Document:

exv10w72

 

Exhibit 10.72

Execution Copy

 

NOTE PURCHASE AGREEMENT

among

CAPITALSOURCE FUNDING VII TRUST,

as Issuer

CS FUNDING VII DEPOSITOR LLC,

as Depositor

CAPITALSOURCE FINANCE LLC,

as Loan Originator

and

CITIGROUP GLOBAL MARKETS REALTY CORP.,

as Purchaser

Dated as of April 19, 2007

COMMERCIAL LOAN BACKED NOTES

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	ARTICLE I
	 
	 	 	 	 
	DEFINITIONS
	 
	 	 	 	 
	SECTION 1.01 Certain Defined Terms
	 	 	4	 
	SECTION 1.02 Other Definitional Provisions.
	 	 	5	 
	 
	 	 	 	 
	ARTICLE II
	 
	 	 	 	 
	CLOSING AND PURCHASES OF ADDITIONAL NOTE PRINCIPAL BALANCES
	 
	 	 	 	 
	SECTION 2.01 Closing
	 	 	6	 
	SECTION 2.02 Requests for Purchases of Additional Note Principal Balances; Reductions in Note Principal Balance
	 	 	6	 
	 
	 	 	 	 
	ARTICLE III
	 
	 	 	 	 
	TRANSFER DATES
	 
	 	 	 	 
	SECTION 3.01 Transfer Dates
	 	 	7	 
	 
	 	 	 	 
	ARTICLE IV
	 
	 	 	 	 
	CONDITIONS PRECEDENT
	 
	 	 	 	 
	SECTION 4.01 Closing Subject to Conditions Precedent
	 	 	8	 
	 
	 	 	 	 
	ARTICLE V
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF THE ISSUER AND THE DEPOSITOR
	 
	 	 	 	 
	SECTION 5.01 Representations and Warranties
	 	 	10	 
	SECTION 5.02 Securities Act
	 	 	13	 
	SECTION 5.03 No Fee
	 	 	13	 
	SECTION 5.04 Information
	 	 	13	 
	SECTION 5.05 The Purchased Notes
	 	 	13	 
	SECTION 5.06 Use of Proceeds
	 	 	13	 
	SECTION 5.07 The Depositor
	 	 	13	 
	SECTION 5.08 Taxes, etc.
	 	 	13	 
	SECTION 5.09 Financial Condition
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VI
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE PURCHASER
	 
	 	 	 	 
	SECTION 6.01 Representations and Warranties 
	 	 	14	 

i

 

	 	 	 	 	 
	ARTICLE VII
	 
	 	 	 	 
	COVENANTS OF THE ISSUER AND THE DEPOSITOR
	 
	 	 	 	 
	SECTION 7.01 Information from the Issuer
	 	 	15	 
	SECTION 7.02 Access to Information
	 	 	16	 
	SECTION 7.03 Ownership and Security Interests; Further Assurances
	 	 	16	 
	SECTION 7.04 Covenants
	 	 	16	 
	SECTION 7.05 Amendments
	 	 	16	 
	SECTION 7.06 With Respect to the Exempt Status of the Purchased Notes.
	 	 	16	 
	 
	 	 	 	 
	ARTICLE VIII
	 
	 	 	 	 
	ADDITIONAL COVENANTS
	 
	 	 	 	 
	SECTION 8.01 Legal Conditions to Closing
	 	 	17	 
	SECTION 8.02 Mutual Obligations
	 	 	17	 
	SECTION 8.03 Restrictions on Transfer
	 	 	17	 
	 
	 	 	 	 
	ARTICLE IX
	 
	 	 	 	 
	INDEMNIFICATION
	 
	 	 	 	 
	SECTION 9.01 Indemnification of Purchaser
	 	 	17	 
	 
	 	 	 	 
	ARTICLE X
	 
	 	 	 	 
	Reserved
	 
	 	 	 	 
	ARTICLE XI
	 
	 	 	 	 
	MISCELLANEOUS
	 
	 	 	 	 
	SECTION 11.01 Amendments
	 	 	18	 
	SECTION 11.02 Notices
	 	 	18	 
	SECTION 11.03 No Waiver; Remedies
	 	 	18	 
	SECTION 11.04 Binding Effect; Assignability.
	 	 	18	 
	SECTION 11.05 Provision of Documents and Information
	 	 	19	 
	SECTION 11.06 GOVERNING LAW; JURISDICTION
	 	 	19	 
	SECTION 11.07 No Proceedings
	 	 	19	 
	SECTION 11.08 Execution in Counterparts
	 	 	19	 
	SECTION 11.09 No Recourse — Purchaser and Depositor
	 	 	20	 
	SECTION 11.10 Survival
	 	 	20	 
	SECTION 11.11 Tax Characterization
	 	 	20	 
	SECTION 11.12 Conflicts
	 	 	20	 
	SECTION 11.13 Limitation on Liability
	 	 	20	 

ScheduleI Information for Notices

Exhibit A  Form of Certificate from Closing Attorney

ii

 

NOTE PURCHASE AGREEMENT

          NOTE PURCHASE AGREEMENT dated as of April 19, 2007 (as amended, supplemented and otherwise
modified from time to time, the “Note Purchase Agreement”), among CapitalSource Funding VII Trust
(the “Issuer”), CS Funding VII Depositor LLC (the “Depositor”), CapitalSource Finance LLC
(“CapitalSource”) and Citigroup Global Markets Realty Corp. (“Citigroup,” and in its capacity as
Purchaser hereunder, the “Purchaser”).

          The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

          SECTION 1.01 Certain Defined Terms. Capitalized terms used herein without definition
shall have the meanings set forth in the Indenture and the Sale and Servicing Agreement (as defined
below). Additionally, the following terms shall have the following meanings:

          “Closing” shall have the meaning set forth in Section 2.01.

          “Closing Date” shall have the meaning set forth in Section 2.01.

          “Commitment Fee” shall have the meaning set forth in the Lender Fee Letter.

          “Confidential Information” means all marketing information, financial information,
terms sheets and other information concerning the transactions contemplated thereby, prepared by
the Purchaser and its Affiliates.

          “Eligible Loan” shall have the meaning set forth in the Sale and Servicing Agreement.

          “Depositor” means CS Funding VII Depositor LLC, a Delaware limited liability company,
in its capacity as depositor under the Sale and Servicing Agreement, or any successor in interest
thereto.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Governmental Actions” means any and all consents, approvals, permits, orders,
authorizations, waivers, exceptions, variances, exemptions or licenses of, or registrations,
declarations or filings with, any Governmental Authority required under any Governmental Rules.

          “Governmental Authority” means the United States of America, any state or other
political subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government and having jurisdiction over
the applicable Person.

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          “Governmental Rules” means any and all laws, statutes, codes, rules, regulations,
ordinances, orders, writs, decrees and injunctions, of any Governmental Authority and any and all
legally binding conditions, standards, prohibitions, requirements and judgments of any Governmental
Authority.

          “Indemnified Party” means the Purchaser and any of its officers, directors, employees,
agents, representatives, assignees and Affiliates and any Person who controls the Purchaser or its
Affiliates within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act.

          “Indenture” means the Indenture dated as of April 19, 2007 among the Issuer as Issuer
and Wells Fargo Bank, National Association as Indenture Trustee as the same may be amended and
supplemented from time to time.

          “Investment Company Act” shall have the meaning provided in Section 5.01(i).

          “Lien” means, with respect to any asset, (a) any mortgage, lien, pledge, charge,
security interest, hypothecation, option or encumbrance of any kind in respect of such asset or (b)
the interest of a vendor or lessor under any conditional sale agreement, financing lease or other
title retention agreement relating to such asset.

          “Loan Originator” means CapitalSource, as originator of the Loans.

          “Maximum Note Principal Balance” means an amount equal to One Billion Two Hundred
Fifty Million Dollars ($1,250,000,000), (provided that from and after the first Business Day
following the Purchaser’s receipt prior to 2:00 p.m. New York City time of a written notice from
the Issuer requesting an increase of the Maximum Note Principal Balance to One Billion Five Hundred
Million Dollars ($1,500,000,000), the Maximum Note Principal Balance shall be increased to One
Billion Five Hundred Million Dollars ($1,500,000,000).

          “Note” means the promissory note in an aggregate principal amount of up to One Billion
Five Hundred Million Dollars ($1,500,000,000), executed by the Issuer in favor of the Purchaser.

          “Purchaser” means the Purchaser and its successors and assigns.

          “Purchased Notes” means the CapitalSource Funding VII Trust Commercial Loan Backed
Notes issued by the Issuer pursuant to the Indenture.

          “Sale and Servicing Agreement” means the Sale and Servicing Agreement dated as of
April 19, 2007, among the Issuer, the Depositor, the Loan Originator, the Servicer and Wells Fargo
Bank, National Association as Indenture Trustee, Collateral Custodian and Backup Servicer, as the
same may be amended, modified or supplemented from time to time.

          “Servicer” means CapitalSource Finance LLC or its permitted successors and assigns.

          SECTION 1.02 Other Definitional Provisions.

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          (a) All terms defined in this Note Purchase Agreement shall have the defined meanings when
used in any certificate or other document made or delivered pursuant hereto unless otherwise
defined therein.

          (b) As used herein and in any certificate or other document made or delivered pursuant hereto
or thereto, accounting terms not defined in Section 1.01, and accounting terms partially defined in
Section 1.01 to the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the definitions of accounting terms
herein are inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained herein shall control.

          (c) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this
Note Purchase Agreement shall refer to this Note Purchase Agreement as a whole and not to any
particular provision of this Note Purchase Agreement; and Section, subsection, Schedule and Exhibit
references contained in this Note Purchase Agreement are references to Sections, subsections, and
Exhibits in or to this Note Purchase Agreement unless otherwise specified.

ARTICLE II

CLOSING AND PURCHASES OF

ADDITIONAL NOTE PRINCIPAL BALANCES

          SECTION 2.01 Closing. The closing (the “Closing”) of the execution of the
Basic Documents shall take place at 10:00 a.m. at the offices of Thacher Proffitt & Wood LLP, Two
World Financial Center, New York, New York 10281 on April 19, 2007, or if the conditions to closing
set forth in Section 4.01 of this Note Purchase Agreement shall not have been satisfied or waived
by such date, as soon as practicable after such conditions shall have been satisfied or waived, or
at such other time, date and place as the parties shall agree upon (the date of the Closing being
referred to herein as the “Closing Date”). On the Closing Date the Purchaser shall have
received the Commitment Fee in immediately available funds, in accordance with the Purchaser’s
wiring instructions.

          SECTION 2.02 Requests for Purchases of Additional Note Principal Balances; Reductions in
Note Principal Balance. (a) At any time during the Revolving Period no later than 12:00 p.m.
New York time at least one (1) Business Day prior to a proposed Transfer Date, to the extent that
the aggregate outstanding Note Principal Balance of the Purchased Notes (after giving effect to the
proposed purchase) is less than the Maximum Note Principal Balance, and subject to the terms and
conditions hereof and in accordance with the other Basic Documents, the Issuer may request that the
Purchaser purchase Additional Note Principal Balances (each such request, a “Notice of Additional
Note Principal Balance”) in the form attached as Exhibit A to the Sale and Servicing Agreement. In
addition, in connection with such Notice of Additional Note Principal Balance the Issuer shall
deliver or cause the delivery of (i) a Borrowing Base Certificate in the form attached as Exhibit F
to the Sale and Servicing Agreement, and a Loan Schedule, (ii) a copy of the S&SA Assignment
executed by the Depositor and the Issuer with respect to the Eligible Loans proposed as Collateral
for such Additional Note Principal Balance, (iii) a copy of the LPA Assignment executed by the Loan

6

 

Originator and the Depositor and (iv) such additional information as may be reasonably
requested by the Purchaser.

          (a) In addition, the Issuer shall or shall cause the Servicer to deliver to the Collateral
Custodian (i) no later than 12:00 p.m. New York time on the Business Day prior to the Transfer
Date, by facsimile transmission or in an electronic format mutually agreed upon by the Servicer and
the Collateral Custodian, a copy of the duly executed original Underlying Notes of the Eligible
Loans and the related Assignments of Mortgage (if any) and, if any Loans are closed in escrow, a
certificate (in the form of Exhibit A) from the closing attorneys of such Eligible Loans certifying
the possession of the Required Loan Documents; provided, however, notwithstanding the foregoing,
the Required Loan Documents (including any UCCs included in the Required Loan Documents) shall be
in the possession of the Collateral Custodian within two (2) Business Days of any related Transfer
Date as to such Loans.

          On the identified Transfer Date, the Purchaser may (in the exercise of its sole and absolute
discretion) purchase the Additional Note Principal Balances requested in the Notice of Additional
Note Principal Balance, subject to the terms and conditions and in reliance upon the covenants,
representations and warranties set forth herein and in the other Basic Documents.

ARTICLE III

TRANSFER DATES

          SECTION 3.01 Transfer Dates.

          (a) Subject to the conditions and terms set forth herein and in Section 2.06 of the Sale and
Servicing Agreement with respect to each Transfer Date, the Purchaser’s purchase of Additional Note
Principal Balances shall be subject to the satisfaction, as of the applicable Transfer Date, of
each of the following additional conditions:

          (i) With respect to the initial Transfer Date only, the Purchaser shall have received
the Commitment Fee;

          (ii) Each document required to be provided pursuant to Section 2.02 hereof shall have
been provided to the Purchaser;

          (iii) Each condition set forth in Section 2.06 of the Sale and Servicing Agreement
shall have been satisfied;

          (iv) Each of the representations and warranties of the Issuer, the Servicer, the Loan
Originator and the Depositor made in the Basic Documents shall be true and correct as of
such date (except to the extent they expressly relate to an earlier or later time);

          (v) The Issuer, the Servicer, the Loan Originator and the Depositor shall be in
compliance with all of their respective covenants contained in the Basic Documents and the
Purchased Notes, including, without limitation, the financial covenants contained in Section
7.01 of the Sale and Servicing Agreement;

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          (vi) No Event of Default or Default shall have occurred and be continuing;

          (vii) With respect to each Transfer Date other than the initial Transfer Date, the
Purchaser shall have received evidence reasonably satisfactory to it of the completion of
all recordings, registrations, and filings as may be necessary or, in the reasonable opinion
of the Purchaser, desirable to perfect or evidence the assignments required to be effected
on such Transfer Date in accordance with the Sale and Servicing Agreement including, without
limitation, the assignment of the Loans and the proceeds thereof required to be assigned
pursuant to the related LPA Assignment, S&SA Assignment and the Indenture; and

          (viii) With respect to each Transfer Date following the ninetieth (90th) day
of the Closing Date, the Commitment Fee shall have been paid in full.

          (b) The Purchaser shall determine in its reasonable discretion whether each of the above
conditions have been met and its determination shall be binding on the parties hereto.

          (c) The price paid by the Purchaser on each Transfer Date for the Additional Note Principal
Balance purchased on such Transfer Date shall be equal to the amount of such Additional Note
Principal Balance, and shall be remitted not later than 5:00 p.m. New York City time on the
Transfer Date by wire transfer of immediately available funds to or at the direction of the Loan
Originator on behalf of the Issuer.

          (d) The Purchaser shall record on the schedule attached to the Purchased Notes, the date and
amount of any Additional Note Principal Balance purchased by it; provided, that failure to
make such recordation on such schedule or any error in such schedule shall not adversely affect the
Purchaser’s rights with respect to its Note Principal Balance and its right to receive interest
payments in respect of the Note Principal Balance actually held. Absent manifest error, the Note
Principal Balance of the Purchased Notes as set forth in the Purchaser’s records shall be binding
upon the parties hereto, notwithstanding any notation or record made or kept by any other party
hereto.

ARTICLE IV

CONDITIONS PRECEDENT

          SECTION 4.01 Closing Subject to Conditions Precedent. The Closing of the Basic
Documents is subject to the satisfaction at the time of the Closing of the following conditions
(any or all of which may be waived by the Purchaser in its sole discretion):

          (a) Payment of Commitment Fee. The Purchaser shall have received the full amount of
the Commitment Fee, in immediately available funds, in accordance with the Purchaser’s wiring
instructions.

          (b) Performance by the Issuer, the Depositor, the Servicer and the Loan Originator.
All the terms, covenants, agreements and conditions of the Basic Documents to be complied with and
performed by the Issuer, the Depositor, the Servicer and the Loan Originator

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on or before the Closing Date shall have been complied with and performed in all material
respects.

          (c) Representations and Warranties. Each of the representations and warranties of the
Issuer, the Depositor, the Servicer and the Loan Originator made in the Basic Documents shall be
true and correct in all material respects as of the Closing Date (except to the extent they
expressly relate to an earlier or later time).

          (d) Officer’s Certificate. The Purchaser shall have received in form and substance
reasonably satisfactory to the Purchaser an Officer’s Certificate from the Loan Originator, the
Depositor and the Servicer and a certificate of an Authorized Officer of the Issuer, dated the
Closing Date, certifying to the satisfaction of the conditions set forth in the preceding
paragraphs (b) and (c).

          (e) Opinions of Counsel to the Issuer, the Loan Originator, the Servicer and the
Depositor. Counsel to the Issuer, the Loan Originator, the Servicer and the Depositor shall
have delivered to the Purchaser opinions, dated as of the Closing Date and reasonably satisfactory
in form and substance to the Purchaser and its counsel. In addition to the foregoing, the Loan
Originator shall have caused its counsel to deliver to the Purchaser an opinion to the effect that
the Issuer will not be treated as an association (or publicly traded partnership) taxable as a
corporation or as a taxable mortgage pool, for federal income tax purposes.

          (f) Opinions of Counsel to the Indenture Trustee. Counsel to the Indenture Trustee
shall have delivered to the Purchaser a favorable opinion, dated as of the Closing Date and
reasonably satisfactory in form and substance to the Purchaser and its counsel.

          (g) Opinions of Counsel to the Owner Trustee. Delaware counsel to the Owner Trustee
of the Issuer shall have delivered to the Purchaser favorable opinions regarding the formation,
existence and standing of the Issuer and of the Issuer’s execution, authorization and delivery of
each of the Basic Documents to which it is a party and such other matters as the Purchaser may
reasonably request, dated as of the Closing Date and reasonably satisfactory in form and substance
to the Purchaser and its counsel.

          (h) Filings and Recordations. Within ten (10) days of the Closing Date and on or
prior to each Transfer Date, the Purchaser shall have received evidence reasonably satisfactory to
it of (i) the completion of all recordings, registrations, and filings as may be necessary or, in
the reasonable opinion of the Purchaser, desirable to perfect or evidence the assignment by the
Loan Originator to the Depositor of the Loan Originator’s ownership interest in the Trust Estate
including, without limitation, the Eligible Loans conveyed pursuant to the Loan Sale Agreement and
the proceeds thereof, (ii) the completion of all recordings, registrations and filings as may be
necessary or, in the reasonable opinion of the Purchaser, desirable to perfect or evidence the
assignment by the Depositor to the Issuer of the Depositor’s ownership interest in the Collateral
including, without limitation, the Loans, the Loan Collateral and the proceeds thereof, (iii) the
completion of all recordings, registrations, and filings as may be necessary or, in the reasonable
opinion of the Purchaser, desirable to perfect or evidence the grant of a first priority perfected
security interest in the Issuer’s ownership interest in the Collateral including, without
limitation, the Loans, in favor of the Indenture Trustee, subject to no Liens prior to the Lien of
the

9

 

Indenture, and (iv) evidence satisfactory to the Purchaser of the transfer of the Required
Equity Contribution by the Depositor to the Issuer.

          (i) Documents. The Purchaser shall have received a duly executed counterpart of each
of the Basic Documents, in form acceptable to the Purchaser, the Purchased Notes and each and every
document or certification delivered by any party in connection with any of the Basic Documents or
the Purchased Notes, and each such document shall be in full force and effect.

          (j) Actions or Proceedings. No action, suit, proceeding or investigation by or before
any Governmental Authority shall have been instituted to restrain or prohibit the consummation of,
or to invalidate, any of the transactions contemplated by the Basic Documents, the Purchased Notes
and the documents related thereto in any material respect.

          (k) Approvals and Consents. All Governmental Actions of all Governmental Authorities
required with respect to the transactions contemplated by the Basic Documents, the Purchased Notes
and the documents related thereto shall have been obtained or made.

          (l) Accounts. The Purchaser shall have received evidence reasonably satisfactory to
it that each Trust Account has each been established in accordance with the terms of the Sale and
Servicing Agreement.

          (m) Reserved.

          (n) Other Documents. The Issuer, the Loan Originator, the Depositor and the Servicer
shall have furnished to the Purchaser such other opinions, information, certificates and documents
as the Purchaser may reasonably request.

          (o) Proceedings in Contemplation of Sale of Purchased Notes. All actions and
proceedings undertaken by the Issuer, the Loan Originator, the Depositor and the Servicer in
connection with the issuance and sale of the Purchased Notes as herein contemplated shall be
satisfactory in all respects to the Purchaser and its counsel.

          (p) Financial Covenants. The Loan Originator shall be in compliance with the financial
covenants set forth in Section 7.01 of the Sale and Servicing Agreement.

          If any condition specified in this Section 4.01 shall not have been fulfilled when and as
required to be fulfilled, this Agreement may be terminated by the Purchaser by notice to the Loan
Originator at any time at or prior to the Closing Date, and the Purchaser shall incur no liability
as a result of such termination.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF

THE ISSUER AND THE DEPOSITOR

          SECTION 5.01 Representations and Warranties. The Issuer and the Depositor hereby
jointly and severally make the following representations and warranties to the Purchaser, as of the
Closing Date, and as of each Transfer Date, and the Purchaser shall be

10

 

deemed to have relied on such representations and warranties in making purchases of Additional
Note Principal Balances on each Transfer Date:

          (a) The Issuer has been duly organized and is validly existing and in good standing as a
statutory trust under the laws of the State of Delaware, with requisite trust power and authority
to own its properties and to transact the business in which it is now engaged, and is duly
qualified to do business and is in good standing (or is exempt from such requirements) in each
State of the United States where the nature of its business requires it to be so qualified and the
failure to be so qualified and in good standing would reasonably be expected to have a material
adverse effect on the Issuer or any adverse effect on the interests of the Purchaser.

          (b) The issuance, sale, assignment and conveyance of the Purchased Notes and the Additional
Note Principal Balances, the performance of the Issuer’s obligations under each Basic Document to
which it is a party and the consummation of the transactions therein contemplated will not conflict
with or result in a breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any Lien (other than any Lien created by the Basic
Documents), charge or encumbrance upon any of the property or assets of the Issuer or any of its
Affiliates pursuant to the terms of, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it or any of its Affiliates is bound or to which any of its
property or assets is subject, nor will such action result in any violation of the provisions of
its organizational documents or any Governmental Rule applicable to the Issuer, in each case which
could reasonably be expected to have a material adverse effect on the transactions contemplated
therein.

          (c) No Governmental Action which has not been obtained is required by or with respect to the
Issuer in connection with the execution and delivery to the Purchaser of the Purchased Notes. No
Governmental Action which has not been obtained is required by or with respect to the Issuer in
connection with the execution and delivery of any of the Basic Documents to which the Issuer is a
party or the consummation by the Issuer of the transactions contemplated thereby except for any
requirements under state securities or “blue sky” laws in connection with any transfer of the
Purchased Notes.

          (d) The Issuer possesses all material licenses, certificates, authorities or permits issued by
the appropriate state, federal or foreign regulatory agencies or bodies necessary to conduct the
business now operated by it, and has not received any notice of proceedings relating to the
revocation or modification of any such license, certificate, authority or permit which, singly or
in the aggregate, would reasonably be expected to materially and adversely affect its condition,
financial or otherwise, or its earnings, business affairs or business prospects.

          (e) Each of the Basic Documents to which the Issuer is a party has been duly authorized,
executed and delivered by the Issuer and is a valid and legally binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms, subject to enforcement of bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general applicability relating to
or affecting creditors’ rights and to general principles of equity.

          (f) The execution, delivery and performance by the Issuer of each of its obligations under
each of the Basic Documents to which it is a party will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any agreement or

11

 

instrument to which the Issuer is a party or by which the Issuer is bound or to which any of
its properties are subject or of any statute, order or regulation applicable to the Issuer of any
court, regulatory body, administrative agency or governmental body having jurisdiction over the
Issuer or any of its properties, in each case which could reasonably be expected to have a material
adverse effect on any of the transactions contemplated therein.

          (g) The Issuer is not in violation of its organizational documents or in default under any
agreement, indenture or instrument the effect of which violation or default would be material to
the Issuer or the transactions contemplated by the Basic Documents. The Issuer is not a party to,
bound by or in breach or violation of any indenture or other agreement or instrument, or subject to
or in violation of any statute, order or regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over the Issuer that would reasonably be expected
to materially and adversely affect (i) the ability of the Issuer to perform its obligations under
any of the Basic Documents to which it is a party or (ii) the business, operations, financial
condition, properties, assets or prospects of the Issuer.

          (h) There are no actions or proceedings against, or investigations of, the Issuer pending, or,
to the knowledge of the Issuer threatened, before any Governmental Authority, court, arbitrator,
administrative agency or other tribunal (i) asserting the invalidity of any of the Basic Documents,
or (ii) seeking to prevent the issuance of the Purchased Notes or the consummation of any of the
transactions contemplated by the Basic Documents or the Purchased Notes, or (iii) that could
reasonably be expected to materially and adversely affect the business, operations, financial
condition, properties, assets or prospects of the Issuer or the validity or enforceability of, or
the performance by the Issuer of its respective obligations under, any of the Basic Documents to
which it is a party or (iv) seeking to affect adversely the income tax attributes of the Purchased
Notes.

          (i) The Issuer is not, and neither the issuance and sale of the Purchased Notes to the
Purchaser nor the activities of the Issuer pursuant to the Basic Documents, shall render the Issuer
an “investment company” or under the “control” of an “investment company” as such terms are defined
in the Investment Company Act of 1940, as amended (the “Investment Company Act”).

          (j) It is not necessary to qualify the Indenture under the Trust Indenture Act of 1939, as
amended.

          (k) The Issuer is solvent and has adequate capital for its business and undertakings.

          (l) The chief executive offices of the Issuer are located at c/o Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890, or, with the consent of
the Purchaser, such other address as shall be designated by the Issuer in a written notice to the
other parties hereto.

          (m) There are no contracts, agreements or understandings between the Issuer and any Person
granting such Person the right to require the filing at any time of a registration statement under
the Act with respect to the Purchased Notes.

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          SECTION 5.02 Securities Act. Assuming the accuracy of the representations and
warranties of and compliance with the covenants of the Purchaser, contained herein, the sale of the
Purchased Notes and the sale of Additional Note Principal Balances pursuant to this Agreement are
each exempt from the registration and prospectus delivery requirements of the Act. In the case of
the offer or sale of the Purchased Notes, no form of general solicitation or general advertising
was used by the Issuer, any Affiliates of the Issuer or any person acting on its or their behalf,
including, but not limited to, advertisements, articles, notices or other communications published
in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general solicitation or general advertising.
Neither the Issuer, any Affiliates of the Issuer nor any Person acting on its or their behalf has
offered or sold, nor will the Issuer or any Person acting on its behalf offer or sell directly or
indirectly, the Purchased Notes or any other security in any manner that, assuming the accuracy of
the representations and warranties and the performance of the covenants given by the Purchaser and
compliance with the applicable provisions of the Indenture with respect to each transfer of the
Purchased Notes, would render the issuance and sale of the Purchased Notes as contemplated hereby a
violation of Section 5 of the Securities Act or the registration or qualification requirements of
any state securities laws, nor has any such Person authorized, nor will it authorize, any Person to
act in such manner.

          SECTION 5.03 No Fee. Neither the Issuer, nor the Depositor, nor any of their
Affiliates has paid or agreed to pay to any Person any compensation for soliciting another to
purchase the Purchased Notes.

          SECTION 5.04 Information. The information provided pursuant to Section 7.01(a) hereof
will, at the date thereof, be true and correct in all material respects.

          SECTION 5.05 The Purchased Notes. The Purchased Notes have been duly and validly
authorized, and, when executed and authenticated in accordance with the terms of the Indenture, and
delivered to and paid for in accordance with this Note Purchase Agreement, will be duly and validly
issued and outstanding and will be entitled to the benefits of the Indenture.

          SECTION 5.06 Use of Proceeds. No proceeds of a purchase hereunder will be used (i)
for a purpose that violates or would be inconsistent with Regulations T, U or X promulgated by the
Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security
in any transaction in violation of Section 13 or 14 of the Exchange Act.

          SECTION 5.07 The Depositor. The Depositor hereby makes to the Purchaser each of the
representations, warranties and covenants set forth in Section 3.01 of the Sale and Servicing
Agreement as of the Closing Date and as of each Transfer Date (except to the extent that any such
representation, warranty or covenant is expressly made as of another date).

          SECTION 5.08 Taxes, etc. Any taxes, fees and other charges of Governmental
Authorities applicable to the Issuer and the Depositor, except for franchise or income taxes, in
connection with the execution, delivery and performance by the Issuer and the Depositor of each
Basic Document to which they are parties, the issuance of the Purchased Notes or otherwise
applicable to the Issuer or the Depositor in connection with the Trust Estate have been paid or
will be paid by the Issuer or the Depositor, as applicable, at or prior to the Closing Date or
Transfer Date, to the extent then due.

13

 

          SECTION 5.09 Financial Condition. On the date hereof and on each Transfer Date,
neither the Issuer nor the Depositor is subject to a Bankruptcy Event or has reason to believe that
its insolvency is imminent.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

WITH RESPECT TO THE PURCHASER

          SECTION 6.01 Representations and Warranties. The Purchaser hereby makes the following
representations and warranties, as to itself, to the Issuer and the Depositor on which the same are
relying in entering into this Note Purchase Agreement.

          (a) Organization. The Purchaser has been duly organized and is validly existing and
in good standing under the laws of the jurisdiction of its organization with power and authority to
own its properties and to transact the business in which it is now engaged.

          (b) Authority, etc. The Purchaser has all requisite power and authority to enter into
and perform its obligations under this Note Purchase Agreement and to consummate the transactions
herein contemplated. The execution and delivery by the Purchaser of this Note Purchase Agreement
and the consummation by the Purchaser of the transactions contemplated hereby have been duly and
validly authorized by all necessary organizational action on the part of the Purchaser. This Note
Purchase Agreement has been duly and validly executed and delivered by the Purchaser and
constitutes a legal, valid and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject as to enforcement to bankruptcy, reorganization,
insolvency, moratorium and other similar laws of general applicability relating to or affecting
creditors’ rights and to general principles of equity. Neither the execution and delivery by the
Purchaser of this Note Purchase Agreement nor the consummation by the Purchaser of any of the
transactions contemplated hereby, nor the fulfillment by the Purchaser of the terms hereof, will
conflict with, or violate, result in a breach of or constitute a default under any term or
provision of the Purchaser’s organizational documents or any Governmental Rule applicable to the
Purchaser.

          (c) Institutional Accredited Investor. The Purchaser is an institutional “accredited
investor” within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the 1933 Act
(an “Institutional Accredited Investor”) that is acquiring the Purchased Notes for its own account
or for one or more accounts (each of which is an Institutional Accredited Investor) as to each of
which it exercises sole investment discretion.

          (d) ERISA. The Purchaser either (i) is not, and is not acquiring the Purchased Notes
on behalf of or with the assets of, an employee benefit plan or other retirement plan or
arrangement subject to Title I of ERISA or Section 4975 of the Code, or (b) is, or is acquiring the
Purchased Notes on behalf of or with the assets of, an employee benefit plan or other retirement
plan or arrangement subject to Title I of ERISA of Section 4975 of the Code and the conditions for
exemptive relief under at least one of the following prohibited transaction class exemptions have
been satisfied: Prohibited Transaction Class Exemption (“PTCE”) 96-23 (relating to transactions
effected by an “in-house asset manager”), PTCE 95-60 (relating to transactions involving insurance
company general accounts), PTCE 91-38 (relating to transactions involving

14

 

bank collective investment funds), PTCE 90-1 (relating to transactions involving insurance
company pooled separate accounts), and PTCE 84-14 (relating to transactions effected by a
“qualified professional asset manager”).

          (e) Securities Act. The Purchaser will acquire the Purchased Notes pursuant to this
Note Purchase Agreement without a view to any public distribution thereof, and will not offer to
sell or otherwise dispose of the Purchased Notes (or any interest therein) in violation of any of
the registration requirements of the Act or any applicable state or other securities laws, or by
means of any form of general solicitation or general advertising (within the meaning of Regulation
D under the Securities Act) and will comply with the requirements of the Indenture. The Purchaser
acknowledges that it has no right to require the Issuer or any other Person to register the
Purchased Notes under the Securities Act or any other securities law.

          (f) Conflicts With Law. The execution, delivery and performance by the Purchaser of
its obligations under this Note Purchase Agreement will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under, any agreement or instrument to which
the Purchaser is a party or by which the Purchaser is bound or of any statute, order or regulation
applicable to the Purchaser of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Purchaser, in each case which could be expected to have a
material adverse effect on the transactions contemplated therein.

          (g) Conflicts With Agreements, etc. The Purchaser is not in violation of its
organizational documents or in default under any agreement, indenture or instrument the effect of
which violation or default would be materially adverse to the Purchaser in the performance of its
obligations or duties under any of the Basic Documents to which it is a party. The Purchaser is
not a party to, bound by or in breach or violation of any indenture or other agreement or
instrument, or subject to or in violation of any statute, order or regulation of any court,
regulatory body, administrative agency or governmental body having jurisdiction over the Purchaser
that materially and adversely affects, or which could be expected in the future to materially and
adversely affect the ability of the Purchaser to perform its obligations under this Note Purchase
Agreement.

ARTICLE VII

COVENANTS OF THE ISSUER AND

THE DEPOSITOR

          SECTION 7.01 Information from the Issuer. So long as the Purchased Notes remain
outstanding, the Issuer and the Depositor shall each furnish to the Purchaser:

          (a) such information (including financial information), documents, records or reports with
respect to the Collateral, including, without limitation, the Loans and the Loan Collateral, the
Issuer, the Loan Originator, the Servicer or the Depositor as the Purchaser may from time to time
reasonably request;

          (b) as soon as possible and in any event within five (5) Business Days after the occurrence
thereof, notice of each Event of Default under the Sale and Servicing Agreement or the Indenture,
and each Default; and

15

 

          (c) promptly and in any event within 30 days after the occurrence thereof, written notice of a
change in address of the chief executive office or place of organization of the Issuer, the Loan
Originator or the Depositor.

          SECTION 7.02 Access to Information. So long as the Purchased Notes remain
outstanding, each of the Issuer and the Depositor shall, on reasonable request from time to time
during regular business hours, permit the Purchaser, or their agents or representatives to:

          (a) examine all books, records and documents (including computer tapes and disks) in the
possession or under the control of the Issuer or the Depositor relating to the Eligible Loans or
the Basic Documents as may be requested, and

          (b) visit the offices and property of the Issuer and the Depositor for the purpose of
examining such materials described in clause (a) above.

          SECTION 7.03 Ownership and Security Interests; Further Assurances. The Depositor will
take all action reasonably necessary to maintain the Issuer’s ownership interest in the Loans and
the other items sold pursuant to Article II of the Sale and Servicing Agreement. The Issuer and
the Depositor will take all action necessary to maintain the Indenture Trustee’s security interest
in the Eligible Loans and the other items pledged to the Indenture Trustee pursuant to the
Indenture.

          The Issuer and the Depositor agree to take any and all acts and to execute any and all further
instruments reasonably necessary or requested by the Purchaser to more fully effect the purposes of
this Note Purchase Agreement.

          SECTION 7.04 Covenants. The Issuer and the Depositor shall each duly observe and
perform each of their respective covenants set forth in each of the Basic Documents to which they
are parties.

          SECTION 7.05 Amendments. Neither the Issuer nor the Depositor shall make, or permit
any Person to make, any amendment, modification or change to, or provide any waiver under any Basic
Document to which the Issuer or the Depositor, as applicable, is a party without the prior written
consent of the Purchaser.

          SECTION 7.06 With Respect to the Exempt Status of the Purchased Notes.

          (a) Neither the Issuer nor the Depositor, nor any of their respective Affiliates, nor any
Person acting on their behalf will, directly or indirectly, make offers or sales of any security,
or solicit offers to buy any security, under circumstances that would require the registration of
the Purchased Notes under the Securities Act.

          (b) Neither the Issuer nor the Depositor, nor any of their Affiliates, nor any Person acting
on their behalf will engage in any form of general solicitation or general advertising (within the
meaning of Regulation D promulgated under the Securities Act) in connection with any offer or sale
of the Purchased Notes.

16

 

ARTICLE VIII

ADDITIONAL COVENANTS

          SECTION 8.01 Legal Conditions to Closing. The parties hereto will take all reasonable
action necessary to obtain (and will cooperate with one another in obtaining) any consent,
authorization, permit, license, franchise, order or approval of, or any exemption by, any
Governmental Authority or any other Person, required to be obtained or made by it in connection
with any of the transactions contemplated by this Note Purchase Agreement.

          SECTION 8.02 Mutual Obligations. On and after the Closing, each party hereto will do,
execute and perform all such other acts, deeds and documents as the other party may from time to
time reasonably require in order to carry out the intent of this Note Purchase Agreement.

          SECTION 8.03 Restrictions on Transfer. The Purchaser agrees that it will comply with
the restrictions on transfer of the Purchased Notes set forth in the Indenture and resell the
Purchased Notes only in compliance with such restrictions.

ARTICLE IX

INDEMNIFICATION

          SECTION 9.01 Indemnification of Purchaser. Each of the Issuer and the Depositor
hereby agree to, jointly and severally, indemnify and hold harmless each Indemnified Party against
any and all losses, claims, damages, liabilities, expenses or judgments (including accounting fees
and reasonable legal fees and other expenses incurred in connection with this Note Purchase
Agreement or any other Basic Document and any action, suit or proceeding or any claim asserted)
(collectively, “Losses”), as incurred (payable promptly upon written request), for or on
account of or arising from or in connection with any information prepared by and furnished or to be
furnished by any of the Issuer, the Loan Originator or the Depositor pursuant to or in connection
with the transactions contemplated hereby including, without limitation, such written information
as may have been and may be furnished in connection with any due diligence investigation with
respect to the business, operations, financial condition of the Issuer, the Loan Originator, the
Depositor or with respect to the Eligible Loans, to the extent such information contains any untrue
statement of material fact or omits to state a material fact necessary to make the statements
contained therein in light of the circumstances under which such statements were made not
misleading, except with respect to any such information used by such Indemnified Party in violation
of the Basic Documents which results in such Losses; provided, however, that neither the Issuer nor
the Depositor will be liable for any portion of any such amount resulting from the gross negligence
or willful misconduct of any Indemnified Party. The indemnities contained in this Section 9.01
will be in addition to any liability which the Issuer or the Depositor may otherwise have pursuant
to this Note Purchase Agreement and any other Basic Document.

17

 

ARTICLE X

RESERVED

ARTICLE XI

MISCELLANEOUS

          SECTION 11.01 Amendments. No amendment or waiver of any provision of this Note
Purchase Agreement shall in any event be effective unless the same shall be in writing and signed
by all of the parties hereto, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

          SECTION 11.02 Notices. All notices and other communications provided for hereunder
shall, unless otherwise stated herein, be in writing (including telecopies) and mailed, telecopied
(with a copy delivered by overnight courier) or delivered, as to each party hereto, at its address
as set forth in Schedule I hereto or at such other address as shall be designated by such party in
a written notice to the other parties hereto. All such notices and communications shall be deemed
effective upon receipt thereof, and in the case of telecopies, when receipt is confirmed by
telephone.

          SECTION 11.03 No Waiver; Remedies. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

          SECTION 11.04 Binding Effect; Assignability.

          (a) This Note Purchase Agreement shall be binding upon and inure to the benefit of the Issuer,
the Depositor and the Purchaser and their respective permitted successors and assigns (including
any subsequent holders of the Purchased Notes); provided, however, except as
provided in clause (d) below, neither the Issuer nor the Depositor shall have any right to assign
their respective rights hereunder or interest herein (by operation of law or otherwise) without the
prior written consent of the Purchaser.

          (b) The Purchaser may, in the ordinary course of its business and in accordance with the Basic
Documents and applicable law, including applicable securities laws, at any time sell to one or more
Persons (each, a “Participant”), participating interests in all or a portion of its rights
and obligations under this Note Purchase Agreement. Notwithstanding any such sale by the Purchaser
of participating interests to a Participant, the Purchaser’s rights and obligations under this Note
Purchase Agreement shall remain unchanged, the Purchaser shall remain solely responsible for the
performance thereof, and the Issuer and the Depositor shall continue to deal solely and directly
with the Purchaser and shall have no obligations to deal with any Participant in connection with
the Purchaser’s rights and obligations under this Note Purchase Agreement.

          (c) This Note Purchase Agreement shall create and constitute the continuing obligation of the
parties hereto in accordance with its terms, and shall remain in full force and

18

 

effect until such time as all amounts payable with respect to the Purchased Notes shall have
been paid in full.

          (d) The Purchaser may sell or assign the Purchased Note only with the prior consent of the
Loan Originator unless (i) such sale or assignment is to an Affiliate of the Purchaser, (ii) such
sale or assignment occurs during the continuance of a Trigger Event under the Sale and Servicing
Agreement or (iii) the Depositor or the Loan Originator breaches a representation or warranty
contained in the Sale and Servicing Agreement. In addition, the Purchaser shall have the right to
sell or finance the Purchased Note pursuant to a repurchase, financing or similar transaction
without the consent of the Loan Originator.

          SECTION 11.05 Provision of Documents and Information. Each of the Issuer and the
Depositor acknowledges and agrees that the Purchaser is permitted to provide to any subsequent
Purchaser, permitted assignees and Participants, opinions, certificates, documents and other
information relating to the Issuer, the Depositor and the Loans delivered to the Purchaser pursuant
to this Note Purchase Agreement provided that with respect to confidential information, such
subsequent Purchaser, permitted assignees and Participants agree to be bound by Section 13.15 of
the Sale and Servicing Agreement.

          SECTION 11.06 GOVERNING LAW; JURISDICTION. THIS NOTE PURCHASE AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE
TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW). EACH OF THE PARTIES TO THIS NOTE PURCHASE AGREEMENT HEREBY AGREES TO THE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY
APPELLATE COURT HAVING JURISDICTION TO REVIEW THE JUDGMENTS THEREOF. EACH OF THE PARTIES HEREBY
WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.

          SECTION 11.07 No Proceedings. Until the date that is one year and one day after the
last day on which any amount is outstanding under this Note Purchase Agreement, the Depositor and
the Purchaser hereby covenant and agree that they will not institute against the Issuer or the
Depositor, or join in any institution against the Issuer or the Depositor of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any
United States federal or state bankruptcy or similar law.

          SECTION 11.08 Execution in Counterparts. This Note Purchase Agreement may be executed
in any number of counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which when taken together shall
constitute one and the same agreement.

19

 

          SECTION 11.09 No Recourse — Purchaser and Depositor.

          (a) The obligations of the Purchaser under this Note Purchase Agreement, or any other
agreement, instrument, document or certificate executed and delivered by or issued by the Purchaser
or any officer thereof are solely the partnership or corporate obligations of the Purchaser, as the
case may be. No recourse shall be had for payment of any fee or other obligation or claim arising
out of or relating to this Note Purchase Agreement or any other agreement, instrument, document or
certificate executed and delivered or issued by the Purchaser or any officer thereof in connection
therewith, against any stockholder, limited partner, employee, officer, director or incorporator of
the Purchaser.

          (b) The obligations of the Depositor under this Note Purchase Agreement, or any other
agreement, instrument, document or certificate executed and delivered by or issued by the Depositor
or any officer thereof are solely the limited liability company obligations of the Depositor. No
recourse shall be had for payment of any fee or other obligation or claim arising out of or
relating to this Note Purchase Agreement or any other agreement, instrument, document or
certificate executed and delivered or issued by the Purchaser or any officer thereof in connection
therewith, against any member, managing director, employee or officer of the Depositor.

          (c) The Purchaser, by accepting the Purchased Notes, acknowledges that such Purchased Notes
represent an obligation of the Issuer and do not represent an interest in or an obligation of the
Loan Originator, the Servicer, the Depositor, the Administrator, the Owner Trustee, the Indenture
Trustee or any Affiliate thereof and no recourse may be had against such parties or their assets,
except as may be expressly set forth or contemplated in this Agreement, the Purchased Notes or the
Basic Documents.

          SECTION 11.10 Survival. All representations, warranties, covenants, guaranties and
indemnifications contained in this Note Purchase Agreement and in any document, certificate or
statement delivered pursuant hereto or in connection herewith shall survive the sale, transfer or
repayment of the Purchased Notes.

          SECTION 11.11 Tax Characterization. Each party to this Note Purchase Agreement (a)
acknowledges and agrees that it is the intent of the parties to this Note Purchase Agreement that
for all purposes, including federal, state and local income, single business and franchise tax
purposes, the Purchased Notes will be treated as evidence of indebtedness secured by the Loans and
proceeds thereof and the trust created under the Indenture will not be characterized as an
association (or publicly traded partnership) taxable as a corporation, (b) agrees to treat the
Purchased Notes for federal, state and local income and franchise tax purposes as indebtedness and
(c) agrees that the provisions of all Basic Documents shall be construed to further these
intentions of the parties.

          SECTION 11.12 Conflicts. Notwithstanding anything contained herein to the contrary,
in the event of the conflict between the terms of the Sale and Servicing Agreement and this Note
Purchase Agreement, the terms of the Sale and Servicing Agreement shall control.

          SECTION 11.13 Limitation on Liability. It is expressly understood and agreed by the
parties hereto that (a) this Note Purchase Agreement is executed and delivered by

20

 

Wilmington Trust Company, not individually or personally, but solely as Owner Trustee of
CapitalSource Funding VII Trust, in the exercise of the powers and authority conferred and vested
in it, (b) each of the representations, undertakings and agreements herein made on the part of the
Issuer is made and intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding only the Issuer, (c)
nothing herein contained shall be construed as creating any liability on Wilmington Trust Company,
individually or personally, to perform any covenant either expressed or implied contained herein,
all such liability, if any, being expressly waived by the parties hereto and by any Person claiming
by, through or under the parties hereto and (d) under no circumstances shall Wilmington Trust
Company be personally liable for the payment of any indebtedness or expenses of the Issuer or be
liable for the breach or failure of any obligation, representation, warranty or covenant made or
undertaken by the Issuer under this Note Purchase Agreement or any other related documents.

[SIGNATURE PAGE FOLLOWS]

21

 

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

	 	 	 	 	 	 	 
	 	 	CAPITALSOURCE FUNDING VII TRUST,	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Wilmington Trust Company, not in its individual

capacity but solely as Owner Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ ROBERT J. PERKINS	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Robert J. Perkins

Title: Sr Financial Services Officer	 	 
	 
	 	 	 	 	 	 
	 	 	CS FUNDING VII DEPOSITOR LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ JEFFREY LIPSON	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jeffrey Lipson

Title: Vice President & Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	CAPITALSOURCE FINANCE LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ JEFFREY LIPSON	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jeffrey Lipson

Title: Vice President & Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	CITIGROUP GLOBAL MARKETS REALTY CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ GERALD F. KEEFE	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Gerald F. Keefe

Title: Authorized Signatoryexv10w73

 

Exhibit 10.73

Execution Copy

 

SALE AND SERVICING AGREEMENT

among

CAPITALSOURCE FUNDING VII TRUST,

as Issuer

and

CS FUNDING VII DEPOSITOR LLC,

as Depositor

and

CAPITALSOURCE FINANCE LLC,

as Loan Originator and Servicer

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Indenture Trustee, Collateral Custodian and Backup Servicer

Dated as of April 19, 2007

COMMERCIAL LOAN BACKED NOTES

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I
	 
	 	 	 	 
	DEFINITIONS
	 
	 	 	 	 
	Section 1.01 Definitions
	 	 	1	 
	Section 1.02 Other Definitional Provisions
	 	 	27	 
	 
	 	 	 	 
	ARTICLE II
	 
	 	 	 	 
	CONVEYANCE OF THE COLLATERAL; ADDITIONAL NOTE PRINCIPAL BALANCES
	 
	 	 	 	 
	Section 2.01 Conveyance of the Collateral; Additional Note Principal Balances
	 	 	28	 
	Section 2.02 Ownership and Possession of Loan Files
	 	 	29	 
	Section 2.03 Books and Records; Intention of the Parties
	 	 	30	 
	Section 2.04 Delivery of Loan Documents
	 	 	30	 
	Section 2.05
Acceptance by the Indenture Trustee of the Loans; Certain
Substitutions and Repurchases; Certification by the 
                  Collateral Custodian
	 	 	31	 
	Section 2.06 Conditions Precedent to Transfer Dates
	 	 	33	 
	Section 2.07 Additional Advances by Initial Noteholder
	 	 	35	 
	Section 2.08 Termination of Revolving Period
	 	 	35	 
	Section 2.09 Correction of Errors
	 	 	35	 
	 
	 	 	 	 
	ARTICLE III
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES
	 
	 	 	 	 
	Section 3.01 Representations and Warranties of the Depositor
	 	 	36	 
	Section 3.02 Representations and Warranties of the Loan Originator
	 	 	38	 
	Section 3.03 [RESERVED]
	 	 	40	 
	Section 3.04 Representations and Warranties Regarding Eligible Loans
	 	 	40	 
	Section 3.05 Purchase and Substitution
	 	 	46	 
	Section 3.06 Dispositions
	 	 	48	 
	Section 3.07 Removal or Repurchase of Call Loans
	 	 	51	 
	Section 3.08 Underwriting Guidelines; Modifications
	 	 	51	 
	 
	 	 	 	 
	ARTICLE IV
	 
	 	 	 	 
	ADMINISTRATION AND SERVICING OF THE LOANS
	 
	 	 	 	 
	Section 4.01 Servicer’s Servicing Obligations
	 	 	51	 
	Section 4.02 Loan Register
	 	 	51	 
	Section 4.03 The Backup Servicer; Duties of the Backup Servicer
	 	 	52	 

i

 

	 	 	 	 	 
	 	 	Page
	ARTICLE V
	 
	 	 	 	 
	ESTABLISHMENT OF TRUST ACCOUNTS
	 
	 	 	 	 
	Section 5.01 Collection Account, Principal Collections Account and Distribution Account
	 	 	54	 
	Section 5.02 Payments to Securityholders
	 	 	59	 
	Section 5.03 Trust Accounts; Trust Account Property
	 	 	60	 
	 
	 	 	 	 
	ARTICLE VI
	 
	 	 	 	 
	STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS
	 
	 	 	 	 
	Section 6.01 Statements
	 	 	62	 
	Section 6.02 Specification of Certain Tax Matters
	 	 	62	 
	 
	 	 	 	 
	ARTICLE VII
	 
	 	 	 	 
	COVENANTS
	 
	 	 	 	 
	Section 7.01 Financial Covenants of CapitalSource
	 	 	62	 
	Section 7.02 Financial Statements of CapitalSource
	 	 	62	 
	 
	 	 	 	 
	ARTICLE VIII
	 
	 	 	 	 
	THE SERVICER AND THE BACKUP SERVICER
	 
	 	 	 	 
	Section 8.01 Indemnification; Third Party Claims
	 	 	63	 
	Section 8.02 Merger or Consolidation of the Servicer and Backup Servicer
	 	 	65	 
	Section 8.03 Limitation on Liability of the Servicer and the Backup Servicer
	 	 	66	 
	Section 8.04 No Resignation; Assignment
	 	 	66	 
	Section 8.05 Relationship of Servicer to Issuer and the Indenture Trustee
	 	 	67	 
	Section 8.06 Servicer May Own Securities
	 	 	67	 
	Section 8.07 Indemnification of the Indenture Trustee and Initial Noteholder
	 	 	68	 
	 
	 	 	 	 
	ARTICLE IX
	 
	 	 	 	 
	SERVICER EVENTS OF DEFAULT
	 
	 	 	 	 
	Section 9.01 Servicer Events of Default
	 	 	68	 
	Section 9.02 Appointment of Successor
	 	 	70	 
	Section 9.03 Waiver of Defaults
	 	 	72	 
	Section 9.04 Accounting Upon Termination of Servicer
	 	 	73	 
	Section 9.05 Removal of Backup Servicer
	 	 	73	 
	 
	 	 	 	 
	ARTICLE X
	 
	 	 	 	 
	THE COLLATERAL CUSTODIAN
	 
	 	 	 	 
	Section 10.01 Appointment
	 	 	73	 
	Section 10.02 No Representations
	 	 	74	 

ii

 

	 	 	 	 	 
	 	 	Page
	Section 10.03 Custody of Custodial Loan Files
	 	 	74	 
	Section 10.04 Standard of Care
	 	 	74	 
	Section 10.05 Acknowledgment
	 	 	74	 
	 
	 	 	 	 
	ARTICLE XI
	 
	 	 	 	 
	[RESERVED.]
	 
	 	 	 	 
	ARTICLE XII
	 
	 	 	 	 
	TERMINATION
	 
	 	 	 	 
	Section 12.01 Termination
	 	 	74	 
	Section 12.02 Optional Termination
	 	 	75	 
	Section 12.03 Notice of Termination
	 	 	75	 
	 
	 	 	 	 
	ARTICLE XIII
	 
	 	 	 	 
	MISCELLANEOUS PROVISIONS
	 
	 	 	 	 
	Section 13.01 Acts of Securityholders
	 	 	75	 
	Section 13.02 Amendment
	 	 	76	 
	Section 13.03 Recordation of Agreement
	 	 	76	 
	Section 13.04 Duration of Agreement
	 	 	76	 
	Section 13.05 Governing Law
	 	 	77	 
	Section 13.06 Notices
	 	 	77	 
	Section 13.07 Severability of Provisions
	 	 	77	 
	Section 13.08 No Partnership
	 	 	78	 
	Section 13.09 Counterparts
	 	 	78	 
	Section 13.10 Successors and Assigns
	 	 	78	 
	Section 13.11 Headings
	 	 	78	 
	Section 13.12 Actions of Securityholders
	 	 	78	 
	Section 13.13 Non-Petition Agreement
	 	 	79	 
	Section 13.14 Holders of the Securities
	 	 	79	 
	Section 13.15 Due Diligence
	 	 	79	 
	Section 13.16 No Reliance
	 	 	80	 
	Section 13.17 Conflicts
	 	 	80	 
	Section 13.18 Limitation on Liability
	 	 	80	 
	Section 13.19 No Agency
	 	 	80	 
	Section 13.20 Third Party Beneficiaries
	 	 	81	 
	Section 13.21 Performance by Wells Fargo Bank, National Association
	 	 	81	 

iii

 

	 	 	 
	EXHIBIT A

	 	Form of Notice of Additional Note Principal Balance
	EXHIBIT B

	 	Form of Monthly Servicer Report
	EXHIBIT C

	 	Form of S&SA Assignment
	EXHIBIT D

	 	Form of Loan Schedule
	EXHIBIT E-1

	 	Form of Initial Certification
	EXHIBIT E-2

	 	Form of Final Certification
	EXHIBIT F

	 	Form of Borrowing Base Certificate
	EXHIBIT G

	 	List of Investors
	EXHIBIT H

	 	Monthly Officer’s Certification
	EXHIBIT I

	 	List of Loans Sold in Connection With a Noteholder SS Advance
	EXHIBIT J

	 	Exceptions With Respect to Representations and Warranties
Made With Respect To Each SS Underlying Loan (Section 3.04(tt))
	EXHIBIT K

	 	Schedule of Certain Loans (Section 2.05(b)(iv))

iv

 

SALE AND SERVICING AGREEMENT

          This Sale and Servicing Agreement is entered into effective as of April 19, 2007, among
CapitalSource Funding VII Trust, a Delaware statutory trust (the “Issuer”), CS Funding VII
Depositor LLC, a Delaware limited liability company, as Depositor (in such capacity, the
“Depositor”), CapitalSource Finance LLC, a Delaware limited liability company (“CapitalSource”), as
Loan Originator (in such capacity, the “Loan Originator”) and as Servicer (in such capacity, the
“Servicer”) and Wells Fargo Bank, National Association, a national banking association, as
Indenture Trustee on behalf of the Noteholders (in such capacity, the “Indenture Trustee”), as
Collateral Custodian (the “Collateral Custodian”) and as Backup Servicer (the “Backup Servicer”).

W I T N E S S E T H:

          In consideration of the mutual agreements herein contained, the parties hereto hereby agree as
follows for the benefit of each of them and for the benefit of the holders of the Securities:

ARTICLE I

DEFINITIONS

          Section 1.01 Definitions.

          Whenever used in this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the meanings specified in this Article. Unless otherwise specified, all
calculations of interest described herein shall be made on the basis of a 360-day year and the
actual number of days elapsed in each Accrual Period.

          Accepted Servicing Practices: The servicing practices and collection procedures of the
Servicer that are in accordance with the Underwriting Guidelines, the Required Loan Documents and
applicable law and which are, in any event, customary servicing practices of prudent institutions
which service loans similar to the Loans for their own account.

          Accrual Period: With respect to the Notes, the period commencing on and including the
preceding Payment Date (or, in the case of the first Payment Date, the period commencing on and
including the first Transfer Date (which first Transfer Date is the first date on which the Note
Principal Balance is greater than zero)) and ending on the day preceding the related Payment Date.

          Act or Securities Act: The Securities Act of 1933.

          Acquired Loan: A Loan that is originated by a Person other than the Loan Originator and is
acquired by the Loan Originator in a “true sale” transaction pursuant to an acquisition agreement
and is otherwise acceptable to the Initial Noteholder.

          Additional Note Principal Balance: With respect to each Transfer Date, the aggregate Sales
Price of all Loans conveyed to the Issuer on such date.

 

 

          Additional Noteholder: Any Noteholder other than the Initial Noteholder.

          Administration Agreement: The Administration Agreement, dated as of April 19, 2007, between
the Issuer and the Administrator, as the same may be amended and supplemented from time to time.

          Administrator: CapitalSource Finance LLC, in its capacity as Administrator under the
Administration Agreement.

          Affiliate: With respect to any specified Person, any other Person controlling or controlled
by or under common control with such specified Person. For the purposes of this definition,
“control” when used with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

          Agreement: This Sale and Servicing Agreement, as the same may be amended and supplemented
from time to time.

          Alarm Service Loan: An Eligible Loan to a Dealer (or any other Person agreed to by the Issuer
and the Initial Noteholder) that has secured its repayment obligations with the payments from one
or more individuals, businesses or other entities which have entered into security alarm monitoring
or security alarm monitoring and maintenance contracts to receive the security alarm monitoring or
security alarm monitoring and maintenance services provided thereby.

          Assigned Loan: A Loan originated by a Person other than the Loan Originator in which a
constant percentage or a fixed principal amount has been assigned to the Loan Originator or in
which a participation interest has been granted to the Loan Originator by such Person in accordance
with the Loan Originator’s Underwriting Guidelines and (a) such transaction has been fully
consummated prior to such Loan becoming subject to this Agreement; (b) except with respect to
participation interests, the Loan Originator is not a party to (but is instead an assignee of) the
underlying loan documents; (c) upon the sale of any Underlying Notes or related Participation
Certificates to the Depositor under the Loan Sale Agreement and sale to the Issuer by the Depositor
under this Agreement, any such Underlying Notes or Participation Certificates, as the case may be,
will be endorsed in blank and held by the Collateral Custodian on behalf of the Indenture Trustee
for the benefit of the Noteholders; (d) the Issuer, as assignee of any Underlying Notes or
Participation Certificates, as applicable, will have all of the rights (but none of the
obligations) of the Loan Originator with respect to any such Underlying Notes or Participation
Certificates, as applicable and the Loan Originator’s right, title and interest in and to the Loan
Collateral; (e) any Underlying Notes are secured by, and the Participation Certificates represent,
an undivided interest in any and all Loan 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 (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.

          Assignment: A LPA Assignment or S&SA Assignment.

2

 

          Backup Servicer: Wells Fargo Bank, National Association or any successor thereto appointed as
provided herein.

          Backup Servicer Fee Letter: Shall mean that certain fee letter, dated as of April 19, 2007,
among the Loan Originator, the Servicer, Citigroup Global Markets Inc. and the Backup Servicer.

          Backup Servicing Fee: Shall have the meaning given such term in the Backup Servicer Fee
Letter.

          Backup Servicer Termination Notice: Has the meaning set forth in Section 9.05(a) hereof.

          Bankruptcy Code: Title 11 of the United States Code.

          Bankruptcy Event: With respect to a Person, shall be deemed to have occurred if either:

          (a) a case or other proceeding shall be commenced, without the application or consent
of such Person, in any court seeking the liquidation, reorganization, debt arrangement,
dissolution, winding up, or composition or readjustment of debts of such Person, the
appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or for all or substantially all of its assets, or any similar action
with respect to such Person under any law relating to bankruptcy, insolvency,
reorganization, winding up or composition or adjustment of debts, and such case or
proceeding shall continue undismissed or unstayed, and in effect, for a period of 60
consecutive days; or an order for relief in respect of such Person shall be entered in an
involuntary case under the Bankruptcy Code or other similar laws now or hereafter in effect,
or

          (b) such Person shall commence a voluntary case or other proceeding under any
applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other
similar law now or hereafter in effect, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) for such Person or for any substantial part of its assets, or shall make
any general assignment for the benefit of creditors, or shall fail to, or admit in writing
its inability to, pay its debts generally as they become due, or, if a corporation or
similar entity, its board of directors shall vote to implement any of the foregoing.

          Basic Documents: This Agreement, the Indenture, the Loan Sale Agreement, the Note Purchase
Agreement, the Trust Agreement, the Lockbox Agreement, the Intercreditor Agreement, the
Administration Agreement, each Interest Rate Hedge Agreement, and, as and when required to be
executed and delivered, the Assignments.

          Borrowing Base: On any date of determination, the sum of:

	 	(i)	 	the product of (A) the Rated Retained
Securities, plus the outstanding unpaid principal balance of
all Eligible Loans included in the Loan Pool prior to such date of
determination

3

 

	 	 	 	minus the amount (calculated without duplication) by which such
Eligible Loans exceed the Concentration Limitation and
minus, with respect to Charged-Off Loans, (x) 50% of the
outstanding unpaid principal balance of all Charged-Off Loans for
which any Scheduled Payment is at least ninety (90) days but less
than one hundred eighty (180) days delinquent as of such date of
determination and (y) the outstanding unpaid principal balance of
all Charged-Off Loans that are Charged-Off Loans for any reason
other than the Scheduled Payment delinquency referenced in clause
(x) above and (B) the Purchase Price Percentage (determined on
such date), and
	 
	 	(ii)	 	the amount on deposit in the Principal
Collections Account on such date of determination, but only to the
extent such amount has been applied to reduce the outstanding principal
balance of the related Loans (without duplication).

          Borrowing Base Certificate: The certificate in the form attached hereto as Exhibit F.

          Borrowing Base Deficiency: With respect to any date of determination, an amount equal to
excess of the Note Principal Balance over the Borrowing Base as of such date of determination.

          Borrowing Base Excess: With respect to any date of determination, an amount equal to the
excess of the Borrowing Base over the Note Principal Balance, in each case as of such date of
determination.

          Business Day: Any day other than (i) a Saturday or Sunday, or (ii) a day on which banking
institutions in New York City or in the city in which the Corporate Trust Office of the Indenture
Trustee or the Paying Agent is located or the city in which the Servicer’s servicing operations are
located are authorized or obligated by law or executive order to be closed.

          Call Loan: As of any date of Disposition, any Loan which does not meet criteria established
by independent rating agencies or surety agency conditions for securitizations at the time of such
Disposition.

          Certificateholder: A holder of a Trust Certificate.

          Change of Control: Shall occur if either (a) Any “Person” or “group”(as such terms are used in
Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended), other than the
Investors, shall become the “beneficial owner” (as defined in Section 13(d)-3 and 13(d)-5 under
such Act), directly or indirectly, of shares representing more than the greater of (i) 20% of the
shares outstanding of CapitalSource Inc. and (ii) the percentage of the aggregate then outstanding
voting stock of CapitalSource Inc. owned beneficially, directly or indirectly, by the Investors; or
(b) the board of directors of CapitalSource Inc. shall not consist of at least a majority of
Continuing Directors.

4

 

          Charged-Off Loan: A Loan in the Loan Pool as to which there has occurred and is continuing one
or more of the following: (i) the occurrence of both (A) all or 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 (B) within
ninety (90) calendar days of when such delinquent payment was first due, all delinquencies have not
been cured, (ii) a Bankruptcy Event has occurred with respect to the related Obligor, (iii) the
related Obligor has suffered any material adverse change that materially affects its viability as a
going concern, (iv) the Servicer has determined, in its sole discretion, in accordance with the
Underwriting Guidelines, that all or a portion of such Loan is not collectible, or (v) 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 Loan Originator or an entity controlled by the Loan Originator to the
Obligor or any of its Affiliates.

          Clean-up Call Date: The first Payment Date occurring after the end of the Revolving Period on
which the Note Principal Balance declines to 10% or less of the aggregate Note Principal Balance as
of the end of the Revolving Period.

          Closing Date: April 19, 2007.

          Code: The Internal Revenue Code of 1986, as amended from time to time, and the regulations
promulgated by the United States Treasury thereunder.

          Collateral: Has the meaning set forth in the Indenture.

          Collateral Custodian: Wells Fargo Bank, National Association.

          Collection Account: The account designated as such, established and maintained by the
Servicer in accordance with Section 5.01(a)(1) hereof.

          Collection Date: The date following the Termination Date on which the Note Principal Balance
has been reduced to zero and paid in full.

          Commission: The Securities and Exchange Commission.

          Concentration Limitation: On any date of determination, the aggregate Principal Balance of all
Loans made to a single Obligor shall not exceed 2.75% of the aggregate Note Principal Balance.

          Continued Errors: Has the meaning set forth in Section 9.02(d) hereof.

          Continuing Directors: The directors of CapitalSource Inc. on the Closing Date, and each other
director if, in each case, such other director’s nomination for election to the board of directors
is recommended by majority of the then Continuing Directors or such other director receives the
vote of the Investors in his or her election by the stockholders of CapitalSource Inc.

          Custodial Loan File: With respect to each Eligible Loan, the documents delivered to the
Collateral Custodian, as agent for the Indenture Trustee, for the benefit of the Noteholders
pursuant to Section 2.04 hereof.

5

 

          Daily Interest Accrual Amount: With respect to each day and the related Accrual Period, an
amount equal to the interest accrued at the Note Interest Rate with respect to such Accrual Period
on an amount equal to the Note Principal Balance, determined as of the preceding Business Day after
giving effect to all changes to the Note Principal Balance on or prior to such preceding Business
Day.

          Dealer: The security alarm dealer who sells one or more security alarm monitoring or security
alarm monitoring and maintenance contracts to one or more Persons obligated to pay for the
service(s) provided under such contract(s).

          Default: Any occurrence that is, or with notice or the lapse of time or both would become, an
Event of Default.

          Deleted Loan: An Eligible Loan replaced or to be replaced by one or more Qualified Substitute
Loans.

          Delinquent Loan: A Loan (other than a Charged-Off Loan) in the Loan Pool as to which there
has occurred one or more of the following: (i) the occurrence of both (A) all or 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, modification, waiver or variance
made to such Loan resulting from the Obligor’s inability to pay such Loan in accordance with its
terms and (B) within sixty (60) calendar days of when such delinquent payment was first due, all
delinquencies have not been cured or (ii) consistent with the Loan Originator’s Underwriting
Guidelines such Loan would be classified as delinquent by the Servicer or the Loan Originator.

          Delivery: When used with respect to Trust Account Property means:

     (a) with respect to bankers’ acceptances, commercial paper, negotiable certificates of
deposit and other obligations that constitute “instruments” within the meaning of Section
9-105(l)(i) of the UCC and are susceptible of physical delivery (except with respect to
Trust Account Property consisting of certificated securities (as defined in Section
8-102(a)(4) of the UCC)), physical delivery to the Indenture Trustee or its custodian (or
the related Securities Intermediary) endorsed to the Indenture Trustee or its custodian (or
the related Securities Intermediary) or endorsed in blank (and if delivered and endorsed to
the Securities Intermediary, by continuous credit thereof by book entry to the related Trust
Account);

     (b) with respect to a certificated security (i) delivery of such certificated security
endorsed to, or registered in the name of, the Indenture Trustee or endorsed in blank to its
custodian or the related Securities Intermediary and the making by such Securities
Intermediary of appropriate entries in its records identifying such certificated securities
as credited to the related Trust Account, or (ii) by delivery thereof to a “clearing
corporation” (as defined in Section 8-102(5) of the UCC) and the making by such clearing
corporation of appropriate entries in its records crediting the securities account of the
related Securities Intermediary by the amount of such certificated security and the making
by such Securities Intermediary of appropriate entries in its records identifying such
certificated securities as credited to the related Trust Account (all of the Trust Account
Property described in Subsections (a) and (b), “Physical Property”);

6

 

and, in any event, any such Physical Property in registered form shall be in the name
of the Indenture Trustee or its nominee or custodian (or the related Securities
Intermediary); and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such Trust Account Property
to the Indenture Trustee or its nominee or custodian, consistent with changes in applicable
law or regulations or the interpretation thereof;

     (c) with respect to any security issued by the U.S. Treasury, Fannie Mae or Freddie Mac
that is a book-entry security held through the Federal Reserve System pursuant to federal
book-entry regulations, the following procedures, all in accordance with applicable law,
including applicable federal regulations and Articles 8 and 9 of the UCC: the making by a
Federal Reserve Bank of an appropriate entry crediting such Trust Account Property to an
account of the related Securities Intermediary or the securities intermediary that is (x)
also a “participant” pursuant to applicable federal regulations and (y) is acting as
securities intermediary on behalf of the Securities Intermediary with respect to such Trust
Account Property; the making by such Securities Intermediary or securities intermediary of
appropriate entries in its records crediting such book-entry security held through the
Federal Reserve System pursuant to federal book-entry regulations and Articles 8 and 9 of
the UCC to the related Trust Account; and such additional or alternative procedures as may
hereafter become appropriate to effect complete transfer of ownership of any such Trust
Account Property to the Indenture Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof; and

     (d) with respect to any item of Trust Account Property that is an uncertificated
security (as defined in Section 8-102(a)(18) of the UCC) and that is not governed by clause
(c) above, registration in the records of the issuer thereof in the name of the related
Securities Intermediary, and the making by such Securities Intermediary of appropriate
entries in its records crediting such uncertificated security to the related Trust Account.

          Depositor: CS Funding VII Depositor LLC, a Delaware limited liability company.

          Designated Depository Institution: With respect to an Eligible Account, an institution whose
deposits are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the
FDIC, the long-term deposits of which shall be rated “A” or better by S&P or “A2” or better by
Moody’s and the short-term deposits of which shall be rated “P-1” or better by Moody’s and “A-1” or
better by S&P, unless otherwise approved in writing by the Initial Noteholder and which is any of
the following: (A) a federal savings and loan association duly organized, validly existing and in
good standing under the federal banking laws, (B) an institution duly organized, validly existing
and in good standing under the applicable banking laws of any state, (C) a national banking
association duly organized, validly existing and in good standing under the federal banking laws,
(D) a principal subsidiary of a bank holding company or (E) approved in writing by the Initial
Noteholder and, in each case acting or designated by the Servicer as the depository institution for
the Eligible Account; provided, however, that any such institution or association shall have
combined capital, surplus and undivided profits of at least $50,000,000.

7

 

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

          Disposition: A Securitization, Whole Loan Sale transaction, or other disposition of Loans,
including, without limitation, pursuant to Section 3.06.

          Disposition Participant: As applicable, with respect to a Disposition, any “depositor” with
respect to such Disposition, the Majority Noteholders, the Issuer, the Servicer, the related
trustee and the related custodian, any nationally recognized credit rating agency, the related
underwriters, the related placement agent, the related credit enhancer, the related whole-loan
purchaser, the related purchaser of securities and/or any other party necessary or, in the good
faith belief of any of the foregoing, desirable to effect a Disposition.

          Disposition Proceeds: With respect to a Disposition, (x) the proceeds of the Disposition
remitted to the Issuer in respect of the Loans transferred on the date of and with respect to such
Disposition, including without limitation, any cash less all costs, fees and expenses incurred in
connection with such Disposition, including, without limitation, all amounts deposited into any
reserve accounts upon the closing thereof plus or minus (y) all other amounts agreed upon in
writing by the Initial Noteholder, the Issuer and the Servicer.

          Distribution Account: The account established and maintained pursuant to Section 5.01(a)(3)
hereof.

          Due Date: The day of the month on which the Scheduled Payment is due from the Obligor with
respect to an Eligible Loan.

          Eligible Account: At any time, an account which is: (i) maintained with a Designated
Depository Institution; or (ii) fully insured by either the Bank Insurance Fund or the Savings
Association Insurance Fund of the FDIC; or (iii) a trust account (which shall be a “segregated
trust account”) maintained with the corporate trust department of a federal or state chartered
depository institution or trust company with trust powers and acting in its fiduciary capacity for
the benefit of the Indenture Trustee and the Issuer, which depository institution or trust company
shall have capital and surplus of not less than $50,000,000; or (iv) with the prior written consent
of the Majority Noteholders, any other account.

          Eligible Loan: With respect to any date of determination, a Rated Retained Security or any
Loan which complies with the representations and warranties set forth in Section 3.04 with respect
to such Loan.

          Eligible Obligor: For any date of determination, any Obligor that (i) is either (x) a legal
operating entity or holding company or (y) an Obligor which is a special purpose entity, and not a
natural person, (ii) has not entered into the Loan primarily for personal, family or household
purposes, (iii) is not a Governmental Authority, (iv) is not in the gaming, nuclear waste,
biotechnology or natural resources industry, (v) except with respect to a DIP Loan, is not the
subject of a Bankruptcy Event, and (vi) is not an Obligor of a Charged-Off Loan or Delinquent Loan;
provided however that the foregoing clause (iv) shall not be deemed to prohibit an Obligor in the
biotechnology industry from being an Eligible Obligor, except for where such Obligor’s business
consists of conducting proprietary research on new drug development, if it otherwise satisfies each
of the foregoing criteria for eligibility.

8

 

          Eligible Servicer: (x) CapitalSource or (y) any other Person to which the Majority
Noteholders may consent in writing.

          Enhanced Mezzanine Loan: Any Loan that (a) is ratably secured among all lenders by a Lien on
real property or the membership or other equity interests of the owner of such real property and
has a subordinated right to payment relative to the senior lenders, (b) has a Loan-to-Value Ratio
of less than or equal to 90% (with the denominator of such ratio calculated using the projected
completed value of the property) and (c) at least 80% of the underlying real property is planned
residential.

          Errors: Has the meaning set forth in Section 9.02(d) hereof.

          Event of Default: Either a Servicer Event of Default or an Event of Default under the
Indenture.

          Excess Spread: For any date of determination, a percentage equal to the positive difference
between (x) the weighted average Loan Interest Rate of the Loan Pool (determined based on the
unpaid principal balance of the Loans in the Loan Pool) and (y) the sum of (i) the Note Interest
Rate and (ii) the rate at which the Trust Fees and Expenses accrue.

          Exchange Act: The Securities Exchange Act of 1934, as amended.

          Excluded Amounts: (a) Any amount received in the Lock-Box by, on or with respect to any Loan
in the Loan Pool, which is required to be remitted in 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 which are required to be paid to the related Obligor and (c) any amount with
respect to any Loan retransferred or substituted for that is otherwise replaced by a Qualified
Substitute Loan, to the extent such amount is attributable to a time after the effective date of
such replacement.

          Fannie Mae: The Federal National Mortgage Association and any successor thereto.

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

          Final Certification: Has the meaning set forth in Section 2.05(b)(ii) hereof.

          Fitch: Fitch Ratings or any successor in interest.

          Foreclosed Loan: As of any date of determination, any Eligible Loan that as of the end of the
preceding Remittance Period has been discharged as a result of (i) the completion of foreclosure or
comparable proceedings on the Loan Collateral by the Servicer on behalf of the Issuer; (ii) in
respect of any Loan secured by real property, the acceptance of the deed or other evidence of title
to the related Mortgaged Property in lieu of foreclosure or other comparable proceeding; or (iii)
the acquisition of title to the related Loan Collateral by operation of law.

          Foreclosure Property: Any real property securing a Foreclosed Loan that has been acquired by
the Servicer on behalf of the Issuer through foreclosure, deed in lieu of foreclosure or similar
proceedings in respect of the related Foreclosed Loan.

9

 

          Freddie Mac: The Federal Home Loan Mortgage Corporation and any successor thereto.

          GAAP: Generally Accepted Accounting Principles as in effect in the United States.

          Governmental Authority: With respect to any Person, any national, government, state or other
political division 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 any court or arbitrator having jurisdiction over such Person.

          Hedge Counterparty: Either (i) Citibank, N.A. or any successor to or assignee of Citibank,
N.A. under the related Interest Rate Hedging Agreement or (ii) both (A) at the time of execution
and delivery of the related Interest Rate Hedge Agreement, any bank or other financial institution
(or any party providing credit support on such Person’s behalf) that has (x) a long-term unsecured
debt rating of at least “A” from S&P and “A2” from Moody’s and (y) a short-term unsecured debt
rating of “A-1” from S&P and “P-1” from Moody’s or is otherwise approved by the Initial Noteholder
and, (B) thereafter, any bank or other financial institution (or any party providing credit support
on such Person’s behalf) that has not suffered an Interest Rate Hedge Counterparty Required Rating
Downgrade Event

          Indemnified Parties: Has the meaning set forth in Section 8.01(c) hereof.

          Indenture: The Indenture dated as of April 19, 2007, between the Issuer and the Indenture
Trustee, as the same may be amended or supplemented from time to time.

          Indenture Trustee: Wells Fargo Bank, National Association, a national banking association, as
Indenture Trustee under the Indenture, or any successor indenture trustee under the Indenture.

          Indenture Trustee Fee: Shall have the meaning given such term in the Backup Servicer Fee
Letter.

          Independent: When used with respect to any specified Person, such Person (i) is in fact
independent of the Loan Originator, the Servicer, the Depositor or any of their respective
Affiliates, (ii) does not have any direct financial interest in, or any material indirect financial
interest in, the Loan Originator, the Servicer, the Depositor or any of their respective Affiliates
and (iii) is not connected with the Loan Originator, the Depositor, the Servicer or any of their
respective Affiliates, as an officer, employee, promoter, underwriter, trustee, partner, director
or Person performing similar functions; provided, however, that a Person shall not fail to be
Independent of the Loan Originator, the Depositor, the Servicer or any of their respective
Affiliates merely because such Person is the beneficial owner of 1% or less of any class of
securities issued by the Loan Originator, the Depositor, the Servicer or any of their respective
Affiliates, as the case may be.

          Initial Certification: Has the meaning set forth in Section 2.05(a) hereof.

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          Initial Noteholder: Citigroup Global Markets Realty Corp., a New York corporation.

          Initial Term: Has the meaning set forth in Section 9.01(c) hereof.

          Insurance Policies: With respect to any Eligible Loan, any insurance policy covering liability
and physical damage to or loss of the related Loan Collateral, including, but not limited to, any
hazard, flood, title, environmental, flood, accident or life insurance policy.

          Insurance Proceeds: All amounts collected in respect of any Loan, Loan Collateral or related
property under any Insurance Policy and not required either pursuant to applicable law or the
related Loan Documents to be applied to the restoration of the related Loan Collateral or paid to
the related Obligor.

          Intercreditor Agreement: The Fourth Amended and Restated Intercreditor and Lockbox
Administration Agreement, dated as of June 30, 2005, by and among Bank of America, N.A., as the
lockbox bank, the Financing Agents (as defined therein), the Loan 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.

          Interest Carry-Forward Amount: With respect to any Payment Date is equal to the amount, if
any, by which the Interest Payment Amount for the immediately preceding Payment Date exceeded the
amount in respect of interest that was actually paid from the Distribution Account on the
immediately preceding Payment Date, together with any Interest Carry-Forward Amount remaining
unpaid from the previous Payment Date.

          Interest Payment Amount: With respect to any Payment Date, the sum of the Daily Interest
Accrual Amounts for all days in the related Accrual Period.

          Interest Rate Hedge Agreement: The ISDA Master Agreement and schedule thereto between the
Issuer and the Hedge Counterparty, together with all confirmations, amendments, supplements and
other modifications thereto.

          Interest Rate Hedge Counterparty Required Rating Downgrade Event: The assignment of a
long-term rating of either BBB or lower by S&P or Baa2 or lower by Moody’s with respect to the
unsecured and unsubordinated debt, deposit or letter of credit obligations of an Interest Rate
Hedge Counterparty (or any party providing credit support on its behalf).

          Investors: Shall mean the investors listed on Exhibit G attached hereto.

          Lender Fee Letter: The fee letter dated the date hereof executed by the Issuer and addressed
to the Initial Noteholder.

          LIBOR Business Day: Any day on which banks in the City of London are open and conducting
transactions in United States dollars.

          LIBOR Determination Date: With respect to each Accrual Period, each Business Day during such
Accrual Period.

          LIBOR Margin: Has the meaning set forth in the Lender Fee Letter.

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          Lien: With respect to any asset, (a) any mortgage, lien, pledge, charge, security interest,
hypothecation, option or encumbrance of any kind in respect of such asset or (b) the interest of a
vendor or lessor under any conditional sale agreement, financing lease or other title retention
agreement relating to such asset.

          Liquidated Loan: Any Delinquent Loan with respect to which the Servicer has recovered, whether
through a trustee’s sale, foreclosure sale or otherwise, all amounts it expects to recover from or
on account of such Delinquent Loan.

          Loan: Any loan sold to the Issuer hereunder and pledged to the Indenture Trustee, which loan
includes, without limitation, (i) the Required Loan Documents and the Loan File and (ii) all right,
title and interest of the Loan Originator in and to the Loan and the related Loan Collateral.

          Loan Collateral: The collateral securing an Underlying Note which, depending on the type of
Loan, typically consists of accounts receivable, inventory, real estate and/or other tangible and
intangible assets of the Obligors.

          Loan Documents: With respect to an Eligible Loan, the documents comprising the Custodial Loan
File for such Eligible Loan.

          Loan File: With respect to each Eligible Loan, the Custodial Loan File and the Servicer’s
Loan File.

          Loan Interest Rate: With respect to each Eligible Loan, the annual rate of interest borne by
the related Underlying Note, as shown on the Loan Schedule, and, in the case of an adjustable rate
Loan, as the same may be periodically adjusted in accordance with the terms of such Eligible Loan.

          Loan Margin: With respect to all Eligible Loans and for any date of determination, the
positive difference between (x) the weighted average Loan Interest Rate of the Loan Pool based on
the unpaid principal balance of the Loans in the Loan Pool and (y) the then-current value of
One-Month LIBOR.

          Loan Maturity Date: With respect to any Eligible Loan as of any date of determination, the
date on which the last payment of principal is due and payable under the related Underlying Note,
after taking into account all principal prepayments received before such date of determination and
any extension permitted under the related Loan Documents (as in effect on the Closing Date) and
this Agreement, but without giving effect to: (a) any acceleration of the principal of such
Eligible Loan by reason of default thereunder, (b) any grace period permitted by the related
Underlying Note, (c) any modification, waiver or amendment of such Eligible Loan (other than any
such permitted extension), or (d) any anticipated repayment date for such Eligible Loan.

          Loan Originator: CapitalSource and its permitted successors and assigns.

          Loan Pool: As of any date of determination, the pool of all Loans conveyed to the Issuer
pursuant to this Agreement on all Transfer Dates up to and including such date of determination,
which Loans have not been released from the Lien of the Indenture pursuant to

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the terms of the Basic Documents, together with the rights and obligations of a holder
thereof, and the payments thereon and proceeds therefrom received on and after the applicable
Transfer Date, as identified from time to time on the Loan Schedule.

          Loan Rating: Shall mean either Loan Rating 1, Loan Rating 2, Loan Rating 3, Loan Rating 4,
Loan Rating 5 or Loan Rating 6, as applicable.

          Loan Rating 1: Shall mean a rating of 1 pursuant to the Underwriting Guidelines of the Loan
Originator.

          Loan Rating 2: Shall mean a rating of 2 pursuant to the Underwriting Guidelines of the Loan
Originator.

          Loan Rating 3: Shall mean a rating of 3 pursuant to the Underwriting Guidelines of the Loan
Originator.

          Loan Rating 4: Shall mean a rating of 4 pursuant to the Underwriting Guidelines of the Loan
Originator.

          Loan Rating 5: Shall mean a rating of 5 pursuant to the Underwriting Guidelines of the Loan
Originator.

          Loan Rating 6: Shall mean a rating of 6 pursuant to the Underwriting Guidelines of the Loan
Originator.

          Loan Register: Shall have the meaning set forth in Section 4.02 hereof.

          Loan Sale Agreement: The Loan Sale Agreement, between CapitalSource, as seller, and the
Depositor, as purchaser, dated as of April 19, 2007, and all supplements and amendments thereto.

          Loan Schedule: The schedule of Loans conveyed to the Issuer on the Closing Date and on each
Transfer Date and delivered to the Initial Noteholder and the Collateral Custodian in the form of a
computer-readable transmission specifying the information set forth on Exhibit D.

          Loan-to-Value Ratio or LTV: 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 total commitment
amount of such Loan as of the date of its origination (or with respect to any Revolving Loans, the
amount funded under such Loan at such date of determination) and (ii) the denominator of which is
equal to the total discounted collateral value of the collateral securing such Loan.

          Lock-Box: The post office box to which collections on the Loans are remitted for retrieval by
a Lock-Box Bank and deposited by such Lock-Box Bank into a Lock-Box Account.

          Lock-Box Account: means any of account numbers 003930559738, 003938703751, 0039393996662 or
003922575610, as applicable, held by CapitalSource or one of its Affiliates at Bank of America,
N.A.

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          Lock-Box Agreement: The Fifth Amended and Restated Three Party Agreement Relating to Lockbox
Services and Control (with Activation Upon Notice), dated as of June 30, 2005, among Bank of
America, N.A. as the lockbox bank, the Financing Agents (as defined therein), the Loan 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.

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

          LPA Assignment: The Assignment of Loans from the Loan Originator to the Depositor under the
Loan Sale Agreement.

          Majority Certificateholders: Has the meaning set forth in the Trust Agreement.

          Majority Noteholders: The holder or holders of in excess of 50% of the Note Principal
Balance. In the event of the release of the Lien of the Indenture in accordance with the terms
thereof, the Majority Noteholders shall mean the Majority Certificateholders.

          Maturity Date: The one hundred eightieth day following the Closing Date.

          Maximum Note Principal Balance: Has the meaning set forth in Section 1.01 of the Note
Purchase Agreement.

          Monthly Servicer Report: Has the meaning set forth in Section 4.03(b)(2) hereof.

          Moody’s: Moody’s Investors Service, Inc., or any successor thereto.

          Mortgage: With respect to any Eligible Loan secured by real property, the mortgage, deed of
trust or other instrument securing the related Underlying Note, which creates a lien on a fee
interest in commercial real property and/or a lien on a leasehold estate in commercial real
property and the assignment of rents and leases related thereto.

          Mortgaged Property: With respect to an Eligible Loan secured by real property, the related
Obligor’s fee and/or leasehold interest in the commercial real property (and/or all improvements,
buildings, fixtures, building equipment and personal property thereon (to the extent applicable)
and all additions, alterations and replacements made at any time with respect to the foregoing) and
all other collateral securing repayment of all amounts payable under such Eligible Loan and the
other Required Loan Documents.

          Net Proceeds: With respect to any Payment Date, Proceeds received during the prior Remittance
Period, net of any reimbursements to the Servicer made from such amounts for any unreimbursed
Servicing Compensation and Servicing Advances (including Nonrecoverable Servicing Advances) made
and any other fees and expenses paid in connection with the foreclosure, inspection, conservation,
liquidation, exchange or other disposition of the related Loans or Loan Collateral.

          Net Loan Losses: With respect to any Delinquent Loan that is subject to a modification, an
amount equal to the portion of the Principal Balance, if any, released in connection with such
modification.

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          Net Worth: With respect to any Person, the excess of total assets of such Person, over total
liabilities of such Person, determined in accordance with GAAP.

          Nonrecoverable Servicing Advance: With respect to any Eligible Loan or any Foreclosure
Property, (a) any Servicing Advance previously made and not reimbursed from late collections,
condemnation proceeds, Proceeds or Insurance Proceeds on the related Eligible Loan or Foreclosure
Property or (b) a Servicing Advance proposed to be made in respect of an Eligible Loan or
Foreclosure Property either of which, in the good faith business judgment of the Servicer, as
evidenced by an Officer’s Certificate of a Servicing Officer delivered to the Initial Noteholder
and the Indenture Trustee, would not be ultimately recoverable.

          Nonutilization Fee: A fee payable by the Issuer to the Initial Noteholder on each Payment
Date in an amount equal to (a) 0.15% multiplied by (b) the excess, if any, of the Maximum Note
Principal Balance over the average daily amount of the Note Principal Balance for the immediately
preceding month divided by (c) 360 and multiplied by (d) the actual number of calendar days that
have elapsed since the immediately preceding Payment Date (or, with respect to the first Payment
Date, the Closing Date).

          Note: Has the meaning set forth in the Indenture.

          Noteholder: Has the meaning set forth in the Indenture.

          Noteholder SS Advance: Each advance of funds made by the Noteholders to the Issuer pursuant
to the terms of the Basic Documents that allow the Issuer to fund or maintain its investment in any
SS Underlying Loan.

          Note Interest Rate: With respect to each Accrual Period, a per annum interest rate equal to
One-Month LIBOR for the related LIBOR Determination Date plus the LIBOR Margin for such Accrual
Period.

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

          Note Principal Balance: With respect to the Notes, as of any date of determination (a) the
sum of the Additional Note Principal Balances purchased on or prior to such date of determination
pursuant to the Note Purchase Agreement less (b) all amounts previously distributed in respect of
principal of the Notes on or prior to such date of determination.

          Note Purchase Agreement: The Note Purchase Agreement among the Initial Noteholder, the Issuer
and the Depositor, dated as of April 19, 2007, as the same may be amended or supplemented from time
to time.

          Note Redemption Amount: As of any Record Date, an amount without duplication equal to the sum
of (i) the then outstanding Note Principal Balance of the Notes, plus the Interest Payment Amount
for the related Payment Date, (ii) any Trust Fees and Expenses due and unpaid on the related
Payment Date and (iii) any Servicing Advance Reimbursement Amount as of such Record Date.

15

 

          Obligor: With respect to any Eligible Loan, means the obligor(s) under the related Required
Loan Documents on an Underlying Note, including any Person that has acquired the related Loan
Collateral and assumed the obligations of the original obligor under the related Required Loan
Documents.

          Officer’s Certificate: A certificate signed by a Responsible Officer of the Depositor, the
Loan Originator, the Servicer or the Issuer, in each case, as required by this Agreement.

          One-Month LIBOR: With respect to each day during each Accrual Period, the rate determined by
the Indenture Trustee on the related LIBOR Determination Date on the basis of the offered rate for
one-month U.S. dollar deposits, as such rate appears on Telerate Page 3750 as of 11:00 a.m. (London
time) on such LIBOR Determination Date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the offered rates of the Reference
Banks for one-month U.S. dollar deposits, as of 11:00 a.m. (London time) on such LIBOR
Determination Date. In such event, the Indenture Trustee will request the principal London office
of each of the Reference Banks to provide a quotation of its rate. If on such LIBOR Determination
Date, two or more Reference Banks provide such offered quotations, One-Month LIBOR for the related
day during such Accrual Period shall be the arithmetic mean of all such offered quotations (rounded
to the nearest whole multiple of 1/16%). If on such LIBOR Determination Date, fewer than two
Reference Banks provide such offered quotations, One-Month LIBOR for each day during the Accrual
Period shall be the higher of (i) LIBOR as determined on the previous LIBOR Determination Date and
(ii) the Reserve Interest Rate. Notwithstanding the foregoing, if, under the priorities described
above, One-Month LIBOR for a LIBOR Determination Date would be based on One-Month LIBOR for the
previous LIBOR Determination Date for the third consecutive LIBOR Determination Date, the Indenture
Trustee shall select an alternative comparable index (over which the Indenture Trustee has no
control), used for determining one-month Eurodollar lending rates that is calculated and published
(or otherwise made available) by an independent party.

          Opinion of Counsel: A written opinion of counsel who may be employed by the Servicer, the
Depositor, the Loan Originator or any of their respective Affiliates.

          Optional Disposition Date: Any Business Day, provided one Business Day’s prior written notice
is given.

          Originator Indemnified Party: Has the meaning set forth in Section 8.01(c) hereof.

          Owner Trustee: Wilmington Trust Company, a Delaware banking corporation, not in its individual
capacity but solely as Owner Trustee under this Agreement, and any successor owner trustee under
the Trust Agreement.

          Owner Trustee Fee: Shall mean the fee payable in the Fee Letter dated as of the date hereof,
among the Loan Originator, the Depositor and the Owner Trustee.

          Participation Certificate: A valid and enforceable certificate issued pursuant to a standard
participation agreement between the Loan Originator and the originator of the related Loan,
evidencing that the registered owner is the beneficial owner of an undivided participating
ownership interest in the related Loan.

16

 

          Participation Loan: A Loan, originated by the Loan Originator and serviced by the Servicer in
the ordinary course of its business and in accordance with Accepted Servicing Practices, in which a
participation interest has been granted to another Person in accordance with the Underwriting
Guidelines and such transaction has been fully consummated, pursuant to a standard participation
agreement.

          Paying Agent: A Person that meets the eligibility standards for the Indenture Trustee
specified in Section 3.03 of the Indenture and is authorized by the Issuer to make payments to and
distributions from the Distribution Account, including payment of principal of or interest on the
Notes on behalf of the Issuer. The initial Paying Agent shall be the Indenture Trustee.

          Payment Date: The 15th day of each calendar month commencing on the first such 15th day to
occur after the first Transfer Date, or if any such day is not a Business Day, the first Business
Day immediately following such day; provided that the Maturity Date shall be a Payment Date.

          Percentage Interest: Has the meaning set forth in the Trust Agreement and the Indenture, as
applicable.

          Permitted Investments: Each of the following:

     (a) Direct general obligations of the United States or the obligations of any agency or
instrumentality of the United States fully and unconditionally guaranteed, the timely
payment or the guarantee of which constitutes a full faith and credit obligation of the
United States.

     (b) Federal Housing Administration debentures rated “Aa2” or higher by Moody’s and “AA”
or better by S&P.

     (c) Freddie Mac senior debt obligations rated “Aa2” or higher by Moody’s and “AA” or
better by S&P.

     (d) Federal Home Loan Banks’ consolidated senior debt obligations rated “Aa2” or higher
by Moody’s and “AA” or better by S&P.

     (e) Fannie Mae senior debt obligations rated “Aa2” or higher by Moody’s.

     (f) Federal funds, certificates of deposit, time and demand deposits, and bankers’
acceptances (having original maturities of not more than 30 days) of any domestic bank, the
short-term debt obligations of which have been rated “A-1” or better by S&P and “P-1” or
better by Moody’s.

     (g) Investment agreements approved by the Initial Noteholder provided:

	 	1.	 	the agreement is with a bank or insurance company which has an
unsecured, uninsured and unguaranteed obligation (or claims-paying ability)
rated “Aa2” or better by Moody’s and “AA” or better by S&P; and

17

 

	 	2.	 	monies invested thereunder may be withdrawn without any
penalty, premium or charge upon not more than one day’s notice (provided such
notice may be amended or canceled at any time prior to the withdrawal date);
and
	 
	 	3.	 	the agreement is not subordinated to any other obligations of
such insurance company or bank; and
	 
	 	4.	 	the same guaranteed interest rate will be paid on any future
deposits made pursuant to such agreement; and
	 
	 	5.	 	the Indenture Trustee and the Noteholders receive an opinion of
counsel that such agreement is an enforceable obligation of such insurance
company or bank.

     (h) Commercial paper (having original maturities of not more than 30 days) rated “A-1”
or better by S&P and “P-1” or better by Moody’s.

     (i) Investments in money market funds rated “AAAM” or “AAAM-G” by S&P and “Aaa” or
“P-1” by Moody’s.

     (j) Investments approved in writing by the Initial Noteholder;

provided that no instrument described above is permitted to evidence either the right to receive
(a) only interest with respect to obligations underlying such instrument or (b) both principal and
interest payments derived from obligations underlying such instrument and the interest and
principal payments with respect to such instrument provided a yield to maturity at par greater than
120% of the yield to maturity at par of the underlying obligations; and provided, further, that no
instrument described above may be purchased at a price greater than par if such instrument may be
prepaid or called at a price less than its purchase price prior to stated maturity; and provided,
further, that, with respect to any instrument described above, such instrument qualifies as a
“permitted investment” within the meaning of Section 860G(a)(5) of the Code and the regulations
thereunder.

          Each of the Permitted Investments may be purchased by the Indenture Trustee or through an
Affiliate of the Indenture Trustee.

          Permitted Liens: With respect to the Loan Collateral (i) Liens for state, municipal or other
local taxes (other than payroll taxes) if such taxes shall not at the time be due and payable or
are being contested in good faith by appropriate proceedings and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance with GAAP so long as
there exists no material risk of sale, forfeiture, loss, or loss of or interference with use or
possession of, or diminution of value, utility or useful life of, the related Loan Collateral, (ii)
liens imposed by operation of law, such as materialmen’s, mechanics’, carriers’, workmen’s and
repairmen’s liens and other similar liens arising in the ordinary course of business securing
obligations that are not overdue for a period of more than thirty (30) days or are being contested
in good faith by appropriate proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP so long as there exists no
material risk of sale, forfeiture, loss, or loss of or interference with use or

18

 

possession of, or diminution of value, utility or useful life of, the related Loan Collateral,
(iii) Liens (other than any Lien imposed by ERISA) on or in respect of deposits or pledges of cash
or letters of credit posted in the ordinary course of business (including, without limitation,
surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and
other types of social security benefits or to secure the performance of tenders, bids, leases,
contracts (other than for the repayment of Indebtedness), statutory obligations and other similar
obligations, provided that any such Lien attaches only to the cash collateral or letter of credit
posted to secure such obligation, and (iv) Liens pursuant to indebtedness incurred by an Obligor
that is subordinated, pursuant to a customary and appropriate subordination agreement, to all
present and future obligations, indebtedness and liabilities of Obligor or any related guarantor
under or in respect of the related Loan at any time and from time to time of every kind, nature and
description, direct or indirect, secured or unsecured, joint and several, absolute or contingent,
due or to become due, matured or unmatured, now existing or hereafter arising, contractual or
tortious, liquidated or unliquidated, such that the Lien in favor of the Originator is senior in
priority and the subordinated lien holder is subject to restrictions for a customary and reasonable
period of time with respect to its right to take foreclosure actions or exercise other remedies
with respect to the related collateral (other than the subordinated lien holder’s customary
purchase option of the senior indebtedness at par) in accordance with its credit and collection
policies. With respect to the Loans, Liens in favor of the Indenture Trustee.

          Person: Any individual, corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, national banking association, unincorporated organization
or government or any agency or political subdivision thereof.

          Physical Property: Has the meaning set forth in clause (b) of the definition of “Delivery”
above.

          Pool Charged-Off Ratio: With respect to any date of determination, the aggregate Principal
Balance of all Charged-Off Loans as of such date of determination divided by the Pool Principal
Balance as of such date of determination.

          Pool Principal Balance: With respect to any date of determination, the aggregate Principal
Balances of the Loans as of such date of determination.

          Pool Purchase Price: With respect to any date of determination, an amount equal to the sum of
the Principal Balance of each Loan as of such date of determination multiplied by the Purchase
Price Percentage relating to each Loan.

          Predecessor Servicer Work Product: Has the meaning set forth in Section 9.02(d) hereof.

          Principal Balance: With respect to any Loan, (i) at the Transfer Date, the Transfer Date
Principal Balance and (ii) with respect to any other date of determination, the outstanding unpaid
principal balance of the Loan as of such date of determination (after giving effect to all payments
received thereon and the allocation of any Net Loan Losses with respect thereto for a Delinquent
Loan prior to such date of determination); provided, however, that any Liquidated Loan shall be
deemed to have a Principal Balance of zero.

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          Principal Collections Account: The account designated as such, established and maintained by
the Servicer in accordance with Section 5.01(a)(2) hereof.

          Proceeding: Any suit in equity, action at law or other judicial or administrative proceeding.

          Proceeds: With respect to a Liquidated Loan, any cash amounts received in connection with the
liquidation of such Loan, whether through sale, foreclosure sale, liquidation, exchange or other
disposition, whether such disposition is voluntary or involuntary, and any other amounts required
to be deposited in the Collection Account pursuant to Section 5.01(b) hereof, in each case other
than Insurance Proceeds.

          Purchase Price Percentage: On any Business Day after the Closing Date, 90% with respect to
all Eligible Loans.

          Qualified Substitute Loan: An Eligible Loan or Eligible Loans substituted for a Deleted Loan
or other Loan pursuant to Section 3.05 hereof, which (i) complies or comply as of the date of
substitution with each representation and warranty set forth in Section 3.04 and (ii) is or are not
Delinquent as of the date of substitution for such Deleted Loan(s), Loan(s) or Unqualified Loan(s),
as the case may be.

          Rated Retained Securities: Each of (i) the CapitalSource Commercial Loan Trust Class E
Floating Rate Deferrable Asset Backed Notes, Series 2005-1; (ii) the CapitalSource Commercial Loan
Trust Class E Floating Rate Deferrable Asset Backed Notes, Series 2006-1; and (iii) such other
securities as agreed upon by mutual consent of the Majority Noteholders and the Issuer.

          Rating Agencies: S&P, Moody’s and Fitch or such other nationally recognized credit rating
agencies as may from time to time be designated in writing by the Majority Noteholders in their
sole discretion.

          Record Date: With respect to each Payment Date, the close of business two (2) Business Days
before such Payment Date.

          Reference Banks: Citibank, N.A., Barclays Bank PLC, The Bank of Tokyo-Mitsubishi UFJ and
National Westminster Bank PLC and their successors in interest; provided, however, that if the
Initial Noteholder determines that any of the foregoing banks are not suitable to serve as a
Reference Bank, then any leading banks selected by the Initial Noteholder with the approval of the
Issuer, which approval shall not be unreasonably withheld, which are engaged in transactions in
Eurodollar deposits in the international Eurocurrency market (i) with an established place of
business in London and (ii) which have been designated as such by the Initial Noteholder.

          Remittance Date: The Business Day immediately preceding each Payment Date.

          Remittance Period: With respect to any Payment Date, the period commencing immediately
following the Record Date for the preceding Payment Date (or, in the case of the initial Payment
Date, commencing immediately following the initial Transfer Date) and ending on and including the
related Record Date.

20

 

          Repurchase Price: With respect to a Loan the product of the Purchase Price Percentage
multiplied by the Principal Balance thereof as of such date of repurchase.

          Required Equity Contribution: On any date of determination, an amount equal to the excess of
(a) the sum of (i) the Borrowing Base on such date, minus (b) the Note Principal Balance on such
date, which amount shall at all times be equal to at least $10,000,000.

          Required Interest Coverage Amount: (a) For any date of determination occurring during the
Revolving Period, an amount equal to the sum of (x) the product of (i) the Maximum Note Principal
Balance, (ii) the sum of (A) the Note Interest Rate and (B) the per annum rate at which the Trust
Fees and Expenses accrue, divided by 12 and (iii) 1.20 and (y) the Interest Carry-Forward Amount
for the preceding Payment Date and (b) for any other date of determination, an amount equal to
amounts collected with respect to the Loans, including without limitation, all Proceeds, Insurance
Proceeds and proceeds in connection with the repurchase or substitution of any Loan pursuant to the
terms hereof.

          Required Loan Documents: With respect to: (a) any Eligible Loan (other than an Assigned
Loan, a Participation Loan, an Alarm Service Loan or a Noteless Loan), the duly executed original
of the Underlying Note and an assignment (which may be by endorsement or allonge) of such
Underlying Note, signed by an officer of the Loan Originator; any related loan agreement, the Loan
Schedule, participation agreement (if set forth on the Loan Schedule), together with originals or
copies of each of the following: the acquisition agreement (if set forth on the Loan Schedule),
subordination agreement (if set forth on the Loan Schedule), intercreditor agreement (if set forth
on the Loan Schedule), security agreements or instruments (to the extent any security interest in
collateral has been granted and as set forth in the Loan Schedule or the Loan Register), UCC
financing statements (to the extent any security interest in collateral has been granted and as set
forth in the Loan Schedule or the Loan Register), guarantee (if set forth on the Loan Schedule),
for each Eligible Loan secured by a Mortgaged Property, an original Assignment of Mortgage and an
original Assignment of Leases and Rents; and (b) any Eligible Loan which is an Assigned Loan (if
such Eligible Loan is identified as an Assigned Loan on the Loan Schedule), (i) the duly executed
original of each of the following: the Underlying Note including an assignment (which may be by
endorsement or allonge), signed by an officer of the Loan Originator and the assignment agreement
and (ii) duly executed originals or copies of each of the following: any related loan agreement,
subordination agreement (if set forth on the Loan Schedule), intercreditor agreement (if set forth
on the Loan Schedule), security agreements or instruments (to the extent any security interest in
collateral has been granted and as set forth in the Loan Schedule or the Loan Register), UCC
financing statements (to the extent any security interest in collateral has been granted and as set
forth in the Loan Schedule or the Loan Register), guarantee (if set forth on the Loan Schedule),
for each Assigned Loan secured by a Mortgaged Property, an original Assignment of Mortgage and an
original Assignment of Leases and Rents; and (c) any Assigned Loan which is a participation
interest, (i) the duly executed original or copy of each of the following: the participation
agreement, signed by an officer of the Loan Originator, and the related Participation Certificate
and (ii) duly executed originals or copies of each of the following: any related loan agreement,
subordination agreement (if set forth on the Loan Schedule), intercreditor agreement (if set forth
on the Loan Schedule), security agreements or instruments (to the extent any security interest in
collateral has been granted and as set forth in the Loan Schedule or the Loan Register), UCC
financing statements (to the extent any security interest in collateral has been granted and as set
forth in the Loan Schedule or the Loan Register)

21

 

and guarantee (if set forth on the Loan Schedule); and (d) any Eligible Loan which is an Alarm
Service Loan, the duly executed of each of the following: the original (and to the extent it
exists, the sole chattel paper counterpart) master purchase agreement and, if any, security
agreement and a copy of the purchase statement related to each Alarm Service Loan, signed by an
officer of the originator of such Alarm Service Loan together with copies of any related assignment
agreements, the Loan Schedule, subordination agreement (if set forth on the Loan Schedule),
intercreditor agreement (if set forth on the Loan Schedule), security agreements or instruments (to
the extent any security interest in collateral has been granted and as set forth in the Loan
Schedule or the Loan Register), UCC financing statements (to the extent any security interest in
collateral has been granted and as set forth in the Loan Schedule or the Loan Register) and
guarantee (if set forth on the Loan Schedule); and (e) any Eligible Loan which is a Noteless Loan,
a copy of the Loan Register (together with a certificate of a Responsible Officer of the Servicer
certifying to the accuracy of such Loan Register as of the date such Loan is included as a part of
the Collateral) and the other documents required by clause (a) above other than an executed
original Underlying Note and related allonge.

          Required Overcollateralization Amount: With respect to any Business Day on or after the
Closing Date, an amount equal to the greatest of (a) the positive difference between (i) the Pool
Principal Balance on such Business Day and (ii) the Pool Purchase Price (reduced by the amount,
without duplication, of any Loan in excess of the Concentration Limitation); and (b) the Required
Equity Contribution.

          Reserve Interest Rate: With respect to any LIBOR Determination Date, the rate per annum that
the Initial Noteholder determines to be either (i) the arithmetic mean (rounded to the nearest
whole multiple of 1/16%) of the one-month U.S. dollar lending rates which New York City banks
selected by the Initial Noteholder are quoting on the relevant LIBOR Determination Date to the
principal London offices of leading banks in the London interbank market or (ii) in the event that
the Initial Noteholder can determine no such arithmetic mean, the lowest one-month U.S. dollar
lending rate which New York City banks selected by the Initial Noteholder are quoting on such LIBOR
Determination Date to leading European banks.

          Responsible Officer: When used with respect to the Indenture Trustee or Collateral Custodian,
any officer within the Corporate Trust Office of such Person, including any Vice President,
Assistant Vice President, Secretary, Assistant Secretary or any other officer of such Person
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 Issuer, any officer of the Owner Trustee who is authorized to act for the Owner
Trustee in matters relating to the Issuer and any officer of the Administrator who is identified on
the list of Authorized Officers delivered by the Administrator on the date hereof (as such list may
be modified or supplemented from time to time thereafter) to the Indenture Trustee and the Owner
Trustee. When used with respect to the Depositor, the Servicer, the Loan Originator or any
Affiliate of any of them, the Controller, the President, any Vice President or the Treasurer of
such Person.

          Review Criteria: Has the meaning set forth in Section 2.05(b)(ii) hereof.

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          Revolving Loan: A Loan that is a line of credit arising from an extension of credit by the
Loan Originator to an Obligor.

          Revolving Period: With respect to the Notes, the period commencing on the Closing Date and
ending on the earlier of (i) one hundred eighty (180) days after the Closing Date, and (ii) the
date on which the Revolving Period is terminated pursuant to Section 2.08.

          Sales Price: For any Transfer Date and any Eligible Loan, the product of (i) the Purchase
Price Percentage multiplied by (b) the Principal Balance of such Eligible Loan as of such Transfer
Date.

          S&SA Assignment: An Assignment, in the form of Exhibit C hereto, of Loans and other property
from the Depositor to the Issuer pursuant to this Agreement.

          Scheduled Payment: 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 Transfer
Date, as adjusted pursuant to the terms of the related Required Loan Documents, and any such
payment received after the related Transfer Date.

          Securities: The Notes and the Trust Certificates.

          Securities Intermediary: A “securities intermediary” as defined in Section 8-102(a)(14) of
the UCC that is holding a Trust Account for the Indenture Trustee as the sole “entitlement holder”
as defined in Section 8-102(a)(7) of the UCC.

          Securitization: A sale or transfer of Loans by the Issuer to any other Person in order to
effect one or a series of structured-finance securitization transactions, including but not limited
to transactions involving the issuance of securities which may be treated for federal income tax
purposes as indebtedness of CapitalSource or one or more of its wholly owned subsidiaries.

          Securityholder: Any Noteholder or Certificateholder.

          Senior Loan: A Loan that (i) is secured by a first priority lien on all of the Obligor’s
assets constituting Loan Collateral for such Loan (subject to Permitted Liens), (ii) has a
Loan-to-Value Ratio less than or equal to 90% and (iii) 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.

          Senior B-Note Loan: Any multilender Loan that (i) is secured by a first priority lien on all
the Obligor’s assets constituting Loan Collateral for such Loan (subject to Permitted Liens), (ii)
has a Loan-to-Value Ratio less than or equal to 90%, and (iii) 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 Loan 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 Secured Loan: Either a Senior Loan or a Senior B-Note Loan.

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          Servicer: CapitalSource, in its capacity as the servicer hereunder, or any successor appointed
as herein provided.

          Servicer Event of Default: Has the meaning set forth in Section 9.01 hereof.

          Servicer Indemnified Party: Has the meaning set forth in Section 8.01(a) hereof.

          Servicer Extension Notice: Has the meaning set forth in Section 9.01(c) hereof.

          Servicer’s Loan File: With respect to each Eligible Loan, all documents (or electronic images
thereof) relating to such Eligible Loan, including, without limitation, copies of all of the Loan
Documents included in the related Custodial Loan File.

          Servicing Advance Reimbursement Amount: With respect to any Record Date, the amount of any
Servicing Advances that have not been reimbursed as of such date, including Nonrecoverable
Servicing Advances.

          Servicing Advances: Advances that are made by the Servicer in conformity with the Underwriting
Guidelines.

          Servicing Compensation: The Servicing Fee, assumption fees, late payment charges and other
ancillary income with respect to any Loan.

          Servicing Fee: With respect to each Eligible Loan (including any Eligible Loan that has been
foreclosed and for which the related Mortgaged Property has become a Foreclosure Property, but
excluding any Liquidated Loan), for each Remittance Period, a per annum fee equal to the sum of (i)
1.00% of the Principal Balance of each Loan (other than Revolving Loans) and (ii) 1.25% of the
Principal Balance of each Revolving Loan, in each case at the beginning of such Remittance Period
payable to the Servicer for the servicing of such Eligible Loan out of Scheduled Payments made by
the Obligor thereunder in an amount determined in the manner in effect on the related Transfer
Date.

          Servicing Officer: Any officer of the Servicer involved in, or responsible for, the
administration and servicing of the Eligible Loans whose name and specimen signature appears on a
list of servicing officers annexed to an Officer’s Certificate furnished by the Servicer on the
date hereof to the Issuer and the Indenture Trustee, on behalf of the Noteholders, as such list may
from time to time be amended.

          S&P: Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.

          SS Underlying Loan: Each of the loans sold and transferred to the Issuer in connection with
the payment of a Noteholder SS Advance. A listing of such loans is set forth on Exhibit I hereto,
as the same may be updated from time to time by the Servicer.

          State: Any one of the states of the United States of America or the District of Columbia.

          Subordinated Loan: Any Loan other than a Senior Loan or a Senior B-Note Loan.

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          Subsidiary: With respect to any Person, any corporation, partnership or other entity of which
at least a majority of the securities or other ownership interests having by the terms thereof
ordinary voting power to elect a majority of the board of directors or other persons performing
similar functions of such corporation, partnership or other entity (irrespective of whether or not
at the time securities or other ownership interests of any other class or classes of such
corporation, partnership or other entity shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or controlled by such
Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.

          Substitution Adjustment: As to any date on which a substitution occurs pursuant to Section
2.05 or Section 3.05 hereof, the amount, if any, by which (a) the aggregate principal balance of
any Qualified Substitute Loans (after application of principal payments received on or before the
related Transfer Date) is less than (b) the aggregate of the Principal Balances of the related
Deleted Loans as of any date of determination.

          Tangible Net Worth: With respect to any Person, as of any date of determination, the
consolidated Net Worth of such Person and its Subsidiaries, less the consolidated net book value of
all assets of such Person and its Subsidiaries (to the extent reflected as an asset in the balance
sheet of such Person or any Subsidiary at such date) which will be treated as intangibles under
GAAP, including, without limitation, such items as deferred financing expenses, net leasehold
improvements, good will, trademarks, trade names, service marks, copyrights, patents, licenses and
unamortized debt discount and expense; provided, that residual securities issued by such Person or
its Subsidiaries shall not be treated as intangibles for purposes of this definition.

          Term Event: Has the meaning set forth in Section 9.01(c) hereof.

          Termination Date: The earliest of (a) the date of termination of the Revolving Period,
pursuant to Section 2.08, (b) the date upon which this Agreement terminates pursuant to Section
12.01 or is optionally terminated by the Servicer pursuant to Section 12.02, (c) the date of
declaration of the Termination Date pursuant to Section 9.01(d) or the date of the automatic
occurrence of the Termination Date pursuant to Section 9.01(e) and (d) the Maturity Date.

          Termination Price: Has the meaning set forth in Section 12.02 hereof.

          Third Party Claim: Has the meaning set forth in Section 8.01(d) hereof.

          Transfer Date: With respect to each Eligible Loan, the day such Loan is sold and conveyed to
the Depositor by the Loan Originator pursuant to the Loan Sale Agreement and to the Issuer by the
Depositor pursuant to Section 2.01 hereof, which results in an increase in the Note Principal
Balance by the related Additional Note Principal Balance. With respect to any Qualified Substitute
Loan, the Transfer Date shall be the day such Loan is conveyed to the Issuer pursuant to Section
2.05 or 3.05. No Transfer Date shall occur following the termination of the Revolving Period.

          Transfer Date Principal Balance: As to each Loan, its Principal Balance as of the close of
business on the Transfer Date (after giving effect to any payments received on the Loan on or
before the Transfer Date).

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          Transition Costs: Has the meaning set forth in Section 9.02(a) hereof.

          Trigger Event: Shall exist, as of any Record Date, if any of the following events shall have
occurred and be continuing for fifteen (15) days (i) the available Excess Spread is less than 2.00%
(determined at all times using the LIBOR Margin then in effect); (ii) the weighted average Loan
Rating of the Loan Pool exceeds 3.0; (iii) the aggregate Principal Balance of all Delinquent Loans
and Foreclosed Loans as of such Record Date divided by the Pool Principal Balance as of such Record
Date is greater than 10%; (iv) the Pool Charged-Off Ratio as of such Record Date is greater than
5%; (v) a Borrowing Base Deficiency shall have occurred and shall not have been cured within five
(5) Business Days of the occurrence thereof; (vi) a Servicer Event of Default shall have occurred;
(vii) a Change of Control of CapitalSource shall have occurred; (viii) CapitalSource shall have
breached any financial covenant set forth in Section 7.01 hereof; (ix) the cumulative sum of all
Delinquent and Charged-Off Loans in the loan pools pledged as part of all Securitizations effected
by the Loan Originator prior to such date of determination exceed 7.5% of the aggregate original
pool principal balance of such loan pools; or (x) CapitalSource shall have suffered an event of
default with respect to any indebtedness for an amount in excess of $10,000,000 (it being
understood that a default under another agreement shall only constitute a Trigger Event hereunder
only when and if the lender or counterparty under the other agreement is presently entitled to
exercise default remedies by the terms of such other agreement).

          Trust Account Property: The Trust Accounts, all amounts and investments held from time to
time in the Trust Accounts and all proceeds of the foregoing.

          Trust Accounts: The Distribution Account, the Collection Account and the Principal
Collections Account.

          Trust Agreement: The Trust Agreement dated as of April 19, 2007 between the Depositor and the
Owner Trustee, as the same may be amended and supplemented from time to time.

          Trust Certificate: Has the meaning set forth in the Trust Agreement.

          Trust Fees and Expenses: As of each Payment Date, an amount equal to the Servicing
Compensation, the Owner Trustee Fee, if applicable, and the Indenture Trustee Fee, if any, the
Backup Servicing Fee, and any expenses of the foregoing.

          UCC: The Uniform Commercial Code as in effect in the State of New York.

          UCC Assignment: A form “UCC-2” or “UCC-3” statement meeting the requirements of the Uniform
Commercial Code of the relevant jurisdiction to reflect an assignment of a secured party’s interest
in collateral.

          UCC-1 Financing Statement: A financing statement meeting the requirements of the Uniform
Commercial Code of the relevant jurisdiction.

          Underlying Note: With respect to an Eligible Loan, the executed promissory note or other
evidence of the indebtedness (including, without limitation, the related Loan Register to

26

 

the extent no physical promissory note or other instrument was executed) of the related
Obligor or Obligors.

          Underwriting Guidelines: The written credit and collection policies and procedures manual of
the Loan Originator, as the same may be amended from time to time.

          Unqualified Loan: Has the meaning set forth in Section 3.05(a) hereof.
Whole Loan Sale: A Disposition of Loans pursuant to a whole-loan sale.

          Section 1.02 Other Definitional Provisions.

          (a) Any agreement, instrument or statute defined or referred to herein or in any instrument or
certificate delivered in connection herewith means such agreement, instrument or statute as from
time to time amended, modified or supplemented and includes (in the case of agreements or
instruments) references to all attachments thereto and instruments incorporated therein; references
to a Person are also to its permitted successors and assigns.

          (b) All terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

          (c) As used in this Agreement and in any certificate or other document made or delivered
pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such
certificate or other document, and accounting terms partly defined in this Agreement or in any such
certificate or other document to the extent not defined, shall have the respective meanings given
to them under GAAP. To the extent that the definitions of accounting terms in this Agreement or in
any such certificate or other document are inconsistent with the meanings of such terms under GAAP,
the definitions contained in this Agreement or in any such certificate or other document shall
control.

          (d) The words “hereof”, “herein”, “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular provision of this
Agreement; Article, Section, Schedule and Exhibit references contained in this Agreement are
references to Articles, Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified; and the term “including” shall mean “including without limitation”.

          (e) The definitions contained in this Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and neuter genders of
such terms.

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ARTICLE II

CONVEYANCE OF THE COLLATERAL;

ADDITIONAL NOTE PRINCIPAL BALANCES

	 	 	     Section 2.01 Conveyance of the Collateral; Additional Note Principal
Balances.

          (a) (i) On each Transfer Date during the Revolving Period, the Depositor agrees to offer for
sale and to sell to the Issuer each of the Loans sold and contributed to the Depositor pursuant to
the Loan Sale Agreement on such Transfer Date and the Issuer agrees to purchase such Loans offered
for sale by the Depositor. No Transfer Date shall occur following the termination of the
Revolving Period. In addition, on each Transfer Date, the Depositor agrees to offer for sale to
the Issuer and the Issuer agrees to purchase from the Depositor additional Loans in an amount
sufficient to maintain the Required Overcollateralization Amount.

     (ii) In consideration of the payment of the Additional Note Principal Balance pursuant
to Section 2.06 hereof, (A) the Depositor as of the related Transfer Date and concurrently
with the execution and delivery hereof, hereby sells and assigns to the Issuer, without
recourse, but subject to the other terms and provisions of this Agreement, all of the right,
title and interest of the Depositor in and to the Loans and the Loan Collateral transferred
on such date and (B) the Issuer grants and pledges such Loans and such Loan Collateral to
the Indenture Trustee on behalf of the Noteholders as security for the Issuer’s obligations
under the Indenture and the other Basic Documents.

     (iii) During the Revolving Period, on each Transfer Date, subject to the conditions
precedent set forth in Section 2.06 and in accordance with the procedures set forth in
Section 2.01(c), the Depositor, pursuant to a S&SA Assignment, will assign to the Issuer
without recourse all of its respective right, title and interest, in and to the Loans and
all proceeds thereof listed on the Loan Schedule attached to such S&SA Assignment, including
all interest and principal on or with respect to such Loans on or after the related Transfer
Date, together with all right, title and interest in and to the proceeds of any related
Insurance Policies and all of the Depositor’s rights, title and interest in and to (but none
of its obligations under) the Loan Sale Agreement and all proceeds of the foregoing.

          (b) As of the Closing Date and as of each Transfer Date, the Issuer acknowledges (or will
acknowledge pursuant to the S&SA Assignment) the conveyance to it of the Loans and Loan
Collateral, including all rights, title and interest of the Depositor in and to the Loans and the
Loan Collateral, receipt of which is hereby acknowledged by the Issuer. Concurrently with such
delivery, as of the Closing Date and as of each Transfer Date, pursuant to the Indenture the Issuer
pledges the Loans and the Loan Collateral to the Indenture Trustee. In addition, concurrently with
such delivery on the Closing Date and in exchange therefor, the Owner Trustee, pursuant to the
instructions of the Depositor, has executed (not in its individual capacity, but solely as Owner
Trustee on behalf of the Issuer) and caused the Trust Certificates to be authenticated and
delivered (which may be by facsimile transmission or in an electronic format) to or at the
direction of the Depositor.

          (c) (i) Pursuant to and subject to the Note Purchase Agreement, the Issuer may, at its sole
option, from time to time request that the Initial Noteholder advance on any Transfer Date
Additional Note Principal Balances and, upon satisfaction of the conditions

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precedent to such advance in accordance with the Note Purchase Agreement, the Initial
Noteholder shall remit on such Transfer Date, to or at the direction of the Depositor, an amount
equal to such Additional Note Principal Balances.

     (ii) Notwithstanding anything to the contrary herein, in no event shall the Issuer be
required to purchase Loans and the Initial Noteholder shall not be required to advance
Additional Note Principal Balances on a Transfer Date if the conditions precedent to a
transfer of the Loans under Section 2.06 and the conditions precedent to the purchase of
Additional Note Principal Balances set forth in Section 3.01 of the Note Purchase Agreement
have not been fulfilled.

     (iii) The Servicer shall appropriately note such Additional Note Principal Balance (and
the increased Note Principal Balance) in the next succeeding Monthly Servicer Report;
provided, however, that failure to make any such notation in such Monthly Servicer Report or
any error in such notation shall not adversely affect any Noteholder’s rights with respect
to its Note Principal Balance and its right to receive interest and principal payments in
respect of the Note Principal Balance held by such Noteholder. The Initial Noteholder shall
record on the schedule attached to such Noteholder’s Note, the date and amount of any
Additional Note Principal Balance advanced by it; provided, that failure to make such
recordation on such schedule or any error in such schedule shall not adversely affect any
Noteholder’s rights with respect to its Note Principal Balance and its right to receive
interest payments in respect of the Note Principal Balance held by such Noteholder.

     (iv) Absent manifest error, the Note Principal Balance of each Note as set forth in
the Initial Noteholder’s records shall be binding upon the Indenture Trustee, the
Noteholders and the Issuer, notwithstanding any notation made by the Servicer in its Monthly
Servicer Report pursuant to the preceding paragraph.

          (d) The Depositor shall, at its own expense, within one Business Day following the Transfer
Date, indicate in its computer files that the Loans identified in each S&SA Assignment have been
sold to the Issuer pursuant to this Agreement.

          (e) Subject to Section 3.01(o), the parties hereto intend that each of the conveyances
contemplated hereby be sales from the Depositor to the Issuer of all of the Depositor’s right,
title and interest in and to the Loans and the Loan Collateral. In the event the transactions set
forth herein are deemed not to be a sale, the Depositor hereby grants to the Issuer a security
interest in all of the Depositor’s right, title and interest in, to and under the Loans and the
Loan Collateral related thereto, whether now existing or hereafter created, to secure all of the
Depositor’s obligations hereunder, and this Agreement shall constitute a security agreement under
applicable law.

          Section 2.02 Ownership and Possession of Loan Files.

          With respect to each Loan, as of the related Transfer Date the ownership of the related
Required Loan Documents and the contents of the related Servicer’s Loan File and Custodial Loan
File shall be vested in the Issuer as part of the Collateral for the benefit of the
Securityholders, and with respect to each Eligible Loan, as of the related Transfer Date, the
related Required Loan Documents and the contents of the related Servicer’s Loan File and

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Custodial Loan File shall be Granted (as defined in the Indenture) and pledged to the
Indenture Trustee on behalf of the Securityholders, and the Collateral Custodian shall take
possession of the Custodial Loan Files as contemplated in Section 2.05 hereof.

          Section 2.03 Books and Records; Intention of the Parties.

          On the Closing Date, the Depositor shall, at such party’s sole expense, cause to be filed
UCC-1 Financing Statements naming the Issuer as “secured party” and describing the Collateral being
sold by the Depositor to the Issuer with the office of the Secretary of State of the state in which
the Depositor is located and in any other jurisdictions as shall be necessary to perfect a security
interest in the Collateral. In addition, on the Closing Date, the Loan Originator shall, at its
expense, cause to be filed UCC-1 Financing Statements naming the Depositor as “secured party” and
describing the Loans being sold by the Loan Originator to the Depositor with the office of the
Secretary of the State in which the Loan Originator is located and in such other jurisdictions as
shall be necessary to perfect a security interest in the Collateral.

          Section 2.04 Delivery of Loan Documents.

          (a) The Loan Originator shall (i) no later than 12:00 noon New York time on the Business Day
prior to the related Transfer Date, deliver or cause to be delivered to the Collateral Custodian,
as the designated agent of the Indenture Trustee, by facsimile transmission or in an electronic
format mutually agreed to by the parties, a Loan Schedule and, with regard to each Loan (other than
an Alarm Service Loan) a copy of the executed Underlying Note endorsed in blank or the related Loan
Register and Assignment of Mortgage, if any, endorsed in blank and (ii) with respect to each Alarm
Service Loan transferred to the Issuer on such Transfer Date, within four Business Days after such
Transfer Date, deliver (or caused to be delivered) to the Collateral Custodian, the original (and
to the extent it exists, the sole chattel paper counterpart) master purchase agreement and, if any,
security agreement and a copy of the purchase statement related to each Alarm Service Loan, and all
other Required Loan Documents for each Alarm Service Loan, and (iii) with respect to each Loan
(other than an Alarm Service Loan) transferred to the Issuer on such Transfer Date, within two
Business Days after such Transfer Date, deliver (or caused to be delivered) to the Collateral
Custodian the original and duly executed Underlying Note (if any) and Assignment of Mortgage (if
any), any security agreement related to each Loan (other than an Alarm Service Loan) transferred to
the Issuer, and all other Required Loan Documents for each Loan (other than an Alarm Service Loan)
(other than those documents required to be retained by the Servicer in connection with the
servicing and administration of the Loans) (with respect to each Loan (including each Alarm Service
Loan), a “Custodial Loan File”).

          (b) The Loan Originator shall, within two (2) Business Days after the related Transfer Date,
deliver or cause to be delivered to the Servicer the related Servicer’s Loan File for the benefit
of, and as agent for, the Indenture Trustee, on behalf of the Noteholders.

          (c) The Indenture Trustee shall cause the Collateral Custodian to take and maintain continuous
physical possession of the Custodial Loan Files in the State of Minnesota and, in connection
therewith, shall act solely as agent for the Noteholders in accordance with the terms hereof and
not as agent for the Loan Originator, the Servicer or any other party.

30

 

          (d) Upon discovery by any of the Issuer, the Depositor, the Loan Originator, the Servicer, the
Indenture Trustee, the Paying Agent, the Collateral Custodian, the Backup Servicer and/or a
Noteholder of the Loan Originator’s or the Depositor’s failure to deliver in accordance with the
terms and conditions of this Agreement and the other Basic Documents any of the Required Loan
Documents required to be included in the Loan File for an Alarm Service Loan, the Person
discovering such breach shall give prompt written notice of such failure to the Issuer, the
Depositor, the Loan Originator, the Servicer, the Indenture Trustee, the Paying Agent, the
Collateral Custodian, the Backup Servicer and each Noteholder; provided, however, that the failure
to give such notice shall not affect the obligations of the Loan Originator and the Depositor
hereunder. Unless such breach has been waived by the Initial Noteholder or Depositor shall not have
cured such breach within five (5) Business Days of the earlier of notice of such breach or
knowledge thereof (provided that, with respect to the original (and to the extent it exists, the
sole chattel paper counterpart) master purchase agreement and, if any, security agreement related
to an Alarm Service Loan, there shall be no right to cure such breach), the Depositor shall
repurchase from the Issuer, and the Loan Originator shall repurchase from the Depositor, the
Loan(s) for which such failure has occurred by paying to the Indenture Trustee the Sales Price
therefor.

	 	 	Section 2.05 Acceptance by the Indenture Trustee of the Loans; Certain
Substitutions and Repurchases; Certification by the Collateral Custodian.

          (a) Based on the initial certification received by it from the Collateral Custodian in the
form of Exhibit E-1 attached hereto (the “Initial Certification”), the Indenture Trustee
acknowledges receipt of, subject to the further review and exceptions reported by the Collateral
Custodian pursuant to the procedures described below, the documents (or certified copies thereof)
delivered to the Indenture Trustee or the Collateral Custodian on its behalf pursuant to Section
2.04 and declares that it holds and will continue to hold directly those documents and any
amendments, replacements or supplements thereto and all other assets constituting the Collateral
delivered to it in trust for the use and benefit of all present and future Noteholders.

          (b) (i) On or before 11:00 a.m. New York City time on the related Transfer Date, the
Collateral Custodian will deliver to the Initial Noteholder, with a copy to the Indenture Trustee,
an Initial Certification, confirming whether or not it has received, by facsimile transmission or
in electronic format mutually agreed upon by the parties, a copy of either the executed Underlying
Note or Loan Register and the Assignment of Mortgage, if any, in each case other than the Loan
Register, endorsed in blank, for each Loan which the Issuer will request the Initial Noteholder to
advance Additional Note Principal Balances on such Transfer Date pursuant to, and subject to the
conditions of, the Note Purchase Agreement.

     (ii) Within five (5) Business Days of its receipt of the remaining Required Loan
Documents for each such Loan, the Collateral Custodian shall review the related Loan and
Required Loan Documents to confirm that (A) any Underlying Note has been properly executed
and has no missing or mutilated pages, (B) Uniform Commercial Code Financing Statements and
other filings (required by the Required Loan Documents) have been made, (C) other than with
respect to a Loan the Loan Collateral for which consists of receivables only as indicated on
the Loan Schedule, an Insurance Policy is contained

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in such Required Loan Documents with respect to any real or personal property
constituting the Loan Collateral, and (D) the related Principal Balance, Loan number and
Obligor name with respect to such Loan is referenced on the related Loan List and is not a
duplicate Loan (collectively, the “Review Criteria”). In order to facilitate the foregoing
review by the Collateral Custodian, in connection with each delivery of Required Loan
Documents hereunder to the Collateral Custodian, the Servicer shall provide to the
Collateral Custodian an electronic file (in Excel or a comparable format) that contains the
related Loan Schedule or that otherwise contains the Loan number and the name of the Obligor
with respect to each related Loan. Upon completion of such review the Collateral Custodian
will deliver a final certification in the form attached hereto as Exhibit E-2 (the “Final
Certification”) to the Initial Noteholder, with a copy to the Indenture Trustee and the Loan
Originator, confirming its receipt of the Required Loan Documents. The Final Certification
will also contain an exception report attached as an exhibit thereto which will identify any
Loans for which (i) the Collateral Custodian has not received a Required Loan Document or
(ii) any Review Criteria is not satisfied.

     (iii) The Loan Originator shall have ten (10) Business Days to deliver any missing
Required Loan Documents or correct any non-compliance with a Review Criteria. If after the
conclusion of such time period the Loan Originator has not delivered such missing Required
Loan Document or cured any non-compliance by a Loan with a Review Criteria and such failure
has a material adverse effect on the value or enforceability of any Eligible Loan or the
interests of the Securityholders in any Eligible Loan, the Loan Originator shall repurchase
such Eligible Loan within one (1) Business Day of notice thereof from the Indenture Trustee
or the Initial Noteholder at the Repurchase Price thereof with respect to such Eligible Loan
by depositing such Repurchase Price in the Collection Account; provided, however that the
Loan Originator shall only be required to pay the Repurchase Price with respect to any such
Loan to the extent that, at the time such repurchase is required pursuant to terms hereof, a
Borrowing Base Deficiency would exist. In lieu of such a repurchase, the Depositor and Loan
Originator may comply with the substitution provisions of Section 3.05 hereof; provided,
however that the Loan Originator shall only be required to comply with the substitution
provisions to the extent that a Borrowing Base Deficiency would exist at the time of such
proposed substitution. The Loan Originator shall provide the Servicer, the Indenture
Trustee, the Issuer and the Initial Noteholder with a certification of a Responsible Officer
on or prior to such repurchase or substitution indicating that the Loan Originator intends
to repurchase or substitute such Eligible Loan.

     (iv) Notwithstanding the foregoing provisions of this Section 2.05(b), it is
understood and agreed that, with respect to the Loans set forth on Schedule K only, the Loan
Originator shall be permitted to deliver the documents required to be delivered under this
Section 2.05(b) within seven (7) calendar days of the first Transfer Date following the date
hereof; provided, that, if the Loan Originator has not delivered such documents for any Loan
as of such date, the Loan Originator shall be obligated to repurchase or substitute any such
Loan pursuant to this Section 2.05(b) without regard to any grace or cure period set forth
herein.

     (v) It is understood and agreed that the obligation of the Loan Originator to
repurchase or substitute any such Loan pursuant to this Section 2.05(b) shall constitute

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the sole remedy with respect to such failure to comply with the foregoing delivery
requirements.

          (c) In performing its reviews of the Custodial Loan Files, the Collateral Custodian shall have
no responsibility to determine the genuineness of any document contained therein and any signature
thereon. The Collateral Custodian shall not have any responsibility for determining whether any
document is valid and binding, whether the text of any assignment or endorsement is in proper or
recordable form, whether any document has been recorded in accordance with the requirements of any
applicable jurisdiction, or whether a blanket assignment is permitted in any applicable
jurisdiction.

          (d) The Servicer’s Loan File shall be held in the custody of the Servicer for the benefit of
the Indenture Trustee, on behalf of the Noteholders. It is intended that, by the Servicer’s
agreement pursuant to this Section 2.05(d), the Indenture Trustee shall be deemed to have
possession of the Servicer’s Loan Files for purposes of Section 9-313 of the UCC of the state in
which such documents or instruments are located. The Servicer shall promptly report to the
Indenture Trustee any failure by it to hold the Servicer’s Loan File as herein provided and shall
promptly take appropriate action to remedy any such failure. In acting as custodian of such
documents and instruments, the Servicer agrees not to assert any legal or beneficial ownership
interest in the Eligible Loans or such documents or instruments. Subject to Section 8.01(d), the
Servicer agrees to indemnify the Securityholders and the Indenture Trustee, their officers,
directors, employees, agents and “control persons” as such term is used under the Act and under the
Securities Exchange Act of 1934, as amended for any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever which may be imposed on, incurred by or
asserted against the Securityholders or the Indenture Trustee as the result of the gross negligence
or willful misfeasance by the Servicer relating to the maintenance and custody of such documents or
instruments which have been delivered to the Servicer; provided, however, that the Servicer will
not be liable for any portion of any such amount resulting from the gross negligence or willful
misconduct of any Securityholders or the Indenture Trustee; and provided, further, that the
Servicer will not be liable for any portion of any such amount resulting from the Servicer’s
compliance with any instructions or directions consistent with this Agreement issued to the
Servicer by the Indenture Trustee or the Majority Noteholders. The Indenture Trustee shall have no
duty to monitor or otherwise oversee the Servicer’s performance as custodian of the Servicer Loan
File hereunder.

          Section 2.06 Conditions Precedent to Transfer Dates.

          At least one (1) Business Day prior to each proposed Transfer Date, the Issuer shall give
notice to the Initial Noteholder, the Indenture Trustee and the Paying Agent of such proposed
upcoming Transfer Date and provide an estimate of the number of Loans and aggregate Principal
Balance of such Loans proposed to be transferred on such Transfer Date. On the Business Day prior
to each Transfer Date, the Issuer shall provide the Initial Noteholder with a final Loan Schedule
with respect to the Loans proposed to be transferred on such Transfer Date. On each Transfer Date,
the Depositor shall convey to the Issuer the Loans and the other property and rights related
thereto described in the related S&SA Assignment and the Issuer shall, pursuant to the Indenture,
grant and pledge to the Indenture Trustee the Loans and Loan Collateral, and the Issuer, only upon
the satisfaction of each of the conditions set forth below on or prior to such Transfer Date, shall
pay or cause to be paid cash in the amount of the Additional

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Note Principal Balance received from the Initial Noteholder in respect of the Loans to or at
the direction of the Depositor.

          As of the Closing Date and each Transfer Date:

     (i) The Servicer shall have delivered to the Issuer and the Initial Noteholder (with a
copy to the Collateral Custodian and the Backup Servicer), no later than 2:00 p.m. New York
City time, one (1) Business Day prior to the related Transfer Date in a form and substance
reasonably satisfactory to the Majority Noteholders, (A) a Notice of Additional Note
Principal Balance, a Borrowing Base Certificate and Loan Schedule, (B) a S&SA Assignment and
(C) a copy of the fully executed LPA Assignment evidencing the sale of the Loans proposed to
be sold on such Transfer Date from the Loan Originator to the Depositor;

     (ii) the Initial Noteholder shall have received the Initial Certification prepared by
the Collateral Custodian with respect to the Loans;

     (iii) the amount of the Additional Note Principal Balance requested on such Transfer
Date shall be at least equal to $1,000,000;

     (iv) On and as of such day, after giving effect to such transfer, the Note Principal
Balance shall not exceed the lesser of (x) the Maximum Note Principal Balance and (y) the
Borrowing Base;

     (v) the Depositor shall have deposited, or caused to be deposited, in the Collection
Account all collections received with respect to each of the Eligible Loans on and after the
applicable Transfer Date;

     (vi) a Bankruptcy Event shall not have occurred with respect to the Loan Originator or
the Depositor;

     (vii) the Termination Date shall not have occurred;

     (viii) the Required Overcollateralization Amount shall have been maintained (after
giving effect to the sale of Loans on such Transfer Date);

     (ix) each of the representations and warranties made by the Loan Originator contained
in Section 3.04 with respect to the Eligible Loans purchased and pledged on a Transfer Date
shall be true and correct as of such Transfer Date with the same effect as if then made and
each of the Depositor and the Loan Originator shall have performed all obligations to be
performed by it under the Basic Documents on or prior to such Transfer Date; provided that,
if any representation or warranty made by the Loan Originator pursuant to Section 3.04
herein shall be incorrect as of any Transfer Date with respect to any Loan to be purchased
on such date, the Issuer shall only be relieved of its obligation to purchase such Loan and,
assuming satisfaction or waiver of the other conditions set forth in this clause (ix), the
Issuer shall nonetheless be obligated to purchase all Loans to be purchased on such date
that are unaffected by such breach;

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     (x) the Depositor shall have taken any action reasonably requested by the Indenture
Trustee, the Issuer or the Noteholders required to maintain the ownership interest of the
Issuer in the Collateral and the security interest of the Indenture Trustee in the
Collateral;

     (xi) all conditions precedent to the Depositor’s purchase and contribution of Loans
pursuant to the Loan Sale Agreement shall have been fulfilled as of such Transfer Date; and

     (xii) all conditions precedent to the Noteholders’ purchase of the Additional Note
Principal Balance pursuant to the Note Purchase Agreement shall have been fulfilled as of
such Transfer Date.

          Section 2.07 Additional Advances by Initial Noteholder.

          If on any date of determination, there exists a Borrowing Base Excess, the Issuer may, upon
one (1) Business Days’ notice to the Initial Noteholder, at its option, request an additional
advance from the Initial Noteholder up to an amount equal to such Borrowing Base Excess. Any
advance pursuant to this Section 2.07 shall be subject to the following conditions:

     (i) as of such date, neither the Loan Originator nor the Depositor shall (A) be subject
to a Bankruptcy Event or (B) have reason to believe that its insolvency is imminent;

     (ii) the Revolving Period shall not have terminated; and

     (iii) as of such date (after giving effect to such advance), the Required
Overcollateralization Amount shall have been maintained.

          Section 2.08 Termination of Revolving Period.

          Upon the occurrence of (i) a Default or (ii) a Trigger Event, the Initial Noteholder may, in
any such case, in their sole discretion and upon written notice to the Servicer, terminate the
Revolving Period.

          Section 2.09 Correction of Errors.

          The parties hereto who have relevant information shall cooperate to reconcile any errors in
calculating the Sales Price of the Eligible Loans from and after the related Transfer Date. In the
event that an error in the Sales Price of the Eligible Loans is discovered by either party, any
miscalculations of Principal Balance, accrued interest, miscalculation of the Required
Overcollateralization Amount or aggregate unreimbursed Servicing Advances attributable to the
applicable Eligible Loan, or any prepayments not properly credited, such party shall give prompt
notice to the other parties hereto, and the party that shall have benefited from such error shall
promptly remit to the other, by wire transfer of immediately available funds, the amount of such
error with no interest thereon.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

          Section 3.01 Representations and Warranties of the Depositor.

          The Depositor hereby represents, warrants and covenants to the other parties hereto and the
Securityholders that as of the Closing Date and as of each Transfer Date:

          (a) The Depositor is a limited liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization and has, and had at all relevant
times, full power to own its property, to carry on its business as currently conducted and to enter
into and perform its obligations under each Basic Document to which it is a party;

          (b) The execution and delivery by the Depositor of each Basic Document to which the Depositor
is a party and its performance of and compliance with all of the terms thereof will not violate the
Depositor’s organizational documents or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in the breach or acceleration
of, any material contract, agreement or other instrument to which the Depositor is a party or which
are applicable to the Depositor or any of its assets;

          (c) The Depositor has the full power and authority to enter into and consummate the
transactions contemplated by each Basic Document to which the Depositor is a party, has duly
authorized the execution, delivery and performance of each Basic Document to which it is a party
and has duly executed and delivered each Basic Document to which it is a party; each Basic Document
to which it is a party, assuming due authorization, execution and delivery by the other party or
parties thereto, constitutes a valid, legal and binding obligation of the Depositor, enforceable
against it in accordance with the terms thereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or other similar laws relating to
or affecting the rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law);

          (d) The Depositor is not in violation of, and the execution and delivery by the Depositor of
each Basic Document to which the Depositor is a party and its performance and compliance with the
terms of each Basic Document to which the Depositor is a party will not constitute a violation with
respect to any order or decree of any court or any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction, which violation would materially and
adversely affect the financial condition or operations of the Depositor or any of its properties or
materially and adversely affect the performance of any of its duties hereunder;

          (e) There are no actions or proceedings against, or investigations of, the Depositor currently
pending with regard to which the Depositor has received service of process and no action or
proceeding against, or investigation of, the Depositor is, to the knowledge of the Depositor,
threatened or otherwise pending before any court, administrative agency or other tribunal that (A)
would prohibit its entering into any of the Basic Documents to which it is a party or render the
Securities invalid, (B) seeks to prevent the issuance of the Securities or the

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consummation of any of the transactions contemplated by any of the Basic Documents to which it
is a party or (C) would prohibit or materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability of, any of the Basic
Documents to which it is a party or the Securities;

          (f) No consent, approval, authorization or order of any court or governmental agency or body
is required for the execution, delivery and performance by the Depositor of, or compliance by the
Depositor with, any of the Basic Documents to which the Depositor is a party or the Securities, or
for the consummation of the transactions contemplated by any of the Basic Documents to which the
Depositor is a party, except for such consents, approvals, authorizations and orders, if any, that
have been obtained prior to such date;

          (g) The Depositor is solvent, is able to pay its debts as they become due and has capital
sufficient to carry on its business and its obligations hereunder; it will not be rendered
insolvent by the execution and delivery of any of the Basic Documents to which it is a party or the
assumption of any of its obligations thereunder; no petition of bankruptcy (or similar insolvency
proceeding) has been filed by or against the Depositor;

          (h) The Depositor did not transfer the Loans sold to the Issuer with any intent to hinder,
delay or defraud any of its creditors; nor will the Depositor be rendered insolvent as a result of
such sale or pledge;

          (i) The Depositor had good and valid title to, and was the sole owner of each Loan sold by the
Depositor to the Issuer, free and clear of any lien other than any such lien released
simultaneously with the sale contemplated herein, and, immediately upon each transfer and
assignment herein contemplated, the Depositor will have delivered to the Issuer good and valid
title to, and the Issuer will be the sole owner of, each Loan transferred by the Depositor and,
subject to the Indenture, the Indenture Trustee will have a first priority perfected security
interest in each Loan, in each case free and clear of any lien;

          (j) The Depositor acquired title to each of the Loans in good faith, without notice of any
adverse claim;

          (k) None of the Basic Documents to which the Depositor is a party, nor any Officer’s
Certificate, statement, report or other document prepared by the Depositor and furnished or to be
furnished by it pursuant to any of the Basic Documents to which it is a party or in connection with
the transactions contemplated thereby contains any untrue statement of material fact or omits to
state a material fact necessary to make the statements contained herein or therein not misleading;

          (l) The Depositor is not required to be registered as an “investment company,” under the
Investment Company Act of 1940, as amended;

          (m) The Depositor’s principal place of business and chief executive offices are located at
4445 Willard Avenue, Chevy Chase, Maryland 20815, or at such other address as shall be designated
by such party in a written notice to the other parties hereto;

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          (n) The Depositor covenants that during the continuance of this Agreement it will comply in
all respects with the provisions of its organizational documents in effect from time to time; and

          (o) The transfer of the Loans by the Depositor to the Issuer pursuant to the Basic Documents
upon completion pursuant to the Basic Documents of the sale of the Notes by the Issuer to the
Initial Noteholder, was intended to constitute a financing of such Loans for tax and consolidated
accounting purposes (with a notation that it is treating the transfers as a sale for legal and all
other purposes on its books, records and financial statements, in each case, consistent with GAAP).

          Section 3.02 Representations and Warranties of the Loan Originator.

          The Loan Originator hereby represents and warrants to the other parties hereto and the
Securityholders that as of the Closing Date and as of each Transfer Date:

          (a) The Loan Originator is a limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization and (i) is duly qualified, in
good standing and licensed to carry on its business in each state where any Loan Collateral related
to a Loan sold by it is located to the extent necessary to ensure the enforceability of each Loan
and the servicing of the Loan in accordance with Accepted Servicing Practices and (ii) is in
compliance with the laws of any such jurisdiction, in both cases, to the extent necessary to ensure
the enforceability of such Loan in accordance with the terms thereof and had at all relevant times,
full power to originate such Loan, to own its property, to carry on its business as currently
conducted and to enter into and perform its obligations under each Basic Document to which it is a
party;

          (b) The execution and delivery by The Loan Originator of each Basic Document to which it is a
party and its performance of and compliance with the terms thereof will not violate The Loan
Originator’s organizational documents or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or result in the breach or acceleration
of, any material contract, agreement or other instrument to which The Loan Originator is a party or
which may be applicable to The Loan Originator or any of its assets in each case that is likely to
affect materially and adversely its ability to carry out the transactions contemplated hereby;

          (c) The Loan Originator has the full power and authority to enter into and consummate all
transactions contemplated by the Basic Documents to be consummated by it, has duly authorized the
execution, delivery and performance of each Basic Document to which it is a party and has duly
executed and delivered each Basic Document to which it is a party; each Basic Document to which it
is a party, assuming due authorization, execution and delivery by each of the other parties
thereto, constitutes a valid, legal and binding obligation of The Loan Originator, enforceable
against it in accordance with the terms hereof, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, receivership, moratorium or other similar laws relating to
or affecting the rights of creditors generally, and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law);

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          (d) The Loan Originator is not in violation of, and the execution and delivery of each Basic
Document to which it is a party by the Loan Originator and its performance and compliance with the
terms of each Basic Document to which it is a party will not constitute a violation with respect
to, any order or decree of any court or any order or regulation of any federal, state, municipal or
governmental agency having jurisdiction, which violation would materially and adversely affect the
financial condition, business or operations of the Loan Originator or its properties or materially
and adversely affect the performance of its duties under any Basic Document to which it is a party;

          (e) There are no actions or proceedings against, or investigations of, the Loan Originator
currently pending with regard to which the Loan Originator has received service of process and no
action or proceeding against, or investigation of, the Loan Originator is, to the Loan Originator’s
knowledge, threatened or otherwise pending before any court, administrative agency or other
tribunal that (A) would prohibit its entering into any Basic Document to which it is a party or
render the Securities invalid, (B) seeks to prevent the issuance of the Securities or the
consummation of any of the transactions contemplated by any Basic Document to which it is a party
or (C) would prohibit or materially and adversely affect the sale of the Loans to the Depositor,
the performance by the Loan Originator of its obligations under, or the validity or enforceability
of, any Basic Document to which it is a party or the Securities;

          (f) No consent, approval, authorization or order of any court or governmental agency or body
is required for: (1) the execution, delivery and performance by the Loan Originator of, or
compliance by the Loan Originator with, any Basic Document to which it is a party, (2) the sale and
contribution of the Eligible Loans to the Depositor, or (3) the consummation of the transactions
required of it by any Basic Document to which it is a party, except such as shall have been
obtained before such date, other than: (A) the filing or recording of financing statements,
instruments of assignment and other similar documents necessary in connection with the sale of the
Loans to the Issuer, (B) such consents, approvals, authorizations, qualifications, registrations,
filings or notices as have been obtained or made and (C) where the lack of such consent, approval,
authorization, qualification, registration, filing or notice is unlikely to have a material adverse
effect on its performance hereunder;

          (g) Immediately prior to the sale of any Loans to the Depositor, the Loan Originator had good
and valid title to the Loans sold by it on such date free and clear of all Liens other than
Permitted Liens;

          (h) The Loan Originator is solvent, is able to pay its debts as they become due and has
capital sufficient to carry on its business and its obligations under each Basic Document to which
it is a party; it will not be rendered insolvent by the execution and delivery of this Agreement or
by the performance of its obligations under each Basic Document to which it is a party; no petition
of bankruptcy (or similar insolvency proceeding) has been filed by or against the Loan Originator
prior to the date hereof;

          (i) The Loan Originator has transferred the Loans transferred by it on or prior to such
Transfer Date without any intent to hinder, delay or defraud any of its creditors;

          (j) The Loan Originator has received fair consideration and reasonably equivalent value in
exchange for the Loans sold and contributed by it on such Transfer Date to the Depositor;

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          (k) The Loan Originator has not dealt with any broker or agent or other Person who might be
entitled to a fee, commission or compensation in connection with the transaction contemplated by
this Agreement;

          (l) The Loan Originator’s principal place of business and chief executive offices are located
at 4445 Willard Avenue, Chevy Chase, Maryland, Maryland 20815 or at such other address as shall be
designated by such party in a written notice to the other parties hereto;

          (m) The Loan Originator acknowledges and agrees that the Servicing Compensation represents
reasonable compensation for the performance of its services hereunder and that the entire Servicing
Compensation shall be treated by the Loan Originator, for accounting purposes, as compensation for
the servicing and administration of the Loans pursuant to this Agreement; and

          (n) The Loan Originator is in compliance with the financial covenants set forth in Section
7.01.

          It is understood and agreed that the representations and warranties set forth in this Section
3.02 shall survive delivery of the respective Custodial Loan Files to the Collateral Custodian (as
the agent of the Indenture Trustee) and shall inure to the benefit of the Securityholders, the
Depositor, the Servicer, the Indenture Trustee, the Owner Trustee and the Issuer. Upon discovery
by the Loan Originator, the Servicer, the Indenture Trustee or the Issuer of a breach of any of the
foregoing representations and warranties that materially and adversely affects the value of any
Loan or the interests of the Securityholders in any Eligible Loan or in the Securities, the party
discovering such breach shall give prompt written notice to the other parties. The obligations of
the Loan Originator set forth in Sections 2.05 and 3.05 hereof to cure any breach or to substitute
for or repurchase an affected Loan shall constitute the sole remedies available hereunder to the
Securityholders, the Depositor, the Servicer, the Indenture Trustee or the Issuer respecting a
breach of the representations and warranties contained in this Section 3.02. The fact that the
Initial Noteholder has conducted or has failed to conduct any partial or complete due diligence
investigation of the Loan Files shall not affect the Securityholders’ rights to demand repurchase
or substitution as provided under this Agreement.

          Section 3.03 [RESERVED].

          Section 3.04 Representations and Warranties Regarding Eligible Loans.

          With respect to each Loan sold to the Issuer on a Transfer Date, the Loan Originator hereby
represents and warrants to the Indenture Trustee, for the benefit of the Noteholders, as of such
Transfer Date and with respect to such Loan, that:

          (a) the Loan, together with the Loan Collateral, has been originated or acquired by the Loan
Originator and immediately before the transfer, sale and conveyance thereof to the Depositor
pursuant to (and in accordance with) the Loan Sale Agreement, the Loan Originator had good and
valid title to, and was the sole owner and holder of, such Loan, free and clear of all Liens. Such
transfer, sale and conveyance validly assigns ownership of such Loan to the Depositor, free and
clear of any Liens;

40

 

          (b) at the time such Loan is included in the Loan Pool, the Loan is not a Charged-Off Loan and
the Loan is not more than ten (10) days past due (after giving effect to the five (5) day grace
period set forth in the Loan Originator’s Underwriting Guidelines in determining the number of days
past due), with respect to payments of principal or interest provided, however that any Loan
previously included in the Loan Pool which was a Charged-Off Loan, but was subsequently assigned
Loan Rating 1, Loan Rating 2 or Loan Rating 3 shall not violate the representation contained in
this clause (b);

          (c) the Loan is an “eligible asset” as defined in Rule 3a-7 under the Investment Company Act
of 1940;

          (d) the Loan has been subject to a grant in favor of the Indenture Trustee for the benefit of
the Noteholders of a first priority perfected security interest and other than with respect to
Subordinated Loans, at the time of the sale of the Loan to the Depositor pursuant to the Loan Sale
Agreement, the Loan Originator had a first priority perfected security interest in the Loan
Collateral relating to such Loan, subject to Permitted Liens;

          (e) the Loan is an “account”, “chattel paper”, “instrument” or a “general intangible” within
the meaning of Article 9 of the UCC of all applicable jurisdictions; provided, however,
if the Loan constitutes “chattel paper”, there is not more than one (1) “secured party’s original”
counterpart of the Loan and the sole manually executed counterpart of the Loan is in the possession
of and has been properly endorsed to the Collateral Custodian;

          (f) the Loan is to an Eligible Obligor and is denominated and payable only in United States
dollars in the United States;

          (g) the Loan is evidenced by a promissory note, an entry on the Loan Register, a security
agreement or an instrument and related loan documents that have been duly authorized and executed,
are in full force and effect and constitute the legal, valid, binding and absolute and
unconditional payment obligation of the related Obligor, enforceable against such Obligor in
accordance with their terms (subject to applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors generally and to general principles of equity,
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;

          (h) the Loan does not contravene in any material respect any applicable laws (including,
without limitation, laws, rules and regulations relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices, licensing and
privacy);

          (i) the Loan, (i) satisfies all applicable requirements of and was originated or acquired,
underwritten and closed in accordance with the Loan Originator’s Underwriting Guidelines (including
without limitation the execution by the Obligor of all documentation required by the Underwriting
Guidelines); (ii) does not contain a confidentiality provision that restricts or purports to
restrict the ability of the Indenture Trustee, on behalf of the Securityholders, to exercise its
rights under this Agreement, 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 Loan
Originator’s business; (iv) arises pursuant to loan documentation

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with respect to which the Loan Originator has performed all obligations required to be
performed by it thereunder; (v) is not subject to a guaranty by the Loan Originator or any
Affiliate thereof; and (vi) other than with respect to Assigned Loans, is executed on forms
substantially similar to those in use by the Loan Originator on the date hereof or in such other
form as shall be adopted by the Loan Originator and approved in writing by the Majority Noteholders
at least ten (10) days prior to such Loan becoming part of the Loan Pool hereunder;

          (j) neither the transfer, sale and assignment of the Loan under the Loan Sale Agreement by the
Loan Originator to the Depositor, the sale of the Loan by the Depositor to the Issuer hereunder or
the pledge of the Loan and the granting of a security interest therein to the Indenture Trustee,
for the benefit of the Noteholders, pursuant to the Indenture by the Issuer violates, conflicts
with or contravenes any applicable laws or any contractual or other restriction, limitation or
encumbrance applicable to Loan Originator, Depositor and Issuer;

          (k) on or before the applicable Transfer Date, the Obligor of such Loan shall have been
directed to make all payments to the Lock-Box or directly to the Lock-Box Account;

          (l) except with respect to a Loan the Loan Collateral for which consists of receivables only,
the Loan requires the Obligor thereof to maintain adequate property damage and liability insurance
with respect to the real or personal property constituting the Loan Collateral and the same has
been at all times covered by adequate physical damage and liability insurance policies issued by
generally accepted carriers;

          (m) the Loan Collateral (i) has not been foreclosed on, or repossessed from the current
Obligor, by the Servicer, and (ii) since origination or acquisition has not suffered any material
loss or damage that has not been repaired or restored;

          (n) the Obligor’s payment obligations are absolute and unconditional with no right of setoff
or counterclaim for any reason against the Loan Originator or any assignee and the Loan contains a
clause that has the effect of unconditionally and irrevocably obligating the Obligor to make
periodic payments (including taxes) which is applicable notwithstanding any rights the Obligor may
have against the assignee and notwithstanding any damage to, defects in or destruction of the Loan
Collateral or any other event, including obsolescence of any property or improvements;

          (o) the Loan is not subject to any litigation, valid right of rescission, set-off,
counterclaim or defense, including without limitation the defense of usury, nor will the operation
of any of the terms of the Loan Documents, or the exercise of any right thereunder, render either
the Underlying Note unenforceable, in whole or in part, or subject to any such right of rescission,
set-off, counterclaim or defense, including without limitation the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted with respect thereto;

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

          (q) the Loan provides (i) for periodic contract payments, which are due and payable on a
monthly or quarterly basis unless otherwise consented to in writing by the Initial

42

 

Noteholder, and (ii) that the Servicer may accelerate all payments on the Loan if the Obligor
is in default under the Loan;

          (r) 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 Basic Documents
would be unlawful, void or voidable;

          (s) the Loan, together with the Required Loan Documents is assignable and does not require the
consent of or notice to the Obligor to consummate the transactions contemplated by the Basic
Documents or contain any other restriction on the transfer or the assignment of the Loan for the
purpose of consummating the transactions contemplated by the Basic Documents, 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 Depositor;

          (t) the Obligor of such Loan is legally responsible for all taxes relating to the Loan
Collateral or other security relating to such Loan, and all payments in respect of the Loan will be
made free and clear of, and without deduction or withholding for or on account of, any taxes,
unless such withholding or deduction is required by applicable law;

          (u) the Loan complies in all material respects with the representations and warranties made by
the Loan Originator hereunder and all information with respect to the Loan is true and correct in
all material respects;

          (v) other than with respect to Participation Loans, the Loan and the Loan Collateral have not
been sold, transferred, assigned or pledged by the Loan Originator to any Person other than as
contemplated under the Basic Documents;

          (w) other than Participation Loans and Assigned Loans, with respect to the Loan Originator’s
obligation to fund and the actual funding of the Loan by the Loan Originator, the Loan Originator
has not assigned its obligations, or granted participations, in whole or in part, to any Person;

          (x) the Loan has not been compromised, adjusted, extended, satisfied, rescinded, set-off or
modified by the Depositor, the Loan Originator or the Obligor with respect thereto and, with
respect to each other Loan, 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, termination or modification, whether arising out of
transactions concerning the Loan, or otherwise, by the Depositor, the Loan Originator or the
Obligor with respect thereto and, with respect to each other Loan, the Obligor with respect thereto
except for amendments to such Loan otherwise permitted under this Agreement and in accordance with
the Underwriting Guidelines;

          (y) the particular Loan is not one as to which the Loan Originator has knowledge which should
lead it to expect such Loan will not be paid in full;

          (z) with respect to any DIP Loan, the Loan Originator or its assignee has been granted a first
priority lien status in respect of all or certain of the Obligor’s assets by final order of the
applicable federal bankruptcy or district court;

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          (aa) except with respect to DIP Loans, the Obligor of such Loan is not the subject of a
Bankruptcy Event;

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

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

          (dd) the Loan is secured by a valid, perfected, first priority (other than with respect to
Subordinated Loans) security interest (subject to Permitted Liens) in all assets that constitute
the collateral for the Loan;

          (ee) 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;

          (ff) the Loan Originator (i) has completed to its satisfaction, in accordance with the
Underwriting Guidelines, 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 or the Securityholders with
respect to the Loan, the Loan Collateral, the Scheduled Payments or any income or Proceeds
therefrom;

          (gg) the Loan is a Senior Secured Loan or Subordinated Loan;

          (hh) no provision of the Loan (other than an Alarm Service Loan) has been waived, modified or
altered in any respect, except in accordance with the Underwriting Guidelines and by instruments
duly authorized and executed and contained in the Required Loan Documents;

          (ii) except with respect to Subordinated Loans and Senior-B Note Loans, the Loan is not
subordinated to any other loan or financing to the related Obligor;

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

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

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          (ll) with respect to any Acquired Loan or Assigned Loan, such Loan has been re-underwritten by
the Loan Originator and satisfies all of the Loan Originator’s underwriting criteria as set forth
in the Underwriting Guidelines;

          (mm) with respect to any Acquired Loan that is originated by an Affiliate or subsidiary of the
Loan Originator, the Depositor has received a satisfactory legal opinion concerning the acquisition
of such Loan by the Loan Originator in a true sale transaction;

          (nn) with respect to any Acquired Loan that was acquired in a pool by the Loan Originator
along with one (1) or more other Acquired Loans, the Initial Noteholder has approved in writing
such Loan for inclusion in the Loan Pool and has completed its own due diligence with respect to
such Loan;

          (oo) at origination or acquisition by the Loan Originator, such Loan was assigned Loan Rating
1, Loan Rating 2 or Loan Rating 3 and, as of any date thereafter, such Loan is assigned Loan Rating
1, Loan Rating 2, Loan Rating 3, Loan Rating 4 or Loan Rating 5;

          (pp) each Subordinated Loan must either (i) have an interest coverage ratio that is not less
than 1.25:1, (ii) be an Enhanced Mezzanine Loan or (iii) be made in respect of construction or
development of unimproved land;

          (qq) the Loan was not an Enhanced Mezzanine Loan or a Loan made in connection with (a) the
construction or development of unimproved land unless (A) the outstanding Principal Balance of such
Loan together with all other Enhanced Mezzanine Loans and Loans made in respect of construction or
development of unimproved land does not exceed ten percent (10%) of the aggregate Principal Balance
of all Loans and (B) the aggregate outstanding principal balance of such Loan does not exceed Seven
Million Five Hundred Thousand Dollars ($7,500,000), or (b) facilitating the trade-in or exchange of
the related mortgaged property;

          (rr) with respect to each Loan that is an Alarm Service Loan:

	 	(i)	 	the Dealer is a Person with a place of business
in the United States or, with respect to two (2) of the Alarm Service
Loans, Canada;
	 
	 	(ii)	 	the Dealer has all necessary licenses, permits
and other authorizations to conduct security alarm sales, installation,
monitoring and maintenance services in the jurisdiction in which it
conducts business;
	 
	 	(iii)	 	the Loan Originator has disclosed on the
related Transfer Date its calculation of the notional minimum amount of
recurring monthly revenue to be received from each security alarm
monitoring or security alarm monitoring and maintenance contract;
	 
	 	(iv)	 	the Loan Originator makes, mutatis mutandis,
the applicable representations and warranties set forth in clauses (a)
through (pp) of this Section 3.04 with respect to (x) the accounts
receivable or accounts (as defined in the UCC) payable pursuant to a
security

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	 	 	 	alarm monitoring or a security alarm monitoring and maintenance
contract, (y) each security alarm monitoring or security alarm
monitoring and maintenance contract and (z) each Dealer; and
	 
	 	(v)	 	the scheduled payments under each security
alarm monitoring or security alarm monitoring and maintenance contract
as set forth in the related Alarm Service Loan are true and correct and
accurately represent the recurring monthly revenue to be received from
each security alarm monitoring or security alarm monitoring and
maintenance contract;

          (ss) Reserved.

          (tt) with respect to each SS Underlying Loan, except as set forth in Exhibit J hereto, the
Loan Originator makes, mutatis mutandis, the applicable representations and warranties set forth in
clauses (a) through (qq) of this Section 3.04 with respect to each SS Underlying Loan.

          It is understood and agreed that the representations and warranties set forth herein shall
survive delivery of the respective Custodial Loan Files to the Issuer and/or the Collateral
Custodian and shall inure to the benefit of the Issuer or Depositor, as applicable, and their
successors and assigns, notwithstanding any restrictive or qualified endorsement or assignment.

          Section 3.05 Purchase and Substitution.

          (a) (i) It is understood and agreed that the representations and warranties set forth in
Section 3.04 hereto shall survive the conveyance of the Eligible Loans to the Indenture Trustee on
behalf of the Issuer or the Depositor, as applicable, and the delivery of the Securities to the
Securityholders. Upon discovery by the Depositor, the Servicer, the Loan Originator, the
Collateral Custodian, the Issuer, the Indenture Trustee or any Securityholder of a breach of any of
such representations and warranties or the representations and warranties of the Loan Originator
set forth in Section 3.02 or 3.04 which materially and adversely affects the value or
enforceability of any Eligible Loan or the interests of the Securityholders, in any Eligible Loan
any party discovering such breach shall give prompt written notice to the others; provided,
however, that for purposes of the repurchase and substitution provisions contained in this Section
3.05, a breach of a representation or warranty set forth in Section 3.04 shall mean that such
representation or warranty was incorrect as of the date such representation or warranty was made by
the Loan Originator. The Loan Originator shall within 30 days of the earlier of the Loan
Originator’s discovery or the Loan Originator’s receiving notice of any breach of a representation
or warranty, promptly cure such breach in all material respects. If within 30 days after the
earlier of the Loan Originator’s discovery of such breach or the Loan Originator’s receiving notice
thereof such breach has not been remedied by the Loan Originator and such breach materially and
adversely affects the interests of the Securityholders in the related Eligible Loan (an
“Unqualified Loan”), the Loan Originator shall promptly upon receipt of written instructions from
the Initial Noteholder or the Indenture Trustee either (i) remove such Unqualified Loan from the
Collateral (in which case it shall become a Deleted Loan) and substitute one or more Qualified
Substitute Loans in the manner and subject to the conditions set forth in this Section 3.05 (except
to the extent that no Borrowing Base Deficiency occurs following the removal of such Unqualified
Loan) or (ii) purchase such Unqualified Loan at a

46

 

purchase price equal to the Repurchase Price with respect to such Unqualified Loan by
depositing or causing to be deposited such Repurchase Price in the Collection Account; provided,
however, that unless a Borrowing Base Deficiency exists, the Loan Originator shall only be required
to remove such Unqualified Loan from the Collateral and shall not be required to pay a Repurchase
Price or substitute a Qualified Substitute Loan therefor.

     (ii) On any day prior to the occurrence of the Termination Date, the Issuer may
recommend in writing to the Initial Noteholder (with a copy to the Collateral Custodian)
that any Loan be replaced with one or more Qualified Substitute Loans.

          Any substitution of Eligible Loans pursuant to this Section 3.05(a) shall be accompanied by
payment by the Loan Originator of the Substitution Adjustment, if any, remitted to the Noteholders
in accordance with Section 5.01(b)(4).

          (b) As to any Deleted Loan or Eligible Loan for which the Loan Originator substitutes a
Qualified Substitute Loan or Loans, the Loan Originator shall effect such substitution by
delivering to the Indenture Trustee and Initial Noteholder an Officer’s Certificate of the Loan
Originator to the effect that the Substitution Adjustment has been remitted to the Servicer for
deposit in the Collection Account. As to any Deleted Loan or Eligible Loan for which the Loan
Originator substitutes a Qualified Substitute Loan or Loans, the Loan Originator shall effect such
substitution by delivering to the Collateral Custodian the documents constituting the Custodial
Loan File for such Qualified Substitute Loan or Loans.

          The Servicer shall deposit in the Collection Account all payments received in connection with
each Qualified Substitute Loan after the date of such substitution. Scheduled Payments received
with respect to Qualified Substitute Loans on or before the date of substitution will be retained
by the Loan Originator. The Depositor or the Issuer, as applicable, will be entitled to all
payments received on the Deleted Loan or substituted Eligible Loan on or before the date of
substitution and the Loan Originator shall thereafter be entitled to retain all amounts
subsequently received in respect of such Deleted Loan or substituted Eligible Loan. The Loan
Originator shall give written notice to the Depositor, the Issuer, the Servicer, the Indenture
Trustee and Initial Noteholder that such substitution has taken place and the Servicer shall amend
the Loan Schedule to reflect (i) the removal of such Deleted Loan or substituted Eligible Loan from
the terms of this Agreement and (ii) the substitution of the Qualified Substitute Loan. The
Servicer shall promptly deliver to the Depositor, Issuer, the Loan Originator, the Indenture
Trustee and Initial Noteholder, a copy of the amended Loan Schedule. Upon such substitution, such
Qualified Substitute Loan or Loans shall be subject to the terms of this Agreement in all respects,
and the Loan Originator shall be deemed to have made with respect to such Qualified Substitute Loan
or Loans, as of the date of substitution, the covenants, representations and warranties set forth
in Section 3.04 hereto. On the date of such substitution, the Indenture Trustee shall release the
Deleted Loan from the lien of the Indenture and the Servicer will cause such Qualified Substitute
Loan to be pledged to the Indenture Trustee under the Indenture as part of the Collateral.

          (c) With respect to all Unqualified Loans or other Eligible Loans repurchased by the Loan
Originator pursuant to this Agreement, upon the deposit of the Repurchase Price therefor into the
Collection Account, (i) the Issuer or the Depositor, as applicable, shall assign to the Loan
Originator, without representation or warranty, all of the Issuer’s or the Depositor’s

47

 

right, title and interest in and to such Unqualified Loan or other Eligible Loan repurchased
by the Loan Originator and (ii) the Indenture Trustee shall assign to the Loan Originator, without
recourse, representation or warranty, all the Indenture Trustee’s right, title and interest in and
to such Unqualified Loans or Eligible Loans, which right, title and interest were conveyed to the
Indenture Trustee pursuant to Section 2.01 hereof and the Indenture. The Issuer or the Depositor,
as applicable, and the Indenture Trustee shall, at the expense of the Loan Originator, take any
actions as shall be reasonably requested by the Loan Originator to effect the repurchase of any
such Loans, to have the Collateral Custodian return the Custodial Loan File of such Loans to the
Servicer and to execute any termination statements and other releases or instruments prepared by
the Loan Originator and acceptable to the Indenture Trustee to effect the release of the lien of
the Indenture Trustee and transfer of such Loans.

          (d) It is understood and agreed that the obligations of the Loan Originator set forth in this
Section 3.05 to cure, purchase or substitute for an Unqualified Loan constitute the sole remedies
hereunder of the Depositor, the Issuer, the Indenture Trustee, the Owner Trustee and the
Securityholders respecting a breach of the representations and warranties contained in Sections
3.02 and 3.04 hereof. Any cause of action against the Loan Originator relating to or arising out
of a defect in a Custodial Loan File or against the Loan Originator relating to or arising out of a
breach of any representations and warranties made in Sections 3.02 and 3.04 hereto shall accrue as
to any Eligible Loan upon (i) discovery of such defect or breach by any party and notice thereof to
the Loan Originator or notice thereof by the Loan Originator to the Indenture Trustee, (ii) failure
by the Loan Originator to cure such defect or breach or purchase or substitute such Eligible Loan
as specified above, and (iii) demand upon the Loan Originator, as applicable, by the Issuer, the
Indenture Trustee or the Majority Noteholders for all amounts payable in respect of such Eligible
Loan.

          (e) Neither the Issuer nor the Indenture Trustee shall have any duty to conduct any
affirmative investigation other than as specifically set forth in this Agreement as to the
occurrence of any condition requiring the repurchase or substitution of any Eligible Loan pursuant
to this Section or the eligibility of any Eligible Loan for purposes of this Agreement.

          (f) Notwithstanding anything to the contrary contained herein, the Loan Originator may, at its
option, cause the removal or repurchase of any Loan subject to this Agreement at any time during
the term hereof by payment of the fair market value of such Loan at the time of repurchase in
immediately available funds or by means of a corresponding reduction in capital contribution or any
combination thereof; provided, however, that the Loan Originator shall only be required to remit a
Repurchase Price with respect thereto if, at the time of such removal or repurchase thereof, a
Borrowing Base Deficiency exists or after giving effect to such removal or repurchase a Borrowing
Base Deficiency would exist.

          Section 3.06 Dispositions.

          (a) On any Optional Disposition Date, the Issuer shall have the right to prepay all or a
portion of the Note Principal Balance in connection with a Disposition in accordance with the
Basic Documents and this Section 3.06. In addition, in connection with the Issuer’s obligation to
maintain the Required Overcollateralization Amount hereunder, the Issuer shall, if directed by
Initial Noteholder, effect Dispositions in accordance with the Basic Documents and this Section
3.06.

48

 

          (b) (i) In consideration of the consideration received from the Depositor under the Loan Sale
Agreement, the Loan Originator hereby agrees and covenants that in connection with each
Disposition:

     (A) After giving effect to the Disposition on any Optional Disposition Date,
the remaining Note Principal Balance shall not exceed the lesser of the Maximum Note
Principal Balance and the Borrowing Base;

     (B) it shall make such representations and warranties concerning the Eligible
Loans as of the “cut-off date” of the related Disposition to the Disposition
Participants as may be necessary to effect the Disposition and such additional
representations and warranties as may be necessary, in the reasonable opinion of any
of the Disposition Participants, to effect such Disposition; provided, that, to the
extent that the Loan Originator has at the time of the Disposition actual knowledge
of any facts or circumstances that would render any of such representations and
warranties materially false, the Loan Originator may notify the Disposition
Participants of such facts or circumstances and, in such event, shall have no
obligation to make such materially false representation and warranty;

     (C) it shall supply such information, opinions of counsel, letters from law
and/or accounting firms and other documentation and certificates regarding the
origination of the Eligible Loans as any Disposition Participant shall reasonably
request to effect a Disposition and enter into such indemnification agreements
customary for such transaction relating to or in connection with the Disposition as
the Disposition Participants may reasonably require;

     (D) it shall make itself available for and engage in good faith consultation
with the Disposition Participants concerning information to be contained in any
document, agreement, private placement memorandum, or filing with the Securities and
Exchange Commission relating to the Loan Originator or the Eligible Loans in
connection with a Disposition and shall use reasonable efforts to compile any
information and prepare any reports and certificates, into a form, whether written
or electronic, suitable for inclusion in such documentation;

     (E) to implement the foregoing and to otherwise effect a Disposition, it shall
enter into, or arrange for its Affiliates to enter into insurance and indemnity
agreements, underwriting or placement agreements, servicing agreements, purchase
agreements and any other documentation which may reasonably be required of or
reasonably deemed appropriate by the Disposition Participants in order to effect a
Disposition;

     (F) it shall use its commercially reasonable efforts to maximize the cash
proceeds received in connection with any such Disposition; and

     (G) it shall take such further actions as may be reasonably necessary to effect
the foregoing;

49

 

provided, that notwithstanding anything to the contrary, (a) the Loan Originator shall have no
liability for the Eligible Loans arising from or relating to the ongoing ability of the related
Obligors to pay under the Eligible Loans; (b) none of the indemnities hereunder shall constitute an
unconditional guarantee by the Loan Originator of collectibility of the Eligible Loans; and (c) the
Loan Originator shall have no obligation with respect to the financial inability of any Obligor to
pay principal, interest or other amount owing by such Obligor under an Eligible Loan.

     (ii) [Reserved.]

     (iii) As long as no Servicer Event of Default or Default shall have occurred and be
continuing under this Agreement or the Indenture, the Servicer may continue to service the
Eligible Loans included in any Disposition subject to any applicable “term-to-term”
servicing provisions in Section 9.01(c) and subject to any required amendments to the
related servicing provisions as may be necessary to effect the related Disposition including
but not limited to the obligation to make recoverable principal and interest advances on the
Eligible Loans.

          The Initial Noteholder shall have the right, in its sole discretion, upon and following the
termination of the Revolving Period, to direct the Loan Originator, the Issuer and the Depositor to
effect a Disposition. Any such Disposition shall be effected by the Loan Originator, the Issuer
and the Depositor in a commercially reasonable manner.

          (c) In connection with any Disposition under this Section 3.06, the Issuer agrees to assist
the Loan Originator in such Dispositions and accordingly it shall:

     (i) transfer, deliver and sell all or a portion of the Loans, as of the “cut-off dates”
of the related Dispositions, to such Disposition Participants as may be necessary to effect
the Dispositions;

     (ii) deposit the cash Disposition Proceeds into the Distribution Account pursuant to
Section 5.01(c)(2)(D); and

     (iii) take such further actions, including executing and delivering documents,
certificates and agreements, as may be reasonably necessary to effect such Dispositions.

          (d) The Servicer hereby covenants that it will take such actions as may be reasonably
necessary to effect Dispositions as the Disposition Participants may request and direct, including
without limitation providing the Loan Originator such information as may be required to make
representations and warranties required hereunder, and covenants that it will make such
representations and warranties regarding its servicing of the Loans hereunder as of the “cut-off
date” of the related Disposition as reasonably required by the Disposition Participants.

          (e) Except as otherwise expressly set forth under this Section 3.06, the parties’ rights and
obligations under this Section 3.06 shall continue notwithstanding the occurrence of an Event of
Default.

          (f) The Disposition Participants shall be independent contractors to the Issuer and shall have
no fiduciary obligations to the Issuer or any of its Affiliates. The Disposition Participants
shall not be liable for any error of judgment made in good faith and shall not be

50

 

liable with respect to any action they take or omit to take in good faith in the performance
of their duties.

          Section 3.07 Removal or Repurchase of Call Loans.

          The Depositor shall be required to remove or repurchase any Loan which has become a Call Loan
within thirty (30) days of the date such Loan became a Call Loan. If a Borrowing Base Deficiency
exists at the time such Loan has become a Call Loan, the Depositor shall effect such repurchase by
deposit of the Repurchase Price therefor into the Collection Account; provided, that, if a Loan has
become a Call Loan solely due to the Loan being uncollectible on account of the insolvency,
bankruptcy or lack of creditworthiness of the related Obligor or would constitute recourse to the
Servicer for such losses, then the Depositor shall not be required to remove or repurchase such
Call Loan, it being understood that such Call Loan shall not be an Eligible Loan for purposes of
any a Disposition, including without limitation, any Securitization pursuant to Section 3.06 nor
any Whole Loan Sale pursuant to Section 3.06 hereof.

          Section 3.08 Underwriting Guidelines; Modifications.

          The Loan Originator shall provide the Initial Noteholder with the Underwriting Guidelines from
time to time on reasonable request by the Initial Noteholder. The Loan Originator shall give the
Initial Noteholder prompt written notification of any modification or change to the Underwriting
Guidelines. If the Initial Noteholder object in writing to such modification or change to the
Underwriting Guidelines within 15 days after receipt of such notice, no Loans may be conveyed to
the Issuer pursuant to this Agreement unless such Loans have been originated pursuant to the
Underwriting Guidelines without giving effect to such modification or change. Notwithstanding
anything contained in this Agreement to the contrary, any Loan conveyed to the Issuer pursuant to
this Agreement pursuant to a modification or change to the Underwriting Guidelines that has been
rejected by the Initial Noteholder or which the Initial Noteholder did not receive notice of, such
Loan shall be deemed an Unqualified Loan and be repurchased or substituted for in accordance with
Section 3.05.

ARTICLE IV

ADMINISTRATION AND SERVICING OF THE LOANS

          Section 4.01 Servicer’s Servicing Obligations.

          The Servicer, as independent contract servicer, shall service and administer the Eligible
Loans in accordance with Accepted Servicing Practices.

          Section 4.02 Loan Register.

          (a) The Servicer shall maintain with respect to each Noteless Loan a register in the name of
or for the benefit of the Collateral Custodian (each, a “Loan Register”) in which it will record
(v) the amount of such Loan, (w) the amount of any principal or interest due and payable or to
become due and payable from the Obligor thereunder, (x) the amount of any sum in respect of such
Loan received from the Obligor, (y) the date of origination of such Loan and (z) the Loan Maturity
Date. The entries made in each Loan Register maintained pursuant to this

51

 

Section 4.02(a) shall be prima facie evidence of the existence and amounts of the obligations
therein recorded; provided, however, that the failure of the Servicer to maintain any such Loan
Register or any error therein shall not in any manner affect the obligations of the Obligor to
repay the related Loans in accordance with their terms. If at any time the Collateral Custodian
shall receive a notice from the Indenture Trustee or the Noteholders directing transfer of such
Loan Register or other orders concerning such Loan Register from the Indenture Trustee or the
Noteholders, the Collateral Custodian shall comply with such orders without further consent of the
Servicer or the Depositor or the Issuer. In connection with any such notice the Servicer shall
take whatever action as is requested and reasonably necessary or advisable to effectuate the
foregoing. The Collateral Custodian may rely upon the contents of any notice or instructions that
the Collateral Custodian believes in good faith to be from the Noteholders or the Indenture
Trustee, as the case may be, without any independent investigation. The Collateral Custodian shall
have no duty to inquire into the authority of the person giving such notice or instruction. In the
event that the Collateral Custodian receives conflicting notices or instructions, any notice
received from the Noteholders shall govern and supersede any and all conflicting notices.

          (b) At any time a Noteless Loan is included as part of the Collateral pursuant to this
Agreement, the Servicer shall deliver to the Collateral Custodian a copy of the Loan Register,
together with a certificate of a Responsible Officer of the Servicer certifying to the accuracy of
such Loan Register as of the date such Loan is included as part of the Collateral.

          (c) The Noteholders may terminate the Servicer’s right to maintain such Loan Register at any
time and require that all such Noteless Loans be evidenced by an originally executed Underlying
Note.

          (d) The 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 or as expressly provided in this Agreement.

          Section 4.03 The Backup Servicer; Duties of the Backup Servicer.

          (a) The parties hereto hereby appoint Wells Fargo Bank, National Association to act as Backup
Servicer, for the benefit of the Noteholders. The Backup Servicer hereby accepts such appointment
and agrees to perform the duties and obligations with respect thereto set forth herein.

          (b) (1) 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 Servicer Report (as described
below) in hard copy and on computer tape; provided, however, the computer tape is in an MS DOS, PC
readable ASCII format or other format to be agreed upon by the Backup Servicer and the Servicer on
or prior to closing.

     (2) Not later than 12:00 noon New York City time on each Record Date, the
Servicer shall deliver to the Backup Servicer a data loan tape and report (together,
the “Monthly Servicer Report”) in the form of Exhibit B attached hereto, which shall
include but not be limited to the information necessary to enable the Backup
Servicer to perform the following duties:

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     (A) compare the information contained in the Monthly Servicer Report to the
definition of Concentration Limitation;

     (B) determine whether or not a Trigger Event described in clauses (i), (ii),
(iii), (iv) or (ix) of such definition has occurred; and

     (C) prepare a trend analysis for the Initial Noteholder comparing the
Concentration Limitation and Trigger Events as set forth in the Monthly Servicer
Report to those set forth in the Monthly Servicer Reports delivered to the Backup
Servicer by the Servicer during each month prior to the Maturity Date.

          The Backup Servicer shall provide a report which summarizes the results of the performance of
the above duties to the Initial Noteholder before 12:00 noon New York City time on the Payment Date
immediately following the Record Date on which such Monthly Servicer Report was delivered to the
Backup Servicer by the Servicer.

     (3) On a weekly basis to the extent a Borrowing Base Certificate and Loan
Schedule has not been received pursuant to a Transfer Date during the immediately
preceding 7 days, not later than 12:00 noon New York City time, the Servicer shall
deliver to the Backup Servicer, with a copy to the Initial Noteholder, a Borrowing
Base Certificate and Loan Schedule. Upon the receipt of a Borrowing Base
Certificate and Loan Schedule pursuant to this Section 4.03(b)(3) or any other
provision this Agreement, the Backup Servicer shall:

     (A) track the Principal Balances of the Eligible Loans and verify the Eligible
Loans with the Loan Schedule;

     (B) compare the advance rates set forth in the Borrowing Base Certificate to
the percentages set forth under the definition of “Purchase Price Percentage”
herein;

     (C) compare the delinquent and charged-off Loans set forth in the Borrowing
Base Certificate to the definition of “Delinquent” and “Charged-Off Loans” set forth
herein;

     (D) compare the “Subordinated Loans” and “Senior B-Note Loans” set forth in the
Borrowing Base Certificate to the definitions of such terms set forth herein; and

     (E) calculate the Borrowing Base, Borrowing Base Excess (if applicable),
Borrowing Base Deficiency (if applicable), Required Overcollateralization Amount and
Required Interest Coverage Amount.

          The Backup Servicer shall provide a report which summarizes the results of the performance of
the above duties to the Initial Noteholder within one (1) Business Day immediately following the
day on which any such Borrowing Base Certificate and Loan Schedule is delivered to the Backup
Servicer.

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          (c) With respect to the duties described in Section 4.03(b)(2) and (3), the Backup Servicer is
entitled to rely conclusively, and shall be fully protected in so relying, on the contents of each
Monthly Servicer Report, Borrowing Base Certificate, Loan Schedule and all other reports,
including, but not limited to, the completeness and accuracy thereof, provided by the Servicer to
the Backup Servicer as described in this Agreement.

ARTICLE V

ESTABLISHMENT OF TRUST ACCOUNTS

	 	 	     Section 5.01 Collection Account, Principal Collections Account and Distribution
Account.

          (a) (1) Establishment of Collection Account. The Servicer, for the benefit of the
Indenture Trustee and the Noteholders, shall cause to be established and maintained one or more
Collection Accounts (collectively, the “Collection Account”), which shall be separate Eligible
Accounts entitled “CapitalSource Funding VII Trust Collection Account, CapitalSource Finance LLC,
as Servicer, for the benefit of the Indenture Trustee and the holders of Commercial Loan Backed
Notes.” The Collection Account shall be maintained with a depository institution and shall satisfy
the requirements set forth in the definition of Eligible Account. Funds in the Collection Account
shall be invested in accordance with Section 5.03 hereof. Net investment earnings shall not be
considered part of funds available in the Collection Account.

     (2) Establishment of Principal Collections Account. The Servicer, for
the benefit of the Indenture Trustee and the Noteholders, shall cause to be
established and maintained one or more Principal Collections Accounts (collectively,
the “Principal Collections Account”), which shall be separate Eligible Accounts
entitled “CapitalSource Funding VII Trust Principal Collections Account,
CapitalSource Finance LLC, as Servicer, for the benefit of the Indenture Trustee and
the holders of Commercial Loan Backed Notes.” The Principal Collections Account
shall be maintained with a depository institution and shall satisfy the requirements
set forth in the definition of Eligible Account. Funds in the Principal Collections
Account shall be invested in accordance with Section 5.03 hereof. Net investment
earnings shall not be considered part of funds available in the Principal
Collections Account.

     (3) Establishment of Distribution Account. The Indenture Trustee, for
the benefit of the Noteholders, shall cause to be established and maintained, one or
more Distribution Accounts (collectively, the “Distribution Account”), which shall
be separate Eligible Accounts, entitled “CapitalSource Funding VII Trust
Distribution Account.” The Distribution Account shall be maintained with a
depository institution and shall satisfy the requirements set forth in the
definition of Eligible Account. Funds in the Distribution Account shall remain
uninvested.

     (4) The Servicer will inform the Indenture Trustee of the location of the
Collection Account and the Principal Collections Account, including any location to
which an account is transferred.

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          (b) Deposits to Collection Account. The Servicer shall deposit or cause to be
deposited (without duplication):

     (1) all payments on or in respect of each Eligible Loan collected on or after
the related Transfer Date (net, in each case, of any Servicing Compensation retained
therefrom by the Servicer (if other than CapitalSource)) within two (2) Business
Days after receipt thereof;

     (2) all Net Proceeds within two (2) Business Days after receipt thereof;

     (3) all Insurance Proceeds within two (2) Business Days after receipt thereof;

     (4) any amounts payable in connection with the repurchase of any Loan and the
amount of any Substitution Adjustment, if any, pursuant to Sections 2.05, 3.05 and
3.07 hereof concurrently with payment thereof;

     (5) the deposit of the Termination Price under Section 12.02 hereof
concurrently with payment thereof;

     (6) the proceeds from any Disposition of the Loans pursuant to Section 3.06
hereof within one (1) Business Day after receipt thereof; and

     (7) any amount required to be remitted by CapitalSource pursuant to Section
10.01 of the Note Purchase Agreement within one (1) Business Day after receipt of
notice thereof.

          Except as otherwise expressly provided in Section 5.01(c)(5)(i), the Servicer agrees that it
will cause the Loan Originator, Depositor, Obligor or other appropriate Person paying such amounts,
as the case may be, to remit directly to the Lock-Box Accounts for deposit into the Collection
Account all amounts referenced in clauses (1) through (6) to the extent such amounts are in excess
of a Scheduled Payment on the related Loan. To the extent the Servicer receives any such amounts,
it will deposit them into the Collection Account on the Business Day following receipt thereof.

          (c) Withdrawals From Collection Account; Deposits to the Principal Collections Account and
the Distribution Account.

     (1) Withdrawals From Collection Account — Reimbursement Items. The Servicer
shall periodically but in any event on each Remittance Date, make the following
withdrawals from the Collection Account prior to any other withdrawals, in no
particular order of priority:

	 	(i)	 	to withdraw any amount not required to be
deposited in the Collection Account or deposited therein in error,
	 
	 	(ii)	 	to withdraw the Required Interest Coverage
Amount and such other amounts as may be necessary for payments required
pursuant

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	 	 	 	to Section 5.01(c)(5) and Section 5.01(c)(6) and remit to the
Indenture Trustee for deposit in the Distribution Account for
payments required pursuant to Section 5.01(c)(5) and Section
5.01(c)(6);
	 
	 	(iii)	 	to deposit into the Principal Collections
Account as described in Section 5.01(c)(2) below; and
	 
	 	(iv)	 	to clear and terminate the Collection Account
in connection with the termination of this Agreement.

     (2) Deposits to Principal Collections Account. On any date of determination
occurring during the Revolving Period, the Servicer, at its option, may deposit into
the Principal Collections Account an amount equal to the excess of (i) the amount on
deposit in the Collection Account over the Required Interest Coverage Amount.

     (3) Withdrawals From the Principal Collections Account. On any date of
determination occurring during the Revolving Period, the Servicer may withdraw the
amount on deposit in the Principal Collections Account and use such amounts to
originate or acquire new Eligible Loans or to pay such amounts as principal on the
Notes.

     (4) [Reserved.]

     (5) Withdrawals From Distribution Account During the Revolving Period—
Payment Dates. On each Payment Date occurring during the Revolving Period, to
the extent funds are available in the Distribution Account, the Paying Agent (based
on the information provided by the Servicer contained in the Monthly Servicer Report
for such Payment Date) shall make withdrawals therefrom for application in the
following order of priority:

	 	(i)	 	to the Hedge Counterparty, payment of any
amounts due and payable to the Hedge Counterparty pursuant to the terms
of the Interest Rate Hedge Agreement (including, without limitation,
any amounts set forth in the confirmation of the Interest Rate Hedge
Agreement), plus any other amounts then due and owing to the Hedge
Counterparty pursuant to the Interest Rate Hedge Agreement (including,
without limitation, any breakage fee payable in accordance with any
such agreement), plus any past due amounts not previously paid;
	 
	 	(ii)	 	to distribute on such Payment Date the
following amounts in the following order: (a) to the Indenture Trustee,
an amount equal to one-twelfth of the annual Indenture Trustee Fee and
all unpaid Indenture Trustee Fees from prior Payment Dates and all
amounts owing to the Indenture Trustee pursuant to Section 6.07 of the
Indenture, (b) to the Servicer, an amount equal to the Servicing
Compensation (only if CapitalSource is not the Servicer and such

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	 	 	 	amounts were not previously retained by the Servicer) and any
Servicing Advance Reimbursement Amounts, (c) to the reimbursement or
payment of any expenses incurred by the Indenture Trustee in
connection with the appointment of a successor Servicer pursuant to
Section 9.02 hereof, (d) to the Back-up Servicer, an amount equal to
one-twelfth of the annual Backup Servicer Fee and (e) on each
anniversary of the Closing
	 
	 	(iii)	 	to the holders of the Notes pro rata, the sum
of the Interest Payment Amount for such Payment Date and the Interest
Carry Forward Amount for the preceding Payment Date;
	 
	 	(iv)	 	to the Initial Noteholder, the Nonutilization
Fee for such Payment Date, together with any Nonutilization Fees unpaid
from any prior Payment Dates;
	 
	 	(v)	 	to the holders of the Notes pro rata, the
amount required to maintain the Required Overcollateralization Amount
for such Payment Date;
	 
	 	(vi)	 	if CapitalSource is the Servicer, to the
Servicer, an amount equal to the Servicing Compensation, all unpaid
Servicing Compensation from prior Payment Dates and any Servicing
Advance Reimbursement Amounts;
	 
	 	(vii)	 	to the appropriate Person, amounts in respect
of Issuer/Depositor Indemnities (as defined in the Trust Agreement)
until such amounts are paid in full;
	 
	 	(viii)	 	to the Owner Trustee all amounts owing to the Owner Trustee pursuant
to the Trust Agreement and not otherwise paid; and
	 
	 	(ix)	 	to the Paying Agent, for distribution to the
holders of the Trust Certificates, in accordance with Section 5.2(b) of
the Trust Agreement, all amounts remaining therein.

     (6) Withdrawals From Distribution Account After the Revolving Period or
During the Existence of a Trigger Event. Notwithstanding anything herein to the
contrary, on each Payment Date after the Termination of the Revolving Period or
during the existence of a Trigger Event, to the extent funds are available in the
Distribution Account, the Paying Agent (based on the information provided by the
Servicer contained in the Monthly Servicer Report for such Payment Date) shall make
withdrawals therefrom for application in the following order of priority (provided
that from and after an Event of Default, if the Indenture Trustee or Paying Agent
collects any money or property pursuant to Article V of the Indenture, it
shall pay out the money or property in accordance with Section 5.04(b) of the
Indenture):

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	 	(i)	 	to the Hedge Counterparty, payment of any
amounts due and payable to the Hedge Counterparty pursuant to the terms
of the Interest Rate Hedging Agreement (including, without limitation,
any amounts set forth in the confirmation of the Interest Rate Hedging
Agreement), plus any other amounts then due and owing to the Hedge
Counterparty pursuant to the Interest Rate Hedging Agreement
(including, without limitation, any breakage fee payable in accordance
with any such agreement), plus any past due amounts not previously
paid;
	 
	 	(ii)	 	to distribute on such Payment Date the
following amounts in the following order: (a) the Indenture Trustee, an
amount equal to one-twelfth of the annual Indenture Trustee Fee and all
unpaid Indenture Trustee Fees from prior Payment Dates and all amounts
owing to the Indenture Trustee pursuant to Section 6.07 of the
Indenture, (b) to the Servicer, an amount equal to the Servicing
Compensation (only if CapitalSource or an Affiliate thereof is not the
Servicer and such amounts were not previously retained by the Servicer)
and any Servicing Advance Reimbursement Amounts, (c) to the
reimbursement or payment of any expenses incurred by the Indenture
Trustee in connection with the appointment of a successor Servicer
pursuant to Section 9.02 hereof, (d) to the Back-up Servicer, an amount
equal to one-twelfth of the annual Backup Servicer Fee and (e) on each
anniversary of the Closing Date, to the Owner Trustee, an amount equal
to the Owner Trustee Fee;
	 
	 	(iii)	 	to the holders of the Notes pro rata, the sum
of the Interest Payment Amount for such Payment Date and the Interest
Carry-Forward Amount for the preceding Payment Date;
	 
	 	(iv)	 	to the holders of the Notes pro rata, in
accordance with the amount of the Note Principal Balance for the
account of the applicable holder, the amount necessary to reduce the
Note Principal Balance to zero;
	 
	 	(v)	 	if CapitalSource is the Servicer, to the
Servicer, an amount equal to the Servicing Compensation, all unpaid
Servicing Compensation from prior Payment Dates and any Servicing
Advance Reimbursement Amounts;
	 
	 	(vi)	 	to each Indemnified Party (as defined in the
Note Purchase Agreement), amounts in respect of Issuer/Depositor
Indemnities (as defined in the Trust Agreement) until such amounts are
paid in full;
	 
	 	(vii)	 	to the Owner Trustee, all amounts owing to the
Owner Trustee pursuant to the Trust Agreement and not otherwise paid;
and

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	 	(viii)	 	to the Paying Agent, for distribution to the holders of the Trust
Certificates, in accordance with Section 5.2(b) of the Trust Agreement,
all amounts remaining therein.

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

     (8) The Servicer shall deposit or cause to be deposited all amounts payable to
the Issuer under each Interest Rate Hedge Agreement into the Distribution Account.

          Notwithstanding that the Notes have been paid in full, the Paying Agent and the Servicer shall
continue to maintain the Distribution Account, the Collection Account and the Principal Collections
Account hereunder until this Agreement has been terminated.

          Section 5.02 Payments to Securityholders.

          (a) All distributions made on the Notes on each Payment Date or pursuant to Section 5.04(b) of
the Indenture will be made on a pro rata basis among the Noteholders of record of the Notes on the
next preceding Record Date based on the Percentage Interest represented by their respective Notes,
without preference or priority of any kind, and, except as otherwise provided in the next
succeeding sentence, shall be made by wire transfer of immediately available funds to the account
such Noteholder shall have so notified the Paying Agent five (5) Business Days prior to the related
Record Date, and otherwise by check mailed to the address of such Noteholder appearing in the Notes
Register. The final distribution on each Note will be made in like manner, but only upon
presentment and surrender of such Note at the location specified in the notice to Noteholders of
such final distribution.

          (b) All distributions made on the Trust Certificates on each Payment Date or pursuant to
Section 5.04(b) of the Indenture will be made in accordance with the Percentage Interest among the
holders of the Trust Certificates of record on the next preceding Record Date based on their
Percentage Interests on the date of distribution, without preference or priority of any kind, and,
except as otherwise provided in the next succeeding sentence, shall be made by wire transfer of
immediately available funds to the account of each such holder, if such holder shall own of record
a Trust Certificate in an original denomination aggregating at least 25% of the Percentage
Interests and shall have so notified the Paying Agent and the Indenture Trustee five (5) Business
Days prior to the related Record Date, and otherwise by check mailed to the address of such
Certificateholder appearing in the Certificate Register. The final distribution on each Trust
Certificate will be made in like manner, but only upon presentment and surrender of such Trust
Certificate at the location specified in the notice to holders of the Trust Certificates of such
final distribution. Any amount distributed to the holders of the Trust Certificates on any Payment
Date shall not be subject to any claim or interest of the Noteholders.

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          Section 5.03 Trust Accounts; Trust Account Property.

          (a) Control of Trust Accounts. Each of the Trust Accounts established hereunder has been
pledged by the Issuer to the Indenture Trustee under the Indenture and shall be subject to the lien
of the Indenture. Amounts distributed from each Trust Account in accordance with the terms of this
Agreement shall be released for the benefit of the Securityholders from the Collateral upon such
distribution thereunder or hereunder. The Indenture Trustee shall possess all right, title and
interest in and to all funds on deposit from time to time in the Trust Accounts and in all proceeds
thereof (including all income thereon) and all such funds, investments, proceeds and income shall
be part of the Trust Account Property and the Collateral. Any Trust Account Property or Collateral
comprising “financial assets” within the meaning of the UCC have been delivered to and are being
held in a “securities account” within the meaning of the UCC that is maintained in the name of, and
under the control and direction of the Indenture Trustee or another institution that for the
purposes of the UCC is a “securities intermediary” whose “jurisdiction” with respect to the Trust
Account Property and Collateral is the State of Minnesota, the terms of which account treat the
Indenture Trustee as entitled to exercise the rights that comprise any financial assets credited to
such account solely on behalf of and for the benefit of the Securityholders. If, at any time, any
Trust Account ceases to be an Eligible Account, the Servicer shall, within ten Business Days (i)
establish a new Trust Account as an Eligible Account, (ii) terminate the ineligible Trust Account,
and (iii) transfer any cash and investments from such ineligible Trust Account to such new Trust
Account.

          With respect to the Trust Accounts, the Issuer and the Indenture Trustee agree, that the
Collection Account and the Principal Collections Account shall be subject to the sole and exclusive
dominion, custody and control of the Servicer and the Distribution Account shall be subject to the
sole and exclusive dominion, custody and control of the Paying Agent on behalf of the Indenture
Trustee, in each case, for the benefit of the Noteholders, and the Servicer and the Paying Agent on
behalf of the Indenture Trustee and the Indenture Trustee, as applicable, shall have sole signature
and withdrawal authority with respect thereto.

          (b) (1) Investment of Funds. Funds held in the Collection Account and the Principal
Collections Account may be invested (to the extent practicable and consistent with any requirements
of the Code) in Permitted Investments by or at the direction of the Servicer. In any case, funds
in the Collection Account and the Principal Collections Account must be available for withdrawal
without penalty, and any Permitted Investments must mature or otherwise be available for
withdrawal, one Business Day prior to the next Remittance Date and shall not be sold or disposed of
prior to its maturity subject to Subsection (b)(2) of this Section. All interest and any other
investment earnings on amounts or investments held in the Collection Account shall be retained by
the Servicer.

     (2) Insufficiency and Losses in Trust Accounts. If any amounts are needed for
disbursement from the Collection Account or the Principal Collections Account and
sufficient uninvested funds are not available to make such disbursement, the
Servicer shall cause to be sold or otherwise converted to cash a sufficient amount
of the investments in the Collection Account. The Servicer shall be liable for any
investment loss or other charge resulting therefrom.

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          If any losses are realized in connection with any investment in the Collection Account or
Principal Collections Account pursuant to this Agreement, then the Servicer shall deposit the
amount of such losses (to the extent not offset by income from other investments in the Collection
Account or Principal Collections Account) into the Collection Account or Principal Collections
Account promptly upon the realization of such loss.

          (c) Subject to Section 6.01 of the Indenture, the Indenture Trustee shall not in any way be
held liable by reason of any insufficiency in any Trust Account held by the Indenture Trustee
resulting from any investment loss on any Permitted Investment included therein.

          (d) With respect to the Trust Account Property, the Indenture Trustee acknowledges and agrees
that:

     (1) any Trust Account Property that is held in deposit accounts shall be held
solely in the Eligible Accounts, subject to the last sentence of Subsection (a) of
this Section 5.03; and each such Eligible Account shall be subject to the sole and
exclusive dominion, custody and control of the Paying Agent on behalf of the
Indenture Trustee; and, without limitation on the foregoing, the Paying Agent on
behalf of the Indenture Trustee shall have sole signature authority with respect
thereto;

     (2) any Trust Account Property that constitutes Physical Property shall be
delivered to the Indenture Trustee or the Paying Agent on behalf of the Indenture
Trustee in accordance with paragraphs (a) and (b) of the definition of “Delivery” in
Section 1.01 hereof and shall be held, pending maturity or disposition, solely by
the Paying Agent on behalf of the Indenture Trustee or the Indenture Trustee or a
securities intermediary (as such term is defined in Section 8-102(a)(14) of the UCC)
acting solely for the Indenture Trustee;

     (3) any Trust Account Property that is a book-entry security held through the
Federal Reserve System pursuant to federal book-entry regulations shall be delivered
in accordance with paragraph (c) of the definition of “Delivery” in Section 1.01
hereof and shall be maintained by the Paying Agent on behalf of the Indenture
Trustee or the Indenture Trustee, pending maturity or disposition, through continued
book-entry registration of such Trust Account Property as described in such
paragraph; and

     (4) any Trust Account Property that is an “uncertificated security” under
Article 8 of the UCC and that is not governed by clause (3) above shall be delivered
to the Paying Agent on behalf of the Indenture Trustee or the Indenture Trustee in
accordance with paragraph (d) of the definition of “Delivery” in Section 1.01 hereof
and shall be maintained by the Paying Agent on behalf of the Indenture Trustee or
the Indenture Trustee, pending maturity or disposition, through continued
registration of the Paying Agent on behalf of the Indenture Trustee or the Indenture
Trustee’s (or its nominee’s) ownership of such security.

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ARTICLE VI

STATEMENTS AND REPORTS; SPECIFICATION OF TAX MATTERS

          Section 6.01 Statements.

          No later than 12:00 noon (New York City time) on each Record Date, the Servicer shall deliver
to the Indenture Trustee and the Initial Noteholder by electronic transmission, the Monthly
Servicer Report, setting forth the date of such Report (day, month and year), the name of the
Issuer (i.e., “CapitalSource Funding VII Trust”), and the date of this Agreement, all in
substantially the form set out in Exhibit B hereto. In addition, the Servicer shall provide to the
Noteholders and the Indenture Trustee such additional reports and information regarding the Loans
as the Majority Noteholders or the Indenture Trustee may reasonably request from time to time.

          Section 6.02 Specification of Certain Tax Matters.

          The Paying Agent shall comply with all requirements of the Code and applicable state and local
law with respect to the withholding from any distributions made to any Securityholder of any
applicable withholding taxes imposed thereon and with respect to any applicable reporting
requirements in connection therewith, giving due effect to any applicable exemptions from such
withholding and effective certifications or forms provided by the recipient. Any amounts withheld
pursuant to this Section 6.02 shall be deemed to have been distributed to the Securityholders, as
the case may be, for all purposes of this Agreement. Neither the Paying Agent nor the Indenture
Trustee shall have any responsibility for preparing or filing any tax returns.

ARTICLE VII

COVENANTS

          Section 7.01 Financial Covenants of CapitalSource.

          (a) At all times during the term of this Agreement, CapitalSource shall maintain a minimum
consolidated Tangible Net Worth of $650,000,000.

          (b) CapitalSource may not exceed a maximum leverage ratio (the ratio of total consolidated
liabilities, determined in accordance with GAAP, to its consolidated Tangible Net Worth) of 6:1 as
of any date of determination.

          Section 7.02 Financial Statements of CapitalSource.

          CapitalSource shall furnish or cause to be furnished to Initial Noteholder the following
financial statements: (x) As soon as available and in any event within ninety (90) days after the
end of each fiscal year of CapitalSource, CapitalSource’s consolidated, audited balance sheets as
of the end of each fiscal year, and CapitalSource’s consolidated, audited financial statements of
income and changes in equity and audited statement of cash flows, each for such fiscal year and (y)
as soon as available and in any event within forty-five (45) days after the end of the first three
quarters of each fiscal year of CapitalSource, CapitalSource’s consolidated,

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unaudited balance sheets as of the end of each quarter, and CapitalSource’s unaudited
financial statements of income and changes in equity and unaudited statement of cash flows, each
for the portion of the fiscal year then ended. Each of the financial statements in (x) and (y)
shall have been prepared in accordance with GAAP (subject to year-end adjustments in the case of
interim statements) and certified by a Responsible Officer of CapitalSource in the form of a
compliance certificate to be delivered along with the above financial statements. Together with
each financial statement delivered pursuant to the foregoing clause (x) or (y), CapitalSource shall
execute and deliver to the Initial Noteholder an officer’s certification substantially in the form
of Exhibit L attached hereto. Each such financial statement and certificate shall be
delivered to the Initial Noteholder at the following electronic mail address (or such other contact
information as may be provided by the Initial Noteholder): cmwarehouse.monitoring@citigroup.com.
CapitalSource shall furnish or cause to be furnished to Initial Noteholder any other financial
information regarding CapitalSource reasonably requested by Initial Noteholder.

ARTICLE VIII

THE SERVICER AND THE BACKUP SERVICER

          Section 8.01 Indemnification; Third Party Claims.

          (a) The Servicer shall indemnify the Loan Originator, the Owner Trustee, the Issuer, the
Paying Agent, the Depositor, the Indenture Trustee, each Hedge Counterparty and the Noteholders,
their respective officers, directors, employees, agents and “control persons,” as such term is used
under the Act and under the Securities Exchange Act of 1934 as amended (each a “Servicer
Indemnified Party”) and hold harmless each of them against any and all claims, losses, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and other costs
and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or
resulting from, a breach of any of the Servicer’s representations and warranties and covenants
contained in this Agreement or in any way relating to the failure of the Servicer to perform its
duties and service the Eligible Loans in compliance with the terms of this Agreement except to the
extent such loss arises out of such Servicer Indemnified Party’s fraud, gross negligence or willful
misconduct; provided, however, that if the Servicer is not liable pursuant to the provisions of
Section 8.01(b) hereof for its failure to perform its duties and service the Eligible Loans in
compliance with the terms of this Agreement, then the provisions of this Section 8.01 shall have no
force and effect with respect to such failure; provided, further that no successor Servicer shall
be liable for the actions or omissions of a predecessor Servicer.

          (b) None of the Depositor or the Servicer or any of their respective Affiliates, directors,
officers, employees or agents shall be under any liability to the Owner Trustee, the Issuer, the
Indenture Trustee or the Securityholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Depositor, the Servicer or any of their respective
Affiliates, directors, officers, employees, agents against the remedies provided herein for the
breach of any warranties, representations or covenants made herein, or against any expense or
liability specifically required to be borne by such party without right of reimbursement pursuant
to the terms hereof, or against any expense or liability which would otherwise be imposed by reason
of misfeasance, bad faith or negligence in the performance of the respective duties of the
Servicer, the Depositor or the Loan Originator, as the case may be.

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The Loan Originator, the Depositor, the Servicer and any of their respective Affiliates,
directors, officers, employees, agents may rely in good faith on any document of any kind which,
prima facie, is properly executed and submitted by any Person respecting any matters arising
hereunder.

          (c) The Loan Originator agrees to indemnify and hold harmless the Depositor, the Indenture
Trustee, each Hedge Counterparty and the Noteholders, as the ultimate assignees from the Depositor
(each an “Originator Indemnified Party,” together with the Servicer Indemnified Parties, the
“Indemnified Parties”), from and against any loss, liability, expense, damage, claim or injury
arising out of or based on (i) any breach of any representation, warranty or covenant of the Loan
Originator, the Servicer or their Affiliates, in any Basic Document, including, without limitation,
the origination or prior servicing of the Loans by reason of any acts, omissions, or alleged acts
or omissions arising out of activities of the Loan Originator, the Servicer or their Affiliates,
and (ii) any untrue statement by the Loan Originator, the Servicer or its Affiliates of any
material fact, including, without limitation, any Officer’s Certificate, statement, report or other
document or information prepared by any such Person and furnished or to be furnished by it pursuant
to or in connection with the transactions contemplated thereby and not corrected prior to
completion of the relevant transaction including, without limitation, such written information as
may have been and may be furnished in connection with any due diligence investigation with respect
to the Eligible Loans or any such Person’s business, operations or financial condition, including
reasonable attorneys’ fees and other costs or expenses incurred in connection with the defense of
any actual or threatened action, proceeding or claim; provided that the Loan Originator shall not
indemnify an Originator Indemnified Party to the extent such loss, liability, expense, damage or
injury is due to either an Originator Indemnified Party’s willful misfeasance, bad faith or
negligence or by reason of an Originator Indemnified Party’s reckless disregard of its obligations
hereunder; provided, further, that the Loan Originator shall not be so required to indemnify an
Originator Indemnified Party or to otherwise be liable to an Originator Indemnified Party for any
losses in respect of the performance of the Eligible Loans, the creditworthiness of the Mortgagors
under the Eligible Loans, changes in the market value of the Eligible Loans or other similar
investment risks associated with the Eligible Loans arising from a breach of any representation or
warranty set forth in Section 3.04 hereto, a remedy for the breach of which is provided in Section
3.05 hereof. The provisions of this indemnity shall run directly to and be enforceable by an
Originator Indemnified Party subject to the limitations hereof.

          (d) With respect to a claim subject to indemnity hereunder made by any Person against an
Indemnified Party (a “Third Party Claim”), such Indemnified Party shall notify the related
indemnifying parties (each an “Indemnifying Party”) in writing of the Third Party Claim within a
reasonable time after receipt by such Indemnified Party of written notice of the Third Party Claim
unless the Indemnifying Parties shall have previously obtained actual knowledge thereof.
Thereafter, the Indemnified Party shall deliver to the Indemnifying Parties, within a reasonable
time after the Indemnified Party’s receipt thereof, copies of all notices and documents (including
court papers) received by the Indemnified Party relating to the Third Party Claim. No failure to
give such notice or deliver such documents shall effect the rights to indemnity hereunder. Each
Indemnifying Party shall promptly notify the Indenture Trustee and the Indemnified Party (if other
than the Indenture Trustee) of any claim of which it has been notified and shall promptly notify
the Indenture Trustee and the Indemnified Party (if applicable) of its intended course of action
with respect to any claim.

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          (e) If a Third Party Claim is made against an Indemnified Party, while maintaining control
over its own defense, the Indemnified Party shall cooperate and consult fully with the Indemnifying
Party in preparing such defense, and the Indemnified Party may defend the same in such manner as it
may deem appropriate, including settling such claim or litigation after giving notice to the
Indemnifying Party of such terms and the Indemnifying Party will promptly reimburse the Indemnified
Party upon written request; provided, however, that the Indemnified Party may not settle any claim
or litigation without the consent of the Indemnifying Party; provided, further, that the
Indemnifying Party shall have the right to reject the selection of counsel by the Indemnified Party
if the Indemnifying Party reasonably determines that such counsel is inappropriate in light of the
nature of the claim or litigation and shall have the right to assume the defense of such claim or
litigation if the Indemnifying Party determines that the manner of defense of such claim or
litigation is unreasonable.

          Section 8.02 Merger or Consolidation of the Servicer and Backup Servicer.

          The Servicer shall keep in full effect its existence, rights and franchises as a limited
liability company, and will obtain and preserve its qualification to do business as a foreign
entity and maintain such other licenses and permits in each jurisdiction necessary to protect the
validity and enforceability of each Basic Document to which it is a party and each of the Eligible
Loans and to perform its duties under each Basic Document to which it is a party; provided,
however, that the Servicer may merge or consolidate with any other corporation upon the
satisfaction of the conditions set forth in the following paragraph.

          Any Person into which the Servicer may be merged or consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Servicer shall be a party, or any Person
succeeding to the business of the Servicer, shall be an Eligible Servicer and shall be the
successor of the Servicer, as applicable hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Servicer shall send notice of any such merger, conversion, consolidation or
succession to the Indenture Trustee and the Issuer.

          Any Person (i) into which the Backup Servicer may be merged or consolidated, (ii) that may
result from any merger or consolidation to which the Backup Servicer shall be a party, or (iii)
that may succeed to the properties and assets of the Backup Servicer substantially as a whole,
which Person in any of the foregoing cases executes an agreement of assumption to perform every
obligation of the Backup Servicer hereunder, shall be the successor to the Backup Servicer under
this Agreement without further act on the part of any of the parties to this Agreement provided
such Person is organized under the laws of the United States of America or any one of the States
thereof or the District of Columbia (or any domestic branch of a foreign bank), (i) (a) that has
either (1) a long-term unsecured debt rating of “A” or better by S&P and “A2” or better by Moody’s
or (2) a short-term unsecured debt rating or certificate of deposit rating of “A-1” or better by
S&P or “P-1” or better by Moody’s, (b) the parent corporation which has either (1) a long-term
unsecured debt rating of “A” or better by S&P and “A2” or better by Moody’s or (2) a short-term
unsecured debt rating or certificate of deposit rating of “A-1” or better by S&P and “P-1” or
better by Moody’s or (c) is otherwise acceptable to the Majority Noteholders.

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          Section 8.03 Limitation on Liability of the Servicer and the Backup
Servicer.

          (a) 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 respecting any matters arising hereunder. Subject to
the terms of Section 8.01 hereof, 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
Eligible Loans in accordance with this Agreement.

          (b) The Backup Servicer undertakes to perform only such duties and obligations as are
specifically set forth in this Agreement, it being expressly understood by all parties hereto that
there are no implied duties or obligations of the Backup Servicer hereunder. Without limiting the
generality of the foregoing, the Backup Servicer, except as expressly set forth herein, shall have
no obligation to supervise, verify, monitor or administer the performance of the Servicer. The
Backup Servicer may act through its agents, nominees, attorneys and custodians in performing any of
its duties and obligations under this Agreement, it being understood by the parties hereto that the
Backup Servicer will be responsible for any misconduct or negligence on the part of such agents,
attorneys or custodians acting on the routine and ordinary day-to-day operations for and on behalf
of the Backup Servicer. Neither the Backup Servicer nor any of its officers, directors, employees
or agents shall be liable, directly or indirectly, for any damages or expenses arising out of the
services performed under this Agreement other than damages or expenses that result from the
negligence or willful misconduct of it or them or the failure to perform materially in accordance
with this Agreement.

          (c) The Backup Servicer shall not be liable for any obligation of the Servicer contained in
this Agreement or for any errors of the Servicer contained in any computer tape, certificate or
other data or document delivered to the Backup Servicer hereunder or on which the Backup Servicer
must rely in order to perform its obligations hereunder, and the Indenture Trustee, the Noteholders
and the Collateral Custodian each agree to look only to the Servicer to perform such obligations.
The Backup Servicer shall have no responsibility and shall not be in default hereunder or incur any
liability for any failure, error, malfunction or any delay in carrying out any of its duties under
this Agreement if such failure or delay results from the Backup Servicer acting in accordance with
information prepared or supplied by a Person other than the Backup Servicer or the failure of any
such other Person to prepare or provide such information. The Backup Servicer shall have no
responsibility, shall not be in default and shall incur no liability for (i) any act or failure to
act of any third party, including the Servicer, (ii) any inaccuracy or omission in a notice or
communication received by the Backup Servicer from any third party, (iii) the invalidity or
unenforceability of any Loan under applicable 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 8.04 No Resignation; Assignment.

          (a) The Servicer shall not resign from the obligations and duties hereby imposed on it except
(i) with the consent of the Majority Noteholders or (ii) upon determination that its duties
hereunder are no longer permissible under applicable law. Any such determination pursuant to clause
(ii) of the preceding sentence permitting the resignation of the Servicer shall be evidenced by an
Independent opinion of counsel to such effect delivered (at the expense of the

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Servicer) to the Indenture Trustee and the Majority Noteholders. No resignation of the
Servicer shall become effective until a successor Servicer, appointed pursuant to the provisions of
Section 9.02 hereof shall have assumed the Servicer’s responsibilities, duties, liabilities (other
than those liabilities arising prior to the appointment of such successor) and obligations under
this Agreement.

          Except as expressly provided herein, the Servicer shall not assign or transfer any of its
rights, benefits or privileges hereunder to any other Person, or delegate to or subcontract with,
or authorize or appoint any other Person to perform any of the duties, covenants or obligations to
be performed by the Servicer hereunder and any agreement, instrument or act purporting to effect
any such assignment, transfer, delegation or appointment shall be void.

          The Servicer agrees to cooperate with any successor Servicer in effecting the transfer of the
Servicer’s servicing responsibilities and rights hereunder pursuant to the first paragraph of this
Section 8.04, including, without limitation, the transfer to such successor of all relevant records
and documents (including any Loan Files in the possession of the Servicer) and all amounts received
with respect to the Loans and not otherwise permitted to be retained by the Servicer pursuant to
this Agreement. In addition, the Servicer, at its sole cost and expense, shall prepare, execute
and deliver any and all documents and instruments to the successor Servicer including all Loan
Files in its possession and do or accomplish all other acts reasonably necessary or appropriate to
effect such termination and transfer of servicing responsibilities.

          (b) The Backup Servicer shall not resign (except with prior consent of the Initial Noteholder
which consent shall not be unreasonably withheld) from the obligations and duties hereby imposed on
it except upon the Backup Servicer’s determination that (i) the performance of its duties hereunder
is or has become impermissible under applicable law and (ii) there is no reasonable action that the
Backup Servicer could take to make the performance of its duties hereunder permissible under
applicable law. Any such determination permitting the resignation of the Backup Servicer shall be
evidenced as to clause (i) above by an Opinion of Counsel to such effect delivered to the Indenture
Trustee and the Initial Noteholder. No such resignation shall become effective until a successor
Backup Servicer shall have assumed the responsibilities and obligations of the Backup Servicer
hereunder.

          Section 8.05 Relationship of Servicer to Issuer and the Indenture Trustee.

          The relationship of the Servicer (and of any successor to the Servicer as servicer under this
Agreement) to the Issuer, the Owner Trustee and the Indenture Trustee under this Agreement is
intended by the parties hereto to be that of an independent contractor and not of a joint venturer,
agent or partner of the Issuer, the Owner Trustee or the Indenture Trustee.

          Section 8.06 Servicer May Own Securities.

          Each of the Servicer and any Affiliate of the Servicer may in its individual or any other
capacity become the owner or pledgee of Securities with the same rights as it would have if it were
not the Servicer or an Affiliate thereof except as otherwise specifically provided herein;
provided, however, that at any time that CapitalSource or any of its Affiliates is the Servicer,
neither the Servicer nor any of its Affiliates (other than an Affiliate which is a corporation
whose purpose is limited to holding securities and related activities and which cannot incur
recourse debt) may be a Noteholder. Securities so owned by or pledged to the Servicer or such
Affiliate

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shall have an equal and proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Securities; provided, however, that any
Securities owned by the Servicer or any Affiliate thereof, during the time such Securities are
owned by them, shall be without voting rights for any purpose set forth in this Agreement unless
the Servicer or such Affiliate owns all outstanding Securities of the related class. The Servicer
shall notify the Indenture Trustee promptly after it or any of its Affiliates becomes the owner or
pledgee of a Security.

          Section 8.07 Indemnification of the Indenture Trustee and Initial
Noteholder.

          CapitalSource agrees to indemnify the Indenture Trustee and its employees, officers, directors
and agents, and reimburse its reasonable out-of-pocket expenses in accordance with Section 6.07 of
the Indenture as if it was a signatory thereto. CapitalSource agrees to indemnify the Initial
Noteholder in accordance with Section 9.01 of the Note Purchase Agreement as if it were a signatory
thereto. CapitalSource agrees to indemnify the Owner Trustee in accordance with Section 8.2 of the
Trust Agreement as if it were a signatory thereto. In addition to the foregoing indemnity, each of
CapitalSource and the Depositor, jointly and severally, hereby agrees to indemnify and hold
harmless the Noteholders from any liability, loss, claim or expense incurred as a result of the
Loan Originator’s or the Depositor’s failure to deliver to the Collateral Custodian the originally
executed (and to the extent it exists, the sole chattel paper counterpart) master purchase
agreement and, if any, security agreement related to any Alarm Service Loan. This Section 8.07
shall survive the termination of this Agreement.

ARTICLE IX

SERVICER EVENTS OF DEFAULT

          Section 9.01 Servicer Events of Default.

          (a) In case one or more of the following Servicer Events of Default shall occur and be
continuing, that is to say:

     (1) any failure by Servicer to deposit into the Collection Account or the
Distribution Account or any failure by Servicer to make any of the required payments
therefrom which continues unremedied for two (2) Business Day; or

     (2) any failure on the part of the Servicer duly to observe or perform in any
material respect any other of the material covenants or agreements on the part of
the Servicer, contained in any Basic Document to which it is a party, which
continues unremedied for a period of 30 days (or, in the case of payment of
insurance premiums with respect to Loans for which the Servicer is required pursuant
to the Loan Documents to escrow such premiums, for a period of 15 days) after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by any other party hereto or to the Servicer
(with copy to each other party hereto), by Holders of 25% of the Percentage
Interests of the Notes or the Trust Certificates; or

     (3) any breach on the part of the Servicer of any representation or warranty
contained in any Basic Document to which it is a party that has a

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material adverse affect on the interests of any of the parties hereto or any
Securityholder and which continues unremedied for a period of 30 days after the date
on which notice of such breach, requiring the same to be remedied, shall have been
given to the Servicer by any other party hereto or to the Servicer (with copy to
each other party hereto) by the Initial Noteholder or Holders of 25% of the
Percentage Interests of the Notes; or

     (4) a Bankruptcy Event shall occur with respect to the Servicer;

     (5) so long as the Servicer or the Loan Originator is an Affiliate of either of
the Depositor or the Issuer, any “event of default” by any such party occurs under
any of the Basic Documents; or

     (6) CapitalSource fails to comply with the financial covenants set forth in
Section 7.01.

          (b) Then, and in each and every such case, so long as a Servicer Event of Default shall not
have been remedied, the Indenture Trustee or the Majority Noteholders, by notice in writing to the
Servicer may, in addition to whatever rights such Person may have at law or in equity to damages,
including injunctive relief and specific performance, on thirty days’ notice, terminate all the
rights and obligations of the Servicer under this Agreement and in and to the Loans and the
proceeds thereof, as servicer under this Agreement. Within a commercially reasonable time following
receipt by the Servicer of such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Loans or otherwise, shall, subject to Section 9.02 hereof,
pass to and be vested in a successor servicer, and the successor servicer is hereby 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 do or cause to be done all other acts or things
necessary or appropriate to effect the purposes of such notice of termination, including, but not
limited to, the transfer and endorsement or assignment of the Loans and related documents. The
Servicer agrees to cooperate with the successor servicer in effecting the termination of the
Servicer’s responsibilities and rights hereunder, including, without limitation, the transfer to
the successor servicer for administration by it of all amounts which shall at the time be credited
by the Servicer to each Collection Account or thereafter received with respect to the Loans.

          (c) Upon the occurrence, and during the continuation, of (i) an Event of Default or Default
under any of the Basic Documents, (ii) a Servicer Event of Default under this Agreement, (iii) a
Trigger Event or (iv) a material adverse change in the business or financial conditions of the
Servicer (each, a “Term Event”), the Servicer’s right to service the Loans pursuant to the terms of
this Agreement shall be in effect for an initial period commencing on the date on which such Term
Event occurred and shall automatically terminate at 5:00 p.m. (New York City time), on the last
business day of the calendar month in which such Term Event occurred (the “Initial Term”).
Thereafter, the Initial Term shall be extendible in the sole discretion of the Initial Noteholder
by written notice (each, a “Servicer Extension Notice”) of the Initial Noteholder for successive
one-month terms (each such term ending at 5:00 p.m. (New York City time), on the last business day
of the related month). Following a Term Event, the Servicer hereby agrees that the Servicer shall
be bound for the duration of the Initial Term and the term covered by any such Servicer Extension
Notice to act as the Servicer pursuant to this

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Agreement. Following a Term Event, the Servicer agrees that if, as of 3:00 p.m. (New York City
time) on the last business day of any month, the Servicer shall not have received a Servicer
Extension Notice from the Initial Noteholder, the Servicer shall give written notice of such
non-receipt to the Initial Noteholder by 4:00 p.m. (New York City time). Following a Term Event,
the failure of the Initial Noteholder to deliver a Servicer Extension Notice by 5:00 p.m. (New York
City time) shall result in the termination of the Servicer upon the completion of the transfer of
the servicing (the “Servicer Termination Date”). The Servicer and the Initial Noteholder shall
comply with all applicable laws in connection with such transfer and the Servicer shall continue to
service the Loans until completion of such transfer.

          (d) Upon the occurrence of a Term Event (other than the occurrence of a Bankruptcy Event with
respect to the Servicer, the Depositor or the Issuer), the Indenture Trustee shall, at the request
of, or may, with the consent of the Majority Noteholders, by notice to the Issuer and the Servicer,
declare the Termination Date to have occurred and all amounts due the Noteholders, the Indenture
Trustee and the Owner Trustee shall be immediately due and payable.

          (e) Upon the occurrence of a Bankruptcy Event with respect to the Servicer, the Depositor or
the Issuer, the Termination Date shall occur immediately and all amounts due and payable to the
Noteholders, the Indenture Trustee and the Owner Trustee shall be immediately due and payable.

          Section 9.02 Appointment of Successor.

          (a) On and after the date the Servicer receives a notice of termination pursuant to Section
9.01 hereof or is terminated pursuant to Section 9.01(c) hereof, or the Owner Trustee receives the
resignation of the Servicer evidenced by an Opinion of Counsel or accompanied by the consents
required by Section 8.04 hereof, or the Servicer is removed as servicer pursuant to this Article
IX, then, Backup Servicer shall automatically succeed and assume all obligations of the Servicer
hereunder, and all authority and power of the Servicer under this Agreement shall pass to and be
vested in the Backup Servicer. As compensation therefor, the Backup Servicer shall be entitled to
the Servicing Fee, together with other servicing compensation in the form of assumption fees, late
payment charges or otherwise as provided herein; including, without limitation, expenses incurred
by the Backup Servicer in connection with the transition of the servicing obligations (“Transition
Costs”). In the event that there is no Backup Servicer or the Backup Servicer is unable to assume
such obligations on such date, the Indenture Trustee shall submit to CapitalSource the name of a
proposed successor servicer (the “Successor Servicer”). CapitalSource shall have the right to
reject one proposed Successor Servicer within two (2) Business Days of the Indenture Trustee’s
submission and, upon such rejection CapitalSource shall have no further consent rights with respect
to the appointment of any Successor Servicer. If CapitalSource shall not have rejected such
proposed Successor Servicer within such two (2) Business Day period, the Indenture Trustee shall,
as promptly as possible, appoint such Successor Servicer as servicer hereunder so long as such
proposed Successor Servicer is acceptable to the Initial Noteholder. The Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to the Indenture Trustee and
the Noteholders. In the event that a Successor Servicer has not accepted its appointment at the
time when the Servicer ceases to act as Servicer, the Indenture Trustee shall petition a court of
competent jurisdiction to appoint any established financial institution, having a net worth of not
less than United States

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$50,000,000 and whose regular business includes the servicing of loans similar to the Loans,
as the Successor Servicer hereunder.

          (b) Upon its appointment, the Backup Servicer or the Successor Servicer, as applicable, shall
be the successor in all respects to the Servicer with respect to servicing functions under this
Agreement and shall be subject to all the responsibilities, duties and liabilities relating thereto
placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to
the Servicer shall be deemed to refer to the Backup Servicer or the Successor Servicer, as
applicable; provided, however, that the Backup Servicer or Successor Servicer, as applicable, shall
have (i) no liability with respect to any action performed by the terminated Servicer prior to the
date that the Backup Servicer or Successor Servicer, as applicable, becomes the successor to the
Servicer or any claim of a third party based on any alleged action or inaction of the terminated
Servicer, (ii) no obligation to perform any advancing obligations, if any, of the Servicer unless
it elects to in its sole discretion, (iii) no obligation to pay any taxes required to be paid by
the Servicer (provided that the Backup Servicer or Successor Servicer, as applicable, shall pay any
income taxes for which it is liable), (iv) no obligation to pay any of the fees and expenses of any
other party to the transactions contemplated hereby, and (v) no liability or obligation with
respect to any indemnification obligations of any prior Servicer, including the original Servicer.
The indemnification obligations of the Backup Servicer or the Successor Servicer, as applicable,
upon becoming a Successor Servicer, are expressly limited to those instances of negligence or
willful misconduct of the Backup Servicer or Successor Servicer, as applicable.

          (c) All authority and power granted to the Servicer under this Agreement shall automatically
cease and terminate upon termination of this Agreement and shall pass to and be vested in the
Issuer and, without limitation, the Issuer is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things necessary or appropriate to effect
the purposes of such transfer of servicing rights. The Servicer agrees to cooperate with the
Seller in effecting the termination of the responsibilities and rights of the Servicer to conduct
servicing of the Loans.

          (d) Upon the Backup Servicer receiving notice that it is required to serve as the Servicer
hereunder pursuant to the foregoing provisions of this Section 9.02, the Backup Servicer will
promptly begin the transition to its role as Servicer. Notwithstanding the foregoing, the Backup
Servicer may, in its discretion, appoint, or petition a court of competent jurisdiction to appoint,
any established servicing institution as the successor to the Servicer hereunder in the assumption
of all or any part of the responsibilities, duties or liabilities of the Servicer hereunder. As
compensation, any Successor Servicer so appointed shall be entitled to receive the Servicing Fee,
together with any other servicing compensation in the form of assumption fees, late payment charges
or otherwise as provided herein that accrued prior thereto, including, without limitation,
Transition Costs. In the event the Backup Servicer is required to solicit bids as provided herein,
the Backup Servicer shall solicit, by public announcement, bids from banks and mortgage servicing
institutions meeting the qualifications set forth in this Section 9.02. 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

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and effect the sale, transfer and assignment of the servicing rights and responsibilities
hereunder to the qualified party submitting the highest qualifying bid. The Backup Servicer shall
deduct from any sum received by the Backup Servicer from the successor to the Servicer in respect
of such sale, transfer and assignment all costs and expenses of any public announcement and of any
sale, transfer and assignment of the servicing rights and responsibilities hereunder and the amount
of any unreimbursed Servicing Advances. After such deductions, the remainder of such sum shall be
paid by the Backup Servicer to the Servicer at the time of such sale, transfer and assignment to
the Servicer’s successor. The Backup Servicer and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such succession. No
appointment of a successor to the Servicer hereunder shall be effective until written notice of
such proposed appointment shall have been provided by the Backup Servicer to the Indenture Trustee
and the Noteholders and the Backup Servicer shall have consented thereto. The Backup Servicer
shall not resign as servicer until a Successor Servicer has been appointed and accepted such
appointment. Notwithstanding anything to the contrary contained herein, in no event shall Wells
Fargo Bank, National Association, in any capacity, be liable for any Servicing Fee or for any
differential in the amount of the Servicing Fee paid hereunder and the amount necessary to induce
any Successor Servicer under this Agreement and the transactions set forth or provided for by this
Agreement.

          If Wells Fargo Bank, National Association becomes the Successor Servicer, Wells Fargo Bank,
National Association shall not be required to service the Loans in accordance with the terms of the
Underwriting Guidelines but rather it shall be required to service the Loans in accordance with
applicable law, the Required Loan Documents and current industry standards.

          Notwithstanding anything contained in this Agreement to the contrary, Wells Fargo Bank,
National Association as successor Servicer is authorized to accept and rely on all of the
accounting, records (including computer records) and work of the prior Servicer relating to the
Loans (collectively, the “Predecessor Servicer Work Product”) without any audit or other
examination thereof, and Wells Fargo Bank, National Association shall have no duty, responsibility,
obligation or liability for the acts and omissions of the prior Servicer. If any error,
inaccuracy, omission or incorrect or non-standard practice or procedure (collectively, “Errors”)
exist in any Predecessor Servicer Work Product and such Errors make it materially more difficult to
service or should cause or materially contribute to Wells Fargo Bank, National Association making
or continuing any Errors (collectively, “Continued Errors”), Wells Fargo Bank, National Association
shall have no duty, responsibility, obligation or liability to perform servicing or for such
Continued Errors; provided, however, that Wells Fargo Bank, National Association agrees to use its
best efforts to prevent further Continued Errors. In the event that Wells Fargo Bank, National
Association becomes aware of Errors or Continued Errors, Wells Fargo Bank, National Association
shall, with the prior consent of the Initial Noteholder, use its best efforts to reconstruct and
reconcile such data as is commercially reasonable to correct such Errors and Continued Errors and
to prevent future Continued Errors. Wells Fargo Bank, National Association shall be entitled to
recover its costs thereby expended in accordance with Section 5.01(c)(5)(i) of this Agreement or
Section 5.04(b) of the Indenture, as applicable.

          Section 9.03 Waiver of Defaults.

          The Initial Noteholder may waive any events permitting removal of the Servicer as servicer
pursuant to this Article IX. Upon any waiver of a past default, such default shall cease

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to exist and any Servicer Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereto except to the extent expressly so waived.

          Section 9.04 Accounting Upon Termination of Servicer.

          Upon termination of the Servicer under this Article IX, the Servicer shall, at its own
expense:

          (a) deliver to its successor or, if none shall yet have been appointed, to the Paying Agent
the funds in the Collection Account;

          (b) deliver to its successor or, if none shall yet have been appointed, to the Collateral
Custodian all Loan Files and related documents and statements held by it hereunder and a Loan
portfolio computer tape;

          (c) deliver to its successor, the Indenture Trustee, the Issuer and the Securityholders a full
accounting of all funds, including a statement showing the Scheduled Payments collected by it and a
statement of monies held in trust by it for payments or charges with respect to the Loans; and

          (d) execute and deliver such instruments and perform all acts reasonably requested in order to
effect the orderly and efficient transfer of servicing of the Loans to its successor and to more
fully and definitively vest in such successor all rights, powers, duties, responsibilities,
obligations and liabilities of the Servicer under this Agreement.

          Section 9.05 Removal of Backup Servicer.

          (a) The Backup Servicer may be removed, with or without cause, by the Indenture Trustee, at
the direction of the Initial Noteholder, by notice given in writing to the Backup Servicer (the
“Backup Servicer Termination Notice”). In the event of any such removal, a replacement Backup
Servicer may be appointed by the Initial Noteholder or the Indenture Trustee with the consent of
the Initial Noteholder.

          (b) Upon the Backup Servicer’s receipt of a Backup Servicer Termination Notice from the
Indenture Trustee of the designation of a replacement Backup Servicer, the Backup Servicer agrees
that it will terminate its activities as Backup Servicer hereunder.

ARTICLE X

THE COLLATERAL CUSTODIAN

          Section 10.01 Appointment.

          The Indenture Trustee, at the direction of the Initial Noteholder, hereby appoints Wells Fargo
Bank, National Association to act as Collateral Custodian, for the benefit of the Indenture
Trustee, as agent for the Noteholders. The Collateral Custodian hereby accepts such appointment and
agrees to perform the duties and obligation with respect thereto set forth herein.

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          Section 10.02 No Representations.

          In taking and retaining custody of the Required Loan Documents, the Collateral Custodian shall
be deemed to be acting as the agent of the Noteholders; provided, however, that the Collateral
Custodian makes no representations as to the existence, perfection or priority of any Lien on the
Required Loan Documents or the instruments therein; and provided, further, that, the Collateral
Custodian’s duties as agent shall be limited to those expressly contemplated herein.

          Section 10.03 Custody of Custodial Loan Files.

          All Custodial Loan Files shall be kept in fire resistant vaults, rooms or cabinets at the
office of the Collateral Custodian set forth in Section 13.06 hereof, or at such other office as
shall be specified to the Indenture Trustee by the Collateral Custodian in a written notice
delivered at least forty- five (45) days prior to such change. All Custodial Loan Files shall be
placed together with an appropriate identifying label and maintained in such a manner so as to
permit retrieval and access. All Custodial Loan Files shall be clearly segregated from any other
documents or instruments maintained by the Collateral Custodian.

          Section 10.04 Standard of Care.

          In performing its duties, the Collateral Custodian shall use the same degree of care and
attention as it employs with respect to loans similar to the Loans that it holds as Collateral
Custodian.

          Section 10.05 Acknowledgment.

          The parties hereto hereby acknowledge and agree that the Collateral Custodian’s execution of
this Agreement shall constitute the Collateral Custodian’s written acknowledgment and agreement
that the Collateral Custodian is holding any Collateral it receives that may be perfected by
possession under the UCC on behalf of and for the benefit of the Indenture Trustee and the
Noteholders.

ARTICLE XI

[RESERVED.]

ARTICLE XII

TERMINATION

          Section 12.01 Termination.

          (a) This Agreement shall terminate upon either: (A) the later of (i) the satisfaction and
discharge of the Indenture and the provisions thereof, and payment to the Noteholders of all
amounts due and owing in accordance with the provisions hereof or (ii) the disposition of all funds
with respect to the last Loan and the remittance of all funds due hereunder and the payment of all
amounts due and payable, including, in both cases, without limitation, indemnification payments
payable pursuant to any Basic Document to the Indenture

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Trustee, the Owner Trustee, the Issuer, the Servicer and the Collateral Custodian, written
notice of the occurrence of either of which shall be provided to the Indenture Trustee by the
Servicer; or (B) the mutual consent of the Servicer, the Depositor and all Securityholders in
writing and delivered to the Indenture Trustee by the Servicer.

          (b) The Securities shall be subject to an early redemption or termination at the option of the
Servicer and the Initial Noteholder in the manner and subject to the provisions of Section 12.02 of
this Agreement.

          (c) Except as provided in this Article XII, none of the Depositor, the Servicer nor any
Certificateholder or Noteholder shall be entitled to revoke or terminate the Issuer.

          Section 12.02 Optional Termination.

          The Servicer may, at its option, effect an early termination of this Agreement and the
Collateral on any Payment Date on or after the Closing Date. The Servicer shall effect such early
termination by providing notice thereof to the Indenture Trustee and Owner Trustee and paying all
amounts due the Indenture Trustee, the Owner Trustee and the Noteholders hereunder (the
“Termination Price”).

          Any such early termination by the Servicer shall be accomplished by depositing into the
Collection Account on the third Business Day prior to the Payment Date on which the purchase is to
occur the amount of the Termination Price to be paid. The Termination Price and any amounts then on
deposit in the Collection Account (other than any amounts withdrawable pursuant to Section
5.01(c)(1) hereof) shall be deposited in the Distribution Account and distributed by the Paying
Agent pursuant to Section 5.01(c)(5) of this Agreement and Section 9.1 of the Trust Agreement on
the next succeeding Payment Date; and any amounts received with respect to the Loans and
Foreclosure Properties subsequent to the final Payment Date shall belong to the purchaser thereof.

          Section 12.03 Notice of Termination.

          Notice of termination of this Agreement or of early redemption and termination of the Issuer
pursuant to Section 12.01 shall be sent by the Indenture Trustee to the Noteholders (in accordance
with Section 12.02 of the Indenture).

ARTICLE XIII

MISCELLANEOUS PROVISIONS

          Section 13.01 Acts of Securityholders.

          Except as otherwise specifically provided herein and except with respect to Section 13.02(b),
whenever action, consent or approval of the Securityholders 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 Securityholders if the Majority Noteholders agree to take such action or give
such consent or approval.

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          Section 13.02 Amendment.

          (a) This Agreement may be amended from time to time by the Depositor, the Servicer, the Paying
Agent, the Loan Originator, the Collateral Custodian, the Backup Servicer, the Indenture Trustee
and the Issuer by written agreement with notice thereof to the Securityholders, without the consent
of any of the Securityholders, to cure any error or ambiguity, to correct or supplement any
provisions hereof which may be defective or inconsistent with any other provisions hereof or to add
any other provisions with respect to matters or questions arising under this Agreement; provided,
however, that such action will not adversely affect in any material respect the interests of the
Securityholders, as evidenced by an Opinion of Counsel to such effect provided at the expense of
the party requesting such Amendment.

          (b) This Agreement may also be amended from time to time by the Depositor, the Servicer, the
Paying Agent, the Loan Originator, the Collateral Custodian, the Backup Servicer, the Indenture
Trustee and the Issuer by written agreement, with the prior written consent of the Majority
Noteholders.

          (c) It shall not be necessary for the consent of Securityholders under this Section to approve
the particular form of any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof.

          Prior to the execution of any amendment to this Agreement, the Issuer and the Indenture
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution
of such amendment is authorized or permitted by this Agreement. The Issuer and the Indenture
Trustee may, but shall not be obligated to, enter into any such amendment which affects the
Issuer’s own rights, duties or immunities of the Issuer or the Indenture Trustee, as the case may
be, under this Agreement.

          Any amendment to this Agreement which affects the rights or duties of the Owner Trustee shall
require the prior written consent of the Owner Trustee.

          Section 13.03 Recordation of Agreement.

          To the extent permitted by applicable law, this Agreement, or a memorandum thereof if
permitted under applicable law, is subject to recordation in all appropriate public offices for
real property records in all of the counties or other comparable jurisdictions in which any or all
of the Mortgaged Property is situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Servicer at the Securityholders’ expense on
direction of the Majority Noteholders but only when accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests of the
Securityholders or is necessary for the administration or servicing of the Loans.

          Section 13.04 Duration of Agreement.

          This Agreement shall continue in existence and effect until terminated as herein provided.

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          Section 13.05 Governing Law.

          THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW (EXCEPT FOR SECTION 5-1401 AND
SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).

          Section 13.06 Notices.

All demands, notices and communications hereunder shall be in writing and shall be deemed to have
been duly given if (i) delivered personally, mailed by overnight mail, certified mail or registered
mail, postage prepaid, or (ii) transmitted by telecopy, upon telephone confirmation of receipt
thereof, as follows: (A) in the case of the Depositor, to CS Funding VII Depositor LLC, 4445
Willard Avenue, Chevy Chase, Maryland 20815, Attention: Treasury, telecopy number (301) 841-2307,
or such other addresses or telecopy or telephone numbers as may hereafter be furnished to the
Securityholders and the other parties hereto in writing by the Depositor; (B) in the case of the
Issuer, to CapitalSource Funding VII Trust, c/o Wilmington Trust Company, as Owner Trustee, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890, telecopy (302) 636-4140,
telephone (302) 651-1000, or such other address or telecopy or telephone numbers as may hereafter
be furnished to the Noteholders and the other parties hereto in writing by the Issuer; (C) in the
case of the Loan Originator, to CapitalSource Finance LLC, 4445 Willard Avenue, Chevy Chase,
Maryland 20815, Attention: Treasury, telecopy number (301) 841-2307, or such other addresses or
telecopy or telephone numbers as may hereafter be furnished to the Securityholders and the other
parties hereto in writing by the Loan Originator, (D) in the case of the Servicer, to
CapitalSource, 4445 Willard Avenue, Chevy Chase, Maryland 20815, Attention: Treasury, telecopy
number (301) 841-2307, or such other addresses or telecopy or telephone numbers as may hereafter be
furnished to the Securityholders and the other parties hereto in writing by the Servicer; (E) in
the case of the Collateral Custodian, to Wells Fargo Bank, National Association, 751 Kasota Avenue,
MAC N9328-011, Minneapolis, Minnesota, Attention: Corporate Trust Services/Asset-Backed Securities
Vault, telecopy number (612) 667-1080, or such other addresses or telecopy or telephone numbers as
may hereafter be furnished to the Securityholders and the other parties hereto in writing by the
Collateral Custodian; (F) in the case of the Backup Servicer, to Wells Fargo Bank, National
Association, MAC N9311-161, Sixth Street and Marquette, Minneapolis, Minnesota 55479, Attention:
Corporate Trust Services/Asset-Backed Administration, telecopy number (612) 667-3539, or such other
addresses or telecopy or telephone numbers as may hereafter be furnished to the Securityholders and
the other parties hereto in writing by the Backup Servicer; (G) in the case of the Indenture
Trustee, at the Corporate Trust Office, as defined in the Indenture; and (H) in the case of the
Initial Noteholder, to Asset Backed Finance, Citigroup Global Markets Realty Corp., 390 Greenwich
Street, 6th Floor, New York, NY 10013, telecopy number (212) 816-7533.

          Section 13.07 Severability of Provisions.

          If any one or more of the covenants, agreements, provisions or terms of this Agreement shall
be held invalid for any reason whatsoever, then such covenants, agreements, provisions or terms
shall be deemed severable from the remaining covenants, agreements,

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provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other covenants, agreements, provisions or terms of this Agreement.

          Section 13.08 No Partnership.

          Nothing herein contained shall be deemed or construed to create any partnership or joint
venture between the parties hereto and the services of the Servicer shall be rendered as an
independent contractor.

          Section 13.09 Counterparts.

          This Agreement may be executed in one or more counterparts and by the different parties hereto
on separate counterparts, each of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same Agreement.

          Section 13.10 Successors and Assigns.

          This Agreement shall inure to the benefit of and be binding upon the Servicer, the Loan
Originator, the Depositor, the Indenture Trustee, the Issuer and the Securityholders and their
respective successors and permitted assigns.

          Section 13.11 Headings.

          The headings of the various Sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed to be part of this Agreement.

          Section 13.12 Actions of Securityholders.

          (a) Any request, demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be given or taken by Securityholders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Securityholders in person
or by an agent duly appointed in writing; and except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered to the Depositor,
the Servicer or the Issuer. Proof of execution of any such instrument or of a writing appointing
any such agent shall be sufficient for any purpose of this Agreement and conclusive in favor of the
Depositor, the Servicer and the Issuer if made in the manner provided in this Section 13.12.

          (b) The fact and date of the execution by any Securityholder of any such instrument or writing
may be proved in any reasonable manner which the Depositor, the Servicer or the Issuer may deem
sufficient.

          (c) Any request, demand, authorization, direction, notice, consent, waiver or other act by a
Securityholder shall bind every holder of every Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof, in respect of anything done, or omitted to be
done, by the Depositor, the Servicer or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Security.

          (d) The Depositor, the Servicer or the Issuer may require additional proof of any matter
referred to in this Section 13.12 as it shall deem necessary.

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          Section 13.13 Non-Petition Agreement.

          Notwithstanding any prior termination of any Basic Document, the Loan Originator, the Paying
Agent, the Servicer, the Depositor and the Indenture Trustee each severally and not jointly
covenants that it shall not, prior to the date which is one year and one day after the payment in
full of the all of the Notes, acquiesce, petition or otherwise, directly or indirectly, invoke or
cause the Issuer or the Depositor to invoke the process of any governmental authority for the
purpose of commencing or sustaining a case against the Issuer or Depositor under any Federal or
state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or Depositor or any
substantial part of their respective property or ordering the winding up or liquidation of the
affairs of the Issuer or the Depositor.

          Section 13.14 Holders of the Securities.

          (a) Any sums to be distributed or otherwise paid hereunder or under this Agreement to the
holders of the Securities shall be paid to such holders pro rata based on their Percentage
Interests;

          (b) Where any act or event hereunder is expressed to be subject to the consent or approval of
the holders of the Securities, such consent or approval shall be capable of being given by the
holder or holders evidencing in the aggregate not less than 51% of the Percentage Interests.

          Section 13.15 Due Diligence.

          The Loan Originator acknowledges that the Initial Noteholder may purchase Notes and Additional
Note Principal Balances and may enter into transactions based solely upon the information provided
by the Loan Originator to the Initial Noteholder in the Loan Schedule and the representations,
warranties and covenants contained herein, and that the Initial Noteholder, at its option, has the
right prior to such purchase of the Notes or Additional Note Principal Balance therein or such
Transactions to conduct a partial or complete due diligence review on some or all of the Eligible
Loans securing such purchase, including without limitation ordering new credit reports on the
related Mortgaged Properties and otherwise re-generating the information used to originate such
Loan. The Initial Noteholder may underwrite such Loans itself or engage a mutually agreed upon
third party underwriter to perform such underwriting. The Loan Originator agrees to cooperate with
the Initial Noteholder and any third party underwriter in connection with such underwriting,
including, but not limited to, providing the Initial Noteholder and any third party underwriter
with access to any and all documents, records, agreements, instruments or information relating to
such Loans in the possession, or under the control, of the Servicer. The Loan Originator also
shall make available to the Initial Noteholder a knowledgeable financial or accounting officer for
the purpose of answering questions respecting the Loan Files and the Loans. Each Noteholder agrees
(on behalf of itself and its Affiliates, directors, officers, employees and representatives) to use
reasonable precaution to keep confidential, in accordance with its customary procedures for
handling confidential information and in accordance with safe and sound practices, and not to
disclose to any third party, any non-public information supplied to it or otherwise obtained by it
hereunder with respect to the Loan Originator or any of its Affiliates (including, but not limited
to, the Loan File); provided, however, that nothing herein shall prohibit the disclosure of any
such

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information to the extent required by statute, rule, regulation or judicial process; provided,
further that, unless specifically prohibited by applicable law or court order, the Noteholder
shall, prior to disclosure thereof, notify the Loan Originator of any request for disclosure of any
such non-public information. The Noteholder further agrees not to use any such non-public
information for any purpose unrelated to this Agreement and that each such Noteholder shall not
disclose such non-public information to any third party underwriter in connection with a potential
Disposition without obtaining a written agreement from such third party underwriter to comply with
the confidentiality provisions of this Section 13.15.

          Section 13.16 No Reliance.

          Each of the Loan Originator, the Depositor and the Issuer hereby acknowledges that it has not
relied on the Initial Noteholder or any of its officers, directors, employees, agents and “control
persons” as such term is used under the Act and under the Securities Exchange Act of 1934, as
amended, for any tax, accounting, legal or other professional advice in connection with the
transactions contemplated by the Basic Documents, that each of the Loan Originator, the Depositor
and the Issuer has retained and been advised by such tax, accounting, legal and other professionals
as it has deemed necessary in connection with the transactions contemplated by the Basic Documents
and that the Initial Noteholder makes no representation or warranty, and shall have no liability
with respect to, the tax, accounting or legal treatment or implications relating to the
transactions contemplated by the Basic Documents.

          Section 13.17 Conflicts.

          Notwithstanding anything contained in the Basic Documents to the contrary, in the event of the
conflict between the terms of this Agreement and any other Basic Document, the terms of this
Agreement shall control.

          Section 13.18 Limitation on Liability.

          It is expressly understood and agreed by the parties hereto that (a) this Agreement is
executed and delivered by Wilmington Trust Company, not individually or personally, but solely as
Owner Trustee of CapitalSource Funding VII Trust, in the exercise of the powers and authority
conferred and vested in it, (b) each of the representations, undertakings and agreements herein
made on the part of the Issuer is made and intended not as personal representations, undertakings
and agreements by Wilmington Trust Company but is made and intended for the purpose for binding
only the Issuer, (c) nothing herein contained shall be construed as creating any liability on
Wilmington Trust Company, individually or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being expressly waived by the parties hereto
and by any Person claiming by, through or under the parties hereto and (d) under no circumstances
shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses
of the Issuer or be liable for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer under this Agreement or any other related documents.

          Section 13.19 No Agency.

          Nothing contained herein or in the Basic Documents shall be construed to create an agency or
fiduciary relationship between the Initial Noteholder, the Noteholders or any of

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their Affiliates and the Issuer, the Depositor, the Loan Originator or the Servicer. None of
the Initial Noteholder, any Noteholders or any of their Affiliates shall be liable for any acts or
actions affected in connection with a Disposition including without limitation, any Securitization
pursuant to Section 3.06 nor any Whole Loan Sale pursuant to Section 3.06 hereof.

          Section 13.20 Third Party Beneficiaries.

          The Owner Trustee is an intended third party beneficiary of this Agreement.

          Section 13.21  Performance by Wells Fargo Bank, National Association.

          The parties expressly acknowledge and consent to Wells Fargo Bank, National Association acting
in the capacities of successor Servicer and in the capacity as Indenture Trustee, Backup Servicer
and Collateral Custodian. Wells Fargo Bank, National Association may, in such dual capacity,
discharge its separate functions fully, without hindrance or regard to conflict of interest
principles, duty of loyalty principles or other breach of fiduciary duties to the extent that any
such conflict or breach arises from the performance by Wells Fargo Bank, National Association of
express duties set forth in this Agreement in any of such capacities, all of which defenses, claims
or assertions are hereby expressly waived by the other parties hereto except in the case of
negligence (other than errors in judgment) and willful misconduct by Wells Fargo Bank, National
Association.

(SIGNATURE PAGE FOLLOWS)

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

	 	 	 	 	 	 	 
	 	 	CAPITALSOURCE FUNDING VII TRUST,	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Wilmington Trust Company, not in its individual

capacity but solely as Owner Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ ROBERT J. PERKINS	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Robert J. Perkins

Title: Sr Financial Services Officer	 	 
	 
	 	 	 	 	 	 
	 	 	CS FUNDING VII DEPOSITOR LLC, as Depositor	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:
	 	/s/ JEFFREY LIPSON	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jeffrey Lipson

Title: Vice President & Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	CAPITALSOURCE FINANCE LLC, as Loan Originator and
Servicer	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:
	 	/s/ JEFFREY LIPSON	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jeffrey Lipson

Title: Vice President & Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, as Indenture
Trustee, Collateral Custodian and Backup Servicer	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:
	 	/s/ JOE NARDI	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Joe Nardi

Title: Vice President

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