exv10w26



 





EXECUTION COPY




Exhibit 10.26














SALE AND SERVICING AGREEMENT




by and among




CAPITALSOURCE COMMERCIAL LOAN TRUST 2004-1,

as the Issuer,




CAPITALSOURCE COMMERCIAL LOAN LLC, 2004-1,

as the Trust Depositor,




CAPITALSOURCE FINANCE LLC,

as the Originator and as the Servicer,




and




WELLS FARGO BANK,
NATIONAL ASSOCIATION,

as the Indenture Trustee and as the Backup Servicer.


Dated as of June 22, 2004
















CapitalSource Commercial Loan Trust 2004-1 Asset Backed Notes, Series 2004-1

Class A-1, Class A-2, Class B, Class C, Class D and Class E Notes




 









 



TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page

	 
	 	ARTICLE 1.	 	 	 	 
	 
	 	DEFINITIONS	 	 	 	 
	Section 1.01
	 	Definitions	 	 	2	 
	Section 1.02
	 	Usage of Terms	 	 	47	 
	Section 1.03
	 	Section References	 	 	47	 
	Section 1.04
	 	Calculations	 	 	47	 
	Section 1.05
	 	Accounting Terms	 	 	47	 
	 
	 	ARTICLE 2.	 	 	 	 
	 
	 	ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS	 	 	 	 
	Section 2.01
	 	Creation and Funding of Issuer; Transfer of Loan Assets	 	 	47	 
	Section 2.02
	 	Conditions to Transfer of Loan Assets to Issuer	 	 	50	 
	Section 2.03
	 	Acceptance by Owner Trustee	 	 	51	 
	Section 2.04
	 	Conveyance of Substitute Loans	 	 	51	 
	Section 2.05
	 	Release of Released Amounts	 	 	54	 
	Section 2.06
	 	Delivery of Documents in the Loan
File; Recording of Assignments of Mortgage	 	 	55	 
	Section 2.07
	 	Optional Purchase or Substitution
by the Servicer for Prepaid or Charged—Off Loans	 	 	56	 
	Section 2.08
	 	Certification by Indenture Trustee; Possession of Loan Files	 	 	56	 
	 
	 	ARTICLE 3.	 	 	 	 
	 
	 	REPRESENTATIONS AND WARRANTIES	 	 	 	 
	Section 3.01
	 	Representations and Warranties Regarding the Trust Depositor	 	 	58	 
	Section 3.02
	 	Representations and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate	 	 	62	 
	Section 3.03
	 	Representations and Warranties Regarding the Initial Loans in the Aggregate	 	 	62	 
	Section 3.04
	 	Representations and Warranties Regarding the Loan Files	 	 	63	 
	Section 3.05
	 	Representations and Warranties Regarding Concentrations of Initial Loans	 	 	63	 
	Section 3.06
	 	Representations and Warranties Regarding the Servicer	 	 	63	 
	Section 3.07
	 	Representations and Warranties of the Backup Servicer	 	 	64	 
	 
	 	ARTICLE 4.	 	 	 	 
	 
	 	PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS	 	 	 	 
	Section 4.01
	 	Custody of Loans	 	 	66	 
	Section 4.02
	 	Filing	 	 	66	 
	Section 4.03
	 	Changes in Name, Corporate Structure or Location	 	 	66	 
	Section 4.04
	 	Costs and Expenses	 	 	67	 
	Section 4.05
	 	Sale Treatment	 	 	67	 
	Section 4.06
	 	Separateness from Trust Depositor	 	 	67	 







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TABLE OF CONTENTS
(continued)


	 	 	 	 	 	 	 
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	 	ARTICLE 5.	 	 	 	 
	 
	 	SERVICING OF LOANS	 	 	 	 
	Section 5.01
	 	Appointment and Acceptance	 	 	67	 
	Section 5.02
	 	Duties of the Servicer	 	 	67	 
	Section 5.03
	 	Liquidation of Loans	 	 	73	 
	Section 5.04
	 	Fidelity Bond	 	 	74	 
	Section 5.05
	 	Maintenance of Hazard Insurance	 	 	74	 
	Section 5.06
	 	Collection of Certain Loan Payments	 	 	75	 
	Section 5.07
	 	Access to Certain Documentation and Information Regarding the Loans	 	 	76	 
	Section 5.08
	 	Satisfaction of Mortgages and Collateral and Release of Loan Files	 	 	76	 
	Section 5.09
	 	Scheduled Payment Advances	 	 	77	 
	Section 5.10
	 	Title, Management and Disposition of Foreclosed Property	 	 	78	 
	Section 5.11
	 	Servicing Compensation	 	 	78	 
	Section 5.12
	 	Assignment; Resignation	 	 	79	 
	Section 5.13
	 	Merger or Consolidation of Servicer	 	 	79	 
	Section 5.14
	 	Limitation on Liability of the Servicer and Others	 	 	80	 
	Section 5.15
	 	The Backup Servicer	 	 	80	 
	Section 5.16
	 	Covenants of the Backup Servicer	 	 	83	 
	 
	 	ARTICLE 6.	 	 	 	 
	 
	 	COVENANTS OF THE TRUST DEPOSITOR	 	 	 	 
	Section 6.01
	 	Legal Existence	 	 	83	 
	Section 6.02
	 	Loans Not to Be Evidenced by Promissory Notes	 	 	83	 
	Section 6.03
	 	Security Interests	 	 	83	 
	Section 6.04
	 	Delivery of Principal Collections and Interest Collections	 	 	84	 
	Section 6.05
	 	Regulatory Filings	 	 	84	 
	Section 6.06
	 	Compliance with Law	 	 	84	 
	Section 6.07
	 	Activities; Transfers of Notes or Certificates by Trust Depositor	 	 	84	 
	Section 6.08
	 	Indebtedness	 	 	84	 
	Section 6.09
	 	Guarantees	 	 	85	 
	Section 6.10
	 	Investments	 	 	85	 
	Section 6.11
	 	Merger; Sales	 	 	85	 
	Section 6.12
	 	Distributions	 	 	85	 
	Section 6.13
	 	Other Agreements	 	 	85	 
	Section 6.14
	 	Separate Legal Existence	 	 	86	 
	Section 6.15
	 	Location; Records	 	 	86	 
	Section 6.16
	 	Liability of Trust Depositor	 	 	87	 
	Section 6.17
	 	Bankruptcy Limitations	 	 	87	 
	Section 6.18
	 	Limitation on Liability of Trust Depositor and Others	 	 	87	 
	Section 6.19
	 	Insurance Policies	 	 	87	 
	Section 6.20
	 	Payments from Obligor Lock—Boxes and Obligor Lock—Box Accounts	 	 	88	 







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TABLE OF CONTENTS
(continued)


	 	 	 	 	 	 	 
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	 	ARTICLE 7.	 	 	 	 
	 
	 	ESTABLISHMENT OF ACCOUNTS; DISTRIBUTIONS; RESERVE FUND	 	 	 	 
	Section 7.01
	 	Note Distribution Account, Reserve Fund and Lock—Boxes	 	 	88	 
	Section 7.02
	 	Reserve Fund Deposit	 	 	89	 
	Section 7.03
	 	Principal and Interest Account	 	 	89	 
	Section 7.04
	 	Securityholder Distributions	 	 	92	 
	Section 7.05
	 	Priority of Payments; Allocations and Distributions	 	 	93	 
	Section 7.06
	 	Determination of LIBOR	 	 	99	 
	Section 7.07
	 	Monthly Reconciliation	 	 	99	 
	 
	 	ARTICLE 8.	 	 	 	 
	 
	 	SERVICER DEFAULT; SERVICER TRANSFER	 	 	 	 
	Section 8.01
	 	Servicer Default	 	 	100	 
	Section 8.02
	 	Servicer Transfer	 	 	101	 
	Section 8.03
	 	Appointment of Successor Servicer; Reconveyance; Successor Servicer to Act	 	 	102	 
	Section 8.04
	 	Notification to Securityholders and Hedge Counterparties	 	 	103	 
	Section 8.05
	 	Effect of Transfer	 	 	104	 
	Section 8.06
	 	Database File	 	 	104	 
	Section 8.07
	 	Waiver of Defaults	 	 	104	 
	Section 8.08
	 	Responsibilities of the Successor Servicer	 	 	105	 
	Section 8.09
	 	Rating Agency Condition for Servicer Transfer	 	 	105	 
	Section 8.10
	 	Appointment of Successor Backup Servicer; Successor Backup Servicer to Act	 	 	105	 
	 
	 	ARTICLE 9.	 	 	 	 
	 
	 	REPORTS	 	 	 	 
	Section 9.01
	 	Monthly Reports	 	 	106	 
	Section 9.02
	 	Officer’s Certificate	 	 	106	 
	Section 9.03
	 	Other Data; Obligor Financial Information	 	 	107	 
	Section 9.04
	 	Annual Report of Accountants	 	 	107	 
	Section 9.05
	 	Annual Statement of Compliance from Servicer	 	 	108	 
	Section 9.06
	 	Reports of Foreclosure and Abandonment of Mortgaged Property	 	 	108	 
	Section 9.07
	 	Notices	 	 	109	 
	Section 9.08
	 	Indenture Trustee’s Right to Examine Servicer Records and Audit Operations	 	 	109	 
	 
	 	ARTICLE 10.	 	 	 	 
	 
	 	TERMINATION	 	 	 	 
	Section 10.01
	 	Optional Purchase of Loan Assets	 	 	109	 
	Section 10.02
	 	Termination	 	 	110	 
	 
	 	ARTICLE 11.	 	 	 	 
	 
	 	REMEDIES UPON MISREPRESENTATION; REPURCHASE OPTION	 	 	 	 







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	Section 11.01
	 	Repurchases of, or Substitution
for, Loans for Breach of Representations and Warranties	 	 	110	 
	Section 11.02
	 	Reassignment of Repurchased or Substituted Loans	 	 	111	 
	 
	 	ARTICLE 12.	 	 	 	 
	 
	 	INDEMNITIES	 	 	 	 
	Section 12.01
	 	Indemnification by Servicer	 	 	111	 
	Section 12.02
	 	Indemnification by Trust Depositor	 	 	112	 
	 
	 	ARTICLE 13.	 	 	 	 
	 
	 	MISCELLANEOUS	 	 	 	 
	Section 13.01
	 	Amendment.	 	 	112	 
	Section 13.02
	 	Protection of Title to Issuer	 	 	113	 
	Section 13.03
	 	Governing Law	 	 	113	 
	Section 13.04
	 	Notices	 	 	114	 
	Section 13.05
	 	Severability of Provisions	 	 	117	 
	Section 13.06
	 	Third Party Beneficiaries	 	 	117	 
	Section 13.07
	 	Counterparts	 	 	117	 
	Section 13.08
	 	Headings	 	 	118	 
	Section 13.09
	 	No Bankruptcy Petition; Disclaimer	 	 	118	 
	Section 13.10
	 	Jurisdiction	 	 	119	 
	Section 13.11
	 	Tax Characterization	 	 	119	 
	Section 13.12
	 	Prohibited Transactions with Respect to the Issuer	 	 	119	 
	Section 13.13
	 	Limitation of Liability of Owner Trustee	 	 	119	 
	Section 13.14
	 	Allocation of Payments with Respect to Loans	 	 	120	 
	Section 13.15
	 	No Partnership	 	 	121	 
	Section 13.16
	 	Successors and Assigns	 	 	121	 
	Section 13.17
	 	Acts of Holders	 	 	121	 
	Section 13.18
	 	Duration of Agreement	 	 	121	 
	Section 13.19
	 	Limited Recourse	 	 	121	 
	Section 13.20
	 	Confidentiality	 	 	121	 
	Section 13.21
	 	Non-Confidentiality of Tax Treatment	 	 	122	 







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







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SALE AND SERVICING AGREEMENT




     THIS SALE AND SERVICING AGREEMENT, dated as of June 22, 2004, is by and
among:




	 	(1)	 	CAPITALSOURCE COMMERCIAL LOAN TRUST 2004-1, a statutory trust
created and existing under the laws of the State of Delaware
(together with its successors and assigns, the “Issuer”);
	 
	 	(2)	 	CAPITALSOURCE COMMERCIAL LOAN LLC, 2004-1, a Delaware limited
liability company, as the trust depositor (together with its
successor and assigns, in such capacity, the “Trust
Depositor”);
	 
	 	(3)	 	CAPITALSOURCE FINANCE LLC, a Delaware limited liability
company (together with its successors and assigns,
“CapitalSource”), as the servicer (together with its
successor and assigns, in such capacity, the “Servicer”), and
as the originator (together with its successor and assigns, in such
capacity, the “Originator”); and
	 
	 	(4)	 	WELLS FARGO BANK, NATIONAL ASSOCIATION (together with its
successors and assigns, “Wells Fargo”), not in its individual
capacity but as the indenture trustee (together with its successors
and assigns, in such capacity, the “Indenture Trustee”), and
not in its individual capacity but as the backup servicer (together
with its successors and assigns, in such capacity, the “Backup
Servicer”).





R E C I T A L S




     WHEREAS, in the regular course of its business, the Originator originates
and/or otherwise acquires Loans (as defined herein);



     WHEREAS, the Trust Depositor acquired the Initial Loans from the
Originator and may acquire from time to time thereafter certain Substitute
Loans (such Initial Loans and Substitute Loans, together with certain related
property as more fully described herein, being the Loan Assets as defined
herein);



     WHEREAS, it was a condition to the Trust Depositor’s acquisition of the
Initial Loans from the Originator that the Originator make certain
representations and warranties regarding the Loan Assets for the benefit of the
Trust Depositor as well as the Issuer;



     WHEREAS, on the Closing Date (as defined herein), the Trust Depositor will
fund the Issuer by selling, conveying and assigning all its right, title and
interest in such Loan Assets and certain other assets to the Issuer;



     WHEREAS, the Issuer is willing to purchase and accept assignment of the
Loan Assets (as defined herein) from the Trust Depositor pursuant to the terms
hereof; and



 









 





     WHEREAS, the Servicer is willing to service the Loan Assets for the
benefit and account of the Issuer pursuant to the terms hereof.



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



ARTICLE 1.




DEFINITIONS




     Section 1.01 Definitions.



     Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:


“1940 Act” means the Investment Company Act of 1940, as amended.



“Accelerated Amortization Event” means the occurrence of either of
(i) the Aggregate Outstanding Loan Balance shall be less than the Aggregate
Outstanding Principal Balance of the Notes for a period greater than 60
calendar days or (ii) any of the Offered Notes shall be outstanding on any
Remittance Date after June 20, 2010.



“Accreted Interest” means accrued interest on a Deferred Interest
Loan that is added to the principal amount of such Deferred Interest Loan
instead of being paid as it accrues.



“Acquired Loan” means a Loan that is originated by a Person other
than the Originator or an Affiliate thereof and acquired by the Originator in a
“true sale” transaction pursuant to a standard loan acquisition agreement.



“Addition Notice” means, with respect to any transfer of Substitute
Loans to the Issuer in accordance with Section 2.04 (and the Trust
Depositor’s corresponding prior purchase of such Loans from the Originator), a
notice in the form of Exhibit N, which shall be given at least ten
Business Days prior to the related Subsequent Transfer Date, identifying the
Substitute Loans to be transferred, the Outstanding Loan Balance of such
Substitute Loans and the related Substitution Event (with respect to an
identified Loan or Loans then in the Loan Pool) to which such Substitute Loan
relates, with such notice to be signed both by the Trust Depositor and the
Originator.



“Additional Servicing Fee” means an amount, in addition to the
Servicing Fee, necessary to induce a Successor Servicer to serve as Servicer
hereunder, which amount shall not exceed $100,000 in the aggregate per
Successor Servicer.



“Affiliate” of any specified Person means any other Person
controlling or controlled by, or under common control with, such specified
Person. For the purposes of this definition, “control” (including the terms
“controlling”, “controlled by” and “under common control with”) when used with
respect to any specified Person means the possession, direct or indirect, of
the power


2









 






to vote 20% or more of the voting securities of such Person or to direct
or cause the direction of the management and policies of such Person whether
through the ownership of voting securities, by contract or otherwise. Each of
the Indenture Trustee and the Owner Trustee may conclusively presume that a
Person is not an Affiliate of another Person unless a Responsible Officer of
such trustee has actual knowledge to the contrary.



“Agented Loans” means, with respect to any Loan, (a) the Loan is
originated by the Originator in accordance with the Credit and Collection
Policy as a part of a syndicated loan transaction that has been fully
consummated prior to such Loan becoming part of the Loan Pool, (b) upon the
sale of the Loan under the Transfer and Servicing Agreements to the Issuer, the
Underlying Notes (if any) representing such loan will be endorsed to and held
by the Indenture Trustee on behalf of the Securityholders and the Hedge
Counterparties or, in the case of a Noteless Loan a copy of the related Loan
Register shall have been delivered to the Indenture Trustee, as applicable, (c)
the Issuer, as assignee of the Loan, will have all of the rights (but none of
the obligations) of the Originator with respect to such Loan and the
Originator’s right, title and interest in and to the Collateral, (d) the Loan
is secured by an undivided interest in the Collateral that also secures and is
shared by, on a pro rata basis, all other holders of such Obligor’s notes of
equal priority and (e) the Originator (or a wholly owned subsidiary of the
Originator) is the collateral agent and payment agent for all noteholders of
such Obligor.



“Aggregate Notional Amount” means, on any date, the aggregate
notional amount in respect of the payment obligations of the relevant Hedge
Counterparty that is outstanding on that date under all Hedge Transactions or
any group thereof, as the context requires.



“Aggregate Outstanding Loan Balance” means, as of any date, the sum
of the Outstanding Loan Balance for each Loan owned by the Issuer.



“Aggregate Outstanding Principal Balance” means, as of any date of
determination, the sum of the Outstanding Principal Balances of each Class
outstanding on such date.



“Agreement” means this Sale and Servicing Agreement, as amended,
modified, waived, supplemented or restated from time to time in accordance with
the terms hereof.



“Amortizing Loan” means a Loan that, by its terms, provides for (or
after a period of time will provide for) a series of Scheduled Payment
installments calculated to amortize the principal balance of the Loan over its
term so that, at the Loan’s maturity, no more than 25% of the maximum
outstanding loan balance remains unpaid, with the remaining balance due at
maturity.



“Asset Based Revolver” means any Revolving Loan (other than a Loan
to an SPE Obligor) secured by accounts receivable and/or inventory.



“Assigned Loan” means a Loan originated by a Person other than the
Originator in which a constant percentage interest has been assigned to the
Originator by such Person in accordance with the Credit and Collection Policy
and (a) such transaction has been fully consummated prior to such Loan becoming
part of the Loan Pool, (b) the Originator is a party to the underlying loan
documents, (c) upon the sale of the Loan under the Transfer and Servicing
Agreements to the Issuer, any Underlying Notes will be endorsed to and held by
the Indenture Trustee, (d) the Issuer, as assignee of the Loan, will have all of the rights
(but none of the obligations) of the


3









 






Originator with respect to such Loan and
the Originator’s right, title and interest in and to the Collateral, (e) the
Loan is secured by an undivided interest in the Collateral that also secures
and is shared by, on a pro rata basis, all other holders of such Obligor’s
indebtedness of equal priority, and (f) the agent bank receives payment
directly from the Obligor thereof on behalf of each lender that has been
assigned a percentage interest in such Loan.



“Assigned Parties” means the Noteholders and Hedge Counterparties
as well as any other holder of a loan to or debt obligation of such Obligor
arising out of the same underlying loan agreement, including, without
limitation, the Originator, CapitalSource Commercial Loan Trust 2002-1,
CapitalSource Commercial Loan Trust 2002-2, CapitalSource Commercial Loan Trust
2003-1, CapitalSource Commercial Loan Trust 2003-2, CapitalSource Funding LLC,
CapitalSource Funding II Trust and CapitalSource Funding III LLC.



“Assignment” means each Assignment, substantially in the form of
Exhibit A, relating to an assignment, transfer and conveyance of Loans
and the related Collateral by the Trust Depositor to the Issuer.



“Assignment of Mortgage” means, with respect to each Loan that is a
Material Mortgage Loan or that is to an SPE Obligor that is secured by real
property and improvements thereon, an assignment of the related Mortgage,
notice of transfer or equivalent instrument sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect or
record the transfer of the Mortgage of the related Loan to the Indenture
Trustee.



“Available Principal Distributable” means, as of any Remittance
Date, the amount of funds remaining after distribution of all amounts payable
under clauses First through Ninth of Section 7.05(a).



“Backup Servicer” means the Person acting as Backup Servicer
hereunder, its successors in interest and any Successor Backup Servicer
hereunder.



“Backup Servicer Termination Notice” shall have the meaning given
to such term in Section 8.10(a).



“Backup Servicer Transfer” shall have the meaning given to such
term in Section 8.10(b).



“Backup Servicing Fee” shall have the meaning given to such term in
the fee letter, dated as of the date hereof, among the Originator, the Trust
Depositor, the Issuer and the Backup Servicer.



“Balloon Loan” means a Loan that, by its terms, provides for (or
after a period of time will provide for) a series of Scheduled Payment
installments calculated to partially amortize the principal balance of the Loan
over its term so that, at the Loan’s maturity, more than 25% (but less than
100%) of the maximum outstanding loan balance remains unpaid, with such
remaining balance due at maturity.



“BIF” means the Bank Insurance Fund, or any successor thereto.




4









 







“Bullet Loan” means a Loan that, by its terms, provides for no
Scheduled Payments of principal prior to the Loan’s maturity, and, at maturity,
the entire unpaid principal balance of the Loan is due.



“Business Day” means any day other than (a) a Saturday or Sunday,
or (b) a day on which banking institutions in the cities of New York, New York
and Minneapolis, Minnesota are authorized or obligated, by law or executive
order, to be closed; provided, that, if any action is required of
the Ireland Paying Agent, then, for purposes of determining when such Ireland
Paying Agent action is required Dublin, Ireland will be considered in
determining “Business Day”.



“CapitalSource” shall have the meaning given to such term in the
Preamble.



“CapitalSource LIBOR Rate” means the posted rate for 30, 60 or 90
day, as applicable, deposits in U.S. dollars appearing on Telerate Page 3750,
as and when determined in accordance with the applicable Required Loan
Documents.



“CapitalSource Prime Rate” means the rate designated by
CapitalSource from time to time as its prime rate in the United States, such
rate to change as and when such designated rate changes; provided,
however, the CapitalSource Prime Rate is not intended to be the lowest
rate of interest charged by CapitalSource in connection with extensions of
credit to debtors.



“Certificate” means the CapitalSource Commercial Loan Trust 2004-1
Certificates representing a beneficial equity interest in the Issuer and issued
pursuant to the Trust Agreement.



“Certificate Account” shall have the meaning given to such term in
Section 5.01 of the Trust Agreement.



“Certificate Register” shall have the meaning given to such term in
the Trust Agreement.



“Certificateholder” means the registered holder of a Certificate.



“Charged—Off Loan” means a Loan in the Loan Pool with respect to
which there has occurred one or more of the following:




     (a) the occurrence of both (i) any portion of a payment of interest on or
principal of such Loan is not paid when due (without giving effect to any grace
period) or would be so delinquent but for any amendment or modification made to
such Loan resulting from the Obligor’s inability to pay such Loan in accordance
with its terms and (ii) within 120 days of when such delinquent payment was
first due, all delinquencies have not been cured;



     (b) an Insolvency Event has occurred with respect to the related Obligor;



     (c) the related Obligor has suffered any material adverse change that
materially affects its viability as a going concern;



     (d) the Servicer has determined, in its sole discretion, in accordance
with the Credit and Collection Policy, that all or a portion such Loan is not
collectible;



5









 





     (e) any portion of the proceeds used to make payments of principal of or
interest on such Loan have come from a new Loan or a new loan by the Originator
or an entity controlled by the Originator to the Obligor or any of its
Affiliates;



     (f) an Overadvance shall have been made with respect to such Loan and any
portion of such Overadvance shall remain outstanding on the date that is 120
calendar days after the date such Overadvance is made;



     (g) a Scheduled Payment Advance shall have been made with respect to such
Loan and such Servicing Advance shall remain outstanding on the date that is
120 calendar days after the date such Servicing Advance is made (after
application of all payments received with respect to such Loan in accordance
with Section 5.02(r)); or



     (h) any Specified Amendment shall have been made with respect to such Loan
at a time when such Loan has a Loan Rating of “4”, “5” or “6”.


“Citi Warehouse” means the Note Purchase Agreement, dated as of
September 17, 2003, among CapitalSource Funding II Trust, CS Funding II
Depositor LLC, the Originator and Citigroup Global Markets Realty Corp., as
amended, modified, restated, waived or supplemented from time to time, and all
documents executed in connection therewith and all transactions contemplated
thereby.



“Citigroup” means Citigroup Global Markets Inc.



“Class” means any of the group of Notes identified herein as, as
applicable, the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the
Class C Notes, the Class D Notes, or the Class E Note.



“Class A Notes” means, collectively, the Class A-1 Notes and the
Class A-2 Notes.



“Class A Trigger Event” means an event which shall be deemed to
occur if, as of any Determination Date, the Aggregate Outstanding Loan Balance
shall be less than the Outstanding Principal Balance of the Class A Notes.



“Class A-1 Interest Amount” means, for each Interest Accrual
Period, the product of (i) the Note Interest Rate applicable to the Class A-1
Notes as of the first day of such Interest Accrual Period, (ii) the Outstanding
Principal Balance of the Class A-1 Notes as of the first day of such Interest
Accrual Period (after giving effect to all distributions made on such day) and
(iii) a fraction, the numerator of which is the number of days in such Interest
Accrual Period and the denominator of which is 360.



“Class A-1 Legal Final Maturity Date” means May 20, 2009.



“Class A-1 Note Interest Rate” means the annual rate of interest
payable with respect to the Class A-1 Notes, which shall be equal to 1.41% for
the first Remittance Date and thereafter shall be equal to LIBOR plus 0.13%.




6









 







“Class A-1 Noteholder” means each Person in whose name a Class A-1
Note is registered in the Note Register.



“Class A-1 Notes” means CapitalSource Commercial Loan Trust 2004-1
Asset—Backed Notes, Series 2004-1, Class A-1 Notes, issued pursuant to the
Indenture.



“Class A-2 Interest Amount” means, for each Interest Accrual
Period, the product of (i) the Note Interest Rate applicable to the Class A-2
Notes as of the first day of such Interest Accrual Period, (ii) the Outstanding
Principal Balance of the Class A-2 Notes as of the first day of such Interest
Accrual Period (after giving effect to all distributions made on such day) and
(iii) a fraction, the numerator of which is the number of days in such Interest
Accrual Period and the denominator of which is 360.



“Class A-2 Note Interest Rate” means the annual rate of interest
payable with respect to the Class A-2 Notes, which shall be equal to 1.61% for
the first Remittance Date and thereafter shall be equal to LIBOR plus 0.33%.



“Class A-2 Noteholder” means each Person in whose name a Class A-2
Note is registered in the Note Register.



“Class A-2 Notes” means CapitalSource Commercial Loan Trust 2004-1
Asset—Backed Notes, Series 2004-1, Class A-2 Notes, issued pursuant to the
Indenture.



“Class B Accrued Payable” means, for any Remittance Date with
respect to which the Class B Interest Amount is calculated using clause
(ii)(b) of the definition thereof, an amount equal to the excess, if any,
of (a) the amount that would have been calculated as the Class B Interest
Amount on such Remittance Date if the calculation was made using clause
(ii)(a) of the definition of Class B Interest Amount and not clause
(ii)(b) of such definition over (b) the amount calculated as the Class B
Interest Amount on such Remittance Date, together with the unpaid portion of
any such excess from prior Remittance Dates (and interest accrued thereon at
the then applicable Class B Note Interest Rate).



“Class B Interest Amount” means, for each Interest Accrual Period,
an amount equal to the product of (i) the Class B Note Interest Rate as of the
first day of such Interest Accrual Period, (ii) the lesser of (a) the
Outstanding Principal Balance of the Class B Notes as of the first day of such
Interest Accrual Period (after giving effect to all distributions made on such
day) and (b) the excess, if any, of (1) the Aggregate Outstanding Loan Balance
as of the last day of the Due Period immediately preceding the start of such
Interest Accrual Period over (2) the Outstanding Principal Balance of the Class
A Notes as of the first day of such Interest Accrual Period (after giving
effect to all distributions made on such day) and (iii) a fraction, the
numerator of which is the number of days in such Interest Accrual Period and
the denominator of which is 360.



“Class B Note Interest Rate” means the annual rate of interest
payable with respect to the Class B Notes, which shall be equal to 1.93% for
the first Remittance Date and thereafter shall be equal to LIBOR plus 0.65% per
annum.



“Class B Noteholder” means each Person in whose name a Class B Note
is registered in the Note Register.




7









 







“Class B Notes” means CapitalSource Commercial Loan Trust 2004-1
Asset—Backed Notes, Series 2004-1, Class B Notes, issued pursuant to the
Indenture.



“Class C Accrued Payable” means, for any Remittance Date with
respect to which the Class C Interest Amount is calculated using clause
(ii)(b) of the definition thereof, an amount equal to the excess, if any,
of (a) the amount that would have been calculated as the Class C Interest
Amount on such Remittance Date if the calculation was made using clause
(ii)(a) of the definition of Class C Interest Amount and not clause
(ii)(b) of such definition over (b) the amount calculated as the Class C
Interest Amount on such Remittance Date, together with the unpaid portion of
any such excess from prior Remittance Dates (and interest accrued thereon at
the then applicable Class C Note Interest Rate).



“Class C Interest Amount” means, for each Interest Accrual Period,
an amount equal to the product of (i) the Class C Note Interest Rate as of the
first day of such Interest Accrual Period, (ii) the lesser of (a) the
Outstanding Principal Balance of the Class C Notes as of the first day of such
Interest Accrual Period (after giving effect to all distributions made on such
day) and (b) the excess, if any, of (1) the Aggregate Outstanding Loan Balance
as of the last day of the Due Period immediately preceding the start of such
Interest Accrual Period over (2) the Outstanding Principal Balance of the Class
A Notes and the Class B Notes as of the first day of such Interest Accrual
Period (after giving effect to all distributions made on such day) and (iii) a
fraction, the numerator of which is the number of days in such Interest Accrual
Period and the denominator of which is 360.



“Class C Note Interest Rate” means the annual rate of interest
payable with respect to the Class C Notes, which shall be equal to 2.28% for
the first Remittance Date and thereafter shall be equal to LIBOR plus 1.00% per
annum.



“Class C Noteholder” means each Person in whose name a Class C Note
is registered in the Note Register.



“Class C Notes” means CapitalSource Commercial Loan Trust 2004-1
Asset—Backed Notes, Series 2004-1, Class C Notes, issued pursuant to the
Indenture.



“Class D Accrued Payable” means, if, for any Remittance Date, the
Class D Interest Amount is calculated using clause (ii)(b) of the
definition thereof, the excess, if any, of (i) the amount that would have been
calculated as the Class D Interest Amount on such Remittance Date if the
calculation was made using clause (ii)(a) of the definition of Class D
Interest Amount and not clause (ii)(b) of such definition over (ii) the
amount calculated as the Class D Interest Amount on such Remittance Date,
together with the unpaid portion of any such excess from prior Remittance Dates
(and interest accrued thereon at the then applicable Class D Note Interest
Rate).



“Class D Interest Amount” means, for each Interest Accrual Period,
the product of (i) the Class D Note Interest Rate as of the first day of such
Interest Accrual Period, (ii) the lesser of (a) the Outstanding Principal
Balance of the Class D Notes as of the first day of such Interest Accrual
Period (after giving effect to all distributions made on such day) and (b) the
excess, if any, of (1) the Aggregate Outstanding Loan Balance as of the last
day of the Due Period immediately


8









 






preceding the start of such Interest Accrual
Period over (2) the Outstanding Principal Balance of the Class A Notes, Class B
Notes and Class C Notes as of the first day of such Interest Accrual Period
(after giving effect to all distributions made on such day) and (iii) a
fraction, the numerator of which is the number of days in such Interest Accrual
Period and the denominator of which is 360.



“Class D Note Interest Rate” means the annual rate of interest
payable with respect to the Class D Notes, which shall be equal to 3.03% for
the first Remittance Date and thereafter shall be equal to LIBOR plus 1.75% per
annum.



“Class D Noteholder” means each Person in whose name a Class D Note
is registered in the Note Register.



“Class D Notes” means CapitalSource Commercial Loan Trust 2004-1
Asset—Backed Notes, Series 2004-1, Class D Notes, issued pursuant to the
Indenture.



“Class E Note” means the CapitalSource Commercial Loan Trust 2004-1
Asset—Backed Note, Series 2004-1, Class E Note, issued pursuant to the
Indenture.



“Class E Noteholder” means each Person in whose name a Class E Note
is registered in the Note Register.



“Closing Date” means June 22, 2004.



“Code” means the Internal Revenue Code of 1986, as amended, or any
successor legislation thereto.



“Collateral” means the assets of an Obligor or others in which a
security interest has been granted by the Obligor or others to secure such
Loan, including, but not limited to, real estate, accounts receivable,
inventory and other tangible and intangible assets of the related Obligor.



“Collections” means the aggregate of Interest Collections and
Principal Collections.



“Commission” means the United States Securities and Exchange
Commission.



“Computer Records” means the computer records generated by the
Servicer that provide information relating to the Loans and that were used by
the Originator in selecting the Loans conveyed to the Trust Depositor pursuant
to Section 2.01 (and any Substitute Loans conveyed to the Trust
Depositor pursuant to Section 2.04).



“Contractual Obligation” means, with respect to any Person, any
provision of any securities issued by such Person or any indenture, mortgage,
deed of trust, contract, undertaking, agreement, instrument or other document to which such Person is a party or by
which it or any of its property is bound or is subject.



“Corporate Trust Office” means, with respect to the Indenture
Trustee or Owner Trustee, as applicable, the office of the Indenture Trustee or
Owner Trustee at which at any particular time


9









 






its corporate trust business
shall be principally administered, which offices at the date of the execution
of this Agreement are located at the addresses set forth in Section
1304(d).



“CP Acquisition Transaction” means the Loan Certificate and
Servicing Agreement, dated as of February 28, 2003, by and among CapitalSource
Acquisition Funding LLC, the Originator, the Servicer, Variable Funding Capital
Corporation and Wells Fargo Bank, National Association, as amended, modified,
restated, waived or supplemented from time to time, and all documents executed
in connection therewith and all transactions contemplated thereby.



“CP Funding III Transaction” means the Sale and Servicing
Agreement, dated as of April 20, 2004, by and among CapitalSource Funding III
LLC, the Originator, the Servicer Variable Funding Capital Corporation, the
other Commercial Paper Conduits from time to time party thereto, Wachovia
Capital Markets and Wells Fargo Bank, National Association, as amended,
modified, restated, waived or supplemented from time to time, and all documents
executed in connection therewith and all transactions contemplated thereby.



“CP Funding Transaction” means the transactions contemplated by the
Fourth Amended and Restated Loan Certificate and Servicing Agreement, dated as
of May 28, 2004, among CapitalSource Funding LLC, as the seller, the
Originator, as the originator and the servicer, Variable Funding Capital
Corporation, Harris Nesbitt Corp., as administrative agent, each of the
purchasers and purchaser agents from time to time party thereto, and Wells
Fargo Bank, National Association, as amended, modified, restated, waived or
supplemented from time to time, and all documents executed in connection
therewith and all transactions contemplated thereby.



“Credit and Collection Policy” means the written credit and
collection policies and procedures manual of the Originator and the Servicer in
effect on the Closing Date and attached hereto as Exhibit K, as amended
or supplemented from time to time in accordance with Section 5.02(m) of
this Agreement; and with respect to any Successor Servicer, the written
collection policies and procedures of such Person at the time such Person
becomes Successor Servicer.



“Curtailment” means, with respect to a Loan, any payment of
principal received by the Issuer during a Due Period as part of a payment
allocable to a Loan that is in excess of the principal portion of the Scheduled
Payment due for such Due Period and which is not intended to satisfy the Loan
in full, nor is intended to cure a delinquency.



“Cut—Off Date” means either or both (as the context may require) of
the Initial Cut—Off Date and any Subsequent Cut—Off Date as applicable to the
Loan or Loans in question.



“Deferred Interest Loan” means a Loan that requires the related
Obligor to pay only a portion of the accrued and unpaid interest on a current
basis, with the remaining interest being
deferred and paid later, together with any unpaid interest thereon, in a lump
sum, which amount shall be treated as Interest Collections at the time it is
received.



“Delinquent Loan” means a Loan (that is not a Charged—Off Loan) in
the Loan Pool as to which there has occurred one or more of the following:




     (a) the occurrence of both (i) any portion of a payment of interest on or
principal of such Loan is not paid when due (without giving effect to any grace
period) or would be so



10









 







delinquent but for any amendment, modification, waiver
or variance made to such Loan resulting from the Obligor’s inability to pay
such Loan in accordance with its terms and (ii)(A) with respect to Asset Based
Revolvers, within one calendar day of when such delinquent payment was first
due and (B) with respect to all other Loans, within 60 calendar days of when
such delinquent payment was first due, all delinquencies have not been cured;



     (b) consistent with the Credit and Collection Policy such Loan would be
classified as delinquent by the Servicer or the Originator;



     (c) the related Obligor is not paying any of the accrued and unpaid
interest on a current basis;



     (d) an Overadvance shall have been made with respect to such Loan and any
portion of such Overadvance shall remain outstanding on the date that is 30
calendar days after the date such Overadvance is made;



     (e) a Scheduled Payment Advance shall have been made with respect to such
Loan and such Servicing Advance shall remain outstanding on the date that is 60
calendar days after the date such Servicing Advance is made (after application
of all payments received with respect to such Loan in accordance with
Section 5.02(r)); or



     (f) any Specified Amendment shall have been made with respect to such Loan
at a time when such Loan has a Loan Rating of “3”;


provided, however, if any Loan to an Obligor is a Delinquent
Loan, or if any Loan from the Originator or any entity controlled by the
Originator would be a Delinquent Loan if owned by the Issuer, then all Loans to
that Obligor shall be deemed to be Delinquent Loans.



“Determination Date” means that day of each month that is the third
Business Day prior to a Remittance Date.



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



“Dollar” and “$” means lawful currency of the United States.



“Due Period” means, with respect to the first Remittance Date, the
period from and including the Initial Cut—Off Date to but excluding the 11th
day of the calendar month immediately preceding the first Remittance Date; and
thereafter, the period from and including
the 11th day of the previous calendar month to but excluding the 11th day of
the month in which such Remittance Date occurs.



“Election Rate Loan” means a Loan which by its terms permits the
related Obligor to periodically elect between Loan Rates based on the
CapitalSource Prime Rate or the CapitalSource LIBOR Rate.



“Eligible Deposit Account” means either (a) a segregated account
with a Qualified Institution, or (b) a segregated trust account with the
corporate trust department of a depository institution


11









 






organized under the laws
of the United States or any one of the states thereof, including the District
of Columbia (or any domestic branch of a foreign bank), and acting as a trustee
for funds deposited in such account, so long as any of the securities of such
depository institution shall have a credit rating from in the case of Fitch of
at least “F-1+”, in the case of Moody’s a short—term credit rating of “P-1” and
in the case of S&P a commercial paper short—term debt rating of “A-1+” and a
long—term unsecured debt rating of “AA-”.



“Eligible Loan” means, on and as of the related Transfer Date, a
Loan as to which each of the following is true:




     (a) the information with respect to each Loan set forth on the List of
Loans delivered to the Indenture Trustee is true and complete;



     (b) the Loan, together with the Collateral, has been originated or
acquired by the Originator, and immediately prior to the transfer and
assignment contemplated by the Loan Sale Agreement, the Originator held, and
immediately prior to the transfer and assignment contemplated by the Sale and
Servicing Agreement, the Trust Depositor held, good and indefeasible title to,
and was the sole owner of, the Loans being transferred to the Trust Depositor
and Issuer, respectively, subject to no Liens except Liens which will be
released simultaneously with such transfer and assignment and Permitted Liens;
and immediately upon the transfer and assignment contemplated by this
Agreement, the Issuer will hold good and indefeasible title to, and be the sole
owner of, each Loan, subject to no Liens except Liens in favor of the Indenture
Trustee;



     (c) (i) the Loan, together with the Collections and Collateral related
thereto, are free and clear of any Liens except Permitted Liens, and (ii) all
filings and other actions required to grant to (A) the Indenture Trustee a
first priority perfected security interest in the Originator’s, the Trust
Depositor’s and the Issuer’s interest in the Loan, the Collections and related
Collateral have been made or taken, and (B) in the case of Agented Loans, the
collateral agent, as agent for all noteholders of the related Obligor, a first
priority perfected security interest in the Collateral (except for Permitted
Liens);



     (d) at the time such Loan is included in the Loan Pool, (i) the Loan is
not (and since its origination or, to the knowledge of the Originator or the
Trust Depositor (as applicable) in the case of Acquired Loans, since its
acquisition, has never been) a Charged—Off Loan, (ii) the Loan is not past due
(and since its origination or, to the knowledge of the Originator or the Trust
Depositor (as applicable) in the case of Acquired Loans, since its acquisition,
has never been more than 30 days past due) after giving effect to any grace
period set forth in the Credit and Collection Policy in determining the number of days past due, with respect
to payments of principal or interest;



     (e) the Loan is an “eligible asset” as defined in Rule 3a—7 under the 1940
Act;



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



     (g) the Loan is to an Eligible Obligor;



12









 





     (h) the Loan is denominated and payable only in United States dollars and
does not permit the currency in which or country in which such Loan is payable
to be changed;



     (i) the Loan is evidenced by an Underlying Note or, in the case of a
Noteless Loan, the related Loan Register, security agreement or instrument and
related loan documents that have been duly authorized and properly executed,
are in full force and effect and constitute the legal, valid, binding and
absolute and unconditional payment obligation of the related Obligor,
enforceable against such Obligor in accordance with their terms (subject to
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and to general principles of equity, whether
considered in a suit at law or in equity), and there are no conditions
precedent to the enforceability or validity of the Loan that have not been
satisfied or validly waived;



     (j) the Loan or any portion thereof does not contravene in any material
respect any Requirements of Law (including, without limitation, Requirements of
Law relating to predatory or abusive lending, usury, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices, licensing and privacy);



     (k) the Loan, (i) satisfies all applicable requirements of and was
originated or acquired, underwritten, closed and serviced in all material
respects in accordance with the Credit and Collection Policy (including without
limitation the execution by the Obligor of all documentation required by the
Credit and Collection Policy); (ii) does not contain a confidentiality
provision that restricts or purports to restrict the ability of the Indenture
Trustee to exercise its rights under the Transaction Documents, including,
without limitation, its rights to review the Loan, the Required Loan Documents
and Loan File; (iii) was generated in the ordinary course of the Originator’s
business; (iv) arises pursuant to loan documentation with respect to which the
Originator has performed all obligations required to be performed by it
thereunder; (v) has an original term to maturity (A) in the case of Senior
Loans and Senior B-Note Loans of not greater than six (6) years (other than in
the case of the Loans to APS Healthcare Holdings, Inc., HealthStar
Communications, Inc. and New Vision Television Group), or (B) in the case of
Subordinated Loans of not greater than seven (7) years; (vi) is not subject to
a guaranty by the Originator or any Affiliate thereof; and (vii) is not a loan
primarily for personal, family or household use;



     (l) the Loan is eligible to be sold, assigned or transferred to the Trust
Depositor and Issuer, respectively, and neither the sale, transfer or
assignment of the Loan under the Transfer and Servicing Agreements to the Trust
Depositor and Issuer, respectively, nor the granting of a security interest
under the Indenture to the Indenture Trustee, violates, conflicts with or contravenes any Requirements of Law or any contractual or other
restriction, limitation or encumbrance;



     (m) the Loan (other than Loans in which the sole collateral is its
accounts receivable) requires the Obligor thereof to maintain adequate property
damage and liability insurance with respect to the real or personal property
constituting the Collateral and the same has been at all times covered by
adequate physical damage and liability insurance policies issued by generally
acceptable carriers;



13









 





     (n) the Collateral, if any, (i) is located in the United States (other
than Collateral that is in addition to the primary Collateral with respect to
which the Loan is principally underwritten), (ii) has not been foreclosed on,
or repossessed from the current Obligor, by the Servicer, and (iii) has not
suffered any material loss or damage that has not been repaired or restored;



     (o) (i) the Loan contains a provision substantially to the effect that the
Obligor’s payment obligations are absolute and unconditional without any right
of rescission, setoff, counterclaim or defense for any reason against the
Originator or any assignee, (ii) the Loan contains a clause that has the effect
of unconditionally and irrevocably obligating the Obligor to make periodic
payments (including taxes) notwithstanding any rights the Obligor may have
against the assignor and notwithstanding any damage to, defects in or
destruction of the Collateral or any other event, including obsolescence of any
property or improvements, (iii) the Obligor has no right of deduction, offset,
netting, recoupment, counterclaim, defense or reservation of rights, and (iv)
the Issuer has no future funding obligation with respect to such Loan;



     (p) the Loan is not subject to any litigation, dispute, refund, claims of
rescission, setoff, netting, counterclaim or defense whatsoever, including but
not limited to, claims by or against the Obligor thereof or a payor to or
account debtor of such Obligor, nor will the operation of any of the terms of
the Required Loan Documents, or the exercise of any right thereunder, render
any of the Required Loan Documents unenforceable in whole or in part;



     (q) the Loan requires the Obligor to maintain the Collateral in good
condition and to bear all the costs of operating and maintaining same,
including taxes and insurance relating thereto;



     (r) the Loan provides (i) for periodic payments of interest and/or
principal in cash, which are due and payable on a monthly or quarterly basis,
and (ii) that the Servicer (or, with respect to Agented Loans and Senior B-Note
Loans, an agent appointed pursuant to the Required Loan Documents or a majority
of the lenders) may accelerate all payments on the Loan if the Obligor is in
default under the Loan and any applicable cure period has expired (in the case
of any Subordinated Loan or Senior B-Note Loan, subject to any applicable
intercreditor or subordination agreement);



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



     (t) the Loan Rate for each Loan adjusts periodically to equal the then
applicable index plus the margin set forth in the related Underlying Note or
the related credit agreement;



     (u) the Loan shall not have been originated in, nor shall it be subject to
the laws of, any jurisdiction under which the sale, transfer and assignment of
such Loan under the Transfer and Servicing Agreements would be unlawful, void
or voidable;



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



14









 





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



     (x) neither the Loan nor any portion of the related Collateral constitutes
Margin Stock;



     (y) the Loan is not a DIP Loan;



     (z) the Loan, together with the Required Loan Documents and Loan File
related thereto, is fully assignable and does not require the consent of or
notice to the Obligor or contain any enforceable restriction on the transfer or
the assignment of the Loan other than a consent or waiver of such restriction
that has been obtained prior to the date on which the Loan was sold to the
Trust Depositor provided, however, that the Required Loan
Documents may restrict the transfer or assignment of the related Loan so long
as such Loan is freely assignable or transferable to a Qualified Transferee;



     (aa) the Obligor of such Loan is legally responsible for all taxes
relating to the Collateral, and all payments in respect of the Loan are
required to be made free and clear of, and without deduction or withholding for
or on account of, any taxes, unless such withholding or deduction is required
by Requirements of Law in which case the Obligor thereof is required to make
“gross-up” payments that cover the full amount of any such withholding taxes on
an after-tax basis;



     (bb) the Loan and the Collateral have not been sold, transferred, assigned
or pledged by the Originator, the Trust Depositor or the Issuer to any Person
other than as contemplated by the Transaction Documents;



     (cc) other than Participation Loans and Agented Loans, with respect to the
Originator’s obligation to fund and the actual funding of the Loan by the
Originator, the Originator has not assigned or granted participations to, in
whole or in part, any Person other than to CapitalSource Commercial Loan Trust
2002-1, CapitalSource Commercial Loan Trust 2002-2, CapitalSource Commercial
Loan Trust 2003-1, CapitalSource Commercial Loan Trust 2003-2, the Issuer or to
a special purpose entity created in connection with the CP Funding Transaction,
the Citi Warehouse, the CP Funding III Transaction, the CP Acquisition
Transaction, a Prior Term Transaction or and any future or similar commercial
paper conduit facility;



     (dd) no selection procedure adverse to the interests of the Noteholders or
Hedge Counterparties was utilized by the Originator or Trust Depositor in the
selection of the Loan for inclusion in the Loan Pool;



     (ee) the Loan has not been compromised, adjusted, extended, satisfied,
rescinded or set—off by the Trust Depositor, the Originator or the Obligor with
respect thereto, and no Loan is subject to compromise, adjustment, extension,
satisfaction, rescission, set—off, counterclaim, defense, abatement,
suspension, deferment, deductible, reduction or termination, whether arising
out of transactions concerning the Loan, or otherwise, by the Trust Depositor,
the Originator or the Obligor with respect thereto;



15









 





     (ff) the particular Loan is not one as to which the Originator or Trust
Depositor has knowledge that the Loan will not be paid in full;



     (gg) with respect to Subordinated Loans and Senior B-Note Loans to the
same Obligor, multiple Loans originated to the same Obligor (excluding any
guarantor) contain standard cross—collateralization and cross—default
provisions;



     (hh) the Obligor of such Loan is not the subject of an Insolvency Event or
Insolvency Proceedings;



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



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



     (kk) other than Subordinated Loans and unsecured Loans representing not
more than 2.76% of the Aggregate Outstanding Loan Balance, the Loan is secured
by a valid, perfected, first priority (other than, solely in the case of a
Senior B-Note Loan, with respect to other lenders on the senior tranche related
to such Loan) security interest in all assets that constitute the Collateral
for the Loan, subject to Permitted Liens;



     (ll) all material consents, licenses, approvals or authorizations of, or
registrations or declarations with, any Governmental Authority required to be
obtained, effected or given in connection with the making or performance of the
Loan have been duly obtained, effected or given and are in full force and
effect;



     (mm) the Originator (i) has completed to its satisfaction, in accordance
with the Credit and Collection Policy, a due diligence audit and collateral
assessment with respect to such Loan and (ii) has done nothing to impair the
rights of the Indenture Trustee, the Noteholders or the Hedge Counterparties
with respect to the Loan, the Collateral, the Scheduled Payments or any income
or proceeds therefrom;



     (nn) the Loan is a Senior Loan, Senior B-Note Loan, Subordinated Loan or
unsecured Loan;



     (oo) no provision of the Required Loan Documents has been waived,
modified, or altered in any respect, except in accordance with the Credit and
Collection Policy and by instruments duly authorized and executed and contained
in the Required Loan Documents and recorded, if necessary, to protect the
interests of the Noteholders and the Hedge Counterparties and which has been
delivered to the Indenture Trustee;



     (pp) the first priority Lien related to any Senior Loan and Senior B-Note
Loan is not subordinated to any other loan or financing to the related Obligor;



16









 





     (qq) other than with respect to Fully Funded Term Loans, either the Loan
provides by its terms that any funding thereunder is in the Originator’s sole
and absolute discretion or any funding obligation under such Loan is subject to
the Retained Interest;



     (rr) the face amount of the Loan is the dollar amount thereof shown on the
books and records of the Originator;



     (ss) with respect to Subordinated Loans, the Originator has entered into
an intercreditor agreement or subordination agreement (or such provisions are
contained in the principal loan documents for such Loan) with, or provisions
for the benefit of, the senior lender, which agreement or provisions are
assignable to and have been assigned to the Trust Depositor and Issuer, and
which provide that any standstill of remedies by the Originator or its assignee
is limited (i) such that there shall be no standstill of remedies (x) until
after a payment default with respect to the senior obligation or the
Originator’s or assignee’s receipt from the senior lender of a notice of
default or a payment default by the Obligor under the senior debt and (y)
unless a covenant default is also in effect, and (ii) provided the Subordinated
Loan has not been accelerated, to no longer than 180 days in duration in the
aggregate in any given year;



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



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



     (vv) with respect to Agented Loans, the Originator (or a wholly owned
subsidiary of the Originator) has been appointed the collateral agent of the
security and the paying agent for all such notes prior to such Agented Loan or
Loan becoming a part of the Loan Pool;



     (ww) with respect to Agented Loans, 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, which in the case of
Agented Loans shall be to the Originator (or a wholly owned subsidiary of the
Originator), all appropriate assignments of the collateral agent’s rights in
and to the collateral on behalf of the noteholders have been executed and filed
or recorded as appropriate prior to such Agented Loan becoming a part of the
Loan Pool;



     (xx) with respect to Agented Loans, all required notifications, if any,
have been given to the collateral agent, the paying agent and any other parties
required by the Required Loan Documents of, and all required consents, if any,
have been obtained with respect to, the Originator’s assignment of the Agented
Loans or Loans and the Originator’s right, title and interest in the Collateral
to the Trust Depositor and the Issuer and the Indenture Trustee’s security
interest therein on behalf of the Noteholders and the Hedge Counterparties;



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



17









 





     (zz) with respect to Agented Loans and any Loans which have more than one
holder of their underlying indebtedness, all syndicated underlying indebtedness
of the Obligor of the same priority is cross-defaulted, and all holders of such
underlying indebtedness (i) have an undivided interest in the collateral
securing such underlying indebtedness, (ii) share in the proceeds of the sale
or other disposition of such collateral on a pro rata basis and (iii) may
transfer or assign their right, title and interest in the collateral;



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



     (bbb) all of the original or certified Required Loan Documents required to
be delivered to the Indenture Trustee (including all material documents related
thereto) with respect to such Loan have been or will be delivered to the
Indenture Trustee on the Transfer Date or as otherwise provided in this
Agreement;



     (ccc) if such Loan is a Material Mortgage Loan, it satisfies the Material
Mortgage Loan Criteria set forth in Appendix A;



     (ddd) other than in the case of Noteless Loans, there is one or more
originally signed Underlying Notes in effect for each Loan, which in the
aggregate evidence the portion of the Loan being assigned to the Issuer and
which Underlying Notes have been delivered to the Indenture Trustee;
provided, however, if the Originator funds such a Loan in
multiple installments, there may be one originally signed Underlying Note for
each installment;



     (eee) there is no obligation on the part of the Originator or the Trust
Depositor, as the case may be, or any other party (except for any guarantor of
a Loan), to make Scheduled Payments in addition to those made by the Obligor;



     (fff) the documents constituting a part of the Loan File as of the date
hereof do not (taken as a whole together with the other components of the Loan
File) contain any untrue statement of a material fact or omit to state a
material fact necessary to make the factual statements contained therein, in
light of the circumstances under which they were made, not misleading; and



     (ggg) as of the related Transfer Date, there is no default, breach,
violation or event of acceleration existing under the related loan agreement
or, as applicable, the Underlying Notes and no event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration (except for such defaults, breaches and
violations that would not have a Material Adverse Effect on the ability of the
Servicer to collect the entire principal and interest thereunder and would not
have a material adverse effect on the ability of the Servicer to realize the
value of the Collateral securing the related Loan); and



     (hhh) with respect to each Pooled Obligor Loan, as of the related Transfer
Date, (i) the collateral (including, but not limited to, the notes of the
Underlying Debtors and assignments of mortgage in each case where real property
secures the Underlying Debtors’ notes) of the related Underlying Debtors
securing such Loan is held by a custodian under a custodial agreement, (ii)



18









 







the
custodial agreement for such Loan provides that (A) the related custodian holds
the collateral of the Underlying Debtors pro rata on behalf of the Indenture
Trustee, for the benefit of the Noteholders and the Hedge Counterparties, and
any other assignee and (B) the custodian will record and file the assignments
of mortgage in its name on behalf of the Indenture Trustee and any other
assignee upon the request of noteholders of such Obligor or SPE Obligor holding
a controlling interest and (iii) the Originator’s rights under the custodial
agreement are fully assignable and have been assigned to the Indenture Trustee.



     (iii) except with respect to the Loans to The Rocks at Pinnacle Peak and
Sunset Cove Marco Limited Partnership, the Loan was not made in connection with
(a) the construction or development of unimproved land or (b) facilitating the
trade-in or exchange of the related Mortgaged property.


“Eligible Loan Rating” means, with respect to a designated Obligor,
a “Loan Rating 1,” a “Loan Rating 2,” or a “Loan Rating 3” in accordance with
the Credit and Collection Policy.



“Eligible Obligor” means, on any date of determination, any Obligor
that (i) is a business organization (and not a natural person) duly organized
and validly existing under the laws of, and has its chief executive offices in,
the United States or any political subdivision thereof, and has a billing
address within the United States, (ii) is a legal operating entity or holding
company (except with respect to a Loan to an SPE Obligor), (iii) is not a
Governmental Authority, (iv) is not an Affiliate (other than with respect to an
SPE Obligor) of the Originator, the Servicer, the Trust Depositor or the Issuer
(v) is not in the gaming, nuclear waste or natural resources industry (other
than Obligors in the business of wholesale purchasing and reselling of natural
gas or electricity, the Loans to which have been appropriately hedged), (vi) is
not engaged in the business of conducting proprietary research on new drug
development, (vii) is not the subject of an Insolvency Proceeding or in
financial distress, (viii) as of the applicable Cut-Off Date, has an Eligible
Loan Rating and (ix) is not an Obligor of a Charged-Off Loan or Delinquent
Loan.



“Eligible Repurchase Obligations” means repurchase obligations with
respect to any security that is a direct obligation of, or fully guaranteed by,
the United States or any agency or instrumentality thereof the obligations of
which are backed by the full faith and credit of the United States, in either
case entered into with a depository institution or trust company (acting as
principal) described in clauses (c)(ii) and (c)(iv) of the
definition of Permitted Investments.



“Event of Default” shall have the meaning specified in Section
5.01 of the Indenture.



“Exchange Act” means the Securities Exchange Act of 1934, as
amended or supplemented from time to time.



“Excluded Amounts” means (a) any amount received by, on or with
respect to any Loan in the Loan Pool, which amount is attributable to the
payment of any tax, fee or other charge imposed by any Governmental Authority
on such Loan, (b) any amount representing a reimbursement of insurance premiums
and (c) any amount with respect to any Loan retransferred or replaced with a
Substitute Loan under Section 11.01, to the extent such amount is
attributable to a time after the effective date of such replacement.



“FDIC” shall mean the Federal Deposit Insurance Corporation and any
successor thereto.




19









 







“Fidelity Bond” shall have the meaning given to such term in
Section 5.04.



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



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



“Fixed Rate Loan” means a Loan that is other than a Floating Rate
Loan or an Election Rate Loan.



“Floating Prime Rate Loan” means a Loan where the Loan Rate payable
by the Obligor thereof is based on the CapitalSource Prime Rate plus some
specified percentage in addition thereto, and the Loan provides that such Loan
Rate will reset immediately upon any change in the related CapitalSource Prime
Rate and no Election Rate Loan shall be considered a Floating Prime Rate Loan.



“Floating Rate Loan” means a Loan where the Loan Rate payable by
the Obligor thereof is based on the CapitalSource Prime Rate or CapitalSource
LIBOR Rate plus some specified interest percentage in addition thereto, and the
Loan provides that such Loan Rate will reset immediately upon any change in the
related CapitalSource Prime Rate.



“Foreclosed Property” means Collateral acquired by the Issuer for
the benefit of the Securityholders and the Hedge Counterparties in foreclosure
or by deed in lieu of foreclosure or by other legal process.



“Foreclosed Property Disposition” means the final sale of a
Foreclosed Property or of Repossessed Collateral. The proceeds of any
“Foreclosed Property Disposition” constitute part of the definition of
Liquidation Proceeds.



“Fully Funded Term Loan” means a Term Loan that is fully funded as
of the Cut—Off Date.



“Governmental Authority” means, with respect to any Person, any
nation or government, any state or other political subdivision thereof, any
central bank (or similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government and any court or arbitrator having
jurisdiction over such Person.



“Healthcare Accounts Receivable Loan” means a Revolving Loan to an
Obligor in the healthcare industry (determined by the NAICS Code) secured
primarily by the healthcare accounts receivable of such Obligor.



“Hedge Agreement” means each agreement between the Issuer and a
Hedge Counterparty that governs one or more Hedge Transactions, which agreement
shall consist of a “Master Agreement” in a form published by the International
Swaps and Derivatives Association, Inc., together with a “Schedule” and “Credit
Support Annex”, and each “Confirmation” thereunder confirming the specific
terms of each such Hedge Transaction.





20









 







“Hedge Breakage Costs” means, for any Hedge Transaction, any amount
(other than Net Trust Hedge Payments) payable by the Issuer for the early
termination of that Hedge Transaction or any portion thereof.



“Hedge Breakage Receipts” means, for any Hedge Transaction, any
amount (other than Net Trust Hedge Receipts) payable to the Issuer for the
early termination of that Hedge Transaction or any portion thereof.



“Hedge Counterparty” means Wachovia Bank, National Association or
any other Qualified Hedge Counterparty that agrees that in the event that it or
its Credit Support Provider fails to maintain certain ratings as provided in
the applicable Hedge Agreement, then the Hedge Counterparty shall (i) transfer
all of its rights and obligations under the Hedge Agreement to a Substitute
Hedge Counterparty as provided in the Hedge Agreement or (ii) post collateral,
as applicable, as provided in the Hedge Agreement.



“Hedge Counterparty Collateral Account” means the segregated
account established by the Trustee at the direction of the Issuer pursuant to
Section 3.32 of the Indenture, in the name of the Indenture Trustee and for the
benefit of the Noteholders.



“Hedge Prime Rate” means a rate equal to “USD—PRIME—H.15” (as
defined in the definitions published by the International Swaps and Derivatives
Association, Inc.), such rate to change as and when such designated rate
changes.



“Hedge Transaction” means each interest rate swap transaction or
interest rate cap transaction between the Issuer and a Hedge Counterparty that
is governed by a Hedge Agreement.



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



“Holder” means (a) with respect to a Certificate, the Person in
whose name such Certificate is registered in the Certificate Register, and (b)
with respect to a Note, the Person in whose name such Note is registered in the
Note Register.



“Indebtedness” means, with respect to any Person at any date, (a)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current liabilities incurred in the
ordinary course of business and payable in accordance with customary trade
practices) or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under capital leases, (c) all
obligations of such Person in respect of acceptances issued or created for the
account of such Person, and (d) all liabilities secured by any Lien on any
property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.




21









 







“Indenture” means the Indenture, dated as of June 22, 2004, between
the Issuer and the Indenture Trustee.



“Indenture Collateral” shall have the meaning given to such term in
the “granting clause” of the Indenture.



“Indenture Trustee” means the Person acting as Indenture Trustee
under the Indenture, its successors in interest and any successor trustee under
the Indenture.



“Indenture Trustee Fee” shall have the meaning given to such term
in the fee letter, dated as of the date hereof, among the Originator, the Trust
Depositor, the Issuer and the Indenture Trustee.



“Independent” means, when used with respect to any specified
Person, the Person (a) is in fact independent of the Issuer, any other obligor
on the Notes, the Trust Depositor and any Affiliate of any of the foregoing
Persons, (b) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Trust
Depositor or any Affiliate of any of the foregoing Persons and (c) is not
connected with the Issuer, any such other obligor, the Trust Depositor or any
Affiliate of any of the foregoing Persons as an officer, employee, trustee,
partner, director or person performing similar functions.



“Independent Accountants” shall have the meaning given to such term
in Section 9.04.



“Individual Notes” shall have the meaning specified in the
Indenture.



“Ineligible Loan” shall have the meaning given to such term in
Section 11.01.



“Initial Aggregate Outstanding Loan Balance” means the Aggregate
Outstanding Loan Balance as of the Initial Cut—Off Date of the Loans
transferred to the Issuer on the Closing Date.



“Initial Aggregate Outstanding Principal Balance” means,
collectively, the sum of the Initial Class A-1 Principal Balance, Class A-2
Principal Balance, the Initial Class B Principal Balance, the Initial Class C
Principal Balance, the Initial Class D Principal Balance, and the Initial Class
E Principal Balance, i.e., $875,000,000.



“Initial Class A-1 Principal Balance” means $218,000,000.



“Initial Class A-2 Principal Balance” means $370,437,000.



“Initial Class B Principal Balance” means $67,813,000.



“Initial Class C Principal Balance” means $70,000,000.



“Initial Class D Principal Balance” means $39,375,000.



“Initial Class E Principal Balance” means $109,375,000.



“Initial Cut—Off Date” means May 21, 2004.




22









 







“Initial Loans” means those Loans conveyed to the Issuer on the
Closing Date and identified on the initial List of Loans required to be
delivered pursuant to Section 2.02(d).



“Initial Purchasers” means Citigroup Global Markets Inc., Wachovia
Capital Markets, LLC and Harris Nesbitt Corp.



“Insolvency Event” means, with respect to a specified Person, (a)
the filing of a decree or order for relief by a court having jurisdiction in
the premises in respect of such Person or any substantial part of its property
in an involuntary case under any applicable Insolvency Law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or ordering the winding—up or liquidation of such Person’s
affairs, and such decree or order shall remain unstayed or undismissed and in
effect for a period of 60 consecutive days; or

(b) the commencement by such Person of a voluntary case under any applicable
Insolvency Law now or hereafter in effect, or the consent by such Person to the
entry of an order for relief in an involuntary case under any such law, or the
consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors,
or the failure by such Person generally to pay its debts as such debts become
due, or the taking of action by such Person in furtherance of any of the
foregoing.



“Insolvency Laws” means the Bankruptcy Code of the United States
and all other applicable liquidation, conservatorship, bankruptcy, moratorium,
rearrangement, receivership, insolvency, reorganization, suspension of
payments, or similar debtor relief laws from time to time in effect affecting
the rights of creditors generally.



“Insurance Policy” means, with respect to any Loan, an insurance
policy covering physical damage to or loss of the related Collateral,
including, but not limited to, title, hazard, life, accident and/or flood
insurance policies.



“Insurance Proceeds” means, depending on the context, any amounts
payable or any payments made under any Insurance Policy covering a Loan,
Collateral, Repossessed Collateral or Foreclosed Property.



“Interest Accrual Period” means the period commencing on a
Remittance Date and ending on the day immediately preceding the next Remittance
Date (or, with respect to the first Remittance Date, the period commencing on
the Closing Date and ending on the day before the first Remittance Date).



“Interest Collection Account” means a sub—account of the Principal
and Interest Account established and maintained pursuant to Section
7.03(a).



“Interest Collections” means the aggregate of:




     (a) amounts deposited into the Principal and Interest Account in respect
of:



23









 






     (i) all payments received on or after the first day of the month in
which the Closing Date occurs on account of interest on the Loans
(including Finance Charges, fees and the deferred interest component of a
Deferred Interest Loan) and all late payment, default and waiver charges;




     (ii) Net Liquidation Proceeds;




     (iii) Insurance Proceeds (other than amounts to be applied to the
restoration or repair of the related Collateral, or released or to be
released to the Obligor or others);




     (iv) Released Mortgaged Property Proceeds and any other proceeds
from any other Collateral securing the Loans (other than amounts released
or to be released to the Obligor or others);




     (v) Net Trust Hedge Receipts and Hedge Breakage Receipts; and




     (vi) the interest portion of any amounts received (x) in connection
with the purchase or repurchase of any Loan and the amount of any
adjustment for substituted Loans and (y) any Scheduled Payment Advances
that the Servicer determines to make; plus



     (b) investment earnings on funds held in the Trust Accounts; minus



     (c) the amount of any losses incurred in connection with investments in
Permitted Investments.


“Interest Shortfall” means, with respect to the Class A-1 Notes,
the Class A-2 Notes, the Class B Notes, the Class C Notes or the Class D Notes,
as applicable, if the amount by which the interest paid to such Class on a Remittance Date is less than the amount due to
such Class, the amount of shortfall will be carried forward and paid on the
immediately following Remittance Date for which funds exist, together with
accrued interest on such amount at the then applicable Note Interest Rate for
such Class.



“Investment Earnings” means the investment earnings (net of losses
and investment expenses) on amounts on deposit in the Principal and Interest
Account, the Note Distribution Account and the Reserve Fund, to be credited to
the Principal and Interest Account on the applicable Remittance Date pursuant
to Section 7.01 and Section 7.03.



“Irish Stock Exchange” means the Irish Stock Exchange and any
successor securities exchange thereto on which the Class A-1 Notes, the Class
A-2 Notes, Class B Notes, Class C Notes and Class D Notes may be listed for
trading.



“Issuer” means the trust created by the Trust Agreement and funded
pursuant to this Agreement, consisting of the Loan Assets.



“Legal Final Maturity Date” means April 20, 2013.



“LIBOR” shall have the meaning given to such term in Section
7.06.





24









 







“LIBOR Determination Date” shall have the meaning given to such
term in Section 7.06.



“Lien” means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other),
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever, including, without limitation, any conditional
sale or other title retention agreement, and any financing lease having
substantially the same economic effect as any of the foregoing (including any
UCC financing statement or any similar instrument filed against a Person’s
assets or properties).



“Liquidation Expenses” means, with respect to any Loan, the
aggregate amount of all out—of—pocket expenses reasonably incurred by the
Servicer (including amounts paid to any Subservicer) and any reasonably
allocated costs of counsel (if any), in each case in accordance with the
Servicer’s customary procedures in connection with the repossession,
refurbishing and disposition of any Collateral securing such Loan upon or after
the expiration or earlier termination of such Loan and other out—of—pocket
costs related to the liquidation of any such Collateral, including the
attempted collection of any amount owing pursuant to such Loan if it is a
Charged—Off Loan, and, if requested by the Indenture Trustee, the Servicer and
Originator must provide to the Indenture Trustee a breakdown of the Liquidation
Expenses for any Loan along with any supporting documentation therefor;
provided, however, to the extent any such “Liquidation Expenses”
relate to any Loan with a Retained Interest, such expenses shall be allocated
pro rata to such Loan based on the Outstanding Loan Balance included in the
Loan Pool and the outstanding loan balance of the Retained Interest.



“Liquidation Proceeds” means, cash, including Insurance Proceeds,
proceeds of any Foreclosed Property Disposition, revenues received by the
Servicer or the Issuer with respect to the conservation and disposition of a
Foreclosed Property, and any other amounts received by the
Servicer or Issuer in connection with the liquidation of Charged—Off Loans,
whether through trustee’s sale, foreclosure sale or otherwise.



“Liquidation Report” shall have the meaning given to such term in
Section 5.03(c).



“List of Loans” means the list identifying each Loan constituting
part of the Loan Assets, which list shall consist of the initial List of Loans
reflecting the Initial Loans transferred to the Issuer on the Closing Date,
together with any Subsequent List of Loans amending the most current List of
Loans reflecting the Substitute Loans transferred to the Issuer on the related
Subsequent Transfer Date (together with a deletion from such list of the
related Loan or Loans identified on the corresponding Addition Notice with
respect to which a Substitution Event has occurred), and which list in each
case (a) identifies by account number and Obligor name each Loan included in
the Loan Pool, and (b) sets forth as to each such Loan (i) the Outstanding Loan
Balance as of the Cut—Off Date, and (ii) the maturity date, and which list (as
in effect on the Closing Date) is attached to this Agreement as Exhibit
G.



“Loan” means, to the extent transferred by the Trust Depositor to
the Issuer, an individual loan or portion thereof made or purchased by the
Originator to an Obligor, including, as applicable, Assigned Loans and Agented
Loans.




25









 







“Loan Assets” shall have the meaning given to such term in
Section 2.01(b) (or Section 2.04(b), in the case of Substitute
Loans).



“Loan Checklist” means the list delivered by the Trust Depositor to
the Indenture Trustee pursuant Section 2.06 of this Agreement that
identifies the items contained in the related Loan File.



“Loan Files” means, with respect to any Loan and Collateral, each
of the Required Loan Documents and duly executed originals (to the extent
required by the Credit and Collection Policy) and copies of any other Records
relating to such Loan and Collateral.



“Loan Pool” means, as of any date, the Initial Loans and the
Substitute Loans (if any), other than any such Loans that (a) have been
reconveyed by the Issuer to the Trust Depositor, and concurrently by the Trust
Depositor to the Originator, pursuant to Section 11.02 hereof or (b)
have been paid (or prepaid) in full.



“Loan Rate” means, for each Loan in a Due Period, the current cash
pay interest rate for such Loan in such period, as specified in the related
Required Loan Documents.



“Loan Rating” means the “loan rating” determined with respect to a
Loan in accordance with the Credit and Collection Policy under the Originator’s
loan risk rating system, which ranks loans based on the Originator’s analysis
of the credit quality of the loan, the structure of the loan or the underlying
collateral.



“Loan Register” means, with respect to each Noteless Loan, the
register in which the agent or collateral agent on such Loan will record, among
other things, (i) the amount of such Loan, (ii) the amount of any principal or
interest due and payable or to become due and payable
from the Obligor thereunder, (iii) the amount of any sum in respect of such
Loan received from the Obligor and each lender’s share thereof, (iv) the date
of origination of such Loan and (v) the maturity date of such Loan.



“Loan Sale Agreement” means the Commercial Loan Sale Agreement,
dated as of the date hereof, between the Originator and the Trust Depositor, as
such agreement may be amended, modified, waived, supplemented or restated from
time to time.



“Loan—to—Value or LTV” means, with respect to any Loan, as of any
date of determination, the percentage equivalent of a fraction (i) the
numerator of which is equal to the maximum availability (as provided in the
applicable loan documentation) of such Loan as of the date of its origination
and (ii) the denominator of which is equal to the total discounted collateral
value of the Collateral securing such Loan.



“Lock—Box” means the post office box to which Collections are
remitted for retrieval by the Lock—Box Bank and deposited by such Lock—Box Bank
into the Lock—Box Account, the details of which are contained in Schedule
I, as such schedule may be amended from time to time.



“Lock—Box Account” means the account maintained at Bank of America,
N.A. in the name of CapitalSource Funding LLC for the purpose of receiving
Collections, including but not limited to


26









 






Collections from the Obligor
Lock—Boxes, the details of which are contained in Schedule I, as such
schedule may be amended from time to time.



“Lock—Box Agreement” means the Fourth Amended and Restated Three
Party Agreement Relating to Lockbox Services and Control (with Activation Upon
Notice), dated as of November 25, 2003, among Wells Fargo, as the indenture
trustee, Bank of America, N.A., as the lockbox bank, Wachovia Capital Markets,
LLC, as the administrative agent thereof, CapitalSource Finance, as the
originator, as the original servicer and as the lockbox servicer, and
CapitalSource Funding LLC, as the owner of the account and as the owner of the
lockbox, as amended, modified, waived, supplemented or restated from time to
time.



“Lock—Box Bank” means Bank of America, N.A.



“London Banking Day” means any day on which dealings in deposits in
Dollars are transacted in the London interbank market.



“Majority Noteholders” means (a) prior to the payment in full of
the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes
and the Class D Notes, the Class A-1 Noteholders evidencing more than 50% of
the aggregate Outstanding Principal Balance of all Class A-1 Notes the Class
A-2 Noteholders evidencing more than 50% of the aggregate Outstanding Principal
Balance of all Class A-2 Notes, the Class B Noteholders evidencing more than
50% of the aggregate Outstanding Principal Balance of all Class B Notes, the
Class C Noteholders evidencing more than 50% of the aggregate Outstanding
Principal Balance of all Class C Notes and the Class D Noteholders evidencing
more than 50% of the aggregate Outstanding Principal Balance of all Class D
Notes and (b) from and after the payment in full of the Class A-1 Notes, the
Class A-2 Notes, the Class B Notes, the Class C Notes and the Class D
Notes, the Class E Noteholder evidencing more than 50% of the aggregate
Outstanding Principal Balance of the Class E Note.



“Margin Stock” means “Margin Stock” as defined under Regulation U
issued by the Board of Governors of the Federal Reserve System.



“Material Adverse Effect” means, with respect to any event or
circumstance, a material adverse effect on (a) the business, financial
condition, operations, performance or properties of the Originator, the Trust
Depositor, the Issuer or the Servicer, (b) the validity, enforceability or
collectibility of this Agreement or any other Transaction Document, or the
validity, enforceability or collectibility of the Loans generally or any
material portion of the Loans, (c) the rights and remedies of the Indenture
Trustee on behalf of the Securityholders and the Hedge Counterparties, (d) the
ability of the Originator, the Trust Depositor, the Issuer, the Servicer, the
Backup Servicer or the Indenture Trustee to perform in all material respects
their respective obligations under this Agreement or any Transaction Document,
or (e) the status, existence, perfection, priority or enforceability of the
Indenture Trustee’s security interest on behalf of the Securityholders and the
Hedge Counterparties.



“Material Modification” means:




          (i) a termination or release (including pursuant to prepayment), or an
amendment, modification or waiver, or equivalent similar undertaking or
agreement, by the



27









 







Servicer with respect to a Loan which would not otherwise be
permitted under the standards and criteria set forth in Section 5.02(e);



          (ii) prior to the date on which the Outstanding Principal Balance of the
Class A-1 Notes has been reduced to zero, any Specified Amendment with respect
to any Loan;



          (iii) any Specified Amendment with respect to a Loan having a Loan Rating
of “3” at the time of such Specified Amendment (and any such Specified
Amendment shall result in such Loan being deemed to be a Delinquent Loan in
accordance with the definition thereof);



          (iv) any Specified Amendment with respect to a Loan having a Loan Rating
of “4”, “5”, or “6” at the time of such Specified Amendment (and any such
Specified Amendment shall result in such Loan being deemed to be a Charged-Off
Loan in accordance with the definition thereof); or



          (v) a termination or release (including pursuant to prepayment), or an
amendment, modification or waiver, or equivalent similar undertaking or
agreement, by the Servicer with respect to a Loan which is entered into for
reasons related to the inability of the applicable Obligor to make payments of
principal or interest under such Loan, as determined in accordance with the
Credit and Collection Policy.


“Material Mortgage Loan” means any Loan for which the underlying
Collateral consisting of real property owned by the Obligor (a) 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 (i) the original commitment for such
Loan and (ii) the fair value of the underlying Obligor and Collateral as a
whole and (b) is material to the operations of the related
business; provided, however, that a Material Mortgage Loan shall not
include certain parcels of real property which the Obligor is in the process of
disposing.



“Monthly Reconciliation Date” means the last day of each Due
Period.



“Monthly Report” shall have the meaning given to such term in
Section 9.01.



“Moody’s” means Moody’s Investors Service or any successor thereto.



“Moody’s Rating Condition” means, with respect to any action or
series of related actions or proposed transaction or series of proposed
transactions, that Moody’s shall have notified the Trust Depositor, the Owner
Trustee and the Indenture Trustee in writing that such action or series of
related actions or the consummation of such proposed transaction or series of
related transactions will not result in a reduction or withdrawal of the rating
issued by Moody’s on the Closing Date with respect to any outstanding class of
Notes as a result of such action or series of related actions or the
consummation of such proposed transaction or series of related transactions.



“Mortgage” means the mortgage, deed of trust or other instrument
creating a Lien on a Mortgaged Property.





28









 







“Mortgaged Property” means the underlying real property, if any,
secured under a Material Mortgage Loan, and any improvements thereon, which
property satisfies either test in the definition of Material Mortgage Loan.



“NAICS Code” means the North American Industry Classification
System Codes by at least four (4) digits.



“Net Liquidation Proceeds” means Liquidation Proceeds relating to a
Loan net of (a) any Liquidation Expenses relating to such Loan reimbursed to
the Servicer therefrom pursuant to terms of this Agreement and (b) amounts
required to be released to other creditors, including any other costs, expenses
and taxes, or the related Obligor or grantor pursuant to applicable law or the
governing Required Loan Documents.



“Net Trust Hedge Payments” means, with respect to each Remittance
Date, the excess, if any, of (a) the monthly payments by the Issuer to the
Hedge Counterparties and any interest accrued thereon over (b) the monthly
payments by the Hedge Counterparties to the Issuer and any interest accrued
thereon.



“Net Trust Hedge Receipts” means, with respect to each Remittance
Date, the excess, if any, of (a) the monthly payments by the Hedge
Counterparties to the Issuer and any interest accrued thereon over (b) the
monthly payments by the Issuer to the Hedge Counterparties and any interest
accrued thereon.



“New York Business Day” means any Business Day in the city of New
York, New York.



“Note” means any one of the notes of the Issuer of any Class
executed and authenticated in accordance with the Indenture.



“Note Distribution Account” means the interest bearing trust
account so designated and established and maintained pursuant to Section
7.01.



“Note Interest Rate” means, as the context requires, any of the
Class A-1 Note Interest Rate, the Class A-2 Note Interest Rate, the Class B
Note Interest Rate, the Class C Note Interest Rate or the Class D Note Interest
Rate.



“Note Register” shall have the meaning given to such term in
Section 2.04 of the Indenture.



“Noteholders” means each Person in whose name a Note is registered
in the Note Register.



“Noteless Loan” means a Loan with respect to which (i) the related
loan agreement does not require the Obligor to execute and deliver an
Underlying Note to evidence the indebtedness created under such Loan and (ii)
no Underlying Notes are outstanding with respect to the portion of the Loan
transferred to the Issuer.



“Obligor” means, with respect to any Loan, any Person or Persons
obligated to make payments pursuant to or with respect to such Loan, including
any guarantor thereof.





29









 







“Obligor Lock—Box” means the post office box to which Collections
are remitted with respect to certain Revolving Loans for retrieval by an
Obligor Lock—Box Bank and deposited by such Obligor Lock—Box Bank into an
Obligor Lock—Box Account, the details of which are contained in Schedule
II, as such schedule may be amended from time to time.



“Obligor Lock—Box Accounts” means the accounts maintained for the
purpose of receiving Collections on certain Revolving Loans and transferring
such Collections to the Lock—Box, the details of which are contained in
Schedule II, as such schedule may be amended from time to time.



“Obligor Lock—Box Bank” means any of the banks or other financial
institutions holding one or more Obligor Lock—Box Accounts.



“OCC” means the Office of the Comptroller of the Currency.



“Offered Notes” means the Class A-1 Notes, the Class A-2 Notes, the
Class B Notes, the Class C Notes and the Class D Notes.



“Offered Notes Priority Date” means the first Remittance Date on or
after the date on which the Outstanding Principal Balance of the Class A-1
Notes has been reduced to zero.



“Offering Memorandum” means the Offering Memorandum, dated June 10,
2004 prepared in connection with the offer and sale of the Class A-1 Notes, the
Class A-2 Notes, the Class B Notes, the Class C Notes and the Class D Notes.



“Officer’s Certificate” means a certificate delivered to the
Indenture Trustee signed by the Chief Executive Officer, the President, an
Executive Vice President, a Senior Vice President, the Treasurer, the
Secretary, or one of the Assistant Treasurers or Assistant Secretaries of the
Trust Depositor, the Servicer, or the Owner Trustee (or another Person) on
behalf of the Issuer, as required by this Agreement or any other Transaction
Document.



“One—Month Index Maturity” shall have the meaning given to such
term in Section 7.06.



“Opinion of Counsel” means a written opinion of counsel, who may be
outside counsel, or internal counsel (except with respect to federal securities
law, tax law, bankruptcy law or UCC matters), for the Trust Depositor or the
Servicer, from Patton Boggs LLP or other counsel reasonably acceptable to the
Owner Trustee or the Indenture Trustee, as the case may be; provided,
however, if the opinion of counsel concerns or relates to any Hedge
Counterparty, such counsel shall be (i) outside counsel and (ii) acceptable to
each Hedge Counterparty.



“Originator” shall have the meaning given to such term in the
Preamble.



“Outstanding” shall have the meaning given to such term in the
Indenture.



“Outstanding Loan Balance” of a Loan means the excess of (a) the
principal amount of such Loan, or portion thereof transferred to the Issuer,
outstanding as of the Cut—Off Date over (b) all Principal Collections received
on such Loan, or portion thereof, transferred to the Issuer since the Cut—Off
Date; provided that for all purposes other than the determination of the
Transfer Deposit


30









 






Amount: (i) any Loan charged—off pursuant to clauses
(a) through (c) and (e) through (g) of the definition
of Charged—Off Loan will be deemed to have an Outstanding Loan Balance equal to
zero; and (ii) all or the portion of any Loan charged—off pursuant to clause
(d) of the definition of Charged—Off Loan will be deemed to have an
Outstanding Loan Balance equal to zero; and provided, further, that for all
purposes other than determining the Transfer Deposit Amount with respect to
such Loan and determining the amount described in clause (y) of the
limitations on repurchase and substitution of Loans set forth in Section
2.07, any Loan charged—off pursuant to clause (h) of the definition of
Charged—Off Loan will be deemed to have an Outstanding Loan Balance equal to
zero; and provided, further, that, for any Deferred Interest Loan, the
Outstanding Loan Balance of such Deferred Interest Loan shall not include any
Accreted Interest with respect thereto



“Outstanding Principal Balance” means, as of date of determination
and with respect to any class of Notes, the original principal amount of such
class of Notes on the Closing Date, as reduced by all amounts paid by the
Issuer with respect to such principal amount up to such date.



“Overadvance” means an advance of funds by the Originator or any of
its Affiliates to an Obligor under a Loan in excess of the availability under
the facility related to such Loan at the time such advance is made.



“Owner Trustee” means the Person acting, not in its individual
capacity, but solely as Owner Trustee, under the Trust Agreement, its
successors in interest and any successor owner trustee under the Trust
Agreement.



“Partially Funded Term Loan” means a Loan that is a closed—end
multiple advance Loan that has not been fully funded as of the Cut—Off Date.



“Participation Loan” means a Loan to an Obligor, originated by the
Originator and serviced by the Servicer in the ordinary course of its business,
in which a participation interest has been granted to another Person in
accordance with the Credit and Collection Policy and such transaction has been
fully consummated, pursuant to a standard participation agreement.



“Paying Agent” shall have the meaning given to such term in
Section 3.03 of the Indenture and Section 3.09 of the Trust
Agreement.



“Performance Trigger Event” means, with respect to any Remittance
Date, the occurrence of one or more of the following: (i) Loans in the Loan
Pool representing 8.0% or more of the Initial Aggregate Outstanding Loan
Balance have become Charged-Off Loans as of the related Determination Date;
(ii) any of the Class B Interest Amount, the Class C Interest Amount or the
Class D Interest Amount is calculated using clause (ii)(b) of the
definition thereof; (iii) an Event of Default; (iv) a Servicer Default; or (v)
an Accelerated Amortization Event.



“Permitted Investments” with respect to any Remittance Date means
negotiable instruments or securities or other investments maturing on or before
such Remittance 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


31









 






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 Remittance Date immediately following such date of determination, and (c)
that evidence:





     (i) direct obligations of, and obligations fully guaranteed as to
full and timely payment by, the United States (or by any agency thereof
to the extent such obligations are backed by the full faith and credit of
the United States);




     (ii) demand deposits, time deposits or certificates of deposit of
depository institutions or trust companies incorporated under the laws of
the United States or any state thereof and subject to supervision and
examination by federal or state banking or depository institution
authorities; provided, however, that at the time of the
Issuer’s investment or contractual commitment to invest therein, the
commercial paper, if any, and short—term unsecured debt obligations
(other than such obligation whose rating is based on the credit of a
Person other than such institution or trust company) of such depository
institution or trust company shall have a credit rating from each Rating
Agency in the Highest Required Investment Category granted by such Rating
Agency, which, in the case of Fitch, shall be “F—1+”;




     (iii) commercial paper, or other short term obligations, having, at
the time of the Issuer’s investment or contractual commitment to invest
therein, a rating in the Highest Required Investment Category granted by
each Rating Agency, which, in the case of Fitch, shall be “F—1+”;




     (iv) demand deposits, time deposits or certificates of deposit that
are fully insured by the FDIC and either have a rating on their
certificates of deposit or short—term deposits from Moody’s and S&P of
“P—1” and “A—1+”, respectively, and, if rated by Fitch, from Fitch of
“F—1+”;




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




     (vi) investments in taxable money market funds or other regulated
investment companies having, at the time of the Issuer’s investment or
contractual commitment to invest therein, a rating of the Highest
Required Investment Category from Moody’s, S&P and Fitch (if rated by
Fitch) or otherwise subject to satisfaction of the Rating Agency
Condition;




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




     (viii) Eligible Repurchase Obligations with a rating acceptable to
the Rating Agencies, which, in the case of Fitch, shall be “F—1+” and in
the case of S&P shall be “A—1+”; or



32









 






     (ix) any negotiable instruments or securities or other investments
subject to satisfaction of the Rating Agency Condition.


The Indenture Trustee may purchase or sell to itself or an Affiliate, as
principal or agent, the Permitted Investments described above.



“Permitted Liens” means



(a) with respect to Loans in the Loan Pool: (i) Liens in favor of the
Trust Depositor created pursuant to the Loan Sale Agreement and transferred to
the Issuer pursuant hereto, (ii) Liens in favor of the Issuer created pursuant
to this Agreement, and (iii) Liens in favor of the Indenture Trustee created
pursuant to the Indenture and/or this Agreement; and



(b) with respect to the interest of the Originator, the Trust Depositor
and the Issuer in the related Collateral: (i) materialmen’s, warehousemen’s,
mechanics’ and other Liens arising by operation of law in the ordinary course
of business for sums not due or sums that are being contested in good faith,
(ii) purchase money security interests in certain items of equipment, (iii)
Liens for state, municipal and other local taxes if such taxes shall not at the
time be due and payable or if the Trust Depositor shall currently be contesting
the validity thereof in good faith by appropriate proceedings, (iv) Liens in
favor of the Trust Depositor created by the Originator and transferred by the Trust Depositor to the Issuer pursuant to this
Agreement, (v) Liens in favor of the Issuer created pursuant to this Agreement,
(vi) Liens in favor of the Indenture Trustee created pursuant to the Indenture
and/or this Agreement, (vii) Liens held by senior lenders with respect to any
Subordinated Loans and (viii) with respect to Agented Loans and Acquired Loans,
Liens in favor of the collateral agent on behalf of all noteholders of such
Obligor.



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



“Pooled Obligor Loans” means Loans to Obligors that are in turn
collateralized by loans to multiple Underlying Debtors, including, without
limitation, Underlying Debtors that are individuals, consumers and small
businesses.



“Prepaid Loan” means any Loan (other than a Charged—Off Loan) that
was terminated or has been prepaid in full prior to its scheduled expiration
date.



“Prepaid Loan Amount” means, with respect to each Substitute Loan
being transferred in place of a Prepaid Loan, an amount equal to the lesser of
(i) the amount deposited into the Principal Collection Account with respect to
such Prepaid Loan and (ii) the Outstanding Loan Balance of the Prepaid Loan
immediately prior to the date it was prepaid.



“Prepayments” means any and all (a) full prepayments, including
prepayment premiums, on or with respect to a Loan (including, with respect to
any Loan and any Due Period, any Scheduled Payment, Finance Charge or portion
thereof that is due in a subsequent Due Period that the Servicer has received
and expressly permitted the related Obligor to make in advance of its


33









 






scheduled
due date, and that will be applied to such Scheduled Payment on such due date),
(b) Liquidation Proceeds, and (c) Insurance Proceeds.



“Principal and Interest Account” means the interest bearing trust
account so designated and established and maintained pursuant to Section
7.03.



“Principal Collection Account” means a sub—account of the Principal
and Interest Account established and maintained pursuant to Section
7.03(a).



“Principal Collections” means amounts deposited into the Principal
and Interest Account in respect of payments received on or after the Cut—Off
Date on account of principal on the Loans, including:




     (a) the principal portion of:




     (i) any Scheduled Payments and Prepayments; and




     (ii) any amounts received (x) in connection with the purchase or
repurchase of any Loan and the amount of any adjustment for substituted
Loans and (y) any Scheduled Payment Advances that the Servicer determines
to make;



     (b) Curtailments; and



     (c) amounts previously deposited in accordance with the procedures for the
substitution of Loans that have not been applied to purchase one or more
Substitute Loans within 180 days of their deposit into the Principal Collection
Account.


“Prior Term Transactions” means the Rule 144A/Regulation S private
placements of Notes issued by (i) CapitalSource Commercial Loan Trust 2002-1 on
or about May 16, 2002, (ii) CapitalSource Commercial Loan Trust 2002-2 on or
about October 30, 2002, (iii) CapitalSource Commercial Loan Trust 2003-1 on or
about April 17, 2003 and (iv) CapitalSource Commercial Loan Trust 2003-2 on or
about November 25, 2003.



“Priority of Payments” means, collectively, the payments made on
each Remittance Date in accordance with Section 7.05(a) and Section
7.05(b).



“Public Securities” means the common stock of CapitalSource Inc., a
Delaware corporation and the ultimate parent of the Originator, and any
subsequent securities issued by CapitalSource Inc. in a transaction registered
under the Securities Act.



“Purchase Agreement” means the Purchase Agreement, dated June 10,
2004, among the Initial Purchasers, the Issuer and CapitalSource, as such
agreement may be amended, modified, waived, supplemented or restated from time
to time.



“Qualified Hedge Counterparty” means a party that is a recognized
dealer in interest rate swaps and interest rate caps, organized under the laws
of the United States or a jurisdiction located therein (or another jurisdiction
reasonably acceptable to the Issuer and each Rating Agency), that with respect
to itself or its Credit Support Provider: (a) at the time it becomes a Hedge


34









 






Counterparty has a short—term rating of at least “A—1” by S&P (for so long as
any of the Offered Notes are deemed Outstanding hereunder and are rated by
S&P), and at least “F—1” by Fitch (for so long as any of the Offered Notes are
deemed Outstanding hereunder and are rated by Fitch) and either a long—term
senior unsecured debt rating of at least “Aa3” by Moody’s (if such Person does
not have at least a “P—1” short—term debt rating by Moody’s) or a long—term
senior unsecured debt rating of at least “A1” by Moody’s and not subject to the
qualification that the party has been placed on credit watch with negative
implications (only if the short—term debt of such Person is rated at least
“P—1” by Moody’s and not subject to the qualification that the party has been
placed on credit watch with negative implications) (for so long as any of the
Offered Notes are deemed Outstanding hereunder and are rated by Moody’s) and
thereafter maintains a short—term rating of at least “A—1” by S&P unless such
party has a long-term senior unsecured debt rating of at least “A+” from S&P
(for so long as any of the Offered Notes are deemed Outstanding hereunder and
are rated by S&P), and a short-term debt rating of at least “F—2” by Fitch (for
so long as any of the Offered Notes are deemed Outstanding hereunder and are
rated by Fitch) and either a long—term senior unsecured debt rating of at least
“A1” by Moody’s (if such Person does not have at least a “P—1” short—term debt
rating by Moody’s) or a long—term senior unsecured debt rating of at least “A2”
by Moody’s (only if the short—term debt of such Person is rated at least “P—1”
by Moody’s) (for so long as any of the Offered Notes are deemed Outstanding
hereunder and are rated by Moody’s); provided that should a Rating Agency
effect an overall downward adjustment of its short-term or long-term debt
ratings, then
the rating required of that Rating Agency under this clause (a) for a party to
constitute a Qualified Hedge Counterparty shall be downwardly adjusted
accordingly; provided further, that any adjustment to a rating shall be subject
to the prior written consent of the applicable Rating Agency (b) legally and
effectively accepts the rights and obligations under the applicable Hedge
Agreement, or, as the case may be, alternate credit support arrangements
pursuant to a written agreement reasonably acceptable to the Issuer and (c) in
connection with a Substitute Hedge Counterparty, otherwise satisfies the Rating
Agency Condition.



“Qualified Institution” means (a) the corporate trust department of
the Indenture Trustee or the corporate trust department of Wachovia Bank,
National Association, or (b) a depository institution organized under the laws
of the United States or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), (i)(A) that has either (1)
a long—term unsecured debt rating acceptable to the Rating Agencies, which, in
the case of S&P, shall be “AA—”, in the case of Fitch, shall be “AAA” and in
the case of Moody’s, shall be “Aa3,” or (2) a short—term unsecured debt rating
or certificate of deposit rating acceptable to the Rating Agencies, which, in
the case of S&P, shall be “A—1+”, in the case of Fitch, shall be “F—1+”, and in
the case of Moody’s, shall be “A-1,” (B) the parent corporation, if such parent
corporation guarantees the obligations of the depository institution, of which
has either (1) a long—term unsecured debt rating acceptable to the Rating
Agencies, which, in the case of S&P, shall be “AA—”, in the case of Fitch,
shall be “AAA” and in the case of Moody’s, shall be “Aa3” or (2) a short—term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies, which, in the case of S&P, shall be “A—1+”, in the case of Fitch,
shall be “F—1+” and in the case of Moody’s, shall be “A-1,” or (C) otherwise
satisfies the Rating Agency Condition, and (ii) whose deposits are insured by
the FDIC and satisfies the Rating Agency Condition.




35









 







“Qualified Transferee” means:




     (a) the Trust Depositor, the Trust, the Indenture Trustee and any
Affiliate thereof; or



     (b) any other Person which:




     (i) has at least $50,000,000 in capital/statutory surplus or
shareholders’ equity (except with respect to a pension advisory firm or
similar fiduciary); and




     (ii) is one of the following:




     (A) an insurance company, bank, savings and loan association,
investment bank, trust company, commercial credit corporation,
pension plan, pension fund, pension fund advisory firm, mutual
fund, real estate investment trust, governmental entity or plan;




     (B) an investment company, money management firm or a
“qualified institutional buyer” within the meaning of Rule 144A
under the Securities Act, or an “institutional accredited investor”
within the meaning of Regulation D who is a Qualified Purchaser for
purposes of Section 3(c)(7) of the 1940 Act;




     (C) the trustee, collateral agent or administrative agent in
connection with (x) a securitization of the subject Loan through
the creation of collateralized debt or loan obligations or (y) an asset-backed commercial
paper funded transaction funded by a commercial paper conduit whose
commercial paper notes are rated at least “A-1” by S&P or at least
“P-1” by Moody’s, or (z) a repurchase transaction funded by a an
entity which would otherwise be a Qualified Transferee so long as
the “equity interest” (other than any nominal or de minimis equity
interest) in the special purpose entity that issues notes or
certificates in connection with any such collateralized debt or
loan obligation, asset-backed commercial paper funded transaction
or repurchase transaction is owned by one or more entities that are
Qualified Transferees under subclauses (A) or (B) above; or




     (D) any entity Controlled (as defined below) by any of the
entities described in subclauses (i) or (ii) above.


For purposes of this definition only, “Control” means the ownership,
directly or indirectly, in the aggregate of more than fifty percent (50%) of
the beneficial ownership interests of an entity and the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of an entity, whether through the ability to exercise voting power, by
contract or otherwise, and “Controlled” has the meaning correlative thereto.



“Rating Agency” means each of S&P, Moody’s and Fitch, so long as
such Persons maintain a rating on the Class A Notes, the Class B Notes, the
Class C Notes and the Class D Notes; and if any of S&P, Moody’s or Fitch no
longer maintains a rating on the Class A Notes, the Class B Notes, the Class C
Notes and the Class D Notes, such other nationally recognized statistical
rating organization selected by the Trust Depositor.




36









 







“Rating Agency Condition” means, with respect to any action or
series of related actions or proposed transaction or series of related proposed
transactions, that each Rating Agency shall have notified the Trust Depositor,
the Owner Trustee and the Indenture Trustee in writing that such action or
series of related actions or the consummation of such proposed transaction or
series of related transactions will not result in a Ratings Effect.



“Ratings Effect” means, with respect to any action or series of
related actions or proposed transaction or series of related proposed
transactions, a reduction or withdrawal of the rating issued by a Rating Agency
on the Closing Date with respect to any outstanding Class of Notes as a result
of such action or series of related actions or the consummation of such
proposed transaction or series of related transactions.



“Record Date” means, for book—entry Notes, the calendar day
immediately preceding the applicable Remittance Date or Redemption Date, and
for the Individual Notes, the last Business Day of the immediately preceding
calendar month.



“Records” means all Loan and other documents, books, records and
other information (including without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
executed in connection with the origination or acquisition of the Loans or
maintained with respect to the Loans and the related Obligors that the
Originator or the Servicer have generated, in which the Originator, the Trust
Depositor, the
Issuer, the Indenture Trustee or the Servicer have acquired an interest
pursuant to the Transfer and Servicing Agreements or in which the Originator,
the Trust Depositor, the Issuer, the Indenture Trustee or the Servicer have
otherwise obtained an interest.



“Redemption Date” means in the case of a redemption of the Notes
pursuant to Section 10.01 of the Indenture, the Remittance Date
specified by the Issuer pursuant to Section 10.01 of the Indenture.



“Redemption Price” means, in the case of a redemption of the Notes
pursuant to Section 10.01 of the Indenture, an amount equal to the then
outstanding principal amount of each class of Notes to be redeemed plus accrued
and unpaid interest thereon to but excluding the Redemption Date plus all other
amounts accrued and unpaid with respect thereto, together with all amounts then
owing to each Hedge Counterparty, including Hedge Breakage Costs, plus, without
duplication, all amounts payable to each Hedge Counterparty upon termination of
all Hedge Transactions in connection with a redemption of the Notes, including
Hedge Breakage Costs.



“Reducing Revolving Loans” means a Loan that is a revolving line of
credit with a commitment that reduces over the life of the Loan.



“Reference Banks” means leading banks selected by the Indenture
Trustee and engaged in transactions in Eurodollar deposits in the international
Eurocurrency market.



“Released Amounts” means, with respect to any payment or collection
received with respect to any Loan on any Business Day (whether such payment or
collection is received by the Servicer, the Owner Trustee or the Trust
Depositor), an amount equal to that portion of such payment or collection on
any Retained Interest released from the Loan Assets pursuant to Section
2.05.




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“Released Mortgage Property Proceeds” means, as to any Loan secured
by a Mortgaged Property, the proceeds received by the Servicer in connection
with (a) a taking of an entire Mortgaged Property by exercise of the power of
eminent domain or condemnation or (b) any release of part of the Mortgaged
Property from the Lien of the related Mortgage, whether by partial
condemnation, sale or otherwise, which is not released to the Obligor, the
grantor or another creditor in accordance with the Requirements of Law, the
governing documents, the Credit and Collection Policy and this Agreement.



“Remittance Date” means the 20th day of each month, commencing July
20, 2004 or, if such 20th day is not a Business Day, on the next succeeding
Business Day.



“Repossessed Collateral” means items of Collateral taken in the
name of the Issuer as a result of legal action enforcing the Lien on the
Collateral resulting from a default on the related Loan.



“Representative Amount” means an amount that is representative for
a single transaction in the relevant market at the relevant time.



“Required Loan Documents” means, with respect to:




     (a) all Loans in the aggregate:




     (i) a blanket assignment of all of the Originator’s and Trust
Depositor’s right, title and interest in and to all Collateral securing
the Loans at any time transferred to the Issuer including without
limitation, all rights under applicable guarantees and Insurance
Policies, such assignment shall be in the name of “Wells Fargo Bank,
National Association, its successors and assigns, as Indenture Trustee
under the Indenture, dated as of June 22, 2004 relating to CapitalSource
Commercial Loan Trust 2004-1”;




     (ii) irrevocable powers of attorney of the Originator, the Trust
Depositor and the Issuer to the Indenture Trustee to execute, deliver,
file or record and otherwise deal with the Collateral for the Loans at
any time transferred to the Issuer. The powers of attorney will be
delegable by the Indenture Trustee to the Servicer and any Successor
Servicer and will permit the Indenture Trustee or its delegate to
prepare, execute and file or record UCC financing statements and notices
to insurers;




     (iii) blanket UCC—1 financing statements identifying by type all
Collateral for the Loans to be transferred to the Issuer as Collateral
under the Indenture and naming the Issuer and the Indenture Trustee, as
assignee of the Issuer, as “Secured Party” and the Trust Depositor as the
“Debtor”;



     (b) for each Loan:




     (i) with the exception of Noteless Loans, the original Underlying
Note, endorsed by means of an allonge as follows: “Pay to the order of
Wells Fargo Bank, National Association, and its successors and assigns,
not in its individual capacity but solely as Indenture Trustee under that
certain Indenture, dated as of June 22, 2004 relating to CapitalSource
Commercial Loan Trust 2004-1, without recourse” and signed, by facsimile
or manual signature, in the name of the Trust Depositor by a Responsible



38









 






Officer, with all prior and intervening endorsements showing a complete
chain of endorsement from the Originator to the Trust Depositor and from
the Trust Depositor to the Issuer;




     (ii) in the case of Noteless Loans, a copy of the Loan Register,
certified by a Responsible Officer of the Originator;




     (iii) a copy of the related loan agreement (which may be included in
the Underlying Note if so indicated in the Loan Checklist), together with
all amendments and modifications thereto;




     (iv) a copy of any related security agreement signed by the primary
Obligor;




     (v) a copy of the Loan Checklist;




     (vi) a copy of any related guarantees then executed in connection
with such Loan;




     (vii) a copy of all UCC financing statements filed securing any
related Collateral naming the Originator or, with respect to Assigned
Loans or Agented Loans, the collateral agent named thereunder, as
“Secured Party”;




     (viii) for Assigned Loans and Participation Loans, a copy of the
assignment agreement or participation agreement (as applicable);




     (ix) if the Originator is the only lender under the credit facility,
if the Originator is the collateral agent for a syndicate of lenders
under the credit facility, or if the Originator has not previously
delivered such stock certificate to Wells Fargo in connection with the CP
Funding Transaction, the Citi Warehouse, the CP Funding III Transaction
or the CP Acquisition Transaction, and the Loan Checklist indicates that
the Collateral includes a pledge of stock, the original stock certificate
serving as Collateral for such Loan, along with an executed stock power
executed in blank;




     (x) if the Originator is the only lender under the credit facility,
if the Originator is the collateral agent for a syndicate of lenders
under the credit facility, or if the Originator has not previously
delivered such items to Wells Fargo in connection with the CP Funding
Transaction, the Citi Warehouse, the CP Funding III Transaction or the CP
Acquisition Transaction, all other items listed in the related Loan
Checklist that have not previously been delivered, or a certificate from
a Responsible Officer of the Trust Depositor that such delivery has been
waived consistent with the prudent lending practices and the Credit and
Collection Policy of the Originator and such waiver shall not have a
material adverse effect on the Noteholders or Hedge Counterparties; and



     (c) for each Loan identified by the Trust Depositor as a Material Mortgage
Loan, each of the following documents (except for Material Mortgaged Loans
where the Originator or one of its Affiliates is a co—lender but not the
agent):



39









 






     (i) either (A) the original Mortgage, with evidence of recording
thereon, (B) a copy of the Mortgage certified as a true copy by a
Responsible Officer of the Originator where the original has been
transmitted for recording until such time as the original is returned by
the public recording office or duly licensed title or escrow officer or
(C) a copy of the Mortgage certified by the public recording office in
those instances where the original recorded Mortgage has been lost;




     (ii) the original Assignment of Mortgage from the Originator
endorsed as follows: “Wells Fargo Bank, National Association, its
successors and assigns, as Indenture Trustee under the Indenture, dated
as of June 22, 2004, as for the pro rata benefit of the Assigned
Parties”;




     (iii) either (A) originals of all intervening assignments, if any,
showing a complete chain of title from the originator of the Loan (where
such originator was not the Originator or one of its Affiliates) to the
Originator or one of its Affiliates, including warehousing assignments,
with evidence of recording thereon if such assignments were recorded, (B)
copies of any assignments certified as true copies by a Responsible
Officer of the Originator where the originals have been submitted for
recording until such time as the originals are returned by the public recording officer, or (C)
copies of any assignments certified by the public recording office in any
instances where the original recorded assignments have been lost; and




     (iv) either (A) a copy of all title insurance policies or a marked
title commitment relating to the title insurance policies for the
Mortgaged Property to the extent the Originator obtained such policies or
(B) copies of any title insurance policies or other evidence of Lien
position, including but not limited to policy insurance record of title
policies, limited liability reports and lot book reports, to the extent
the Originator obtains such policies or other evidence of Lien position,
certified as true by the Originator.


“Required Reserve Amount” means, with respect to each Remittance
Date, an amount equal to the sum of (a) three times the sum of the Class A-1
Interest Amount, the Class A-2 Interest Amount, the Class B Interest Amount,
the Class C Interest Amount and the Class D Interest Amount due on the next
Remittance Date and (b) the Outstanding Loan Balance of each Delinquent Loan.



“Requirements of Law” for any Person means the certificate of
incorporation or articles of association and by—laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
order or determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).



“Reserve Fund” means the interest bearing trust account so
designated and established and maintained pursuant to Section 7.01.





40









 







“Reserve Fund Initial Balance” means an amount equal to
$3,283,922.28 (i.e., the product of (a) the sum of the Outstanding Principal
Balance of the Class A-1 Notes, Class A-2 Notes, the Class B Notes, the Class C
Notes and the Class D Notes as of the Closing Date, (b) the weighted average
Note Interest Rate applicable to the Class A-1 Notes, Class A-2 Notes, the
Class B Notes, the Class C Notes and the Class D Notes as of the first day of
the initial Interest Accrual Period (weighted by the Outstanding Principal
Balance of each of the Class A-1 Notes, Class A-2 Notes, the Class B Notes, the
Class C Notes and the Class D Notes) and (c) 0.25).



“Responsible Officer” means, when used with respect to the Owner
Trustee or the Indenture Trustee, any officer assigned to the Corporate Trust
Office, including any Chief Executive Officer, President, Executive Vice
President, Vice President, Assistant Vice President, Secretary, any Assistant
Secretary, any trust officer or any other officer of the Owner Trustee or the
Indenture Trustee customarily performing functions similar to those performed
by any of the above designated officers and also, with respect to a particular
matter, any other officer to whom such matter is referred because of such
officer’s knowledge of and familiarity with the particular subject. When used
with respect to the Trust Depositor, the Issuer, the Originator or the
Servicer, any Chief Executive Officer, the President, an Executive Vice
President, a Senior Vice President, the Treasurer, the Secretary or any
Assistant Secretary or Assistant Treasurer.



“Retained Interest” means, for each Loan, the following interests,
rights and obligations in such Loan and under the related loan documents, which
are being retained by the Originator: (a) all of the obligations, if any, to
provide additional funding with respect to such Loan, (b) all of the rights and
obligations, if any, of the agent(s) under the documentation evidencing such
Loan, (c) the applicable portion of the interests, rights and obligations under
the documentation evidencing such Loan that relate to such portion(s) of the
indebtedness that is owned by another lender or is being retained by the
Originator, (d) any unused commitment fees associated with the additional
funding obligations that are not being transferred in accordance with clause
(a) above, (e) any agency or similar fees associated with the rights and
obligations of the agent that are not being transferred in accordance with
clause (b) above, (f) any advisory, consulting, audit, in—house legal
expenses or similar fees and/or expenses due from the Obligor associated with
services provided by the agent that are not being transferred in accordance
with clause (b) above, and (g) any and all warrants and equity
instruments issued in the name of the Originator or its Affiliates in
connection with or relating to any Loan.



“Revolving Loan” means a Loan that is a line of credit arising from
an extension of credit by the Originator to an Obligor with a commitment that
is fixed for the life of the Loan.



“S&P” means Standard and Poor’s Rating Services, a division of The
McGraw Hill Companies or any successor thereto.



“S&P Rating Condition” means, with respect to any action or series
of related actions or proposed transaction or series of proposed transactions,
that S&P shall have notified the Trust Depositor, the Owner Trustee and the
Indenture Trustee in writing that such action or series of related actions or
the consummation of such proposed transaction or series of related transactions
will not result in a reduction or withdrawal of the rating issued by S&P on the
Closing Date with respect to any outstanding class of Notes as a result of such
action or series of related actions or the consummation of such proposed
transaction or series of related transactions.





41









 







“SAIF” means the Savings Association Insurance Fund, or any
successor thereto.



“Scheduled Payment” means, with respect to any Loan, the payment of
principal and/or interest scheduled to be made by the related Obligor under the
terms of such Loan after the related Cut—Off Date, as adjusted pursuant to the
terms of the related Underlying Note or Required Loan Documents, and any such
payment received after the related Cut—Off Date.



“Scheduled Payment Advance” means, with respect to any Remittance
Date, the amounts, if any, deposited by the Servicer in the Principal and
Interest Account for such Remittance Date in respect of Scheduled Payments (or
portions thereof) pursuant to Section 5.09.



“Securities” means the Notes and the Certificate, or any of them.



“Securities Act” means the Securities Act of 1933, as amended from
time to time.



“Securityholders” means the Holders of the Notes or the
Certificate.



“Senior B-Note Loan” means any multilender Loan that (a) is secured
by a first priority Lien on all the Obligor’s assets constituting Collateral
for the Loan, (b) has a Loan-to-Value of less than or equal to 90%, and (c)
that contains provisions which, upon the occurrence of an event of default
under the Underlying Loan Documents or in the case of any liquidation or
foreclosure on the related Collateral, the Issuer’s portion of such Loan would
be paid only after the other lender party to such Loan (whose right to payment
is contractually senior to the Issuer) is paid in full.



“Senior Loan” means any Loan that (a) is secured by a first
priority Lien on all of the Obligor’s assets constituting Collateral for the
Loan, (b) has a Loan—to—Value of less than or equal to 90%, and (c) provides
that the Payment Obligation of the related Obligor on such Loan is either
senior to, or pari passu with, all other loans or financings to such Obligor.



“Servicer” means initially CapitalSource, or its successor, until
any Servicer Transfer hereunder or the resignation or permitted assignment by
the Servicer and, thereafter, means the Successor Servicer appointed pursuant
to ARTICLE 8 with respect to the duties and obligations required of the
Servicer under this Agreement.



“Servicer Default” shall have the meaning specified in Section
8.01.



“Servicer Employees” shall have the meaning specified in Section
5.04.



“Servicer Transfer” shall have the meaning specified in Section
8.02(b).



“Servicing Advances” means, all reasonable and customary
“out—of—pocket” costs and expenses incurred in the performance by the Servicer
of its servicing obligations, including, but not limited to, the cost of (a)
the preservation, restoration and protection of the Collateral, (b) any
enforcement or judicial proceedings, including foreclosures, (c) the management
and liquidation of the Foreclosed Property or Repossessed Collateral, (d)
compliance with the obligations under this Agreement, which “Servicing
Advances” are reimbursable to the Servicer to the extent provided in Section
5.10(d) of this Agreement, and (e) in connection with the liquidation of a


42









 






Loan, for all of which costs and expenses the Servicer is entitled to
reimbursement thereon up to a maximum rate per annum equal to the related Loan
Rate.



“Servicing Fee” shall have the meaning given to such term in
Section 5.11.



“Servicing Fee Percentage” means 1.25% per annum for Asset Based
Revolvers and 1.0% per annum for all other Loans.



“Servicing Officer” means any officer of the Servicer involved in,
or responsible for, the administration and servicing of Loans whose name
appears on a list of servicing officers appearing in an Officer’s Certificate
furnished to the Indenture Trustee by the Servicer, as the same may be amended
from time to time.



“Solvent” means, as to any Person at any time, that (a) the fair
value of the property of such Person is greater than the amount of such
Person’s liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for
purposes of Section 101(32) of the Bankruptcy Code; (b) such Person is able to
realize upon its property and
pay its debts and other liabilities (including disputed, contingent and
unliquidated liabilities) as they mature in the normal course of business; (c)
such Person does not intend to, and does not believe that it will, incur debts
or liabilities beyond such Person’s ability to pay as such debts and
liabilities mature; and (d) such Person is not engaged in business or a
transaction, and is not about to engage in a business or a transaction, for
which such Person’s property would constitute unreasonably small capital.



“SPE Obligor” means an Obligor that (a) is organized as a special
purpose entity and is not an operating company and (b) has as its primary
assets loans to, and a security interest in the assets of, Underlying Debtors.



“Specified Amendment” means, with respect to any Loan:




     (a) any waiver, modification, amendment or variance of any term of such
Loan in a manner that would:




     (i) modify the amortization schedule with respect to such Loan to
reduce, postpone or eliminate a Scheduled Payment with respect thereto
(and for the avoidance of doubt, any extension of the date of a scheduled
commitment reduction under a Revolving Loan at a time when the amount
outstanding under such loan is in excess of the amount to which the
commitment would be reduced according to such schedule shall be
considered a modification of the amortization schedule of such Loan);




     (ii) reduce the interest rate payable by the Obligor thereunder; or




     (iii) extend the stated maturity date of such Loan; or



     (b) the making of an Overadvance to the Obligor with respect to such Loan;


provided that any waiver or forgiveness by the Servicer of any amount
described in Section 5.11(b) shall not constitute a Specified Amendment.




43









 







“Statutory Trust Statute” means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C. §§ 3801 et seq., as the same may
be amended from time to time.



“Subordinated Loan” means any Loan other than a Senior Loan or a
Senior B-Note Loan.



“Subsequent Cut—Off Date” means the date specified as such for
Substitute Loans in the related Subsequent Transfer Agreement.



“Subsequent List of Loans” means a list, in the form of the initial
List of Loans delivered on the Closing Date, but listing each Substitute Loan
transferred to the Issuer pursuant to the related Subsequent Transfer
Agreement.



“Subsequent Purchase Agreement” means, with respect to any
Substitute Loans, the agreement between the Originator and the Trust Depositor
pursuant to which the Originator will
transfer the Substitute Loans to the Trust Depositor, the form of which is
attached to hereto as Exhibit J.



“Subsequent Transfer Agreement” means the agreement described in
Section 2.04(d)(v) hereof, the form of which is attached hereto as
Exhibit I.



“Subsequent Transfer Date” means any date on which Substitute Loans
are transferred to the Issuer.



“Subservicer” means any direct or indirect wholly owned subsidiary
of CapitalSource that CapitalSource has identified as a subservicer or
additional collateral agent or any other Person with whom the Servicer has
entered into a Subservicing Agreement and who satisfies the requirements set
forth in Section 5.02(a) of this Agreement in respect of the
qualification of a Subservicer.



“Subservicing Agreement” means any agreement between the Servicer
and any Subservicer relating to subservicing and/or administration of certain
Loans as provided in this Agreement, a copy of which shall be delivered, along
with any modifications thereto, to the Indenture Trustee.



“Substitute Hedge Counterparty” means any substitute or replacement
Hedge Counterparty under a Hedge Agreement.



“Substitute Loan” means one or more Eligible Loans (a) transferred
to the Issuer under and in accordance with Section 2.04 and/or
Section 2.07 and identified in the related Addition Notice, and (b) that
become part of the Loan Pool.



“Substitute Loan Qualification Conditions” means, with respect to
any Substitute Loan being transferred to the Issuer pursuant to Section
2.04 and/or Section 2.07, the accuracy of each of the following
statements as of the related Cut—Off Date for such Loan:




     (a) the current weighted average Loan Rate (i.e., the current pay interest
rate) on such Substitute Loan is equal to or greater than the current Loan Rate
on the Loan identified on the related Addition Notice as the Loan released by
the Issuer to the Trust Depositor and reconveyed to the Originator in
connection with such Substitute Loan;



44









 





     (b) the then current weighted average gross interest rate (i.e., the sum
of Loan Rate and any deferred interest that will be deferred) of the Substitute
Loan shall be not less than ninety percent (90%) (or, if the Loan to be
replaced was not an Initial Loan, one hundred percent (100%)) of the then
current Loan Rate of the Loan identified on the related Addition Notice as the
Loan released by the Issuer to the Trust Depositor and reconveyed to the
Originator in connection with such Substitute Loan;



     (c) the Outstanding Loan Balance of such Substitute Loan is equal to or
greater than that of the Loan identified on the related Addition Notice as the
Loan to be released by the Issuer to the Trust Depositor and reconveyed to the
Originator in exchange for such Substitute Loan, or the remaining balance of
any deposit made by the Servicer in connection with the substitution shall be
released in accordance with Section 2.04;



     (d) after giving effect to such substitution, the Legal Final Maturity
Date will not be extended;



     (e) either (i) the Eligible Loan Rating of the Substitute Loan is equal to
or better than the Eligible Loan Rating of the Loan being replaced at the time
of its replacement; or (ii) if the Loan Rating of the Substitute Loan is worse
than the Eligible Loan Rating of the Loan being replaced at the time of its
replacement, then after giving effect to such substitution, the weighted
average Eligible Loan Rating of the Loan Pool is equal to or better than the
weighted average Eligible Loan Rating of the Loan Pool as of the related
Cut-Off Date;



     (f) either (i) the estimated Moody’s rating and estimated S&P rating of
the Substitute Loan is equal to or better than the estimated Moody’s rating and
the estimated S&P rating, as applicable, of the Loan being replaced at the time
of its replacement or (ii) if the estimated Moody’s rating and estimated S&P
rating of the Substitute Loan is worse than the estimated Moody’s rating and
the estimated S&P rating, as applicable, of the Loan being replaced at the time
of its replacement, then after giving effect to such substitution, the weighted
average estimated Moody’s rating and weighted average estimated S&P rating of
the Loans in the Loan Pool shall be equal to or better than the weighted
average estimated Moody’s rating and the weighted average estimated S&P rating
of the Loans in the Loan Pool, as applicable, as of the related Cut-Off Date;



     (g) after giving effect to such substitution, there will be no material
adverse change in the Loan Pool;



     (h) the weighted average life of the Substitute Loan is no greater than
110% of the Loan being replaced;



     (i) the frequency of payment of the Substitute Loan is at least as
frequent as the Loan being replaced;



     (j) the Collateral securing the Substitute Loan is similar to the
Collateral securing the Loan being replaced; and



45









 





     (k) the Substitute Loan was originated under credit criteria and policies
that are the same in all material respects as the credit criteria and policies
under which the Loan being replaced was originated.


“Substitution Event” shall have occurred if a Loan then held by the
Issuer and identified in the related Addition Notice is one of (a) a Prepaid
Loan, (b) a Charged—Off Loan, (c) a Loan that has a covenant default, (d) a
Delinquent Loan, (e) a Loan that becomes subject to a Material Modification or
(f) the subject of a breach of a representation or warranty under this
Agreement or other provision, which breach or other provision, in the absence
of a substitution of a Substitute Loan for such Loan pursuant to Section
2.04, would require the payment of a Transfer Deposit Amount to the Issuer
in respect of such Loan pursuant to Section 11.01; provided,
that, the occurrence of a Substitution Event under clauses
(a)-(d) above shall be subject to the limits set forth in Section
2.07.



“Successor Backup Servicer” shall have the meaning given to such
term in Section 8.10(a).



“Successor Servicer” shall have the meaning given to such term in
Section 8.02(b).



“Tape” shall have the meaning given to such term in Section
5.15(b)(ii).



“Telerate Page 3750” means the display page currently so designated
on the Dow Jones Telerate Service (or such other page as may replace that page
on that service for the purpose of displaying comparable rates or prices).



“Termination Notice” shall have the meaning given to such term in
Section 8.02(a).



“Term Loan” means a loan that is a closed-end extension of credit
by the Originator to an Obligor which may be fully funded or partially funded
at the closing thereof, and which provides for full amortization of the
principal thereof prior to or upon maturity.



“Total Principal Distributable” means, as of any date of
determination, the excess, if any, of the Aggregate Outstanding Principal
Balance over the Aggregate Outstanding Loan Balance.



“Traditional Revolving Loans” means a Loan that is a revolving line
of credit with a commitment that does not vary over the life of the Loan.



“Transaction Documents” means this Agreement, the Indenture, the
Trust Agreement, the Loan Sale Agreement, the Purchase Agreement, any
Subsequent Transfer Agreement, any Subsequent Purchase Agreement, any Hedge
Agreement, and any documents or agreements executed in connection with the
forgoing, as the forgoing documents and agreements are amended, modified,
restated, replaced, substituted, waived, supplemented or extended from time to
time.



“Transfer and Servicing Agreements” means collectively this
Agreement and the Loan Sale Agreement.



“Transfer Date” means each date on which the Trust Depositor
transfers Loans, or portions thereof, to the Issuer.





46









 







“Transfer Deposit Amount” means, with respect to each Ineligible
Loan or Loan that is to be purchased pursuant to Section 2.07, on any
date of determination, the sum of the Outstanding Loan Balance of such Loan,
together with accrued interest thereon through such date of determination at
the Loan Rate provided for thereunder, and any outstanding Scheduled Payment
Advances thereon that have not been waived by the Servicer entitled thereto.



“Trust Account Property” means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, physical
property, book—entry securities, uncertificated securities or otherwise)
including, without limitation, the Reserve Fund Initial Balance, and all
proceeds of the foregoing.



“Trust Accounts” means, collectively, the Principal and Interest
Account (including the Principal Collection Account and Interest Collection
Account), the Reserve Fund, the Note Distribution Account and the Certificate
Account, the Hedge Counterparty Collateral Account (if applicable), or any of
them.



“Trust Agreement” means the Trust Agreement, dated on or about June
22, 2004, between the Trust Depositor and the Owner Trustee, as such agreement
may be amended, modified, waived, supplemented or restated from time to time.



“Trust Depositor” shall have the meaning given to such term in the
Preamble.



“Trust Estate” shall have the meaning given to such term in the
Trust Agreement.



“Trustees” means the Owner Trustee and the Indenture Trustee, or
any of them individually as the context may require.



“UCC” means the Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction.



“Underlying Custodial Agreement” means, with respect to each Loan to an
SPE Obligor, that certain custodial agreement entered into among the Originator
and a collateral custodian under which such collateral custodian agrees to hold
certain underlying loan documents or other collateral of the Pooled Debtors
with respect to such Loan for the benefit of the Originator and its assignees.



“Underlying Custodian” means the party acting as collateral
custodian under a Custodial Agreement.



“Underlying Debtors” means each of the underlying obligors who are
obligated as debtors on a Loan from an SPE Obligor.



“Underlying Note” means the one or more promissory notes executed
by an Obligor evidencing a Loan.



“United States” means the United States of America.




47









 







“Unreimbursed Scheduled Payment Advances” means, at any time, the
amount of all previous Scheduled Payment Advances (or portions thereof) as to
which the Servicer has not been reimbursed as of such time pursuant to
Section 7.03 or Section 7.05, the Servicer has determined in its
sole discretion that the same are Uncollectible Scheduled Payment Advances, and
with respect to which the Servicer has given a written certification to such
effect to each Trustee.



“USD—LIBOR—Reference Banks” shall have the meaning given to such
term in Section 7.06(a).




     Section 1.02 Usage of Terms.



     With respect to all terms in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the
other genders; references to “writing” include printing, typing, lithography
and other means of reproducing words in a visible form; references to
agreements and other contractual instruments include all amendments,
modifications and supplements thereto or any changes therein entered into in
accordance with their respective terms and not prohibited by this Agreement;
references to Persons include their permitted successors and assigns; and the
term “including” means “including without limitation.”



     Section 1.03 Section References.



     All Section references (including references to the Preamble),
unless otherwise indicated, shall be to Sections (and the Preamble) in
this Agreement.



     Section 1.04 Calculations.



     Except as otherwise provided herein, all interest rate and basis point
calculations hereunder will be made on the basis of a 360 day year and the
actual days elapsed in the relevant period and will be carried out to at least
three decimal places.



     Section 1.05 Accounting Terms.



     All accounting terms used but not specifically defined herein shall be
construed in accordance with generally accepted accounting principles in the
United States.



ARTICLE 2.




ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS




     Section 2.01 Creation and Funding of Issuer; Transfer of Loan Assets.



     (a) The Issuer shall be created pursuant to the terms and conditions of
the Trust Agreement, upon the execution and delivery of the Trust Agreement and
the filing by the Owner Trustee of an appropriately completed Certificate of
Trust (as defined in the Trust Agreement) under the Statutory Trust Statute.
The Trust Depositor, as settlor of the Issuer, shall fund and convey assets to
the Issuer pursuant to the terms and provisions hereof. The Issuer shall be
administered pursuant to the provisions of this Agreement and the Trust
Agreement for the benefit of the Securityholders and the Hedge Counterparties.
The Owner Trustee is hereby specifically recognized by the parties hereto as
empowered to conduct business dealings on



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behalf of the Issuer in accordance
with the terms hereof and of the Trust Agreement. The Servicer is hereby
specifically recognized by the parties hereto as empowered to act on behalf of
the Issuer and the Owner Trustee in accordance with Section 5.02(e) and
Section 5.02(h).



     (b) Subject to and upon the terms and conditions set forth herein, the
Trust Depositor hereby sells, transfers, assigns, sets over and otherwise
conveys to the Issuer, for a purchase price consisting of $756,598,890.23 in
cash (less placement expenses and certain other expenses
associated with the initial offer and sale of the Notes the proceeds of
which represent the consideration paid by the Issuer herein), the Class E Note
and the Certificate, all the right, title and interest of the Trust Depositor
in and to the following, including but not limited to, all accounts, cash and
currency, chattel paper, electronic chattel paper, tangible chattel paper,
copyrights, copyright licenses, equipment, fixtures, general intangibles,
instruments, commercial tort claims, deposit accounts, inventory, investment
property, letter of credit rights, software, supporting obligations,
accessions, and other property consisting of, arising out of, or related to the
following (the Trust Depositor’s interest in items (i)—(vi) below, being
collectively referred to herein as the “Loan Assets” but in each case
shall exclude any Retained Interest):




     (i) the Initial Loans, all payments paid in respect thereof and all
monies due, to become due or paid in respect thereof accruing on and
after the Initial Cut—Off Date and all Liquidation Proceeds and
recoveries thereon, in each case as they arise after the Initial Cut—Off
Date, but not including the Retained Interest or Interest Collections
received prior to June 1, 2004;




     (ii) all security interests and Liens and Collateral subject thereto
from time to time purporting to secure payment by Obligors under such
Loans;




     (iii) all guaranties, indemnities and warranties, and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Loans;




     (iv) the Trust Accounts, each Obligor Lock—Box, each Obligor
Lock—Box Account, the Lock—Box, the Lock—Box Account, and together with
all cash and investments in each of the foregoing;




     (v) all collections and records (including computer records) with
respect to the foregoing;




     (vi) all documents relating to the Loan Files; and




     (vii) all income, payments, proceeds and other benefits of any and
all of the foregoing.


To the extent the purchase price paid to the Trust Depositor for any Loan is
less than the fair market value of such Loan, the difference between such fair
market value and the purchase price shall be deemed to be a capital
contribution made by the Trust Depositor to the Issuer on the relevant Transfer
Date.




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     (c) The Originator and the Trust Depositor acknowledge that the
representations and warranties of the Trust Depositor in Section 3.01(a)
through Section 3.01(e) will run to and be for the benefit of the
Issuer, the Trustees and the Hedge Counterparties, and the Issuer and the
Trustees may enforce, directly without joinder of Trust Depositor, the
repurchase obligations of the Originator with respect to breaches of such
representations and warranties as set forth herein and in Section 11.01.



     (d) The sale, transfer, assignment, set—over and conveyance of the Loan
Assets by the Trust Depositor to the Issuer pursuant to this Agreement does not
constitute and is not intended to result in a creation or an assumption by the
Trust Depositor or the Issuer of any obligation of the Originator in connection
with the Loan Assets, or any agreement or instrument relating thereto,
including, without limitation, any obligation to any Obligor, if any, not
financed by the Originator, or (i) any taxes, fees, or other charges imposed by
any Governmental Authority and (ii) any insurance premiums that remain owing
with respect to any Loan at the time such Loan is sold hereunder. The Trust
Depositor also hereby assigns to the Issuer all of the Trust Depositor’s right,
title and interest (but none of its obligations) under the Loan Sale Agreement,
including but not limited to the Trust Depositor’s right to exercise the
remedies created by the Loan Sale Agreement.



     (e) The Originator, Trust Depositor and Issuer intend and agree that (i)
the transfer of the Loan Assets to the Trust Depositor and the transfer of the
Loan Assets to the Issuer are intended to be a sale, conveyance and transfer of
ownership of the Loan Assets, as the case may be, rather than the mere granting
of a security interest to secure a borrowing and (ii) such Loan Assets shall
not be part of the Originator’s or the Trust Depositor’s estate in the event of
a filing of a bankruptcy petition or other action by or against such Person
under any Insolvency Law. In the event, however, that notwithstanding such
intent and agreement, such transfers are deemed to be of a mere security
interest to secure indebtedness, the Originator shall be deemed to have granted
the Trust Depositor and the Trust Depositor shall be deemed to have granted the
Issuer, as the case may be, a perfected first priority security interest in
such Loan Assets respectively and this Agreement shall constitute a security
agreement under Requirements of Law, securing the repayment of the purchase
price paid hereunder, the obligations and/or interests represented by the
Securities and the obligations of the Issuer under the Hedge Transactions and
the Hedge Agreements, in the order and priorities, and subject to the other
terms and conditions of, this Agreement, the Indenture, the Trust Agreement and
the Hedge Agreements, together with such other obligations or interests as may
arise hereunder and thereunder in favor of the parties hereto and thereto.



     (f) If any such transfer of the Loan Assets is deemed to be the mere
granting of a security interest to secure a borrowing, the Trust Depositor may,
to secure the Trust Depositor’s own borrowing under this Agreement (to the
extent that the transfer of the Loan Assets thereunder is deemed to be a mere
granting of a security interest to secure a borrowing) repledge and reassign
(1) all or a portion of the Loan Assets pledged to Trust Depositor by the
Originator and with respect to which the Trust Depositor has not released its
security interest at the time of such pledge and assignment, and (2) all
proceeds thereof. Such repledge and reassignment may be made by Trust
Depositor with or without a repledge and reassignment by Trust Depositor of its
rights under any agreement with the Originator, and without further notice to
or acknowledgment from the Originator. The Originator waives, to the extent
permitted by



50









 







applicable law, all claims, causes of action and remedies, whether
legal or equitable (including any right of setoff), against Trust Depositor or
any assignee of Trust Depositor relating to such action by Trust Depositor in
connection with the transactions contemplated by this Agreement.



     Section 2.02 Conditions to Transfer of Loan Assets to Issuer.



     On or before the Closing Date, the Originator or the Trust Depositor, as
applicable, shall deliver or cause to be delivered to the Owner Trustee and
Indenture Trustee each of the documents, certificates and other items as
follows:



     (a) a certificate of an officer of the Originator substantially in the
form of Exhibit C hereto;



     (b) copies of resolutions of the Manager of the Originator, the Servicer
and the member of the Trust Depositor or of the Executive Committee of the
Board of Directors of the Originator, the Servicer and the member of the Trust
Depositor approving the execution, delivery and performance of this Agreement
and the transactions contemplated hereunder, certified in each case by the
Secretary or an Assistant Secretary of the Originator, the Servicer and member
of the Trust Depositor;



     (c) officially certified evidence dated within 30 days of the Closing Date
of due formation and good standing of the Originator under the laws of the
State of Delaware;



     (d) the initial List of Loans, certified by an officer of the Trust
Depositor, together with an Assignment substantially in the form of Exhibit
A (along with the delivery of any instruments and Loan Files as required
under Section 2.06);



     (e) a certificate of an officer of the Trust Depositor substantially in
the form of Exhibit B hereto;



     (f) a letter from Ernst & Young LLP or another nationally recognized
accounting firm, addressed to the Originator and the Trust Depositor (with a
copy to Moody’s and S&P), stating that such firm has reviewed a sample of the
Initial Loans and performed specific procedures for such sample with respect to
certain loan terms and that identifies those Initial Loans that do not conform;



     (g) officially certified, evidence dated within 30 days of the Closing
Date of due organization and good standing of the Trust Depositor under the
laws of the State of Delaware;



     (h) evidence of proper filing with appropriate offices in the State of
Delaware of UCC financing statements listing the Originator, as debtor, naming
the Trust Depositor as secured party (and the Indenture Trustee as assignee)
and identifying the Loan Assets as collateral; and evidence of proper filing
with appropriate officer in the State of Delaware of UCC financing statements
executed by the Trust Depositor, as debtor, naming the Issuer as secured party
(and the Indenture Trustee as assignee) and identifying the Loan Assets as
collateral; and evidence of proper filing with appropriate officers in the
State of Delaware of UCC financing statements executed by the Issuer and naming
the Indenture Trustee as secured party and identifying the Indenture
Collateral, as collateral;



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     (i) an Officer’s Certificate listing the Servicer’s Servicing Officers;



     (j) evidence of deposit in the Principal and Interest Account of all funds
received with respect to the Initial Loans on and after the Initial Cut—Off
Date to the date two days preceding the Closing Date, together with an
Officer’s Certificate from the Servicer to the effect that such amount is
correct;



     (k) evidence of deposit in the Reserve Fund of the Reserve Fund Initial
Balance by the Issuer; and



     (l) a fully executed copy of the Transaction Documents.



     Section 2.03 Acceptance by Owner Trustee.



     On the Closing Date, if the conditions set forth in Section 2.02
have been satisfied, the Issuer shall issue to, or upon the order of, the Trust
Depositor the Certificate representing ownership of a beneficial interest in
100% of the Issuer and the Issuer shall issue, and the Indenture Trustee shall
authenticate, to, or upon the order of, the Trust Depositor the Notes secured
by the Indenture Collateral. The Owner Trustee hereby acknowledges its
acceptance, on behalf of the Issuer, of the Loan Assets, and declares that it
shall maintain such right, title and interest in accordance with the terms of
this Agreement and the Trust Agreement upon the trust herein and therein set
forth.



     Section 2.04 Conveyance of Substitute Loans.



     (a) (i) Subject to Sections 2.01(d) and (e) and, as
applicable, the satisfaction of the conditions set forth in Section
2.04(c), the Originator may, at its option (but shall not be obligated to)
either:




     (A) contemporaneously convey to the Trust Depositor one or
more Loans as described in Section 2.04(b); or




     (B) deposit to the Principal Collection Account an amount
sufficient to purchase the Loan as to which a Substitution Event
has occurred and then, prior to the expiry of the Substitution
Period, convey to the Trust Depositor one or more Loans as
described in Section 2.04(b) in exchange for the funds so
deposited or a portion thereof.




     (ii) Any substitution pursuant to this Section 2.04 shall be
initiated by delivery of written notice (a “Notice of
Substitution”) to the Indenture Trustee that the Servicer intends to
substitute a Loan pursuant to this Section 2.04 and shall be
completed prior to the earliest of:




     (A) the expiration of 180 days after delivery of such notice;




     (B) delivery of written notice to the Indenture Trustee from
the Servicer stating that it does not intend to use any remaining
deposit to purchase Substitute Loans; or



52









 






     (C) in the case of a Loan which has become subject to a
Material Modification, the effective date set forth in such
Material Modification (such period described in clause
(ii)(A), (B) or (C), as applicable, being the
“Substitution Period”).




     (iii) Each Notice of Substitution shall specify the Loan to be
substituted, the reasons for such substitution and the amount sufficient
to purchase the Loan, which shall be determined in compliance with
Section 2.07. On the last day of any Substitution Period, any
amounts previously deposited in accordance with clause (II) above which
relate to such Substitution Period that have not been applied to purchase
one or more Substitute Loans shall be deemed to constitute Principal
Collections and shall be transferred on the next Remittance Date to the
Note Distribution Account and distributed to the Securityholders in
accordance with the priority of payments set forth in Section 7.05
(a) or (b), as applicable and prior to the expiration of the
related Substitution Period any such amounts shall not be deemed to be
Principal Collections and shall remain in the Principal Collection
Account.



     (b) With respect to any Substitute Loans to be conveyed to the Trust
Depositor by the Issuer as described in Section 2.04(a), the Originator
shall sell, transfer, assign, set over and otherwise convey to the Trust
Depositor (by delivery of an executed Subsequent Purchase Agreement
substantially in the form attached as Exhibit J hereto), without
recourse other than as expressly provided herein and therein (and the Trust
Depositor shall be required to purchase through cash payment or by exchange of
one or more related Loans released by the Issuer to the Trust Depositor on the
Subsequent Transfer Date), all the right, title and interest of the Originator
in and to the following, including but not limited to, all accounts, cash and
currency, chattel paper, electronic chattel paper, tangible chattel paper,
copyrights, copyright licenses, equipment, fixtures, general intangibles,
instruments, commercial tort claims, deposit accounts, inventory, investment
property, letter of credit rights, software, supporting obligations,
accessions, and other property consisting of, arising out of, or related to the
following (other than the Retained Interest) (the Originator’s interest in
property in clauses (i)-(vii) below, upon such transfer, becoming part
of the “Loan Assets”):




     (i) the Substitute Loans listed in the related Addition Notice, all
payments paid in respect thereof and all monies due, to become due or
paid in respect thereof accruing on and after the related Subsequent
Cut—Off Dates and all Liquidation Proceeds and recoveries thereon, in
each case as they arise after the related Subsequent Cut—Off Dates, but
not including the Retained Interest or Interest Collections received
prior to the Subsequent Cut—Off Date;




     (ii) all security interests and Liens and Collateral subject thereto
from time to time purporting to secure payment by Obligors under such
Loans;




     (iii) all guaranties, indemnities and warranties, and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Loans;



53









 






     (iv) the Trust Accounts, each Obligor Lock—Box, each Obligor
Lock—Box Account, the Lock—Box, the Lock—Box Account, and together with
all cash and investments in each of the foregoing;




     (v) all collections and records (including computer records) with
respect to the foregoing;




     (vi) all documents relating to the Loan Files; and




     (vii) all income, payments, proceeds and other benefits of any and
all of the foregoing.


To the extent the purchase price paid to the Originator for any Substitute Loan
is less than the fair market value of such Substitute Loan, the difference
between such fair market value and the purchase price shall be deemed to be a
capital contribution made by the Originator to the Trust Depositor on the
relevant Transfer Date.




     (c) Subject to Section 2.01(d) and Section 2.01(e) and the
conditions set forth in Section 2.04(d), the Trust Depositor shall sell,
transfer, assign, set over and otherwise convey to the Issuer, without recourse
other than as expressly provided herein and therein, (i) all the right, title
and interest of the Trust Depositor in and to the Substitute Loans purchased
pursuant to Sections 2.04(a) and (b), and (ii) all other rights
and property interests consisting of Loan Assets related to such Substitute
Loans (the property in clauses (i) and (ii) above, upon such
transfer, becoming part of the “Loan Assets”).



     (d) The Originator shall transfer to the Trust Depositor and the Trust
Depositor shall transfer to the Issuer the Substitute Loans and the other
property and rights related thereto described in Section 2.04(b) only
upon the satisfaction of each of the following conditions on or prior to the
related Subsequent Transfer Date (and the delivery of a related Addition Notice
by the Trust Depositor shall be deemed a representation and warranty by the
Trust Depositor and of the Originator that such conditions have been or will
be, as of the related Subsequent Transfer Date, satisfied):




     (i) the Trust Depositor shall have provided the Owner Trustee and
the Indenture Trustee with a timely Addition Notice complying with the
definition thereof contained herein, which Addition Notice shall in any
event be no later than ten (10) Business Days prior to the date of
addition;




     (ii) there shall have occurred, with respect to each such Substitute
Loan, a corresponding Substitution Event with respect to one or more
Loans then in the Loan Pool;




     (iii) the Substitute Loan being conveyed to the Issuer satisfy the
Substitute Loan Qualification Conditions; provided that, notwithstanding
that a Substitute Loan shall otherwise satisfy clause (f) of the
definition of Substitute Loan Qualification Condition, a Substitute Loan
which at the time of delivery of the related Addition Notice
has a Moody’s rating lower than B3 shall not become part of the Loan
Pool on the proposed Subsequent Transfer Date without the prior written
consent of Moody’s;



54









 






     (iv) the Originator shall have delivered to the Trust Depositor a
duly executed written assignment in substantially the form of Exhibit
J hereto (the “Subsequent Purchase Agreement”), which shall
include a Subsequent List of Loans listing the Substitute Loan;




     (v) the Trust Depositor shall have delivered to the Issuer a duly
executed written assignment (including an acceptance by the Owner
Trustee) in substantially the form of Exhibit I hereto (the
“Subsequent Transfer Agreement”), which shall include a Subsequent
List of Loans listing the Substitute Loan;




     (vi) the Trust Depositor shall have deposited or caused to be
deposited in the Principal and Interest Account all Collections received
with respect to the Substitute Loan on and after the related Subsequent
Cut—Off Date;




     (vii) each of the representations and warranties made by the Trust
Depositor pursuant to Sections 3.02, 3.03(i), (ii)
and (iv), 3.04, and 3.05 applicable to the
Substitute Loan (including without limitation that each such Substitute
Loan is an Eligible Loan) shall be true and correct as of the related
Subsequent Transfer Date; provided, however, that,
(A) with respect to the representation and warranty made by the Trust
Depositor in Section 3.05(a), such representation and warranty
shall only apply to a Loan that is being substituted for a Loan that is
not an Eligible Loan and (B) with respect to the representations and
warranties made by the Trust Depositor in Sections 3.03(iv) and
3.05, such representations and warranties shall be determined
based upon the Outstanding Loan Balances of the Substitute Loan as of the
applicable Subsequent Transfer Date over the Initial Aggregate
Outstanding Loan Balance;




     (viii) the Originator shall bear all incidental transactions costs
incurred in connection with a substitution effected pursuant to this
Agreement and shall, at its own expense, on or prior to the Subsequent
Transfer Date, indicate in its Computer Records that ownership of the
Substitute Loan identified on the Subsequent List of Loans in the
Subsequent Transfer Agreement has been sold to the Issuer through the
Trust Depositor pursuant to this Agreement; and




     (ix) prior to such substitution the Originator shall provide written
notice to each Rating Agency and shall have received written confirmation
from Moody’s and S&P (which shall respond to the Originator within
fifteen (15) Business Days after receiving written notice from the
Originator of its intention to substitute a Loan) that the proposed
substitution will not result in a reduction or withdrawal of the rating
on the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class
C Notes or the Class D Notes; provided, however, that any failure by
either of Moody’s and S&P to respond to the Originator shall be deemed a
non—approval by Moody’s and/or S&P, as applicable. In the case of Fitch,
only notice to, not confirmation from, Fitch shall be required in
connection with a proposed substitution, provided, however, that
Fitch shall be entitled to receive from the Originator financial
statements, credit committee papers and such other information relating
to such Substitute Loan as is reasonably requested by Fitch in connection
with the proposed substitution of a Loan.



55









 





     (e) Notwithstanding anything in this Section 2.04 to the contrary,
in connection with any substitution to be effected pursuant to this Section
2.04, the number of Loans being replaced in connection with such
substitution must be less than or equal to the number of Substitute Loans added
to the Loan Pool.



     Section 2.05 Release of Released Amounts.



     (a) The parties hereto acknowledge and agree that the Issuer has no
interest in the Retained Interest and Released Amounts. The Indenture Trustee
hereby agrees to release to the Issuer from the Loan Assets, and the Issuer
hereby agrees to release to the Trust Depositor, an amount equal to the
Released Amounts immediately upon identification thereof and upon receipt of an
Officer’s Certificate of the Servicer, which release shall be automatic and
shall require no further act by the Indenture Trustee or the Issuer;
provided, that, the Indenture Trustee and Owner Trustee shall
execute and deliver such instruments of release and assignment or other
documents, or otherwise confirm the foregoing release, as may reasonably be
requested by the Trust Depositor in writing. Such Released Amounts shall not
constitute and shall not be included in the Loan Assets.



     (b) Immediately upon the release to the Trust Depositor by the Indenture
Trustee of the Released Amounts, the Trust Depositor hereby irrevocably agrees
to release to the Originator such Released Amounts, which release shall be
automatic and shall require no further act by the Trust Depositor;
provided, that, the Trust Depositor shall execute and deliver
such instruments of release and assignment, or otherwise confirming the
foregoing release of any Released Amounts, as may be reasonably requested by
the Originator.



     Section 2.06 Delivery of Documents in the Loan File; Recording of Assignments of Mortgage.



     (a) Subject to the delivery requirements set forth in Section
2.06(b), the Issuer hereby authorizes and directs the Originator and the
Trust Depositor to deliver possession of all the Loan Files to the Indenture
Trustee (with copies to be held by the Servicer) on behalf of and for the
account of the Securityholders and the Hedge Counterparties. The Originator
and the Trust Depositor shall also identify on the List of Loans (including any
deemed amendment thereof associated with any Substitute Loans), whether by
attached schedule or marking or other effective identifying designation, all
Loans that are or are evidenced by such instruments.



     (b) With respect to each Loan in the Loan Pool on or before the related
Transfer Date, the Trust Depositor will deliver or cause to be delivered to the
Indenture Trustee, to the extent not previously delivered, each of the
documents in the Loan File with respect to such Loan, except that (i) the
original recorded Mortgage, in those instances where a copy thereof certified
by a Responsible Officer of the Originator was delivered to the Indenture
Trustee, will be delivered or caused to be delivered within ten Business Days
after receipt thereof, and in any
event within one year after the related Transfer Date, and (ii) any
intervening Assignments of Mortgage, in those instances where copies thereof
certified by the Originator were delivered to the Indenture Trustee, will be
delivered or caused to be delivered within ten Business Days after the receipt
thereof, and in any event, within one year of the related Transfer Date.
Notwithstanding the foregoing in clauses (i) and (ii) of this
Section 2.06(b), in those instances



56









 







where the public recording office
retains the original Mortgage or the intervening Assignments of the Mortgage
after it has been recorded, the Trust Depositor shall be deemed to have
satisfied its obligations hereunder upon delivery to the Indenture Trustee of a
copy of such Mortgage or Assignments of Mortgage certified by the public
recording office to be a true copy of the recorded original thereof.



     (c) Prior to the occurrence of an Event of Default or a Servicer Default,
the Indenture Trustee shall not record the Assignments of Mortgage delivered
pursuant to Section 2.06(b). Upon the occurrence of an Event of Default
or a Servicer Default, the Indenture Trustee shall cause to be recorded in the
appropriate offices each Assignment of Mortgage delivered to it. Each such
recording shall be at the expense of the Servicer; provided,
however, to the extent the Servicer does not pay such expense then the
Indenture Trustee shall be reimbursed pursuant to the provisions of Section
7.05.



     Section 2.07 Optional Purchase or Substitution by the Servicer for Prepaid or Charged—Off Loans.



     The Servicer shall have the right, but not the obligation, to purchase, or
substitute for, any Prepaid Loan, Charged—Off Loan, Delinquent Loan, a Loan
that has a material covenant default or a Loan which has become subject to a
Material Modification of the type specified in clause (v) of the definition
thereof, subject to the limitations set forth in this Section 2.07. In
the case of a purchase, the Servicer shall deposit in the Principal and
Interest Account, on the next succeeding Determination Date, an amount equal to
the Transfer Deposit Amount for such Loan (or applicable portion thereof) as of
the date of such purchase. Any substitution shall be made in accordance with
the provisions of Section 2.04. On the date of such substitution, the
Servicer shall deliver to the Indenture Trustee a certificate stating that such
Loan satisfies each of the Substitute Loan Qualification Conditions. The
Servicer, the Issuer and the Indenture Trustee shall execute and deliver such
instruments, consents or other documents and perform all acts reasonably
requested by the Servicer in order to effect the transfer and release of any of
the Issuer’s interests in the Loans that are being purchased or substituted.
In no event, however, may the initial aggregate Outstanding Loan Balance of
Prepaid Loans, Charged—Off Loans (excluding Loans deemed to be Charged-Off
Loans solely by the operation of clause (h) of the definition
thereof), Delinquent Loans (excluding Loans deemed to be Delinquent Loans
solely by the operation of clause (f) of the definition thereof),
Loans that have a material covenant default and Loans which have become subject
to a Material Modification of the type specified in clause (v) of the
definition thereof (without regard to whether such Material Modification may
otherwise constitute a Material Modification of a type specified in
clauses (i)-(iv) of the definition thereof) purchased or
substituted for pursuant to this Section 2.07 or substituted pursuant to
Section 2.04, exceed an amount equal to (x) 20% of the Initial Aggregate
Outstanding Loan Balance minus (y) the Outstanding Loan Balance of all Loans
which have become subject to a Specified Amendment and which are part of the
Loan Pool on such date.



     Section 2.08 Certification by Indenture Trustee; Possession of Loan Files.



     (a) On or prior to the applicable Transfer Date, the Indenture Trustee
shall review the portion of the Loan File required to be delivered pursuant to
Section 2.06(b) on the applicable Transfer Date and shall deliver to the
Originator, the Trust Depositor, each Hedge Counterparty



57









 







and the Servicer a
certification in the form attached hereto as Exhibit L—1 on or prior to
such Transfer Date. Within two Business Days after the Indenture Trustee
receives the portion of the Loan File permitted to be delivered after the
applicable Transfer Date pursuant to Section 2.06(b), the Indenture
Trustee shall deliver to the Originator, the Trust Depositor, each Hedge
Counterparty and the Servicer a certification in the form attached hereto as
Exhibit L—1. Within 360 days after each Transfer Date (or, with respect
to any Substitute Loan, within 360 days after the assignment thereof), the
Indenture Trustee shall deliver to the Originator, the Servicer, the Trust
Depositor, each Hedge Counterparty and any Noteholder who requests a copy from
the Indenture Trustee a final certification in the form attached hereto as
Exhibit L—2 evidencing the completeness of the Loan Files with respect
to the Loans being transferred on such Transfer Date.



     (b) If the Indenture Trustee during the process of reviewing the Loan
Files finds any document constituting a part of a Loan File which is not
properly executed, has not been received, is unrelated to a Loan identified in
the List of Loans, or does not conform in a material respect to the
requirements of the definition of Loan File, or the description thereof as set
forth in the List of Loans, the Indenture Trustee shall promptly so notify the
Originator, the Trust Depositor and the Servicer. In performing any such
review, the Indenture Trustee may conclusively rely on the Originator as to the
purported genuineness of any such document and any signature thereon. It is
understood that the scope of the Indenture Trustee’s review of the Loan Files
is limited solely to confirming that the documents listed in the definition of
Loan File have been executed and received and relate to the Loans identified in
the List of Loans; provided, however, with respect to the UCC
financing statements referenced in clause (a)(iii) of the definition of
Required Loan Documents, the Indenture Trustee’s sole responsibility will be to
confirm that the Loan File contains UCC financing statements and not to make
determinations about the materiality of such UCC financing statements. The
Originator agrees to use reasonable efforts to remedy a material defect in a
document constituting part of a Loan File of which it is so notified by the
Indenture Trustee. If, however, within 30 days after the Indenture Trustee’s
notice to it respecting such material defect the Originator has not remedied
the defect and such defect materially and adversely affects the value of the
related Loan, such Loan will be treated as an “Ineligible Loan” and the
Originator will (i) substitute in lieu of such Loan a Substitute Loan in the
manner and subject to the conditions set forth in Section 11.01 or (ii)
repurchase such Loan at a purchase price equal to the Transfer Deposit Amount,
which purchase price shall be deposited in the Principal and Interest Account
within such 30 day period.



     (c) Release of Entire Loan File Upon Substitution. Subject to
Section 5.08(a), upon receipt by the Indenture Trustee of a
certification of a Servicing Officer of the Servicer of such substitution or of
such purchase and the deposit of the amounts described in Section
2.08(b) in the Principal and Interest Account (which certification shall be
in the form of Exhibit M hereto), the Indenture Trustee shall release to
the Servicer for release to the Originator the related Loan File and the
Indenture Trustee and the Issuer shall execute,
without recourse, and deliver such instruments of transfer necessary to
transfer all right, title and interest in such Loan to the Originator free and
clear of any Liens created by the Transaction Documents. All costs of any such
transfer shall be borne by the Servicer.



     (d) Partial Release of Loan File and/or Collateral. Subject to
Section 5.08(b), if in connection with taking any action in connection
with a Loan (including, without limitation, the



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amendment to documents in the
Loan File and/or a revision to Collateral) the Servicer requires any item
constituting part of the Loan File, or the release from the Lien of the related
Loan of all or part of any Collateral, the Servicer shall deliver to the
Indenture Trustee a certificate to such effect in the form attached as
Exhibit M hereto. Subject to Section 5.08(d), upon receipt of
such certification, the Indenture Trustee shall deliver to the Servicer within
two 2 Business Days of such request (if such request was received by 2:00 p.m.,
central time), the requested documentation, and the Indenture Trustee shall
execute, without recourse, and deliver such instruments of transfer necessary
to release all or the requested part of the Collateral from the Lien of the
related Loan and/or the Lien under the Transaction Documents.



     (e) Annual Certification. On the Remittance Date in June of each
year, commencing June 2005, the Indenture Trustee shall deliver to the
Originator, the Trust Depositor, each Hedge Counterparty and the Servicer a
certification detailing all transactions with respect to the Loans for which
the Indenture Trustee holds the Loan Files pursuant to this Agreement during
the prior calendar year. Such certification shall list all Loan Files which
were released by or returned to the Indenture Trustee during the prior calendar
year, the date of such release or return and the reason for such release or
return.



ARTICLE 3.




REPRESENTATIONS AND WARRANTIES




     The Trust Depositor makes, and upon execution of each Subsequent Purchase
Agreement is deemed to make, the following representations and warranties in
Section 3.01 through Section 3.05, on which the Issuer will rely
in purchasing the Loan Assets on the Closing Date (and on any Subsequent
Transfer Date), and on which the Securityholders and the Hedge Counterparties
will rely.



     Such representations and warranties are given as of the execution and
delivery of this Agreement and as of the Closing Date (or Subsequent Transfer
Date, as applicable), but shall survive the sale, transfer and assignment of
the Loan Assets to the Issuer. The repurchase obligation or substitution
obligation of the Trust Depositor set forth in Section 11.01 constitutes
the sole remedy available for a breach of a representation or warranty of the
Trust Depositor set forth in Section 3.01 through Section 3.05 of
this Agreement. Except as otherwise provided in Section 2.04(d)(vii),
the Trust Depositor shall not be deemed to be remaking any of the
representations set forth in Section 3.03 on a Subsequent Transfer Date
with respect to the Substitute Loans, as such representations relate solely to
the composition of the Initial Loans conveyed on the Closing Date.



     Section 3.01 Representations and Warranties Regarding the Trust Depositor.



     By its execution of this Agreement and each Subsequent Transfer Agreement,
the Trust Depositor represents and warrants to the Issuer, the Indenture
Trustee, the Securityholders and the Hedge Counterparties that:



     (a) Organization and Good Standing. The Trust Depositor is a
limited liability company duly organized, validly existing and in good standing
under the laws of Delaware and



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has the power to own its assets and to transact
the business in which it is currently engaged. The Trust Depositor is duly
qualified to do business as a foreign entity and is in good standing in each
jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in which the
failure so to qualify would have a material adverse effect on the business,
properties, assets, or condition (financial or otherwise) of the Trust
Depositor or the Issuer.



     (b) Authorization; Valid Sale; Binding Obligations. The Trust
Depositor has the power and authority to make, execute, deliver and perform
this Agreement and the other Transaction Documents to which it is a party and
all of the transactions contemplated under this Agreement and the other
Transaction Documents to which it is a party, and to create the Issuer and
cause it to make, execute, deliver and perform its obligations under this
Agreement and the other Transaction Documents to which it is a party and has
taken all necessary limited liability company action to authorize the
execution, delivery and performance of this Agreement and the other Transaction
Documents to which it is a party and to cause the Issuer to be created. This
Agreement and each Subsequent Transfer Agreement, if any, shall effect a valid
sale, transfer and assignment of or grant a security interest in the Loan
Assets from the Trust Depositor to the Issuer, enforceable against the Trust
Depositor and creditors of and purchasers from the Trust Depositor. This
Agreement and the other Transaction Documents to which the Trust Depositor is a
party constitute the legal, valid and binding obligation of the Trust Depositor
enforceable in accordance with their terms, except as enforcement of such terms
may be limited by applicable Insolvency Laws and general principles of equity,
whether considered in a suit at law or in equity.



     (c) No Consent Required. The Trust Depositor is not required to
obtain the consent of any other party (other than those that it has already
obtained) or any consent, license, approval or authorization from, or
registration or declaration with, any Governmental Authority (other than those
that it has already obtained) in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or the other
Transaction Documents to which it is a party.



     (d) No Violations. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party by the
Trust Depositor, and the consummation of the transactions contemplated hereby
and thereby, will not violate any Requirement of Law applicable to the Trust
Depositor, or conflict with, result in a default under or constitute a breach
of the Trust Depositor’s organizational documents or Contractual Obligations to
which the Trust Depositor is a party or by which the Trust Depositor or any of
the Trust Depositor’s properties may be bound, or result in the creation or
imposition of any Lien of
any kind upon any of its properties pursuant to the terms of any such
Contractual Obligations, other than as contemplated by the Transaction
Documents.



     (e) Litigation. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to the
knowledge of the Trust Depositor threatened, against the Trust Depositor or any
of its properties or with respect to this Agreement, the other Transaction
Documents to which it is a party or the Securities (i) that, if adversely
determined, would in the reasonable judgment of the Trust Depositor be expected
to have a material adverse effect on the business, properties, assets or
condition (financial or otherwise) of



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the Trust Depositor or the Issuer or the
transactions contemplated by this Agreement or the other Transaction Documents
to which the Trust Depositor is a party or (ii) seeking to adversely affect the
federal income tax or other federal, state or local tax attributes of the
Certificate or Notes.



     (f) Solvency. The Trust Depositor, at the time of and after giving
effect to each conveyance of Loan Assets hereunder, is Solvent on and as of the
date thereof.



     (g) Taxes. The Trust Depositor has filed or caused to be filed all
tax returns which, to its knowledge, are required to be filed and has put all
taxes shown to be due and payable on such returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any amount of tax due, the validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
accordance with generally accepted accounting principles have been provided on
the books of the Trust Depositor); no tax Lien has been filed and, to the Trust
Depositor’s knowledge, no claim is being asserted, with respect to any such
tax, fee or other charge.



     (h) Place of Business; No Changes. The Trust Depositor’s location
(within the meaning of Article 9 of the UCC) is as set forth in Section
13.04. The Trust Depositor has not changed its name, whether by amendment
of its certificate of formation, by reorganization or otherwise, and has not
changed its location within the 4-months preceding the Closing Date.



     (i) Not an Investment Company. The Trust Depositor is not and,
after giving effect to the transactions contemplated by the Transaction
Documents, will not be required to be registered as an “investment company”
under the 1940 Act.



     (j) Sale Treatment. Other than for tax and accounting purposes,
the Trust Depositor has treated the transfer of Loan Assets to the Trust
Depositor for all purposes as a sale and purchase on all of its relevant books
and records and other applicable documents.



     (k) Security Interest.




     (i) This Agreement creates a valid and continuing security interest
(as defined in the applicable UCC) in the Loan Assets in favor of the
Issuer, which security interest is prior to all other Liens (except for
Permitted Liens), and is enforceable as such against creditors of and
purchasers from the Trust Depositor;




     (ii) the Loans, along with the related Loan Files, constitute either
a “general intangible,” an “instrument,” an “account,” “investment
property,” or “chattel paper,” within the meaning of the applicable UCC;




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




     (iv) the Trust Depositor has received all consents and approvals
required by the terms of the Loan Assets to the sale of the Loan Assets
hereunder to the Issuer;



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     (v) the Trust Depositor has caused the filing of all appropriate
financing statements in the proper filing office in the appropriate
jurisdictions under applicable law in order to perfect the security
interest in such Loan Assets granted to the Issuer under this Agreement;




     (vi) other than the security interest granted to the Issuer pursuant
to this Agreement, the Trust Depositor has not pledged, assigned, sold,
granted a security interest in or otherwise conveyed any of such Loan
Assets. The Trust Depositor has not authorized the filing of and is not
aware of any financing statements against the Trust Depositor that
include a description of collateral covering such Loan Assets other than
any financing statement (A) relating to the security interest granted to
the Trust Depositor under the Loan Sale Agreement, or (B) that has been
terminated. The Trust Depositor is not aware of the filing of any
judgment or tax Lien filings against the Trust Depositor;




     (vii) all original executed copies of each Underlying Note (if any)
that constitute or evidence the Loan Assets have been delivered to the
Indenture Trustee, and in the case of Noteless Loans, a copy of each
related Note Register, certified by a Responsible Officer of the
Originator, has been delivered to the Indenture Trustee;




     (viii) the Trust Depositor has received a written acknowledgment
from the Indenture Trustee that the Indenture Trustee or its bailee is
holding any Underlying Notes that constitute or evidence any Loan Assets
solely on behalf of and for the benefit of the Securityholders and the
Hedge Counterparties; and




     (ix) none of the Underlying Notes that constitute or evidence any
Loan Assets has any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other than the
Issuer.



     (l) Value Given. The cash payments received by the Trust Depositor
in respect of the purchase price of each Loan sold hereunder constitutes the
face value of such Loan and the reasonably equivalent value in consideration
for the transfer to the Issuer of such Loan under this Agreement, such transfer
was not made for or on account of an antecedent debt owed by the Originator to
the Trust Depositor, and such transfer was not and is not voidable or subject
to avoidance under any Insolvency Law.



     (m) Investment Company. The Issuer is not and, after giving effect
to the transactions contemplated by the Transaction Documents, will not be
required to be registered as an “investment company” within the meaning of the
1940 Act.



     (n) No Defaults. The Trust Depositor is not in default with
respect to any order or decree of any court or any order, regulation or demand
of any federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the condition
(financial or otherwise) or operations of the Trust Depositor or its respective
properties or might have consequences that would materially and adversely
affect its performance hereunder.



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     (o) Bulk Transfer Laws. The transfer, assignment and conveyance of
the Loans by the Trust Depositor pursuant to this Agreement are not subject to
the bulk transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.



     (p) Origination and Collection Practices. The origination and
collection practices used with respect to each Loan have been in all material
respects legal, proper and prudent and comply with the Credit and Collection
Policy.



     (q) Adequacy of Consideration. The Trust Depositor will receive
fair consideration and reasonably equivalent value in exchange for the sale of
the Loans.



     (r) Lack of Intent to Hinder, Delay or Defraud. Neither the Trust
Depositor nor any of its Affiliates sold, or will sell, any interest in any
Loan with any intent to hinder, delay or defraud any of their respective
creditors.



     (s) Nonconsolidation. The Trust Depositor conducts its affairs
such that the Issuer would not be substantively consolidated in the estate of
the Trust Depositor and their respective separate existences would not be
disregarded in the event of the Trust Depositor’s bankruptcy.



     (t) Accuracy of Information. All written factual information
heretofore furnished by the Trust Depositor for purposes of or in connection
with this Agreement or the other Transaction Documents to which Trust Depositor
is a party, or any transaction contemplated hereby or thereby is, and all such
written factual information hereafter furnished by the Trust Depositor to any
such party will be, true and accurate in every material respect, on the date
such information is stated or certified.


The representations and warranties set forth in Section 3.01(k) may not
be waived by any Person and shall survive the termination of this Agreement.




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



     The Trust Depositor represents and warrants (x) with respect to Section
3.02(a), Section 3.02(b), Section 3.02(d) and Section
3.02(e) as to each Loan as of the execution and delivery of this Agreement
and on the Closing Date, and as of each Subsequent Transfer Date with respect
to each Substitute Loan, and (y) with respect to Section 3.02(c), as to
the Loan Pool in the aggregate as of the Initial Cut—Off Date, and as of each
Subsequent Transfer Date with respect to Substitute Loans (after giving effect
to the addition of such Substitute Loans to the Loan Pool), that:



     (a) List of Loans. The information set forth in the List of Loans
attached hereto as Exhibit G (as the same may be amended or deemed
amended in respect of a conveyance of Substitute Loans on a Subsequent Transfer
Date) is true, complete and correct as of the applicable Cut—Off Date.



     (b) Eligible Loan. Such Loan satisfies the criteria for the
definition of Eligible Loan set forth in this Agreement as of the date of its
conveyance hereunder.



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     (c) Loans Secured by Real Property. Less than 45% of the Aggregate
Outstanding Loan Balance of the Loan Pool as of the Initial Cut—Off Date
consists of Loans principally secured by real property, and the Trust Depositor
will not effectuate the transfer of a Substitute Loan if such transfer would
cause more than 45% of the Aggregate Outstanding Loan Balance of the Loan Pool
as of any Subsequent Transfer Date to consist of Loans principally secured by
real property.



     (d) Underlying Custodial Agreements. With respect to each Pooled
Obligor Loan, the underlying loan documents and other collateral pledged by the
Underlying Debtors is held by an Underlying Custodian for the benefit of the
Originator and its assignees. The Originator’s rights under each such
Underlying Custodial Agreement are fully assignable and have been assigned by
it to the Trust Depositor, and assigned by the Trust Depositor to the Issuer in
connection with the transfer of the Loan Assets.



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



     The Trust Depositor represents and warrants, on the Closing Date, that as
of the Initial Cut—Off Date, the Initial Loans have the following additional
characteristics: (i) no Loan has a remaining maturity of more than 72 months;
(ii) the date of the final Scheduled Payment on the Loan with the latest
maturity is not later than May 31, 2010; (iii) no Loan was originated after the
Initial Cut—Off Date; and (iv) none of the Initial Loans provide for Scheduled
Payments of interest due on a basis other than monthly or quarterly.



     Section 3.04 Representations and Warranties Regarding the Loan Files.



     The Trust Depositor represents and warrants on the Closing Date with
respect to the Initial Loans (or as of the Subsequent Transfer Date, with
respect to Substitute Loans), that (i) to the extent any such Loans were
pledged under the CP Funding Transaction, the Citi Warehouse, the CP Funding
III Transaction or the CP Acquisition Transaction, immediately prior to such
date (as applicable), the Originator and/or a collateral custodian under the CP
Funding Transaction, the Citi Warehouse, the CP Funding III Transaction or the
CP Acquisition Transaction had possession of each original Underlying Note
(except in the case of Noteless Loans) and the related complete Loan File, and
there were no other custodial agreements relating to the same in effect and
(ii) except as otherwise provided in Section 2.06, the complete Loan
File for each Loan is in the possession of the Indenture Trustee.



     Section 3.05 Representations and Warranties Regarding Concentrations of Initial Loans.



     The Trust Depositor represents and warrants on the Closing Date, as to the
composition of the Initial Loans in the Loan Pool as of the Initial Cut—Off
Date, that:



     (a) the sum of the Outstanding Loan Balances of Obligors that are in the
same industry (by NAICS Code) shall not exceed 18.70% of the Initial Aggregate
Outstanding Loan Balance;




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     (b) the sum of the Outstanding Loan Balances of the ten (10) largest
Obligors shall not exceed 20.00% of the Initial Aggregate Outstanding Loan
Balance; and



     (c) the sum of the Outstanding Loan Balances of Obligors that have their
primary business in the same State of the United States shall not exceed 14.54%
of the Initial Aggregate Outstanding Loan Balance.



     Section 3.06 Representations and Warranties Regarding the Servicer.



     The Servicer represents and warrants to the Owner Trustee, the Indenture
Trustee, the Securityholders and the Hedge Counterparties that:



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



     (b) Authorization; Binding Obligations. The Servicer has the power
and authority to make, execute, deliver and perform this Agreement and the
other Transaction Documents to which the Servicer is a party and all of the
transactions contemplated under this Agreement and the other Transaction
Documents to which the Servicer is a party, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Servicer is a party.
This Agreement and the other Transaction Documents to which the Servicer is a
party constitute the legal, valid and binding obligation of the Servicer
enforceable in accordance with their terms, except as enforcement of such terms
may be limited by Insolvency Laws and general principles of equity, whether
considered in a suit at law or in equity.



     (c) No Consent Required. The Servicer is not required to obtain
the consent of any other party (other than those that it has already obtained)
or any consent, license, approval
or authorization from, or registration or declaration with, any
Governmental Authority (other than those that it has already obtained) in
connection with the execution, delivery, performance, validity or
enforceability of this Agreement and the other Transaction Documents to which
the Servicer is a party.



     (d) No Violations. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Servicer is a party
by the Servicer will not violate any Requirements of Law applicable to the
Servicer, or conflict with, result in a default under or constitute a breach of
the Servicer’s organizational documents or any Contractual Obligations to



65









 







which
the Servicer is a party or by which the Servicer or any of the Servicer’s
properties may be bound, or result in the creation of or imposition of any Lien
of any kind upon any of its properties pursuant to the terms of any such
Contractual Obligations, other than as contemplated by the Transaction
Documents.



     (e) Litigation. No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending, or to the
knowledge of the Servicer threatened, against the Servicer or any of its
properties or with respect to this Agreement, or any other Transaction Document
to which the Servicer is a party that, if adversely determined, would in the
reasonable judgment of the Servicer be expected to have a material adverse
effect on the business, properties, assets or condition (financial or
otherwise) of the Servicer or the Issuer or the transactions contemplated by
this Agreement or any other Transaction Document to which the Servicer is a
party.



     (f) Reports. All reports, certificates and other written
information furnished by the Servicer with respect to the Loans are correct in
all material respects.



     Section 3.07 Representations and Warranties of the Backup
Servicer.



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



     (a) Organization. It is a national banking association duly
organized, validly existing and in good standing under the federal laws of the
United States with all requisite power and authority to own its properties and
to conduct its business as presently conducted and to enter into and perform
its obligations pursuant to this Agreement.



     (b) Good Standing. The Backup Servicer is duly qualified to do
business as a national banking association and is in good standing, and has
obtained all necessary licenses and approvals, in all jurisdictions in which
the ownership or lease of its property and the conduct of its business requires
such qualification, licenses or approvals, except where the failure to so
qualify or have such licenses or approvals has not had, and would not be
reasonably expected to have, a material adverse effect on the interests of the
Securityholders or the Hedge Counterparties.



     (c) Authorization. It has the power and authority to execute and
deliver this Agreement and to carry out its terms. It has duly authorized the
execution, delivery and performance of this Agreement by all requisite action.



     (d) No Violations. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement by it will
not violate any Requirements of Law or conflict with, result in any breach of
any of the terms or provisions of, or constitute a default under, its
organizational documents or any Contractual Obligations by which it or any of
its property is bound or result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any Contractual Obligations.



     (e) No Consent Required. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or with any
Governmental Authority having jurisdiction



66









 







over it or any of its respective
properties is required to be obtained in order for it to enter into this
Agreement or perform its obligations hereunder.



     (f) Binding Obligation. This Agreement constitutes its legal,
valid and binding obligation, enforceable in accordance with its terms, except
as such enforceability may be limited by applicable Insolvency Laws and general
principles of equity (whether considered in a suit at law or in equity).



     (g) Litigation. There are no proceedings or investigations pending
or, to the best of its knowledge, threatened, against it before any
Governmental Authority (i) asserting the invalidity of this Agreement, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
this Agreement or (iii) seeking any determination or ruling that might (in its
reasonable judgment) have a material adverse effect on the interests of the
Securityholders or the Hedge Counterparties.



ARTICLE 4.




PERFECTION OF TRANSFER AND

PROTECTION OF SECURITY INTERESTS




     Section 4.01 Custody of Loans.



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



     Section 4.02 Filing.



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



     Section 4.03 Changes in Name, Corporate Structure or Location.



     (a) During the term of this Agreement, none of the Originator, the
Servicer, the Trust Depositor or the Issuer shall change its name, identity,
structure, existence, state of formation or



67









 







location without first giving at
least 30 days’ prior written notice to the Owner Trustee, the Indenture Trustee
and each Hedge Counterparty.



     (b) If any change in either the Servicer’s, the Originator’s or the Trust
Depositor’s name, identity, structure, existence, state of formation, location
or other action would make any financing or continuation statement or notice of
ownership interest or Lien relating to any Loan Asset seriously misleading
within the meaning of applicable provisions of the UCC or any title statute,
the Servicer, no later than five Business Days after the effective date of such
change, shall file such amendments as may be required to preserve and protect
the Indenture Trustee’s security interest in the Loan Assets and the proceeds
thereof. Promptly after taking any of the foregoing actions, the Servicer
shall deliver to the Owner Trustee and the Indenture Trustee an Opinion of
Counsel reasonably acceptable to the Owner Trustee and the Indenture Trustee
stating that, in the opinion of such counsel, all financing statements or
amendments necessary to preserve and protect the Indenture Trustee’s security
interest in the Loan Assets have been filed, and reciting the details of such
filing.



     Section 4.04 Costs and Expenses.



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



     Section 4.05 Sale Treatment.



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



     Section 4.06 Separateness from Trust Depositor.



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



ARTICLE 5.




SERVICING OF LOANS




     Section 5.01 Appointment and Acceptance.



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



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     Section 5.02 Duties of the Servicer.



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



     (b) Notwithstanding any Subservicing Agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Servicer and
a Subservicer or reference to actions taken through a Subservicer or otherwise,
so long as this Agreement shall remain effective, the Servicer shall remain
obligated and primarily liable to the Indenture Trustee, for itself and on
behalf of the Securityholders and the Hedge Counterparties, for the servicing
and administering of the Loans in accordance with the provisions of this
Agreement and the Credit and Collection Policy, without diminution of such
obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from the Subservicer and to the
same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Loans. For purposes of this Agreement,
the Servicer shall be deemed to have received payments on Loans when any
Subservicer has received such payments. The Servicer shall be entitled to
enter into any agreement with a Subservicer for indemnification of the Servicer
by such Subservicer, and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.



     (c) Any Subservicing Agreement that may be entered into and any
transactions or services relating to the Loans involving a Subservicer in its
capacity as such and not as an originator shall be deemed to be between the
Subservicer and the Servicer alone, and the Indenture Trustee, the
Securityholders and the Hedge Counterparties shall not be deemed parties
thereto and shall have no claims, rights, obligations, duties or liabilities
with respect to the Subservicer except as set forth in Section 5.02(d).
Notwithstanding the foregoing, the Servicer shall (i) at its expense and
without reimbursement, deliver to the Indenture Trustee a copy of each
Subservicing Agreement and (ii) provide notice of the termination of any
Subservicer within a reasonable time after such Subservicer’s termination to
the Indenture Trustee.



     (d) In the event the Servicer shall for any reason no longer be the
Servicer, the Servicer at its expense and without right of reimbursement
therefor, shall, upon request of the Indenture Trustee, deliver to the
Successor Servicer all documents and records (including computer tapes and
diskettes) relating to each Subservicing Agreement and the Loans then being
serviced hereunder and an accounting of amounts collected and held by it
hereunder and otherwise use its best efforts to effect the orderly and
efficient transfer of the Subservicing Agreements to the assuming party.



     (e) Modifications and Waivers Relating to Loans. So long as it is
consistent with the Credit and Collection Policy, the Servicer may waive,
modify or vary any term of any Loan if in



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the Servicer’s determination such
waiver, modification or variance will not be materially adverse to the
interests of the Noteholders or the Hedge Counterparties; provided,
however, the Servicer may not:




     (i) amend, waive, modify or vary any Loan in any manner that would
extend the maturity date of such Loan beyond April 20, 2010;




     (ii) prior to the date on which the Outstanding Principal Balance of
the Class A-1 Notes has been reduced to zero, enter into any Specified
Amendment with respect to any Loan; or




     (iii) enter into any amendment, waiver, modification or variance
with respect to any loan for the purpose or with the intention of causing
a Substitution Event to occur with respect to such Loan solely in order
to render such loan eligible for repurchase or substitution hereunder.


provided, further, however, if any Loan is amended,
modified, waived or varied due to an Obligor’s inability to pay principal or
interest, then the Loan shall be treated as a Delinquent Loan as of the date
that is one day in case of Asset Based Revolvers or 60 days in the case of all
other Loans after such delinquent payment was first due if all delinquencies
have not been cured within that one day or 60 day period, as applicable.




     The Servicer may execute any amendments, waivers, modifications or
variances on behalf of the Issuer. The Servicer will provide the Rating
Agencies with a written summary of any such amendment, waiver, modification or
variance promptly after its execution and, promptly upon request by any Rating
Agency, a copy of any such waiver, modification or variance. Such summary
shall set forth a brief description of the reasons for, and the effect of, such
waiver, modification or variance, and shall indicate whether such waiver,
modification or variance constitutes a Specified Amendment. No costs incurred
by the Servicer or any Subservicer in respect of Servicing Advances shall for
the purposes of distributions to Noteholders or Hedge Counterparties be added
to the amount owing under the related Loan. Any fees and costs imposed in
connection therewith may be retained by the Servicer. Without limiting the
generality of the foregoing, so long as it is consistent with the Credit and
Collection Policy, the Servicer shall continue, and is hereby authorized and
empowered to execute and deliver on behalf of the Indenture Trustee, the Owner
Trustee, each Securityholder and each Hedge Counterparty, all instruments of
amendment, waiver, satisfaction or cancellation, or of partial or full release,
discharge and all other comparable instruments, with respect to the Loans
and with respect to any Collateral. Such authority shall include, but not
be limited to, the authority to substitute or release items of Collateral
consistent with the Credit and Collection Policy and sell participations or
assignments in Loans previously transferred to the Issuer. In connection with
any such sale, the Servicer shall deposit in the Principal and Interest
Account, pursuant to Section 7.03(b), all proceeds received upon such
sale. If reasonably required by the Servicer, the Indenture Trustee, on behalf
of the Issuer, shall furnish the Servicer, within five (5) Business Days of
receipt of the Servicer’s request, with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement. Any such request to
the Indenture Trustee, on behalf of the Issuer, shall be accompanied by a
certification in the form of Exhibit L attached



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hereto signed by a
Servicing Officer. In connection with any substitution of Collateral, the
Servicer shall deliver to the Indenture Trustee the items, and within the time
frame, set forth in Section 2.06, assuming that the date of substitution
is the relevant “Transfer Date.”



     (f) The Servicer, in servicing and administering the Loans, shall act in
good faith, exercise commercially reasonable judgment and reasonable care,
consistent with the Credit and Collection Policy, employ or cause to be
employed procedures (including collection, foreclosure, Foreclosed Property and
Repossessed Collateral management procedures), prudent lending standards and
exercise a degree of skill and attention not less than that which it
customarily employs and exercises in servicing and administering loans for its
own account and in a manner consistent with those policies and procedures as
are customarily used by reasonable and prudent servicers of national repute in
connection with servicing of assets of the nature and of the character of the
Loans, giving due consideration to the Noteholders’ and Hedge Counterparties’
reliance on the Servicer. The Servicer shall not permit an Obligor of a
Revolving Loan to receive an Overadvance thereunder for the purpose of making
payments of principal or interest (in whole or in part) due with respect to a
Term Loan, where any portion of such Revolving Loan or Term Loan, as
applicable, shall constitute a part of the Loan Assets hereunder or an asset of
any Prior Term Transaction.



     (g) Hedge Covenants.




     (i) So long as any of the Notes are outstanding, if on any date
either:




     (A) the then current Aggregate Notional Amount of all Hedge
Transactions (excluding any interest rate cap transactions) hedging
the Fixed Rate Loans exceeds the then Outstanding Loan Balance of
the Fixed Rate Loans for the corresponding Due Period by more than
the Fixed Rate Permitted Excess Amount; or




     (B) the Aggregate Notional Amount for any future calculation
period of all Hedge Transactions (excluding any interest rate cap
transactions) hedging the Fixed Rate Loans exceeds the projected
Outstanding Loan Balance of the Fixed Rate Loans for the
corresponding Due Period by more than the Fixed Rate Permitted
Excess Amount;


then, not later than 1:00 p.m. (New York City time) on the Determination Date
preceding the next Remittance Date, the Servicer will notify the Indenture
Trustee, the Hedge Counterparties
and the Rating Agencies of such event and with effect on such next Remittance
Date one or more of the Hedge Transactions (excluding any interest rate cap
transactions) hedging the Fixed Rate Loans will be reduced or amended in
accordance with the terms of the applicable Hedge Agreements so that the
Aggregate Notional Amount for each calculation period of the Hedge Transactions
hedging the Fixed Rate Loans will not exceed the Outstanding Loan Balance of
the Fixed Rate Loans at the end of the corresponding Due Period or as projected
to be outstanding at the end of the corresponding Due Period.





     (ii) So long as any of the Notes are outstanding, if on any date
either:



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     (A) the then current Aggregate Notional Amount of all Hedge
Transactions (excluding any interest rate cap transactions) hedging
the Floating Prime Rate Loans exceeds the then Outstanding Loan
Balance of the Floating Prime Rate Loans for the corresponding Due
Period by more than the Floating Prime Rate Permitted Excess
Amount; or




     (B) the Aggregate Notional Amount for any future calculation
period of all Hedge Transactions (excluding any interest rate cap
transactions) hedging the Floating Prime Rate Loans exceeds the
projected Outstanding Loan Balance of the Floating Prime Rate Loans
for the corresponding Due Period by more than the Floating Prime
Rate Permitted Excess Amount;


then, not later than 1:00 p.m. (New York City time) on the Determination Date
preceding the next Remittance Date, the Servicer will notify the Indenture
Trustee, the Hedge Counterparties and the Rating Agencies of such event and
with effect on such next Remittance Date one or more of the Hedge Transactions
hedging the Floating Prime Rate Loans will be reduced or amended in accordance
with the terms of the applicable Hedge Agreements so that the Aggregate
Notional Amount of the Hedge Transactions (excluding any interest rate cap
transactions) hedging the Floating Prime Rate Loans will not exceed the
Outstanding Loan Balance of the Floating Prime Rate Loans at the end of the
corresponding Due Period or as projected to be outstanding at the end of the
corresponding Due Period.





     (iii) So long as any of the Notes are outstanding, if on any date
either:




     (A) the then current Aggregate Notional Amount of all Hedge
Transactions (excluding any interest rate cap transactions) under
all Hedge Agreements then in effect exceeds the then Aggregate
Outstanding Principal Balance; or




     (B) the Aggregate Notional Amount of all Hedge Transactions
(excluding any interest rate cap transactions) for any future
calculation period under all Hedge Agreements then in effect
exceeds the projected Aggregate Outstanding Principal Balance for
the corresponding Interest Accrual Period;



then, not later than 1:00 p.m. (New York City time) on the Determination Date
preceding the next Remittance Date, the Servicer will notify the Indenture
Trustee, the Hedge Counterparties and the Rating Agencies of such event and
with effect on such next Remittance Date one or more of the Hedge Transactions
(excluding any interest rate cap transactions) will be reduced or
amended in accordance with the terms of the applicable Hedge Agreements so that
the Aggregate Notional Amount of the Hedge Transactions for any future
calculation period will not exceed the Aggregate Outstanding Principal Balance
of the Notes for the corresponding Interest Accrual Period.



     (h) In accordance with the power set forth in Section 2.01(a), the
Servicer shall perform the duties of the Issuer and the Owner Trustee under the
Transaction Documents. In furtherance of the foregoing, the Servicer shall
consult with the Owner Trustee as the Servicer deems appropriate regarding the
duties of the Issuer and the Owner Trustee under the Transaction Documents.
The Servicer shall monitor the performance of the Issuer and the Owner Trustee
and shall advise the Owner Trustee when action is necessary to comply with the
Issuer’s or the Owner Trustee’s duties under the



72









 







Transaction Documents. The
Servicer shall prepare for execution by the Owner Trustee or the Issuer or
shall cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions as it shall be the
duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to
the Transaction Documents.



     (i) In addition to the duties of the Servicer set forth in this Agreement
or any of the Transaction Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee
or shall cause the preparation by other appropriate Persons of all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to state and
federal tax and securities laws. In accordance with the directions of the
Issuer or the Owner Trustee, the Servicer shall administer, perform or
supervise the performance of such other activities in connection with the
Issuer as are not covered by any of the foregoing provisions and as are
expressly requested by the Issuer or the Owner Trustee and are reasonably
within the capability of the Servicer.



     (j) Notwithstanding anything in this Agreement or any of the Transaction
Documents to the contrary, the Servicer shall be responsible for promptly (upon
knowledge thereof) notifying the Owner Trustee and the Paying Agent in the
event that any withholding tax is imposed on the Issuer’s payments (or
allocations of income) to a Securityholder. Any such notice shall be in
writing and specify the amount of any withholding tax required to be withheld
by the Owner Trustee or the Paying Agent pursuant to such provision.



     (k) All tax returns will be signed by the Servicer on behalf of the
Issuer.



     (l) The Servicer shall maintain appropriate books of account and records
relating to services performed under this Agreement, which books of account and
records shall be reasonably accessible for inspection by the Owner Trustee and
each Hedge Counterparty at any time during normal business hours.



     (m) Without the prior written consent of the Majority Noteholders and the
Hedge Counterparties and subject to the satisfaction of the S&P Rating
Condition, the Servicer shall not agree or consent to, or otherwise permit to
occur, any amendment, modification, change, supplement or rescission of or to
the Credit and Collection Policy, in whole or in part, in any manner that could
have a material adverse effect on the Loans.



     (n) For so long as any of the Notes are outstanding and are “restricted
securities” within the meaning of Rule 144(a)(3) of the Securities Act, (i) the
Servicer will provide or cause to be provided to any holder of such Notes and
any prospective purchaser thereof designated by such holder, upon the request
of such a holder or prospective purchaser, the information required to be
provided to such holder or prospective purchaser by Rule 144A(d)(4) under the
Securities Act; and (ii) the Servicer shall update such information from time
to time in order to prevent such information from becoming false and misleading
and will take such other actions as are necessary to ensure that the safe
harbor exemption from the registration requirements of the



73









 







Securities Act under
Rule 144A is and will be available for resales of such Notes conducted in
accordance with Rule 144A.



     (o) The Servicer will keep in full force and effect its existence, rights
and franchise as a Delaware limited liability company, and the Servicer shall
obtain and preserve its qualification to do business as a foreign limited
liability company in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of this Agreement and
of any of the Loans and to perform its duties under this Agreement.



     (p) The Servicer shall be obligated to make the Servicing Advances (but
not Scheduled Payment Advances) incurred in the performance of its servicing
duties hereunder. The Servicer shall be entitled to reimbursement for such
Servicing Advances from the Collections received from the Loan to which such
Servicing Advances relate pursuant to Section 5.10(d) and Section
7.03(h). Notwithstanding anything contained herein to the contrary, in no
event shall the application of Servicing Advances or Scheduled Payment Advances
prevent a Loan from being or becoming a Delinquent Loan or Charged—Off Loan, as
applicable.



     (q) The Servicer shall not be responsible for any taxes on the Issuer or
any Servicing Fees to any Successor Servicer.



     (r) All payments (other than Prepayments) received on Loans will be
applied by the Servicer to amounts due by the Obligor starting with the most
recent Scheduled Payment.



     (s) The Servicer shall be responsible for any tax reporting, disclosure,
record keeping or list maintenance requirements of the Issuer under Internal
Revenue Code Sections 6011(a), 6111(d) or 6112, including, but not limited to,
the preparation of IRS Form 8886 pursuant to Federal Income Tax Regulations
Section 1.6011-4(d) or any successor provision and any required list
maintenance under Federal Income Tax Regulations Section 301.6112-1 or any
successor provision.



     Section 5.03 Liquidation of Loans.



     (a) In the event that any payment due under any Loan and not postponed
pursuant to Section 5.02 is not paid when the same becomes due and
payable, or in the event the Obligor fails to perform any other covenant or
obligation under the Loan, the Servicer in accordance with the Credit and
Collection Policy shall take such action as shall maximize the amount of
recovery thereon and it shall deem to be in the best interests of the
Noteholders and the Hedge Counterparties. The Servicer, consistent with its
Credit and Collection Policy, may
accelerate all payments due thereunder to the extent permitted by the
Required Loan Documents and foreclose upon at a public or private sale or
otherwise comparably effect the ownership of Collateral relating to defaulted
Loans for which the related Loan is still outstanding and as to which no
satisfactory arrangements can be made for collection of delinquent payments in
accordance with the provisions of Section 5.10 and shall act as sales
and processing agent for the Collateral that is repossessed. In connection
with such foreclosure or other conversion and any other liquidation action or
enforcement of remedies, the Servicer shall exercise collection and foreclosure
procedures with the same degree of care and skill in its exercise or use as it
would exercise with respect to its own affairs, in accordance with prudent
servicing standards, and in accordance with



74









 







the Credit and Collection Policy.
Without limiting the generality of the foregoing, the Servicer may not sell any
such Collateral without first using commercially reasonable efforts to obtain
bids to purchase such Collateral from at least three (3) Persons (other than
the Servicer or any of its Affiliates). The Servicer may sell the Collateral
to the highest bidder (if any bids are received) or the Servicer or an
Affiliate may purchase the Collateral for a price equal to the highest bid, but
in no event may the Servicer sell any Collateral for less than the then fair
market value of the Collateral. If no bids are received and the Servicer has
used commercially reasonable efforts to obtain such bids, the Servicer or an
Affiliate may purchase the Collateral for a price equal to the then fair market
value of such Collateral. Any such sale of the Collateral is to be evidenced
by a certificate of a Responsible Officer of the Servicer delivered to the
Indenture Trustee setting forth the Loan, the Collateral, the sale price of the
Collateral and certifying that such sale price is the fair market value of such
Collateral. In any case in which any such Collateral has suffered damage, the
Servicer will not expend funds in connection with any repair or toward the
repossession of such Collateral unless it reasonably determines that such
repair and/or repossession will increase the Liquidation Proceeds by an amount
greater than the amount of such expenses.



     (b) Prior to undertaking foreclosure of any Loan secured by real property
and any improvements thereon including any Mortgaged Property of a Material
Mortgage Loan, the Servicer must investigate environmental conditions,
including, in accordance with the Credit and Collection Policy, the performance
of a Phase I and/or Phase II environmental site assessment, to ascertain the
actual or potential presence of any hazardous material on or under such
property. For purposes of this Agreement, the term hazardous material includes
(1) any hazardous substance, as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. 9601—9675, and (2)
petroleum (as that term is defined at 42 U.S.C. §6991) including any
derivative, fraction, by—product, constituent or breakdown product thereof, or
additive thereto. In the event that the environmental investigation determines
the existence of any hazardous material on or under the real property in excess
of minimum action levels established by relevant regulatory agencies, title to
such property shall not be taken without satisfaction of the Rating Agency
Condition.



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



     Section 5.04 Fidelity Bond.



     The Servicer shall at all times maintain with a responsible company, and
at its own expense, a blanket fidelity bond (the “Fidelity Bond”) in a
minimum aggregate amount equal to $2,000,000, and a maximum deductible of
$50,000, with coverage on all employees acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Loans or
the Collateral (“Servicer Employees”). The Fidelity Bond shall provide
coverage to the Indenture Trustee, the Owner Trustee, the Hedge Counterparties
and the Securityholders, their respective officers and employees, against
losses resulting from forgery, theft, embezzlement or



75









 







fraud by such Servicer
Employees. The Fidelity Bond shall not relieve the Servicer from its duties or
indemnity obligations as set forth in this Sale and Servicing Agreement. Upon
the request of the Indenture Trustee, the Owner Trustee, any Securityholder or
any Hedge Counterparty, the Servicer shall cause to be delivered to the
Indenture Trustee, the Owner Trustee, such Securityholder or such Hedge
Counterparty a certified true copy of such Fidelity Bond.



     Section 5.05 Maintenance of Hazard Insurance.



     (a) The Servicer will use its reasonable best efforts to ensure that each
Obligor maintains an Insurance Policy with respect to any tangible, personal
property Collateral (other than accounts receivable) in an amount at least
equal to the sum of the Outstanding Loan Balance of the related Eligible Loan
and shall ensure that each such Insurance Policy names the Servicer as loss
payee and as an insured thereunder and all of the Originator’s right, title and
interest therein is fully assigned to the Indenture Trustee. Additionally,
other than with respect to unsecured Loans and Loans in which the sole
collateral is the related Obligor’s accounts receivable, the Servicer will
require that each Obligor maintain property damage liability insurance during
the term of each Loan in 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 Indenture Trustee, the Securityholders and the Hedge
Counterparties, claims to the insurer under each Insurance Policy and any such
liability policy, and to settle, adjust and compromise such claims, in each
case, consistent with the terms of each Loan. The Servicer’s Insurance
Policies with respect to the Collateral will insure against liability for
physical damage relating to such Collateral in accordance with the requirements
of the Credit and Collection Policy. The Servicer hereby disclaims any and all
right, title and interest in and to any Insurance Policy and Insurance Proceeds
with respect to any Collateral, including any Insurance Policy with respect to
which it is named as loss payee and as an insured, and agrees that it has no
equitable, beneficial or other interest in the Insurance Polices and Insurance
Proceeds other than being named as loss payee and as an insured. The Servicer
acknowledges that with respect to the Insurance Policies and Insurance Proceeds
thereof that it is acting solely in the capacity as agent for the Indenture
Trustee.



     (b) Notwithstanding Section 5.05(a), in the case of each Material
Mortgage Loan, the Servicer shall comply with the Credit and Collection Policy
concerning the issuance and maintenance of fire and hazard insurance with
extended coverage customary in the area where the Mortgaged Property is
located. If at origination of a Loan, to the best of the Servicer’s
knowledge after reasonable investigation, the related Mortgaged Property
is in an area identified in the Federal Register by the Flood Emergency
Management Agency as having special flood hazards (and such flood insurance has
been made available) consistent with the Credit and Collection Policy, the
Servicer will require the related Obligor or other creditors to purchase a
flood insurance policy covering each piece of property that is material with a
generally acceptable insurance carrier, in an amount representing coverage not
less than the least of (i) the full insurable value of the Mortgaged Property
that is material, or (ii) the maximum amount of insurance available under the
National Flood Insurance Act of 1968, as amended. The Servicer shall also
maintain, to the extent such insurance is available, and required by the Credit
and



76









 







Collection Policy, on Foreclosed Property constituting real property that
is material, fire and hazard insurance in the amounts described above and
liability insurance.



     (c) Any amounts collected by the Servicer under any such Insurance
Policies (other than amounts to be applied to the restoration or repair of the
Collateral, or to be released to the Obligor or other creditors in accordance
with Requirements of Law or the governing documents) shall be deposited in the
Principal and Interest Account, subject to withdrawal pursuant to Section
7.03(h). It is understood and agreed that no earthquake or other
additional insurance need be required by the Servicer of any Obligor or other
creditors or maintained on Foreclosed Property, other than pursuant to such
Requirements of Law and regulations as shall at any time be in force and as
shall require such additional insurance. All policies required hereunder
(unless the Seller is a non—agent co—lender with respect to such Loan) shall be
endorsed with standard mortgagee clauses with losses payable to the Servicer or
its Affiliates.



     Section 5.06 Collection of Certain Loan Payments.



     (a) The Servicer shall make reasonable efforts, consistent with the Credit
and Collection Policy, to collect all payments required under the terms and
provisions of the Loans. Consistent with the foregoing and the Credit and
Collection Policy, the Servicer may in its discretion waive or permit to be
waived any fee or charge which the Servicer would be entitled to retain
hereunder as servicing compensation and extend the due date for payments due on
a Loan as provided in Section 5.02(e).



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



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



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



77









 







Trustee may reasonably determine that such
disclosure is consistent with their obligations hereunder.



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



     (a) Upon the payment in full of any Loan, the receipt by the Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes or the deposit into the Principal and Interest Account of the
purchase price of any Loan acquired by the Trust Depositor, the Servicer or
another Person pursuant to this Agreement, or any other Transaction Document,
the Servicer will immediately notify the Indenture Trustee by a certification
in the form of Exhibit M attached hereto (which certification shall
include a statement to the effect that all amounts received or to be received
in connection with such payment which are required to be deposited in the
Principal and Interest Account pursuant to Section 7.03(b) have been or
will be so deposited) of a Servicing Officer and shall request delivery to it
of the Loan File. Upon receipt of such certification and request, the
Indenture Trustee shall in accordance with Section 2.08(c) release,
within two (2) Business Days (if such request was received by 2:00 p.m. central
time), the related Loan File to the Servicer. Expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be payable by
the Servicer and shall not be chargeable to the Principal and Interest Account
or the Note Distribution Account provided; that the Servicer may collect
and retain such expenses from the underlying Obligor.



     (b) From time to time and as appropriate for the servicing or foreclosure
of any Loan, the Indenture Trustee shall, upon request of the Servicer and
delivery to the Indenture Trustee of a certification in the form of Exhibit
M attached hereto signed by a Servicing Officer, release the related Loan
File to the Servicer within two (2) Business Days (if such request was received
by 2:00 p.m. central time), and the Indenture Trustee shall execute such
documents as shall be necessary to the prosecution of any such proceedings.
The Servicer shall return the Loan File to the Indenture Trustee when the need
therefor by the Servicer no longer exists, unless the Loan has been liquidated
and the Net Liquidation Proceeds relating to the Loan have been deposited in
the Principal and Interest Account and remitted to the Indenture Trustee for
deposit in the Note Distribution Account or the Loan File or such document has
been delivered to an attorney, or to a public trustee or other public official
as required by law, for purposes of
initiating or pursuing legal action or other proceedings for the
foreclosure or repossession of Collateral either judicially or non—judicially,
and the Servicer has delivered to the Indenture Trustee a certificate of a
Servicing Officer certifying as to the name and address of the Person to whom
such Loan File or such document was delivered and the purpose or purposes of
such delivery. Upon receipt of a certificate of a Servicing Officer stating
that such Loan was liquidated, the servicing receipt relating to such Loan
shall be released by the Indenture Trustee to the Servicer.



     (c) The Indenture Trustee shall execute and deliver to the Servicer any
court pleadings, requests for trustee’s sale or other documents provided to it
necessary to the foreclosure or trustee’s sale in respect of Collateral or to
any legal action brought to obtain judgment against any Obligor on the related
loan agreement (including any Underlying Note or other agreement securing
Collateral) or to obtain a deficiency judgment, or to enforce any other
remedies or rights provided by the related loan agreement (including any
Underlying Note or other agreement securing Collateral) or otherwise available
at law or in equity. Together with such documents or pleadings, the Servicer
shall deliver to the Indenture Trustee a certificate of a



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Servicing Officer
requesting that such pleadings or documents be executed by the Indenture
Trustee and certifying as to the reason such documents or pleadings are
required and that the execution and delivery thereof by the Indenture Trustee
will not invalidate or otherwise adversely affect the Lien of the agreement
securing Collateral, except for the termination of such a Lien upon completion
of the foreclosure or trustee’s sale. The Indenture Trustee shall, upon
receipt of a written request from a Servicing Officer, execute any document
provided to the Indenture Trustee by the Servicer or take any other action
requested in such request, that is, in the opinion of the Servicer as evidenced
by such request, required or appropriate by any state or other jurisdiction to
discharge the Lien securing Collateral upon the satisfaction thereof and the
Indenture Trustee will sign and post, but will not guarantee receipt of, any
such documents to the Servicer, or such other party as the Servicer may direct,
within five (5) Business Days of the Indenture Trustee’s receipt of such
certificate or documents. Such certificate or documents shall establish to the
Indenture Trustee’s satisfaction that the related Loan has been paid in full by
or on behalf of the Obligor (or subject to a deficiency claim against such
Obligor) and that such payment has been deposited in the Principal and Interest
Account.



     (d) Notwithstanding anything contained in this Section 5.08 to the
contrary, in no event may the Servicer possess in excess of fifteen (15) Loan
Files (excluding Loan Files for Loans which have been paid in full or
repurchased) at any given time.



     Section 5.09 Scheduled Payment Advances.



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



     Section 5.10 Title, Management and Disposition of Foreclosed
Property.



     (a) In the event that title to Collateral is acquired in foreclosure or by
deed in lieu of foreclosure or by other legal process, the deed or certificate
of sale, or the Repossessed Collateral, shall be taken in the name of the
Issuer for the benefit of the Securityholders and the Hedge Counterparties.



     (b) The Servicer, subject to the provisions of this ARTICLE 5,
shall manage, conserve, protect and operate each Foreclosed Property or other
Repossessed Collateral for the Securityholders and the Hedge Counterparties
solely for the purpose of its prudent and prompt disposition and sale. The
Servicer shall, either itself or through an agent selected by the Servicer,
manage, conserve, protect and operate the Foreclosed Property or other
Repossessed Collateral in the same manner that it manages, conserves, protects
and operates other foreclosed



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or repossessed property for its own account, and
in a similar manner to that of similar property in the same locality as the
Foreclosed Property or other Repossessed Collateral is managed. The Servicer
shall attempt to sell the same (and may temporarily rent the same) on such
terms and conditions as the Servicer deems to be in the best interest of the
Securityholders and the Hedge Counterparties.



     (c) The Servicer shall cause to be deposited in the Principal and Interest
Account, no later than two (2) Business Days after the receipt thereof, all
revenues received with respect to the conservation and disposition of the
related Foreclosed Property or other Repossessed Collateral net of Servicing
Advances.



     (d) The Servicer shall, subject to Section 5.02(p) and Section
7.03, reimburse itself for any related unreimbursed Servicing Advances and
unpaid Servicing Fees, and the Servicer shall deposit in the Principal and
Interest Account the net cash proceeds of the sale of any Foreclosed Property
or other Repossessed Collateral to be distributed to the Securityholders and
the Hedge Counterparties in accordance with Section 7.05 hereof.



     Section 5.11 Servicing Compensation.



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



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



     Section 5.12 Assignment; Resignation.



     The Servicer shall not assign its rights and duties under this Agreement
(other than in connection with a subservicing arrangement) nor resign from the
obligations and duties hereby imposed on it as Servicer except (a) by mutual
consent of the Servicer, the Indenture Trustee, the Majority Noteholders and
the Hedge Counterparties, (b) in connection with a merger, conversion or
consolidation permitted pursuant to Section 5.13 (in which case the
Person resulting from the merger, conversion or consolidation shall be the
successor of the Servicer), (c) in connection with an assignment permitted
pursuant to Section 5.13 (in which case the Assignee shall be the



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successor of the Servicer), or (d) upon the Servicer’s determination that its
duties hereunder are no longer permissible under Requirements of Law or
administrative determination and such incapacity cannot be cured by the
Servicer. Any such determination permitting the resignation of the Servicer
shall be evidenced by a written Opinion of Counsel (who may be counsel for the
Servicer) to such effect delivered to the Indenture Trustee, which Opinion of
Counsel shall be in form and substance reasonably acceptable to the Indenture
Trustee. No such resignation shall become effective until a successor has
assumed the Servicer’s responsibilities and obligations hereunder in accordance
with Section 8.03.



     Section 5.13 Merger or Consolidation of Servicer.



     (a) Any Person into which the Servicer may be merged or consolidated, or
any Person resulting from such merger, conversion or consolidation to which the
Servicer is a party, or any Person succeeding to substantially all of the
business of the Servicer, and who shall be an established commercial loan
servicing institution that on a consolidated basis has a net worth of at least
$50,000,000, shall be the Successor Servicer hereunder without execution or
filing of any paper or any further act on the part of any of the parties
hereto, notwithstanding anything herein to the contrary; provided,
however, no such merger, conversion or consolidation of the Servicer or
transfer of all or substantially all or the Servicer assets or business shall
be permitted hereunder unless the Rating Agency Condition is satisfied with
respect thereto.



     (b) Upon the occurrence of a change-in-control (including any merger or
consolidation of the Originator or transfer of substantially all of its assets
and its business), the Servicer shall (i) provide the Trust Depositor, the
Indenture Trustee, the Hedge Counterparties and the Rating Agencies with notice
of such change-in-control within thirty (30) days after completion of the same,
and (ii) satisfy the Rating Agency Condition after completion of the same.



     Section 5.14 Limitation on Liability of the Servicer and Others.



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



     Section 5.15 The Backup Servicer.



     (a) The Issuer, the Indenture Trustee and the Trust Depositor hereby
appoint Wells Fargo Bank, National Association to act as Backup Servicer in
accordance with the terms of this Agreement. Wells Fargo Bank, National
Association hereby accepts such appointment and agrees to perform the duties
and responsibilities with respect thereto set forth herein.



     (b) The Backup Servicer shall perform the following duties and
obligations:



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     (i) On or before the Closing Date, the Backup Servicer shall accept
from the Servicer delivery of the information required to be set forth in
the Monthly Reports in hard copy and in an agreed upon electronic format.




     (ii) Not later than 12:00 noon New York time four Business Days
after the end of the related Due Period, the Servicer shall provide to
the Backup Servicer and the Backup Servicer shall accept delivery of tape
in an agreed upon electronic format (the “Tape”) from the
Servicer, which shall include but not be limited to the following
information: (A) for each Loan, (1) Loan number, (2) Loan category
(i.e., asset based financed, healthcare secured, senior cash flow,
subordinate cash flow or real estate) (3) legal name of the related
Obligor, (4) state of Obligor’s primary business, (5) NAICS Code, (6)
type of Loan (i.e., Partially Funded Term Loan, Fully Funded Term Loan,
Reducing Revolving Loan or Traditional Revolving Loan), (7) type of
security interest (i.e., senior or subordinated), (8) term payment type
(i.e., Amortizing Loans, Balloon Loans or Bullet Loans), (9) origination
date, (10) maturity date, (11) benchmark for Loan Rate, (12) margin, (13)
frequency of Scheduled Payments, (14) controlling interest (i.e., whether
the Loan is syndicated and whether the Issuer holds a majority of the
outstanding indebtedness under such syndicated Loan), (15) the collection
status, (16) the Loan status, and (17) the Outstanding Loan Balance and
(B) the Aggregate Outstanding Loan Balance. With respect to its duties
pursuant to this Section 5.15(b)(ii), the Backup Servicer shall
have no duty to confirm that the Tape contains the foregoing information.




     (iii) Prior to the Remittance Date, the Backup Servicer shall review
the Monthly Report to ensure that it is complete on its face and that the
following items in such Monthly Report have been accurately calculated,
if applicable, and reported: (A) the Aggregate Outstanding Loan Balance,
(B) the Backup Servicing Fee, (C) the
Loans that are more than one day delinquent in the case of Asset
Based Revolvers and more than 60 days delinquent in the case of all other
Loans (other than Charged—Off Loans), (D) the Charged—Off Loans, and (E)
the Priority of Payments. The Backup Servicer shall notify the Indenture
Trustee, each Hedge Counterparty, the Initial Purchasers and the Servicer
of any discrepancies with the Monthly Report based on such review not
later than the Business Day preceding such Remittance Date.




     (iv) If the Servicer disagrees with the report provided under
paragraph (iii) above by the Backup Servicer or if the Servicer or
any subservicer has not reconciled such discrepancy, the Backup Servicer
agrees to confer with the Servicer to resolve such disagreement on or
prior to the next succeeding Determination Date and shall settle such
discrepancy with the Servicer if possible, and notify the Indenture
Trustee, each Hedge Counterparty, the Initial Purchasers and the Rating
Agencies of the resolution thereof. The Servicer hereby agrees to
cooperate at its own expense with the Backup Servicer in reconciling any
discrepancies herein. If within twenty (20) days after the delivery of
the report provided under paragraph (iii) above by the Backup
Servicer, such discrepancy is not resolved, the Backup Servicer shall
promptly notify the Servicer, Indenture Trustee, each Hedge Counterparty,
the Initial Purchasers and the Rating Agencies of the continued existence
of such discrepancy. Following receipt of such notice by the Indenture
Trustee, each Hedge Counterparty, the Initial Purchasers and the Rating
Agencies, the Servicer shall deliver to the Indenture Trustee, each Hedge
Counterparty, the Initial Purchasers,



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the Backup Servicer and the Rating
Agencies no later than the related Remittance Date a certificate
describing the nature and amount of such discrepancies and the actions
the Servicer proposes to take with respect thereto.



     With respect to the foregoing, the Backup Servicer, in the performance of
its duties and obligations hereunder, is entitled to rely conclusively, and
shall be fully protected in so relying, on the contents of each Tape,
including, but not limited to, the completeness and accuracy thereof, provided
by the Servicer.



     (c) After the termination or resignation by the Servicer in accordance
with this Agreement, all authority, power, rights and responsibilities of the
Servicer, under this Agreement, whether with respect to the Loans or otherwise,
shall pass to and be vested in the Successor Servicer or the Backup Servicer,
as applicable in accordance with Section 8.03 and such applicable party
shall be deemed the Successor Servicer, subject to and in accordance with the
provisions of Section 8.03, as long as such named Successor Servicer is
not prohibited by any Requirements of Law from fulfilling the same, as
evidenced by an Opinion of Counsel; provided, however, if Wells
Fargo as Backup Servicer becomes the Successor Servicer, it will not make any
Scheduled Payment Advances.



     (d) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) that may result from any merger or consolidation to which
the Backup Servicer shall be a party, or (iii) that may succeed to the
properties and assets of the Backup Servicer substantially as a whole, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Backup Servicer hereunder, shall be the
successor to the Backup Servicer under this Agreement without further act on
the part of any of the parties to this Agreement.



     (e) As compensation for its backup servicing activities hereunder, the
Backup Servicer shall be entitled to receive the Backup Servicing Fee from the
Servicer. The Backup Servicing Fee shall be calculated and payable monthly in
arrears on each Remittance Date. The Backup Servicer’s entitlement to receive
the Backup Servicing Fee (other than due and unpaid Backup Servicer Fees owed
through such date) shall cease on the earliest to occur of: (i) it becoming
the Successor Servicer, (ii) its removal as Backup Servicer, or (iii) the
termination of this Agreement.



     (f) The Backup Servicer may be removed with or without cause by the
Majority Noteholders by notice given in writing to the Backup Servicer. In the
event of any such removal, a replacement Backup Servicer may be appointed by
Majority Noteholders.



     (g) The Backup Servicer undertakes to perform only such duties and
obligations as are specifically set forth in this Agreement, it being expressly
understood by all parties hereto that there are no implied duties or
obligations of the Backup Servicer hereunder. Without limiting the generality
of the foregoing, the Backup Servicer, except as expressly set forth herein,
shall have no obligation to supervise, verify, monitor or administer the
performance of the Servicer. The Backup Servicer may act through its agents,
attorneys and custodians in performing any of its duties and obligations under
this Agreement, it being understood by the parties hereto that the Backup
Servicer will be responsible for any misconduct or negligence on



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the part of
such agents, attorneys or custodians acting for and on behalf of the Backup
Servicer. Neither the Backup Servicer nor any of its officers, directors,
employees or agents shall be liable, directly or indirectly, for any damages or
expenses arising out of the services performed under this Agreement other than
damages or expenses that result from the negligence or willful misconduct of it
or them or the failure to perform materially in accordance with this Agreement.



     (h) Limitation on Liability. The Backup Servicer shall not be
liable for any obligation of the Servicer contained in this Agreement or for
any errors of the Servicer contained in any Tape, certificate or other data or
document delivered to the Backup Servicer hereunder or on which the Backup
Servicer must rely in order to perform its obligations hereunder, and the
parties hereto each agree to look only to the Servicer to perform such
obligations. The Backup Servicer shall have no responsibility and shall not be
in default hereunder or incur any liability for any failure, error, malfunction
or any delay in carrying out any of its respective duties under this Agreement
if such failure or delay results from the Backup Servicer acting in accordance
with information prepared or supplied by a Person other than the Backup
Servicer or the failure of any such other Person to prepare or provide such
information. The Backup Servicer shall have no responsibility, shall not be in
default and shall incur no liability for (i) any act or failure to act of any
third party, including the Servicer (other than any agent, attorney or
custodian acting on behalf of the Backup Servicer), (ii) any inaccuracy or
omission in a notice or communication received by the Backup Servicer from any
third party (other than any agent, attorney or custodian acting on behalf of
the Backup Servicer), (iii) the invalidity or unenforceability of any Loan
under Requirements of Law, (iv) the breach or inaccuracy of any representation
or warranty made with respect to any Loan, or (v) the acts or omissions of any
Successor Backup Servicer.



     Section 5.16 Covenants of the Backup Servicer.



     The Backup Servicer hereby covenants that:



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



     (b) The Backup Servicer will preserve and maintain its existence, rights,
franchises and privileges as a national banking association in good standing
under the federal laws of the United States.



     (c) The Backup Servicer shall perform in all material respects all of its
obligations and duties under this Agreement.



ARTICLE 6.




COVENANTS OF THE TRUST DEPOSITOR




     Section 6.01 Legal Existence.



     During the term of this Agreement, the Trust Depositor will keep in full
force and effect its existence, rights and franchises as a limited liability
company under the laws of the jurisdiction of its organization and will obtain
and preserve its qualification to do business in



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each jurisdiction in which
such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the other Transaction Documents and each
other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby. In
addition, all transactions and dealings between the Trust Depositor and its
Affiliates will be conducted on an arm’s—length basis.



     Section 6.02 Loans Not to Be Evidenced by Promissory Notes.



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



     Section 6.03 Security Interests.



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



     Section 6.04 Delivery of Principal Collections and Interest Collections.



     The Trust Depositor agrees to pay to the Servicer promptly (but in no
event later than two (2) Business Days after receipt) all Collections received
by the Trust Depositor in respect of the Loans, for application in accordance
with Section 7.05 hereof.



     Section 6.05 Regulatory Filings.



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



     Section 6.06 Compliance with Law.



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



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



     Except as contemplated by this Agreement or the other Transaction
Documents, the Trust Depositor shall not engage in any business or activity of
any kind, or enter into any transaction or



85









 







indenture, mortgage, instrument,
agreement, contract, lease or other undertaking, which is not directly related
to the transactions contemplated and authorized by this Agreement or the other
Transaction Documents; provided, however, that the Trust
Depositor may purchase and sell (or grant Liens in respect of) assets similar
to the Loan Assets to other Persons in securitization or other non—recourse
financing transactions involving the Originator or any of its Affiliates on
terms and conditions (with respect to liabilities and restrictions on its
activities, as well as restrictions on its interactions with the Originator or
its Affiliates, relevant to the “bankruptcy remoteness” or “substantive
consolidation” analysis relating to the Trust Depositor) substantially similar
to the terms and conditions applicable to the Trust Depositor under the
Transaction Documents so long as the Securityholders and the Hedge
Counterparties are not materially adversely affected thereby and the Rating
Agency Condition is satisfied. Notwithstanding anything to the contrary
contained herein, the Trust Depositor may assign, transfer, convey or finance
all or any portion of any Class of Notes or Certificates owned by it provided
such assignment, transfer, conveyance or financing is done in accordance with
the terms of Section 4.02 of the Indenture.



     Section 6.08 Indebtedness.



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



     Section 6.09 Guarantees.



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



     Section 6.10 Investments.



     The Trust Depositor shall not make or suffer to exist any loans or
advances to, or extend any credit to, or make any investments (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business or assets, or
otherwise) in, any Person except for (a) purchases of Loans from the
Originator, (b) for investments in Permitted Investments in accordance with the
terms of this Agreement, (c) as may be necessary to facilitate transactions
permitted by Section 6.07 or (d) the receipt of the Class E Note and the
Certificate as consideration for the transfer of the Loan Assets to the Issuer.
Without limiting the generality of the foregoing, the Trust Depositor shall
not: (i) provide credit to any Securityholder for the purpose of enabling such
Securityholder to purchase any Securities or (ii) lend any money to the Issuer.



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     Section 6.11 Merger; Sales.



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



     Section 6.12 Distributions.



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



     Section 6.13 Other Agreements.



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



     Section 6.14 Separate Legal Existence.



     The Trust Depositor shall:



     (a) Maintain its own deposit account or accounts, separate from those of
any Affiliate, with commercial banking institutions. The funds of the Trust
Depositor will not be diverted to any other Person or for other than authorized
uses of the Trust Depositor.



     (b) Ensure that, to the extent that it shares the same officers or other
employees as any of its members or Affiliates, the salaries of and the expenses
related to providing benefits to such officers and other employees shall be
fairly allocated among such entities, and each such entity shall bear its fair
share of the salary and benefit costs associated with all such common officers
and employees.



     (c) Ensure that, to the extent that it jointly contracts with any of its
members or Affiliates to do business with vendors or service providers or to
share overhead expenses, the costs incurred in so doing shall be allocated
fairly among such entities, and each such entity shall bear its fair share of
such costs. To the extent that the Trust Depositor contracts or does business
with vendors or service providers when the goods and services provided are
partially for the



87









 







benefit of any other Person, the costs incurred in so doing
shall be fairly allocated to or among such entities for whose benefit the goods
and services are provided, and each such entity shall bear its fair share of
such costs. All material transactions between Trust Depositor and any of its
Affiliates shall be only on an arm’s length basis.



     (d) To the extent that the Trust Depositor and any of its members or
Affiliates have offices in the same location, there shall be a fair and
appropriate allocation of overhead costs among them, and each such entity shall
bear its fair share of such expenses.



     (e) Conduct its affairs strictly in accordance with its organizational
documents and observe all necessary, appropriate and customary limited
liability company formalities, including, but not limited to, holding all
regular and special board of director meetings appropriate to authorize all
limited liability company action, keeping separate and accurate minutes of its
meetings, passing all resolutions or consents necessary to authorize actions
taken or to be taken, and maintaining accurate and separate books, records and
accounts, including, but not limited to, payroll and intercompany transaction
accounts.



     (f) Take or refrain from taking, as applicable, each of the activities
specified in the “substantive consolidation” opinion of Patton Boggs LLP,
delivered on the Closing Date, upon which the conclusions expressed therein are
based.



     Section 6.15 Location; Records.



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



     Section 6.16 Liability of Trust Depositor.



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



     Section 6.17 Bankruptcy Limitations.



     The Trust Depositor shall not, without the affirmative vote of a majority
of the managers of the Trust Depositor (which must include the affirmative vote
of at least two (2) duly appointed Independent managers) (a) dissolve or
liquidate, in whole or in part, or institute proceedings to be adjudicated
bankrupt or insolvent, (b) consent to the institution of bankruptcy or
insolvency proceedings against it, (c) file a petition seeking or consent to
reorganization or relief under any applicable federal or state law relating to
bankruptcy, (d) consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the limited liability
company or a substantial part of its property, (e) make a general assignment
for the benefit of creditors, (f) admit in writing its inability to pay its
debts generally as they become due, or (g) take any limited liability company
action in furtherance of the actions set forth in clauses (a) through
(f) above; provided, however, that no manager may be
required by any



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member of the Trust Depositor to consent to the institution of
bankruptcy or insolvency proceedings against the Trust Depositor so long as it
is Solvent.



     Section 6.18 Limitation on Liability of Trust Depositor and
Others.



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



     Section 6.19 Insurance Policies.



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



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



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



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ARTICLE 7.




ESTABLISHMENT OF ACCOUNTS;

DISTRIBUTIONS; RESERVE FUND




     Section 7.01 Note Distribution Account, Reserve Fund and
Lock—Boxes.



     (a) On or before the Closing Date, the Servicer shall establish the Note
Distribution Account and the Reserve Fund with and in the name of the Indenture
Trustee for the benefit of the Securityholders and the Hedge Counterparties.
The Servicer and Indenture Trustee are hereby required to ensure that each of
the Note Distribution Account and Reserve Fund is established and maintained as
an Eligible Deposit Account with a Qualified Institution. If any institution
with which any of the accounts established pursuant to this Section
7.01(a) are established ceases to be a Qualified Institution, the Servicer,
or if the Servicer fails to do so, the Indenture Trustee (as the case may be)
shall within ten (10) Business Days establish a replacement account at a
Qualified Institution after notice of such event. In no event shall the
Indenture Trustee be responsible for monitoring whether such Eligible
Institution shall remain a Qualified Institution. Each Qualified Institution
maintaining an Eligible Deposit Account shall agree in writing to comply with
all instructions originated by the Indenture Trustee or, with respect to the
Principal and Interest Account only, the Servicer directing disposition of the
funds in the Eligible Deposit Account without the further consent of the Trust
Depositor.



     (b) If the Servicer so directs (or, if the Servicer does not so direct,
the Trust Depositor has the right to direct), in writing, the Indenture Trustee
shall accept such directions as directions of the Issuer and shall invest the
amounts in the Note Distribution Account and the Reserve Fund in Permitted
Investments of the type specified in such written direction that mature or are
withdrawable not later than the next succeeding Determination Date, except for
investments in Section (vi) of the definition of Permitted Investments.
Once such funds are invested, the Indenture Trustee shall not change the
investment of such funds other than in connection with the withdrawal or
liquidation of such investments and the transfer of such funds as provided
herein on or prior to the next succeeding Determination Date. Funds in the
Note Distribution
Account and Reserve Fund not so invested must be insured to the extent and
the amount permitted by law by BIF or SAIF of the FDIC. Subject to the
restrictions herein, the Servicer or Indenture Trustee may purchase a Permitted
Investment from itself or an Affiliate with respect to investment of funds in
the Trust Accounts. Subject to the other provisions hereof, the Servicer in
the case of the Principal and Interest Account and the Indenture Trustee in the
case of all other Trust Accounts shall have sole control over each such
investment and the income thereon, and any certificate or other instrument
evidencing any such investment, if any, shall be delivered directly to the
Servicer or its agent or the Indenture Trustee or its agent, as applicable,
together with each document of transfer, if any, necessary to transfer title to
such investment to the Servicer or Indenture Trustee, as applicable, in a
manner which complies with this Section 7.01. All Investment Earnings
on investments of funds in the Trust Accounts shall be deposited in the
Interest Collection Account pursuant to Section 7.01 and distributed on
the next Remittance Date pursuant to Section 7.05. The Trust Depositor
and the Issuer agree and acknowledge that the Servicer and Indenture Trustee
are to have “control” (within the meaning of the UCC) of collateral comprised
of “Investment Property” (within the meaning of the UCC) for all purposes of
this Agreement. In the absence of timely written direction from the Servicer
or the Trust



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Depositor, the Indenture Trustee shall invest amounts in the Note
Distribution Account and Reserve Fund Account in Permitted Investments of the
type specified in clause (vi) of the definition of Permitted Investments
herein.



     (c) The Servicer and the Originator have established, or caused to be
established, and will maintain, or caused to be maintained, various Obligor
Lock—Boxes and Obligor Lock—Box Accounts, for the deposit of the amounts
representing payments sent by Obligors with respect to certain Revolving Loans.
The Servicer and the Originator have established, or caused to be established,
and will maintain, or caused to be maintained, the Lock—Box and the Lock—Box
Account, for the deposit of the amounts representing payments sent by Obligors
and Obligor Lock—Box Banks, as applicable, with respect to Loans pledged to the
Indenture Trustee as well as with respect to loans not pledged to the Indenture
Trustee. The Servicer, as agent for the Issuer, and the Originator will cause
each Obligor Lock—Box Bank to deposit within two (2) Business Days of receipt
all Collections that have been sent to such Obligor Lock—Box Bank into the Lock
Box Account, and within two (2) Business Days of the deposit into the Lock—Box
or the Lock Box Account, the Servicer and the Originator will cause the
Lock—Box Bank to cause the amounts in the Lock Box Account to be deposited into
the Principal and Interest Account.



     Section 7.02 Reserve Fund Deposit.



     On the Closing Date, the Owner Trustee, on behalf of the Issuer, shall
deposit the Reserve Fund Initial Balance into the Reserve Fund from the net
proceeds of the sale of the Securities.



     Section 7.03 Principal and Interest Account.



     (a) The Servicer shall cause to be established and maintained one or more
Principal and Interest Accounts (including for each such account two
subaccounts, one designated as the Interest Collection Account and the other
designated as the Principal Collection Account), in one or more Eligible
Deposit Accounts, in the form of time deposit or demand accounts, which may be
interest—bearing or such accounts may be trust accounts wherein the moneys
therein are
invested in Permitted Investments, titled “CapitalSource Finance LLC, as
Servicer, in trust for the Hedge Counterparties and the registered holders of
CapitalSource Commercial Loan Trust Notes, Series 2004-1 Class A-1, Class A-2,
Class B, Class C, Class D and Class E Notes.” All funds in such Principal and
Interest Accounts not so invested shall be insured to the extent and the amount
permitted by the BIF or SAIF of the FDIC to the maximum extent provided by law.
The creation of any Principal and Interest Account shall be evidenced by a
letter agreement in the form of Exhibit E hereto. A copy of such letter
agreement shall be furnished to the Indenture Trustee, the Owner Trustee and,
upon request, any Securityholder or Hedge Counterparty. The Servicer may, upon
written notice to the Indenture Trustee, transfer any Principal and Interest
Account to a different Eligible Deposit Account.



     (b) The Servicer and each Subservicer shall deposit without duplication
(within two (2) Business Days of receipt thereof) in the applicable Principal
and Interest Account and retain therein the following amounts received by the
Servicer (and shall segregate and deposit Interest Collections into the
Interest Collections Account and Principal Collections into the Principal
Collection Account):



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     (i) all Principal Collections accruing and received on or after the
applicable Cut—Off Date;




     (ii) all Interest Collections accruing and received on or after the
tenth day of the month of the Closing Date (net of the Servicing Fee with
respect to each Loan and other servicing compensation payable to the
Servicer as permitted herein) and all origination and commitment fees;




     (iii) all Net Liquidation Proceeds (other than Insurance Proceeds
covered under clause (iv) below);




     (iv) all Insurance Proceeds (other than amounts to be applied to
restoration or repair of any related Collateral or amounts in excess of
the Outstanding Loan Balance of the related Loan to be released to the
Obligor in accordance with the Credit and Collection Policy);




     (v) all Released Mortgaged Property Proceeds and any other proceeds
from any other Collateral securing the Loans (other than amounts released
to the Obligor in accordance with the Credit and Collection Policy);




     (vi) any amounts paid in connection with the purchase or repurchase
of any Loan;




     (vii) any amount required to be deposited in the Principal and
Interest Account pursuant to Section 5.10 or Section 7.03;
and




     (viii) the amount of any gains and interest incurred in connection
with investments in Permitted Investments.



     (c) The Servicer shall have no obligation to deposit into the Principal
and Interest Account any Retained Interest or Released Amounts.



     (d) Not later than the close of business on each Determination Date
immediately preceding a Remittance Date, the Servicer will remit to the
Principal and Interest Account any Scheduled Payment Advance that the Servicer
determines to make.



     (e) Notwithstanding Section 7.03(b), if (i) the Servicer makes a
deposit into the Principal and Interest Account in respect of a Collection of a
Loan in the Loan Pool and such Collection was received by the Servicer in the
form of a check that is not honored for any reason, or (ii) the Servicer makes
a mistake with respect to the amount of any Collection and deposits an amount
that is less than or more than the actual amount of such Collection, the
Servicer shall appropriately adjust the amount subsequently deposited into the
Principal and Interest Account to reflect such dishonored check or mistake.
Any Scheduled Payment in respect of which a dishonored check is received shall
be deemed not to have been paid.



     (f) The foregoing requirements for deposit in the Principal and Interest
Accounts shall be exclusive, it being understood and agreed that, without
limiting the generality of the



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foregoing, payments with respect to the
Servicing Fee, together with the Liquidation Expenses, may not be deposited by
the Servicer in the Principal and Interest Account.



     (g) So long as no Servicer Default shall have occurred and be continuing,
and consistent with any requirements of the Code, the Principal and Interest
Accounts shall either be maintained with an Eligible Deposit Account as an
interest—bearing account meeting the requirements set forth in Section
7.03(a), or the funds held therein may be invested by the Servicer (to the
extent practicable) in Permitted Investments, as directed in writing by the
Servicer, and, in each case, with a stated maturity (giving effect to any
applicable grace period) no later than the fourth Business Day immediately
preceding the Remittance Date next following the Due Period in which the date
of investment occurs; provided, however, that Permitted
Investments shall not include any interest-only security, any security
purchased at a price in excess of 100% of par or any security whose repayment
is subject to substantial non-credit related risk as determined by the
Servicer. All Permitted Investments must be held by or registered in the name
of “CapitalSource, as Servicer, in trust for the Hedge Counterparties and the
registered holders of CapitalSource Commercial Loan Trust Notes, Series
2004-1.” Any Investment Interest Earnings on funds held in the Principal and
Interest Account shall be deemed part of the Interest Collection Account and
shall be deposited therein pursuant to Section 7.03 and distributed on
the next Remittance Date pursuant to Section 7.05. The amount of any
losses incurred in connection with the investment of funds in the Principal and
Interest Account in Permitted Investments shall be deposited in the Principal
and Interest Account by the Servicer from its own funds immediately as realized
without reimbursement therefor.



     (h) The Servicer may (and, for the purposes of clause (ii) below,
shall), at any time upon one Business Day’s notice to the Indenture Trustee,
make withdrawals from the Principal and Interest Account for the following
purposes:




     (i) to remit to the Trust Depositor, in connection with the transfer
of a Substitute Loan to the Issuer in place of a Prepaid Loan, an amount
equal to the Prepaid Loan Amount;




     (ii) to remit to the Indenture Trustee on each Determination Date
immediately preceding a Remittance Date, for deposit in the Note
Distribution Account, the Interest Collections and Principal Collections
received during the immediately preceding Due Period less any amounts
remitted to the Trust Depositor pursuant to clause (i) above prior
to such Determination Date;




     (iii) prior to a Servicer Default, and subject to Section
5.02(p), to reimburse itself for any unreimbursed Servicing Advances
to the extent deposited in the Principal and Interest Account (and not
netted from Scheduled Payments received from the related Loans);




     (iv) to withdraw any amount received from an Obligor that is
recoverable and sought to be recovered as a voidable preference by a
trustee in bankruptcy pursuant to the United States Bankruptcy Code in
accordance with a final, nonappealable order of a court having competent
jurisdiction;



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     (v) to make investments in Permitted Investments;




     (vi) to withdraw any funds deposited in the Principal and Interest
Account that were not required or permitted to be deposited therein or
were deposited therein in error;




     (vii) prior to a Servicer Default, to pay itself certain additional
servicing compensation as permitted under Section 5.11(b) of the
Agreement;




     (viii) prior to (A) a payment default on the related Loan (and in
the case of Asset Based Revolvers, a payment default shall mean any
failure to make a payment on the date such payment is due and such
failure continues for more than one calendar day), (B) a Servicer
Default, (C) an Event of Default, or (D) an Accelerated Amortization
Event, with respect to Revolving Loans secured by Collateral only, to
advance to an Obligor in a given Due Period prior to the Monthly
Reconciliation Date an amount not to exceed the Principal Collections
received from such Obligor during that Due Period;




     (ix) to purchase substitute Loans as contemplated by Section
2.04(a) to the extent funds have been deposited by the Originator for
such purpose pursuant to Section 2.04(a)(i)(B); and




     (x) to clear and terminate the Principal and Interest Account upon
the termination of the Agreement



     Section 7.04 Securityholder Distributions.



     (a) Each Securityholder as of the related Record Date shall be paid on the
next succeeding Remittance Date by check mailed to such Securityholder at the
address for such Securityholder appearing on the Note Register or Certificate
Register or by wire transfer if such Securityholder provides written
instructions to the Indenture Trustee, or Owner Trustee, respectively, at least
(10) ten days prior to such Remittance Date, which instructions may be in the
form of a standing order.



     (b) The Indenture Trustee shall serve as the Paying Agent hereunder and
shall make the payments to the Securityholder required hereunder. The
Indenture Trustee hereby agrees that all amounts held by it for payment
hereunder will be held in trust for the benefit of the Securityholder.



     Section 7.05 Priority of Payments; Allocations and Distributions.



     (a) On each Determination Date prior to the occurrence of an Event of
Default, a Servicer Default or an Accelerated Amortization Event, (i) the
Indenture Trustee shall deposit into the Note Distribution Account all funds on
deposit in the Reserve Fund and (ii) the Servicer shall instruct the Indenture
Trustee in writing to withdraw, and on the related Remittance Date the
Indenture Trustee shall withdraw from the Note Distribution Account (A) the
Collections and (B) all amounts deposited therein from the Reserve Fund to make
the following payments. The payments listed below will be made only to the
extent there are sufficient amounts available on the Remittance Date. Payments
will be made in the order of priority listed below. With respect to pro rata
payments of principal as described herein, payments shall be made pro rata
based on



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the respective original principal amounts of the class of Notes with
respect to which such payments are made.



     First, pro rata, based on the amounts owed to such Persons under
this clause First, to the Hedge Counterparties, any Net Trust Hedge
Payments for the current and any prior Remittance Dates owing to the Hedge
Counterparties under Hedge Agreements (other than Hedge Breakage Costs),
together with interest accrued thereon;



     Second, pro rata, based on the amounts owed under this clause
Second, any amounts due and not paid by the Originator in respect of
listing the Offered Notes on the Irish Stock Exchange and any amounts owed to
the Indenture Trustee, the Backup Servicer and the Owner Trustee under the
Transaction Documents for fees and expenses, other than for fees, expenses and
other amounts related to indemnification; provided, however, that
in no event shall the amounts payable pursuant to this clause Second:




     (i) to the Indenture Trustee and the Backup Servicer, in the
aggregate, exceed $5,000 for any 12-month period (excluding amounts paid
as part of the monthly fees to be paid to the Indenture Trustee and the
Backup Servicer);




     (ii) to the Owner Trustee, exceed $5,000 for any 12-month period
(excluding amounts paid as part of its fee);




     (iii) if a Successor Servicer is being appointed, to the Indenture
Trustee for costs and expenses associated with that appointment, exceed
$100,000 in the aggregate for any given servicing transfer; and




     (iv) in payment of amounts due in respect of listing the Offered
Notes on the Irish Stock Exchange, exceed $2,000 for any 12-month period;



     Third, to the Servicer, from Collections received from the specific
Loans for which Scheduled Payment Advances were made, reimbursement for the
amount of such Scheduled Payment Advances relating to interest on such Loans;



     Fourth, to the Servicer, its accrued and unpaid Servicing Fee;



     Fifth, to the Holders of the Class A-1 Notes and the Holders of the
Class A-2 Notes, the sum of (i) the Class A-1 Interest Amount and the Class A-2
Interest Amount and (ii) any related unpaid Class A-1 Interest Shortfall with
respect to prior Remittance Dates, and any related unpaid Class A-2 Interest
Shortfall with respect to prior Remittance Dates, together with interest on any
Class A-1 Interest Shortfall at the Note Interest Rate then applicable to the
Class A-1 Notes and interest on any Class A-2 Interest Shortfall at the Note
Interest Rate then applicable to the Class A-2 Notes;



     Sixth, to the Holders of the Class B Notes, the Class B Interest
Amount for the related Interest Accrual Period and any related unpaid Class B
Interest Shortfall with respect to prior Remittance Dates, together with
interest on any Class B Interest Shortfall at the Note Interest Rate then
applicable to the Class B Notes;



95









 





     Seventh, to the Holders of the Class C Notes, the Class C Interest
Amount for the related Interest Accrual Period and any related unpaid Class C
Interest Shortfall with respect to prior Remittance Dates, together with
interest on any Class C Interest Shortfall at the Note Interest Rate then
applicable to the Class C Notes;



     Eighth, to the Holders of the Class D Notes, the Class D Interest
Amount for the related Interest Accrual Period and any related unpaid Class D
Interest Shortfall with respect to prior Remittance Dates, together with
interest on any Class D Interest Shortfall at the Note Interest Rate then
applicable to the Class D Notes;



     Ninth, to the Reserve Fund, an amount, if any, which when so
deposited causes the balance of the Reserve Fund to equal (i) three times the
sum of the Class A-1 Interest Amount, the Class A-2 Interest Amount, the Class
B Interest Amount, the Class C Interest Amount and the Class D Interest Amount
due on the current Remittance Date;



     Tenth, (i) on each Remittance Date prior to the occurrence of any
Performance Trigger Event, to the Holders of the Notes as follows:




     (a) if such Remittance Date is prior to the Offered Notes Priority
Date, to the Holders of the Class A Notes, the Class B Notes, the Class C
Notes, the Class D Notes and the Class E Note, pro rata, in an amount up
to the Total Principal Distributable; provided that (1) if on such
Remittance Date the Available Principal Distributable shall be less than
the Total Principal Distributable, no payment to the Class E Notes shall
be made hereunder; and (2) the amount distributed in respect of the Class
A Notes hereunder shall be paid to the Class A-1 Notes and the Class A-2
Notes (x) sequentially to the Class A-1 Notes and then the Class A-2
Notes at all times prior to the occurrence of a Class A Trigger Event and
(y) pro rata between the Class A-1 Notes and the Class A-2 Notes at all
times on and after the date on which a Class A Trigger Event shall have
occurred and be continuing; and




     (b) if such Remittance Date is on or after the Offered Notes
Priority Date and the Rating Agency Condition shall not have been
satisfied with respect to the payment of principal of the Notes being
made in accordance with subclause (i)(a) of this
clause Tenth, first, to the Holders of Holders of the Class A-2
Notes, the Class B Notes, the Class C Notes and the Class D Notes, pro
rata in an amount up to the Total Principal Distributable until each such
class of Offered Notes is paid in full, and second to the Class E Notes
in an amount up to the Total Principal Distributable until the Class E
Notes are paid in full;



     (ii) on each Remittance Date on and after the occurrence of a Performance
Trigger Event (other than an Event of Default, a Servicer Default or an
Accelerated Amortization Event), sequentially to the Holders of the Notes as
follows:




	 	(a)	 	to the Holders of the Class A Notes until paid in full, in an
amount up to the Total Principal Distributable; provided that the
amount distributed in respect of the Class A Notes hereunder shall
be paid to the Class A-1 Notes and the Class A-2 Notes (i)
sequentially to the Class A-1 Notes until paid in full, and then the
Class 




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	 	 	 	A-2 Notes at all times prior to the occurrence of a Class A
Trigger Event and (ii) pro rata between the Class A-1 Notes and the
Class A-2 Notes at all times on and after the date on which a Class
A Trigger Event shall have occurred and be continuing;






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





     Eleventh, to the Reserve Fund, an amount, if any, which when so
deposited causes the balance of the Reserve Fund to equal the Required Reserve
Amount;



     Twelfth, to the extent not paid pursuant to clause Second
above, any amounts due in respect of listing the Offered Notes on the Irish
Stock Exchange;



     Thirteenth, to the Servicer, to the extent not reimbursed pursuant
to clause Third above, reimbursement for the amount of any Scheduled
Payment Advances relating to interest on the Loans;



     Fourteenth, pro rata, based on the amounts owed to such Persons
under this clause Fourteenth, to the Hedge Counterparties, any unpaid
Hedge Breakage Costs, together with interest accrued thereon;



     Fifteenth, pro rata, based on the amounts owed to such Persons
under this clause Fifteenth, to the Indenture Trustee, the Backup
Servicer and the Owner Trustee, to the extent not paid pursuant to clause
Second due to the limitations set forth therein, and to the Hedge
Counterparties, amounts owed to such parties for fees and expenses and other
amounts, including such amounts related to indemnification, and, to a Successor
Servicer, any Additional Servicing Fee payable to such Successor Servicer;



     Sixteenth, to the Holder of the Class E Note until paid in full, in
an amount up to the remaining Total Principal Distributable after payments to
the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes
under clause Tenth; and



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     Seventeenth, to the Owner Trustee for payment to the
Certificateholder, in an amount equal to the sum of (i) any amount on deposit
in the Reserve Fund in excess of the amount described in clause
Eleventh, and (ii) any excess remaining after application of amounts
under clause Sixteenth.



     (b) On each Determination Date on and after the occurrence of an Event of
Default, a Servicer Default or an Accelerated Amortization Event, the Servicer
shall instruct the Indenture Trustee in writing to withdraw, and on the
Remittance Date the Indenture Trustee will follow the instructions to withdraw,
the Collections and all other funds available for distributions on deposit in
the Note Distribution Account, to the extent there are sufficient funds, to
make the following payments, in the order of priority listed below.



     First, pro rata, based on the amounts owed to such Persons under
this clause First, to the Hedge Counterparties, any Net Trust Hedge
Payments for the current and any prior Remittance Dates owing to the Hedge
Counterparties under Hedge Agreements (other than Hedge Breakage Costs),
together with interest accrued thereon; provided, however, that
on each Remittance Date on and after the occurrence of an Event of Default,
Hedge Breakage Costs in an aggregate amount not to exceed $500,000 shall be
payable under this clause First;



     Second, pro rata, based on the amounts owed under this clause
Second, any amounts due and not paid by the Originator in respect of
listing the Offered Notes on the Irish Stock Exchange and any amounts owed to
the Indenture Trustee, the Backup Servicer and the Owner Trustee under the
Transaction Documents for fees and expenses, other than for fees, expenses and
other amounts related to indemnification; provided, however, that
in no event shall the amounts payable pursuant to this clause Second:




     (i) to the Indenture Trustee and the Backup Servicer, in the
aggregate, exceed $5,000 for any 12-month period (excluding amounts paid
as part of the monthly fees to be paid to the Indenture Trustee and the
Backup Servicer);




     (ii) to the Owner Trustee, exceed $5,000 for any 12-month period
(excluding amounts paid as part of its fee);




     (iii) if a Successor Servicer is being appointed, to the Indenture
Trustee for costs and expenses associated with that appointment, exceed
$100,000 in the aggregate for any given servicing transfer; and




     (iv) in payment of amounts due in respect of listing the Offered
Notes on the Irish Stock Exchange, exceed $2,000 in any 12-month period;



     Third, to the Servicer, from Collections received from the specific
Loans for which such Scheduled Payment Advances were made, reimbursement for
the amount of such Scheduled Payment Advances relating to interest on such
Loans;



     Fourth, to the Servicer, its accrued and unpaid Servicing Fee;



     Fifth, to the Holders of the Class A-1 Notes and the Holders of the
Class A-2 Notes, the sum of (i) the Class A-1 Interest Amount and the Class A-2
Interest Amount and (ii) any related



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unpaid Class A-1 Interest Shortfall with
respect to prior Remittance Dates, and any related unpaid Class A-2 Interest
Shortfall with respect to prior Remittance Dates, together with interest on any
Class A-1 Interest Shortfall at the Note Interest Rate then applicable to the
Class A-1 Notes and interest on any Class A-2 Interest Shortfall at the Note
Interest Rate then applicable to the Class A-2 Notes;



     Sixth, to the Holders of the Class B Notes, the Class B Interest
Amount for the related Interest Accrual Period any related unpaid Class B
Interest Shortfall with respect to prior Remittance Dates, together with
interest on any Class B Interest Shortfall at the Note Interest Rate then
applicable to the Class B Notes;



     Seventh, to the Holders of the Class C Notes, the Class C Interest
Amount for the related Interest Accrual Period and any related unpaid Class C
Interest Shortfall with respect to prior Remittance Dates, together with
interest on any Class C Interest Shortfall at the Note Interest Rate then
applicable to the Class C Notes;



     Eighth, to the Holders of the Class D Notes, the Class D Interest
Amount for the related Interest Accrual Period and any related unpaid Class D
Interest Shortfall with respect to prior Remittance Dates, together with
interest on any Class D Interest Shortfall at the Note Interest Rate then
applicable to the Class D Notes;



     Ninth, sequentially to the Holders of the Notes as follows:




	 	(a)	 	to the Holders of the Class A Notes until the Outstanding
Principal Balance of the Class A Notes is reduced to zero; provided
that the amount distributed in respect of the Class A Notes
hereunder shall be paid to the Class A-1 Notes and the Class A-2
Notes (i) sequentially to the Class A-1 Notes and then the Class A-2
Notes at all times prior to the occurrence of a Class A Trigger
Event and (ii) pro rata between the Class A-1 Notes and the Class
A-2 Notes at all times on and after the date on which a Class A
Trigger Event shall have occurred and be continuing;
	 
	 	(b)	 	to the Holders of the Class B Notes, the Class B Accrued
Payable, if any;
	 
	 	(c)	 	to the Holders of the Class B Notes until the Outstanding
Principal Balance of the Class B Notes is reduced to zero;
	 
	 	(d)	 	to the Holders of the Class C Notes, the Class C Accrued
Payable, if any;
	 
	 	(e)	 	to the Holders of the Class C Notes until the Outstanding
Principal Balance of the Class C Notes is reduced to zero;
	 
	 	(f)	 	to the Holders of the Class D Notes, the Class D Accrued
Payable, if any; and
	 
	 	(g)	 	to the Holders of the Class D Notes until the Outstanding
Principal Balance of the Class D Notes is reduced to zero;





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     Tenth, to the Servicer, to the extent not reimbursed pursuant to
clause Third above, reimbursement for the amount of any Scheduled
Payment Advances relating to interest on the Loans;



     Eleventh, pro rata, based on the amounts owed to such Persons under
this clause Eleventh, to the Hedge Counterparties, any unpaid Hedge
Breakage Costs, together with interest accrued thereon;



     Twelfth, pro rata, based on the amounts owed to such Persons under
this clause Twelfth, to the Indenture Trustee, the Backup Servicer and
the Owner Trustee, to the extent not paid pursuant to clause Second due
to the limitations set forth therein, and to the Hedge Counterparties, amounts
owed to such parties for fees and expenses and other amounts, including such
amounts related to indemnification, and, to a Successor Servicer, any
Additional Servicing Fee payable to such Successor Servicer;



     Thirteenth, to the extent not paid pursuant to clause Second
above, any amounts due in respect of listing the Offered Notes on the Irish
Stock Exchange;



     Fourteenth, to the Holder of the Class E Note until the Outstanding
Principal Balance of the Class E Note is reduced to zero; and



     Fifteenth, to the Owner Trustee for payment to the Holders of the
Certificate, any remaining Collections.



     Prior to the Class A-1 Legal Final Maturity Date, in the case of the Class
A-1 Notes, and the Legal Final Maturity Date, in the case of the Class A-2
Notes, the Class B Notes, the Class C Notes and the Class D Notes, amounts to
be applied in reduction of the Outstanding Principal Balance of any Note will
not be due and payable, although the failure of the Trust Depositor or Servicer
to remit any amounts available for payment on the Notes will, after the
applicable grace period, constitute an Event of Default under the Indenture.



     Section 7.06 Determination of LIBOR.



     (a) The Indenture Trustee will determine the interest rate for each
Interest Accrual Period by determining the London interbank offered rate
(“LIBOR”) for deposits in U.S. Dollars
for a period of 1-month (the “One—Month Index Maturity”) which
appears on Telerate Page 3750 as of 11:00 a.m., London time, on the day that is
two (2) London Banking Days preceding that Interest Accrual Period (“LIBOR
Determination Date”). If such rate does not appear on Telerate Page 3750
on the related LIBOR Determination Date, the rate for that Interest Accrual
Period will be determined as if the parties had specified “USD—LIBOR—Reference
Banks” as the applicable rate. “USD—LIBOR—Reference Banks” means that the
interest rate for an Interest Accrual Period will be determined on the basis of
the rates at which deposits in U.S. Dollars are offered by the Reference Banks
at approximately 11:00 a.m., London time, on the related LIBOR Determination
Date to prime banks in the London interbank market for the 1—Month Index
Maturity commencing on the beginning of that Interest Accrual Period and in a
Representative Amount. The Indenture Trustee will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If
at least two (2) such quotations are provided, the rate for that Interest
Accrual Period will be the arithmetic mean of the quotations.



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If fewer than
two (2) quotations are provided as requested, the rate for that Interest
Accrual Period will be the arithmetic mean of the rates quoted by major banks
in New York City, selected by the Indenture Trustee, at 11:00 a.m. New York
City time, on the beginning of that Interest Accrual Period for loans in U.S.
Dollars to leading European banks for the 1—Month Index Maturity commencing at
the beginning of that Interest Accrual Period and in a Representative Amount.



     (b) The establishment of LIBOR on the applicable London Banking Day by the
Indenture Trustee and the Indenture Trustee’s subsequent calculation of the
rates of interest applicable to the Notes for the related Remittance Date
shall, in the absence of manifest error, be final and binding. Each such rate
of interest may be obtained by telephoning the Indenture Trustee at (612)
667—8058.



     Section 7.07 Monthly Reconciliation.



     (a) Except as set forth in Section 7.07(b), on each Business Day
during each Due Period that Principal Collections are received in the Principal
Collection Account with respect to any Loan in the Loan Pool, the Servicer will
determine the Outstanding Loan Balance and the principal amount of the portion
of such Loan not owned by the Issuer (if any) with respect to such Loan.



     (b) Prior to (i) a payment default on the related Loan (and in the case of
Asset Based Revolvers, a payment default shall mean any failure to make a
payment on the date such payment is due and such failure continues for more
than one calendar day), (ii) a Servicer Default, (iii) an Event of Default or
(iv) an Accelerated Amortization Event, on each Monthly Reconciliation Date,
the Servicer will determine the Outstanding Loan Balance and principal amount
of the portion of such Loan not owned by the Issuer (if any) with respect to
each Revolving Loan secured by Collateral (but specifically excluding any
Revolving Loan that is not secured by any Collateral) in the Loan Pool, and on
and as of such date will determine the net effect of the Principal Collections
received from, and payments from the Principal Collection Account representing
new advances made to, the related Obligor during such Due Period.
Notwithstanding the foregoing, the Servicer will maintain the underlying data
of all Principal Collections received and payments or advances made with
respect to any Revolving Loan secured by Collateral from the Principal
Collection Account on each day during each Due
Period, and shall make such underlying data available pursuant to and in
accordance with the provisions of Section 9.03.



ARTICLE 8.




SERVICER DEFAULT; SERVICER TRANSFER




     Section 8.01 Servicer Default.


“Servicer Default” means the occurrence of any of the following:




     (a) any failure by the Servicer to remit when due any payment required to
be made under the terms of this Agreement or the other Transaction Documents,
it being understood that the Servicer shall not be responsible for the failure
of either the Owner Trustee or the Indenture



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Trustee to remit funds that were
received by the Owner Trustee or the Indenture Trustee from the Servicer in
accordance with this Agreement or the other Transaction Documents; or



     (b) failure by the Servicer duly to observe or perform, in any material
respect, any other covenants, obligations or agreements of the Servicer set
forth in this Agreement or the other Transaction Documents, or any
representation or warranty of the Servicer made in this Agreement or the other
Transaction Documents or in any certificate or other writing delivered thereto
or in connection therewith proves to have been incorrect when made, which
failure or breach has a material adverse effect on the rights of the
Noteholders or the Hedge Counterparties and continues unremedied for a period
of thirty (30) days (if such failure or breach can be cured, and, for the
avoidance of doubt, any breach of Section 5.02(e)(ii) shall be deemed
cured upon the substitution or repurchase of the applicable Loan) after the
first to occur of (i) the date on which written notice of such failure
requiring the same to be remedied shall have been given to a Responsible
Officer of the Servicer by the Indenture Trustee, or a Responsible Officer of
the Servicer and the Indenture Trustee by any Securityholder or Hedge
Counterparty, and (ii) the date on which a Responsible Officer of the Servicer
receives actual knowledge of such failure or breach; or



     (c) a decree or order of a court or agency or supervisory authority having
jurisdiction for the appointment of a conservator or receiver or liquidator in
any Insolvency Proceedings, or for the winding—up or liquidation of its
affairs, shall have been entered against the Servicer and such decree or order
shall have remained in force, undischarged or unstayed for a period of thirty
(30) days; or



     (d) the Servicer shall consent to the appointment of a conservator or
receiver or liquidator in any Insolvency Proceedings of or relating to the
Servicer or of or relating to all or substantially all of the Servicer’s
property; or



     (e) the Servicer shall admit in writing its inability to pay its debts as
they become due, file a petition to take advantage of any applicable Insolvency
Laws, make an assignment for the benefit of its creditors, or voluntarily
suspend payment of its obligations; or



     (f) without the consent of the Majority Noteholders or the Hedge
Counterparties, the Servicer agrees or consents to, or otherwise permits to
occur, any amendment, modification,
change, supplement or rescission of or to the Servicer or the Credit and
Collection Policy, in whole or in part, in any manner that would have a
material adverse effect on the Loans; or



     (g) failure by the Servicer to observe or perform the Credit and
Collection Policy regarding the servicing of the Loans in any manner that would
have a material adverse effect on the Loans.



     Section 8.02 Servicer Transfer.



     (a) If a Servicer Default has occurred and is continuing, the Majority
Noteholders may, by written notice (a “Termination Notice”) delivered to
the parties hereto and each of the Hedge Counterparties, terminate all (but not
less than all) of the Servicer’s management, administrative, servicing,
custodial and collection functions; provided, however, no
Termination



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Notice shall be required with respect to any Servicer Default
described under Section 8.01(c), Section 8.01(d) and Section
8.01(e).



     (b) Upon delivery of the notice required by Section 8.02(a) (or, if
later, on a date designated therein), and on the date that a Successor Servicer
shall have been appointed pursuant to Section 8.03 (such appointment
being herein called a “Servicer Transfer”), all rights, benefits, fees,
indemnities, authority and power of the Servicer under this Agreement, whether
with respect to the Loans, the Loan Files or otherwise, shall pass to and be
vested in such successor (the “Successor Servicer”) pursuant to and
under this Section 8.02; and, without limitation, the Successor Servicer
is authorized and empowered to execute and deliver on behalf of the Servicer,
as attorney—in—fact or otherwise, any and all documents and other instruments,
and to do any and all acts or things necessary or appropriate to effect the
purposes of such notice of termination. The Servicer agrees to cooperate with
the Successor Servicer in effecting the termination of the responsibilities and
rights of the Servicer hereunder, including, without limitation, the transfer
to the Successor Servicer for administration by it of all cash amounts which
shall at the time be held by the Servicer for deposit, or have been deposited
by the Servicer, in the Principal and Interest Account, or for its own account
in connection with its services hereafter or thereafter received with respect
to the Loans. The Servicer shall transfer to the Successor Servicer (i) all
records held by the Servicer relating to the Loans in such electronic form as
the Successor Servicer may reasonably request and (ii) any Loan Files in the
Servicer’s possession. In addition, the Servicer shall permit access to its
premises (including all computer records and programs) to the Successor
Servicer or its designee, and shall pay the reasonable transition expenses of
the Successor Servicer. Upon a Servicer Transfer, the Successor Servicer shall
also be entitled to receive the Servicing Fee for performing the obligations of
the Servicer. Any indemnities provided in this Agreement or the other
Transaction Documents in favor of the Servicer and any fees, costs, expenses,
Servicing Advances or Scheduled Payment Advances which have accrued and/or are
unpaid to the Servicer shall survive the resignation or termination of the
Servicer.



     Section 8.03 Appointment of Successor Servicer; Reconveyance;
Successor Servicer to Act.



     (a) Upon delivery of the notice required by Section 8.02(a) (or, if
later, on a date designated therein), the Servicer shall continue to perform
all servicing functions under this
Agreement until the date specified in the Termination Notice or, if no
such date is specified, until a date mutually agreed by the Servicer and the
Indenture Trustee. The Indenture Trustee shall as promptly as possible after
the giving of or receipt of a Termination Notice, appoint a Successor Servicer,
which shall be the Backup Servicer, in accordance with Section 5.15(c),
and named Successor Servicer shall accept its appointment by a written
assumption in a form acceptable to the Indenture Trustee and Owner Trustee;
provided, that no appointment of a Successor Servicer or acceptance and
assumption by a proposed Successor Servicer shall be effective without the
prior satisfaction of the Rating Agency Condition. If within 60 days of
delivery of a Termination Notice a Successor Servicer is not appointed and the
Servicer shall have yet to cure the Servicer Default, then the Indenture
Trustee shall offer the Trust Depositor, and the Trust Depositor shall offer
the Originator, the right to accept retransfer of all the Loan Assets, and such
parties may accept retransfer of such Loan Assets in consideration of the Trust
Depositor’s delivery to the Principal and Interest Account on or prior to the
next upcoming Remittance Date of a sum equal



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to the Aggregate Outstanding
Principal Balance of all Securities (other than the Certificates) then
outstanding, together with accrued and unpaid interest thereon through such
date of deposit and all other amounts due and owing to any Person under the
Transaction Documents, including amounts owing to each Hedge Counterparty,
including Hedge Breakage Costs, it being a condition precedent to such
retransfer that all Hedge Transactions then outstanding under any Hedge
Agreements then in effect shall be terminated and all amounts payable to the
Hedge Counterparties, including Hedge Breakage Costs, upon such termination
shall be paid in full; provided, that, the Indenture Trustee, if
so directed by the Majority Noteholders in writing, need not accept and effect
such reconveyance in the absence of evidence (which may include valuations of
an investment bank or similar entity) reasonably acceptable to such Indenture
Trustee or Majority Noteholders that such retransfer would not constitute a
fraudulent conveyance of the Trust Depositor or the Originator.



     (b) The Backup Servicer may, in its discretion, or shall, if it is unable
to so act or if the Majority Noteholders request in writing to the Backup
Servicer, appoint, or petition a court of competent jurisdiction to appoint,
any established servicing institution having a net worth of not less than
$50,000,000 as the Successor Servicer in the assumption of all or any part of
the responsibilities, duties or liabilities of the Servicer.



     (c) As compensation, any Successor Servicer (including, without
limitation, the Backup Servicer) so appointed shall be entitled to receive the
Servicing Fee, together with any other servicing compensation in the form of
assumption fees, late payment charges or otherwise as provided herein that
accrued prior thereto; including, without limitation, all reasonable costs
(including reasonable attorneys’ fees) incurred in connection with transferring
the servicing obligations under the Agreement and amending the Agreement to
reflect such transfer.



     (d) In the event the Backup Servicer is required to solicit bids, the
Backup Servicer shall solicit, by public announcement, bids from banks and
mortgage servicing institutions meeting the qualifications set forth above.
Such public announcement shall specify that the Successor Servicer shall be
entitled to the full amount of the Servicing Fee as servicing compensation,
together with the other servicing compensation in the form of assumption fees,
late payment charges or otherwise that accrued prior thereto. Within thirty
(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 the Agreement, as shall be necessary to
effectuate any such succession. Neither the Backup Servicer nor any other
Successor Servicer shall be held liable by reason of any failure to make, or
any delay in making, any distribution hereunder or any portion thereof caused
by (i) the failure of the Servicer to deliver, or any delay in delivering,
cash, documents or records to it, or (ii) restrictions imposed by any
regulatory authority having jurisdiction over the Servicer hereunder. No
appointment of a successor to the Servicer shall be effective until written
notice



104









 







of such proposed appointment shall have been provided by the Indenture
Trustee to each Securityholder and each Hedge Counterparty and the Backup
Servicer shall have consented thereto. The Backup Servicer shall not resign as
Servicer until a Successor Servicer has been appointed and accepted such
appointment.



     (e) On or after a Servicer Transfer, the Successor Servicer shall be the
successor in all respects to the Servicer in its capacity as servicer under
this Agreement and the transactions set forth or provided for herein and shall
be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, and the terminated
Servicer shall be relieved of such responsibilities, duties and liabilities
arising after such Servicer Transfer; provided, however, that (i)
the Successor Servicer will not assume any obligations of the Servicer
described in Section 8.02 and (ii) the Successor Servicer shall not be
liable for any acts or omissions of the Servicer occurring prior to such
Servicer Transfer or for any breach by the Servicer of any of its
representations and warranties contained herein or in any related document or
agreement. Notwithstanding anything else herein to the contrary, in no event
shall the Indenture Trustee or the Backup Servicer be liable for any Servicing
Fee or for any differential in the amount of the servicing fee paid hereunder
and the amount necessary to induce any Successor Servicer to act as Successor
Servicer under this Agreement and the transactions set forth or provided for
herein, including any Additional Servicing Fee. The Owner Trustee,
Securityholders and the Indenture Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. To the extent the terminated Servicer has made Servicing
Advances, it shall be entitled to reimbursement of the same notwithstanding its
termination hereunder, to the same extent as if it had continued to service the
Loans hereunder.



     Section 8.04 Notification to Securityholders and Hedge
Counterparties.



     (a) Promptly following the occurrence of any Servicer Default, the
Servicer shall give written notice thereof to the Trustees, the Trust Depositor
and each Rating Agency at the addresses described in Section 13.04
hereof, to the Noteholders and Certificateholder at their respective addresses
appearing on the Note Register and the Certificate Register, respectively, and
to each Hedge Counterparty at the address set forth in the register kept by the
Issuer, as provided under the Indenture.



     (b) Within 10 days following any termination of the Servicer or
appointment of a Successor Servicer pursuant to this ARTICLE 8, the
Indenture Trustee shall give written notice thereof to each Rating Agency and
the Trust Depositor at the addresses described in Section 13.04 hereof,
to the Noteholders and Certificateholder at their respective addresses
appearing on the Note Register and the Certificate Register, respectively, and
to each Hedge Counterparty at the address set forth for such party in the
register kept by the Issuer, as provided under the Indenture.



     Section 8.05 Effect of Transfer.



     (a) After a Servicer Transfer, the terminated Servicer shall have no
further obligations with respect to the management, administration, servicing,
custody or collection of the Loans and the Successor Servicer appointed
pursuant to Section 8.03 shall have all of such



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obligations, except that
the terminated Servicer will transmit or cause to be transmitted directly to
the Successor Servicer for its own account, promptly on receipt and in the same
form in which received, any amounts (properly endorsed where required for the
Successor Servicer to collect them) received as payments upon or otherwise in
connection with the Loans.



     (b) A Servicer Transfer shall not affect the rights and duties of the
parties hereunder (including but not limited to the indemnities of the
Servicer) other than those relating to the management, administration,
servicing, custody or collection of the Loans.



     Section 8.06 Database File.



     Upon reasonable request by the Indenture Trustee or the Backup Servicer,
the Servicer will provide the Successor Servicer with a magnetic tape or
Microsoft Excel or similar spreadsheet file containing the database file for
each Loan (a) as of the Cut—Off Date, (b) the Subsequent Cut—Off Dates, (c)
thereafter, as of the last day of the preceding Due Period on the Determination
Date prior to a Servicer Default and (d) on and as of the Business Day before
the actual commencement of servicing functions by the Successor Servicer
following the occurrence of a Servicer Default.



     Section 8.07 Waiver of Defaults.



     The Majority Noteholders may, on behalf of all the Securityholders, and
subject to satisfying the Rating Agency Condition, waive any events permitting
removal of the Servicer pursuant to this ARTICLE 8; provided,
however, that the Majority Noteholders may not waive a default in making
a required distribution to the Hedge Counterparties without the consent of the
Hedge Counterparties or on a Note without the consent of each holder of such
Note. Upon any waiver or cure of a past default, such default shall cease to
exist, and any Servicer Default or Event of Default arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such
waiver or cure shall extend to any subsequent or other default or impair any
right consequent thereto except to the extent expressly so waived. No such
waivers shall affect any Hedge Transaction that has been terminated in
accordance with its terms.



     Section 8.08 Responsibilities of the Successor Servicer.



     (a) The Successor Servicer will not be responsible for delays attributable
to the Servicer’s failure to deliver information, defects in the information
supplied by the Servicer or other circumstances beyond the control of the
Successor Servicer.



     (b) The Successor Servicer will make arrangements with the Servicer for
the prompt and safe transfer of, and the Servicer shall provide to the
Successor Servicer, all necessary servicing files and records, including (as
deemed necessary by the Successor Servicer at such time): (i) microfiche loan
documentation, (ii) servicing system tapes, (iii) Loan payment history, (iv)
collections history and (v) the trial balances, as of the close of business on
the day immediately preceding conversion to the Successor Servicer, reflecting
all applicable Loan information. The current Servicer shall be obligated to
pay the costs associated with the transfer of the servicing files and records
to the Successor Servicer.



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     (c) The Successor Servicer shall have no responsibility and shall not be
in default hereunder nor incur any liability for any failure, error,
malfunction or any delay in carrying out any of its duties under this Agreement
if any such failure or delay results from the Successor Servicer acting in
accordance with information prepared or supplied by a Person other than the
Successor Servicer or the failure of any such Person to prepare or provide such
information. The Successor Servicer shall have no responsibility, shall not be
in default and shall incur no liability (i) for any act or failure to act by
any third party, including the Servicer, the Trust Depositor or the Trustees or
for any inaccuracy or omission in a notice or communication received by the
Successor Servicer from any third party or (ii) which is due to or results from
the invalidity, unenforceability of any Loan with applicable law or the breach
or the inaccuracy of any representation or warranty made with respect to any
Loan.



     (d) If the Indenture Trustee or any other Successor Servicer assumes the
role of Successor Servicer hereunder, such Successor Servicer shall be entitled
to the benefits of (and subject to the provisions of) Section 5.02
concerning delegation of duties to subservicers.



     Section 8.09 Rating Agency Condition for Servicer Transfer.



     Notwithstanding the foregoing provisions relating to a Servicer Transfer,
no Servicer Transfer shall be effective hereunder unless prior written notice
thereof shall have been given to the Rating Agencies, and the Rating Agency
Condition shall have been satisfied with respect thereto.



     Section 8.10 Appointment of Successor Backup Servicer; Successor
Backup Servicer to Act.



     (a) The Backup Servicer may be removed, with or without cause, by the
Majority Noteholders or the Indenture Trustee, by notice given in writing to
the Backup Servicer (the “Backup Servicer Termination Notice”). The
Backup Servicer shall continue to perform all backup servicing functions under
this Agreement until the date specified in the Backup Servicer Termination
Notice or, if no such date is specified, until a date mutually agreed by the
Backup Servicer and the Indenture Trustee. The Indenture Trustee shall as
promptly as
possible after the giving of a Backup Servicer Termination Notice, to
appoint a Successor Backup Servicer (the “Successor Backup Servicer”)
and such Successor Backup Servicer shall accept its appointment by a written
assumption in a form acceptable to the Indenture Trustee and Owner Trustee.



     (b) In the event that a Successor Backup Servicer has not been appointed
and has not accepted its appointment at the time when the then Backup Servicer
has ceased to act as Backup Servicer, the Indenture Trustee shall petition a
court of competent jurisdiction to appoint any established financial
institution having a net worth of at least $50,000,000 and whose regular
business includes the backup servicing of loans similar to the Loans as the
Successor Backup Servicer hereunder and the Successor Backup Servicer shall be
the successor in all respects to the Backup Servicer in its capacity as Backup
Servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Backup Servicer by the terms and provisions
hereof, and the terminated Backup Servicer shall be relieved of such
responsibilities, duties and liabilities arising after such backup servicer
transfer (the “Backup Servicer Transfer”); provided,
however,



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that the Successor Backup Servicer shall not be liable for any
acts or omissions of the Backup Servicer occurring prior to such Backup
Servicer Transfer or for any breach by the Backup Servicer of any of its
representations and warranties contained herein or in any related document or
agreement. As compensation therefor, the Successor Backup Servicer shall be
entitled to receive reasonable compensation equal to the monthly Backup
Servicing Fee. Notwithstanding anything else herein to the contrary, in no
event shall the Indenture Trustee or the Servicer be liable for any Backup
Servicing Fee or for any differential in the amount of the backup servicing fee
paid hereunder and the amount necessary to induce any Successor Backup Servicer
to act as Backup Servicer under this Agreement and the transactions set forth
or provided for herein. The Owner Trustee, Securityholders and the Indenture
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.



ARTICLE 9.




REPORTS




     Section 9.01 Monthly Reports.



     With respect to each Remittance Date and the related Due Period, the
Servicer will provide to each Trustee, the Backup Servicer, each Rating Agency,
each Hedge Counterparty and Citigroup, on the related Determination Date, a
monthly statement (a “Monthly Report”) substantially in the form of
Exhibit H hereto with respect to the preceding Due Period.



     Section 9.02 Officer’s Certificate.



     Each Monthly Report delivered pursuant to Section 9.01 shall be
accompanied by a certificate of a Responsible Officer of the Servicer
certifying the accuracy of the Monthly Report and that no Servicer Default or
event that with notice or lapse of time or both would
become a Servicer Default has occurred, or if such event has occurred and
is continuing, specifying the event and its status.



     Section 9.03 Other Data; Obligor Financial Information.



     (a) The Servicer shall, upon the request of any Trustees, any Hedge
Counterparty, the Backup Servicer, or any Rating Agency, furnish such Trustee,
Hedge Counterparty, Rating Agency or the Backup Servicer, as the case may be,
such underlying data used to generate a Monthly Report as may be reasonably
requested



     (b) The Servicer will forward to the Indenture Trustee, the Owner Trustee,
each Hedge Counterparty, each Rating Agency and Citigroup (a) within 60 days
after each calendar quarter (except the fourth calendar quarter), commencing
with the quarter ending June 30, 2004, the unaudited quarterly financial
statements of the Servicer and (b) within ninety (90) days after each fiscal
year of the Servicer, commencing with the fiscal year ending December 31, 2004,
the audited annual financial statements of the Servicer, together with the
related report of the independent accountants to the Servicer. On the
Remittance Date following the receipt of each such financial statements and
report, the Indenture Trustee will forward to each Noteholder of record a copy
of such financial statements and report.



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     (c) The Servicer will forward to Moody’s and S&P within 30 days after
receipt by the Servicer, copies of all financial statements of Obligors then
received by the Servicer with respect to the prior fiscal year of each Obligor.



     (d) The Servicer will forward to Moody’s and S&P promptly upon request any
additional financial information as Moody’s and S&P shall reasonably request
with respect to an obligor as to which any Scheduled Payment is past due for at
least 10 days.



     (e) The Servicer will forward to Moody’s and S&P promptly upon any Loan
becoming a Delinquent Loan, and without any request therefor by Moody’s and
S&P, updated financial information with respect to the related Obligor.



     (f) The Servicer will provide to the Rating Agencies such financial
information, documents and other materials as the Rating Agencies shall
reasonably request in connection with any annual review and/or re-grading of
the Loans in the Loan Pool and the related Obligors which the Rating Agencies
may undertake.



     Section 9.04 Annual Report of Accountants.



     The Servicer shall cause a firm of nationally recognized independent
certified public accountants (the “Independent Accountants”), who may
also render other services to the Servicer or its Affiliates, to deliver to the
Indenture Trustee, the Owner Trustee, each Hedge Counterparty, the Backup
Servicer and each Rating Agency, on or before March 31 of each year, beginning
on March 31, 2005, a report addressed to the Board of Managers of the Servicer,
the Indenture Trustee and the Owner Trustee indicating that (a) with respect to
the 12-months ended the immediately preceding December 31, to the effect that
such Independent Accountants have audited the financial statements of the
Servicer, that as part of that audit, nothing came to the attention of such
Independent Accountants that causes them to believe that the Servicer was not
in compliance with any of the terms, covenants, provisions or conditions
of the relevant sections of this Agreement, insofar as they relate to
accounting matters, except for such exceptions as such Independent Accountants
shall believe to be immaterial and such other exceptions as shall be set forth
in such report, (b) in connection with the Independent Accountants’ audit of
the Servicer, there were no exceptions or errors in records related to Loans
serviced by the Servicer, except for such exceptions as such Independent
Accountants shall believe to be immaterial and such other exceptions as shall
be set forth in such report, (c) the payment testing for Asset Based Revolvers
has been reviewed and such testing is in compliance with the terms of the
related Required Loan Documents and (d) the Independent Accountants have
performed certain procedures as agreed by the Servicer, the Indenture Trustee
and the Owner Trustee, whereby the Independent Accountants will obtain the
Monthly Report for 4-months with respect to the 12-months ended the immediately
preceding December 31 and, for each Monthly Report, the Independent Accountants
will agree all amounts in the Monthly Report to the Servicer’s computer,
accounting and other reports, which will include in such report any amounts
which were not in agreement. In the event such firm of Independent Accountants
requires the Indenture Trustee to agree to the procedures performed by such
firm of Independent Accountants, the Servicer shall direct the Indenture
Trustee in writing to so agree; it being understood and agreed that the
Indenture Trustee will deliver such letter of agreement in conclusive reliance
upon the direction of the Servicer, and the Indenture Trustee will not make any
independent inquiry or



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investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures. The Independent Accountants’ report shall also indicate that the
firm is independent of the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants.



     Section 9.05 Annual Statement of Compliance from Servicer.



     The Servicer will deliver to the Trustees and each Hedge Counterparty
within 90 days of the end of each fiscal year commencing with the year ending
December 31, 2005, an Officer’s Certificate stating that (a) the Servicer has
fully complied in all material respects with certain provisions of the
Agreement relating to servicing of the Loans and payments on the Notes, (b) a
review of the activities of the Servicer during the prior calendar year and of
its performance under this Agreement was made under the supervision of the
officer signing such certificate and (c) to the best of such officer’s
knowledge, based on such review, the Servicer has fully performed or cause to
be performed in all material respects all its obligations under this Agreement
for such year, or, if there has been a default in the fulfillment in all
material respects any of its obligations, specifying each such default known to
such officer and the nature and status thereof and the steps being taken or
necessary to be taken to remedy such event. A copy of such certificate may be
obtained by any Securityholder by a request in writing to the Indenture
Trustee, with respect to any Noteholder, or the Owner Trustee, with respect to
any Certificateholder.



     Section 9.06 Reports of Foreclosure and Abandonment of Mortgaged
Property.



     Each year the Servicer shall make the reports of foreclosures and
abandonment of any Mortgaged Property as and to the extent required by § 6050J
of the Code. Promptly after filing
any such report with the Code, the Servicer shall provide the Indenture
Trustee with an Officer’s Certificate certifying that such report has been
filed.



     Section 9.07 Notices.



     (a) The Servicer shall furnish to the Indenture Trustee and each Hedge
Counterparty (i) promptly, copies of any material and adverse notices
(including, without limitation, notices of defaults, breaches, potential
defaults or potential breaches) given to or received from its other lenders and
(ii) immediately, notice of the occurrence of any Event of Default or Servicer
Default or of any situation which the Servicer reasonably expects to develop
into an Event of Default or Servicer Default.



     (b) The Servicer also agrees to make available on a reasonable basis to
any Noteholder or Hedge Counterparty a knowledgeable financial or accounting
officer for the purpose of answering reasonable questions respecting recent
developments affecting the Servicer or the financial statements of the Servicer
and to permit any Noteholder or Hedge Counterparty upon reasonable advance
notice and subject to reasonable confidentiality restrictions to inspect the
Servicer’s servicing facilities during normal business hours and in a manner
that does not unreasonably interfere with the Servicer’s normal operations or
customer or employee relations for the purpose of satisfying such Noteholder or
Hedge Counterparty that the Servicer has the ability to service the Loans in
accordance with this Agreement.



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     Section 9.08 Indenture Trustee’s Right to Examine Servicer Records and
Audit Operations.



     The Indenture Trustee and each Hedge Counterparty shall have the right
upon reasonable prior notice, during normal business hours, in a manner that
does not unreasonably interfere with the Servicer’s normal operations or
customer or employee relations, and as often as reasonably required, to examine
and audit any and all of the books, records or other information of the
Servicer, whether held by the Servicer or by another on behalf of the Servicer,
which may be relevant to the performance or observance by the Servicer of the
terms, covenants or conditions of this Agreement. No amounts payable in
respect of the foregoing shall be paid from the Loan Assets.



ARTICLE 10.




TERMINATION




     Section 10.01 Optional Purchase of Loan Assets.



     (a) On the last day of any Due Period as of which the Aggregate
Outstanding Loan Balance shall be less than or equal to 10% of the Initial
Aggregate Outstanding Loan Balance, the Servicer shall have the option to
purchase for the Redemption Price the Loan Assets, pursuant to the Indenture
and the other Transaction Documents. To exercise such option, the Servicer
shall deposit in the Note Distribution Account, on or prior to the Remittance
Date upon which such redemption is to occur, an amount equal to the Redemption
Price and shall comply with the requirements of Section 10.01 of the
Indenture.



     (b) Notice of any purchase pursuant to Section 10.01(a) shall be
given by the Servicer to the Issuer, the Indenture Trustee and the Rating
Agencies.



     (c) Following the satisfaction and discharge of the Indenture, the payment
in full of the principal of and interest on the Notes, the termination of all
Hedge Transactions then outstanding under all Hedge Agreements then in effect
and the payment in full of all amounts, including Hedge Breakage Costs, payable
to such Hedge Counterparties upon such terminations, the Certificateholders
will succeed to the rights of the Noteholders hereunder and the Owner Trustee
will succeed to the rights of the Indenture Trustee pursuant to this Agreement.



     Section 10.02 Termination.



     (a) This Agreement shall terminate upon notice to the Indenture Trustee of
the earlier of the following events: (i) the final payment on or the
disposition or other liquidation by the Issuer of the last Loan (including,
without limitation, in connection with a purchase by the Servicer of all
outstanding Loan Assets pursuant to Section 10.01) or the disposition of
all property acquired upon foreclosure or deed in lieu of foreclosure of any
Loan and the remittance of all funds due thereunder, or (ii) mutual written
consent of the Servicer, the Trust Depositor, Indenture Trustee, the
Originator, all Securityholders and all Hedge Counterparties.



     (b) Notice of any termination, specifying the Remittance Date upon which
the Issuer will terminate and that the Noteholders shall surrender their Notes
to the Indenture Trustee for



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payment of the final distribution and cancellation
shall be given promptly by the Servicer by letter to all Noteholders mailed
during the month of such final distribution before the Determination Date in
such month, specifying (i) the Remittance Date upon which final payment of the
Notes (or Redemption Price, as applicable) will be made upon presentation and
surrender of Notes at the office of the Indenture Trustee therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Remittance Date is not applicable, payments being
made only upon presentation and surrender of the Notes at the office of the
Indenture Trustee therein specified. The Servicer shall give such notice to
the Indenture Trustee and the Hedge Counterparties at the time such notice is
given to Noteholders.



ARTICLE 11.




REMEDIES UPON MISREPRESENTATION;

REPURCHASE OPTION




     Section 11.01 Repurchases of, or Substitution for, Loans for Breach of
Representations and Warranties.



     Upon a discovery by a Responsible Officer of the Servicer or any
subservicer, a Responsible Officer of the Owner Trustee or the Indenture
Trustee of a breach of a representation or warranty as set forth in Section
3.01, Section 3.02, Section 3.03, Section 3.04 or
Section 3.05 or as made or deemed made in any Addition Notice or any
Subsequent Purchase Agreement relating to Substitute Loans that materially and
adversely affects the value of the Loans or the interests of the
Securityholders or the Hedge Counterparties therein or which materially and
adversely affects
the interests of the Securityholders or the Hedge Counterparties in the
related Loan in the case of a representation or warranty relating to a
particular Loan (notwithstanding that such representation or warranty was made
to the Originator’s or the Trust Depositor’s best knowledge) (an “Ineligible
Loan”), the party discovering the breach shall give prompt written notice
to the other parties and to each Hedge Counterparty; provided,
that, the Indenture Trustee shall have no duty or obligation to inquire
or to investigate the breach of any of such representations or warranties.
Within thirty (30) days of the earlier of its discovery or its receipt of
notice of any breach of a representation or warranty, the Originator or Trust
Depositor shall (a) promptly cure such breach in all material respects, (b)
repurchase each such Ineligible Loan by depositing in the Principal and
Interest Account, within such thirty (30) day period, an amount equal to the
Transfer Deposit Amount, or (c) remove such Loan from the Issuer and effect a
substitution for such affected Loan with a Substitute Loan in accordance with
the substitution requirements set forth in Section 2.04, not later than
the date a repurchase of such affected Loan would be required hereunder;
provided, however, that with respect to a breach of a
representation or warranty relating to the Loans in the aggregate and not to
any particular Loan, the Originator may select Loans (without adverse
selection) to repurchase (or substitute for) such that had such Loans not been
included as part of the Loan Assets (and, in the case of a substitution, had
such Substitute Loan been included as part of the Loan Assets instead of the
selected Loan) there would have been no breach of such representation or
warranty.



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     Section 11.02 Reassignment of Repurchased or Substituted Loans.



     Upon receipt by the Indenture Trustee for deposit in the Principal and
Interest Account of the amounts described in Section 11.01 (or upon the
Subsequent Transfer Date related to a Substitute Loan described in Section
11.01), and upon receipt of an Officer’s Certificate of the Servicer in the
form attached hereto as Exhibit F, the Indenture Trustee shall assign to
the Trust Depositor and the Trust Depositor shall assign to the Originator all
of the Issuer’s (or Trust Depositor’s, as applicable) right, title and interest
in the repurchased or substituted Loan and related Loan Assets without
recourse, representation or warranty. Such reassigned Loan shall no longer
thereafter be included in any calculations of Outstanding Loan Balances
required to be made hereunder or otherwise be deemed a part of the Issuer.



ARTICLE 12.




INDEMNITIES




     Section 12.01 Indemnification by Servicer.



     The Servicer agrees to indemnify, defend and hold the Indenture Trustee
(as such and in its individual capacity), the Owner Trustee (as such and in its
individual capacity), the Backup Servicer, the Hedge Counterparties (as such
and in their individual capacities) and each Securityholder harmless from and
against any and all claims, losses, penalties, fines, forfeitures, reasonable
legal fees and related costs, judgments, and any other reasonable costs, fees
and expenses that such Person may sustain as a result of the Servicer’s fraud
or the failure of the Servicer to perform its duties and service the Loans in
compliance in all material respects with the terms of this Agreement, except to
the extent arising from the gross negligence, willful
misconduct or fraud by the Person claiming indemnification. The Servicer
shall immediately notify the Indenture Trustee and the Owner Trustee if a claim
is made by any party with respect to this Agreement, and the Servicer shall
assume (with the consent of the indemnified party) the defense and any
settlement of any such claim and pay all expenses in connection therewith,
including reasonable counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against the indemnified party in
respect of such claim.



     Section 12.02 Indemnification by Trust Depositor.



     The Trust Depositor agrees to indemnify, defend, and hold the Indenture
Trustee (as such and in its individual capacity), the Owner Trustee (as such
and in its individual capacity), the Hedge Counterparties (as such and in their
individual capacities) and each Securityholder harmless from and against any
and all claims, losses, penalties, fines, forfeitures, reasonable legal fees
and related costs, judgments, and any other reasonable costs, fees and expenses
that such Person may sustain as a result of the Trust Depositor’s fraud or the
failure of the Trust Depositor to perform its duties in compliance with the
terms of this Agreement and in the best interests of the Securityholders and
Hedge Counterparties, except to the extent arising from the gross negligence,
willful misconduct or fraud by the Person claiming indemnification. The Trust
Depositor shall immediately notify the Indenture Trustee and the Owner Trustee
if a claim is made by a third party with respect to this Agreement, and the
Trust Depositor shall assume (with the consent of the indemnified party) the
defense and any settlement of any such claim and pay



113









 







all expenses in connection
therewith, including reasonable counsel fees, and promptly pay, discharge and
satisfy any judgment or decree which may be entered against the indemnified
party in respect of such claim.



ARTICLE 13.




MISCELLANEOUS




     Section 13.01 Amendment.



     (a) This Agreement may be amended from time to time by the parties hereto
by written agreement, with the prior written consent of the Indenture Trustee
but without notice to or consent of the Securityholders or Hedge
Counterparties, to cure any ambiguity, to correct or supplement any provisions
herein, to comply with any changes in the Code, or to make any other provisions
with respect to matters or questions arising under this Agreement which shall
not be inconsistent with the provisions of this Agreement; provided,
however, that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Indenture Trustee, adversely affect the interests of
any Securityholders or Hedge Counterparties; further, provided,
that, no such amendment shall amend, modify or vary any provision of
Section 5.02(g) or reduce in any manner the amount of, or delay the
timing of, any amounts received on Loans which are required to be distributed
to the Hedge Counterparties without the consent of the Hedge Counterparties or
on any Note or Certificate without the consent of the Holder of such Note or
Certificate, or change the rights or obligations of any other party hereto
without the consent of such party.



     (b) This Agreement may be amended from time to time by the parties hereto
by written agreement, with the prior written consent of the Indenture Trustee
and with the consent of the Majority Noteholders and each Hedge Counterparty,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Holders of the Notes or Certificates; provided,
however, that (i) no such amendment shall reduce in any manner the
amount of, or delay the timing of, any amounts which are required to be
distributed on any Note or Certificate without the consent of the Holder of
such Note or Certificate or reduce the percentage of Holders of any Note or
Certificate which are required to consent to any such amendment without the
consent of the Holders of 100% of the Notes affected thereby, (ii) no amendment
affecting only one Class shall require the approval of the Holders of any other
Class and (iii) (A) the consent of each Hedge Counterparty shall be required
for any amendment, modification or variance to Section 5.02(g) and (B)
as to all other amendments, the consent of each Hedge Counterparty shall be
required unless the Issuer obtains an Opinion of Counsel stating that such
amendment does not adversely affect in any material respect the interests of
the Hedge Counterparties.



     (c) Prior to the execution of any such amendment or consent, the Indenture
Trustee shall furnish written notification of the substance of such amendment
or consent, together with a copy thereof, to each Rating Agency. Prior to the
execution of any amendment pursuant to Section 13.01, the Issuer shall
obtain written confirmation from Moody’s and S&P that entry into such amendment
satisfies the Moody’s Rating Condition and the S&P Rating Condition.



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     (d) Promptly after the execution of any such amendment or consent, the
Owner Trustee and the Indenture Trustee, as the case may be, shall furnish
written notification of the substance of such amendment or consent to each
Securityholder and each Hedge Counterparty. It shall not be necessary for the
consent of the Securityholders and the Hedge Counterparties pursuant to
Section 13.01(b) to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization by the Securityholders and the Hedge Counterparties of the
execution thereof shall be subject to such reasonable requirements as the Owner
Trustee or the Indenture Trustee may prescribe.



     (e) Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and conclusively
rely upon an Opinion of Counsel stating that the execution of such amendment is
authorized and permitted by this Agreement. Such Trustee may, but shall not be
obligated to, enter into any such amendment that affects such Trustee’s own
rights, duties, indemnities or immunities under this Agreement or otherwise.



     Section 13.02 Protection of Title to Issuer.



     The Servicer shall execute and file such financing statements and cause to
be executed and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve, maintain and protect
the interest of the Issuer, the Securityholders, the Hedge Counterparties, the
Indenture Trustee and the Owner Trustee in the Loans and in the
proceeds thereof. The Servicer shall deliver (or cause to be delivered)
to the Owner Trustee and the Indenture Trustee file—stamped copies of, or
filing receipts for, any document filed as provided above, as soon as available
following such filing.



     Section 13.03 Governing Law.



     (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES
UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.



     (b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT. EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.03(b).




115









 





     Section 13.04 Notices.



     All notices, demands, certificates, requests and communications hereunder
(“notices”) shall be in writing and shall be effective (a) upon receipt when
sent through the U.S. mails, registered or certified mail, return receipt
requested, postage prepaid, with such receipt to be effective the date of
delivery indicated on the return receipt, or (b) one Business Day after
delivery to an overnight courier, or (c) on the date personally delivered to an
Responsible Officer of the party to which sent, or (d) on the date transmitted
by legible telecopier transmission with a confirmation of receipt, in all cases
addressed to the recipient as follows:




	 	(i)	 	if to the Servicer or the Originator:
	 
	 	 	 	CapitalSource Finance LLC

4445 Willard Avenue

12th Floor

Chevy Chase, Maryland 20815

Attention: Treasurer

Facsimile No.: (301) 841—2375
	 
	 	(ii)	 	if to the Trust Depositor:
	 
	 	 	 	CapitalSource Commercial Loan LLC, 2004-1

4445 Willard Avenue

12th Floor

Chevy Chase, Maryland 20815

Attention: Treasurer

Facsimile No.: (301) 841—2375
	 
	 	(iii)	 	if to the Indenture Trustee:
	 
	 	 	 	Wells Fargo Bank, National Association

Sixth Street and Marquette Avenue

MAC N9311—161

Minneapolis, Minnesota 55479

Attention: Corporate Trust Services/Asset Backed Administration
	 
	 	 	 	Facsimile No.: (612) 667—3464
	 
	 	(iv)	 	if to the Owner Trustee:
	 
	 	 	 	Wilmington Trust Company

One Rodney Square North

Wilmington, Delaware 19890

Attention: Corporate Trust Administration

Facsimile No.: (302) 427—4749
	 
	 	 	 	with a copy to:
	 
	 	 	 	the Originator and the Servicer as provided in clause
(i) above





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	 	(v)	 	if to the Issuer:
	 
	 	 	 	CapitalSource Commercial Loan Trust 2004-1

c/o Wilmington Trust Company

One Rodney Square North

Wilmington, Delaware 19890

Attention: Corporate Trust Administration

Facsimile No.: (302) 427-4749

	 
	 	 	 	with a copy to:
	 
	 	 	 	the Originator and the Servicer as provided in clause (i) above
	 
	 	(vi)	 	if to S&P:
	 
	 	 	 	Standard and Poor’s Rating Service

55 Water Street

41st Floor

New York, New York 10041

Attention: Surveillance: Asset—Backed Services

Facsimile No.: (212) 438-2662
	 
	 	(vii)	 	if to Moody’s:
	 
	 	 	 	Moody’s Investors Service

99 Church Street

New York, New York 10007

Attention: CDO Monitoring Department

Facsimile No.: (212) 553-0344

Email: cdomonitoring@moodys.com
	 
	 	(viii)	 	if to Fitch:
	 
	 	 	 	Fitch, Inc.

One State Street Plaza

New York, New York 10004

Attention: CDO Surveillance

Facsimile No.: (212) 514-6501





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	 	(ix)	 	if to the Initial Purchasers:
	 
	 	 	 	Citigroup Global Markets Inc.

390 Greenwich Street

New York, NY 10013

Attention: Asset-Backed Finance

Facsimile No.: (212) 723-8591; and
	 
	 	 	 	Wachovia Capital Markets, LLC

One Wachovia Center, Mail Code: NC0602

301 South College Street

Charlotte, North Carolina 28288—0610

Attention: Asset Securitization Division

Facsimile No.: (704) 383-4012;
	 
	 	 	 	Harris Nesbitt Corp.

115 S. LaSalle Street, #13W

Chicago Illinois 60603

Attention: U.S. Securitization Group

Facsimile No.: (312) 293-4908
	 
	 	(x)	 	if to the Hedge Counterparties:





     At the address set forth for such party in the applicable Hedge Agreement.



     Each party hereto may, by notice given in accordance herewith to each of
the other parties hereto, designate any further or different address to which
subsequent notices shall be sent.



     Section 13.05 Severability of Provisions.



     If one or more of the covenants, agreements, provisions or terms of this
Agreement shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no
way affect the validity or enforceability of the other provisions of this
Agreement, the Notes or Certificates or the rights of the Securityholders or
the Hedge Counterparties, and any such prohibition, invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such covenants, agreements, provisions or terms in any other
jurisdiction.



     Section 13.06 Third Party Beneficiaries.



     Except as otherwise specifically provided herein, the parties hereto
hereby manifest their intent that no third party (other than the Owner Trustee
and the Hedge Counterparties) shall be deemed a third party beneficiary of this
Agreement, and specifically that the Obligors are not third party beneficiaries
of this Agreement.





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     Section 13.07 Counterparts.


     This Agreement may be executed by facsimile signature and in several
counterparts, each of which shall be an original and all of which shall
together constitute but one and the same instrument.



     Section 13.08 Headings.



     The headings of the various Articles and Sections herein are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof.



     Section 13.09 No Bankruptcy Petition; Disclaimer.



     (a) Each of the Originator, the Indenture Trustee, the Servicer, the
Issuer acting through the Owner Trustee and each Holder (by acceptance of the
applicable Securities) covenants and agrees that, prior to the date that is one
year and one day after the payment in full of all amounts owing in respect of
all outstanding Classes of Notes rated by any Rating Agency, it will not
institute against the Trust Depositor or the Issuer, or join any other Person
in instituting against the Trust Depositor or the Issuer, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceedings under the laws of the United States or any state of the
United States; provided, however, that nothing herein shall
prohibit the Indenture Trustee from filing proofs of claim or otherwise
participating in any such proceedings instituted by any other Person. This
Section 13.09 will survive the termination of this Agreement.



     (b) The Issuer acknowledges and agrees that the Certificates represent a
beneficial interest in the Issuer and Loan Assets only and the Securities do
not represent an interest in any assets (other than the Loan Assets) of the
Trust Depositor (including by virtue of any deficiency claim in respect of
obligations not paid or otherwise satisfied from the Loan Assets and proceeds
thereof). In furtherance of and not in derogation of the foregoing, to the
extent that the Trust Depositor enters into other transactions as contemplated
in Section 6.07, the Issuer acknowledges and agrees that it shall have
no right, title or interest in or to any assets (or interests therein), other
than the Loan Assets, conveyed or purported to be conveyed (whether by way of a
sale, capital contribution or by the granting of a Lien) by the Trust Depositor
to any Person other than the Issuer (the “Other Assets”).



     (c) To the extent that notwithstanding the agreements contained in this
Section 13.09, the Issuer, any Securityholder or any Hedge Counterparty,
either (i) asserts an interest in or claim to, or benefit from any Other
Assets, whether asserted against or through the Trust Depositor or any other
Person owned by the Trust Depositor, or (ii) is deemed to have any interest,
claim or benefit in or from any Other Assets, whether by operation of law,
legal process, pursuant to applicable provisions of Insolvency Laws or
otherwise (including without limitation pursuant to Section 1111(b) of the
federal Bankruptcy Code, as amended) and whether deemed asserted against or
through the Trust Depositor or any other Person owned by the Trust Depositor,
then the Issuer, each Securityholder by accepting a Note or Certificate and
each Hedge Counterparty further acknowledges and agrees that any such interest,
claim or benefit in or from the Other Assets is and shall be expressly
subordinated to the indefeasible payment in full of all obligations and
liabilities of the Trust Depositor that, under the terms of the documents
relating to the securitization of the Other Assets, are entitled to be paid
from, entitled to the
benefits of, or



119









 







otherwise secured by such Other Assets (whether or not any
such entitlement or security interest is legally perfected or otherwise
entitled to a priority of distribution under applicable law, including
Insolvency Laws, and whether asserted against the Trust Depositor or any other
Person owned by the Trust Depositor) including, without limitation, the payment
of post—petition interest on such other obligations and liabilities. This
subordination agreement shall be deemed a subordination agreement within the
meaning of Section 510(a) of the Bankruptcy Code. Each of the Issuer, the
Hedge Counterparties and the Securityholders is deemed to have acknowledged and
agreed that no adequate remedy at law exists for a breach of this Section
13.09 and that the terms and provisions of this Section 13.09 may be
enforced by an action for specific performance.



     (d) The provisions of this Section 13.09 shall be for the third
party benefit of those entitled to rely thereon, including the Securityholders
and the Hedge Counterparties, and shall survive the termination of this
Agreement.



     Section 13.10 Jurisdiction.



     Any legal action or proceeding with respect to this Agreement may be
brought in the courts of the United States for the Southern District of New
York, and by execution and delivery of this Agreement, each party hereto
consents, for itself and in respect of its property, to the non—exclusive
jurisdiction of those courts. Each such party irrevocably waives any
objection, including any objection to the laying of venue or based on the
grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction in respect of this
Agreement or any document related hereto.



     Section 13.11 Tax Characterization.



     Notwithstanding the provisions of Section 2.01 and Section
2.04 hereof, the Trust Depositor and Owner Trustee agree that, pursuant to
Treasury Regulations Section 301.7701—3(b)(1) and for federal income tax
purposes, in the event that the Certificates and the Class E Notes are owned by
more than one Holder, the Issuer will be treated as a partnership the partners
of which are the Certificateholders and the Holders of the Class E Notes, and
in the event that the Certificates the Class E Notes are owned by a single
Holder, the Issuer will be treated as a division of such Holder.



     Section 13.12 Prohibited Transactions with Respect to the Issuer.



     The Originator shall not:



     (a) Provide credit to any Noteholder or Certificateholder for the purpose
of enabling such Noteholder or Certificateholder to purchase Notes or
Certificates, respectively;



     (b) Purchase any Notes or Certificates in an agency or trustee capacity;
or



     (c) Except in its capacity as Servicer as provided in this Agreement, lend
any money to the Issuer.




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     Section 13.13 Limitation of Liability of Owner Trustee.



     Wilmington Trust Company acts on behalf of the Issuer solely as Owner
Trustee hereunder and not in its individual capacity, and all Persons having
any claim against the Issuer by reason of the transactions contemplated by this
Agreement or any other Transaction Document shall look only to the Trust Estate
under the Trust Agreement for payment or satisfaction thereof. The Owner
Trustee makes no representations as to the validity or sufficiency of this
Agreement, any other Transaction Document or the Notes, or of any Loan or
related documents. The Owner Trustee shall at no time have any responsibility
or liability for or with respect to the legality, validity and enforceability
of any Loan, or the perfection and priority of any security interest created by
any Loan in any Collateral or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Trust Estate under
the Trust Agreement or its ability to generate the payments to be distributed
to the Certificateholder under the Trust Agreement or the Noteholders under the
Indenture, including, without limitation, the existence, condition and
ownership of any Collateral; the existence and enforceability of any insurance
thereon; the existence and contents of any Loan on any computer or other record
thereof; the validity of the assignment of any Loan to the Issuer or of any
intervening assignment; the completeness of any Loan; the performance or
enforcement of any Loan; the compliance by the Issuer, the Trust Depositor or
the Servicer with any covenant, agreement or other obligation or any warranty
or representation made under any Transaction Document or in any related
document or the accuracy of any such warranty or representation; or any action
of the Indenture Trustee or the Servicer or any subservicer taken in the name
of the Owner Trustee or the Issuer.



     Section 13.14 Allocation of Payments with Respect to Loans.



     (a) With respect to any Partially Funded Term Loans and any Revolving
Loans, the Issuer will own only the principal portion of such Loans outstanding
as of the applicable Cut—Off Date. Principal Collections received by the
Servicer on any Revolving Loans (other than Loans to SPE Obligors) will be
allocated first to the portion of such Loan not owned by the Issuer, until the
principal amount of such portion is reduced to zero, and then to the portion
owned by the Issuer; provided, however, if (i) a payment default
occurs with respect to any of the related Loans (and in the case of Asset Based
Revolvers, a payment default shall mean any failure to make a payment on the
date such payment is due and such failure continues for more than one calendar
day), (ii) the Originator has determined in its sole discretion that an
Obligor’s credit has deteriorated or the Originator has determined in its sole
discretion to reduce its commitment to an Obligor, (iii) an Event of Default
occurs, (iv) a Servicer Default occurs, or (v) an Accelerated Amortization
Event occurs, then Principal Collections received on (A) the applicable Loan
(in the case of clause (i) or (ii) above) or (B) all the
Revolving Loans (in the case of clauses (iii), (iv) and (v)
above) will be allocated between the portion not owned by the Issuer and the
portion owned by the Issuer pro rata based upon the outstanding principal
amount of each such portion. So long as there is no (1) payment default on the
related Loans (and in the case of Asset Based Revolvers, a payment default
shall mean any failure to make a payment on the date such payment is due and
such failure continues for more than one calendar day), (2) Servicer Default,
(3) Event of Default, or (4) Accelerated Amortization Event, the Servicer will
determine the Outstanding Loan Balance, the Retained Interest (if any) and the
Principal Collections received with respect to any Revolving Loan secured by
Collateral on each Monthly Reconciliation Date, and all other Loans (including
Revolving Loans not secured by any Collateral) and in all other cases on
each Business Day, pursuant to Section 7.07.



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     (b) With respect to any Revolving Loan (other than Loans to SPE Obligors),
Interest Collections received by the Servicer on those Loans will be allocated
between the portion not owned by the Issuer and the portion owned by the Issuer
on a pro rata basis according to the outstanding principal amount of each such
portion.



     (c) With respect to any Fully Funded Term Loans, Partially Funded Term
Loans and Loans to SPE Obligors, Collections received by the Servicer will be
allocated between the portion not owned by the Issuer (if any) and the portion
owned by the Issuer on a pro rata basis according to the outstanding principal
amount of such portion.



     Section 13.15 No Partnership.



     Nothing herein contained shall be deemed or construed to create a
co—partnership or joint venture between the parties hereto, and the services of
the Servicer shall be rendered as an independent contractor and not as agent
for the Securityholders or the Hedge Counterparties.



     Section 13.16 Successors and Assigns.



     This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.



     Section 13.17 Acts of Holders.



     Except as otherwise specifically provided herein, whenever Holder action,
consent or approval is required under this Agreement, such action, consent or
approval shall be deemed to have been taken or given on behalf of, and shall be
binding upon, all Holders if the Majority Noteholders agree to take such action
or give such consent or approval.



     Section 13.18 Duration of Agreement.



     This Agreement shall continue in existence and effect until terminated as
herein provided.



     Section 13.19 Limited Recourse.



     The obligations of the Trust Depositor, the Originator and the Servicer
under this Agreement are solely the obligations of the Trust Depositor, the
Originator and the Servicer. No recourse shall be had for the payment of any
amount owing by the Trust Depositor, the Originator, and the Servicer under
this Agreement or for the payment by the Trust Depositor, the Originator and
the Servicer of any fee in respect hereof or any other obligation or claim of
or against the Trust Depositor, the Originator and the Servicer arising out of
or based upon this Agreement, against any employee, officer, director,
Affiliate, shareholder, partner or member of the Trust Depositor, the
Originator and the Servicer or against the employee, officer, director,
shareholder, partner or member or any Affiliate of such Person. The provisions
of this Section 13.19 shall survive termination of this Agreement.




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     Section 13.20 Confidentiality.



     Each of the Issuer, the Trust Depositor, the Servicer (if other than
CapitalSource), the Indenture Trustee and the Backup Servicer shall maintain
and shall cause each of its employees, officers, agents and Affiliates to
maintain the confidentiality of material non-public information concerning
CapitalSource Inc. and its Public Securities or about the Obligors (to the
extent CapitalSource Inc. has advised such Person or such Person has actual
knowledge that the Loan Documents prohibit disclosure of such information with
respect to the Obligors) obtained by it or them in connection with the
structuring, negotiating, execution and performance of the transactions
contemplated by the Transaction Documents, except that each such party and its
employees, officers, agents and Affiliates may disclose such information to
other parties to the Transaction Documents and to its external accountants,
attorneys, any potential subservicers and the agents of such Persons provided
such Persons expressly agree to maintain the confidentiality of such
information, and as required by an applicable law or order of any judicial or
administrative proceeding.



     Section 13.21 Non-Confidentiality of Tax Treatment.



     All parties hereto agree that each of them and each of their employees,
representatives, and other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to any of them relating to such tax treatment and tax structure.
“Tax treatment” and “tax structure” shall have the same meaning as such terms
have for purposes of Treasury Regulation Section 1.6011-4.



[Remainder of Page Intentionally Left Blank]



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



    	 	 	 	 	 
	 	CAPITALSOURCE COMMERCIAL
          LOAN TRUST 2004-1, as the Issuer	 
	 
	 	 	 	 
	 
	By: 	 	WILMINGTON TRUST COMPANY, not

          in its individual capacity, but solely as

          Owner Trustee on behalf of the Issuer	 
	 
	 	 	 	 
	 
	By: 	 	/s/ Joann A. Rozell	 
	 
	Name: 	 	Joann A. Rozell	 
	 
	Title: 	 	Financial Services Officer	 
	 
	 	 	 	 
	 	CAPITALSOURCE COMMERCIAL
          LOAN LLC, 2004-1, as the Trust Depositor	 
	 
	 	 	 	 
	 
	By: 	 	/s/ STEVEN A. MUSELES	 
	 
	Name: 	 	STEVEN A. MUSELES	 
	 
	Title: 	 	Senior Vice President	 
	 
	 	 	 	 
	 	CAPITALSOURCE FINANCE LLC,
          as the Originator and as the Servicer	 
	 
	 	 	 	 
	 
	By: 	 	/s/ STEVEN A. MUSELES	 
	 
	Name: 	 	STEVEN A. MUSELES	 
	 	Title:  	 	Senior Vice
          President	 







[Signatures Continued on the Following Page]




 








 







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


	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, not

in its individual capacity but as the

Indenture Trustee and as the Backup

Servicer

 	 
	 	By:  	/s/ Joe Nardi	 
	 	Name:  	Joe Nardi	 
	 	Title:  	Vice President