ERISA.



     (j) Operating Agreement; Sale Agreement. The Seller will not amend, modify, waive or
terminate any provision of its operating agreement or the Sale Agreement without the prior written
consent of the Administrative Agent and each Purchaser Agent.



     (k) Changes in Payment Instructions to Obligors. The Seller will not add or terminate
any bank as a Lock-Box Bank or any Lock-Box Account from those listed in Schedule II or
make any change, or permit Servicer to make any change, in its instructions to Obligors regarding
payments to be made to Seller or Servicer or payments to be made to any Lock-Box Bank, unless the
Administrative Agent has consented to such addition, termination or change



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(which consent shall not be unreasonably withheld) and has received duly executed copies of
Lock-Box Agreements with each new Lock-Box Bank or with respect to each new Lock-Box Account, as
the case may be.




     (l) Extension or Amendment of Collateral. The Seller will not, except as otherwise
permitted in Section 6.4(a), waive, extend, amend or otherwise modify, or permit the
Servicer to extend, amend or otherwise modify, the terms of any Collateral (including the Related
Security); provided that no waiver, extension, modification or alteration otherwise permitted under
Section 6.4(a) shall (i) alter the status of any Asset as a Delinquent Asset or Charged-Off
Asset, (ii) in the reasonable judgment of the Administrative Agent, prevent or delay any Asset from
becoming a Delinquent Asset or Charged-Off Asset, or (iii) limit and/or impair the rights of the
Administrative Agent or the Secured Parties under this Agreement.



     (m) Credit and Collection Policy. The Seller will not materially amend, modify,
restate or replace, in whole or in part, the Credit and Collection Policy, which amendment,
modification, restatement or replacement would impair the collectibility of any of the Collateral
or otherwise adversely affect the interests or remedies of the Administrative Agent, each Purchaser
Agent or the Secured Parties under this Agreement or any other Transaction Document, without the
prior written consent of the Administrative Agent and each Purchaser Agent (which consent will not
be unreasonably withheld).



     (n) Other Indebtedness. The Seller will not issue or extend any class or type of
Indebtedness whether senior, pari passu or subordinated to the Indebtedness arising under this
Agreement, unless an opinion of special tax counsel is first rendered to the effect that such
issuance of additional Indebtedness will not cause the Seller to be treated as a taxable mortgage
pool.



     Section 5.3 Covenants of the Seller Relating to the Hedging of Assets.



     (a) On or prior to each Funding Date, as applicable, the Seller shall enter into one or more
Hedge Transactions for that Advance; provided that each such Hedge Transaction shall:




     (i) be entered into with a Hedge Counterparty and governed by a Hedging Agreement;




     (ii) have a schedule of monthly calculation periods the first of which commences on the
Funding Date of that Advance and the last of which ends on the last Scheduled Payment due to
occur under or with respect to the Assets included in the Aggregate Outstanding Asset
Balance to which that Advance relates;




     (iii) have an amortizing notional amount such that the Hedge Notional Amount shall be
at least equal to the product of the Hedge Percentage and the portion of the Hedge Amount
represented by such Advance; and




     (iv) provide for two series of monthly payments to be netted against each other, one
such series being payments to be made by the Seller to a Hedge Counterparty (solely on a net
basis) by reference to a fixed rate for that Advance, and the other such series being
payments to be made by such Hedge Counterparty to the Administrative



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Agent (solely on a net basis) at a floating rate equal to “USD-LIBOR-BBA” (as defined
in the ISDA Definitions), the net amount of which shall be paid into the Collection Account
(if payable by such Hedge Counterparty) or from the Collection Account to the extent funds
are available under Section 2.9(a)(1) and Section 2.10(a)(1) (if payable by
the Seller);



     (b) As additional security hereunder, Seller hereby assigns to the Administrative Agent, as
agent for the Secured Parties, all right, title and interest but none of the obligations of the
Seller in each Hedging Agreement, each Hedge Transaction, and all present and future amounts
payable by a Hedge Counterparty to Seller under or in connection with the respective Hedging
Agreement and Hedge Transaction(s) with that Hedge Counterparty (“Hedge Collateral”), and grants a
security interest to the Administrative Agent, as agent for the Secured Parties, in the Hedge
Collateral. Seller acknowledges that, as a result of that assignment, Seller may not, without the
prior written consent of the Administrative Agent, exercise any rights under any Hedging Agreement
or Hedge Transaction, except for Seller’s right under any Hedging Agreement to enter into Hedge
Transactions in order to meet the Seller’s obligations under Section 5.3(a) hereof.
Nothing herein shall have the effect of releasing the Seller from any of its obligations under any
Hedging Agreement or any Hedge Transaction, nor be construed as requiring the consent of the
Administrative Agent or any Secured Party for the performance by Seller of any such obligations.



     Section 5.4 Affirmative Covenants of the Servicer.



     From the date hereof until the Collection Date:



     (a) Compliance with Law. The Servicer will comply in all material respects with all
Applicable Laws, including those with respect to the Collateral or any part thereof.



     (b) Preservation of Company Existence. The Servicer will preserve and maintain its
company existence, rights, franchises and privileges in the jurisdiction of its formation, and
qualify and remain qualified in good standing as a limited liability company in each jurisdiction
where the failure to preserve and maintain such existence, rights, franchises, privileges and
qualification has had, or could reasonably be expected to have, a Material Adverse Effect.



     (c) Obligations and Compliance with Collateral. The Servicer will duly fulfill and
comply with all obligations on the part of the Seller to be fulfilled or complied with under or in
connection with each Collateral and will do nothing to impair the rights of the Administrative
Agent, as agent for the Secured Parties, or of the Secured Parties in, to and under the Collateral.



     (d) Keeping of Records and Books of Account.




     (i) The Servicer will maintain and implement administrative and operating procedures
(including without limitation, an ability to recreate records evidencing Collateral in the
event of the destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for the collection of
all Collateral and the identification of the Collateral.



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     (ii) The Servicer shall permit the Administrative Agent, each Purchaser Agent or their
respective agents or representatives, to visit the offices of the Servicer during normal
office hours and upon reasonable notice and examine and make copies of all documents, books,
records and other information concerning the Collateral and discuss matters related thereto
with any of the officers or employees of the Servicer having knowledge of such matters.




     (iii) The Servicer will on or prior to the date hereof, mark its master data processing
records and other books and records relating to the Collateral with a legend, acceptable to
the Administrative Agent and each Purchaser Agent, describing the sale of the Collateral (A)
from the Originator to the Seller, and (B) from the Seller to the Purchaser.



     (e) Preservation of Security Interest. The Servicer (at its own expense) will execute
and file such financing and continuation statements and any other documents that may be required by
any law or regulation of any Governmental Authority to preserve and protect fully the security
interest of the Administrative Agent as agent for the Secured Parties in, to and under the
Collateral.



     (f) Credit and Collection Policy. The Servicer will (i) comply in all material
respects with the Credit and Collection Policy in regard to the Collateral, and (ii) furnish to the
Administrative Agent and each Purchaser Agent, prior to its effective date, prompt notice of any
proposed material change in the Credit and Collection Policy. Without the prior written consent of
the Administrative Agent and each Purchaser Agent (which consent will not be unreasonably
withheld), the Servicer will not agree to or otherwise permit to occur any material change in the
Credit and Collection Policy, which change would impair the collectibility of any of the Collateral
or otherwise adversely affect the interests or remedies of the Administrative Agent, each Purchaser
Agent or the Secured Parties under this Agreement or any other Transaction Document.



     (g) Termination Events. The Servicer will provide the Administrative Agent and each
Purchaser Agent with immediate written notice of the occurrence of each Termination Event and each
Unmatured Termination Event of which the Servicer has knowledge or has received notice. In
addition, no later than two Business Days following the Servicer’s knowledge or notice of the
occurrence of any Termination Event or Unmatured Termination Event, the Servicer will provide to
the Administrative Agent and each Purchaser Agent a written statement of the chief financial
officer or chief accounting officer of the Servicer setting forth the details of such event and the
action that the Servicer proposes to take with respect thereto.



     (h) Taxes. The Servicer will file and pay any and all Taxes required to meet the
obligations of the Seller and the Servicer under the Transaction Documents.



     (i) Other. The Servicer will promptly furnish to the Administrative Agent and each
Purchaser Agent such other information, documents, records or reports respecting the Collateral or
the condition or operations, financial or otherwise, of the Seller or the Servicer as the
Administrative Agent and each Purchaser Agent may from time to time reasonably request in



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order to protect the interests of the Administrative Agent, each Purchaser Agent or Secured
Parties under or as contemplated by this Agreement.



     (j) Proceedings. As soon as possible and in any event within three Business Days
after any executive officer of the Servicer receives notice or obtains knowledge thereof, of any
settlement of, material judgment (including a material judgment with respect to the liability phase
of a bifurcated trial) in or commencement of any material labor controversy, material litigation,
material action, material suit or material proceeding before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the
Collateral, the Transaction Documents, the Secured Parties’ interest in the Collateral, or the
Seller, the Servicer or the Originator or any other Subsidiary of CapitalSource Inc.; provided that
notwithstanding the foregoing, any settlement, judgment, labor controversy, litigation, action,
suit or proceeding affecting the Collateral, the Transaction Documents, the Secured Parties’
interest in the Collateral, or the Seller, the Servicer or the Originator or any other Subsidiary
of CapitalSource Inc. in excess of $2,500,000 or more shall be deemed to be material for purposes
of this Section 5.4(j).



     (k) Deposit of Collections. The Servicer shall promptly (but in no event later than
two Business Days after receipt) deposit into the Collection Account any and all Collections
received by the Seller, the Servicer or any of their Affiliates.



     (l) Servicing of Participation, Acquired and Assigned Loans. With respect to
Participation Loans, Acquired Loans and Assigned Loans, the Servicer shall: (i) segregate all Loan
Files with respect to such Loans; (ii) keep separate records with respect to such Loans; and (iii)
identify each such Type of Loan on the Servicing Reports required hereunder with respect to such
Loans.



     (m) Change-in-Control. Upon the occurrence of a Change-in-Control, the Servicer shall
provide the Administrative Agent, each Purchaser Agent and the Hedge Counterparties with notice of
such Change-in-Control within 30 days after completion of the same.



     (n) Loan Register.




     (i) The Servicer shall maintain with respect to each Noteless Loan a register (each, a
“Loan Register”) in which it will record (v) the amount of such Loan, (w) the amount of any
principal or interest due and payable or to become due and payable from the Obligor
thereunder, (x) the amount of any sum in respect of such Loan received from the Obligor and
each Purchaser’s share thereof, (y) the date of origination of such Loan and (z) the
maturity date of such Loan. The entries made in each Loan Register maintained pursuant to
this Section 5.04(n) shall be prima facie evidence of the existence and amounts of
the obligations therein recorded; provided that the failure of the Servicer to maintain any
such Loan Register or any error therein shall not in any manner affect the obligations of
the Obligor to repay the related Loans in accordance with their terms or any Purchaser’s
interest therein.




     (ii) At any time a Noteless Loan is included as part of the Collateral pursuant to this
Agreement, the Servicer shall deliver to the Collateral Custodian a copy of the



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related Loan Register, together with a certificate of a Responsible Officer of the
Servicer certifying to the accuracy of such Loan Register as of the date such Loan is
included as part of the Collateral.



     Section 5.5 Negative Covenants of the Servicer.



     From the date hereof until the Collection Date.



     (a) Deposits to Special Accounts. Except as otherwise provided in the Lock-Box
Agreement, the Servicer will not deposit or otherwise credit, or cause or permit to be so deposited
or credited, to any Lock-Box Account cash or cash proceeds other than Collections in respect of the
Collateral.



     (b) Mergers, Acquisition, Sales, etc. The Servicer will not consolidate with or merge
into any other Person or convey or transfer its properties and assets substantially as an entirety
to any Person, unless the Servicer is the surviving entity and unless:




     (i) the Servicer has delivered to the Administrative Agent and each Purchaser Agent an
Officer’s Certificate and an Opinion of Counsel each stating that any consolidation, merger,
conveyance or transfer complies with this Section 5.5 and that all conditions
precedent herein provided for relating to such transaction have been complied with and, in
the case of the Opinion of Counsel, is legal, valid and binding with respect to the Servicer
and such other matters as the Administrative Agent may reasonably request;




     (ii) the Servicer shall have delivered notice of such consolidation, merger, conveyance
or transfer to the Administrative Agent and each Purchaser Agent;




     (iii) after giving effect thereto, no Termination Event or Servicer Default or event
that with notice or lapse of time would constitute either a Termination Event or a Servicer
Default shall have occurred; and




     (iv) the Administrative Agent and each Purchaser Agent have consented in writing to
such consolidation, merger, conveyance or transfer.



     (c) Change of Name or Location of Loan Files. The Servicer shall not (x) change its
name, move the location of its principal place of business and chief executive office, change the
offices where it keeps records concerning the Collateral from the location referred to in
Section 13.2, or change the jurisdiction of its formation, or (y) move, or consent to the
Collateral Custodian moving, the Required Asset Documents and Asset Files from the location thereof
on the Closing Date, unless the Servicer has given at least 30 days’ written notice to the
Administrative Agent and has taken all actions required under the UCC of each relevant jurisdiction
in order to continue the first priority perfected security interest of the Administrative Agent as
agent for the Secured Parties in the Collateral.



     (d) Change in Payment Instructions to Obligors. The Servicer will not add or
terminate any bank as a Lock-Box Bank or any Lock-Box Account from those listed in Schedule
II or make any change in its instructions to Obligors regarding payments to be made to the
Seller or the Servicer or payments to be made to any Lock-Box Bank, unless the Administrative Agent



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has consented to such addition, termination or change (which consent shall not be unreasonably
withheld) and has received duly executed copies of Lock-Box Agreements with each new Lock-Box Bank
or with respect to each new Lock-Box Account, as the case may be.



     (e) Extension or Amendment of Assets. The Servicer will not, except as otherwise
permitted in Section 6.4(a), extend, amend or otherwise modify the terms of any Assets;
provided that no waiver, extension, modification or alteration otherwise permitted under
Section 6.4(a) shall (i) alter the status of any Asset as a Delinquent Asset or Charged-Off
Asset, (ii) in the reasonable judgment of the Administrative Agent, prevent or delay any Asset from
becoming a Delinquent Asset or Charged-Off Asset, or (iii) limit and/or impair the rights of the
Administrative Agent or the Secured Parties under this Agreement.



     Section 5.6 Affirmative Covenants of the Backup Servicer.



     From the date hereof until the Collection Date:



     (a) Compliance with Law. The Backup Servicer will comply in all material respects
with all Applicable Laws.



     (b) Preservation of Existence. The Backup Servicer will preserve and maintain its
existence, rights, franchises and privileges in the jurisdiction of its formation, and qualify and
remain qualified in good standing in each jurisdiction where the failure to preserve and maintain
such existence, rights, franchises, privileges and qualification has had, or could reasonably be
expected to have, a Material Adverse Effect.



     Section 5.7 Negative Covenants of the Backup Servicer.



     From the date hereof until the Collection Date:



     No Changes in Backup Servicer Fee. The Backup Servicer will not make any changes to
the Backup Servicer Fee set forth in the Backup Servicer Fee Letter without the prior written
approval of the Administrative Agent and each Purchaser Agent.



     Section 5.8 Affirmative Covenants of the Collateral Custodian.



     From the date hereof until the Collection Date:



     (a) Compliance with Law. The Collateral Custodian will comply in all material
respects with all Applicable Laws.



     (b) Preservation of Existence. The Collateral Custodian will preserve and maintain
its existence, rights, franchises and privileges in the jurisdiction of its formation and qualify
and remain qualified in good standing in each jurisdiction where failure to preserve and maintain
such existence, rights, franchises, privileges and qualification has had, or could reasonably be
expected to have, a Material Adverse Effect.



     (c) Location of Required Asset Documents. The Required Asset Documents shall remain
at all times in the possession of the Collateral Custodian at the address set forth herein



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unless notice of a different address is given in accordance with the terms hereof or unless
the Administrative Agent agrees to allow certain Required Asset Documents to be released to the
Servicer on a temporary basis in accordance with the terms hereof.



     Section 5.9 Negative Covenants of the Collateral Custodian.



     From the date hereof until the Collection Date:



     (a) Required Asset Documents. The Collateral Custodian will not dispose of any
documents constituting the Required Asset Documents in any manner that is inconsistent with the
performance of its obligations as the Collateral Custodian pursuant to this Agreement and will not
dispose of any Collateral except as contemplated by this Agreement.



     (b) No Changes in Collateral Custodian Fee. The Collateral Custodian will not make
any changes to the Collateral Custodian Fee set forth in the Collateral Custodian Fee Letter
without the prior written approval of the Administrative Agent and each Purchaser Agent.



ARTICLE VI




ADMINISTRATION AND SERVICING OF ASSETS




     Section 6.1 Designation of the Servicer.



     (a) Initial Servicer. The servicing, administering and collection of the Collateral
shall be conducted by the Person designated as the Servicer hereunder from time to time in
accordance with this Section 6.1. Until the Administrative Agent acting at the direction
of Purchaser Agents representing Purchasers holding a majority of the Commitments (the “Majority
Purchaser Agents”) gives to the Originator a Servicer Termination Notice, the Originator is hereby
designated as, and hereby agrees to perform the duties and responsibilities of, the Servicer
pursuant to the terms hereof.



     (b) Successor Servicer. Upon the Servicer’s receipt of a Servicer Termination Notice
(with a copy to the Backup Servicer) from the Administrative Agent pursuant to the terms of
Section 6.15, the Servicer agrees that it will terminate its activities as Servicer
hereunder in a manner that the Administrative Agent reasonably believes will facilitate the
transition of the performance of such activities to a successor Servicer, and the successor
Servicer shall assume each and all of the Servicer’s obligations to service and administer the
Collateral, on the terms and subject to the conditions herein set forth, and the Servicer shall use
its best reasonable efforts to assist the successor Servicer in assuming such obligations.



     (c) Subcontracts. The Servicer may, with the prior consent of the Administrative
Agent, subcontract with any other Person for servicing, administering or collecting the Collateral;
provided that the Servicer shall remain liable for the performance of the duties and obligations of
the Servicer pursuant to the terms hereof and that any such subcontract may be terminated upon the
occurrence of a Servicer Default.



     (d) Servicing Programs. In the event that the Servicer uses any software program in
servicing the Collateral that it licenses from a third party, the Servicer shall use its best



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reasonable efforts to obtain, either before the Closing Date or as soon as possible
thereafter, whatever licenses or approvals are necessary to allow the Administrative Agent or the
Servicer to use such program.



     Section 6.2 Duties of the Servicer.



     (a) Appointment. The Seller hereby appoints the Servicer as its agent, as from time
to time designated pursuant to Section 6.1, to service the Collateral and enforce its
respective rights in and under such Collateral. The Servicer hereby accepts such appointment and
agrees to perform the duties and obligations with respect thereto as set forth herein. The
Servicer and the Seller hereby acknowledge that the Administrative Agent, each Purchaser Agent and
the Secured Parties are third party beneficiaries of the obligations undertaken by the Servicer
hereunder.



     (b) Duties. The Servicer shall take or cause to be taken all such actions as may be
necessary or advisable to collect on the Collateral from time to time, all in accordance with
Applicable Laws, with reasonable care and diligence, and in accordance with the Credit and
Collection Policy. Without limiting the foregoing, the duties of the Servicer shall include the
following:




     (i) preparing and submitting of claims to, and post-billing liaison with, Obligors on
each Asset;




     (ii) maintaining all necessary servicing records with respect to the Collateral and
providing such reports to the Administrative Agent and each Purchaser Agent in respect of
the servicing of the Collateral (including information relating to its performance under
this Agreement) as may be required hereunder or as the Administrative Agent and each
Purchaser Agent may reasonably request;




     (iii) maintaining and implementing administrative and operating procedures (including,
without limitation, an ability to recreate servicing records evidencing the Collateral in
the event of the destruction of the originals thereof) and keeping and maintaining all
documents, books, records and other information reasonably necessary or advisable for the
collection of the Collateral;




     (iv) promptly delivering to the Administrative Agent, each Purchaser Agent or the
Collateral Custodian, from time to time, such information and servicing records (including
information relating to its performance under this Agreement) as the Administrative Agent,
each Purchaser Agent or the Collateral Custodian may from time to time reasonably request;




     (v) identifying each Asset clearly and unambiguously in its servicing records to
reflect that such Asset is owned by the Seller and that the Seller is selling an undivided
ownership interest therein to the Secured Parties pursuant to this Agreement;




     (vi) notifying the Administrative Agent and each Purchaser Agent of any material
action, suit, proceeding, dispute, offset, deduction, defense or counterclaim (1) that is or
is threatened to be asserted by an Obligor with respect to any Asset (or portion



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thereof) of which it has knowledge or has received notice; or (2) that is reasonably
expected to have a Material Adverse Effect;




     (vii) notifying the Administrative Agent and each Purchaser Agent of any proposed
change in the Credit and Collection Policy that could have an adverse effect on the
collectibility of the Collateral, on the Seller or on the interests of the Administrative
Agent, each Purchaser Agent or any Secured Party;




     (viii) using its reasonable best efforts to maintain the perfected security interest of
the Administrative Agent, as agent for the Secured Parties, in the Collateral;




     (ix) maintaining in the same manner as the Collateral Custodian holds the Required
Asset Documents, the Asset File (other than Required Asset Documents) with respect to each
Asset included as part of the Collateral; and




     (x) the Servicer shall make payments pursuant to the terms of the Monthly Report in
accordance with Section 2.9 and Section 2.10.



     (c) Notwithstanding anything to the contrary contained herein, the exercise by the
Administrative Agent, each Purchaser Agent and the Secured Parties of their rights hereunder shall
not release the Servicer, the Originator or the Seller from any of their duties or responsibilities
with respect to the Collateral. The Secured Parties, the Administrative Agent, each Purchaser
Agent and the Collateral Custodian (except in the role of Backup Servicer) shall not have any
obligation or liability with respect to any Collateral, nor shall any of them be obligated to
perform any of the obligations of the Servicer hereunder.



     (d) Any payment by an Obligor in respect of any Indebtedness owed by it to the Originator or
the Seller shall, except as otherwise specified by such Obligor or otherwise required by contract
or Applicable Law and unless otherwise instructed by the Administrative Agent, be applied as a
Collection of an item of Collateral of such Obligor (starting with the oldest such Collateral) to
the extent of any amounts then due and payable thereunder before being applied to any other
receivable or other obligation of such Obligor.



     Section 6.3 Authorization of the Servicer.



     (a) Each of the Seller, the Administrative Agent, each Purchaser Agent, each Purchaser and
each Hedge Counterparty hereby authorizes the Servicer (including any successor thereto) to take
any and all reasonable steps in its name and on its behalf necessary or desirable and not
inconsistent with the sale of the Collateral to the Purchasers and each Hedge Counterparty, in the
determination of the Servicer, to collect all amounts due under any and all Collateral, including,
without limitation, endorsing any of their names on checks and other instruments representing
Collections, executing and delivering any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments, with respect to the
Collateral and, after the delinquency of any Collateral and to the extent permitted under and in
compliance with Applicable Law, to commence proceedings with respect to enforcing payment thereof,
to the same extent as the Originator could have done if it had continued to own such Collateral.
The Originator, the Seller and the Administrative Agent on behalf of the Secured Parties and each
Hedge Counterparty shall furnish the Servicer (and any



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successors thereto) with any powers of attorney and other documents necessary or appropriate
to enable the Servicer to carry out its servicing and administrative duties hereunder, and shall
cooperate with the Servicer to the fullest extent in order to ensure the collectibility of the
Collateral. In no event shall the Servicer be entitled to make the Secured Parties, any Hedge
Counterparty, the Collateral Custodian, the Administrative Agent or the Purchaser Agents a party to
any litigation without such party’s express prior written consent, or to make the Seller a party to
any litigation (other than any routine foreclosure or similar collection procedure) without the
Administrative Agent’s and each Purchaser Agent’s consent.



     (b) After a Termination Event has occurred and is continuing, at the direction the
Administrative Agent, the Servicer shall take such action as the Administrative Agent may deem
necessary or advisable to enforce collection of the Collateral; provided that the Administrative
Agent may, at any time that a Termination Event or Unmatured Termination Event has occurred and is
continuing, notify any Obligor with respect to any Collateral of the assignment of such Collateral
to the Administrative Agent and direct that payments of all amounts due or to become due be made
directly to the Administrative Agent and each Purchaser Agent or any servicer, collection agent or
lock-box or other account designated by the Administrative Agent and each Purchaser Agent and, upon
such notification and at the expense of the Seller, the Administrative Agent may enforce collection
of any such Collateral, and (with the consent of the Majority Purchaser Agents) adjust, settle or
compromise the amount or payment thereof.



     Section 6.4 Collection of Payments.



     (a) Collection Efforts, Modification of Collateral. The Servicer will use its
reasonable best efforts to collect all payments called for under the terms and provisions of the
Assets included in the Collateral as and when the same become due in accordance with the Credit and
Collection Policy, and will follow those collection procedures that it follows with respect to all
comparable Collateral that it services for itself or others. The Servicer may not waive, modify or
otherwise vary any provision of an item of Collateral in a manner that, in its reasonable judgment,
would impair the collectibility of the Collateral or in any manner contrary to the Credit and
Collection Policy. The Servicer may otherwise amend or modify the underlying documents related to
any item of Collateral in compliance with the Credit and Collection Policy.



     (b) Prepaid Asset. Prior to a Termination Event, upon any Asset becoming a Prepaid
Asset, the Servicer shall either (x) provide a Substitute Asset in accordance with Section
2.18 or (y) deposit to the Collection Account (in addition to all amounts received from the
related Obligor upon the prepayment of such Asset) an amount equal to the excess, if any, of the
sum of (a) the Outstanding Asset Balance on the date of such payment, (b) any outstanding Servicer
Advances thereon, (c) any accrued and unpaid interest, and (d) all Hedge Breakage Costs owing to
the relevant Hedge Counterparty for any termination of one or more Hedge Transactions, in whole or
in part, as required by the terms of any Hedging Agreement as the result of any such Asset becoming
a Prepaid Asset, over the amount received from the related Obligor upon such prepayment
(such excess, the “Prepayment Amount”), in each case, only to the extent necessary to cause the
Availability as of such date (after giving effect to such substitution or deposit, as applicable)
to be greater than or equal to zero. After a Termination Event has occurred, upon any Asset
becoming a Prepaid Asset, the Servicer shall deposit to the Collection Account all



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amounts received from the related Obligor upon the prepayment of such Asset plus the
Prepayment Amount, if any.



     (c) Acceleration. If required by the Credit and Collection Policy, the Servicer shall
accelerate the maturity of all or any Scheduled Payments and other amounts due under any Asset in
which a default under the terms thereof has occurred and is continuing (after the lapse of any
applicable grace period) promptly after such Asset becomes a Charged-Off Asset.



     (d) Taxes and other Amounts. To the extent provided for in any Asset, the Servicer
will use its reasonable best efforts to collect all payments with respect to amounts due for taxes,
assessments and insurance premiums relating to such Asset and remit such amounts to the appropriate
Governmental Authority or insurer on or prior to the date such payments are due.



     (e) Payments to Lock-Box Account. Subject to Section 5.1(p), on or before the
applicable Cut-Off Date, the Servicer shall have instructed all Obligors to make all payments in
respect of the Collateral to the Lock-Box or directly to the Lock-Box Account.



     (f) Establishment of the Collection Account. The Servicer shall cause to be
established, on or before the Closing Date, with the Collateral Custodian, and maintained in the
name of the Administrative Agent as agent for the Secured Parties, with an office or branch of a
depository institution or trust company a segregated corporate trust account entitled Collection
Account for Citigroup Global Markets Realty Corp., as Administrative Agent for the Secured Parties
(the “Collection Account”), and the Servicer shall further maintain a subaccount within the
Collection Account for the purpose of segregating, within two Business Days of the receipt of any
Collections, Principal Collections (the “Principal Collections Account”), over which the Collateral
Custodian as agent for the Secured Parties shall have control and from which neither the
Originator, Servicer nor the Seller shall have any right of withdrawal except in accordance with
Section 2.9(b); provided that at all times such depository institution or trust company
shall be acceptable to the Administrative Agent and a depository institution organized under the
laws of the United States of America 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 of “A” or better by S&P and “A2” or better by Moody’s or (2) a short-term unsecured debt
rating or certificate of deposit rating of “A-1” or better by S&P or “P-1” or better by Moody’s,
(b) the parent corporation of which has either (1) a long-term unsecured debt rating of “A” or
better by S&P and “A2” or better by Moody’s or (2) a short-term unsecured debt rating or
certificate of deposit rating of “A-1” or better by S&P and “P-1” or better by Moody’s or (c) is
otherwise acceptable to the Administrative Agent and each Purchaser Agent and (ii) whose deposits
are insured by the Federal Deposit Insurance Corporation (any such depository institution or trust
company, a “Qualified Institution”).



     (g) Establishment of the Excess Spread Account. The Seller or the Servicer on its
behalf shall establish, on or before the Closing Date, with the Collateral Custodian, and cause to
be maintained in the name of the Seller and assigned to the Administrative Agent, with a Qualified
Institution an account into which all amounts paid by the Originator pursuant to Section
2.21 of this Agreement shall be deposited (the “Excess Spread Account”). Upon receipt of the
Required Equity Contribution Notice the Seller shall deposit within the timeframe set forth in
Section 2.21 an amount of cash into the Excess Spread Account equal to the Required Equity



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Shortfall. To the extent that, on any Payment Date during the Amortization Period, there are
funds on deposit in the Excess Spread Account, such funds shall be applied on such Payment Date in
accordance with Section 2.10.



     (h) Establishment of the Securities Account. The Seller or the Servicer on its behalf
shall establish, on or before the date any CMBS Security becomes a part of the Collateral, an
account with the Securities Intermediary to which financial assets may be credited (the “Securities
Account”) pursuant to Section 8.11. Upon receipt of any Collections to the Securities
Account the Servicer shall cause the transfer of such Collections to the Collection Account by the
close of business on the Business Day after such Collections are so received into the Securities
Account.



     (i) Adjustments. If (i) the Servicer makes a deposit into the Collection Account in
respect of a Collection of an item of Collateral 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 Collection Account to 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.



     Section 6.5 Servicer Advances.



     For each Collection Period, if the Servicer determines that any Scheduled Payment (or portion
thereof) that was due and payable pursuant to an Asset during such Collection Period was not
received prior to the last day of such Collection Period, the Servicer may (in its sole and
absolute discretion) make an advance in an amount up to the amount of such delinquent Scheduled
Payment. The Servicer will deposit any Servicer Advances into the Collection Account on or prior
to 9:00 a.m. (New York City, New York time) on the Business Day prior to the related Payment Date,
in immediately available funds. Notwithstanding anything to the contrary contained herein, no
Successor Servicer shall have any responsibility to make Servicer Advances.



     Section 6.6 Realization Upon Charged-Off Assets.



     The Servicer will use reasonable efforts to repossess or otherwise comparably convert the
ownership of any Related Property relating to a Charged-Off Asset and will act as sales and
processing agent for Related Property that it repossesses. The Servicer will follow such other
practices and procedures as it deems necessary or advisable and as are customary and usual in its
servicing of contracts and other actions by the Servicer in order to realize upon such Related
Property, which practices and procedures may include reasonable efforts to enforce all obligations
of Obligors and repossessing and selling such Related Property at public or private sale in
circumstances other than those described in the preceding sentence. Without limiting the
generality of the foregoing, unless the Administrative Agent has specifically given instruction to
the contrary, the Servicer may sell any such Related Property to the Servicer or its Affiliates for
a purchase price equal to the then fair market value thereof, any such sale to be evidenced by a
certificate of a Responsible Officer of the Servicer delivered to the Administrative Agent setting



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forth the Asset, the Related Property, the sale price of the Related Property and certifying
that such sale price is the fair market value of such Related Property. In any case in which any
such Related Property has suffered damage, the Servicer will not expend funds in connection with
any repair or toward the repossession of such Related Property unless it reasonably determines that
such repair and/or repossession will increase the Recoveries by an amount greater than the amount
of such expenses. The Servicer will remit to the Collection Account the Recoveries received in
connection with the sale or disposition of Related Property relating to a Charged-Off Asset.



     Section 6.7 Maintenance of Insurance Policies.



     The Servicer will use its reasonable best efforts to ensure that each Obligor maintains an
Insurance Policy with respect to any Related Property (other than accounts receivable) in an amount
at least equal to the Servicer’s good faith and commercially reasonable estimate of the value of
the real property, inventory, and/or equipment constituting such Related Property and shall ensure
that each such Insurance Policy names the Servicer as loss payee and as an insured thereunder and
all of the Seller’s right, title and interest therein is fully assigned to the Administrative
Agent, as agent for the Secured Parties. Additionally, the Servicer will require that each Obligor
maintain property damage liability insurance during the term of each Asset in amounts and against
risks customarily insured against by the Obligor on property owned by it. If an Obligor fails to
maintain property damage insurance, the Servicer may in its discretion purchase and maintain such
insurance on behalf of, and at the expense of, the Obligor. In connection with its activities as
Servicer, the Servicer agrees to present, on behalf of the Administrative Agent, 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 Asset. The Servicer’s
Insurance Policies with respect to the Related Property will insure against liability for physical
damage relating to such Related Property 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 Related Property, 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 Insurance Proceeds thereof that it is acting solely in the
capacity as agent for the Administrative Agent, as agent for the Secured Parties.



     Section 6.8 Servicing Compensation.



     As compensation for its servicing activities hereunder and reimbursement for its expenses, the
Servicer shall be entitled to receive the Servicing Fee to the extent of funds available therefor
pursuant to the provisions of Section 2.9(a)(3) or Section 2.10(a)(3), as
applicable.



     Section 6.9 Payment of Certain Expenses by Servicer.



     The Servicer will be required to pay all expenses incurred by it in connection with its
activities under this Agreement, including fees and disbursements of independent accountants,



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Taxes imposed on the Servicer, expenses incurred in connection with payments and reports
pursuant to this Agreement, and all other fees and expenses not expressly stated under this
Agreement for the account of the Seller, but excluding Liquidation Expenses incurred as a result of
activities contemplated by Section 6.6; provided that for avoidance of doubt, to the extent
Liquidation Expenses relate to a Loan and a Retained Interest such Liquidation Expenses shall be
allocated pro rata. The Servicer will be required to pay all reasonable fees and expenses owing to
any bank or trust company in connection with the maintenance of the Collection Account and the
Lock-Box Account. The Servicer shall be required to pay such expenses for its own account and
shall not be entitled to any payment therefor other than the Servicing Fee.



     Section 6.10 Reports.



     (a) Borrowing Notice. On each Funding Date, on each reduction of Advances Outstanding
pursuant to Section 2.4(b) and on each reinvestment of Principal Collections pursuant to
Section 2.9(b), the Seller (and the Servicer on its behalf) will provide a Borrowing
Notice, updated as of such date, to the Administrative Agent and each Purchaser Agent (with a copy
to the Collateral Custodian).



     (b) Monthly Report. On each Reporting Date, the Servicer will provide to the Seller,
the Administrative Agent, each Purchaser Agent, the Backup Servicer and any Liquidity Bank, a
monthly statement including a Borrowing Base calculated as of the most recent Determination Date,
with respect to the related Collection Period signed by a Responsible Officer of the Servicer and
the Seller and substantially in the form of Exhibit C (a “Monthly Report”).



     (c) Servicer’s Certificate. Together with each Monthly Report, the Servicer shall
submit to the Administrative Agent, each Purchaser Agent and any Liquidity Bank a certificate (a
“Servicer’s Certificate”), signed by a Responsible Officer of the Servicer and substantially in the
form of Exhibit J.



     (d) Financial Statements. The Servicer will submit to the Administrative Agent, each
Purchaser Agent, each Purchaser, the Backup Servicer and any Liquidity Bank, (i) within 45 days
after the end of each of its first three fiscal quarters, commencing with the fiscal quarter ending
June 30, 2006, a copy of the quarterly report on Form 10-Q of CapitalSource Inc. for the most
recent fiscal quarter and unaudited consolidating statements, and (ii) within 90 days after the end
of each fiscal year, commencing with the fiscal year ending December 31, 2006, a copy of the annual
report on Form 10-K of CapitalSource Inc., in each case in the form as filed with the Securities
and Exchange Commission and unaudited consolidating statements.



     (e) Tax Returns. Upon demand by the Administrative Agent, any Purchaser Agent and any
Liquidity Bank, copies of all federal, state and local Tax returns and reports filed by the Seller
and Servicer, or in which the Seller or Servicer was included on a consolidated or combined basis
(excluding sales, use and like taxes).



     (f) Financial Statements of Obligors. Upon demand by the Administrative Agent, any
Purchaser Agent and any Liquidity Bank, the Servicer will provide to such party the financial
statements of any Obligor.



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     (g) Other Reports. The Servicer will provide any other reports requested by the
Administrative Agent or any Purchaser Agent and reasonably acceptable to the Originator.



     Section 6.11 Annual Statement as to Compliance.



     The Servicer will provide to the Administrative Agent and each Purchaser Agent, within 90 days
following the end of each fiscal year of the Servicer, commencing with the fiscal year ending on
December 31, 2006, a fiscal report signed by a Responsible Officer of the Servicer certifying that
(a) a review of the activities of the Servicer, and the Servicer’s performance pursuant to this
Agreement, for the fiscal period ending on the last day of such fiscal year has been made under
such Person’s supervision and (b) the Servicer has performed or has caused to be performed in all
material respects all of its obligations under this Agreement throughout such year and no Servicer
Default has occurred and is continuing.



     Section 6.12 Annual Independent Public Accountant’s Servicing Reports.



     The Servicer will cause a firm of nationally recognized independent public accountants (who
may also render other services to the Servicer) to furnish to the Administrative Agent, each
Purchaser Agent, the Collateral Custodian and the Backup Servicer, within 90 days following the end
of each fiscal year of the Servicer, commencing with the fiscal year ending on December 31, 2006:
(i) a report relating to such fiscal year to the effect that (a) such firm has reviewed certain
documents and records relating to the servicing of the Collateral, and (b) based on such
examination, such firm is of the opinion that the Monthly Reports for such year were prepared in
compliance with this Agreement, except for such exceptions as it believes to be immaterial and such
other exceptions as will be set forth in such firm’s report and (ii) a report covering such fiscal
year to the effect that such accountants have applied certain agreed-upon procedures (which
procedures shall have been approved by the Administrative Agent and each Purchaser Agent) to
certain documents and records relating to the Collateral under any Transaction Document, compared
the information contained in the Monthly Reports and the Servicer’s Certificates delivered during
the period covered by such report with such documents and records and that no matters came to the
attention of such accountants that caused them to believe that such servicing was not conducted in
compliance with this Article VI, except for such exceptions as such accountants shall
believe to be immaterial and such other exception as shall be set forth in such statement.



     Section 6.13 Limitation on Liability of the Servicer and Others




     Except as provided herein, the Servicer shall not be under any liability to the Administrative
Agent, each Purchaser Agent, the Secured Parties or any other Person for any action taken or for
refraining from the taking of any action pursuant to this Agreement whether arising from express or
implied duties under this Agreement; provided that notwithstanding anything to the contrary
contained herein nothing shall protect the Servicer against any liability that would otherwise be
imposed by reason of its willful misfeasance, bad faith or negligence in the performance of duties
or by reason of its willful misconduct hereunder.



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     Section 6.14 The Servicer Not to Resign.



     The Servicer shall not resign from the obligations and duties hereby imposed on it except upon
the Servicer’s determination that (i) the performance of its duties hereunder is or becomes
impermissible under Applicable Law and (ii) there is no reasonable action that the Servicer could
take to make the performance of its duties hereunder permissible under Applicable Law. Any such
determination permitting the resignation of the Servicer shall be evidenced as to clause (i) above
by an Opinion of Counsel to such effect delivered to the Administrative Agent, each Purchaser Agent
and the Backup Servicer. No such resignation shall become effective until a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in accordance with
Section 6.2.



     Section 6.15 Servicer Defaults.



     If any one of the following events (a “Servicer Default”) shall occur and be continuing:



     (a) any failure by the Servicer to make any payment, transfer or deposit (including without
limitation with respect to Collections) as required by this Agreement which continues unremedied
for a period of one Business Day;



     (b) any failure by the Servicer to give instructions or notice to the Administrative Agent and
each Purchaser Agent as required by this Agreement, or to deliver any required Monthly Report or
other Required Reports hereunder on or before the date occurring two Business Days after the date
such instruction, notice or report is required to be made or given, as the case may be, under the
terms of this Agreement;



     (c) any failure on the part of the Servicer duly to observe or perform in any material respect
any other covenants or agreements of the Servicer set forth in this Agreement or the other
Transaction Documents to which the Servicer is a party and the same continues unremedied for a
period of 30 days after the earlier to occur of (i) the date on which written notice of such
failure requiring the same to be remedied shall have been given to the Servicer by the
Administrative Agent and each Purchaser Agent and (ii) the date on which the Servicer becomes aware
thereof;



     (d) any representation, warranty or certification made by the Servicer in any Transaction
Document or in any certificate delivered pursuant to any Transaction Document shall prove to have
been incorrect when made, which has a Material Adverse Effect on the Administrative Agent, any
Purchaser Agent or the Secured Parties and which continues to be unremedied for a period of 30 days
after the earlier to occur of (i) the date on which written notice of such incorrectness requiring
the same to be remedied shall have been given to the Servicer by the Administrative Agent or any
Purchaser Agent and (ii) the date on which the Servicer becomes aware thereof;



     (e) an Insolvency Event shall occur with respect to the Servicer;



     (f) any material delegation of the Servicer’s duties that is not permitted by Section
6.1;



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     (g) any financial or other information reasonably requested by the Administrative Agent, any
Purchaser Agent or any Purchaser is not provided as requested within a reasonable amount of time
following such request;



     (h) the rendering against the Servicer of one or more final judgments, decrees or orders for
the payment of money in excess of $10,000,000, individually or in the aggregate, and the
continuance of such judgment, decree or order unsatisfied and in effect for any period of more than
60 consecutive days without a stay of execution;



     (i) the failure of the Servicer to make any payment due with respect to any recourse debt or
other obligations, which debt or other obligations are in excess of $10,000,000, individually or in
the aggregate, or the occurrence of any event or condition that would permit acceleration of such
recourse debt or other obligations whether or not waived;



     (j) CapitalSource Inc.’s Consolidated Tangible Net Worth is less than (i) $1,015,000,000 plus
(ii) 70% of the cumulative Net Proceeds of Capital Stock/Conversion of Debt received at any time
after December 31, 2005;



     (k) [Reserved];



     (l) the Servicer fails in any material respect to comply with the Credit and Collection Policy
regarding the servicing of the Collateral; or



     (m) the Servicer consents or agrees to, or otherwise permits to occur, any amendment,
modification, change, supplement or rescission of or to the Credit and Collection Policy (after the
adoption of same) in whole or in part that could be reasonably expected to have a Material Adverse
Effect upon the Collateral, the Administrative Agent, any Purchaser Agent or the Secured Parties,
without the prior written consent of the Administrative Agent and each Purchaser Agent.



then notwithstanding anything herein to the contrary, so long as any such Servicer Default shall
not have been remedied within any applicable cure period prior to the date of the Servicer
Termination Notice (defined below), the Administrative Agent (acting at the direction of the
Majority Purchaser Agents), by written notice to the Servicer (with a copy to the Backup Servicer)
(a “Servicer Termination Notice”), may terminate all of the rights and obligations of the Servicer
as Servicer under this Agreement.



     Section 6.16 Appointment of Successor Servicer.



     (a) On and after the receipt by the Servicer of a Servicer Termination Notice pursuant to
Section 6.15, the Servicer shall continue to perform all servicing functions under this
Agreement until the date specified in the Servicer Termination Notice or otherwise specified by the
Administrative Agent in writing or, if no such date is specified in such Servicer Termination
Notice or otherwise specified by the Administrative Agent, until a date mutually agreed upon by the
Servicer and the Administrative Agent. The Administrative Agent (acting at the direction of the
Majority Purchaser Agents) may at the time described in the immediately preceding sentence, appoint
the Backup Servicer as the Servicer hereunder, and the Backup Servicer shall on such date assume
all obligations of the Servicer hereunder, and all authority and power of the Servicer



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under this Agreement shall pass to and be vested in the Backup Servicer. As compensation
therefor, the Backup Servicer shall be entitled to the Servicing Fee, together with other servicing
compensation in the form of assumption fees, late payment charges or otherwise as provided herein;
including, without limitation, Transition Expenses. In the event that the Administrative Agent
does not so appoint the Backup Servicer, there is no Backup Servicer or the Backup Servicer is
unable to assume such obligations on such date, the Administrative Agent (acting at the direction
of the Majority Purchaser Agents) shall as promptly as possible appoint a successor servicer (the
“Successor Servicer”), and such Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Administrative Agent and each Purchaser Agent. In the event
that a Successor Servicer has not accepted its appointment at the time when the Servicer ceases to
act as Servicer, the Administrative Agent shall petition a court of competent jurisdiction to
appoint any established financial institution, having a net worth of not less than $50,000,000 and
whose regular business includes the servicing of Collateral, as the Successor Servicer hereunder.



     (b) Upon its appointment, the Backup Servicer (subject to Section 6.16(a)) or the
Successor Servicer, as applicable, shall be the successor in all respects to the Servicer with
respect to servicing functions under this Agreement and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to
the Backup Servicer or the Successor Servicer, as applicable; provided that the Backup Servicer or
Successor Servicer, as applicable, shall have (i) no liability with respect to any action performed
by the terminated Servicer prior to the date that the Backup Servicer or Successor Servicer, as
applicable, becomes the successor to the Servicer or any claim of a third party based on any
alleged action or inaction of the terminated Servicer, (ii) no obligation to perform any advancing
obligations, if any, of the Servicer unless it elects to in its sole discretion, (iii) no
obligation to pay any taxes required to be paid by the Servicer (provided that the Backup Servicer
or Successor Servicer, as applicable, shall pay any income taxes for which it is liable), (iv) no
obligation to pay any of the fees and expenses of any other party to the transactions contemplated
hereby, and (v) no liability or obligation with respect to any Servicer indemnification obligations
of any prior Servicer, including the original Servicer. The indemnification obligations of the
Backup Servicer or the Successor Servicer, as applicable, upon becoming a Successor Servicer, are
expressly limited to those arising on account of its failure to act in good faith and with
reasonable care under the circumstances. In addition, the Backup Servicer or Successor Servicer,
as applicable, shall have no liability relating to the representations and warranties of the
Servicer contained in Article IV. Further, for so long as the Backup Servicer shall be the
Successor Servicer, the provisions of Section 2.15, Section 2.16(b) and Section
2.16(e) of this Agreement shall not apply to it in its capacity as Servicer.



     (c) All authority and power granted to the Servicer under this Agreement shall automatically
cease and terminate upon termination of this Agreement and shall pass to and be vested in the
Seller and, without limitation, the Seller is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or appropriate to effect
the purposes of such transfer of servicing rights. The Servicer agrees to cooperate with the
Seller in effecting the termination of the responsibilities and rights of the Servicer to conduct
servicing of the Collateral.



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     (d) Upon the Backup Servicer receiving notice that it is required to serve as the Servicer
hereunder pursuant to the foregoing provisions of this Section 6.16, the Backup Servicer
will promptly begin the transition to its role as Servicer. Notwithstanding the foregoing, the
Backup Servicer may, in its discretion, appoint, or petition a court of competent jurisdiction to
appoint, any established servicing institution as the successor to the Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities of the Servicer
hereunder. As compensation, any Successor Servicer (including, without limitation, the
Administrative Agent) 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, Transition Expenses.
In the event the Backup Servicer is required to solicit bids as provided herein, the Backup
Servicer shall solicit, by public announcement, bids from banks and mortgage servicing institutions
meeting the qualifications set forth in Section 6.16(a). 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 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 this Agreement, as shall
be necessary to effectuate any such succession. No appointment of a successor to the Servicer
hereunder shall be effective until written notice of such proposed appointment shall have been
provided by the Backup Servicer to the Administrative Agent and each Purchaser Agent 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. Notwithstanding anything to
the contrary contained herein, in no event shall Wells Fargo, in any capacity, 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 under this Agreement and the transactions set
forth or provided for by this Agreement.



ARTICLE VII




THE BACKUP SERVICER




     Section 7.1 Designation of the Backup Servicer.



     (a) Initial Backup Servicer. The backup servicing role with respect to the Collateral
shall be conducted by the Person designated as Backup Servicer hereunder from time to time in
accordance with this Section 7.1. Until the Administrative Agent shall give to Wells Fargo
a Backup Servicer Termination Notice, Wells Fargo is hereby designated as, and hereby agrees to
perform the duties and obligations of, a Backup Servicer pursuant to the terms hereof.



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     (b) Successor Backup Servicer. Upon the Backup Servicer’s receipt of Backup Servicer
Termination Notice from the Administrative Agent of the designation of a replacement Backup
Servicer pursuant to the provisions of Section 7.5, the Backup Servicer agrees that it will
terminate its activities as Backup Servicer hereunder.



     Section 7.2 Duties of the Backup Servicer.



     (a) Appointment. The Seller and the Administrative Agent, as agent for the Secured
Parties, each hereby appoints Wells Fargo to act as Backup Servicer, for the benefit of the
Administrative Agent, each Purchaser Agent and the Secured Parties, as from time to time designated
pursuant to Section 7.1. The Backup Servicer hereby accepts such appointment and agrees to
perform the duties and obligations with respect thereto set forth herein.



     (b) Duties. On or before the initial Funding Date, and until its removal pursuant to
Section 7.5, the Backup Servicer shall perform, on behalf of the Administrative Agent and
the Secured Parties, 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 (if any) in hard
copy and on computer tape; provided that the computer tape is in an MS DOS, PC readable
ASCII format or other format to be agreed upon by the Backup Servicer and the Servicer on or
prior to closing.




     (ii) Not later than 12:00 noon (New York City, New York time) on each Reporting Date,
the Servicer shall deliver to the Backup Servicer the asset tape, which shall include but
not be limited to the following information: (x) for each Asset, the name and number of the
related Obligor, the collection status, the loan status, the date of each Scheduled Payment
and the Outstanding Asset Balance, (y) the Borrowing Base and (z) the Aggregate Outstanding
Asset Balance (the “Tape”). The Backup Servicer shall accept delivery of the Tape.




     (iii) Prior to the related 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
Borrowing Base, (B) the Backup Servicing Fee, (C) the Assets that are current and not past
due, (D) the Assets that are 1 — 30 days past due, (E) the Assets that are 31 — 60 days past
due, (F) the Assets that are 61 — 90 days past due, (G) the Assets that are 90+ days past
due, (H) the Pool Charged-Off Ratio, and (I) the Aggregate Outstanding Asset Balance. The
Backup Servicer by a separate written report shall notify the Administrative Agent and the
Servicer of any disagreements with the Monthly Report based on such review not later than
the Business Day preceding such Payment Date to such Persons.




     (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



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discrepancy with the Servicer if possible, and notify the Administrative Agent 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 Administrative
Agent of the continued existence of such discrepancy. Following receipt of such notice by
the Administrative Agent, the Servicer shall deliver to the Administrative Agent, the
Secured Parties and the Backup Servicer 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.



     (c) Reliance on Tape. With respect to the duties described in Section 7.2(b),
the Backup Servicer, 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.



     Section 7.3 Merger or Consolidation.



     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 provided
such Person is organized under the laws of the United States of America 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 of “A” or better by S&P and “A2” or better by Moody’s
or (2) a short-term unsecured debt rating or certificate of deposit rating of “A-1” or better by
S&P or “P-1” or better by Moody’s, (b) the parent corporation which has either (1) a long-term
unsecured debt rating of “A” or better by S&P and “A2” or better by Moody’s or (2) a short-term
unsecured debt rating or certificate of deposit rating of “A-1” or better by S&P and “P-1” or
better by Moody’s or (c) is otherwise acceptable to the Administrative Agent and each Purchaser
Agent.



     Section 7.4 Backup Servicing Compensation.



     As compensation for its back-up servicing activities hereunder, the Backup Servicer shall be
entitled to receive the Backup Servicing Fee from the Servicer. To the extent that such Backup
Servicing Fee is not paid by the Servicer, the Backup Servicer shall be entitled to receive the
unpaid balance of its Backup Servicing Fee to the extent of funds available therefor pursuant to
Section 2.9(a)(4) and Section 2.10(a)(4), as applicable. The Backup Servicer’s
entitlement to receive the Backup Servicing Fee shall cease (excluding any unpaid outstanding
amounts as of that date) on the earliest to occur of: (i) it becoming the Successor Servicer, (ii)
its removal as Backup Servicer pursuant to Section 7.5, or (iii) the termination of this
Agreement. Upon becoming Successor Servicer pursuant to Section 6.16, the Backup Servicer
shall be entitled to the Servicing Fee.




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     Section 7.5 Backup Servicer Removal.



     The Backup Servicer may be removed, with or without cause, by the Administrative Agent with
the consent of the Majority Purchaser Agents by notice given in writing to the Backup Servicer (the
“Backup Servicer Termination Notice”). In the event of any such removal, a replacement Backup
Servicer may be appointed by the Administrative Agent with the consent of the Majority Purchaser
Agents.



     Section 7.6 Limitation on Liability.



     (a) 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, nominees, 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 on the routine and ordinary day-to-day operations 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 gross
negligence or willful misconduct of it or them or the failure to perform materially in accordance
with this Agreement.



     (b) 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 computer 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 Secured Parties, the
Administrative Agent and the Collateral Custodian 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 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, (ii) any
inaccuracy or omission in a notice or communication received by the Backup Servicer from any third
party, (iii) the invalidity or unenforceability of any Collateral under Applicable Law, (iv) the
breach or inaccuracy of any representation or warranty made with respect to any Collateral, or (v)
the acts or omissions of any successor Backup Servicer.



     Section 7.7 The Backup Servicer Not to Resign.



     The Backup Servicer shall not resign (except with prior consent of the Administrative Agent
with the consent of the Majority Purchaser Agents which consent shall not be unreasonably withheld)
from the obligations and duties hereby imposed on it except upon the



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Backup Servicer’s determination that (i) the performance of its duties hereunder is or becomes
impermissible under Applicable Law and (ii) there is no reasonable action that the Backup Servicer
could take to make the performance of its duties hereunder permissible under Applicable Law. Any
such determination permitting the resignation of the Backup Servicer shall be evidenced as to
clause (i) above by an Opinion of Counsel to such effect delivered to the Administrative Agent and
each Purchaser Agent. No such resignation shall become effective until a successor Backup Servicer
shall have assumed the responsibilities and obligations of the Backup Servicer hereunder.



ARTICLE VIII




THE COLLATERAL CUSTODIAN




     Section 8.1 Designation of Collateral Custodian.



     (a) Initial Collateral Custodian. The role of collateral custodian with respect to
the Required Asset Documents shall be conducted by the Person designated as Collateral Custodian
hereunder from time to time in accordance with this Section 8.1. Until the Administrative
Agent shall give to Wells Fargo a Collateral Custodian Termination Notice, Wells Fargo is hereby
designated as, and hereby agrees to perform the duties and obligations of, Collateral Custodian
pursuant to the terms hereof.



     (b) Successor Collateral Custodian. Upon the Collateral Custodian’s receipt of a
Collateral Custodian Termination Notice from the Administrative Agent of the designation of a
successor Collateral Custodian pursuant to the provisions of Section 8.5, the Collateral
Custodian agrees that it will terminate its activities as Collateral Custodian hereunder.



     Section 8.2 Duties of Collateral Custodian.



     (a) Appointment. The Seller and the Administrative Agent each hereby appoints Wells
Fargo to act as Collateral Custodian, for the benefit of the Administrative Agent, as agent for the
Secured Parties. The Collateral Custodian hereby accepts such appointment and agrees to perform
the duties and obligation with respect thereto set forth herein.



     (b) Duties. On or before the initial Funding Date, and until its removal pursuant to
Section 8.5, the Collateral Custodian shall perform on behalf of the Administrative Agent
and the Secured Parties, the following duties and obligations:




     (i) The Collateral Custodian shall take and retain custody of the Required Asset
Documents delivered by the Seller pursuant to Section 3.2 in accordance with the
terms and conditions of this Agreement, all for the benefit of the Secured Parties and
subject to the Lien thereon in favor of the Administrative Agent as agent for the Secured
Parties. Within five Business Days of its receipt of any Required Asset Documents, the
Collateral Custodian shall review the related Collateral and Required Asset Documents to
confirm that (A) such Collateral has been properly executed and has no missing or mutilated
pages, (B) any UCC and other filings (as set forth on the Asset Checklists) have been made,
(C) an Insurance Policy exists with respect to any real or personal property constituting
the Related Property, and (D) confirming the related Outstanding Asset



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Balance, Asset number and Obligor name with respect to such Asset is referenced on the
related Asset List and is not a duplicate Asset (collectively, the “Review Criteria”). In
order to facilitate the foregoing review by the Collateral Custodian, in connection with
each delivery of Required Asset Documents hereunder to the Collateral Custodian, the
Servicer shall provide to the Collateral Custodian an electronic file (in EXCEL or a
comparable format) that contains the related Asset List or that otherwise contains the Asset
identification number and the name of the Obligor with respect to each related Asset. If,
at the conclusion of such review, the Collateral Custodian shall determine that (i) the
Outstanding Asset Balances of the Collateral it has received Required Asset Documents with
respect to is less than as set forth on the electronic file, the Collateral Custodian shall
immediately notify the Administrative Agent of such discrepancy, and (ii) any Review
Criteria is not satisfied, the Collateral Custodian shall within one Business Day notify the
Servicer of such determination and provide the Servicer with a list of the non-complying
Assets and the applicable Review Criteria that they fail to satisfy. The Servicer shall
have five Business Days to correct any non-compliance with a Review Criteria. If after the
conclusion of such time period the Servicer has still not cured any non-compliance by an
Asset with a Review Criteria, the Collateral Custodian shall promptly notify the Seller and
the Administrative Agent of such determination by providing a written report to such persons
identifying, with particularity, each Asset and each of the applicable Review Criteria that
such Asset fails to satisfy. In addition, if requested in writing by the Servicer and
approved by the Administrative Agent within ten Business Days of the Collateral Custodian’s
delivery of such report, the Collateral Custodian shall return any Asset which fails to
satisfy a Review Criteria to the Seller. Other than the foregoing, the Collateral Custodian
shall not have any responsibility for reviewing any Required Asset Documents.




     (ii) In taking and retaining custody of the Required Asset Documents, the Collateral
Custodian shall be deemed to be acting as the agent of the Administrative Agent and the
Secured Parties; provided that the Collateral Custodian makes no representations as to the
existence, perfection or priority of any Lien on the Required Asset Documents or the
instruments therein; and provided further that, the Collateral Custodian’s duties as agent
shall be limited to those expressly contemplated herein.




     (iii) All Required Asset Document shall be kept in fire resistant vaults, rooms or
cabinets at the locations specified on Schedule III attached hereto, or at such
other office as shall be specified to the Administrative Agent by the Collateral Custodian
in a written notice delivered at least 45 days prior to such change. All Required Asset
Documents shall be placed together with an appropriate identifying label and maintained in
such a manner so as to permit retrieval and access. All Required Asset Documents shall be
clearly segregated from any other documents or instruments maintained by the Collateral
Custodian.




     (iv) The Collateral Custodian shall make payments pursuant to the terms of the Monthly
Report in accordance with Section 2.9 and Section 2.10 (the “Payment
Duties”).



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     (v) On each Reporting Date, the Collateral Custodian shall provide a written report to
the Administrative Agent and the Servicer (in a form acceptable to the Administrative Agent)
identifying each Asset for which it holds Required Asset Documents, the non-complying Assets
and the applicable Review Criteria that any non-complying Asset fails to satisfy.




     (vi) In performing its duties, the Collateral Custodian shall use the same degree of
care and attention as it employs with respect to similar Collateral that it holds as
Collateral Custodian.



     Section 8.3 Merger or Consolidation.



     Any Person (i) into which the Collateral Custodian may be merged or consolidated, (ii) that
may result from any merger or consolidation to which the Collateral Custodian shall be a party, or
(iii) that may succeed to the properties and assets of the Collateral Custodian substantially as a
whole, which Person in any of the foregoing cases executes an agreement of assumption to perform
every obligation of the Collateral Custodian hereunder, shall be the successor to the Collateral
Custodian under this Agreement without further act of any of the parties to this Agreement.



     Section 8.4 Collateral Custodian Compensation.



     As compensation for its collateral custodian activities hereunder, the Collateral Custodian
shall be entitled to a Collateral Custodian Fee (the “Collateral Custodian Fee”) from the Servicer.
To the extent that such Collateral Custodian Fee is not paid by the Servicer, the Collateral
Custodian shall be entitled to receive the unpaid balance of its Collateral Custodian Fee to the
extent of funds available therefor pursuant to the provision of Section 2.9(a)(4) or
Section 2.10(a)(4), as applicable. The Collateral Custodian’s entitlement to receive the
Collateral Custodian Fee shall cease on the earlier to occur of: (i) its removal as Collateral
Custodian pursuant to Section 8.5 or (ii) the termination of this Agreement.



     Section 8.5 Collateral Custodian Removal.



     The Collateral Custodian may be removed, with or without cause, by the Administrative Agent
with the consent of the Majority Purchaser Agents by notice given in writing to the Collateral
Custodian (the “Collateral Custodian Termination Notice”); provided that notwithstanding its
receipt of a Collateral Custodian Termination Notice, the Collateral Custodian shall continue to
act in such capacity until a successor Collateral Custodian has been appointed, has agreed to act
as Collateral Custodian hereunder, and has received all Required Asset Documents held by the
previous Collateral Custodian.



     Section 8.6 Limitation on Liability.




     (i) The Collateral Custodian may conclusively rely on and shall be fully protected in
acting upon any certificate, instrument, opinion, notice, letter, telegram or other document
delivered to it and that in good faith it reasonably believes to be genuine and that has
been signed by the proper party or parties. The Collateral Custodian may rely conclusively
on and shall be fully protected in acting upon (a) the written



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instructions of any designated officer of the Administrative Agent or (b) the verbal
instructions of the Administrative Agent.




     (ii) The Collateral Custodian may consult counsel satisfactory to it and the advice or
opinion of such counsel shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.




     (iii) The Collateral Custodian shall not be liable for any error of judgment, or for
any act done or step taken or omitted by it, in good faith, or for any mistakes of fact or
law, or for anything that it may do or refrain from doing in connection herewith except in
the case of its willful misconduct or grossly negligent performance or omission of its
duties and in the case of the negligent performance of its Payment Duties and in the case of
its negligent performance of its duties in taking and retaining custody of the Required
Asset Documents.




     (iv) The Collateral Custodian makes no warranty or representation and shall have no
responsibility (except as expressly set forth in this Agreement) as to the content,
enforceability, completeness, validity, sufficiency, value, genuineness, ownership or
transferability of the Collateral, and will not be required to and will not make any
representations as to the validity or value (except as expressly set forth in this
Agreement) of any of the Collateral. The Collateral Custodian shall not be obligated to
take any legal action hereunder that might in its judgment involve any expense or liability
unless it has been furnished with an indemnity reasonably satisfactory to it.




     (v) The Collateral Custodian shall have no duties or responsibilities except such
duties and responsibilities as are specifically set forth in this Agreement and no covenants
or obligations shall be implied in this Agreement against the Collateral Custodian.




     (vi) The Collateral Custodian shall not be required to expend or risk its own funds in
the performance of its duties hereunder.




     (vii) It is expressly agreed and acknowledged that the Collateral Custodian is not
guaranteeing performance of or assuming any liability for the obligations of the other
parties hereto or any parties to the Collateral.



     Section 8.7 The Collateral Custodian Not to Resign.



     The Collateral Custodian shall not resign from the obligations and duties hereby imposed on it
except upon the Collateral Custodian’s determination that (i) the performance of its duties
hereunder is or becomes impermissible under Applicable Law and (ii) there is no reasonable action
that the Collateral Custodian could take to make the performance of its duties hereunder
permissible under Applicable Law. Any such determination permitting the resignation of the
Collateral Custodian shall be evidenced as to clause (i) above by an Opinion of Counsel to
such effect delivered to the Administrative Agent and each Purchaser Agent. No such resignation
shall become effective until a successor Collateral Custodian shall have assumed the
responsibilities and obligations of the Collateral Custodian hereunder.



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     Section 8.8 Release of Documents.



     (a) Release for Servicing. From time to time and as appropriate for the enforcement
or servicing any of the Collateral, the Collateral Custodian is hereby authorized (unless and until
such authorization is revoked by the Administrative Agent), upon written receipt from the Servicer
of a request for release of documents and receipt in the form annexed hereto as Exhibit H
to release to the Servicer the related Required Asset Documents or the documents set forth in such
request and receipt to the Servicer. All documents so released to the Servicer shall be held by
the Servicer in trust for the benefit of the Administrative Agent in accordance with the terms of
this Agreement. The Servicer shall return to the Collateral Custodian the Required Asset Documents
or other such documents (i) immediately upon the request of the Administrative Agent, or (ii) when
the Servicer’s need therefor in connection with such foreclosure or servicing no longer exists,
unless the Asset shall be liquidated, in which case, upon receipt of an additional request for
release of documents and receipt certifying such liquidation from the Servicer to the Collateral
Custodian in the form annexed hereto as Exhibit H, the Servicer’s request and receipt
submitted pursuant to the first sentence of this subsection shall be released by the Collateral
Custodian to the Servicer.



     (b) Limitation on Release. The foregoing provision respecting release to the Servicer
of the Required Asset Documents and documents by the Collateral Custodian upon request by the
Servicer shall be operative only to the extent that at any time the Collateral Custodian shall not
have released to the Servicer active Required Asset Documents (including those requested)
pertaining to more than 15 Assets at the time being serviced by the Servicer under this Agreement.
Any additional Required Asset Documents or documents requested to be released by the Servicer may
be released only upon written authorization of the Administrative Agent. The limitations of this
paragraph shall not apply to the release of Required Asset Documents to the Servicer pursuant to
the immediately succeeding subsection.



     (c) Release for Payment. Upon receipt by the Collateral Custodian of the Servicer’s
request for release of documents and receipt in the form annexed hereto as Exhibit H(which
certification shall include a statement to the effect that all amounts received in connection with
such payment or repurchase have been credited to the Collection Account as provided in this
Agreement), the Collateral Custodian shall promptly release the related Required Asset Documents to
the Servicer.



     Section 8.9 Return of Required Asset Documents.



     The Seller may, with the prior written consent of the Administrative Agent (such consent not
to be unreasonably withheld), require that the Collateral Custodian return each Required Asset
Document (a) delivered to the Collateral Custodian in error, (b) for which a Substitute Asset has
been substituted in accordance with Section 2.18, (c) as to which the lien on the Related
Property has been so released pursuant to Section 9.2, (d) that has been repaid by the
Seller pursuant to Section 4.6 or (e) that is required to be redelivered to the Seller in
connection with the termination of this Agreement, in each case by submitting to the Collateral
Custodian and the Administrative Agent a written request in the form of Exhibit H hereto
(signed by both the Seller and the Administrative Agent) specifying the Collateral to be so
returned and reciting that the conditions to such release have been met (and specifying the Section
or Sections of this



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Agreement being relied upon for such release). The Collateral Custodian shall upon its
receipt of each such request for return executed by the Seller and the Administrative Agent
promptly, but in any event within five Business Days, return the Required Asset Documents so
requested to the Seller.



     Section 8.10 Access to Certain Documentation and Information Regarding the Collateral;
Audits.



     The Collateral Custodian shall provide to the Administrative Agent and each Purchaser Agent
access to the Required Asset Documents and all other documentation regarding the Collateral
including in such cases where the Administrative Agent and each Purchaser Agent is required in
connection with the enforcement of the rights or interests of the Secured Parties, or by applicable
statutes or regulations, to review such documentation, such access being afforded without charge
but only (i) upon two Business Days prior written request, (ii) during normal business hours and
(iii) subject to the Servicer’s and Collateral Custodian’s normal security and confidentiality
procedures. Prior to the Closing Date and periodically thereafter at the discretion of the
Administrative Agent and each Purchaser Agent, the Administrative Agent and each Purchaser Agent
may review the Servicer’s collection and administration of the Collateral in order to assess
compliance by the Servicer with the Credit and Collection Policy, as well as with this Agreement
and may conduct an audit of the Collateral, Required Asset Documents in conjunction with such a
review. Such review shall be reasonable in scope and shall be completed in a reasonable period of
time. Without limiting the foregoing provisions of this Section 8.10, from time to time on
request of the Administrative Agent, the Collateral Custodian shall permit certified public
accountants or other auditors acceptable to the Administrative Agent to conduct, at the Servicer’s
expense, a review of the Required Asset Documents and all other documentation regarding the
Collateral.



     Section 8.11 Securities Intermediary



     (a) There shall at all times be one or more “securities intermediaries” (as defined in the
UCC) appointed by the Collateral Custodian for purposes of this Agreement (the “Securities
Intermediary”). The Collateral Custodian hereby appoints Wells Fargo Bank, National Association at
its Corporate Trust Office as the initial Securities Intermediary hereunder and Wells Fargo Bank,
National Association hereby accepts such appointment.



     (b) The Securities Intermediary shall be, and the initial Securities Intermediary hereunder
hereby represents and warrants that it is as of the date hereof and shall be for so long as it is
the Securities Intermediary hereunder, a corporation or national bank that in the ordinary course
of its business maintains securities accounts for others and is acting in that capacity hereunder.
The Securities Intermediary shall, and the initial Securities Intermediary does, agree with the
parties hereto that the Securities Account shall be an account to which financial assets may be
credited and undertake to treat the Collateral Custodian as entitled to exercise the rights that
comprise such financial assets. The Securities Intermediary shall, and the initial Securities
Intermediary does, agree with the parties hereto that each item of property credited to the
Securities Account shall be treated as a “financial asset” as defined in the UCC. The Securities
Intermediary shall, and the initial Securities Intermediary does, agree and acknowledge that the
“securities intermediary’s jurisdiction” for purpose of the UCC of the



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Securities Intermediary with respect to the Collateral shall be the State of New York. The
Securities Intermediary shall, and the initial Securities Intermediary does, represent and covenant
that it is not and will not be (as long as it is the Securities Intermediary hereunder) a party to
any agreement that is inconsistent with the provisions of this Agreement. The Securities
Intermediary shall, and the initial Securities Intermediary does, covenant that it will not take
any action inconsistent with the provisions of this Agreement applicable to it. The Securities
Intermediary shall, and the initial Securities Intermediary does, agree that any item of property
credited to the Securities Account shall not be subject to any security interest, lien,
encumbrance, or right of setoff in favor of the Securities Intermediary or anyone claiming through
the Securities Intermediary (other than the Collateral Custodian).



     (c) It is the intent of the Collateral Custodian and the Seller that the Securities Account
shall be a securities account of the Collateral Custodian and not an account of the Seller.
Nonetheless, (i) the Securities Intermediary shall agree to comply with entitlement orders
originated by the Collateral Custodian without further consent by the Seller or any other person or
entity, and (ii) the initial Securities Intermediary agrees that for so long as it is the
Securities Intermediary hereunder, it will comply with entitlement orders originated by the
Collateral Custodian without further consent by the Seller or any other person or entity. The
Securities Intermediary shall covenant that it will not agree with any person or entity other than
the Collateral Custodian that it will comply with entitlement orders originated by any person or
entity other than the Collateral Custodian, and the initial Securities Intermediary hereby
covenants that, for so long as it is the Securities Intermediary hereunder, it will not agree with
any person or entity other than the Collateral Custodian that it will comply with entitlement
orders originated by any person or entity other than the Collateral Custodian.



     (d) Nothing herein shall imply or impose upon the Securities Intermediary any duties or
obligations other than those expressly set forth herein and those applicable to a securities
intermediary under the UCC (and the Securities Intermediary shall be entitled to all of the
protections available to a securities intermediary under the UCC). Without limiting the foregoing,
nothing herein shall imply or impose upon the Securities Intermediary any duties of a fiduciary
nature (such as, without limitation, the fiduciary duties of the Collateral Custodian hereunder).



     (e) The Securities Intermediary may at any time resign by notice to the Collateral Custodian
and may at any time be removed by notice from the Collateral Custodian; provided however that it
shall be the responsibility of the Collateral Custodian to appoint a successor Securities
Intermediary and to cause the Securities Account to be established and maintained with such
successor Securities Intermediary in accordance with the terms hereof; and the responsibilities and
duties of the retiring Securities Intermediary hereunder shall remain in effect until all of the
Collateral credited to the Securities Account held by such retiring Securities Intermediary have
been transferred to such successor. Any corporation into which the Securities Intermediary may be
merged or converted or with which it may be consolidated, or any corporation resulting from any
merger, consolidation or conversion to which the Securities Intermediary shall be a party, shall be
the successor of the Securities Intermediary hereunder, without the execution or filing of any
further act on the part of the parties hereto or such Securities Intermediary or such successor
corporation.



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ARTICLE IX




SECURITY INTEREST




     Section 9.1 Grant of Security Interest.



     The parties to this Agreement intend that the conveyance of the Collateral by the Seller to
the applicable Purchasers be treated as sales for all purposes (other than for the purposes
described in Section 13.19). If, despite such intention, a determination is made that such
transactions not be treated as sales, then the parties hereto intend that this Agreement constitute
a security agreement and the transactions effected hereby constitute secured loans by the
applicable Purchasers to the Seller under Applicable Law. For such purpose, the Seller hereby
transfers, conveys, assigns and grants as of the Closing Date to the Administrative Agent, as agent
for the Secured Parties, a lien and continuing security interest in all of the Seller’s right,
title and interest in, to and under (but none of the obligations under) all Collateral (including
any Hedging Agreements), whether now existing or hereafter arising or acquired by the Seller, and
wherever the same may be located, to secure the prompt, complete and indefeasible payment and
performance in full when due, whether by lapse of time, acceleration or otherwise, of the Aggregate
Unpaids of the Seller arising in connection with this Agreement and each other Transaction
Document, whether now or hereafter existing, due or to become due, direct or indirect, or absolute
or contingent, including, without limitation, all Aggregate Unpaids. The assignment under this
Section 9.1 does not constitute and is not intended to result in a creation or an
assumption by the Administrative Agent, the Purchaser Agents, any Hedge Counterparty, the Liquidity
Banks or any of the Secured Parties of any obligation of the Seller or any other Person in
connection with any or all of the Collateral or under any agreement or instrument relating thereto.
Anything herein to the contrary notwithstanding, (a) the Seller shall remain liable under the
Collateral to the extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed, (b) the exercise by the
Administrative Agent, as agent for the Secured Parties, of any of its rights in the Collateral
shall not release the Seller from any of its duties or obligations under the Collateral, and (c)
none of the Administrative Agent, the Purchaser Agents, any Hedge Counterparty, the Liquidity Banks
or any Secured Party shall have any obligations or liability under the Collateral by reason of this
Agreement, nor shall the Administrative Agent, the Purchaser Agents, any Hedge Counterparty, the
Liquidity Banks or any Secured Party be obligated to perform any of the obligations or duties of
the Seller thereunder or to take any action to collect or enforce any claim for payment assigned
hereunder.



     Section 9.2 Release of Lien on Collateral.



     At the same time as (i) any Collateral expires by its terms and all amounts in respect thereof
have been paid in full by the related Obligor and deposited in the Collection Account, (ii) any
Asset becomes a Prepaid Asset and all amounts in respect thereof have been paid in full by the
related Obligor and deposited in the Collection Account, (iii) such Asset is replaced in accordance
with Section 2.18, or (iv) this agreement terminates in accordance with Section
13.6, the Administrative Agent as agent for the Secured Parties will, to the extent requested
by the Servicer, release its interest in such Collateral. In connection with any sale of such
Related Property, the Administrative Agent as agent for the Secured Parties will after the deposit
by the



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Servicer of the Proceeds of such sale into the Collection Account, at the sole expense of the
Servicer, execute and deliver to the Servicer any assignments, bills of sale, termination
statements and any other releases and instruments as the Servicer may reasonably request in order
to effect the release and transfer of such Related Property; provided that the Administrative Agent
as agent for the Secured Parties will make no representation or warranty, express or implied, with
respect to any such Related Property in connection with such sale or transfer and assignment.
Nothing in this section shall diminish the Servicer’s obligations pursuant to Section 6.6
with respect to the Proceeds of any such sale.



     Section 9.3 Further Assurances.



     The provisions of Section 13.12 shall apply to the security interest granted under
Section 9.1 as well as to the Advances hereunder.



     Section 9.4 Remedies.



     Upon the occurrence of a Termination Event, the Administrative Agent and Secured Parties shall
have, with respect to the Collateral granted pursuant to Section 9.1, and in addition to
all other rights and remedies available to the Administrative Agent and Secured Parties under this
Agreement or other Applicable Law, all rights and remedies of a secured party upon default under
the UCC.



     Section 9.5 Waiver of Certain Laws.



     Each of the Seller and the Servicer agrees, to the full extent that it may lawfully so agree,
that neither it nor anyone claiming through or under it will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in
force in any locality where any Collateral may be situated in order to prevent, hinder or delay the
enforcement or foreclosure of this Agreement, or the absolute sale of any of the Collateral or any
part thereof, or the final and absolute putting into possession thereof, immediately after such
sale, of the purchasers thereof, and each of the Seller and the Servicer, for itself and all who
may at any time claim through or under it, hereby waives, to the full extent that it may be lawful
so to do, the benefit of all such laws, and any and all right to have any of the properties or
assets constituting the Collateral marshaled upon any such sale, and agrees that the Administrative
Agent or any court having jurisdiction to foreclose the security interests granted in this
Agreement may sell the Collateral as an entirety or in such parcels as the Administrative Agent or
such court may determine.



     Section 9.6 Power of Attorney.



     Each of the Seller and the Servicer hereby irrevocably appoints the Administrative Agent its
true and lawful attorney (with full power of substitution) in its name, place and stead and at is
expense, in connection with the enforcement of the rights and remedies provided for in this
Agreement, including without limitation the following powers: (a) to give any necessary receipts
or acquittance for amounts collected or received hereunder, (b) to make all necessary transfers of
the Collateral in connection with any such sale or other disposition made pursuant hereto, (c) to
execute and deliver for value all necessary or appropriate bills of sale, assignments and other
instruments in connection with any such sale or other disposition, the Seller and the Servicer



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hereby ratifying and confirming all that such attorney (or any substitute) shall lawfully do
hereunder and pursuant hereto, and (d) to sign any agreements, orders or other documents in
connection with or pursuant to any Transaction Document or Hedging Agreement. Nevertheless, if so
requested by the Administrative Agent or a Purchaser Agent, the Seller shall ratify and confirm any
such sale or other disposition by executing and delivering to the Administrative Agent or such
purchaser all proper bills of sale, assignments, releases and other instruments as may be
designated in any such request.



ARTICLE X




TERMINATION EVENTS




     Section 10.1 Termination Events.



     The following events shall be Termination Events (“Termination Events”) hereunder:



     (a) as of any Determination Date, the Average Portfolio Delinquency Ratio exceeds 6.5%; or



     (b) as of any Determination Date, the Adjusted Average Pool Charged-Off Ratio exceeds 3.0%; or



     (c) as of any Determination Date, the Average Portfolio Charged-Off Ratio exceeds 4.0%; or



     (d) (i) the Advances Outstanding on any day exceeds the lesser of the Facility Amount and
Maximum Availability, and the same continues unremedied for two Business Days or (ii) the Adjusted
Advances Outstanding on any day exceeds the lesser of the Adjusted Facility Amount and Adjusted
Maximum Availability, and the same continues unremedied for two Business Days; provided that during
the period of time that either such event remains unremedied, no additional Advances will be made
under this Agreement and any payments required to be made by the Servicer on a Payment Date shall
be made under Section 2.10; or



     (e) a Servicer Default occurs and is continuing; or



     (f) the Facility Termination Date shall have occurred; or



     (g) failure on the part of the Seller or Originator to make any payment or deposit (including
without limitation with respect to Collections) required by the terms of any Transaction Document
on the day such payment or deposit is required to be made and the same continues unremedied for two
Business Days; or



     (h) the occurrence of an Insolvency Event relating to the Seller or the Servicer which is a
party to a Permitted Securitization Transaction; or



     (i) the Seller shall become required to register as an “investment company” within the meaning
of the Investment Company Act of 1940, as amended or the arrangements



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contemplated by the Transaction Documents shall require registration as an “investment
company” within the meaning of the 1940 Act; or



     (j) a regulatory, tax or accounting body has ordered that the activities of the Seller or any
other Subsidiary of CapitalSource Inc. contemplated hereby be terminated or, as a result of any
other event or circumstance, the activities of the Seller contemplated hereby may reasonably be
expected to cause the Seller or any other Subsidiary of CapitalSource Inc. to suffer materially
adverse regulatory, accounting or tax consequences; or



     (k) there shall exist any Material Adverse Effect; or



     (l) the Internal Revenue Service shall file notice of a lien pursuant to Section 6323
of the Code with regard to any assets of the Seller or the Originator and such lien shall not have
been released within five Business Days, or the Pension Benefit Guaranty Corporation shall file
notice of a lien pursuant to Section 4068 of ERISA with regard to any of the assets of the Seller
or the Originator and such lien shall not have been released within five Business Days; or



     (m) any Change-in-Control shall occur; or



     (n) (i) any Transaction Document, or any lien or security interest granted thereunder, shall
(except in accordance with its terms), in whole or in part, terminate, cease to be effective or
cease to be the legally valid, binding and enforceable obligation of the Seller, the Originator, or
the Servicer,



      (ii) the Seller, the Originator, the Servicer or any other party shall, directly or
indirectly, contest in any manner the effectiveness, validity, binding nature or
enforceability of any Transaction Document or any lien or security interest thereunder, or




      (iii) any security interest securing any obligation under any Transaction Document
shall, in whole or in part, cease to be a perfected first priority security interest; or




     (o) on any date of determination, the aggregate Hedge Notional Amount in effect for that day
under all Hedge Transactions is less than the product of the Hedge Percentage on such day and the
Hedge Amount on that day, and the same continues unremedied for a period of two Business Days; or



     (p) any failure on the part of the Seller or the Originator duly to observe or perform in any
material respect any other covenants or agreements of the Seller or the Originator set forth in
this Agreement or the other Transaction Documents to which the Seller or the Originator is a party
and the same continues unremedied for a period of 30 days after the earlier to occur of (i) the
date on which written notice of such failure requiring the same to be remedied shall have been
given to the Seller or the Originator by the Administrative Agent or any Purchaser Agent and (ii)
the date on which the Seller or the Originator becomes aware thereof; or



     (q) any representation, warranty or certification made by the Seller or the Originator in any
Transaction Document or in any certificate delivered pursuant to any Transaction Document shall
prove to have been incorrect when made, which has a Material Adverse Effect



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on the Secured Parties and which continues to be unremedied for a period of 30 days after the
earlier to occur of (i) the date on which written notice of such incorrectness requiring the same
to be remedied shall have been given to the Seller or the Originator by the Administrative Agent or
any Purchaser Agent and (ii) the date on which the Seller or the Originator becomes aware thereof;
or



     (r) any failure by the Seller to give instructions or notice to the Administrative Agent as
required by this Agreement, or to deliver any required Monthly Report or other Required Reports
hereunder on or before the date occurring two Business Days after the date such instruction, notice
or report is required to be made or given, as the case may be, under the terms of this Agreement;
or



     (s) the failure of the Seller, the Servicer or the Originator to make any payment due with
respect to recourse debt or other obligations, in the case of the Servicer or the Originator, in
excess of $10,000,000, or the occurrence of any event or condition that would permit acceleration
of such recourse debt or other obligations whether or not such event or condition has been waived;
or



     (t) (1) the rendering of one or more final judgments, decrees or orders by a court or
arbitrator of competent jurisdiction for the payment of money in excess of $10,000,000,
individually or in the aggregate, against the Originator, or $2,000,000 against the Seller,
individually or in the aggregate, and the Originator shall not have either (i) discharged or
provided for the discharge of any such judgment, decree or order in accordance with its terms or
(ii) perfected a timely appeal of such judgment, decree or order and caused the execution of same
to be stayed during the pendency of the appeal or (2) the failure of the Originator or the Seller
to make any payments due of amounts in excess of $7,500,000 by the Originator, or $2,000,000 by the
Seller, in the settlement of any litigation, claim or dispute (excluding payments made from
insurance proceeds); or



     (u) as of any Determination Date, (i) the Adjusted Pool Yield does not equal or exceed the
Adjusted Minimum Pool Yield or (ii) the Pool Yield does not equal or exceed the Minimum Pool Yield
and the same continues unremedied by the following Determination Date; or



     (v) on any day an (i) Overcollateralization Shortfall or (ii) Adjusted Overcollateralization
Shortfall exists and continues unremedied for two Business Days; or



     (w) as of any Quarterly Determination Date, the Originator’s ratio of Consolidated Funded
Indebtedness to Consolidated Tangible Net Worth is more than 6 to 1; provided that such calculation
shall exclude the effects of any Liquid Real Estate Assets that are acquired and levered by the
Originator solely to satisfy REIT asset and income tests.



     Section 10.2 Remedies.



     (a) Upon the occurrence of a Termination Event (other than a Termination Event described in
Section 10.1(h)), the Administrative Agent will, by notice to the Seller, declare the
Termination Date to have occurred and the Amortization Period to have commenced; provided



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that such Termination Event has not been waived by Purchasers holding 66 2/3% of the
Commitments then in effect in accordance with Section 13.1.



     (b) Upon the occurrence of a Termination Event described in Section 10.1(h), the
Termination Date shall occur immediately and the Amortization Period shall commence automatically.



     (c) Upon the occurrence of any Termination Event described in Section 10.1, no
Advances will thereafter be made, and the Administrative Agent and the Secured Parties shall have,
in addition to all other rights and remedies under this Agreement or otherwise, all other rights
and remedies provided under the UCC of each applicable jurisdiction and other Applicable Laws,
which rights shall be cumulative, and also may require the Seller and Servicer to, and the Seller
and Servicer hereby agree that they will at the Servicer’s expense and upon request of the
Administrative Agent forthwith, (i) assemble all or any part of the Collateral as directed by the
Administrative Agent and make the same available to the Administrative Agent at a place to be
designated by the Administrative Agent and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at a public or private sale, at any of the
Administrative Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon
such other terms as the Administrative Agent may deem commercially reasonable. The Seller agrees
that, to the extent notice of sale shall be required by law, at least ten days’ notice to the
Seller of the time and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Administrative Agent shall not be obligated to
make any sale of Collateral regardless of notice of sale having been given. The Administrative
Agent may adjourn any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the time and place to
which it was so adjourned. All cash Proceeds received by the Administrative Agent in respect of
any sale of, collection from, or other realization upon, all or any part of the Collateral (after
payment of any amounts incurred in connection with such sale) shall be deposited into the
Collection Account and to be applied against all or any part of the Aggregate Unpaids pursuant to
Section 2.10 or otherwise in such order as the Administrative Agent shall elect in its
discretion.



ARTICLE XI




INDEMNIFICATION




     Section 11.1 Indemnities by the Seller.



     (a) Without limiting any other rights that any such Person may have hereunder or under
Applicable Law, the Seller hereby agrees to indemnify the Administrative Agent, the Purchaser
Agents, the Backup Servicer, the Collateral Custodian, the Secured Parties, the Affected Parties
and each of their respective assigns and officers, directors, employees and agents thereof
(collectively, the “Indemnified Parties”), forthwith on demand, from and against any and all
damages, losses, claims, liabilities and related reasonable out of pocket costs and expenses,
including reasonable attorneys’ fees and disbursements (all of the foregoing being collectively
referred to as the “Indemnified Amounts”) awarded against or incurred by such Indemnified Party and
other non-monetary damages of any such Indemnified Party or any of



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them arising out of or as a result of this Agreement or the ownership of an interest in the
Collateral or in respect of any Asset included in the Collateral, excluding, however, (a)
Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part
of such Indemnified Party or (b) Indemnified Amounts that have the effect of recourse for
non-payment of the Assets included in the Collateral due to credit problems of the Obligors (except
as otherwise specifically provided in this Agreement). If the Seller has made any indemnity
payment pursuant to this Section 11.1 and such payment fully indemnified the recipient
thereof and the recipient thereafter collects any payments from others in respect of such
Indemnified Amounts then, the recipient shall repay to the Seller an amount equal to the amount it
has collected from others in respect of such indemnified amounts. Without limiting the foregoing,
the Seller shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting
from:




     (i) any representation or warranty made or deemed made by the Seller, the Servicer (if
the Originator or one of its Affiliates is the Servicer) or any of their respective officers
under or in connection with this Agreement or any other Transaction Document, which shall
have been false or incorrect in any material respect when made or deemed made or delivered;




     (ii) the failure by the Seller or the Servicer (if the Originator or one of its
Affiliates is the Servicer) to comply with any term, provision or covenant contained in this
Agreement or any agreement executed in connection with this Agreement, or with any
Applicable Law, with respect to any Collateral or the nonconformity of any Collateral with
any such Applicable Law;




     (iii) the failure to vest and maintain vested in the Administrative Agent, as agent for
the Secured Parties, an undivided ownership interest in the Collateral, together with all
Collections, free and clear of any Lien (other than Permitted Liens) whether existing at the
time of any Advance or at any time thereafter;




     (iv) the failure to maintain, as of the close of business on each Business Day prior to
the Termination Date, (x) an amount of Advances Outstanding that is less than or equal to
the lesser of (I) the Facility Amount and (II) the Maximum Availability on such Business Day
and (y) an amount of Adjusted Advances Outstanding that is less than or equal to the lesser
of (I) the Adjusted Facility Amount and (II) the Adjusted Maximum Availability on such
Business Day;




     (v) the failure to file, or any delay in filing, financing statements, continuation
statements or other similar instruments or documents under the UCC of any applicable
jurisdiction or other Applicable Laws with respect to any Collateral, whether at the time of
any Advance or at any subsequent time;




     (vi) any dispute, claim, offset or defense (other than the discharge in bankruptcy of
the Obligor) of the Obligor to the payment with respect to any Collateral (including,
without limitation, a defense based on the Collateral not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its



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terms), or any other claim resulting from the sale of the merchandise or services
related to such Collateral or the furnishing or failure to furnish such merchandise or
services;




     (vii) any failure of the Seller or the Servicer (if the Originator or one of its
Affiliates is the Servicer) to perform its duties or obligations in accordance with the
provisions of this Agreement or any of the other Transaction Documents to which it is a
party or any failure by the Originator, the Seller or any Affiliate thereof to perform its
respective duties under any Collateral;




     (viii) the failure of any Lock-Box Bank to remit any amounts held in a Lock-Box Account
pursuant to the instructions of the Servicer or the Administrative Agent (to the extent such
Person is entitled to give such instructions in accordance with the terms hereof and of any
applicable Lock-Box Agreement) whether by reason of the exercise of set-off rights or
otherwise;




     (ix) any inability to obtain any judgment in, or utilize the court or other
adjudication system of, any state in which an Obligor may be located as a result of the
failure of the Seller or the Originator to qualify to do business or file any notice or
business activity report or any similar report;




     (x) any action taken by the Seller or the Servicer in the enforcement or collection of
any Collateral;




     (xi) any products liability claim or personal injury or property damage suit or other
similar or related claim or action of whatever sort arising out of or in connection with the
Related Property or services that are the subject of any Collateral;




     (xii) any claim, suit or action of any kind arising out of or in connection with
Environmental Laws including any vicarious liability;




     (xiii) the failure by Seller to pay when due any Taxes for which the Seller is liable,
including without limitation, sales, excise or personal property taxes payable in connection
with the Collateral;




     (xiv) any repayment by the Administrative Agent, the Purchaser Agents or a Secured
Party of any amount previously distributed in reduction of Advances Outstanding, or payment
of Interest or any other amount due hereunder or under any Hedging Agreement, in each case
which amount the Administrative Agent, the Purchaser Agents or a Secured Party believes in
good faith is required to be repaid;




     (xv) the commingling of Collections on the Collateral at any time with other funds,
unless permitted hereunder;




     (xvi) any investigation, litigation or proceeding related to this Agreement or the use
of proceeds of Advances or the security interest in the Collateral;




     (xvii) any failure by the Seller to give reasonably equivalent value to the Originator
in consideration for the transfer by the Originator to the Seller of any item of



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Collateral or any attempt by any Person to void or otherwise avoid any such transfer
under any statutory provision or common law or equitable action, including, without
limitation, any provision of the Bankruptcy Code;




     (xviii) the use of the proceeds of any Advance in a manner other than as provided in
this Agreement and the Sale Agreement;




     (xix) the failure of the Seller, the Originator or any of their respective agents or
representatives to remit to the Servicer or the Administrative Agent or the Purchaser
Agents, Collections on the Collateral remitted to the Seller, the Originator, the Servicer
or any such agent or representative;




     (xx) the failure by the Seller to comply with any of the covenants relating to any
Hedging Agreement in accordance with the Transaction Documents; or




     (xxi) the failure of the Seller to comply with any of the covenants relating to the
Required Equity Contribution in accordance with the Transaction Documents.



     (b) Any amounts subject to the indemnification provisions of this Section 11.1 shall
be paid by the Seller to the Indemnified Party within five Business Days following such Person’s
demand therefor.



     (c) If for any reason the indemnification provided above in this Section 11.1 is
unavailable to the Indemnified Party or is insufficient to hold an Indemnified Party harmless, then
the Seller or the Servicer, as the case may be, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect not only the relative benefits received by such Indemnified Party on the
one hand and the Seller or the Servicer, as the case may be, on the other hand but also the
relative fault of such Indemnified Party as well as any other relevant equitable considerations.



     (d) The obligations of the Seller under this Section 11.1 shall survive the
resignation or removal of the Administrative Agent, the Purchaser Agents, the Servicer, the Backup
Servicer or the Collateral Custodian and the termination of this Agreement.



     Section 11.2 Indemnities by the Servicer.



     (a) Without limiting any other rights that any such Person may have hereunder or under
Applicable Law, the Servicer hereby agrees to indemnify each Indemnified Party, forthwith on
demand, from and against any and all Indemnified Amounts awarded against or incurred by any such
Indemnified Party by reason of any acts, omissions or alleged acts or omissions of the Servicer,
including, but not limited to (i) any representation or warranty made by the Servicer under or in
connection with any Transaction Document, any Monthly Report, Servicer’s Certificate or any other
information or report delivered by or on behalf of the Servicer pursuant hereto, which shall have
been false, incorrect or misleading in any material respect when made or deemed made, (ii) the
failure by the Servicer to comply with any Applicable Law, (iii) the failure of the Servicer to
comply with its duties or obligations in accordance with the Agreement, (iv) the failure by the
Servicer to comply with any of the covenants relating to any Hedging Agreement in accordance with
the Transaction Documents, or (v) any litigation,



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proceedings or investigation against the Servicer. The provisions of this indemnity shall run
directly to and be enforceable by an injured party subject to the limitations hereof.



     (b) Any amounts subject to the indemnification provisions of this Section 11.2 shall
be paid by the Servicer to the Indemnified Party within five Business Days following such Person’s
demand therefor.



     (c) The Servicer shall have no liability for making indemnification hereunder to the extent
any such indemnification constitutes recourse for uncollectible or uncollected Assets.



     (d) The obligations of the Servicer under this Section 11.2 shall survive the
resignation or removal of the Administrative Agent, the Purchaser Agents, the Backup Servicer or
the Collateral Custodian and the termination of this Agreement.



     (e) Any indemnification pursuant to this Section 11.2 shall not be payable from the
Collateral.



     Section 11.3 After-Tax Basis.



     Indemnification under Section 11.1 and Section 11.2 shall be in an amount
necessary to make the Indemnified Party whole after taking into account any tax consequences to the
Indemnified Party of the receipt of the indemnity provided hereunder, including the effect of such
tax or refund on the amount of tax measured by net income or profits that is or was payable by the
Indemnified Party.



ARTICLE XII




THE ADMINISTRATIVE AGENT

AND PURCHASER AGENTS




     Section 12.1 The Administrative Agent.



     (a) Each Purchaser Agent and each Secured Party hereby appoints and authorizes the
Administrative Agent as its agent and bailee for purposes of perfection pursuant to the applicable
UCC or other Applicable Law and hereby further authorizes the Administrative Agent to appoint
additional agents and bailees to act on its behalf and for the benefit of each of the Purchaser
Agents and each Secured Party. Each of the Purchaser Agents and each Secured Party further
authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement and the other Transaction Documents as are delegated to the
Administrative Agent by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. In furtherance, and without limiting the generality, of the foregoing, each
Secured Party hereby appoints the Administrative Agent as its agent to execute and deliver all
further instruments and documents, and take all further action that the Administrative Agent may
deem necessary or appropriate or that a Secured Party may reasonably request in order to perfect,
protect or more fully evidence the security interests granted by the Seller hereunder, or to enable
any of them to exercise or enforce any of their respective rights hereunder, including, without
limitation, the execution by the Administrative Agent as secured party/assignee of such financing
or continuation statements, or amendments



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thereto or assignments thereof, relative to all or any of the Collateral now existing or
hereafter arising, and such other instruments or notices, as may be necessary or appropriate for
the purposes stated hereinabove. The Purchaser Agents and the Purchasers may direct the
Administrative Agent to take any such incidental action hereunder. With respect to other actions
which are incidental to the actions specifically delegated to the Administrative Agent hereunder,
the Administrative Agent shall not be required to take any such incidental action hereunder, but
shall be required to act or to refrain from acting (and shall be fully protected in acting or
refraining from acting) upon the direction of the Purchaser Agents and the Purchasers; provided
that that the Administrative Agent shall not be required to take any action hereunder if the taking
of such action, in the reasonable determination of the Administrative Agent, shall be in violation
of any Applicable Law or contrary to any provision of this Agreement or shall expose the
Administrative Agent to liability hereunder or otherwise. In the event the Administrative Agent
requests the consent of a Purchaser Agent or a Purchaser pursuant to the foregoing provisions and
the Administrative Agent does not receive a consent (either positive or negative) from such Person
within ten Business Days of such Person’s receipt of such request, then such Purchaser Agent or
Purchaser shall be deemed to have declined to consent to the relevant amendments.



     (b) The Administrative Agent shall exercise such rights and powers vested in it by this
Agreement and the other Transaction Documents, and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in the conduct of such
person’s own affairs.



     (c) Administrative Agent’s Reliance, Etc. Neither the Administrative Agent nor any of
its directors, officers, agents or employees shall be liable for any action taken or omitted to be
taken by it or them as Administrative Agent under or in connection with this Agreement or any of
the other Transaction Documents, except for its or their own gross negligence or willful
misconduct. Without limiting the foregoing, the Administrative Agent: (i) may consult with legal
counsel (including counsel for the Seller or the Originator), independent public accountants and
other experts selected by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes
no warranty or representation and shall not be responsible for any statements, warranties or
representations made in or in connection with this Agreement; (iii) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or any of the other Transaction Documents on the part of the Seller,
the Originator, or the Servicer or to inspect the property (including the books and records) of the
Seller, the Originator, or the Servicer; (iv) shall not be responsible for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any of the
other Transaction Documents or any other instrument or document furnished pursuant hereto or
thereto; and (v) shall incur no liability under or in respect of this Agreement or any of the other
Transaction Documents by acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by telex) believed by it to be genuine and
signed or sent by the proper party or parties.



     (d) Credit Decision with Respect to the Administrative Agent. Each Purchaser Agent
and Secured Party acknowledges that it has, independently and without reliance upon the
Administrative Agent, or any of the Administrative Agent’s Affiliates, and based upon such
documents and information as it has deemed appropriate, made its own evaluation and decision



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to enter into this Agreement and the other Transaction Documents to which it is a party. Each
Purchaser Agent and Secured Party also acknowledges that it will, independently and without
reliance upon the Administrative Agent, or any of the Administrative Agent’s Affiliates, and based
on such documents and information as it shall deem appropriate at the time, continue to make its
own decisions in taking or not taking action under this Agreement and the other Transaction
Documents to which it is a party.



     (e) Indemnification of the Administrative Agent. Each Purchaser Agent and Purchaser
agrees to indemnify the Administrative Agent (to the extent not reimbursed by the Seller or the
Servicer), ratably in accordance with its Pro Rata Share from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Administrative Agent in any way relating to or arising out of this Agreement or any of
the other Transaction Documents, or any action taken or omitted by the Administrative Agent
hereunder or thereunder; provided that none of the Purchaser Agents or Purchasers shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Administrative Agent’s gross negligence
or willful misconduct. Without limitation of the foregoing, each Purchaser Agent and Purchaser
agrees to reimburse the Administrative Agent, ratably in accordance with its Pro Rata Share
promptly upon demand for any out-of-pocket expenses (including counsel fees) incurred by the
Administrative Agent in connection with the administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and the other Transaction Documents, to the extent
that such expenses are incurred in the interests of or otherwise in respect of the Purchaser
Agents, or the Purchasers hereunder and/or thereunder and to the extent that the Administrative
Agent is not reimbursed for such expenses by the Seller or the Servicer.



     (f) Successor Administrative Agent. The Administrative Agent may resign at any time,
effective upon the appointment and acceptance of a successor Administrative Agent as provided
below, by giving at least five days’ written notice thereof to each Purchaser Agent and the Seller
and may be removed at any time with cause by the Purchaser Agents acting jointly. Upon any such
resignation or removal, the Purchaser Agents and the Seller acting jointly shall appoint a
successor Administrative Agent. Each of the Purchaser Agents and the Seller agrees that it shall
not unreasonably withhold or delay its approval of the appointment of a successor Administrative
Agent. If no such successor Administrative Agent shall have been so appointed, and shall have
accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of
notice of resignation or the removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Secured Parties, appoint a successor Administrative
Agent which successor Administrative Agent shall be either (i) a commercial bank organized under
the laws of the United States or of any state thereof and have a combined capital and surplus of at
least $50,000,000 or (ii) an Affiliate of such a bank. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations under this Agreement. After any retiring Administrative
Agent’s resignation or removal hereunder as Administrative



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Agent, the provisions of this Article XII shall continue to inure to its benefit as to
any actions taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.



     (g) Payments by the Administrative Agent. Unless specifically allocated to a specific
Purchaser Agent pursuant to the terms of this Agreement, all amounts received by the Administrative
Agent on behalf of the Purchaser Agents shall be paid by the Administrative Agent to the Purchaser
Agents in accordance with their respective Pro Rata Shares in the applicable Advances Outstanding,
or if there are no Advances Outstanding then to the Purchaser Agents in accordance with the most
recent applicable Commitment, on the Business Day received by the Administrative Agent, unless such
amounts are received after 12:00 noon on such Business Day, in which case the Administrative Agent
shall use its reasonable efforts to pay such amounts to each Purchaser Agent on such Business Day,
but, in any event, shall pay such amounts to such Purchaser Agent not later than the following
Business Day.



     Section 12.2 The Purchaser Agents.



     (a) Authorization and Action. Each Purchaser hereby designates and appoints its
applicable Purchaser Agent to act as its agent hereunder and under each other Transaction Document,
and authorizes such Purchaser Agent to take such actions as agent on its behalf and to exercise
such powers as are delegated to such Purchaser Agent by the terms of this Agreement together and
the other Transaction Documents with such powers as are reasonably incidental thereto. Such
Purchaser Agent shall not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with its related Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of such Purchaser Agent
shall be read into this Agreement or any other Transaction Document or otherwise exist for such
Purchaser Agent. In performing its functions and duties hereunder and under the other Transaction
Documents, such Purchaser Agent shall act solely as agent for its related Purchaser and does not
assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its successors or assigns. Such Purchaser Agent shall not be required
to take any action that exposes such Purchaser Agent to personal liability or that is contrary to
this Agreement, or any other Transaction Document or Applicable Law. The appointment and authority
of such Purchaser Agent hereunder shall terminate at the indefeasible payment in full of the
Aggregate Unpaids. Each Purchaser Agent, respectively, hereby authorizes the Administrative Agent
to execute each of the UCC Financing Statements on behalf of such Purchaser (the terms of which
shall be binding on such Purchaser).



     (b) Delegation of Duties. Each applicable Purchaser Agent may execute any of its
duties under this Agreement by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. Such Purchaser Agent shall not
be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care.



     (c) Exculpatory Provisions. Neither any applicable Purchaser Agent nor any of its
directors, officers, agents or employees shall be (i) liable for any action lawfully taken or
omitted to be taken by it or them under or in connection with this Agreement or any other
Transaction Document (except for its, their or such Person’s own gross negligence or willful
misconduct or, in the case of such Purchaser Agent, the breach of its obligations expressly set
forth in this



141









 







Agreement or any other Transaction Document), or (ii) responsible in any manner to its related
Purchaser for any recitals, statements, representations or warranties made by the Seller contained
in this Agreement or any other Transaction Document, for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any other Transaction Document or any
other document furnished in connection herewith, for any failure of the Seller to perform its
obligations hereunder, or for the satisfaction of any condition specified in Article III.
Such Purchaser Agent shall not be under any obligation to its related Purchaser to ascertain or to
inquire as to the observance or performance of any of the agreements or covenants contained in, or
conditions of, this Agreement or any other Transaction Document, or to inspect the properties,
books or records of the Seller. Such Purchaser Agent shall not be deemed to have knowledge of any
Unmatured Termination Event, Termination Event or Servicer Default unless such Purchaser Agent has
received notice from the Seller or a Secured Party.



     (d) Reliance. Such Purchaser Agent shall in all cases be entitled to rely, and shall
be fully protected in relying, upon any document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the Seller), independent
accountants and other experts selected by such Purchaser Agent. Such Purchaser Agent shall in all
cases be fully justified in failing or refusing to take any action under this Agreement, any other
Transaction Document or any other document furnished in connection herewith unless it shall first
receive such advice or concurrence of its related Purchaser, as it deems appropriate, or it shall
first be indemnified to its satisfaction by its related Purchaser; provided that unless and until
such Purchaser Agent shall have received such advice, such Purchaser Agent may take or refrain from
taking any action as such Purchaser Agent shall deem advisable and in the best interests of its
related Purchaser. Such Purchaser Agent shall in all cases be fully protected in acting, or in
refraining from acting, in accordance with a request of its related Purchaser, and such request and
any action taken or failure to act pursuant thereto shall be binding upon its related Purchaser.



     (e) Non-Reliance on the Purchaser Agent and Other Purchasers. Each applicable
Purchaser, respectively, expressly acknowledges that neither its related Purchaser Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by such Purchaser Agent hereafter taken,
including, without limitation, any review of the affairs of the Seller, shall be deemed to
constitute any representation or warranty by the such Purchaser Agent. Each applicable Purchaser,
respectively, represents and warrants to its related Purchaser Agent that it has and will,
independently and without reliance upon such Purchaser Agent, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, prospects, financial and other conditions and creditworthiness of
the Seller and made its own decision to enter into this Agreement, the other Transaction Documents
or any Hedging Agreement, as the case may be.



     (f) Purchaser Agents in their Respective Capacities. Each applicable Purchaser Agent,
respectively, and any of its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Seller or any Affiliate of the Seller as though such
Purchaser Agent were not a Purchaser Agent hereunder. With respect to the Advances made pursuant
to this Agreement, such Purchaser Agent and each of its Affiliates shall have the



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same rights and powers under this Agreement as any Purchaser and may exercise the same as
though it were not a Purchaser Agent and the terms “Purchaser” and “Purchasers” shall include such
Purchaser Agent in its individual capacity.



     (g) Successor Purchaser Agent. Each applicable Purchaser Agent, respectively, may,
upon five days’ notice to the Seller and its related Purchaser, and such Purchaser Agent will, upon
the direction of its related Purchaser, resign as Purchaser Agent for such Purchaser. If such
Purchaser Agent shall resign, then its related Purchaser, during such five day period, shall
appoint a successor agent, with the prior written consent of the Seller, such consent not to be
unreasonably withheld; provided that the consent of the Seller shall not be required if a
Termination Event has occurred and is continuing. If for any reason no successor Agent is
appointed by such Purchaser during such five day period, then effective upon the expiration of such
five day period, the Seller shall make all payments in respect of the Aggregate Unpaids directly to
such Purchaser and for all purposes shall deal directly with such Purchaser. After any retiring
Purchaser Agent’s resignation hereunder as Purchaser Agent, the provisions of Articles XI and XII
shall inure to its benefit as to any actions taken or omitted to be taken by it while it was a
Purchaser Agent under this Agreement. Notwithstanding the resignation or removal of the Purchaser
Agent for Citigroup, the Hedge Counterparties, shall each continue to be a Secured Party hereunder.



     Section 12.3 Additional Agent.



     (a) Authorization and Action. Each Additional Purchaser hereby designates and appoints
the relevant Additional Agent designated in the related Additional Purchaser Agreement to act as
its agent hereunder and under each other Transaction Document, and authorizes such Additional Agent
to take such actions as agent on its behalf and to exercise such powers as are delegated to the
Additional Agent by the terms of this Agreement and the other Transaction Documents together with
such powers as are reasonably incidental thereto. No Additional Agent shall have any duties or
responsibilities, except those expressly set forth herein or in any other Transaction Document, or
any fiduciary relationship with such related Additional Purchaser, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of such Additional
Agent shall be read into this Agreement or any other Transaction Document or otherwise exist for
such Additional Agent. In performing its functions and duties hereunder and under the other
Transaction Documents, each Additional Agent shall act solely as agent for the related Additional
Purchaser and does not assume nor shall be deemed to have assumed any obligation or relationship of
trust or agency with or for the Seller or the Servicer or any of the Seller’s or the Servicer’s
successors or assigns. No Additional Agent shall be required to take any action that exposes the
Additional Agent to personal liability or that is contrary to this Agreement, any other Transaction
Document or Applicable Law. The appointment and authority of each Additional Agent hereunder shall
terminate upon the indefeasible payment in full of all Aggregate Unpaids. Each Additional Agent
hereby authorizes the Administrative Agent to execute each of the UCC financing statements on
behalf of such Additional Agent (the terms of which shall be binding on such Additional Agent).



     (b) Delegation of Duties. Any of the Additional Agents may execute any of its duties
under this Agreement and each other Transaction Document by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to such duties.



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No Additional Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.




     (c) Exculpatory Provisions. Neither any Additional Agent nor any of its directors,
officers, agents or employees shall be (i) liable for any action lawfully taken or omitted to be
taken by it or them under or in connection with this Agreement or any other Transaction Document
(except for its, their or such Person’s own gross negligence or willful misconduct), or (ii)
responsible in any manner to any Additional Purchaser for any recitals, statements, representations
or warranties made by the Seller or the Servicer contained in Article IV, any other
Transaction Document or any certificate, report, statement or other document referred to or
provided for in, or received under or in connection with, this Agreement or any other Transaction
Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, any other Transaction Document or any other document furnished in connection
herewith or therewith, or for any failure of the Seller or the Servicer to perform its obligations
hereunder or thereunder, or for the satisfaction of any condition specified in this Agreement, or
for the perfection, priority, condition, value or sufficiency of any collateral pledged in
connection herewith. No Additional Agent shall be under any obligation to any Additional Purchaser
to ascertain or to inquire as to the observance or performance of any of the agreements or
covenants contained in, or conditions of, this Agreement or any other Transaction Document, or to
inspect the properties, books or records of the Seller or the Servicer. No Additional Agent shall
be deemed to have knowledge of any Termination Event or Unmatured Termination Event unless such
Additional Agent has received notice from the Seller or the related Additional Purchaser.



     (d) Reliance by Additional Agent. Each Additional Agent shall in all cases be
entitled to rely, and shall be fully protected in relying, upon any document or conversation
believed by it to be genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without limitation, counsel
to the Seller), independent accountants and other experts selected by such Additional Agent. Each
Additional Agent shall in all cases be fully justified in failing or refusing to take any action
under this Agreement or any other Transaction Document unless it shall first receive such advice or
concurrence of the related Additional Purchaser as it deems appropriate and it shall first be
indemnified to its satisfaction by such Additional Purchaser; provided that unless and until such
Additional Agent shall have received such advice, the Additional Agent may take or refrain from
taking any action, as the Additional Agent shall deem advisable and in the best interests of the
Related Additional Purchaser. Each Additional Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance with a request of the related Additional
Purchaser, and such request and any action taken or failure to act pursuant thereto shall be
binding upon such Additional Purchaser.



     (e) Non-Reliance on Additional Agent. Each Additional Purchaser expressly
acknowledges that neither any Additional Agent, nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that
no act by such Additional Agent hereafter taken, including, without limitation, any review of the
affairs of the Seller or the Servicer, shall be deemed to constitute any representation or warranty
by such Additional Agent. Each Additional Purchaser represents and warrants to the related
Additional Agent that it has and will, independently and without reliance upon such Additional
Agent, such Additional Purchaser and based on such documents and information as it has



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deemed appropriate, made its own appraisal of and investigation into the business, operations,
property, prospects, financial and other conditions and creditworthiness of the Seller and made its
own decision to enter into this Agreement, the other Transaction Documents and all other documents
related hereto or thereto.



     (f) Additional Agent in its Individual Capacity. Each Additional Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any kind of business
with the Seller or any Affiliate of the Seller as though such Additional Agent were not an
Additional Agent hereunder. With respect to Advances pursuant to this Agreement, each Additional
Agent shall have the same rights and powers under this Agreement in its individual capacity as any
Purchaser and may exercise the same as though it were not an Additional Agent, and the terms
“Purchaser,” and “Purchasers,” shall include the Additional Agent in its individual capacity.



     (g) Successor Additional Agent. Each Additional Agent may, upon five days’ notice to
the Seller, and the related Additional Purchaser, and such Additional Agent will, upon the
direction of such Additional Purchaser (other than such Additional Agent, in its individual
capacity) resign as Additional Agent. If any Additional Agent shall resign, then the related
Additional Purchaser during such five day period shall appoint a successor agent. If for any
reason no successor Additional Agent is appointed by the related Additional Purchaser during such
five day period, then effective upon the termination of such five day period, and the Seller shall
make all payments in respect of the Aggregate Unpaids directly to such Additional Purchaser, and
for all purposes shall deal directly with such Additional Purchaser. After any retiring Additional
Agent’s resignation hereunder as an Additional Agent, the provisions of Articles XI and
XII shall inure to its benefit with respect to any actions taken or omitted to be taken by
it while it was an Additional Agent under this Agreement.



ARTICLE XIII




MISCELLANEOUS




     Section 13.1 Amendments and Waivers.



     (a) Except as provided in this Section 13.1, no amendment, waiver or other
modification of any provision of this Agreement shall be effective without the written agreement of
the Seller, the Servicer, the Backup Servicer, the Collateral Custodian, the Administrative Agent,
each Purchaser Agent and the Secured Parties; provided that no such amendment, waiver or
modification adversely affecting the rights or obligations of any Hedge Counterparty shall be
effective without the written agreement of such Person.



     (b) The parties hereto acknowledge and agree that after the Closing Date the Agreement may
need to be amended to correct certain ambiguities or errors as well as to correct inconsistencies
with the terms of the other Transaction Documents and each such party agrees to cooperate in good
faith to effectuate, and not to unreasonably withhold, delay or condition its consent to, any such
amendments; provided that notwithstanding the foregoing, to the extent any such amendment would
have a adverse effect on any Secured Party, such Secured Party shall have the right to consent or
withhold consent in its sole discretion.



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     Section 13.2 Notices, Etc.



     All notices, reports and other communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including telex communication and communication by facsimile copy)
and mailed, telexed, transmitted or delivered, as to each party hereto, at its address set forth
under its name on the signature pages hereof or at such other address as shall be designated by
such party in a written notice to the other parties hereto. All such notices and communications
shall be effective, upon receipt, or in the case of (a) notice by mail, five days after being
deposited in the United States mail, first class postage prepaid or (b) notice by facsimile copy,
when communication of receipt is obtained.



     Section 13.3 Ratable Payments.



     If any Secured Party, whether by setoff or otherwise, has payment made to it with respect to
any portion of the Aggregate Unpaids owing to such Secured Party (other than payments received
pursuant to Section 11.1) in a greater proportion than that received by any other Secured
Party, such Secured Party agrees, promptly upon demand, to purchase for cash without recourse or
warranty a portion of the Aggregate Unpaids held by the other Secured Parties so that after such
purchase each Secured Party will hold its ratable proportion of the Aggregate Unpaids; provided
that if all or any portion of such excess amount is thereafter recovered from such Secured Party,
such purchase shall be rescinded and the purchase price restored to the extent of such recovery,
but without interest.



     Section 13.4 No Waiver; Remedies.



     No failure on the part of the Administrative Agent, the Purchaser Agents, the Collateral
Custodian, the Backup Servicer or a Secured Party to exercise, and no delay in exercising, any
right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies herein provided are cumulative and not
exclusive of any rights and remedies provided by law.



     Section 13.5 Binding Effect; Benefit of Agreement.



     This Agreement shall be binding upon and inure to the benefit of the Seller, the Servicer, the
Administrative Agent, the Purchaser Agents, the Backup Servicer, the Collateral Custodian, the
Secured Parties and their respective successors and permitted assigns and, in addition, the
provisions of Section 2.9(a)(1) and Section 2.10(a)(1) shall inure to the benefit
of each Hedge Counterparty, whether or not that Hedge Counterparty is a Secured Party.



     Section 13.6 Term of this Agreement.



     This Agreement, including, without limitation, the Seller’s representations and covenants set
forth in Articles IV and V, and the Servicer’s representations, covenants and
duties set forth in Articles VI, VII and VIII, create and constitute the
continuing obligation of the parties hereto in accordance with its terms, and shall remain in full
force and effect until the Collection Date. Upon the occurrence of the Collection Date and the
written request of the Seller, the Administrative Agent shall release its interest in the
Collateral pursuant to Section 9.2; provided



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however that the rights and remedies with respect to any breach of any representation and
warranty made or deemed made by the Seller pursuant to Articles III and IV the
indemnification and payment provisions of Article XI and the provisions of Section
13.9, Section 13.10 and Section 13.11, shall be continuing and shall survive
any termination of this Agreement.



     Section 13.7 Governing Law; Consent to Jurisdiction; Waiver of Objection to Venue.



     THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW PROVISIONS THEREOF (OTHER THAN SECTIONS
5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). EACH OF THE PARTIES
HERETO AND EACH HEDGE COUNTERPARTY HEREBY AGREES TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL
COURT LOCATED WITHIN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO AND EACH SECURED PARTY
HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.



     Section 13.8 Waiver of Jury Trial.



     TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO AND EACH HEDGE
COUNTERPARTY HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF THEM IN CONNECTION WITH THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.



     Section 13.9 Costs, Expenses and Taxes.



     (a) In addition to the rights of indemnification granted under Article XI hereof, the Seller
and Originator agrees to pay on demand all reasonable out of pocket costs and expenses of the
Administrative Agent, the Purchaser Agents, the Backup Servicer, the Collateral Custodian and the
Secured Parties incurred in connection with the preparation, execution, delivery, administration
(including periodic auditing, which shall be limited to two audits per year prior to the occurrence
of a Termination Event), renewal, amendment or modification of, or any waiver or consent issued in
connection with, this Agreement and the other documents to be delivered hereunder or in connection
herewith (including any Hedging Agreement), including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Administrative Agent, the Purchaser Agents, the Backup
Servicer, the Collateral Custodian and the Secured Parties with respect thereto and with respect to
advising the Administrative Agent, the Purchaser Agents, the Backup Servicer, the Collateral
Custodian and the Secured Parties as to their



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respective rights and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith (including any Hedging Agreement), and all reasonable out of
pocket costs and expenses, if any (including reasonable counsel fees and expenses), incurred by the
Administrative Agent, the Purchaser Agents, the Backup Servicer, the Collateral Custodian or the
Secured Parties in connection with the enforcement of this Agreement and the other documents to be
delivered hereunder or in connection herewith (including any Hedging Agreement).



     (b) The Seller and Originator shall pay on demand any and all stamp, sales, excise and other
taxes and fees payable or determined to be payable in connection with the execution, delivery,
filing and recording of this Agreement, the other documents to be delivered hereunder or any
agreement or other document providing liquidity support, credit enhancement or other similar
support to the Purchasers in connection with this Agreement or the funding or maintenance of
Advances hereunder.



     (c) The Seller and Originator shall pay on demand all other reasonable out of pocket costs,
expenses and Taxes (excluding income taxes) incurred by the Administrative Agent, the Purchaser
Agents, the Secured Parties (“Other Costs”), including, without limitation, all costs and expenses
incurred by the Administrative Agent and the Purchaser Agents in connection with periodic audits of
the Seller’s or the Servicer’s books and records.



     Section 13.10 No Proceedings.



     (a) Each of the parties hereto (other than a particular Purchaser that is an Issuer) and each
Hedge Counterparty (by accepting the benefits of this Agreement) hereby agrees that it will not
institute against, or join any other Person in instituting against, such Purchaser, any Insolvency
Proceeding so long as any commercial paper issued by such Purchaser shall be outstanding and there
shall not have elapsed one year and one day since the last day on which any such commercial paper
shall have been outstanding.



     (b) Each of the parties hereto (other than a particular Additional Purchaser that is an
Issuer) hereby agrees that it will not institute against, or join any other Person in instituting
against such Additional Purchaser, any Insolvency Proceeding so long as any commercial paper issued
by such Additional Purchaser shall be outstanding and there shall not have elapsed one year and one
day since the last day on which any such commercial paper shall have been outstanding.



     (c) Each of the parties hereto (other than the Administrative Agent without the consent of the
Purchaser Agents) hereby agrees that it will not institute against, or join any other Person in
instituting against, the Seller any Insolvency Proceeding so long as there shall not have elapsed
one year and one day since the Collection Date; provided that nothing in this Section 13.10
shall limit any party’s right to file any claim in or otherwise take any action with respect to any
Insolvency Proceeding that was instituted by any other Person.



     Section 13.11 Recourse Against Certain Parties.



     (a) No recourse under or with respect to any obligation, covenant or agreement (including,
without limitation, the payment of any fees or any other obligations) of the



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Administrative Agent, the Purchaser Agents, the Seller, the Servicer, the Originator or any
Secured Party as contained in this Agreement or any other agreement, instrument or document entered
into by it pursuant hereto or in connection herewith shall be had against any administrator of the
Administrative Agent, the Purchaser Agents, the Seller, the Servicer, the Originator or any Secured
Party, or any incorporator, affiliate, stockholder, officer, employee or director of the
Administrative Agent, the Purchaser Agents, the Seller, the Servicer, the Originator or any Secured
Party, or of any such administrator, as such, by the enforcement of any assessment or by any legal
or equitable proceeding, by virtue of any statute or otherwise; it being
expressly agreed and understood that the agreements of the
Administrative Agent, the Purchaser Agents, the Seller, the Servicer, the Originator or any Secured
Party contained in this Agreement and all of the other agreements, instruments and documents
entered into by it pursuant hereto or in connection herewith are, in each case, solely the
corporate obligations of the Administrative Agent, the Purchaser Agents, the Seller, the Servicer,
the Originator or any Secured Party, and that no personal liability whatsoever shall attach to or
be incurred by any administrator of the Administrative Agent, the Purchaser Agents, the Seller, the
Servicer, the Originator or any Secured Party or any incorporator, stockholder, affiliate, officer,
employee or director of the Administrative Agent, the Purchaser Agents, the Seller, the Servicer,
the Originator or any Secured Party or of any such administrator, as such, or any other of them,
under or by reason of any of the obligations, covenants or agreements of the Administrative Agent,
the Purchaser Agents, the Seller, the Servicer, the Originator or any Secured Party contained in
this Agreement or in any other such instruments, documents or agreements, or that are implied
therefrom, and that any and all personal liability of every such administrator of the
Administrative Agent, the Purchaser Agents, the Seller, the Serivicer, the Originator or any
Secured Party and each incorporator, stockholder, affiliate, officer, employee or director of the
Administrative Agent, the Purchaser Agents, the Seller, the Servicer, the Originator or any Secured
Party or of any such administrator, or any of them, for breaches by the Administrative Agent, the
Purchaser Agents, the Seller, the Servicer, the Originator or any Secured Party of any such
obligations, covenants or agreements, which liability may arise either at common law or at equity,
by statute or constitution, or otherwise, is hereby expressly waived as a condition of and in
consideration for the execution of this Agreement. The provisions of this Section 13.11
shall survive the termination of this Agreement.



     (b) Notwithstanding anything in this Agreement to the contrary, no Purchaser or Additional
Purchaser shall have any obligation to pay any amount required to be paid by it hereunder in excess
of any amount available to such Purchaser or such Additional Purchaser, as applicable, after paying
or making provision for the payment of its Commercial Paper Notes. All payment obligations of each
Purchaser and each Additional Purchaser, as applicable, hereunder are contingent on the
availability of funds in excess of the amounts necessary to pay its Commercial Paper Notes; and
each of the other parties hereto agrees that it will not have a claim under Section 101(5) of the
Bankruptcy Code if and to the extent that any such payment obligation owed to it by a Purchaser or
an Additional Purchaser, as applicable, exceeds the amount available to such Purchaser or such
Additional Purchaser, as applicable, to pay such amount after paying or making provision for the
payment of its Commercial Paper Notes.



     (c) Notwithstanding any contrary provision set forth herein, no claim may be made by the
Seller, the Originator or the Servicer or any other Person against the Administrative Agent and the
Secured Parties or their respective Affiliates, directors, officers, employees, attorneys or



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agents for any special, indirect, consequential or punitive damages in respect to any claim
for breach of contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement, or any act, omission or event occurring in connection
therewith; and the Seller, the Originator and the Servicer each hereby waives, releases, and agrees
not to sue upon any claim for any such damages, whether or not accrued and whether or not known or
suspected.



     (d) No obligation or liability to any Obligor under any of the Assets is intended to be
assumed by the Administrative Agent and the Secured Parties under or as a result of this Agreement
and the transactions contemplated hereby



     Section 13.12 Protection of Right, Title and Interest in the Collateral; Further Action
Evidencing Advances .



     (a) The Servicer shall cause this Agreement, all amendments hereto and/or all financing
statements and continuation statements and any other necessary documents covering the right, title
and interest of the Administrative Agent as agent for the Secured Parties and of the Secured
Parties to the Collateral to be promptly recorded, registered and filed, and at all times to be
kept recorded, registered and filed, all in such manner and in such places as may be required by
law fully to preserve and protect the right, title and interest of the Administrative Agent as
agent for the Secured Parties hereunder to all property comprising the Collateral. The Servicer
shall deliver to the Administrative Agent file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available following such
recording, registration or filing. The Seller shall cooperate fully with the Servicer in
connection with the obligations set forth above and will execute any and all documents reasonably
required to fulfill the intent of this Section 13.12(a).



     (b) The Seller agrees that from time to time, at its expense, it will promptly execute and
deliver all instruments and documents, and take all actions, that the Administrative Agent may
reasonably request in order to perfect, protect or more fully evidence the Advances hereunder and
the security interest granted in the Collateral, or to enable the Administrative Agent or the
Secured Parties to exercise and enforce their rights and remedies hereunder or under any
Transaction Document.



     (c) If the Seller or the Servicer fails to perform any of its obligations hereunder, the
Administrative Agent or any Secured Party may (but shall not be required to) perform, or cause
performance of, such obligation; and the Administrative Agent’s or such Secured Party’s costs and
expenses incurred in connection therewith shall be payable by the Seller as provided in Article
XI. The Seller irrevocably authorizes the Administrative Agent and appoints the Administrative
Agent as its attorney-in-fact to act on behalf of the Seller (i) to execute on behalf of the Seller
as debtor and to file financing statements necessary or desirable in the Administrative Agent’s
sole discretion to perfect and to maintain the perfection and priority of the interest of the
Secured Parties in the Collateral and (ii) to file a carbon, photographic or other reproduction of
this Agreement or any financing statement with respect to the Collateral as a financing statement
in such offices as the Administrative Agent in its sole discretion deems necessary or desirable to
perfect and to maintain the perfection and priority of the interests of the



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Secured Parties in the Collateral. This appointment is coupled with an interest and is
irrevocable.



     (d) Without limiting the generality of the foregoing, Seller will, not earlier than six months
and not later than three months prior to the fifth anniversary of the date of filing of the
financing statement referred to in Section 3.1 or any other financing statement filed
pursuant to this Agreement or in connection with any Advance hereunder, unless the Collection Date
shall have occurred:




     (i) deliver and file or cause to be filed an appropriate continuation statement with
respect to such financing statement; and




     (ii) deliver or cause to be delivered to the Administrative Agent an opinion of the
counsel for Seller, in form and substance reasonably satisfactory to the Administrative
Agent, and each Purchaser Agent confirming and updating the opinion delivered pursuant to
Section 3.1 with respect to perfection and otherwise to the effect that the security
interest hereunder continues to be an enforceable and perfected security interest, subject
to no other Liens of record except as provided herein or otherwise permitted hereunder,
which opinion may contain usual and customary assumptions, limitations and exceptions.



     Section 13.13 Confidentiality



     (a) Each of the Administrative Agent, the Purchaser Agents, the Secured Parties, the Servicer,
the Collateral Custodian, the Backup Servicer and the Seller shall maintain and shall cause each of
its employees and officers to maintain the confidentiality of the Agreement and all information
with respect to the other parties, including all information regarding the business of
CapitalSource Inc. and its Affiliates, the Seller and the Servicer hereto, and their respective
businesses obtained by it or them in connection with the structuring, negotiating and execution of
the transactions contemplated herein or related to any of the underlying Obligors, except that each
such party and its officers and employees may (i) disclose such information to its external
accountants, attorneys, investors, potential investors parties that provide or may in the future
provide first loss or credit enhancement to such Person and the agents of such Persons (“Excepted
Persons”); (ii) disclose the existence of the Agreement, but not the financial terms thereof, (iii)
disclose such information as is required by Applicable Law and (iv) disclose the Agreement and such
information in any suit, action, proceeding or investigation (whether in law or in equity or
pursuant to arbitration) involving any of the Transaction Documents or any Hedging Agreement for
the purpose of defending itself, reducing its liability, or protecting or exercising any of its
claims, rights, remedies, or interests under or in connection with any of the Transaction Documents
or any Hedging Agreement. It is understood that the financial terms that may not be disclosed
except in compliance with this Section 13.13(a) include, without limitation, all fees and
other pricing terms, and all Termination Events, Servicer Defaults, and priority of payment
provisions.



     (b) Anything herein to the contrary notwithstanding, the Seller and the Servicer each hereby
consents to the disclosure of any nonpublic information with respect to it (i) to the
Administrative Agent, the Purchaser Agents, the Collateral Custodian, the Backup Servicer or



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the Secured Parties by each other, (ii) by the Administrative Agent, the Purchaser Agents, the
Collateral Custodian, the Backup Servicer and the Secured Parties to any prospective or actual
assignee or participant of any of them provided such Person agrees to hold such information
confidential, (iii) by the Administrative Agent, the Purchaser Agents, and the Secured Parties to
any commercial paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to
any Purchaser, as applicable, and to any officers, directors, employees, outside accountants and
attorneys of any of the foregoing, provided each such Person is informed of the confidential nature
of such information or (iv) to any Rating Agency (provided that only information about the general
terms of this Agreement, and no information about any specific Collateral, the issuers of such
Collateral or the underlying documents and transactions related thereto, may be provided to a
Rating Agency). In addition, the Secured Parties, the Administrative Agent and the Purchaser
Agents, may disclose any such nonpublic information as required pursuant to any law, rule,
regulation, direction, request or order of any judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect of law).



     (c) Notwithstanding anything herein to the contrary, the foregoing shall not be construed to
prohibit (i) disclosure of any and all information that is or becomes publicly known; (ii)
disclosure of any and all information (a) if required to do so by any applicable statute, law, rule
or regulation, (b) to any government agency or regulatory body having or claiming authority to
regulate or oversee any respects of the Administrative Agents’, the Purchaser Agents’, the Secured
Parties’, the Collateral Custodian’s, the Backup Servicer’s, the Seller, the Servicer or the
Originator business or that of their affiliates, (c) pursuant to any subpoena, civil investigative
demand or similar demand or request of any court, regulatory authority, arbitrator or arbitration
to which the Administrative Agent, the Purchaser Agents, the Secured Parties, the Collateral
Custodian, the Backup Servicer, the Seller, the Servicer or the Originator or an officer, director,
employer, shareholder or affiliate of any of the foregoing is a party, (d) in any preliminary or
final offering circular, registration statement or contract or other document approved in advance
by the Seller, the Servicer or the Originator or (e) to any affiliate, independent or internal
auditor, agent, employee or attorney of the Collateral Custodian or Backup Servicer having a need
to know the same, provided that the Collateral Custodian or Backup Servicer advises such recipient
of the confidential nature of the information being disclosed; or (iii) any other disclosure
authorized in writing by the Seller, Servicer or Originator.



     Section 13.14 Execution in Counterparts; Severability; Integration.



     This Agreement may be executed in any number of counterparts and by different parties hereto
in separate counterparts (including by facsimile), each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and the same agreement.
In case any provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not
in any way be affected or impaired thereby. This Agreement and the Transaction Documents contains
the final and complete integration of all prior expressions by the parties hereto with respect to
the subject matter hereof and shall constitute the entire agreement among the parties hereto with
respect to the subject matter hereof, superseding all prior oral or written understandings
delivered by the Originator to the Administrative Agent, the Purchaser Agents, and the Secured
Parties.



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     Section 13.15 Waiver of Set-off.



     (a) Each of the parties hereto (other than any one of the Purchasers) hereby waives any right
of setoff it may have or to which it may be entitled under this Agreement from time to time against
such Purchaser, its Affiliates or its respective assets.



     (b) Each of the parties hereto (other than any one of the Additional Purchasers) hereby waives
any right of setoff it may have or to which it may be entitled under this Agreement from time to
time against such Additional Purchaser, its Affiliates or its respective assets.



     Section 13.16 Assignments.



     (a) The Purchasers may at any time assign, or grant a security interest or sell a
participation interest in, with the prior written consent of the Seller provided that no
Termination Event has occurred and is continuing (provided that such consent shall not be required
in connection with any assignment, grant of a security interest or sale of a participation interest
in an Advance or Commitment to any other Purchaser, any Purchaser Agent who is party to this
Agreement on the date hereof or any Purchaser Affiliate), in any Advance or Commitment (or portion
thereof) to any Person (such Person, an “Additional Purchaser”); provided that in the case of an
assignment of the Purchaser Variable Funding Certificate or Additional Purchaser Variable Funding
Certificate the assignee (other than any assignee that is a Liquidity Bank) shall execute and
deliver to the Servicer and the Administrative Agent and each Purchaser Agent a Transferee Letter
substantially in the form of Exhibit K hereto (the “Transferee Letter”). The parties to
any such assignment, grant or sale of participation interest shall execute and deliver to the
Purchaser Agent or the related Additional Agent, as applicable, for its acceptance and recording in
its books and records, such agreement or document as may be satisfactory to such parties and the
Purchaser Agent or such Additional Agent, as applicable. The Seller shall not assign or delegate,
or grant any interest in, or permit any Lien (other than any Permitted Lien) to exist upon, any of
the Seller’s rights, obligations or duties under this Agreement without the prior written consent
of the Administrative Agent and each Purchaser Agent and each Hedge Counterparty.



     (b) The Originator may, with the written consent of the Administrative Agent, add additional
Persons as an Additional Purchaser or an Additional Agent or cause an existing Purchaser to
increase its Commitment; provided however that the Commitment of any Purchaser may only be
increased with the prior written consent of such Purchaser and the Administrative Agent. Each new
Additional Purchaser and Additional Agent shall become a party hereto by executing and delivering
to the Administrative Agent and the Originator an Assumption Agreement substantially in the form of
Exhibit M hereto (the “Assumption Agreement”).



     (c) An Additional Purchaser (except for with respect to Mica, Swiss Re and their respective
Affiliates in connection with the transactions consummated on the Amended and Restated Closing
Date) shall not be entitled to receive any greater payment under Sections 2.14 through
2.16 or Article XI than the applicable Purchaser would have been entitled to
receive with respect to the participation interest sold to the Additional Purchaser.



153









 





     Section 13.17 Heading and Exhibits.



     The headings herein are for purposes of references only and shall not otherwise affect the
meaning or interpretation of any provision hereof. The schedules and exhibits attached hereto and
referred to herein shall constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.



     Section 13.18 Loans Subject to Retained Interest Provisions.



     (a) With respect to any Loan included in the Collateral subject to the Retained Interest
provisions of this Agreement, the Seller will own only the principal portion of such Loans
outstanding as of the applicable Cut-Off Date. Principal Collections received by the Seller or the
Servicer on any Revolving Loans will be allocated first to the portion of such Revolving Loan owned
by the Seller, until the principal amount of such portion is reduced to zero, and then to the
portion not owned by the Seller; provided that if (i) a payment default occurs with respect to any
of the related Loans, (ii) a Liquidity Factor Reduction Event occurs and continues, (iii) 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, or (iv) an
Allocation Adjustment Event occurs, then Principal Collections received on (x) the applicable Loan
(in the case of clause (i) or (iii) above or during the time that a Liquidity
Factor Reduction Event exists and continues in the case of clause (ii) above) or (y) all the
Revolving Loans (in the case of clauses (iv) above) will be allocated between the portion
owned by the Seller and the portion not owned by the Seller, pro rata based upon the outstanding
principal amount of each such portion.



     (b) With respect to any Term Loans included in the Collateral subject to the Retained Interest
provisions of this Agreement, Principal Collections and Interest Collections received by the
Servicer will be allocated between the portion owned by the Seller and to the portion not owned by
the Seller (if any) on a pro rata basis according to the outstanding principal amount of such
portion.



     Section 13.19 Tax Treatment of Advances.



     It is the intention of the Seller and the Purchasers that, for U.S. federal, state and local
income and franchise tax purposes only, the Advances made hereunder will be treated as indebtedness
secured by the Collateral. The Seller, by entering into this Agreement, and the Purchasers, by
making the Advances described herein, agree to treat the Advances for U.S. federal, state and local
income and franchise tax purposes as indebtedness. The provisions of this Agreement and all
related Transaction Documents shall be construed to further these intentions of the parties.



     Section 13.20 Amendment and Restatement




     This Amended and Restated Sale and Servicing Agreement is given in amendment, restatement,
renewal and extension (but not in novation, extinguishment or satisfaction) of the original Sale
and Servicing Agreement, dated as of the Closing Date. All liens and security interests securing
payment of the obligations under the original Sale and Servicing Agreement are hereby collectively
renewed, extended, ratified and brought forward as security for the



154









 







payment and performance of the obligations. With respect to matters relating to the period prior
to the date hereof, all of the provisions of the original Sale and Servicing Agreement, and the
security agreements and other documents, instruments or agreements executed in connection
therewith, are each hereby ratified and confirmed and shall remain in force and effect.



[Remainder of Page Intentionally Left Blank.]




155









 





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



	 	 	 	 	 
	THE SELLER:	 	CSE QRS FUNDING II LLC  
	 
	 	 	 	 
	 

	 	By: /S/ GILES COATES
	 

	 	 

	 

	 	Name: Giles Coates
	 

	 	Title: Director — Treasury & Risk Management
	 
	 	 	 	 
	 

	 	CSE QRS Funding II LLC

4445 Willard Avenue, 12th Floor

Chevy Chase, Maryland 20815
	 

	 	Attention:
	 	Treasurer
	 

	 	Facsimile No.:
	 	(301) 841-2375
	 

	 	Confirmation No.:
	 	(301) 841-2731






	 	 	 	 	 	 	 
	THE ORIGINATOR
AND SERVICER:	 	CSE MORTGAGE LLC
	 
	 	 	 	 	 	 
	 

	 	By: /S/ GILES COATES	 	 
	 

	 	 

	 

	 	Name: Giles Coates	 	 
	 

	 	Title: Director — Treasury & Risk Management	 	 
	 
	 	 	 	 	 	 
	 

	 	CSE Mortgage LLC

4445 Willard Avenue, 12th Floor


Chevy Chase, Maryland 20815	 	 
	 

	 	Attention:
	 	Treasurer	 	 
	 

	 	Facsimile No.:
	 	(301) 841-2375	 	 
	 

	 	Confirmation No.:
	 	(301) 841-2731	 	 






[Signatures Continued on the Following Page]




Amended and Restated Sale and Servicing Agreement





 









 








	 	 	 	 	 
	CITIGROUP:	 	CITIGROUP GLOBAL MARKETS
	Commitment: $500,000,000	 	REALTY CORP., in its capacity as a Purchaser
	 
	 	 	 	 
	 

	 	By: /S/ JOHN PAWLOWSKI
	 

	 	 

	 

	 	Name: John Pawlowski
	 

	 	Title: Authorized Signer
	 
	 	 	 	 
	 

	 	Citigroup Global Markets Realty Corp.
	 

	 	390 Greenwich Street
	 

	 	New York, New York 10013
	 

	 	Facsimile No.:
	 	212-723-8591
	 

	 	Confirmation No.:
	 	212-723-5800
	 
	 	 	 	 
	THE ADMINISTRATIVE AGENT	 	CITIGROUP GLOBAL MARKETS
	AND THE CITIGROUP AGENT	 	REALTY CORP.
	 
	 	 	 	 
	 

	 	By: /S/ JOHN PAWLOWSKI
	 

	 	 

	 

	 	Name: John Pawlowski
	 

	 	Title: Authorized Signer
	 
	 	 	 	 
	 	 	Citigroup Global Markets Realty Corp.
	 

	 	390 Greenwich Street
	 

	 	New York, New York 10013
	 

	 	Facsimile No.:
	 	212-723-8591
	 

	 	Confirmation No.:
	 	212-723-5800






[Signatures Continued on the Following Page]




Amended and Restated Sale and Servicing Agreement




 









 








	 	 	 	 	 	 	 
	MICA :	 	MICA FUNDING, LLC
	 
	Commitment: $400,000,000
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By: /S/ DAVID CARROLL	 	 
	 

	 	 
	 	 
	 

	 	Name: David Carroll	 	 
	 

	 	Title: Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	Mica Funding, LLC

c/o Stanfield Global Strategies

430 Park Avenue

New York, New York 10022	 	 
	 

	 	Facsimile No.:
	 	(212) 891-9650	 	 
	 
	 	 	 	 	 	 
	THE MICA FUNDING, LLC AGENT:	 	SWISS RE FINANCIAL PRODUCTS
CORP.
	 
	 	 	 	 	 	 
	 

	 	By: /S/ DAN OZIZMIK	 	 
	 

	 	 
	 	 
	 

	 	Name: Dan Ozizmik	 	 
	 

	 	Title: Managing Director	 	 
	 
	 	 	 	 	 	 
	 

	 	Swiss Re Financial
Products Corp.

55 East 52nd Street, 39th Floor

New York, New York 10010	 	 
	 

	 	Attention:
	 	Operations	 	 
	 

	 	Facsimile No.:
	 	(212) 317-5537	 	 






[Signatures Continued on the Following Page]




Amended and Restated Sale and Servicing Agreement




 









 








	 	 	 	 	 	 	 
	THE BACKUP SERVICER:	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,
	AND THE COLLATERAL

CUSTODIAN: 	 	 not in its individual capacity but solely as Backup Servicer
	 
	 	 	 	 	 	 
	 

	 	By: /S/ JEANINE C. CASEY	 	 
	 

	 	 
	 	 
	 

	 	Name: Jeanine C. Casey	 	 
	 

	 	Title: Assistant Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Wells Fargo Bank, National Association
	 	 	Sixth Street and Marquette Avenue
	 	 	MAC N9311-161
	 	 	Minneapolis, Minnesota 55479
	 

	 	Attention:
	 	Corporate Trust Services

Collateral-Backed Administration	 	 
	 

	 	Facsimile No.:
	 	(612) 667-3539	 	 
	 

	 	Confirmation No.:
	 	(612) 667-8058	 	 






[Signatures Continued on the Following Page]




Amended and Restated Sale and Servicing Agreement




 









 








	 	 	 
	Acknowledged and Agreed to
	as of the date first written above.
	 
	 	 
	[                                        ],
	as the Hedge Counterparty
	 
	 	 
	By:
	 	 
	 


	 
	Name:
	 	 
	 


	 
	Title:
	 	 
	 


	 
	 
	 	 
	[                                        ]
	[                                        ]
	[                                        ]
	Attention:

	[                    ]
	Facsimile No.:

	[                    ]
	Confirmation No.:

	[                    ]





Amended and Restated Sale and Servicing Agreement