exv10w23w1



 




EXHIBIT 10.23.1







JPMorgan Chase Bank

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England



March 16, 2004



To: CapitalSource Inc.

4445 Willard Avenue, 12th Floor

Chevy Chase, MD 20815

Attention: Chief Financial Officer

Telephone No.: 301-841-2866

Facsimile No.: 301-841-2375



Re: Call Option Transaction




Reference:




     The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between JPMorgan Chase Bank, London
Branch (“JPMorgan”) and CapitalSource Inc. (“Counterparty”) on the Trade Date
specified below (the “Transaction”). This letter agreement constitutes a
“Confirmation” as referred to in the ISDA Master Agreement specified below.
This Confirmation shall replace any previous letter and serve as the final
documentation for this Transaction.



     The definitions and provisions contained in the 1996 ISDA Equity
Derivatives Definitions (the “Equity Definitions”), as published by the
International Swaps and Derivatives Association, Inc., are incorporated into
this Confirmation. In the event of any inconsistency between the Equity
Definitions and this Confirmation, this Confirmation shall govern. Certain
defined terms used herein have the meanings assigned to them in the Offering
Memorandum dated March 16, 2004 (the “Offering Memorandum”) relating to the USD
225,000,000 principal amount of Senior Convertible Debentures due March 15,
2034, (the “Convertible Notes”) issued by the Counterparty pursuant to an
Indenture to be dated March 19, 2004 between Counterparty and U.S. Bank
National Association, as trustee (the “Indenture”). In the event of any
inconsistency between the terms defined in the Offering Memorandum and this
Confirmation, the Confirmation shall govern.



     Each party is hereby advised, and each such party acknowledges, that the
other party has engaged in, or refrained from engaging in, substantial
financial transactions and has taken other material actions in reliance upon
the parties’ entry into the Transaction to which this Confirmation relates on
the terms and conditions set forth below.


1. This Confirmation evidences a complete and binding agreement between
JPMorgan and the Counterparty as to the terms of the Transaction to which this
Confirmation relates. This Confirmation shall supplement, form a part of, and
be subject to an agreement in the form of the 2002 ISDA Master Agreement (the
“Agreement”) as if JPMorgan and the Counterparty had executed an agreement in
such form (but without any Schedule except for the election of the laws of the
State of New York as the governing law and United States dollars as the
Termination Currency) on the Trade Date. In the event of any inconsistency
between provisions of that Agreement and this Confirmation, this Confirmation
will prevail for the purpose of the Transaction to which this Confirmation
relates. The parties hereby agree that no Transaction other than the
Transaction to which this Confirmation relates shall be governed by the
Agreement.




A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.




 









 











	2.	 	The terms of the particular Transaction to which this Confirmation
relates are as follows:





	 	 	 	 	 
	General Terms:	 	 
	 
	 	 	 	 
	

	 	Trade Date:
	 	March 16, 2004
	 
	 	 	 	 
	

	 	Option Style:
	 	“Modified American”, as set forth under “Exercise and
Valuation” below.
	 
	 	 	 	 
	

	 	Option Type:
	 	Call
	 
	 	 	 	 
	

	 	Buyer:
	 	Counterparty
	 
	 	 	 	 
	

	 	Seller:
	 	JPMorgan
	 
	 	 	 	 
	

	 	Shares:
	 	The common stock of Counterparty, par value USD 0.01 per Share
(Exchange symbol “CSE”).
	 
	 	 	 	 
	

	 	Number of Options:
	 	As of any date, a number equal to the Conversion Rate
(as defined in the Offering Memorandum, but without regard to any
provision in the Indenture allowing the Counterparty to unilaterally
increase the Conversion Rate, without the occurrence of a Potential
Adjustment Event), multiplied by the number of Convertible Notes in
denominations of USD 1,000 principal amount issued by the
Counterparty (each such USD 1,000 principal amount, a “Convertible
Note”). For the avoidance of doubt, the Number of Options shall be
reduced by (i) any Options exercised by the Counterparty upon an
Early Exercise (as defined below) and (ii) any Options exercised by
the Counterparty in respect of an Exercise Period (as defined below)
relating to the Convertible Notes. In no event shall the Number of
Options be less than zero.
	 
	 	 	 	 
	

	 	Option Entitlement:
	 	One Share per Option
	 
	 	 	 	 
	

	 	Strike Price:
	 	USD 30.3996
	 
	 	 	 	 
	

	 	Premium:
	 	USD 49,797,160.37
	 
	 	 	 	 
	

	 	Premium Payment Date:
	 	March 19, 2004
	 
	 	 	 	 
	

	 	Exchange:
	 	The New York Stock Exchange
	 
	 	 	 	 
	

	 	Related Exchange(s):
	 	The principal exchange(s) for options contracts or
futures contracts, if any, with respect to the Shares.
	 
	 	 	 	 
	Exercise and Valuation:	 	 
	 
	 	 	 	 
	

	 	Exercise Period:
	 	Notwithstanding the Equity Definitions, the Exercise
Period shall be, in respect of the Exercise Options (as
defined below), each period commencing from the date a





A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.




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	 	 	 	notice of conversion is
submitted to the Counterparty by a holder
of Convertible Notes to and including the
fifth Exchange Business Day following the
Conversion Date for such Convertible Notes.
	 
	 	 	 	 
	

	 	Exercise Options:
	 	The lesser of (i) the Number of Options and (ii) a
number of Options equal to the Conversion Rate (but without regard to
any provision in the Indenture allowing the Counterparty to
unilaterally increase the Conversion Rate, without the occurrence of
a Potential Adjustment Event) of Convertible Notes surrendered to
Counterparty for conversion times the number of such Convertible
Notes.
	 
	 	 	 	 
	

	 	Expiration Time:
	 	The Valuation Time
	 
	 	 	 	 
	

	 	Expiration Date:
	 	In respect of any Exercise Options, the earlier of (i)
March 15, 2009, (ii) the final day of the Exercise Period in respect
of such Exercise Options, and (iii) the day the Number of Options is
zero.
	 
	 	 	 	 
	

	 	Multiple Exercise:
	 	Applicable, as described herein.
	 
	 	 	 	 
	

	 	Automatic Exercise:
	 	Applicable; and means that in respect of any Exercise
Period a number of Options not previously exercised hereunder equal
to the Exercise Options shall be deemed to be exercised on the
Expiration Date for the Exercise Period relating to such Exercise
Options; provided that Counterparty has notified JPMorgan (in
writing or orally) of the Conversion Date and the number of such
Exercise Options one Exchange Business Day prior to such Expiration
Date.
	 
	 	 	 	 
	

	 	Valuation Time:
	 	At the close of trading of the regular trading session on
the Exchange
	 
	 	 	 	 
	

	 	Early Exercise:
	 	The Counterparty may at any time, and from time to
time, from the Trade Date to and including February 14, 2009,
exercise all or any portion of the unexercised Options as set forth
in its notice of exercise to JPMorgan.
	 
	 	 	 	 
	Settlement Terms:	 	 
	 
	 	 	 	 
	

	 	Physical Settlement:
	 	Applicable; provided that if and to the extent
Counterparty is required to deliver cash in lieu of fractional Shares
(or any fractional Shares) with respect to the settlement of
Convertible Notes, the Calculation Agent shall adjust the settlement
terms hereunder to account for delivery by JPMorgan to Counterparty
of such cash or fractional Shares in the amount of such required
delivery obligation.






 A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



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	 	Settlement Date:
	 	For any Exercise Options relating to the conversion of
Convertible Notes, the settlement date for Shares to be delivered
under such Convertible Notes under the terms of the Indenture. For
any Early Exercise, the Settlement Date shall be third Exchange
Business Day following the delivery of a notice of exercise to
JPMorgan.
	 
	 	 	 	 
	

	 	Failure to Deliver:
	 	Applicable
	 
	 	 	 	 
	3. Additional Terms applicable to the Transaction:	 	 
	 
	 	 	 	 
	  Adjustments applicable to the Transaction:	 	 
	 
	 	 	 	 
	

	 	Potential Adjustment Events:
	 	Notwithstanding Section 9.1(e) of the Equity
Definitions, a “Potential Adjustment Event” means any occurrence of any
event or condition, as set forth in Section 14.06(a) to Section 14.06(g)
of the Indenture that would result in an adjustment to the Conversion
Rate of the Convertible Notes; provided that in no event shall there be
any adjustment hereunder as a result of an adjustment to the Conversion
Rate pursuant to any provision in the Indenture allowing the
Counterparty to unilaterally increase the Conversion Rate, without the
occurrence of a Potential Adjustment Event.
	 
	 	 	 	 
	

	 	Method of Adjustment:
	 	Calculation Agent Adjustment, and means that,
notwithstanding Section 9.1(c) of the Equity Definitions, upon any
adjustment to the Conversion Rate of the Convertible Notes pursuant to
the Indenture (other than any provision in the Indenture allowing the
Counterparty to unilaterally increase the Conversion Rate, without the
occurrence of a Potential Adjustment Event), the Calculation Agent will
make a corresponding adjustment to any one or more of the Strike Price,
Number of Options, the Option Entitlement and any other variable
relevant to the exercise, settlement or payment for the Transaction.
	 
	 	 	 	 
	Extraordinary Events applicable to the Transaction:	 	 
	 
	 	 	 	 
	

	 	Merger Events:
	 	Notwithstanding Section 9.2(a) of the Equity Definitions, a
“Merger Event” means the occurrence of any event or condition set
forth in Section 14.07 of the Indenture.
	 
	 	 	 	 
	

	 	Consequence of Merger Events:
	 	Notwithstanding Section 9.3 of the Equity
Definitions, upon the occurrence of a Merger Event, the Calculation
Agent shall make a corresponding adjustment in respect of any
adjustment under the Indenture to any one or more of the nature of
the Shares, Strike Price, Number of Options, the Option Entitlement
and any other variable relevant to the exercise, settlement or
payment for the Transaction.







	 	 	 
	Additional Termination Events:

	 	If an event of default with respect to
Counterparty shall occur under the terms of the Convertible Notes as set
forth in Section






 A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



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	 	6.01 of the Indenture, then such event shall
constitute an Additional Termination Event
applicable to this Transaction and, with
respect to such event (i) Counterparty shall be
deemed to be Affected Party and JPMorgan shall
be deemed to be the party that is not the
Affected Party and (ii) JPMorgan shall be the
party entitled to designate an Early
Termination Date pursuant to Section 6(b) of
the Agreement.
	 
	 	 
	4. Calculation Agent:

	 	JPMorgan, whose calculations and determinations shall
be made in good faith and in a commercially reasonable manner, including
with respect to calculations and determinations that are made in its sole
discretion.






	5.	 	Account Details:






	(a)	 	Account for payments to Counterparty:






	 	 	Bank of America, New York

ABA: 026009593

Acct Name: CapitalSource Finance LLC

Acct No.: 003930250176






	 	 	Account for delivery of Shares to Counterparty:






	 	 	To be determined in advance of any such delivery.






	(b)	 	Account for payments to JPMorgan:






	 	 	JPMorgan Chase Bank, New York

ABA: 021 000 021

Favour: JPMorgan Chase Bank – London

A/C: 0010962009 CHASUS33






	 	 	Account for delivery of Shares from JPMorgan:






	 	 	DTC 060






	6.	 	Offices:




The Office of Counterparty for the Transaction is: Inapplicable, Counterparty
is not a Multibranch Party.




The Office of JPMorgan for the Transaction is: New York





	 	 	JP Morgan Chase Bank

London Branch

P.O. Box 161

60 Victoria Embankment

London EC4Y 0JP

England




A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



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	7.	 	Notices: For purposes of this Confirmation:






	(a)	 	Address for notices or communications to Counterparty:






	 	 	CapitalSource Inc.

4445 Willard Avenue

Chevy Chase, MD 20815

Attention: Chief Financial Officer

Telephone No.: 301-841-2866

Facsimile No.: 301-841-2375
	 
	 	 	Address for notices or communications to JPMorgan:
	 
	 	 	JPMorgan Chase Bank






	 	 	277 Park Avenue, 11th Floor

New York, NY 10172

Attention: Kevin J. Moran

EDG Corporate Marketing

Telephone No.: (212) 622-6707

Facsimile No.: (212) 622-8534






	8.	 	Representations, Warranties of the Counterparty






	(a)	 	The Counterparty hereby represents and warrants to JPMorgan
that the Counterparty has been duly incorporated and is an existing
corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties
and conduct its business as set forth or incorporated by reference
in or contemplated by the Offering Memorandum; and the Counterparty
is duly authorized, qualified or registered, as the case may be, to
do business as a foreign corporation in all other jurisdictions in
which its ownership or lease of property or the conduct of its
business requires such authorization, qualification or registration,
except where the failure to obtain such authorization, qualification
or registration would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition,
management or results of operations of the Counterparty and its
subsidiaries, taken as a whole (“Material Adverse Effect”).
	 
	(b)	 	The Counterparty hereby represents and warrants to JPMorgan
that the Counterparty has all necessary corporate power and
authority to execute, deliver and perform its obligations in respect
of this Transaction; such execution, delivery and performance have
been duly authorized by all necessary corporate action on the
Counterparty’s part; and this Confirmation has been duly and validly
executed and delivered by the Counterparty and constitutes its valid
and binding obligation, enforceable against the Counterparty in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies generally, and
subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and
fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except that rights to
indemnification and contribution thereunder may be limited by
federal or state securities laws or public policy relating thereto.




A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



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	(c)	 	The Counterparty hereby represents and warrants to JPMorgan
that neither the execution and delivery of this Confirmation nor the
incurrence or performance of obligations of the Counterparty
hereunder will conflict with or result in a breach of the Delaware
General Corporation Law, the certificate of incorporation or by-laws
(or any equivalent documents) of the Counterparty, or any applicable
law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or
instrument to which the Counterparty or any of its subsidiaries is a
party or by which the Counterparty or any of its subsidiaries is
bound or to which the Counterparty or any of its subsidiaries is
subject, or constitute a default under, or result in the creation of
any lien under, any such agreement or instrument, or breach or
constitute a default under any agreements and contracts of the
Counterparty and the significant subsidiaries filed as exhibits to
the Counterparty’s Annual Report on Form 10-K for the year ended
December 31, 2003, incorporated by reference in the Offering
Memorandum.
	 
	(d)	 	The Counterparty hereby represents and warrants to JPMorgan
that no consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required in
connection with the execution, delivery or performance by the
Counterparty of this Confirmation, except such as have been obtained
or made and such as may be required under the Securities Act of 1933
or state securities laws.
	 
	(e)	 	The Counterparty hereby represents and warrants to JPMorgan
that except as set forth or incorporated by reference in the
Offering Memorandum, there are no pending actions, suits or
proceedings against or affecting the Counterparty, any of its
subsidiaries or any of their respective properties that, if
determined adversely to the Counterparty or any of its subsidiaries,
would individually or in the aggregate have, or reasonably be
expected to have, a Material Adverse Effect, or would materially and
adversely affect the ability of the Counterparty to perform its
obligations under this Confirmation; and no such actions, suits or
proceedings are, to the Company’s knowledge, threatened or
contemplated.
	 
	(f)	 	The Counterparty hereby represents and warrants to JPMorgan
that the Offering Memorandum and the documents incorporated by
reference therein do not, as of the Trade Date, contain an untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
	 
	(g)	 	The Counterparty hereby represents and warrants to JPMorgan
that the Counterparty is an “eligible contract participant” (as such
term is defined in Section 1(a)(12) of the Commodity Exchange Act,
as amended).
	 
	(h)	 	The Counterparty hereby represents and warrants to JPMorgan
that the Counterparty is not an “investment company” or a company
“controlled” by an “investment company,” in each case within the
meaning of the Investment Company Act of 1940, as amended.
	 
	(i)	 	The Counterparty shall deliver an opinion of counsel, dated
as of the Trade Date, to JPMorgan with respect to the matters set
forth in clauses (a) to (d) and (h) of this Section 8.
	 
	(j)	 	If the Initial Purchasers party to the Purchase Agreement
among the Counterparty and J.P. Morgan Securities Inc., as
representative of the Initial Purchasers, dated as of March 16,
2004, relating to the purchase of the Convertible Notes exercises
their right to receive additional Convertible Notes pursuant to the
Initial Purchasers’ option to purchase additional Convertible Notes,
then, at the discretion of the Counterparty, JPMorgan and the
Counterparty will either enter into a new confirmation or amend this
Confirmation to




A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



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	 	 	provide for such increase in Convertible Notes (but on pricing
terms acceptable to JPMorgan and the Counterparty) (such
additional confirmation or amendment to this Confirmation to
provide for the payment by the Counterparty to JPMorgan of the
additional premium related thereto).






	9.	 	Other Provisions:






	(a)	 	No Reliance, etc. Each party represents that (i) it is
entering into the Transaction evidenced hereby as principal (and not
as agent or in any other capacity); (ii) neither the other party nor
any of its agents is acting as a fiduciary for it; (iii) it is not
relying upon any representations except those expressly set forth in
the Agreement or this Confirmation; (iv) it has not relied on the
other party for any legal, regulatory, tax, business, investment,
financial, and accounting advice, and it has made its own
investment, hedging, and trading decisions based upon its own
judgment and not upon any view expressed by the other party or any
of its agents; and (v) it is entering into this Transaction with a
full understanding of the terms, conditions and risks thereof and it
is capable of and willing to assume those risks.
	 
	(b)	 	Share De-listing Event. If at any time during the period
from and including the Trade Date, to and including March 15, 2009,
the Shares cease to be listed or quoted on the Exchange for any
reason (other than a Merger Event as a result of which the shares of
common stock underlying the Options are listed or quoted on The New
York Stock Exchange, The American Stock Exchange or the NASDAQ
National Market System (or their respective successors) (the
“Successor Exchange”)) and are not immediately re-listed or quoted
as of the date of such de-listing on the Successor Exchange, then
Cancellation and Payment (as defined in Section 9.6 of the Equity
Definitions treating the “Announcement Date” as the date of first
public announcement that the Share De-Listing will occur and the
“Merger Date” as the date of the Share De-Listing) shall apply, and
the date of the de-listing shall be deemed the date of termination
for purposes of calculating any payment due from one party to the
other in connection with the cancellation of this Transaction. If
the Shares are immediately re-listed on a Successor Exchange upon
their de-listing from the Exchange, this Transaction shall continue
in full force and effect, provided that the Successor Exchange shall
be deemed to be the Exchange for all purposes hereunder. In
addition, the Calculation Agent shall make any adjustments it deems
necessary to the terms of the Transaction in accordance with
Calculation Agent Adjustment method as defined under Section 9.1(c)
of the Equity Definitions.
	 
	(c)	 	Repurchase Notices. Counterparty shall, on any day on which
Counterparty effects any repurchase of Shares, promptly give
JPMorgan a written notice of such repurchase (a “Repurchase Notice”)
on such day if following such repurchase, the Options Equity
Percentage as determined on such day is (i) equal to or greater than
8.0% and (ii) greater by 0.5% than the Options Equity Percentage
included in the immediately preceding Repurchase Notice (or, in the
case of the first such Repurchase Notice, greater than the Options
Equity Percentage as of the date hereof). The “Options Equity
Percentage” as of any day is the fraction (A) the numerator of which
is the product of the Number of Options and the Option Entitlement
and (B) the denominator of which is the number of Shares outstanding
on such day. Counterparty agrees to indemnify and hold harmless
JPMorgan and its affiliates and their respective officers, directors
and controlling persons (each, an “Indemnified Person”) from and
against any and all losses (including losses relating to JPMorgan’s
hedging activities as a consequence of becoming, or of the risk of
becoming, a Section 16 “insider”, including without limitation, any
forbearance from hedging activities or cessation of hedging
activities and any losses in connection




A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



8









 









	 	 	therewith with respect to this Transaction), claims, damages,
judgments, liabilities and expenses (including reasonable
attorney’s fees), joint or several, to which an Indemnified Person
may become subject, as a result of Counterparty’s failure to
provide JPMorgan with a Repurchase Notice on the day and in the
manner specified in this Section 9(c), and to reimburse, upon
written request, each of such Indemnified Persons for any
reasonable legal or other expenses incurred in connection with
investigating, preparing for, providing testimony or other
evidence in connection with or defending any of the foregoing. If
any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or
asserted against the Indemnified Person, such Indemnified Person
shall promptly notify the Counterparty in writing, and the
Counterparty, upon request of the Indemnified Person, shall retain
counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Counterparty
may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. Counterparty
shall be relieved from liability to the extent that the
Indemnified Person fails to promptly notify Counterparty of any
action commenced against it in respect of which indemnity may be
sought hereunder; provided, that failure to notify Counterparty
(i) shall not relieve Counterparty from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and
(ii) shall not, in any event, relieve Counterparty from any
liability which it may have otherwise than on account of this
indemnity agreement. Counterparty shall not be liable for any
settlement of any proceeding effected without its written consent,
but if settled with such consent or if there be a final judgment
for the plaintiff, Counterparty agrees to indemnify any
Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Counterparty shall not,
without the prior written consent of the Indemnified Person,
effect any settlement of any pending or threatened proceeding in
respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all
liability on claims that are the subject matter of such proceeding
on terms reasonably satisfactory to such Indemnified Person. If
the indemnification provided for in this paragraph (c) is
unavailable to an Indemnified Person or insufficient in respect of
any losses, claims, damages or liabilities referred to therein,
then Counterparty, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such
Indemnified Person as a result of such losses, claims, damages or
liabilities. The remedies provided for in this paragraph (c) are
not exclusive and shall not limit any rights or remedies that may
otherwise be available to any Indemnified Party at law or in
equity. The indemnity and contribution agreements contained in
this paragraph (c) shall remain operative and in full force and
effect regardless of the termination of this Transaction.
	 
	(d)	 	Regulation M. The Counterparty was not on the Trade Date and
is not on the date hereof engaged in a distribution, as such term is
used in Regulation M under the Securities Exchange Act of 1934, as
amended (“Exchange Act”), of any securities of Counterparty, other
than a distribution meeting the requirements of the exception set
forth in sections 101(b)(10) and 102(b)(7) of Regulation M. The
Counterparty shall not, until the fifth Exchange Business Day
immediately following the Trade Date, engage in any such
distribution.
	 
	(e)	 	No Manipulation. The Counterparty is not entering into this
Transaction for the purpose of (i) creating actual or apparent
trading activity in the Shares (or any security convertible into or
exchangeable for the Shares) or (ii) raising or depressing or
otherwise manipulating the price of the Shares (or any security
convertible into or exchangeable for the Shares), in either case in
violation of Section 9 of the Exchange Act.




A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



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	(f)	 	Board Authorization. Each of this Transaction and the
issuance of the Convertible Notes was approved by its board of
directors and publicly announced, solely for the purposes stated in
such board resolution and public disclosure and, prior to any
exercise of Options hereunder, Counterparty’s board of directors
will have duly authorized any repurchase of Shares pursuant to this
Transaction. Counterparty further represents that there is no
internal policy, whether written or oral, of Counterparty that would
prohibit Counterparty from entering into any aspect of this
Transaction, including, but not limited to, the purchases of Shares
to be made pursuant hereto.
	 
	(g)	 	Transfer or Assignment. Neither party may transfer any of
its rights or obligations under this Transaction without the prior
written consent of the non-transferring party; provided that if, as
determined at JPMorgan’s sole discretion, its “beneficial ownership”
(within the meaning of Section 16 of the Exchange Act and rules
promulgated thereunder) exceeds 8.0% of Counterparty’s outstanding
Shares, JPMorgan may transfer or assign a number of Options
sufficient to reduce such “beneficial ownership” to 8.0% to any
third party with a rating for its long term, unsecured and
unsubordinated indebtedness of A+ or better by Standard and Poor’s
Rating Group, Inc. or its successor (“S&P”), or A1 or better by
Moody’s Investor Service, Inc. (“Moody’s”) or, if either S&P or
Moody’s ceases to rate such debt, at least an equivalent rating or
better by a substitute agency rating mutually agreed by Counterparty
and JPMorgan. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing JPMorgan to
purchase, sell, receive or deliver any shares or other securities to
or from Counterparty, JPMorgan may designate any of its affiliates
to purchase, sell, receive or deliver such shares or other
securities and otherwise to perform JPMorgan’s obligations in
respect of this Transaction and any such designee may assume such
obligations. JPMorgan shall be discharged of its obligations to
Counterparty to the extent of any such performance.
	 
	(h)	 	Amendment. Paragraph (i) of Section 9.7(b) of the Equity
Definitions is hereby amended for purposes of this Transaction by
replacing “two-year” with “90 calendar day”.
	 
	(i)	 	Damages. Neither party shall be liable under Section 6.10 of
the Equity Definitions for special, indirect or consequential
damages, even if informed of the possibility thereof.
	 
	(j)	 	Early Unwind. In the event the sale of Convertible Notes is
not consummated with the initial purchasers for any reason (other
than as a result of a breach by the initial purchasers) by the close
of business in New York on March 19, 2004 (or such later date as
agreed upon by the parties) (March 19, 2004 or such later date as
agreed upon being the “Early Unwind Date”), this Transaction shall
automatically terminate (the “Early Unwind”), on the Early Unwind
Date and (i) the Transaction and all of the respective rights and
obligations of JPMorgan and Counterparty under the Transaction shall
be cancelled and terminated and (ii) each party shall be released
and discharged by the other party from and agrees not to make any
claim against the other party with respect to any obligations or
liabilities of the other party arising out of and to be performed in
connection with the Transaction either prior to or after the Early
Unwind Date; provided that Counterparty shall purchase from JPMorgan
on the Early Unwind Date all Shares purchased by JPMorgan or one or
more of its affiliates and assume, or reimburse the cost of,
derivatives entered into by JPMorgan or one or more of its
affiliates in connection with hedging this Transaction. The
purchase price paid by the Counterparty shall be JPMorgan’s actual
cost of such Shares and derivatives as JPMorgan informs Counterparty
and shall be paid in immediately available funds on the Early Unwind
Date. JPMorgan and Counterparty represent and acknowledge to the
other that, subject to the proviso included in the preceding
sentence, upon an Early Unwind, all obligations with respect to the
Transaction shall be deemed fully and finally discharged.




A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



10









 








	(k)	 	Role of Agent. Each party agrees and acknowledges that (i)
J.P. Morgan Securities Inc., an affiliate of JPMorgan (“JPMSI”), has
acted solely as agent and not as principal with respect to this
Transaction and (ii) JPMSI has no obligation or liability, by way of
guaranty, endorsement or otherwise, in any manner in respect of this
Transaction (including, if applicable, in respect of the settlement
thereof). Each party agrees it will look solely to the other party
(or any guarantor in respect thereof) for performance of such other
party’s obligations under this Transaction.
	 
	(l)	 	Additional Provisions.
	 
	 	 	(i) Section 9.6(a)(ii) of the Equity Definitions is hereby
amended by (1) deleting from the third line thereof the word “or”
after the word “official” and inserting a comma therefor, and (2)
deleting the period at the end of subsection (ii) thereof and
inserting the following words therefor “ or (C) at JPMorgan’s
option, the occurrence of any of the events specified in Section
5(a)(vii) (1) through (9) of the ISDA Master Agreement with
respect to that Issuer.”
	 
	 	 	(ii) Notwithstanding Section 9.7 of the Equity Definitions,
everything in the first paragraph of Section 9.7(b) of the Equity
Definitions after the words “Calculation Agent” in the third line
through the remainder of such Section 9.7 shall be deleted and
replaced with the following:
	 
	 	 	“and based on an amount representing the Calculation Agent’s
commercially reasonable, good faith determination of the fair
value to Buyer of an option with terms that would preserve for
Buyer the economic equivalent of any payment or delivery (assuming
satisfaction of each applicable condition precedent) by the
parties in respect of the relevant Transaction that would have
been required after that date but for the occurrence of the
Nationalization or De-Listing Event, as the case may be.”
	 
	(m)	 	No Collateral or Setoff. Notwithstanding any provision of
the Agreement or any other agreement between the parties to the
contrary, the obligations of Counterparty hereunder are not secured
by any collateral. Obligations under this Transaction shall not be
set off against any other obligations of the parties, whether
arising under the Agreement, this Confirmation, under any other
agreement between the parties hereto, by operation of law or
otherwise, and no other obligations of the parties shall be set off
against obligations under this Transaction, whether arising under
the Agreement, this Confirmation, under any other agreement between
the parties hereto, by operation of law or otherwise, and each party
hereby waives any such right of setoff. In calculating any amounts
under Section 6(e) of the Agreement, notwithstanding anything to the
contrary in the Agreement, (1) separate amounts shall be calculated
as set forth in such Section 6(e) with respect to (i) this
Transaction and (ii) all other Transactions, and (2) such separate
amounts shall be payable pursuant to Section 6(d)(ii) of the
Agreement.
	 
	(n)	 	Alternative Calculations and Payment on Early Termination and
on Certain Extraordinary Events. If in respect of this
Transaction, an amount is payable by JPMorgan to Counterparty (i)
pursuant to Section 9.7 of the Equity Definitions or (ii) pursuant
to Section 6(d)(ii) of the Agreement (a “Payment Obligation”),
JPMorgan may, in its sole discretion, satisfy any such Payment
Obligation by the Share Termination Alternative (as defined below)
by giving irrevocable telephonic notice to Counterparty, confirmed
in writing within one Currency Business Day, between the hours of
9:00 a.m. and 4:00 p.m. New York local time on the Merger Date or
Early Termination Date, as applicable (“Notice of Share
Termination”). Upon Notice of Share Termination no





A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



11









 









	 	 	later than 8:00 a.m. on the Exchange Business Day immediately
following the Merger Date or Early Termination Date, as
applicable, the following provisions shall apply:





	 	 	 	 	 
	

	 	Share Termination Alternative:
	 	Applicable and means
that JPMorgan shall deliver to Counterparty the Share
Termination Delivery Property on the date when the Payment
Obligation would otherwise be due pursuant to Section 9.7 of
the Equity Definitions or Section 6(d)(ii) of the Agreement,
as applicable (the “Share Termination Payment Date”), in
satisfaction of the Payment Obligation in the manner
reasonably requested by Counterparty free of payment.
	 
	 	 	 	 
	

	 	Share Termination Delivery Property:
	 	A number of
Share Termination Delivery Units, as calculated by the
Calculation Agent, equal to the Payment Obligation divided by
the Share Termination Unit Price. The Calculation Agent
shall adjust the Share Termination Delivery Property by
replacing any fractional portion of a security therein with
an amount of cash equal to the value of such fractional
security based on the values used to calculate the Share
Termination Unit Price.
	 
	 	 	 	 
	

	 	Share Termination Unit Price:
	 	The value to JPMorgan
of property contained in one Share Termination Delivery Unit
on the date such Share Termination Delivery Units are to be
delivered as Share Termination Delivery Property, as
determined by the Calculation Agent in its discretion by
commercially reasonable means and notified by the Calculation
Agent to JPMorgan at the time of notification of the Payment
Obligation.
	 
	 	 	 	 
	

	 	Share Termination Delivery Unit:
	 	One Share or, if a
Merger Event has occurred and a corresponding adjustment to
this Transaction has been made, a unit consisting of the
number or amount of each type of property received by a
holder of one Share (without consideration of any requirement
to pay cash or other consideration in lieu of fractional
amounts of any securities) in such Merger Event, as
determined by the Calculation Agent.
	 
	 	 	 	 
	

	 	Other applicable provisions:
	 	If this Transaction is
to be Share Termination Settled, the provisions of Sections
6.6, 6.7, 6.8, 6.9 and 6.10 (as modified above) of the Equity
Definitions





A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.




12









 









	 	 	 	 	 
	

	 	 	 	will be applicable, except that
all references in such provisions
to “Physically-Settled” shall be
read as references to “Share
Termination Settled” and all
references to “Shares” shall be
read as references to “Share
Termination Delivery Units”.
“Share Termination Settled” in
relation to this Transaction
means that Share Termination
Settlement is applicable to this
Transaction.








	(o)	 	Waiver of Jury Trial. Each party waives, to the fullest
extent permitted by applicable law, any right it may have to a trial
by jury in respect of any suit, action or proceeding relating to
this Transaction. Each party (i) certifies that no representative,
agent or attorney of the other party has represented, expressly or
otherwise, that such other party would not, in the event of such a
suit, action or proceeding, seek to enforce the foregoing waiver and
(ii) acknowledges that it and the other party have been induced to
enter into this Transaction, as applicable, by, among other things,
the mutual waivers and certifications provided herein.




A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.



13









 














     Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to EDG Confirmation
Group, J.P. Morgan Securities Inc., 277 Park Avenue, 11th Floor, New York, NY
10172-3401, or by fax on 212 622 8519.




Very truly yours,


	 	 	 	 	 
	 	J.P. Morgan Securities Inc., as

agent for JPMorgan Chase Bank

 	 
	 	By:  	/s/ STEPHEN L. ROTI
 	 
	 	Authorized Signatory 	 
	 	Name: Stephen L. Roti 	 
	 



	 	 	 	 	 	 	 	 	 
	 	 	Accepted and confirmed
	 	 	as of the Trade Date:
	

	 	 	 	 
	 	 	CapitalSource Inc.
	

	 	 	 	 
	

	 	By:
	 	/s/ THOMAS A. FINK
	

	 	 	 	
 
	

	 	Authorized Signatory
	

	 	Name: Thomas A. Fink







A subsidiary of J.P. Morgan Chase & Co.

Incorporated with Limited Liability as a New York State chartered commercial bank.

Registered in England branch number BR000746. Authorised by the FSA.

Registered branch address 125 London Wall, London, EC2Y 5AJ. Head office 270 Park Avenue, New York, USA.