Document:

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EXHIBIT 10.16

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is made by and between Atlantic Coast Bank (the
“Bank”) and Jon C. Parker, Sr. (“Executive”) and
is effective as of                                         , 2007 (the
“Effective Date”). References herein to the “Company” mean Atlantic Coast Federal Corporation,
which owns 100% of the common stock of the Bank. The Company is a signatory to this Agreement for
the sole purpose of guaranteeing the Bank’s performance hereunder.

     WHEREAS, the Executive, the Bank and the Company are a party to an employment agreement dated
September 1, 2006, and this Agreement supersedes such prior agreement and all obligations of the
parties under such prior agreement shall become null and void after the Effective Date of this
Agreement; and

     WHEREAS, Executive is serving as an executive officer of the Bank and the Bank wishes to
assure itself of the services of Executive as an officer of the Bank for the period provided in
this Agreement; and

     WHEREAS, in order to induce Executive to remain in the employ of the Bank and to provide
further incentive for Executive to achieve the financial and performance objectives of the Bank,
the parties desire to enter into this Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the terms
and conditions hereinafter provided, the parties hereby agree as follows:

1. POSITION AND RESPONSIBILITIES.

     During the term of this Agreement, Executive shall serve as an executive officer of the Bank.
In that position, pursuant to direction from the Chief Executive Officer, the Executive shall be
responsible for such duties for the Company and the Bank as assigned by the Chief Executive
Officer, including, but not limited to, strategic growth, asset liability management and
acquisition opportunities. Executive also agrees to serve, if appointed or elected, as an officer
and director of any subsidiary or affiliate of the Bank.

2. TERM AND DUTIES.

     (a) One Year Contract. The term of Executive’s employment hereunder will begin as of
the Effective Date and continue for a period of twelve (12) full calendar months.

     (b) Termination of Agreement. Notwithstanding anything contained in this agreement to
the contrary, either Executive or the Bank may terminate Executive’s employment with the Bank at
any time during the term of this Agreement, subject to the terms and conditions of this Agreement.

     (c) Continued Employment Following Expiration of Term. Nothing in this Agreement
shall mandate or prohibit a continuation of Executive’s employment following the expiration of the
term of this Agreement, upon such terms and conditions as the Bank and Executive may mutually
agree.

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     (d) Duties; Membership on Other Boards. During the term of this Agreement, except for
periods of absence occasioned by illness, reasonable vacation periods, and reasonable leaves of
absence approved by the Chief Executive Officer, Executive shall devote substantially all his
business time, attention, skill, and efforts to the faithful performance of his duties hereunder
including activities and services related to the operation and management of the Bank; provided,
however, that, with the approval of the Chief Executive Officer, Executive may serve, or continue
to serve, on the boards of directors of, and hold any other offices or positions in, business,
social, religious, charitable or similar organizations which, in the Chief Executive Officer’s
judgment, will not present any conflict of interest with the Bank, or materially affect the
performance of Executive’s duties pursuant to this Agreement.

3. COMPENSATION, BENEFITS AND REIMBURSEMENT.

     (a) Base Salary. In consideration of Executive’s performance of the duties set forth
in Section 2, the Bank shall provide Executive the compensation specified in this Agreement. The
Bank shall pay Executive a salary of $                     per year (“Base Salary”). The Base Salary
shall be payable biweekly, or with such other frequency as officers of the Bank are generally paid.
During the term of this Agreement, the Base Salary shall be reviewed at least annually by Chief
Executive Officer and maybe adjusted from time to time.

     (b) Bonus and Incentive Compensation. Executive shall be entitled to incentive
compensation and bonuses as provided in any plan or arrangement of the Bank in which Executive is
eligible to participate. Nothing paid to Executive under any such plan or arrangement will be
deemed to be in lieu of other compensation to which Executive is entitled under this Agreement.

     (c) Employee Benefits and Perquisites. Executive will be entitled to participate in or
receive benefits under any employee benefit plans including, but not limited to, retirement plans,
supplemental retirement plans, pension plans, profit-sharing plans, health-and-accident insurance
plans, medical coverage or any other employee benefit plan or arrangement made available by the
Bank its senior executives, including any stock benefit plans, subject to and on a basis consistent
with the terms, conditions and overall administration of such plans and arrangements established by
the Board of Directors of the Bank.

     (d) Paid Time Off. Executive shall be entitled to paid vacation time each year
during the term of this Agreement (measured on a fiscal or calendar year basis, in accordance with
the Bank’s usual practices), as well as sick leave, holidays and other paid absences in accordance
with the Bank’s policies and procedures for senior executives. Any unused paid time off during an
annual period shall be administered in accordance with the Bank’s personnel policies as in effect
from time to time.

     (e) Expense Reimbursements. During the term of this Agreement, the Bank shall pay or
reimburse Executive for all reasonable travel, entertainment and other reasonable expenses incurred
by Executive during the course of performing his obligations under this Agreement, including,
without limitation, fees for memberships in such organizations and associations as Executive and
the Chief Executive Officer shall mutually agree are necessary and appropriate in

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connection with the performance of his duties under this Agreement, upon presentation to the
Bank of an itemized account of such expenses in such form as the Bank may reasonably require.

4. PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

     (a) Upon the occurrence of an Event of Termination (as herein defined) during the term of this
Agreement, the provisions of this Section 4 shall apply. As used in this Agreement, an “Event of
Termination’’ shall mean any one or more of the following:

          (i) the involuntary termination by the Bank of Executive’s full-time employment hereunder for
any reason other than a termination due to death (see Section 6), a termination upon “Retirement,”
as defined in Section 7 or a termination for “Cause,” as defined in Section 8, and

          (ii) Executive’s voluntary resignation from the Bank’s employ within 90 days after a material
breach of this Agreement by the Bank , provided that Executive gives not less than 30 days prior
written notice to the Bank within a reasonable period of time after such breach; and provided that
the Bank has at least 30 days to remedy the condition.

     (b) An “Event of Termination” shall not include the assignment of different duties, functions
or responsibilities with the Bank by the Chief Executive Officer that would change the scope of the
position and attributes thereof described in Section 1.

     (c) Upon the occurrence of an Event of Termination, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate, as the case may be,
as severance pay or liquidated damages, or both, a lump sum in cash equal to the sum of: (i) his
earned but unpaid salary as of the date of his termination of employment with the Bank; (ii) the
benefits, if any, to which he is entitled to as a former employee under the employee benefit plans
and programs and compensation plans and programs maintained for the benefit of the Bank or
Company’s officers and employees; (ii) the remaining payments that Executive would have earned, in
accordance with Sections 3(a) and 3(b), if he had continued his employment with the Bank for twelve
(12) full months following such Event of Termination, and had earned the maximum bonus or incentive
award in each calendar year that ends during such term; and (iv) the annual contributions or
payments that would have been made on Executive’s behalf to any employee benefit plans of the Bank
as if Executive had continued his employment with the Bank for twelve (12) full months following
such Event of Termination, based on contributions or payments made (on an annualized basis) as of
the date of the Event of Termination. Any payments hereunder shall be made in a lump sum within
thirty (30) days after the date of such Event of Termination. Notwithstanding the foregoing, in
the event Executive is a “Specified Employee” (as defined in Code Section 409A and the regulations
thereunder), to the extent required under Code Section 409A, no payment shall be made to Executive
prior to the first day of the seventh month following the Event of Termination.

     (d) Upon the occurrence of an Event of Termination, the Bank will cause to be continued life
insurance coverage and non-taxable medical and disability coverage substantially identical to the
coverage maintained by the Bank for Executive and his family prior to Event of Termination for the
remaining unexpired term of this Agreement. Thereafter, COBRA group

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health care continuation coverage shall be made available to the Executive and his spouse and
dependents in accordance with applicable law.

5. CHANGE IN CONTROL.

     (a) In the event that the aggregate payments or benefits to be made or afforded to Executive in the
event of a change in control as defined in Code Section 280G would be deemed to include an “excess
parachute payment” under Code Section 280G of the Internal Revenue Code or any successor thereto,
then at the election of Executive, (i) such payments or benefits shall be payable or provided to
Executive over the minimum period necessary to reduce the present value of such payments or
benefits to an amount that is one dollar ($1.00) less than three times Executive’s “base amount”
under such Section 280G, or (ii) the payments or benefits to be provided under this Agreement shall
be reduced to the extent necessary to avoid treatment as an excess parachute payment, with the
allocation of the reduction among such payments and benefits to be determined by Executive.
Notwithstanding anything in this subsection to the contrary, a change in control shall not be
deemed to have occurred upon the conversion of the Company’s mutual holding company parent to stock
form, or in connection with any reorganization used to effect such a conversion.

6. PAYMENTS UPON DEATH.

     In the event of Executive’s death during the term of this Agreement, his estate, legal
representatives or named beneficiary or beneficiaries (as directed by Executive in writing) shall
be paid Executive’s earned but unpaid Base Salary through the date of the Executive’s death. Such
payments are in addition to any other benefits that Executive’s beneficiaries may be entitled to
receive under any employee benefit plan maintained by the Bank for the benefit of Executive,
including, but not limited to, the Bank’s life insurance and tax-qualified and non-qualified
retirement plans.

7. TERMINATION UPON RETIREMENT.

     Termination of Executive’s employment based on “Retirement” shall mean termination of
Executive’s employment at any time after Executive reaches age 55 or in accordance with any
retirement policy established by the Board with Executive’s consent with respect to him. Upon
termination of Executive based on Retirement, no amounts or benefits shall be due Executive under
this Agreement, and Executive shall be entitled to all benefits under any retirement plan of the
Bank and other plans to which Executive is a party.

8. TERMINATION FOR CAUSE.

     (a) The Bank may terminate Executive’s employment at any time, but any termination other than
termination for “Cause,” as defined herein, shall not prejudice Executive’s right to compensation
or other benefits under this Agreement. Executive shall have no right to receive compensation or
other benefits for any period after termination for “Cause.” Termination for “Cause” shall mean
termination because of Executive’s personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, material breach of the Bank’s Code of Ethics, material
violation of the Sarbanes-Oxley requirements for officers of public companies that in the
reasonable opinion of the Board will likely cause

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substantial financial harm or substantial injury to the reputation of the Bank or the Company,
willfully engaging in actions that in the reasonable opinion of the Board will likely cause
substantial financial harm or substantial injury to the business reputation of the Bank,
intentional failure to perform stated duties, willful violation of any law, rule or regulation
(other than routine traffic violations or similar offenses) or final cease-and-desist order, or
material breach of any provision of this Agreement.

     (b) For purposes of this Section 8, no act or failure to act, on the part of Executive, shall
be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or
without reasonable belief that Executive’s action or omission was in the best interests of the
Bank. Any act, or failure to act, based upon the direction of the Chief Executive Officer or Board
or based upon the advice of counsel for the Bank shall be conclusively presumed to be the done, or
omitted to be done, by Executive in good faith and in the best interests of the Bank.

9. RESIGNATION FROM BOARDS OF DIRECTORS.

     (a) In the event of Executive’s termination of employment for any reason, Executive’s service
as a director of the Bank or the Company and any affiliate of the Bank or the Company shall
immediately terminate. This section 9 shall constitute a resignation notice for such purposes.

10. NOTICE.

     (a) Any purported termination by the Bank for Cause shall be communicated by Notice of
Termination to Executive. If, within thirty (30) days after any Notice of Termination for Cause is
given, Executive notifies the Bank that a dispute exists concerning the termination, the parties
shall promptly proceed to arbitration, as provided in Section 19. Notwithstanding the pendency of
any such dispute, the Bank shall discontinue paying Executive’s compensation until the dispute is
finally resolved in accordance with this Agreement. If it is determined that Executive is entitled
to compensation and benefits under Section 3, the payment of such compensation and benefits by the
Bank shall commence immediately following the date of resolution by arbitration, with interest due
Executive on the cash amount that would have been paid pending arbitration (at the prime rate as
published in The Wall Street Journal from time to time).

     (b) Any other purported termination by the Bank or by Executive shall be communicated by a
“Notice of Termination” (as defined in Section 9(c)) to the other party. If, within thirty (30)
days after any Notice of Termination is given, the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the termination, the parties shall
promptly proceed to arbitration as provided in Section 19. Notwithstanding the pendency of any
such dispute, the Bank shall continue to pay Executive his Base Salary, and other compensation and
benefits in effect when the notice giving rise to the dispute was given (except as to termination
of Executive for Cause); provided, however, that such payments and benefits shall not continue
beyond the date that is twelve (12) months from the date the Notice of Termination is given. In
the event the voluntary termination by Executive of his employment is disputed by the Bank, and if
it is determined in arbitration that Executive is not entitled to termination benefits pursuant to
this Agreement, he shall return all cash payments made to him

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pending resolution by arbitration, with interest thereon at the prime rate as published in The
Wall Street Journal from time to time, if it is determined in arbitration that Executive’s
voluntary termination of employment was not taken in good faith and not in the reasonable belief
that grounds existed for his voluntary termination. If it is determined that Executive is entitled
to receive severance benefits under this Agreement, then any continuation of Base Salary and other
compensation and benefits made to Executive under this Section 9 shall offset the amount of any
severance benefits that are due to Executive under this Agreement.

     (c) For purposes of this Agreement, a “Notice of Termination” shall mean a written notice that
shall indicate the specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so indicated.

11. POST-TERMINATION OBLIGATIONS.

     (a) Executive hereby covenants and agrees that (except following a change in control as
defined in the Company’s 2005 Stock Option Plan), for a period of one year following his
termination of employment with the Bank, he shall not, without the written consent of the Bank,
either directly or indirectly:

          (i) solicit, offer employment to, or take any other action intended (or that a reasonable
person acting in like circumstances would expect) to have the effect of causing any officer or
employee of the Bank or the Company, or any of their respective subsidiaries or affiliates, to
terminate his or her employment and accept employment or become affiliated with, or provide
services for compensation in any capacity whatsoever to, any business whatsoever that competes with
the business of the Bank or the Company, or any of their direct or indirect subsidiaries or
affiliates or has headquarters or offices within 50 miles of the locations in which the Bank or the
Company has business operations or has filed an application for regulatory approval to establish an
office;

          (ii) become an officer, employee, consultant, director, independent contractor, agent, sole
proprietor, joint venturer, greater than 5% equity owner or stockholder, partner or trustee of any
savings bank, savings and loan association, savings and loan holding company, credit union, bank or
bank holding company, insurance company or agency, any mortgage or loan broker or any other entity
competing with the Bank or its affiliates in the same geographic locations where the Bank or its
affiliates has material business interests; or

          (iii) solicit, provide any information, advice or recommendation or take any other action
intended (or that a reasonable person acting in like circumstances would expect) to have the effect
of causing any customer of the Bank to terminate an existing business or commercial relationship
with the Bank.

     (b) Executive shall, upon reasonable notice, furnish such information and assistance to the
Bank as may reasonably be required by the Bank, in connection with any litigation in which it or
any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive
shall not be required to provide information or assistance with respect to any litigation between
the Executive and the Bank or any of its subsidiaries or affiliates.

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     (c) All payments and benefits to Executive under this Agreement shall be subject to
Executive’s compliance with this Section 11. The parties hereto, recognizing that irreparable
injury will result to the Bank, its business and property in the event of Executive’s breach of
this Section 10, agree that, in the event of any such breach by Executive, the Bank will be
entitled, in addition to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive and all persons acting for or with Executive. Executive represents
and admits that Executive’s experience and capabilities are such that Executive can obtain
employment in a business engaged in other lines and/or of a different nature than the Bank, and
that the enforcement of a remedy by way of injunction will not prevent Executive from earning a
livelihood. Nothing herein will be construed as prohibiting the Bank or the Company from pursuing
any other remedies available to them for such breach or threatened breach, including the recovery
of damages from Executive.

12. SOURCE OF PAYMENTS.

     All payments provided in this Agreement shall be timely paid in cash or check from the general
funds of the Bank. The Company, however, guarantees payment and provision of all amounts and
benefits due hereunder to Executive, and if such amounts and benefits due from the Bank are not
timely paid or provided by the Bank, such amounts and benefits shall be paid or provided by the
Company.

13. EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto and supersedes any
prior employment agreement between the Bank or any predecessor of the Bank and Executive, except
that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to
Executive of a kind elsewhere provided. No provision of this Agreement shall be interpreted to
mean that Executive is subject to receiving fewer benefits than those available to him without
reference to this Agreement.

14. NO ATTACHMENT; BINDING ON SUCCESSORS.

     (a) Except as required by law, no right to receive payments under this Agreement shall be
subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or
hypothecation, or to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void, and
of no effect.

     (b) This Agreement shall be binding upon, and inure to the benefit of, Executive and the Bank
and their respective successors and assigns.

15. MODIFICATION AND WAIVER.

     (a) This Agreement may not be modified or amended except by an instrument in writing signed by
the parties hereto.

     (b) No term or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this Agreement, except

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by written instrument of the party charged with such waiver or estoppel. No such written
waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically waived.

16. REQUIRED PROVISIONS.

     (a) The Bank may terminate Executive’s employment at any time, but any termination by the
Board other than termination for Cause shall not prejudice Executive’s right to compensation or
other benefits under this Agreement. Executive shall have no right to receive compensation or
other benefits for any period after termination for Cause.

     (b) If Executive is suspended from office and/or temporarily prohibited from participating in
the conduct of the Bank’s affairs by a notice served under Section 8(e)(3) [12 USC §1818(e)(3)] or
8(g)(1) [12 USC §1818(g)(1)] of the Federal Deposit Insurance Act, the Bank’s obligations under
this contract shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may in its discretion (i) pay
Executive all or part of the compensation withheld while its contract obligations were suspended
and (ii) reinstate (in whole or in part) any of its obligations which were suspended.

     (c) If Executive is removed and/or permanently prohibited from participating in the conduct of
the Bank’s affairs by an order issued under Section 8(e)(4) [12 USC §1818(e)(4)] or 8(g)(1) [12 USC
§1818(g)(1)] of the Federal Deposit Insurance Act, all obligations of the Bank under this Agreement
shall terminate as of the effective date of the order, but vested rights of the contracting parties
shall not be affected.

     (d) If the Bank is in default as defined in Section 3(x)(1) [12 USC §1813(x)(1)] of the
Federal Deposit Insurance Act, all obligations of the Bank under this Agreement shall terminate as
of the date of default, but this paragraph shall not affect any vested rights of the contracting
parties.

     (e) All obligations under this Agreement shall be terminated, except to the extent determined
that continuation of the contract is necessary for the continued operation of the Bank, (i) by the
Director of the Office of Thrift Supervision (“OTS”) or his or her designee, at the time the FDIC
enters into an agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) [12 USC §1823(c)] of the Federal Deposit Insurance Act; or (ii) by the
Director or his or her designee at the time the Director or his or her designee approves a
supervisory merger to resolve problems related to operation of the Bank or when the Bank is
determined by the Director to be in an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such action.

     (f) Notwithstanding anything herein contained to the contrary, any payments to Executive by
the Bank or the Company, whether pursuant to this Agreement or otherwise, are subject to and
conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12
U.S.C. Section 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359.

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17. SEVERABILITY.

     If, for any reason, any provision of this Agreement, or any part of any provision, is held
invalid, such invalidity shall not affect any other provision of this Agreement or any part of such
provision not held so invalid, and each such other provision and part thereof shall to the full
extent consistent with law continue in full force and effect.

18. HEADINGS FOR REFERENCE ONLY.

     The headings of sections and paragraphs herein are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the provisions of this
Agreement.

19. GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Georgia but only to the extent
not superseded by federal law.

20. ARBITRATION.

     Any dispute or controversy arising under or in connection with this Agreement shall be settled
exclusively by binding arbitration, as an alternative to civil litigation and without any trial by
jury to resolve such claims, conducted by a panel of three arbitrators sitting in a location
selected by Executive within fifty (50) miles from the main office of the Bank, in accordance with
the rules of the American Arbitration Association’s National Rules for the Resolution of Employment
Disputes (“National Rules”) then in effect. One arbitrator shall be selected by Executive, one
arbitrator shall be selected by the Bank and the third arbitrator shall be selected by the
arbitrators selected by the parties. If the arbitrators are unable to agree within fifteen (15)
days upon a third arbitrator, the arbitrator shall be appointed for them from a panel of
arbitrators selected in accordance with the National Rules. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction.

21. INDEMNIFICATION.

     (a) Executive shall be provided with coverage under a standard directors’ and officers’
liability insurance policy, and shall be indemnified for the term of this Agreement and for a
period of six years thereafter to the fullest extent permitted under applicable law against all
expenses and liabilities reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which he may be involved by reason of his having been a director or
officer of the Bank or any affiliate (whether or not he continues to be a director or officer at
the time of incurring such expenses or liabilities), such expenses and liabilities to include, but
not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable
settlements (such settlements must be approved by the Board), provided, however, Executive shall
not be indemnified or reimbursed for legal expenses or liabilities incurred in connection with an
action, suit or proceeding arising from any illegal or fraudulent act committed by Executive. Any
such indemnification shall be made consistent with Section 545.121 of the OTS Regulations and
Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(K), and the regulations issued
thereunder in 12 C.F.R. Part 359.

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     (b) Any indemnification by the Bank shall be subject to compliance with any applicable
regulations of the OTS.

22. NOTICE.

     For the purposes of this Agreement, notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed
by certified or registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:

	 	 	 
	To the Bank:

	 	Atlantic Coast Bank
	 

	 	505 Haines Avenue
	 

	 	Waycross, Georgia 31501
	 

	 	Telephone: (912) 284-2211
	 
	 	 
	To the Company:

	 	Atlantic Coast Federal Corporation
	 

	 	505 Haines Avenue
	 

	 	Waycross, Georgia 31501
	 

	 	Telephone: (912) 284-2211
	 
	 	 
	To Executive:

	 	Jon C. Parker, Sr.
	 

	 	[ADDRESS]

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SIGNATURES

     IN WITNESS WHEREOF, the Bank and the Company have caused this Agreement to be executed by its
duly authorized representatives, and Executive has signed this Agreement, on the date first above
written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	ATLANTIC COAST BANK	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

Date

	 	 	 	 	 	 

Robert J. Larison, Jr., President and
	 	 
	 

	 	 	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	ATLANTIC COAST FEDERAL

CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	Date

	 	 	 	 	 	Robert J. Larison, Jr., President and	 	 
	 

	 	 	 	 	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Date	 	 	 	Jon C. Parker, Sr.	 	 

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April 19, 2007

CapitalSource Funding II Trust

c/o Wilmington Trust Company, as Owner Trustee

Rodney Square North

1100 North Market Street

Wilmington, Delaware 19890

Ladies and Gentlemen:

     Reference is hereby made to that certain Amended and Restated Sale and Servicing Agreement,
entered into effective as of September 17, 2003 (as amended, supplemented and otherwise modified
from time to time, the “Sale and Servicing Agreement”), among CapitalSource Funding II Trust (the
“Issuer”), CS Funding II Depositor LLC, as Depositor (in such capacity, the “Depositor”),
CapitalSource Finance LLC (“CapitalSource”), as Loan Originator (in such capacity, the “Loan
Originator”) and as Servicer (in such capacity, the “Servicer”), and Wells Fargo Bank, National
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”). Capitalized terms used but not defined herein have the meanings assigned to them in
the Sale and Servicing Agreement.

     In connection with the extension of the CSVII Financing Facility (defined below) by Citigroup
Global Markets Realty Corp. to CapitalSource Funding VII Trust, an affiliate of the Issuer,
Citigroup Global Markets Realty Corp. and Transamerica Life Insurance Company, as
Noteholders/Purchasers, agree that the Issuer shall have no obligation to pay the Nonutilization
Fee contemplated by the Sale and Servicing Agreement from and after the date hereof until the
earlier of (x) October 16, 2007 and (y) the termination of the obligations of Citigroup to make any
future advances under the CSVII Financing Facility and the repayment in full of all interest on and
principal of the notes issued pursuant to that certain Indenture, dated as of April 19, 2007 (the
“CSVII Indenture”), between CapitalSource Funding VII Trust, as issuer, and Wells Fargo Bank,
National Association, as indenture trustee, and purchased by Citigroup Global Markets Realty Corp.
pursuant to that certain Note Purchase Agreement, dated as of April 17, 2007, among CapitalSource
Funding VII Trust, as issuer, CS Funding VII Depositor LLC, CapitalSource and Citigroup Global
Markets Realty Corp., as purchaser (the “CSVII Financing Facility”); provided that the Issuer or
the Servicer shall notify in writing the Noteholders/Purchasers of the earlier to occur of (x)
repayment in full of all interest on and principal of the notes issued pursuant to the CSVII
Indenture and the termination of the obligations of Citigroup to make any future advances under the
CSVII Financing Facility and (y) October 16, 2007 at least ten (10) Business Days prior to the
occurrence thereof. From and after the date hereof, the Issuer agrees that until the repayment in
full of all obligations payable under the CSVII Financing Facility and the termination of the
obligations of Citigroup to make any future advances under the CSVII Financing Facility,
notwithstanding anything to the contrary in the Basic Documents, the Issuer may not request that
either Purchaser purchase any Additional Note Principal Balances and neither Purchaser shall have
any obligation to purchase any Additional Note Principal Balances.

 

 

     The parties hereto agree that while the CSVII Financing Facility is outstanding, the Issuer
owns no Loans and no interest on or principal of the Notes remains unpaid or Outstanding, the
Servicer shall not be obligated to deliver a Monthly Servicing Report for any Payment Date
occurring after the Payment Date following the date hereof.

     Except as specifically provided in the second paragraph of this Side Letter, no other term,
condition or provision of the Credit Agreement shall be deemed modified or amended, this Side
Letter shall not be considered a novation of the Sale and Servicing Agreement and/or any other
Basic Document, and the Sale and Servicing Agreement and the other Basic Documents shall remain in
full force and effect. This Side Letter represents the entire agreement between the parties with
respect to the subject matter hereof.

     Each of the Depositor, the Servicer, the Loan Originator and the Issuer hereby represents and
warrants that (i) it has the power and is duly authorized to execute and deliver this Side Letter,
(ii) this Side Letter has been duly authorized, executed and delivered, (iii) it is and will
continue to be duly authorized to perform its obligations under the Basic Documents, (iv) except as
required by this Side Letter, the execution, delivery and performance by it of this Side Letter
does not and will not require any consent or approval, which has not already been obtained, from
any Governmental Authority, equityholder or any other Person, (v) the execution, delivery and
performance by it of this Side Letter shall not result in the breach of, or constitute a default
under, any material agreement or instrument to which it is a party, (vi) this Side Letter and each
of the Basic Documents to which it is a party constitutes its legal, valid and binding obligations,
enforceable against it in accordance with their respective terms, except as limited by bankruptcy,
reorganization, insolvency, fraudulent conveyance, moratorium and other similar laws (whether
statutory, regulatory or decisional) and general equitable principles affecting creditors’ rights
and remedies regardless of whether such enforceability is considered in a proceeding in equity or
at law, and (vii) no Default, Event of Default or Servicer Event of Default exists.

     Each of the Depositor, the Servicer, the Loan Originator and the Issuer hereby (i) agrees to
promptly reimburse the other parties hereto for any and all fees and expenses (including, without
limitation, legal fees and expenses) which any such party hereto has incurred, incurs or will incur
in connection with the preparation, negotiation, execution and enforcement of this Side Letter or
any document, instrument or agreement delivered or to be delivered pursuant to this Side Letter,
and (ii) affirms the reimbursement and indemnification provisions set forth in the Basic Documents,
which are hereby incorporated herein by reference.

     This Side Letter is a document executed pursuant to the Sale and Servicing Agreement and shall
(unless otherwise expressly indicated therein) be construed, administered or applied in accordance
with the terms and provisions thereof.

     This Side Letter may be executed in any number of counterparts, each of which (including any
copy hereof delivered by facsimile or PDF) shall constitute one and the same original instrument.

     This Side Letter shall be governed by, and construed in accordance with, the laws of the State
of New York without regard to its conflict of law principles (except for Sections 5-1401 and 5-1402
of the New York General Obligations Law).

 

 

     The Owner (as such term is defined in the Trust Agreement) hereby instructs the Owner
Trustee, pursuant to Section 6.3 of the Trust Agreement, to execute and deliver this Side Letter.

[remainder of page intentionally left blank; signature page follows]

 

 

	 	 	 	 	 
	 	Very truly yours,

CITIGROUP GLOBAL MARKETS REALTY CORP.

 	 
	 	BY:  	/s/ Gerald F. Keefe
 	 
	 	 	Name:  	Gerald F. Keefe 	 
	 	 	Title:  	Authorized Signatory 	 
	 
	 	TRANSAMERICA LIFE INSURANCE COMPANY

as Purchasing Noteholder

 	 
	 	BY:  	/s/ Greg A. Podhajsky
 	 
	 	 	Name:  	Greg A. Podhajsky 	 
	 	 	Title:  	Vice President 	 
	 

 

 

     ACKNOWLEDGED AND AGREED:

	 	 	 	 	 
	 	CAPITALSOURCE FUNDING II TRUST,

 	 
	 	BY:  	Wilmington Trust Company, not in its individual
capacity but solely as Owner Trustee 	 
	 
	 	 	 
	 	BY:  	                       /s/ Ian P. Monigle
 	 
	 	 	Name:  	Ian P. Monigle 	 
	 	 	Title:  	Financial Services Officer 	 
	 

 

 

     ACKNOWLEDGED AND AGREED:

	 	 	 	 	 
	 	CS FUNDING II 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 	 
	 

 

 

     ACKNOWLEDGED AND AGREED:

	 	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL 
ASSOCIATION, as Indenture Trustee, Collateral 
Custodian and Backup Servicer

 	 
	 	BY:  	/s/ Jeanine C. Casey
 	 
	 	 	Name:  	Jeanine C. Casey 	 
	 	 	Title:  	Assistant Vice President

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