Exhibit 10.1
 COMPOSITE VERSION:
REFLECTS ALL AMENDMENTS THROUGH JUNE 30, 2009
 
 U.S. $106,518,000
 SALE AND SERVICING AGREEMENT
  CSE QRS FUNDING I LLC,  as a Seller
 CAPITALSOURCE FUNDING III LLC,  as a Seller
 CSE MORTGAGE LLC,  as the QRS Originator
 CAPITALSOURCE FINANCE LLC,  as the CSIII Originator and as the Servicer
 CS EUROPE FINANCE LIMITED,  as a Guarantor
 CS UK FINANCE LIMITED  as a Guarantor
 EACH OF THE CONDUIT PURCHASERS AND THE INSTITUTIONAL
PURCHASERS FROM TIME TO TIME PARTY HERETO,  as Purchasers
 EACH OF THE PURCHASER AGENTS
FROM TIME TO TIME PARTY HERETO,  as the Purchaser Agents
 WACHOVIA CAPITAL MARKETS, LLC,  as the Administrative Agent and as the WBNA Agent
  WELLS FARGO BANK, NATIONAL ASSOCIATION,  as the Backup Servicer and as the Collateral Custodian




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##### 



ARTICLE I DEFINITION
    
    
    2Section 1.1
    
    Certain Defined Terms
    
    
    2Section 1.2
    
    Other Terms
    
    
    48Section 1.3
    
    Computation of Time Periods
    
    
    48Section 1.4
    
    Interpretation
    
    
    48ARTICLE II PURCHASE OF THE VARIABLE FUNDING NOTES
    
    
    49Section 2.1
    
    The Variable Funding Notes
    
    
    49Section 2.2
    
    Release of any Purchaser and the Related Purchaser Agent
    
    
    50Section 2.3
    
    [Reserved]
    
    
    50Section 2.4
    
    Reduction of the Facility Amount; Mandatory and Optional Repayments
    
    
    50Section 2.5
    
    Determination of Interest
    
    
    51Section 2.6
    
    [Reserved]
    
    
    51Section 2.7
    
    [Reserved]
    
    
    51Section 2.8
    
    Notations on Variable Funding Notes
    
    
    51Section 2.9
    
    [Reserved]
    
    
    52Section 2.10
    
    Settlement Procedures
    
    
    52Section 2.11
    
    Collections and Allocations
    
    
    53Section 2.12
    
    Payments, Computations, Etc
    
    
    53Section 2.13
    
    [Reserved]
    
    
    54Section 2.14
    
    Fees
    
    
    54Section 2.15
    
    Increased Costs; Capital Adequacy; Illegality
    
    
    55Section 2.16
    
    Taxes
    
    
    56Section 2.17
    
    Assignment of the Sale Agreements
    
    
    58Section 2.18
    
    [Reserved]
    
    
    58Section 2.19
    
    Optional Sales
    
    
    58Section 2.20
    
    Discretionary Sales
    
    
    60Section 2.21
    
    Loans Originated by Affiliates of
CapitalSource Inc. Other than the Originator
    
    
    62ARTICLE III CONDITIONS TO ADVANCES
    
    
    62Section 3.1
    
    Conditions to Closing and the Advance
    
    
    62Section 3.2
    
    Condition Precedent to Repayments
    
    
    63




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##### 



ARTICLE IV REPRESENTATIONS AND WARRANTIES
    
    
    64Section 4.1
    
    Representations and Warranties of the Sellers
    
    
    64Section 4.2
    
    Representations and Warranties of the Sellers
Relating to the Agreement and the Collateral
    
    
    73Section 4.3
    
    Representations and Warranties of the Servicer
    
    
    74Section 4.4
    
    Representations and Warranties of the Backup Servicer
    
    
    77Section 4.5
    
    Representations and Warranties of the Collateral Custodian
    
    
    77Section 4.6
    
    Breach of Certain Representations and Warranties
    
    
    78Section 4.7
    
    Representations and Warranties of the Guarantors
    
    
    79ARTICLE V GENERAL COVENANTS
    
    
    80Section 5.1
    
    Affirmative Covenants of the Sellers
    
    
    80Section 5.2
    
    Negative Covenants of the Sellers
    
    
    84Section 5.3
    
    [Reserved]
    
    
    86Section 5.4
    
    Affirmative Covenants of the Servicer
    
    
    86Section 5.5
    
    Negative Covenants of the Servicer
    
    
    89Section 5.6
    
    Affirmative Covenants of the Backup Servicer
    
    
    90Section 5.7
    
    Negative Covenants of the Backup Servicer
    
    
    91Section 5.8
    
    Affirmative Covenants of the Collateral Custodian
    
    
    91Section 5.9
    
    Negative Covenants of the Collateral Custodian
    
    
    91ARTICLE VI ADMINISTRATION AND SERVICING OF CONTRACTS
    
    
    92Section 6.1
    
    Designation of the Servicer
    
    
    92Section 6.2
    
    Duties of the Servicer
    
    
    92Section 6.3
    
    Authorization of the Servicer
    
    
    94Section 6.4
    
    Collection of Payments
    
    
    95Section 6.5
    
    Servicer Advances
    
    
    96Section 6.6
    
    Realization Upon Defaulted Loans
    
    
    96Section 6.7
    
    Maintenance of Insurance Policies
    
    
    97Section 6.8
    
    Servicing Compensation
    
    
    98Section 6.9
    
    Payment of Certain Expenses by Servicer
    
    
    98Section 6.10
    
    Reports
    
    
    98Section 6.11
    
    Annual Statement as to Compliance
    
    
    99Section 6.12
    
    Annual Independent Public Accountants Servicing Reports
    
    
    99Section 6.13
    
    Limitation on Liability of the Servicer and Others
    
    
    100Section 6.14
    
    The Servicer Not to Resign
    
    
    100




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##### 



Section 6.15
    
    Servicer Defaults
    
    
    100Section 6.16
    
    Appointment of Successor Servicer
    
    
    102Section 6.17
    
    Servicing of REO Assets
    
    
    104ARTICLE VII THE BACKUP SERVICER
    
    
    106Section 7.1
    
    Designation of the Backup Servicer
    
    
    106Section 7.2
    
    Duties of the Backup Servicer
    
    
    106Section 7.3
    
    Merger or Consolidation
    
    
    107Section 7.4
    
    Backup Servicing Compensation
    
    
    108Section 7.5
    
    Backup Servicer Removal
    
    
    108Section 7.6
    
    Limitation on Liability
    
    
    108Section 7.7
    
    The Backup Servicer Not to Resign
    
    
    109ARTICLE VIII THE COLLATERAL CUSTODIAN
    
    
    109Section 8.1
    
    Designation of Collateral Custodian
    
    
    109Section 8.2
    
    Duties of Collateral Custodian
    
    
    110Section 8.3
    
    Merger or Consolidation
    
    
    111Section 8.4
    
    Collateral Custodian Compensation
    
    
    111Section 8.5
    
    Collateral Custodian Removal
    
    
    112Section 8.6
    
    Limitation on Liability
    
    
    112Section 8.7
    
    The Collateral Custodian Not to Resign
    
    
    113Section 8.8
    
    Release of Documents
    
    
    113Section 8.9
    
    Return of Required Loan Documents
    
    
    114Section 8.10
    
    Access to Certain Documentation and Information Regarding the
Collateral; Audits
    
    
    114ARTICLE IX SECURITY INTEREST
    
    
    115Section 9.1
    
    Grant of Security Interest
    
    
    115Section 9.2
    
    Release of Lien on Collateral
    
    
    115Section 9.3
    
    Further Assurances
    
    
    116Section 9.4
    
    [Reserved]
    
    
    116Section 9.5
    
    Waiver of Certain Laws
    
    
    116Section 9.6
    
    Power of Attorney
    
    
    116ARTICLE X TERMINATION EVENTS
    
    
    117Section 10.1
    
    Termination Events
    
    
    117Section 10.2
    
    Remedies
    
    
    119




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##### 



ARTICLE XI INDEMNIFICATION
    
    120Section 11.1
    
    Indemnities by the Sellers
    
    
    120Section 11.2
    
    Indemnities by the Servicer
    
    
    122Section 11.3
    
    After-Tax Basis
    
    
    123ARTICLE XII THE ADMINISTRATIVE AGENT AND PURCHASER AGENTS
    
    
    123Section 12.1
    
    The Administrative Agent
    
    
    123Section 12.2
    
    The Purchaser Agents
    
    
    126Section 12.3
    
    Additional Agent
    
    
    128ARTICLE XIII MISCELLANEOUS
    
    
    130Section 13.1
    
    Amendments and Waivers
    
    
    130Section 13.2
    
    Notices, Etc
    
    
    130Section 13.3
    
    Ratable Payments
    
    
    131Section 13.4
    
    No Waiver; Remedies
    
    
    131Section 13.5
    
    Binding Effect; Benefit of Agreement
    
    
    131Section 13.6
    
    Term of this Agreement
    
    
    131Section 13.7
    
    Governing Law; Consent to Jurisdiction;
Waiver of Objection to Venue
    
    
    132Section 13.8
    
    Waiver of Jury Trial
    
    
    132Section 13.9
    
    Costs, Expenses and Taxes
    
    
    132Section 13.10
    
    No Proceedings
    
    
    133Section 13.11
    
    Recourse Against Certain Parties
    
    
    133Section 13.12
    
    Protection of Right, Title and Interest in the Collateral; Further
Action Evidencing the Advance
    
    
    135Section 13.13
    
    Confidentiality
    
    
    136Section 13.14
    
    Execution in Counterparts; Severability; Integration
    
    
    137Section 13.15
    
    Waiver of Setoff
    
    
    137Section 13.16
    
    Assignments
    
    
    138Section 13.17
    
    Heading and Exhibits
    
    
    138Section 13.18
    
    Loans Subject to Retained Interest Provisions
    
    
    138Section 13.19
    
    Tax Treatment of the Advance
    
    
    139ARTICLE XIV GUARANTY
    
    
    139Section 14.1
    
    The Guaranty
    
    
    139Section 14.2
    
    Bankruptcy
    
    
    140




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##### 



Section 14.3
    
    Nature of Liability
    
    
    140Section 14.4
    
    Independent Obligation
    
    
    140Section 14.5
    
    Authorization
    
    
    141Section 14.6
    
    Reliance
    
    
    141Section 14.7
    
    Waiver
    
    
    141Section 14.8
    
    Limitation on Enforcement
    
    
    142Section 14.9
    
    Limitations on Payment
    
    
    142Section 14.10
    
    Limited Recourse and No Proceedings
    
    
    143




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##### 



SALE AND SERVICING AGREEMENT
 THIS SALE AND SERVICING AGREEMENT Agreement
 CSE QRS FUNDING I LLC QRS Seller
 CAPITALSOURCE FUNDING III LLC CSIII Seller Sellers Seller
 CSE MORTGAGE LLC CSE Mortgage QRS Originator
 CAPITALSOURCE FINANCE LLC CapitalSource
Finance CSIII Originator Originators Originator Servicer
 CS EUROPE FINANCE LIMITED Europe Guarantor
 CS UK FINANCE LIMITED UK Guarantor Guarantors Guarantor
 EACH OF THE CONDUIT PURCHASERS FROM TIME TO TIME PARTY HERETO Conduit Purchaser
 EACH OF THE INSTITUTIONAL PURCHASERS FROM TIME TO TIME PARTY HERETO Institutional Purchaser Purchasers
 EACH OF THE PURCHASER AGENTS FROM TIME TO TIME PARTY HERETO Purchaser Agent
 WACHOVIA CAPITAL MARKETS, LLC WCM




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##### 



Administrative Agent WBNA WBNA Agent
 WELLS FARGO BANK, NATIONAL ASSOCIATION Wells Fargo Backup Servicer Collateral Custodian
 R E C I T A L S
 WHEREAS
 WHEREAS
 WHEREAS
 WHEREAS
 WHEREAS
 WHEREAS
 NOW, THEREFORE,
 ARTICLE I
 DEFINITION
 Section 1.1 Certain Defined Terms
 Section 1.1
 -2-




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##### 



40 Act Section 10.1(d)
 Accrual Period
 Acquired Loan provided
 Additional Agent
 Additional Agent Fee Letter
 Additional Agents Account
 Additional Purchaser
 Additional Purchaser Agreement
 Adjusted Balance
 provided
 minus
 -3-




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##### 



provided however clause (b)
 Adjusted Eurodollar Rate minus
 Administrative Agent ARTICLE XII
 Advance Section 2.1(b)
 Advances Outstanding
 Affected Party
 Affiliate
 Agents Account
 Agented Loans
 -4-




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##### 



pro rata
 Aggregate Outstanding Loan Balance minus minus plus plus
 Aggregate Unpaids Article XI Section
2.10 Section 2.14 Section 2.15 Section 2.16
 Alarm Service Agreement
 Alternative Rate provided, however
 Applicable Law
 -5-




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##### 



Appraisal
 Appraisal Institute
 Assigned Loan Section 2.21
 Assignment of Leases and Rents
 Assignment of Mortgage Exhibit I
 Available Funds
 B-Note Loan
 -6-




---



##### 



Backup Servicer Section 7.3 Section 7.5
 Backup Servicer Fee Letter
 Backup Servicer Fee Rate
 Backup Servicer Termination Notice Section 7.5
 Backup Servicing Fee
 Bank Subsidiary
 Bankruptcy Code et seq
 Base Rate plus
 Benefit Plan Section 3(3) Section 3(5)
 Borrowing Notice Exhibit A-1
 Breakage Costs
 Business Day
 -7-




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##### 



CapitalSource Bank Acquisition Agreement
 CapitalSource Bank Entities
 CapitalSource Bank Transaction
 CapitalSource LIBOR Rate
 CapitalSource Prime Rate provided however
 Capital Stock
 Change-in-Control
  Sections 13(d) 14(d)
 -8-




---



##### 



provided however
 provided however
 provided however
 clause (a)
 -9-




---



##### 



provided Section 12(g) Sections 13 15(d)
 Citibank Facilities
 Clearing Agency
 Closing Date
 Code
 Collateral
 -10-




---



##### 



clause (i)
 Collateral Custodian Section
8.3 Section
8.5
 Collateral Custodian Fee
 Collateral Custodian Fee Letter
 Collateral Custodian Termination Notice Section 8.5
 Collection Account Section 6.4(f)
 Collection Date
 Collection Period
 Collections
 Commercial Paper Notes
 Commitment
 Condominium Conversions
 Conduit Purchasers Preamble
 Consolidated Subsidiary
 -11-




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##### 



Consolidated Tangible Net Worth provided however provided further however
 Construction Properties
 Contractual Obligation
 Core Transaction Terms
 CP Rate per annum per annum
 -12-




---



##### 



provided per annum
 Credit Agreement
 Credit and Collection Policy Section 5.1(h) Section
5.4(f)
 Credit Party
 CSIII Criteria Schedule V
 CSIII Loan
 CSIII Originator Preamble
 CSIII Sale Agreement
 CSIII Seller Preamble
 CS Europe Financing
 -13-




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##### 



Deemed Collection Section 2.4(b)
 Defaulted Loan clause (ii) provided clauses (ii) (iv)
 Derivatives
 Determination Date
 Development Properties provided
 DIP Loan subsection (b) (c) (d)
 -14-




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##### 



Discretionary Sale Section 2.20(a)
 Discretionary Sale Date
 Discretionary Sale Notice Section 2.20(a)(i)
 Distributions
 Dollars $
 Eligible Loan provided provided however clauses (a) (b) (j) (q) (r) (z) (ee)
 -15-




---



##### 



Section 3(a)(3)
    -16-




---



##### 



-17-




---



##### 



Section 7.4(a)
     -18-




---



##### 



-19-




---



##### 



-20-




---



##### 



-21-




---



##### 



pro rata
     Eligible Obligor
 Eligible Repurchase Obligations clauses (c)(2) (c)(4)
 Eligible Risk Rating
 Environmental Laws
 -22-




---



##### 



et seq et
seq et seq et seq et seq et
seq et seq et seq
 Equipment
 ERISA
 ERISA Affiliate  Section 414(b) Section 414(c) Section 414(m) clause (a) clause (b)
 Eurocurrency Liabilities
 Eurodollar Disruption Event
 -23-




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##### 



Eurodollar Reserve Percentage
 Exchange Act
 Excluded Amounts
 Face Amount
 Facility Amount
 FDIC
 Federal Funds Rate
 Finance Charges
 Fitch
 Fixed Rate Loan
 Floating Rate Loan
 -24-




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##### 



GAAP
 Governmental Authority
 Guaranteed Obligations Section 14.1
 Guarantors Preamble
 Guaranty Article XIV
 H.15
 Healthcare Properties
 Healthcare REIT
 Healthcare REIT Consolidated Subsidiary
 Healthcare REIT Entities
 Highest Required Investment Category
 Hospitality Properties
 -25-




---



##### 



Increased Costs Section 2.15
 Indebtedness clauses (a) (h)
 Indemnified Amounts Section 11.1
 Indemnified Parties Section 11.1
 Industrial Properties
 Industry
 Insolvency Event
 -26-




---



##### 



Insolvency Laws
 Insolvency Proceeding
 Institutional Purchaser Preamble
 Instrument
 Insurance Policy
 Insurance Proceeds
 Intercreditor Agreement
 Interest
 IR x P x
    
    1D
  IR
    
    =
    
    the Interest Rate applicable on such day;P
    
    =
    
    the principal amount of such Advance on such day; andD
    
    =
    
    360 or, to the extent the Interest Rate is based on the Base Rate,
365 or 366 days, as applicable.
 provided, however
 -27-




---



##### 



Interest Collections
 Interest Rate
   provided, however
 Interests in Real Property
 Investment
 Investment Loan
 Investment Loan Subsidiary
 -28-




---



##### 



Investment in Equity Instruments
 Issuer
 Land Development
 LIBOR Market Index Rate
 Lien
 -29-




---



##### 



Liquidation Expenses
 Liquidity Agreement
 Liquidity Bank
 Loan
 Loan Checklist
 Loan Files
 Loan List Schedule IV
 Loan Register Section 5.4(n)
 -30-




---



##### 



Loan-to-Liquidation Value Schedule IV
 Loan-to-Value Ratio Schedule IV plus pari passu
 Schedule IV plus pari
passu
 Lock-Box Schedule II
 Lock-Box Account Schedule II
 Lock-Box Agreement
 -31-




---



##### 



Lock-Box Bank
 Margin Stock
 Material Adverse Effect
 Material Modification provided minus
 -32-




---



##### 



provided
 Materially Modified Loan
 Materials of Environmental Concern
 Middle Market ABL Loan pari passu provided, however
 Middle Market Loan
 Minimum Overcollateralization Ratio
 Mixed Use Properties
 Monthly Report Section 6.10(b)
 Moodys
 Mortgage
 Mortgaged Property
 -33-




---



##### 



Multiemployer Plan Section 4001(a)(3)
 Multifamily Properties
 NAICS Code
 Net Proceeds of Capital Stock/Conversion of Debt provided however
 NOI
 Noteless Loan
 Obligor
 Office Properties
 -34-




---



##### 



Officers Certificate
 Opinion of Counsel
 Optional Sale Section 2.19(a)
 Optional Sale Date  Section 2.19(a)
 Originators Preamble
 Other Costs Section 13.9(c)
 Other Property
 Outstanding Loan Balance plus
 Overcollateralization Ratio plus divided by
 Participation Loan provided, however
 Payment Date
 -35-




---



##### 



Permitted Investments
  provided, however,
   clause (2)
   -36-




---



##### 



Permitted Liens
 Permitted Securitization Transaction
 Person
 Prepayments Section 6.4(b)
 Prime Rate
 Principal Collections
 Principal Collections Account Section 6.4(f)
 -37-




---



##### 



Proceeds
 Program Fee
 Program Fee Rate
 Pro-Rata Share Annex A
 Purchaser Purchasers
 Purchaser Agent
 Purchaser Fee Letter
 QRS Criteria Schedule VI
 QRS Loan
 QRS Originator Preamble
 QRS Sale Agreement
 QRS Seller Preamble
 Qualified Institution Section 6.4(f)
 Qualified Transferee
 -38-




---



##### 



subclauses (A) (B)
 subclauses (i) (ii) (iii)
  Rating Agency
 -39-




---



##### 



Real Estate ABL Loan provided pari passu provided, however
 Real Estate Loan provided however
 Records
 -40-




---



##### 



Recovery Rate
 Middle Market Loans
 Middle Market ABL
    
    
    50
    %Senior Secured Loan
    
    
    50
    %Second Lien Loan
    
    
    30
    %Subordinated Loan
    
    
    15
    %
 Real Estate Loans
 Real Estate ABL
    
    
    50
    %Senior Secured Whole Loans
    
    
    50
    %B-Note Loans
    
    
    15
    %
 Recoveries
 Regulation U
 REIT
 Related Loan pari
passu
 Related Property provided
 Related Security
  -41-




---



##### 



REO Asset
 REO Asset Owner Section 6.17
 Repayment Notice Section 2.4(a) Exhibit A-2
 Reporting Date
 Required Loan Documents
 -42-




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##### 



provided Section 2.21
 Required Reports Section 6.10(c) Section 6.10(d) Section 6.11 Section 6.12
 Residential Mortgage Policies and Procedures Schedule
VII
 Resort Finance Properties
 Responsible Officer
 Restricted Junior Payment
 Retail Properties
 Retained Interest
 -43-




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##### 



clause (A)
 Revolving Loan provided, however
 Retransfer Date Section 4.6
 Retransfer Price Section 4.6
 Review Criteria Section 8.2(b)
 S&P
 Sale Agreements
 Scheduled Payments
 Second Lien Loan pari passu
 Secured Party
 Security System Loan
 -44-




---



##### 



Securities Account Control Agreement
 Sellers Preamble
 Sellers Guaranty
 Senior Secured Loan pari passu
 Senior Secured Whole Loan pari passu
 Servicer  Section 6.16(a)
 Servicer Advance Section 6.5
 Servicer Default Section 6.15
 Servicer Termination Notice Section 6.15
 Servicers Certificate Section 6.10(c)
 Servicing Fee Section 2.14(b)
 Servicing Fee Rate per annum
 Servicing Guarantor
 Servicing Guaranty Section
2.21
 Solvent
 -45-




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##### 



Section
101(32)
 Subordinated Loan
 Subsidiary provided however Section 6.15(k) provided further however
 Successor Servicer Section 6.16(a)
 Tape Section 7.2(b)(ii)
 Taxes
 -46-




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##### 



Termination Date Section
2.1(c)
 Termination Event Section 10.1
 Term Loan
 Transaction Section 3.2
 Transaction Documents
 Transferee Letter Section 13.16
 Transition Expenses
 UCC
 United States
 Unmatured Termination Event
 Variable Funding Note VFN Section 2.1(a)
 Voting Stock
 Wachovia
 Warranty Loan
 -47-




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##### 



WBNA Preamble
 WBNA Agent Preamble
 WBNA Agents Account
 Wholly Owned Subsidiary
 Section 1.2 Other Terms
  Section 1.3 Computation of Time Periods
  Section 1.4 Interpretation
        -48-




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##### 



ARTICLE II
 PURCHASE OF THE VARIABLE FUNDING NOTES
 Section 2.1 The Variable Funding Notes
 Variable Funding Note VFN Exhibit B-1 B-2 Section 9.1 provided
 Advance Section 2.1
 -49-




---



##### 



Section 2.2 Release of any Purchaser and the Related Purchaser Agent
 provided however
 Section 2.3 [Reserved]
 Section 2.4 Reduction of the Facility Amount; Mandatory and Optional Repayments
 provided provided first pro rata second third Section 2.4(a)
 -50-




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##### 



Deemed Collection pro rata Section 2.4(b)
 Section 2.5 Determination of Interest
   Section 2.6 [Reserved]
 Section 2.7 [Reserved].
 Section 2.8 Notations on Variable Funding Notes
  -51-




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##### 



Section 2.9 [Reserved]
 Section 2.10 Settlement Procedures
  FIRST
 SECOND
 THIRD pro rata
 FOURTH pro rata
 FIFTH pro rata
 SIXTH pro rata FOURTH
 SEVENTH pro rata SEVENTH
 EIGHTH
 NINTH
 -52-




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##### 



SEVENTH Sections 2.11(b) 2.12(c) 2.15 2.17 5.1(k) 5.1(q) 5.4(o) 6.10(a) 6.12 10.1(f) 10.1(k) 10.1(n) 10.1(o) Articles III IV XIV
 Section 2.11 Collections and Allocations
 Collections Section 6.10(b)
 Initial Deposits
 Excluded Amounts
 Investment of Funds Section 2.10
 Section 2.12 Payments, Computations, Etc
  -53-




---



##### 



provided however
 SEVENTH Section 2.10
  Section 2.13 [Reserved]
 Section 2.14 Fees
 Section
2.10(a)(iv)
 Servicing Fee Section 2.10(a)(ii) provided however
 -54-




---



##### 



Section 2.10(a)(iii)
 Section 2.10(a)(iii)
  Section 2.15 Increased Costs; Capital Adequacy; Illegality
   -55-




---



##### 



Section 2.15
 clauses
(a) (b) Section 2.15
 Section 2.15 Section 2.15
 clause (a)
 Section 2.15
 Section 2.16 Taxes
  -56-




---



##### 



Additional Amount
   Section 2.16(d)
 Section 2.16
 -57-




---



##### 



Section 2.16
 Section 2.17 Assignment of the Sale Agreements
 Article VIII
 Section 2.18 [Reserved]
 Section 2.19 Optional Sales
 Optional
Sale
    -58-




---



##### 



Section 4.1
 plus plus provided, clauses (iii) (iv) (v) Section 2.19(a)
   clause (a)(v)  clause (a)(iv)
  -59-




---



##### 



clause
(i) Section 2.19 Section 2.19(a)(i)
 Section 2.20 Discretionary Sales
 Discretionary Sale
 Discretionary Sale
Notice provided
 -60-




---



##### 



provided however
 Section 4.1
 provided
 Section 2.20(a) Tandem Discretionary Sale
 Tandem
Discretionary Sale Notice
 provided however
 Section 4.1
 -61-




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##### 



Section 2.21 Loans Originated by Affiliates of CapitalSource Inc. Other than the
Originator
  ARTICLE III
 CONDITIONS TO ADVANCES
 Section 3.1 Conditions to Closing and the Advance
  Schedule I
  -62-




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##### 



Exhibit A-1
 Exhibits E-1-1 E-1-2 Exhibit E-2
 Exhibits F-1-1 F-1-2 Exhibits F-2-1 F-2-2 F-2-3
 Exhibits G-1-1 G-1-2 Exhibit G-2
   Section 3.2 Condition Precedent to Repayments
 Section 2.4(a) Transaction Exhibit A-2
 -63-




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##### 



ARTICLE IV
 REPRESENTATIONS AND WARRANTIES
 Section 4.1 Representations and Warranties of the Sellers
  Organization and Good Standing
 Due Qualification
 Power and Authority; Due Authorization; Execution and Delivery
 Binding Obligation
 No Violation
 -64-




---



##### 



No Proceedings
 All Consents Required
 Bulk Sales
 Solvency Exhibit E-1-1 Exhibit E-1-2
 Selection Procedures
 Taxes
 Exchange Act Compliance; Regulations T, U and X
 Security Interest
 -65-




---



##### 



Reports Accurate
 -66-




---



##### 



Location of Offices Section 13.2 Section 5.2(g)
 Lock-Boxes Schedule II  Section
5.2(k)
 Tradenames
 Sale Agreement
 Value Given
 Accounting
 Special Purpose Entity
 -67-




---



##### 



provided,
     -68-




---



##### 



-69-




---



##### 



Independent Director provided, however
    Investment Company Act
 ERISA Pension Plans
 -70-




---



##### 



Compliance with Law
 Credit and Collection Policy
 Collections
 Set-Off, etc Section 6.4(a)
 Full Payment
 Accuracy of Representations and Warranties
 Representations and Warranties in the applicable Sale Agreement Section 4.1(ff)
 -71-




---



##### 



mutatis mutandis
  Participation, Acquired and Assigned Loans
 Environmental
       -72-




---



##### 



USA PATRIOT Act
 Section 4.2 Representations and Warranties of the Sellers Relating to the Agreement and
the Collateral
  Binding Obligation, Valid Security Interest
  Section 4.1(m)
 Eligibility of Collateral
 -73-




---



##### 



No Fraud
 Loans Secured by Real Property
 Section 4.3 Representations and Warranties of the Servicer
  Organization and Good Standing
 Due Qualification
 Power and Authority; Due Authorization; Execution and Delivery
 Binding Obligation
 No Violation
 -74-




---



##### 



No Proceedings
 All Consents Required
 Reports Accurate
 Credit and Collection Policy
 Collections
 Bulk Sales
 Solvency Exhibit E-2
 Taxes
 -75-




---



##### 



Exchange Act Compliance; Regulations T, U and X
 Security Interest
 ERISA Pension Plans
 Investment Company Act
 USA PATRIOT Act
 -76-




---



##### 



Section 4.4 Representations and Warranties of the Backup Servicer
  Organization and Corporate Power
 Due Authorization
 No Conflict
 No Violation
 All Consents Required
 Validity, Etc
 Section 4.5 Representations and Warranties of the Collateral Custodian
  -77-




---



##### 



Organization and Corporate Power
 Due Authorization
 No Conflict
 No Violation
 All Consents Required
 Validity, Etc
 Section 4.6 Breach of Certain Representations and Warranties
 Section 2.10 Retransfer Price Retransfer Date
 -78-




---



##### 



Section 4.6
 Section 4.7 Representations and Warranties of the Guarantors
  Organization and Good Standing
 Due Qualification
 Power and Authority; Due Authorization; Execution and Delivery
 Binding Obligation
 -79-




---



##### 



No Violation
 No Proceedings
 All Consents Required
 Bulk Sales
 Investment Company Act
 Solvency
 ARTICLE V
 GENERAL COVENANTS
 Section 5.1 Affirmative Covenants of the Sellers
  Compliance with Laws
 Preservation of Company Existence
 -80-




---



##### 



Performance and Compliance with Collateral
 Keeping of Records and Books of Account
 Originators Collateral
 Delivery of Collections Section 5.4(k)
 Separate Limited Liability Company Existence Section 4.1(u)
 Credit and Collection Policy
 -81-




---



##### 



provided
 Termination Events
 Taxes
 Use of Proceeds
 Obligor Notification Forms
 Adverse Claims
 Sellers Collateral
 Notices
 Income Tax Liability
 -82-




---



##### 



Auditors Management Letters
 Representations Section 4.1
 ERISA
 Proceedings provided, however Section
5.1(o)
 Notice of Material Events
 Other
 -83-




---



##### 



Notice of Modifications to the Citibank Facilities
 Section 5.2 Negative Covenants of the Sellers
  Other Business
 Collateral Not to be Evidenced by Instruments
 Security Interests Section 6.17 provided however Section 5.2(c)
 Mergers, Acquisitions, Sales, etc
 Deposits to Special Accounts
 -84-




---



##### 



Restricted Payments
 Change of Name or Location of Loan Files Section 13.2
 Accounting of Purchases
 ERISA Matters
 Operating Agreement; Sale Agreement
 Changes in Payment Instructions to Obligors Schedule II
 -85-




---



##### 



Extension or Amendment of Collateral Section 6.4(a) provided however Section 6.4(a)
 Credit and Collection Policy provided
 Tax provided Section
2.16(f)
 Section 5.3 [Reserved]
 Section 5.4 Affirmative Covenants of the Servicer
  Compliance with Law
 Preservation of Company Existence
 Obligations and Compliance with Collateral
 -86-




---



##### 



Keeping of Records and Books of Account
    Preservation of Security Interest
 Credit and Collection Policy provided
 Termination Events
 -87-




---



##### 



Taxes
 Other
 Proceedings provided however Section 5.4(j)
 Deposit of Collections
 Servicing of Participation, Acquired and Assigned Loans
 Change-in-Control
 Loan Register
 Loan Register
 -88-




---



##### 



Section 5.04(n) provided, however
  Modifications to the Citibank Facilities
 Section 5.5 Negative Covenants of the Servicer
  Deposits to Special Accounts
 Mergers, Acquisition, Sales, etc
 Section 5.5
  -89-




---



##### 



Change of Name or Location of Loan Files Section 13.2
 Change in Payment Instructions to Obligors Schedule
II
 Extension or Amendment of Loans Section 6.4(a) provided however Section 6.4(a)
 Tax provided Section 2.16(f)
 Section 5.6 Affirmative Covenants of the Backup Servicer
  -90-




---



##### 



Compliance with Law
 Preservation of Existence
 Section 5.7 Negative Covenants of the Backup Servicer
  No Changes in Backup Servicer Fee
 Section 5.8 Affirmative Covenants of the Collateral Custodian
  Compliance with Law
 Preservation of Existence
 Location of Required Loan Documents
 Section 5.9 Negative Covenants of the Collateral Custodian
  Required Loan Documents
 -91-




---



##### 



No Changes in Collateral Custodian Fee
 ARTICLE VI
 ADMINISTRATION AND SERVICING OF CONTRACTS
 Section 6.1 Designation of the Servicer
 Initial Servicer Section 6.1
 Successor Servicer Section 6.15
 Subcontracts provided however
 Servicing Programs
 Section 6.2 Duties of the Servicer
 Appointment Section 6.1
 Duties
 -92-




---



##### 



-93-




---



##### 



Section 2.10
   Section 6.3 Authorization of the Servicer
  provided however
 -94-




---



##### 



Section 6.4 Collection of Payments
 Collection Efforts, Modification of Collateral
   Taxes and other Amounts
 Payments to Lock-Box Account Section 5.1(p)
 Establishment of the Collection Account Collection Account Principal Collections Account
 -95-




---



##### 



provided however Qualified Institution
 Adjustments
 Section 6.5 Servicer Advances
  Section 6.6 Realization Upon Defaulted Loans
  -96-




---



##### 



Section 6.7 Maintenance of Insurance Policies
  -97-




---



##### 



Section 6.8 Servicing Compensation
 Section 2.10(a)(ii)
 Section 6.9 Payment of Certain Expenses by Servicer
 Section 6.6 provided however pro rata
 Section 6.10 Reports
 Repayment Notice Section 2.4(a)
 Monthly Report Monthly Report Exhibit
C
 Servicers Certificate Servicers Certificate Exhibit J
 Financial Statements
 -98-




---



##### 



Tax Returns
 Obligor Financial Statements; Valuation Reports; Other Reports
 Section 6.11 Annual Statement as to Compliance
  Section 6.12 Annual Independent Public Accountants Servicing Reports
 Article VI
 -99-




---



##### 



Section 6.13 Limitation on Liability of the Servicer and Others
 provided, however,
 Section 6.14 The Servicer Not to Resign
 clause
(i) Section 6.2
 Section 6.15 Servicer Defaults
 Servicer Default
    -100-




---



##### 



Section 6.1
     provided
 -101-




---



##### 



Servicer Termination Notice
 Section 6.16 Appointment of Successor Servicer
 Section 6.15
 -102-




---



##### 



Successor Servicer
 Section 6.16(a) provided however provided Article IV Section 2.15 Section 2.16(b) Section
2.16(e)
  Section 6.16
 -103-




---



##### 



Section 6.16(a)
 Section 6.17 Servicing of REO Assets
 Section 6.6 REO Asset Owner Exhibit L Section 9.1 Exhibit M
 -104-




---



##### 



REO Servicing Standard
     -105-




---



##### 



Section 6.17(c)
 ARTICLE VII
 THE BACKUP SERVICER
 Section 7.1 Designation of the Backup Servicer
 Initial Backup Servicer Section 7.1
 Successor Backup Servicer Section 7.5
 Section 7.2 Duties of the Backup Servicer
 Appointment Section 7.1
 Duties Section 7.5
 provided, however,
 -106-




---



##### 



Tape
  clause (iii) clause (iii)
 Reliance on Tape Section 7.2(b)
 Section 7.3 Merger or Consolidation
  -107-




---



##### 



Section 7.4 Backup Servicing Compensation
 Section 2.10(a)(iii) Section 7.5 Section 6.16
 Section 7.5 Backup Servicer Removal
 Backup Servicer Termination Notice
 Section 7.6 Limitation on Liability
  -108-




---



##### 



Section 7.7 The Backup Servicer Not to Resign
 clause (i)
 ARTICLE VIII
 THE COLLATERAL CUSTODIAN
 Section 8.1 Designation of Collateral Custodian
 Initial Collateral Custodian Section 8.1
 Successor Collateral Custodian Section 8.5
 -109-




---



##### 



Section 8.2 Duties of Collateral Custodian
 Appointment
 Duties Section 8.5
 Section 3.2 Review Criteria
 -110-




---



##### 



provided, however provided, further,
 Schedule III
 Section 2.10 Payment Duties
   Section 8.3 Merger or Consolidation
  Section 8.4 Collateral Custodian Compensation
 Collateral Custodian Fee Section
2.10(a)(iii)
 -111-




---



##### 



Section 8.5
 Section 8.5 Collateral Custodian Removal
 Collateral Custodian Termination
Notice provided, however
 Section 8.6 Limitation on Liability
      -112-




---



##### 



Section 8.7 The Collateral Custodian Not to Resign
 clause (i)
 Section 8.8 Release of Documents
 Release for Servicing Exhibit H Exhibit H
 Limitation on Release
 -113-




---



##### 



Release for Payment Exhibit H provided
 Section 8.9 Return of Required Loan Documents
 Section 9.2 Section 4.6 Exhibit H
 Section 8.10 Access to Certain Documentation and Information Regarding the Collateral;
Audits
 Section 8.10
 -114-




---



##### 



ARTICLE IX
 SECURITY INTEREST
 Section 9.1 Grant of Security Interest
 Section 9.1
 Section 9.2 Release of Lien on Collateral
 Section 13.6 Section 2.19 Section
2.20 Section 4.6 provided,
 -115-




---



##### 



Section 6.6
 Section 9.3 Further Assurances
 Section 13.12 Section 9.1
 Section 9.4 [Reserved]
 Section 9.5 Waiver of Certain Laws
  Section 9.6 Power of Attorney
  -116-




---



##### 



ARTICLE X
 TERMINATION EVENTS
 Section 10.1 Termination Events
 Termination Events
    40 Act
     Section 2.4(b)
 -117-




---



##### 



-118-




---



##### 



SEVENTH Section 2.10
 Section 10.2 Remedies
 provided however Section 10.1(c) Section 9.1 Section 2.10
 -119-




---



##### 



ARTICLE XI
 INDEMNIFICATION
 Section 11.1 Indemnities by the Sellers
 Indemnified Parties Indemnified Amounts Section 11.1
     -120-




---



##### 



-121-




---



##### 



Section 11.1
 Section 11.1
 Section 11.1
 Section 11.2 Indemnities by the Servicer
  -122-




---



##### 



Section 11.2
  Section 11.2
 Section 11.2
 Section 11.3 After-Tax Basis
 Section 11.1 Section 11.2
 ARTICLE XII
 THE ADMINISTRATIVE AGENT AND PURCHASER AGENTS
 Section 12.1 The Administrative Agent
  -123-




---



##### 



provided however
  Administrative Agents Reliance, Etc
 -124-




---



##### 



Credit Decision with Respect to the Administrative Agent
 Indemnification of the Administrative Agent provided
 Successor Administrative Agent
 -125-




---



##### 



Payments by the Administrative Agent
 Section 12.2 The Purchaser Agents
 Authorization and Action
 Delegation of Duties
 -126-




---



##### 



Exculpatory Provisions Article III
 Reliance provided
 Non-Reliance on the Purchaser Agent and Other Purchasers
 -127-




---



##### 



Purchaser Agents in their Respective Capacities
 Successor Purchaser Agent
 Section 12.3 Additional Agent
 Authorization and Action
 -128-




---



##### 



Delegation of Duties
 Exculpatory Provisions
 Reliance by Additional Agent provided
 Non-Reliance on Additional Agent
 -129-




---



##### 



Additional Agent in its Individual Capacity
 Successor Additional Agent Articles XI XII
 ARTICLE XIII
 MISCELLANEOUS
 Section 13.1 Amendments and Waivers
 Section 13.1 Appendix B
 Section 13.2 Notices, Etc
  -130-




---



##### 



provided, however, Article II Section 6.10 Section
6.11 Section 6.12
 Section 13.3 Ratable Payments
 Section 11.1 provided,
however
 Section 13.4 No Waiver; Remedies
  Section 13.5 Binding Effect; Benefit of Agreement
  Section 13.6 Term of this Agreement
 Articles IV V Articles VI VII VIII provided, however Articles III IV
 -131-




---



##### 



Article XI Section
13.9 Section 13.10 Section 13.11
 Section 13.7 Governing Law; Consent to Jurisdiction; Waiver of Objection to Venue
  Section 13.8 Waiver of Jury Trial
  Section 13.9 Costs, Expenses and Taxes
 Article XI
 -132-




---



##### 



Other Costs
 Section 13.10 No Proceedings
   provided Section
13.10
 Section 13.11 Recourse Against Certain Parties
  -133-




---



##### 



it being expressly agreed and understood Section 13.11
   -134-




---



##### 



Section 13.12 Protection of Right, Title and Interest in the Collateral; Further Action
Evidencing the Advance
 Section 13.12(a)
  Article XI
 Section 3.1
 -135-




---



##### 



Section 3.1
 Section 13.13 Confidentiality
 Excepted Persons Section 13.13(a) clause (a)
  -136-




---



##### 



provided that
 Section 13.14 Execution in Counterparts; Severability; Integration
  Section 13.15 Waiver of Setoff
  -137-




---



##### 



Section 13.16 Assignments
 provided Exhibit K Transferee Letter
 Section 13.17 Heading and Exhibits
  Section 13.18 Loans Subject to Retained Interest Provisions
 provided however pro rata pro rata
  -138-




---



##### 



pro rata
 Section 13.19 Tax Treatment of the Advance
  ARTICLE XIV
 GUARANTY
 Section 14.1 The Guaranty .
 Section 14.9 Section 14.10 Guaranteed
Obligations Section 14.9  Section
14.10 Article XIV Article XIV provided however Article XIV clause (i)
  -139-




---



##### 



Section 14.2 Bankruptcy
 Section 14.9 Section 14.10
 Section 14.3 Nature of Liability
  Section 14.4 Independent Obligation
  -140-




---



##### 



Section 14.5 Authorization
  Section 14.6 Reliance
  Section 14.7 Waiver
 Section 10.2
  -141-




---



##### 



Other Parties
 Section 14.8 Limitation on Enforcement
  Section 14.9 Limitations on Payment
 Article XIV Article XIV Section 14.10
 -142-




---



##### 



Section 14.10 Limited Recourse and No Proceedings
 mutatis mutandis
 [Remainder of Page Intentionally Left Blank.]
 -143-




---



##### 



THE SELLERS:
    
    CAPITALSOURCE FUNDING III LLC,By:
    
    /s/ JEFFREY A. LIPSONName:
    
    Jeffrey A. LipsonTitle:
    
    Senior Vice President & TreasurerCSE QRS FUNDING I LLCBy:
    
    /s/ JEFFREY A. LIPSONName:
    
    Jeffrey A. LipsonTitle:
    
    Senior Vice President & Treasurer
 [Signatures Continued on the Following Page]




---



##### 



THE ORIGINATORS:
    
    CAPITALSOURCE FINANCE LLCBy:
    
    /s/ JEFFREY A. LIPSONName:
    
    Jeffrey A. LipsonTitle:
    
    Senior Vice President & TreasurerCSE MORTGAGE LLCBy:
    
    /s/ JEFFREY A. LIPSONName:
    
    Jeffrey A. LipsonTitle:
    
    Senior Vice President & Treasurer
 [Signatures Continued on the Following Page]




---



##### 



THE SERVICER:
    
    CAPITALSOURCE FINANCE LLCBy:
    
    /s/ JEFFREY A. LIPSONName:
    
    Jeffrey A. LipsonTitle:
    
    Senior Vice President & Treasurer
 [Signatures Continued on the Following Page]




---



##### 



PURCHASER
    
    WACHOVIA BANK, NATIONAL ASSOCIATIONBy:
    
    /s/ RAJ SHAHName:
    
    Raj ShahTitle:
    
    Managing DirectorTHE ADMINISTRATIVE AGENT 
AND THE WBNA AGENT
    
    WACHOVIA CAPITAL MARKETS, LLCBy:
    
    /s/ MARY KATHERINE DUBOSEName:
    
    Mary Katherine DuBoseTitle:
    
    Managing Director
 [Signatures Continued on the Following Page]




---



##### 



THE BACKUP SERVICER: 
AND THE COLLATERAL 
CUSTODIAN:
    
    WELLS FARGO BANK, NATIONAL
ASSOCIATION, not in its individual capacity but
solely as the Backup Servicer and as the Collateral CustodianBy:
    
    /s/ JEANINE C. CASEYName:
    
    Jeanine C. CaseyTitle:
    
    Vice President