SALE AND SERVICING AGREEMENT by and among CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, as the Issuer, CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, as the Trust Depositor, CAPITALSOURCE FINANCE LLC, as the Originator and as the Servicer, and WELLS FARGO...

SALE AND SERVICING AGREEMENT by and among CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, as the Issuer, CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, as the Trust Depositor, CAPITALSOURCE FINANCE LLC, as the Originator and as the Servicer, and WELLS FARGO...

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Exhibit 10.55

EXECUTION COPY

SALE AND SERVICING AGREEMENT

by and among

CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1,
as the Issuer,

CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1,
as the Trust Depositor,

CAPITALSOURCE FINANCE LLC,
as the Originator and as the Servicer,

and

XXXXX FARGO BANK, NATIONAL ASSOCIATION,
as the Indenture Trustee and as the Backup Servicer.

Dated as of April 11, 2006

CapitalSource Commercial Loan Trust 2006-1 Asset Backed Notes
Class A, Class B, Class C, Class D, Class E and Class F Notes

TABLE OF CONTENTS


			Page
ARTICLE 1.		DEFINITIONS		2

	Section 1.01.	Definitions		2
	Section 1.02.	Usage of Terms		52
	Section 1.03.	Section References		52
	Section 1.04.	Calculations		52
	Section 1.05.	Accounting Terms		52

ARTICLE 2.		ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS		52

	Section 2.01.	Creation and Funding of Issuer; Transfer of Initial Loan Assets		52
	Section 2.02.	Conditions to Transfer of Initial Loan Assets to Issuer		55
	Section 2.03.	Acceptance by Owner Trustee		56
	Section 2.04.	Conveyance of Substitute Loans		56
	Section 2.05.	[Reserved]		60
	Section 2.06.	Release of Released Amounts		60
	Section 2.07.	Delivery of Documents in the Loan File; Recording of Assignments of Mortgage		60
	Section 2.08.	Optional Purchase by the Servicer of Certain Loans; Limitations on Substitution and Xxxxxxxxxx		00
	Section 2.09.	Certification by Indenture Trustee; Possession of Loan Files		61

ARTICLE 3.		REPRESENTATIONS AND WARRANTIES		63

	Section 3.01.	Representations and Warranties Regarding the Trust Depositor		63
	Section 3.02.	Representations and Warranties Regarding Each Loan and as to Certain Loans in the Aggregate		67
	Section 3.03.	Representations and Warranties Regarding the Initial Loans in the Aggregate		68
	Section 3.04.	Representations and Warranties Regarding the Loan Files		68
	Section 3.05.	[Reserved]		68
	Section 3.06.	Representations and Warranties Regarding the Servicer		68
	Section 3.07.	Representations and Warranties of the Backup Servicer		69

ARTICLE 4.		PERFECTION OF TRANSFER AND PROTECTION OF SECURITY INTERESTS		71

	Section 4.01.	Custody of Loans		71
	Section 4.02.	Filing		71
	Section 4.03.	Changes in Name, Corporate Structure or Location		71
	Section 4.04.	Costs and Expenses		72
	Section 4.05.	Sale Treatment		72
	Section 4.06.	Separateness from Trust Depositor		72

ARTICLE 5.		SERVICING OF LOANS		72

	Section 5.01.	Appointment and Acceptance		72

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TABLE OF CONTENTS
(Continued)


			Page
	Section 5.02.	Duties of the Servicer		72
	Section 5.03.	Liquidation of Loans		79
	Section 5.04.	Fidelity Bond		80
	Section 5.05.	Maintenance of Hazard Insurance		80
	Section 5.06.	Collection of Certain Loan Payments		81
	Section 5.07.	Access to Certain Documentation and Information Regarding the Loans		82
	Section 5.08.	Satisfaction of Mortgages and Collateral and Release of Loan Files		82
	Section 5.09.	Scheduled Payment Advances		83
	Section 5.10.	Title, Management and Disposition of Foreclosed Property		84
	Section 5.11.	Servicing Compensation		84
	Section 5.12.	Assignment; Resignation		85
	Section 5.13.	Merger or Consolidation of Servicer		85
	Section 5.14.	Limitation on Liability of the Servicer and Others		85
	Section 5.15.	The Backup Servicer		86
	Section 5.16.	Covenants of the Backup Servicer		88

ARTICLE 6.		COVENANTS OF THE TRUST DEPOSITOR		89

	Section 6.01.	Legal Existence		89
	Section 6.02.	Loans Not to Be Evidenced by Promissory Notes		89
	Section 6.03.	Security Interests		89
	Section 6.04.	Delivery of Principal Collections and Interest Collections		89
	Section 6.05.	Regulatory Filings		90
	Section 6.06.	Compliance with Law		90
	Section 6.07.	Activities; Transfers of Notes or Certificates by Trust Depositor		90
	Section 6.08.	Indebtedness		90
	Section 6.09.	Guarantees		90
	Section 6.10.	Investments		90
	Section 6.11.	Merger; Sales		91
	Section 6.12.	Distributions		91
	Section 6.13.	Other Agreements		91
	Section 6.14.	Separate Legal Existence		91
	Section 6.15.	Location; Records		92
	Section 6.16.	Liability of Trust Depositor		92
	Section 6.17.	Bankruptcy Limitations		92
	Section 6.18.	Limitation on Liability of Trust Depositor and Others		93
	Section 6.19.	Insurance Policies		93
	Section 6.20.	Payments from Obligor Lock– Boxes and Obligor Lock– Box Accounts		93

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TABLE OF CONTENTS
(Continued)


			Page
ARTICLE 7.		ESTABLISHMENT OF ACCOUNTS; DISTRIBUTIONS; RESERVE FUND		94

	Section 7.01.	Note Distribution Account, Reserve Fund and Lock– Boxes		94
	Section 7.02.	Reserve Fund Deposit		95
	Section 7.03.	Principal and Interest Account		95
	Section 7.04.	Securityholder Distributions		98
	Section 7.05.	Priority of Payments; Allocations and Distributions		98
	Section 7.06.	Determination of LIBOR		104
	Section 7.07.	Monthly Reconciliation		105

ARTICLE 8.		SERVICER DEFAULT; SERVICER TRANSFER		106

	Section 8.01.	Servicer Default		106
	Section 8.02.	Servicer Transfer		107
	Section 8.03.	Appointment of Successor Servicer; Reconveyance; Successor Servicer to Act		107
	Section 8.04.	Notification to Securityholders and Hedge Counterparties		109
	Section 8.05.	Effect of Transfer		110
	Section 8.06.	Database File		110
	Section 8.07.	Waiver of Defaults		110
	Section 8.08.	Responsibilities of the Successor Servicer		110
	Section 8.09.	Rating Agency Condition for Servicer Transfer		111
	Section 8.10.	Appointment of Successor Backup Servicer; Successor Backup Servicer to Act		111

ARTICLE 9.		REPORTS		112

	Section 9.01.	Monthly Reports		112
	Section 9.02.	Officer’s Certificate		112
	Section 9.03.	Other Data; Obligor Financial Information		112
	Section 9.04.	Annual Report of Accountants		113
	Section 9.05.	Annual Statement of Compliance from Servicer		114
	Section 9.06.	Reports of Foreclosure and Abandonment of Mortgaged Property		114
	Section 9.07.	Notices		114
	Section 9.08.	Indenture Trustee’s Right to Examine Servicer Records and Audit Operations		115

ARTICLE 10.		TERMINATION		115

	Section 10.01.	Optional Repurchase of Offered Notes		115
	Section 10.02.	Termination		116

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TABLE OF CONTENTS
(Continued)


			Page
ARTICLE 11.		REMEDIES UPON MISREPRESENTATION; REPURCHASE OPTION		116

	Section 11.01.	Repurchases of, or Substitution for, Loans for Breach of Representations and Warranties		116
	Section 11.02.	Reassignment of Repurchased or Substituted Loans		117

ARTICLE 12.		INDEMNITIES		117

	Section 12.01.	Indemnification by Servicer		117
	Section 12.02.	Indemnification by Trust Depositor		118

ARTICLE 13.		MISCELLANEOUS		118

	Section 13.01.	Amendment		118
	Section 13.02.	Protection of Title to Issuer		119
	Section 13.03.	Governing Law		119
	Section 13.04.	Notices		120
	Section 13.05.	Severability of Provisions		122
	Section 13.06.	Third Party Beneficiaries		122
	Section 13.07.	Counterparts		122
	Section 13.08.	Headings		122
	Section 13.09.	No Bankruptcy Petition; Disclaimer		123
	Section 13.10.	Jurisdiction		124
	Section 13.11.	Tax Characterization		124
	Section 13.12.	Prohibited Transactions with Respect to the Issuer		124
	Section 13.13.	Limitation of Liability of Owner Trustee		124
	Section 13.14.	Allocation of Payments with Respect to Loans		125
	Section 13.15.	No Partnership		126
	Section 13.16.	Successors and Assigns		126
	Section 13.17.	Acts of Holders		126
	Section 13.18.	Duration of Agreement		126
	Section 13.19.	Limited Recourse		126
	Section 13.20.	Confidentiality		127
	Section 13.21.	Non- Confidentiality of Tax Treatment		127
	Section 13.22.	Alternative Exchange Listing		127

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EXHIBITS, SCHEDULES AND APPENDIX


Exhibit A	Form of Assignment	A–1
Exhibit B	Form of Closing Certificate of Trust Depositor	B–1
Exhibit C	Form of Closing Certificate of Servicer/Originator	C –1
Exhibit D	Form of Liquidation Report	D–1
Exhibit E	Form of Principal and Interest Account Letter Agreement	E–1
Exhibit F	Form of Certificate Regarding Repurchased Loans	F –1
Exhibit G	List of Loans	G–1
Exhibit H	Form of Monthly Servicer Report	H–1
Exhibit I	Form of Subsequent Transfer Agreement	I–1
Exhibit J	Form of Subsequent Purchase Agreement	J–1
Exhibit K	Credit and Collection Policy	K –1
Exhibit L–1	Form of Initial Certification	L–1
Exhibit L–2	Form of Final Certification	L–2
Exhibit M	Form of Request For Release Of Documents	M–1
Exhibit N	Form of Addition Notice	N –1

Schedule I	Lock– Box Banks and Lock–Box Accounts	Schedule–I
Schedule II	Obligor Lock–Box Banks and Obligor Lock– Box Accounts	Schedule–II

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SALE AND SERVICING AGREEMENT

THIS SALE AND SERVICING AGREEMENT, dated as of April 11, 2006, is by and among:

	(1)		CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, a statutory trust created and existing under the laws of the State of Delaware (together with its successors and assigns, the “Issuer”);

	(2)		CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, a Delaware limited liability company, as the trust depositor (together with its successor and assigns, in such capacity, the “Trust Depositor”);

	(3)		CAPITALSOURCE FINANCE LLC, a Delaware limited liability company (together with its successors and assigns, “CapitalSource”), as the servicer (together with its successor and assigns, in such capacity, the “Servicer”), and as the originator (together with its successor and assigns, in such capacity, the “Originator”); and

	(4)		XXXXX FARGO BANK, NATIONAL ASSOCIATION (together with its successors and assigns, “Xxxxx Fargo ”), not in its individual capacity but as the indenture trustee (together with its successors and assigns, in such capacity, the “Indenture Trustee”), and not in its individual capacity but as the backup servicer (together with its successors and assigns, in such capacity, the “Backup Servicer”).

R E C I T A L S

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

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

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

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

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

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

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

ARTICLE 1.

DEFINITIONS

Section 1.01. Definitions.

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

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

“A/B Exchange ” means an exchange or sale of one security ( the “A Security”) and the subsequent delivery of or reinvestment in another security (the “B Security”) which shall be issued by the issuer or issuers of the A Security and shall have substantially identical terms to the A Security, except that one or more restrictions on the ability of the holder to sell or otherwise dispose of the A Security are intended to be inapplicable to the B Security and cash or cash equivalents in settlement of fractional or unauthorized denominations of A Securities tendered for exchange or B Securities received in exchange.

“Accelerated Amortization Event ” means the occurrence of either of (i) the Aggregate Outstanding Loan Balance shall be less than the Aggregate Outstanding Principal Balance of the Notes for a period greater than 60 calendar days or (ii) any of the Offered Notes shall be outstanding on any Payment Date after August 20, 2013.

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

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

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

“Addition Notice” means, with respect to any transfer of Substitute Loans to the Issuer in accordance with Section 2.04 (and the Trust Depositor’s corresponding prior purchase of such Loans from the Originator), a notice in the form of Exhibit N, which shall be given at least ten

Business Days prior to the related Subsequent Transfer Date, identifying the Substitute Loans to be transferred, the Outstanding Loan Balance of such Substitute Loans and the related Substitution Event (with respect to an identified Loan or Loans then in the Loan Pool) to which such Substitute Loan relates, with such notice to be signed both by the Trust Depositor and the Originator.

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

“Affiliate” of any specified Person means any other Person controlling or controlled by, or under common control with, such specified Person. For the purposes of this definition, “control” (including the terms “controlling,” “controlled by” and “under common control with”) when used with respect to any specified Person means the possession, direct or indirect, of the power to vote 20% or more of the voting securities of such Person or to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities, by contract or otherwise. Each of the Indenture Trustee and the Owner Trustee may conclusively presume that a Person is not an Affiliate of another Person unless a Responsible Officer of such trustee has actual knowledge to the contrary.

“Agented Loans ” means, with respect to any Loan, (a) the Loan is originated by the Originator as a part of a syndicated loan transaction that has been fully consummated prior to such Loan becoming part of the Loan Pool and (b) the Issuer, as assignee of the Loan, will have all of the rights (but none of the obligations) of the Originator with respect to such Loan and the Originator’s right, title and interest in and to the Collateral.

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

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

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

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

“Alarm Service Agreement ” means an agreement between a Dealer and its customer pursuant to which the Dealer is obligated to service and monitor the customer’s alarm system in consideration for monthly payments by the customer.

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

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

“Assigned Loan” means a Loan originated by a Person other than the Originator in which a constant percentage interest has been assigned to the Originator by such Person in accordance with the Credit and Collection Policy and (a) such transaction has been fully consummated prior to such Loan becoming part of the Loan Pool, (b) the Originator is a party to the underlying loan documents, (c) the Issuer, as assignee of the Loan, will have all of the rights (but none of the obligations) of the Originator with respect to such Loan and the Originator’s right, title and interest in and to the Collateral, and (d) the agent bank receives payment directly from the Obligor thereof on behalf of each lender that has been assigned a percentage interest in such Loan.

“Assigned Parties” means the Noteholders and Hedge Counterparties as well as any other holder of a loan to or debt obligation of such Obligor arising out of the same underlying loan agreement, including, without limitation, the Originator, CapitalSource Commercial Loan Trust 2002-2, CapitalSource Commercial Loan Trust 2003-1, CapitalSource Commercial Loan Trust 2003-2, CapitalSource Commercial Loan Trust 2004-1, CapitalSource Commercial Loan Trust 2004-2, CapitalSource Commercial Loan Trust 2005-1, CapitalSource Funding Inc., CapitalSource Funding II Trust, CapitalSource Funding III LLC and CS Funding V Trust.

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

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

“Available Principal Distributable” means, as of any Payment Date, an amount equal to (i) the amount of funds remaining after distribution of all amounts payable under clauses First through Tenth of Section 7.05(a) minus (ii) the Outstanding Loan Balance of each Delinquent Loan.

“Average Life ”means, as of any date of determination, the number obtained by dividing (a) the sum of the products, for each Loan in the Loan Pool, of (i) the number of years (rounded to the nearest one tenth) from such Measurement Date to the respective dates of each successive Scheduled Payment of principal of such Loan and (ii) the respective amounts of principal of such Scheduled Payments by (b) the sum of all future Scheduled Payments of principal on such Loan.

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

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

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

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

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

“Barclays Capital” means Barclays Capital Inc.

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

“Blended Rate Loan” means an Election Rate Loan or a Loan which by its terms has Loan Rates determined by reference to more than one Loan Rate Index (but does not permit the related Obligor to change Loan Rate Indexes).

“Break—Even Default Rate” means, with respect to any class of Notes, the maximum cumulative rate of defaults with respect to Loans in the Loan Pool that such class of Notes can withstand, while subjected to the cash flow stresses employed by S&P in rating such class of Notes, and still pay timely interest and ultimate principal to the Holders of such by the Final Maturity Date.

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

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

“Call Period” means the period on and after the date on which the Outstanding Principal Balance of the Class A Notes is less than or equal to 20% of the Outstanding Principal Balance of the Class A Notes on the Closing Date.

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

“CapitalSource LIBOR Rate” means the posted rate for one- month, two- month, three- month or six-month, as applicable, deposits in U.S. dollars appearing on Telerate Page 3750, as and when determined in accordance with the applicable Required Loan Documents.

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

“Certificate” means the CapitalSource Commercial Loan Trust 2006-1 Certificates representing a beneficial equity interest in the Issuer and issued pursuant to the Trust Agreement.

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

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

“Certificateholder” means the registered holder of a Certificate.

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

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

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

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

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

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

(f) the related Obligor is rated “D” by-S&P.

“Citigroup ” means Citigroup Global Markets Inc.

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

“Class A Notes” means the CapitalSource Commercial Loan Trust 2006-1 Asset-Backed Notes, Class A Notes, issued pursuant to the Indenture.

“Class A Interest Amount” means, for each Interest Accrual Period, the product of (i) the Note Interest Rate applicable to the Class A Notes as of the first day of such Interest Accrual Period, (ii) the Outstanding Principal Balance of the Class A Notes as of the first day of such Interest Accrual Period (after giving effect to all distributions made on such day) and (iii) a fraction, the

numerator of which is the number of days in such Interest Accrual Period and the denominator of which is 360.

“Class A Note Interest Rate” means the annual rate of interest payable with respect to the Class A Notes, which shall be equal to LIBOR plus 0.12% per annum.

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

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

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

“Class B Note Interest Rate” means the annual rate of interest payable with respect to the Class B Notes, which shall be equal to LIBOR plus 0.25% per annum.

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

“Class B Notes” means CapitalSource Commercial Loan Trust 2006-1 Asset—Backed Notes, Class B Notes, issued pursuant to the Indenture.

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

“Class C Interest Amount” means, for each Interest Accrual Period, an amount equal to the product of (i) the Class C Note Interest Rate as of the first day of such Interest Accrual Period,

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

“Class C Note Interest Rate” means the annual rate of interest payable with respect to the Class C Notes, which shall be equal to LIBOR plus 0.55% per annum.

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

“Class C Notes” means CapitalSource Commercial Loan Trust 2006-1 Asset—Backed Notes, Class C Notes, issued pursuant to the Indenture.

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

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

“Class D Note Interest Rate” means the annual rate of interest payable with respect to the Class D Notes, which shall be equal to LIBOR plus 1.30% per annum.

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

“Class D Notes” means CapitalSource Commercial Loan Trust 2006-1 Asset—Backed Notes, Class D Notes, issued pursuant to the Indenture.

“Class E Accrued Payable ” means, if, for any Payment Date, the Class E Interest Amount is calculated using clause (ii)(b) of the definition thereof, the excess, if any, of (i) the amount that

would have been calculated as the Class E Interest Amount on such Payment Date if the calculation was made using clause (ii)(a) of the definition of Class E Interest Amount and not clause (ii)(b) of such definition over (ii) the amount calculated as the Class E Interest Amount on such Payment Date, together with the unpaid portion of any such excess from prior Payment Dates (and interest accrued thereon at the then applicable Class E Note Interest Rate).

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

“Class E Note Interest Rate” means the annual rate of interest payable with respect to the Class E Notes, which shall be equal to LIBOR plus 2.50% per annum.

“Class E Notes” means the CapitalSource Commercial Loan Trust 2006-1 Asset—Backed Notes, Class E Notes, issued pursuant to the Indenture.

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

“Class F Note” means the CapitalSource Commercial Loan Trust 2006-1 Asset—Backed Note, Class F Note, issued pursuant to the Indenture.

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

“Closing Date” means April 11, 2006.

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

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

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

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

“Computer Records” means the computer records generated by the Servicer or any subservicer that provide information relating to the Loans and that were used by the Originator in selecting

the Loans conveyed to the Trust Depositor pursuant to Section 2.01 (and any Substitute Loans conveyed to the Trust Depositor pursuant to Section 2.04).

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

“Corporate Trust Office” means, with respect to the Indenture Trustee or Owner Trustee, as applicable, the office of the Indenture Trustee or Owner Trustee at which at any particular time its corporate trust business shall be principally administered, which offices at the date of the execution of this Agreement are located at the addresses set forth in Section 1304(d).

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

“Credit Support Provider” means, with respect to any Hedge Counterparty, any Person providing credit support on behalf of such Hedge Counterparty.

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

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

“Dealer” means an alarm system dealer that has sold an Alarm Service Agreement to the SLP Financing Originator or the Originator pursuant to an MPA.

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

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

(a) the occurrence of both (i) any portion of a payment of interest on or principal (excluding payments of principal constituting excess cash flow sweeps) of such Loan is not paid in cash on a current basis when due (without giving effect to any grace period or any Scheduled Payment Advance made in respect of such payment of interest or principal) 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 (ii) all delinquencies have not been cured (A) with respect to Asset Based Revolvers, within one

business day of when such delinquent payment was first due and (B) with respect to all other Loans, within 60 calendar days of when such delinquent payment was first due;

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

(c) the cash interest rate payable by the Obligor under such Loan has been reduced, and, either before or immediately after giving effect to such reduction, the Weighted Average LIBOR Spread Test is not satisfied;

provided, however, if any Loan to an Obligor is a Delinquent Loan, or if any Loan from the Originator or any entity controlled by the Originator would be a Delinquent Loan if owned by the Issuer, then all Loans to that Obligor shall be deemed to be Delinquent Loans; provided, further, that such Loan or Loans shall cease to be deemed delinquent as of the date that each Loan which caused any other Loan to be deemed delinquent in accordance with the preceding proviso has become a performing Loan and maintained such status for a period of 12 consecutive months.

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

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

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

“Downgrade Event” means the reduction or withdrawal of the rating issued by any Rating Agency on the Closing Date with respect to any outstanding class of Offered Notes.

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

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

“Eligible Deposit Account ” means either (a) a segregated account with a Qualified Institution, or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States or any one of the states thereof, including the District of Columbia (or any domestic branch of a foreign bank), and acting as a trustee for funds deposited in such account, so long as any of the securities of such depository institution shall have a credit rating from in the case of Fitch of at least “F-1+”, in the case of Xxxxx’x a short–term credit rating of “P-1” and in the case of S&P a commercial paper short–term debt rating of “A-1+” and a long—term unsecured debt rating of “AA-”.

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

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

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

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

(d) at the time such Loan is included in the Loan Pool, (i) the Loan is not (and since its origination or, to the knowledge of the Originator or the Trust Depositor (as applicable) in the case of Acquired Loans, since its acquisition, has never been) a Charged—Off Loan, (ii) the Loan is not past due (and since its origination or, to the knowledge of the Originator or the Trust Depositor (as applicable) in the case of Acquired Loans, since its acquisition, has never been more than 30 days past due) after giving effect to any grace period set forth in the Credit and Collection Policy in determining the number of days past due, with respect to payments of principal or interest; provided that any Loan which would be rendered ineligible by this clause (d) shall cease to be deemed ineligible by the operation of this clause (d) as of the date such Loan has become a performing Loan and maintained such status for a period of 12 consecutive months;

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

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

(g) the Loan is to an Eligible Obligor;

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

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

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

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

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

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

(n) the Collateral, if any, (i) is located in the United States (other than with respect to Collateral securing two loans representing not more than 0.93% of the Initial Aggregate Outstanding Loan Balance and with respect to Collateral that is in addition to the primary Collateral with respect to which the Loan is principally underwritten), (ii) has not been

foreclosed on, or repossessed from the current Obligor, by the Servicer, and (iii) has not suffered any material loss or damage that has not been repaired or restored;

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

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

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

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

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

(t) the Loan Rate for each Loan adjusts periodically to equal the then applicable Loan Rate Index plus the margin set forth in the related Underlying Note or the related credit agreement (other than with respect to two Loans representing approximately 1.90% of the Initial Aggregate Outstanding Loan Balance which bear interest at a fixed rate);

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

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

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

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

(y) the Loan is not a DIP Loan;

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

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

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

(cc) other than Participation Loans and Agented Loans, with respect to the Originator’s obligation to fund and the actual funding of the Loan by the Originator, the Originator has not assigned or granted participations to, in whole or in part, any Person other than to the Issuer or to a special purpose entity created in connection with one or more of the Warehouse Facilities, a Prior Term Transaction and any future or similar credit facility;

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

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

out of transactions concerning the Loan, or otherwise, by the Trust Depositor, the Originator or the Obligor with respect thereto;

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

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

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

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

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

(kk) the Loan is secured by a valid, perfected, first priority (other than, solely in the case of a Senior B-Note Loan, with respect to other lenders on the senior tranche related to such Loan) security interest in all assets that constitute the Collateral for the Loan, subject to Permitted Liens;

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

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

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

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

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

(qq) other than with respect to Fully Funded Term Loans, any funding obligation under such Loan is subject to the Retained Interest;

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

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

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

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

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

(ww) with respect to Agented Loans and Assigned Loans, if the entity serving as the collateral agent of the security for all syndicated notes of the Obligor has or will change from the time of the origination of such notes, all appropriate assignments of the collateral agent’s rights in and to the collateral on behalf of the noteholders have been executed and filed or recorded as appropriate prior to such Agented Loan or Assigned Loan becoming a part of the Loan Pool;

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

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

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

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

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

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

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

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

(fff) with respect to each Pooled Obligor Loan, as of the related Transfer Date, (i) the collateral (including, but not limited to, the notes of the Underlying Debtors and assignments of mortgage in each case where real property secures the Underlying Debtors’ notes) of the related Underlying Debtors securing such Loan is held by a custodian under a custodial agreement, (ii) the custodial agreement for such Loan provides that (A) the related custodian holds the collateral of the Underlying Debtors pro rata on behalf of the Indenture Trustee, for the benefit of the Noteholders and the Hedge Counterparties, and any other assignee and (B) the custodian will record and file the assignments of mortgage in its name on behalf of the Indenture Trustee and any other assignee upon the request of noteholders of such Obligor or SPE Obligor holding a controlling interest and (iii) the Originator’s rights under the custodial agreement are fully assignable and have been assigned to the Indenture Trustee;

(ggg) the Loan was not made in connection with (a) the construction or development of unimproved land or (b) facilitating the trade-in or exchange of the related Mortgaged Property;

(hhh) with respect to MPAs, the related loan documents require the Dealer to repurchase all Alarm Service Agreements then subject to such MPA on the earlier of (i) a date certain or (ii) when so demanded by the purchaser (as defined in such MPA) after a default (as defined in such MPA), as provided in such MPA, which repurchase is required to be at a repurchase price sufficient to pay all principal and interest outstanding on such MPA, and “Default” under such MPA requiring the Dealer to repurchase an Alarm Service Agreement shall include, without limitation, (w) a failure by the related customer to make a monthly payment due under such Alarm Service Agreement and such failure shall continue unremedied for more than 60 days, (x) the related customer shall fail to make a monthly payment when due two or more times in any 180 day period and (y) a default by the Dealer in any of its obligations, covenants, agreements, representation or warranties contained in any Alarm Service Agreement or in such MPA;

(iii) with respect to MPAs, if such Loan is a Security System Loan, such Loan has an original term to maturity and full amortization of not more than 84 months; and

(jjj) with respect to MPAs, the Obligor of such Loan shall have been directed to make all payments to one of the Lock-Boxes or directly to one of the Lock-Box Accounts.

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

“Eligible Obligor” means, on any date of determination, any Obligor that (i) is a business organization (and not a natural person) that is duly organized and validly existing under the laws of, and has its chief executive offices in, the United States or any political subdivision thereof, and has a billing address within the United States, (ii) is a legal operating entity or holding company (except with respect to a Loan to an SPE Obligor), (iii) is not a Governmental Authority, (iv) is not an Affiliate (other than with respect to an SPE Obligor and with respect to one Loan representing approximately 0.70% of the Initial Aggregate Outstanding Loan Balance) of the Originator, the Servicer, the Trust Depositor or the Issuer (v) is not in the nuclear waste or natural resources industry (other than Obligors in the business of wholesale purchasing and reselling of natural gas or electricity, the Loans to which have been appropriately hedged), (vi) is not engaged in the business of conducting proprietary research on new drug development, (vii) is not the subject of an Insolvency Proceeding, (viii) as of the applicable Cut-Off Date, is the Obligor with respect to a Loan having an Eligible Loan Rating (other than in the case of Obligors of Initial Loans having a Loan Rating of 4, which represent in the aggregate approximately 17.23% of the Initial Aggregate Outstanding Loan Balance) and (ix) is not an Obligor of a Charged-Off Loan or Delinquent Loan; provided, that, an Obligor with respect to a Charged-Off Loan or a Delinquent Loan shall cease to be disqualified under this clause (ix) as of the date that each Loan which caused such Obligor to be so disqualified has become a performing Loan and maintained such status for a period of 12 consecutive months.

“Eligible Repurchase Obligations ” means repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States or any agency or

instrumentality thereof the obligations of which are backed by the full faith and credit of the United States, in either case entered into with a depository institution or trust company (acting as principal) described in clauses (c)(ii) and (c)(iv) of the definition of Permitted Investments.

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

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

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

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

“Final Maturity Date ” means August 22, 2016.

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

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

“Fitch Rating” means, for any Loan, the rating assigned to such Loan by Fitch, as updated from time to time by Fitch.

“Fixed Rate Loan” means a Loan, other than a Floating Rate Loan, where the Loan Rate payable by the Obligor thereunder is expressed as a fixed rate of interest.

“Fixed Rate Permitted Excess Amount ” means $250,000 in the aggregate.

“Floating LIBOR Rate Loan” means an Eligible Loan where the Loan Rate payable by the Obligor thereof is based on the CapitalSource LIBOR Rate plus some specified percentage in addition thereto, and the Loan provides that such Loan Rate will reset immediately upon any change in the related CapitalSource LIBOR Rate; provided that Loans with respect to which the Loan Rate payable thereunder is determined by reference to both the CapitalSource LIBOR Rate and the CapitalSource Prime Rate shall be deemed to be Floating LIBOR Rate Loans under this Agreement.

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

“Floating Prime Rate Permitted Excess Amount ” means $250,000 in the aggregate.

“Floating Rate Loan” means a Floating Prime Rate Loan or a Floating LIBOR Rate Loan.

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

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

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

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

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

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

“Funding IV Transaction” means the loan evidenced that certain Promissory Note, dated as of December 16, 2004, by CapitalSource Funding IV LLC, as borrower, in favor of Wachovia Bank, National Association, as lender, as amended, modified, restated, waived or supplemented from time to time, and all documents executed in connection therewith and all transactions contemplated thereby.

“Funding V Transaction” means the Credit Agreement, dated as of June 30, 2005, among CapitalSource Funding V Trust, CS Funding V Depositor Inc., the Originator and JPMorgan Chase Bank, N.A., as amended, modified, restated, waived or supplemented from time to time, and all documents executed in connection therewith and all transactions contemplated thereby.

“Funding VI Transaction” means the Note Purchase Agreement, dated as of March 24, 2005, among CapitalSource Funding Trust VI, CS Funding Depositor VI LLC, the Originator and Citigroup Global Markets Realty Corp., as amended, modified, restated, waived or supplemented from time to time, and all documents executed in connection therewith and all transactions contemplated thereby.

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

“Gross Interest Rate” means, with respect to any Loan, the sum of the Loan Rate with respect to such Loan plus the rate of interest, if any, that the related Obligor may defer and pay later, together with interest thereon.

“Xxxxxx Xxxxxxx” means Xxxxxx Xxxxxxx Corp.

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

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

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

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

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

“Hedge Rate” means the rate of interest used to compute the amounts payable by the Issuer to a Hedge Counterparty pursuant to a Hedge Transaction.

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

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

with respect to rating assigned by S&P, “A-1+” for short–term instruments and “AAA” for long-term instruments.

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

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

“Indenture” means the Indenture, dated as of April 11, 2006, between the Issuer and the Indenture Trustee.

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

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

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

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

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

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

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

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

“Initial Aggregate Outstanding Principal Balance” means, collectively, the sum of the Initial Class A Principal Balance, the Initial Class B Principal Balance, the Initial Class C Principal

Balance, the Initial Class D Principal Balance, the Initial Class E Principal Balance, and the Initial Class F Principal Balance, i.e., $782,254,764.

“Initial Class A Principal Balance” means $567,134,000.

“Initial Class B Principal Balance” means $27,379,000.

“Initial Class C Principal Balance” means $68,447,000.

“Initial Class D Principal Balance” means $52,803,000.

“Initial Class E Principal Balance” means $31,290,000.

“Initial Class F Principal Balance” means $35,201,764.

“Initial Cut–Off Date” means the close of business on January 31, 2006.

“Initial Loan Assets” shall have the meaning given to such term in Section 2.01(b).

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

“Initial Purchasers” means, collectively, Citigroup, Wachovia Capital Markets, Xxxxxx Xxxxxxx, JPMorgan, SG CIB, SunTrust and Barclays Capital.

“Insolvency Event” means, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding–up or liquidation of such Person’s affairs, and such decree or order shall remain unstayed or undismissed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

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

“Insolvency Proceeding” means any case, action or proceeding before any court or other Governmental Authority relating to any Insolvency Event.

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

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

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

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

“Interest Collections ” means the aggregate of:

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

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

(ii) Net Liquidation Proceeds;

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

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

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

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

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

“Interest Shortfall” means, with respect to the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes or the Class E Notes, as applicable, if the amount by which the interest paid to such Class on a Payment Date is less than the amount due to such Class, the amount of shortfall will be carried forward and paid on the immediately following Payment Date for which

funds exist, together with accrued interest on such amount at the then applicable Note Interest Rate for such Class.

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

“Ireland Paying Agent ” means the Person acting as Ireland Paying Agent hereunder and its successors in interest.

“Irish Stock Exchange” means the Irish Stock Exchange and any successor securities exchange thereto on which the Listed Notes may be listed for trading.

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

“JPMorgan” means X.X. Xxxxxx Securities Inc.

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

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

“LIBOR Spread” means, as of any date of determination:

(a) in the case of any Floating LIBOR Rate Loan or Blended Rate Loan, the excess, if any, of the Gross Interest Rate on such Loan over One-Month LIBOR as of such date;

(b) in the case of any Floating Prime Rate Loan, the excess, if any, of the Gross Interest Rate on such Loan over the weighted average Hedge Rate under all Hedge Transactions hedging the Floating Prime Rate Loans as of such date;

(c) in the case of any Fixed Rate Loan, the excess, if any, of the Gross Interest Rate on such Loan over the weighted average Hedge Rate under all Hedge Transactions hedging the Fixed Rate Loans as of such date;

provided that for purposes of determining the LIBOR Spread with respect to any Loan, (1) no contingent payment of interest will be included in such calculation; and (2) any Gross Interest Rate shall exclude any portion of the interest that is currently being deferred in violation of the terms of the related loan documents.

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

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

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

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

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

“Listed Notes” means the Class A Notes, Class B Notes, Class C Notes and Class D Notes.

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

“Loan Assets” means, collectively and as applicable, the Initial Loan Assets and the Substitute Loan Assets.

“Loan Checklist” means the list delivered by the Trust Depositor to the Indenture Trustee pursuant Section 2.07 of this Agreement that identifies the items contained in the related Loan File.

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

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

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

“Loan Rate Index” means (a) in the case of a Floating Prime Rate Loan, the CapitalSource Prime Rate, (b) in the case of a Floating LIBOR Rate Loan, the CapitalSource LIBOR Rate and (c) in the case of a Fixed Rate Loan, a fixed rate of interest.

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

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

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

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

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

“Lock-Box Accounts” means the accounts maintained at Bank of America, N.A. in the name of CapitalSource Funding Inc. for the purpose of receiving Collections, including but not limited to Collections from the Obligor Lock–Boxes, the details of which are contained in Schedule I, as such schedule may be amended from time to time.

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

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

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

“Majority Noteholders” means (a) prior to the payment in full of the Offered Notes, the Noteholders evidencing more than 50% of the aggregate Outstanding Principal Balance of each Class of Offered Notes (with each Class voting separately) and (b) from and after the payment in full of the Offered Notes, the Class F Noteholder evidencing more than 50% of the aggregate Outstanding Principal Balance of the Class F Note.

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

“Mariner Funding Transaction” means the Loan Agreement, dated as of December 13, 2004, by and among CapitalSource Finance LLC, as borrower, Xxxxxx Xxxxxxx Financing, as lender and Bank of Montreal, as agent, as amended, modified, restated, waived or supplemented from time to time, and all documents executed in connection therewith and all transactions contemplated thereby.

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

“Material Modification” means:

(i) a termination or release (including pursuant to prepayment), or an amendment, modification or waiver, or equivalent similar undertaking or agreement, by the Servicer with respect to a Loan which would not otherwise be permitted under the standards and criteria set forth in Section 5.02(e); or

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

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

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

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

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

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

“Mortgaged Property” means the underlying real property, if any, and any improvements thereon on which a Lien is granted to secure a Loan.

“MPA” means any master purchase agreement between the SLP Financing Originator or the Originator and a Dealer, as supplemented and/or modified by one or more purchase statements, pursuant to which such Dealer has sold Alarm Service Agreements to the SLP Financing Originator or the Originator. With respect to any MPA:

(a) references in this Agreement to “payments” due under a Loan shall mean all payments owed by the related Dealer under such MPA and (without duplication), to the extent not payable to the Dealer pursuant to such MPA, all payments owed by a customer under any Alarm Service Agreement sold pursuant to such MPA;

(b) references in this Agreement to “principal” due on a Loan or “principal” of a Loan shall mean the aggregate amount of all purchase prices paid to the Dealer under such MPA for Alarm Service Agreements as reduced by any payments previously received by the “Purchaser” under such MPA and allocable to principal in accordance with such MPA;

(c) references in this Agreement to “interest” on a Loan shall mean the portion of payments due under such MPA allocable to interest in accordance with such MPA;

(d) references to “loan documents” or “loan documentation” shall include the related master purchase agreement, initial purchase statements, purchase statement, security agreement and other documents executed and delivered in connection with such MPA;

(e) references in this Agreement to “maturity” or “maturity date” shall mean the date on which the Dealer is required under the MPA to repurchase all related Alarm Service Agreements;

(f) references in this Agreement to “note” or “promissory note” means the related master purchase agreement and all related purchase statements; and

(g) references in this Agreement to “Loans” shall include MPAs.

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

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

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

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

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

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

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

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

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

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

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

“Obligor” means, with respect to any Loan, any Person or Persons obligated to make payments pursuant to or with respect to such Loan, including any guarantor thereof, but excluding, in each case, any such Person that is an obligor or guarantor that is in addition to the primary obligors or guarantors with respect to the assets, cash flows or credit of which the related Loan is principally underwritten.

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

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

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

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

“Offer” means, with respect to any security, (a) any offer by the issuer of such security or by any other Person made to all of the holders of such security to purchase or otherwise acquire such security (other than (i) pursuant to any redemption in accordance with the terms of the related underlying instruments or (ii) an A/B Exchange) or to convert or exchange such security into or for cash or for any other security or other property or (b) any solicitation by the issuer of such security or any other Person to amend, modify or waive any provision of such security or any related underlying instruments in any manner.

“Offered Notes” means the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes.

“Offering Memorandum” means the Offering Memorandum, dated March 31, 2006 prepared in connection with the offer and sale of the Offered Notes.

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

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

“One–Month LIBOR” means LIBOR for the One-Month Index Maturity.

“Opinion of Counsel” means a written opinion of counsel, who may be outside counsel, or internal counsel (except with respect to federal securities law, tax law, bankruptcy law or UCC matters), for the Trust Depositor or the Servicer, from Xxxxxx Xxxxx LLP or other counsel

reasonably acceptable to the Owner Trustee or the Indenture Trustee, as the case may be; provided, however, if the opinion of counsel concerns or relates to any Hedge Counterparty, such counsel shall be (i) outside counsel and (ii) acceptable to each Hedge Counterparty.

“Optional Repurchase” means a repurchase of the Notes pursuant to Section 10.01 of the Indenture.

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

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

“Outstanding Loan Balance” of a Loan means the excess of (a) the principal amount of such Loan, or portion thereof transferred to the Issuer, outstanding as of the applicable Cut–Off Date over (b) all Principal Collections received on such Loan, or portion thereof, transferred to the Issuer since the applicable Cut–Off Date; provided that for all purposes other than the determination of the Transfer Deposit Amount: (i) any Loan charged–off pursuant to clauses (a), (b), (c), (e) and (f) of the definition of Charged–Off Loan will be deemed to have an Outstanding Loan Balance equal to zero; and (ii) all or the portion of any Loan charged–off pursuant to clause (d) of the definition of Charged–Off Loan will be deemed to have an Outstanding Loan Balance equal to zero; and provided, further, that for any Deferred Interest Loan, the Outstanding Loan Balance of such Deferred Interest Loan shall exclude any Accreted Interest with respect thereto.

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

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

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

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

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

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

“Payment Date” means the 20th day of each month, commencing April 20, 2006 or, if such 20th day is not a Business Day, the next succeeding Business Day.

“Permitted Investments” with respect to any Payment Date means negotiable instruments or securities or other investments maturing on or before such Payment Date (a) which, except in the case of demand or time deposits, investments in money market funds and Eligible Repurchase Obligations, are represented by instruments in bearer or registered form or ownership of which is represented by book entries by a Clearing Agency or by a Federal Reserve Bank in favor of depository institutions eligible to have an account with such Federal Reserve Bank who hold such investments on behalf of their customers, (b) that, as of any date of determination, mature by their terms on or prior to the Payment Date immediately following such date of determination, and (c) that evidence:

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

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

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

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

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

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

(vii) time deposits (having maturities of not more than 90 days) by an entity the commercial paper of which has, at the time of the Issuer’s investment or contractual

commitment to invest therein, a rating of the Highest Required Investment Category granted by each Rating Agency;

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

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

Permitted Investments shall not include any instrument, security or investment (a) which is purchased at a price (excluding accrued interest) in excess of 100% of par, (b) which is subject to substantial non-credit risk as determined by the Servicer in its reasonable business judgment, (c) the S&P rating of which includes a “p”, “pi”, “q”, “r” or “t” subscript, (d) which is subject to an Offer, or (e) if the income from such obligation or security is or will be subject to deduction or withholding for or on account of any withholding or similar tax, unless the issuer is required to make gross up payments equal to the full amount of any such withholding tax, or the acquisition (including the manner of acquisition), ownership, enforcement or disposition of such obligation or security will subject the Issuer to net income tax in any jurisdiction other than its jurisdiction of incorporation. Permitted Investments may not include obligations secured by real property, including mortgage-backed securities. The Indenture Trustee may purchase or sell to itself or an Affiliate, as principal or agent, the Permitted Investments described above.

“Permitted Liens ” means

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

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

“Person” means any individual, corporation, estate, partnership, business or statutory trust, limited liability company, sole proprietorship, joint venture, association, joint stock company,

trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof or other entity.

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

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

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

“Prepayments” means any and all (a) full prepayments, including prepayment premiums, on or with respect to a Loan (including, with respect to any Loan and any Due Period, any Scheduled Payment, Finance Charge or portion thereof that is due in a subsequent Due Period that the Servicer has received and expressly permitted the related Obligor to make in advance of its scheduled due date, and that will be applied to such Scheduled Payment on such due date), (b) Liquidation Proceeds, and (c) Insurance Proceeds.

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

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

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

(a) the principal portion of:

(i) any Scheduled Payments and Prepayments; and

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

(b) Curtailments; and

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

“Principal Distributable Shortfall” means, on each Payment Date, the amount, if any, by which the Total Principal Distributable exceeds the Available Principal Distributable.

“Prior Term Transactions” means the Rule 144A/Regulation S private placements of Notes issued by (i) CapitalSource Commercial Loan Trust 2002-2 on or about October 30, 2002, (ii) CapitalSource Commercial Loan Trust 2003-1 on or about April 17, 2003, (iii) CapitalSource Commercial Loan Trust 2003-2 on or about November 25, 2003, (iv) CapitalSource Commercial Loan Trust 2004-1 on or about June 22, 2004, (v) CapitalSource Commercial Loan Trust 2004-2 on or about October 28, 2004 and (vi) CapitalSource Commercial Loan Trust 2005-1 on or about April 14, 2005.

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

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

“Purchase Agreement” means the Purchase Agreement, dated March 31, 2006 among the Initial Purchasers, the Trust Depositor, the Issuer and CapitalSource, as such agreement may be amended, modified, waived, supplemented or restated from time to time.

“Qualified Hedge Counterparty” means a party that is a recognized dealer in interest rate swaps and interest rate caps, organized under the laws of the United States or a jurisdiction located therein (or another jurisdiction reasonably acceptable to the Issuer and each Rating Agency), that with respect to itself or its Credit Support Provider: (a) at the time it becomes a Hedge Counterparty has a short–term rating of at least “A-1” or a long-term senior unsecured debt rating of at least “A+” if such Person does not have a short-term rating by S&P (for so long as any of the Offered Notes are deemed Outstanding hereunder and are rated by S&P), and at least “F-1” by Fitch (for so long as any of the Offered Notes are deemed Outstanding hereunder and are rated by Fitch) and either a long–term senior unsecured debt rating of at least “Aa3” by Moody’s (if such Person does not have at least a “P-1” short–term debt rating by Moody’s) or a long–term senior unsecured debt rating of at least “A1” by Moody’s and not subject to the qualification that the party has been placed on credit watch with negative implications (only if the short–term debt of such Person is rated at least “P-1” by Moody’s and not subject to the qualification that the party has been placed on credit watch with negative implications) (for so long as any of the Offered Notes are deemed Outstanding hereunder and are rated by Moody’s) and thereafter maintains long-term senior unsecured debt rating of at least “BBB- ” from S&P (for so long as any of the Offered Notes are deemed Outstanding hereunder and are rated by S&P), and a short-term debt rating of at least “F–2” by Fitch (for so long as any of the Offered Notes are deemed Outstanding hereunder and are rated by Fitch) and either a long-term senior unsecured debt rating of at least “A1” by Moody’s (if such Person does not have at least a “P-1” short–term debt rating by Moody’s) or a long–term senior unsecured debt rating of at least “A2” by Moody’s (only if the short–term debt of such Person is rated at least “P-1” by Moody’s) (for so long as any of the Offered Notes are deemed Outstanding hereunder and are rated by Moody’s); provided, that, should a Rating Agency effect an overall downward adjustment of its short-term or long-term debt ratings, then the rating required of that Rating Agency under this clause (a) for a party to constitute a Qualified Hedge Counterparty shall be downwardly adjusted accordingly; provided further, that any adjustment to a rating shall be subject to the prior written consent of the applicable Rating Agency (b) legally and effectively accepts the rights and

obligations under the applicable Hedge Agreement, or, as the case may be, alternate credit support arrangements pursuant to a written agreement reasonably acceptable to the Issuer and (c) in connection with a Substitute Hedge Counterparty, otherwise satisfies the Rating Agency Condition.

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

“Qualified Transferee” means:

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

(b) any other Person which:

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

(ii) is one of the following:

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

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

(C) the trustee, collateral agent or administrative agent in connection with (x) a securitization of the subject Loan through the creation of collateralized debt or loan obligations or (y) an asset-backed commercial paper funded transaction funded by a commercial paper conduit whose commercial paper notes are rated at least “A-1” by S&P or at least “P-1” by Xxxxx’x, or (z) a repurchase

transaction funded by a an entity which would otherwise be a Qualified Transferee so long as the “equity interest” (other than any nominal or de minimis equity interest) in the special purpose entity that issues notes or certificates in connection with any such collateralized debt or loan obligation, asset-backed commercial paper funded transaction or repurchase transaction is owned by one or more entities that are Qualified Transferees under subclauses (A) or (B) above; or

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

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

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

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

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

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

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

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

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

“Released Amounts” means, with respect to any payment or collection received with respect to any Loan on any Business Day (whether such payment or collection is received by the Servicer, the Owner Trustee or the Trust Depositor), an amount equal to that portion of such payment or collection on any Retained Interest released from the Loan Assets pursuant to Section 2.06.

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

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

“Repurchase Date” means in the case of an Optional Repurchase, the Payment Date specified by the Issuer pursuant to Section 10.01 of the Indenture.

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

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

“Required Loan Documents” means, with respect to:

(a) all Loans in the aggregate:

(i) a blanket assignment of all of the Originator’s and Trust Depositor’s right, title and interest in and to all Collateral securing the Loans at any time transferred to the Issuer including without limitation, all rights under applicable guarantees and Insurance Policies, such assignment shall be in the name of “Xxxxx Fargo Bank, National Association, its successors and assigns, as Indenture Trustee under the Indenture, dated as of April 11, 2006 relating to CapitalSource Commercial Loan Trust 2006-1”;

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

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

(b) for each Loan:

(i) with the exception of Noteless Loans, the original Underlying Note, endorsed by means of an allonge in blank or as follows: “Pay to the order of Xxxxx Fargo Bank, National Association, and its successors and assigns, not in its individual capacity but solely as Indenture Trustee under that certain Indenture, dated as of April 11, 2006 relating to CapitalSource Commercial Loan Trust 2006-1, without recourse” and signed, by facsimile or manual signature, in the name of the Trust Depositor by a Responsible Officer, with all prior and intervening endorsements showing a complete chain of endorsement from the Originator to the Trust Depositor and from the Trust Depositor to the Issuer;

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

(iii) a copy of the related loan agreement (which may be included in the Underlying Note if so indicated in the Loan Checklist) or, with respect to an MPA, the master purchase agreement and purchase statements, together with a copy of all amendments and modifications thereto;

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

(v) a copy of the Loan Checklist;

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

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

(viii) for Assigned Loans, a copy of the assignment agreement;

(ix) if the Originator is the only lender under the credit facility, if the Originator is the collateral agent for a syndicate of lenders under the credit facility, or if the Originator has not previously delivered such stock certificate to Xxxxx Fargo in

connection with any of the Warehouse Facilities or any Prior Term Transaction, and the Loan Checklist indicates that the Collateral includes a pledge of stock, the original stock certificate serving as Collateral for such Loan, along with an executed stock power executed in blank; and

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

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

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

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

“Reserve Fund Initial Balance” means an amount equal to $9,710,067.72 (i.e., the product of (a) the sum of the Outstanding Principal Balance of the Offered Notes as of the Closing Date, (b) the weighted average Note Interest Rate applicable to each Class of Offered Notes as of the first day of the initial Interest Accrual Period (weighted by the Outstanding Principal Balance of each Class of Offered Notes) and (c) 0.25).

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

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

“Revolving Loan” means a Loan that is a line of credit arising from an extension of credit by the Originator to an Obligor with a commitment that is fixed pursuant to the terms of the related Required Loan Documents.

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

“S&P CDO Evaluator” means the dynamic, analytical computer program in the form provided by S&P to the Servicer as of the Closing Date for the purpose of estimating the default risk of Loans.

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

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

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

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

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

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

“Security System Loan” means a Loan with respect to which the related Obligor is in the business classified under 2002 NAICS Code 56162 (Security Systems Services), which is secured by Alarm Service Agreements.

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

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

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

“Sequential Pay Event” means, with respect to any Payment Date, that one or more of the following has occurred;

(a) as of the related Determination Date, the Outstanding Loan Balance of Loans which have become Charged-Off Loans represent 8.0% or more of the Initial Aggregate Outstanding Loan Balance;

(b) any of the Class B Interest Amount, the Class C Interest Amount, the Class D Interest Amount or the Class E Interest Amount is calculated using clause (ii)(b) of the definition thereof;

(d) a Servicer Default;

(e) an Accelerated Amortization Event;

(f) the Aggregate Outstanding Loan Balance is less than 45% of the Initial Aggregate Outstanding Loan Balance; or

(g) a Downgrade Event.

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

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

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

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

“Servicing Advances” means, all reasonable and customary “out–of–pocket” costs and expenses incurred in the performance by the Servicer of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration and protection of the Collateral, (b) any enforcement or judicial proceedings, including foreclosures, (c) the management and liquidation of the Foreclosed Property or Repossessed Collateral, (d) compliance with the obligations under this Agreement, which “Servicing Advances” are reimbursable to the Servicer to the extent provided in Section 5.10(d) of this Agreement, and (e) in connection with the liquidation of a Loan, for all of which costs and expenses the Servicer is entitled to reimbursement thereon up to a maximum rate per annum equal to the related Loan Rate.

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

“Servicing Fee Percentage ” means 1.0%.

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

“SG CIB” means SG Americas Securities, LLC.

“SLP Financing Originator” means Security Leasing Partners, LP, a Delaware limited partnership.

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

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

“Specified Amendment” means, with respect to any Loan, any waiver, modification, amendment or variance of such Loan which does not constitute a Material Modification of the type specified in clause (ii) of the definition thereof and which effects:

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

(i) modify the amortization schedule with respect to such Loan to reduce the dollar amount of any Scheduled Payment by more than 20%, or to postpone by more than two payment periods or eliminate a Scheduled Payment with respect thereto; provided that any such modification, postponement or elimination shall not cause the weighted average life of the applicable Loan to increase by more than 10%; or

(ii) reduce or increase the cash interest rate payable by the Obligor thereunder by more than 100 basis points (excluding any increase in an interest rate arising by operation of a default or penalty interest clause under a Loan); or

(iii) forgive any of the principal amount thereof; or

(iv) extend the stated maturity date of such Loan by more than 24 months; provided that, any such extension shall be deemed not to have been made until the business day following the original stated maturity date of such Loan, except that the Servicer shall provide notice and a summary of such extension to the Rating Agencies in accordance with the second sentence of Section 5.02(e)(ii) as though a Specified Amendment had occurred as of the date such extension is entered into; or

(v) release any party from its obligations under such Loan, if such release would have a material adverse effect on the Loan; or

(vi) release, or permit the sharing of, the collateral included in the borrowing base under an Asset Based Revolver such that the advance rate for such Loan would exceed 90% based upon the remaining collateral; or

(vii) increase the advance rate under an Asset Based Revolver to more than 90%; or

(b) the making of an Overadvance not scheduled to be repaid within one year of being made to the Obligor with respect to an Asset Based Revolver, where such Overadvance results in an advance rate in excess of 90% for such Loan;

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

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

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

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

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

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

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

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

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

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

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

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

“Substitute Loan Assets” shall have the meaning given to such term in Section 2.04(b).

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

(a) (i) if the Loan Rate of such Substitute Loan is determined by reference to the same Loan Rate Index as the Loan being replaced, the Loan Rate of such Substitute Loan equals or exceeds the Loan Rate of the Loan being replaced, or (ii) if the Loan Rate of each Substitute Loan is not determined by reference to the same Loan Rate Index as the Loan being replaced, the Weighted Average LIBOR Spread Test is satisfied; provided that if the Weighted Average LIBOR Spread Test is not satisfied prior to giving effect to the inclusion of any Substitute Loans under the circumstances described in this clause (ii), the Weighted Average LIBOR Spread Test shall be deemed satisfied if the Weighted Average LIBOR Spread is maintained or improved by the inclusion of such Substitute Loan(s);

(b) the number of Loans being replaced must be less than or equal to the number of Substitute Loans added to the Loan Pool;

(c) the Outstanding Loan Balance of such Substitute Loan, or, if more than one Substitute Loan will be added in replacement of a Loan, the sum of the Outstanding Loan Balances of the Substitute Loans, is not less than that of the Loan identified on the related Addition Notice as the Loan to be reassigned by the Issuer to the Trust Depositor and reconveyed to the Originator in exchange for such Substitute Loan;

(d) no selection procedures believed by the Originator or the Trust Depositor to be adverse shall have been employed in the selection of such Loan being substituted from the Originator’s portfolio;

(e) all actions or additional actions (if any) necessary to perfect the security interest and assignment of such Substitute Loan and related Collateral to the Trust Depositor, the Issuer, and the Indenture Trustee shall have been taken as of or prior to the Subsequent Transfer Date;

(f) the Substitute Loan has a maturity date not later than 36 months prior to the Final Maturity Date;

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

(h) either: (i) the estimated Xxxxx’x rating and estimated S&P rating of each Substitute Loan is equal to or better than the estimated Xxxxx’x rating and the estimated S&P rating, as applicable, of the Loan being replaced at the time of its replacement; (ii) if the estimated S&P rating of such Substitute Loan is equal to or better than the estimated S&P rating of the Loan being replaced but the estimated Xxxxx’x rating of any Substitute Loan is worse than the estimated Xxxxx’x rating of the Loan being replaced, in each case at the time of its replacement, then after giving effect to such substitution, the weighted average estimated Xxxxx’x rating of the Loans in the Loan Pool shall be equal to or better than the weighted average estimated Xxxxx’x rating of the Loans in the Loan Pool as of the Cut-Off Date; (iii) if the estimated Xxxxx’x rating of such Substitute Loan is equal to or better than the estimated Xxxxx’x rating of the Loan being replaced but the estimated S&P rating of any Substitute Loan is worse than the estimated S&P rating of the Loan being replaced, in each case at the time of its replacement, then after giving effect to such substitution, the Break-Even Default Rate with respect to the Class A Notes and the Class B Notes determined using the S&P CDO Evaluator shall not be lower than the Break-Even Default Rate with respect to the Class A Notes and the Class B Notes determined using the S&P CDO Evaluator as of the Cut-Off Date; or (iv) if the estimated Xxxxx’x rating and estimated S&P rating of any Substitute Loan is worse than the estimated Xxxxx’x rating and the estimated S&P rating, as applicable, of the Loan being replaced at the time of its replacement, then after giving effect to such substitution, the weighted average estimated Xxxxx’x rating of the Loans in the Loan Pool shall be equal to or better than

the weighted average estimated Xxxxx’x rating of the Loans in the Loan Pool as of the Cut-Off Date and the Break-Even Default Rate with respect to the Class A Notes and the Class B Notes determined using the S&P CDO Evaluator shall not be lower than the Break-Even Default Rate with respect to the Class A Notes and the Class B Notes determined using the S&P CDO Evaluator as of the Cut-Off Date;

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

(j) after giving effect to such substitution, the Weighted Average Life Test is satisfied;

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

(l) the type of Collateral securing each Substitute Loan is similar to the type of Collateral securing the Loan being replaced, and the lien position of such Substitute Loan with respect to the related Collateral securing each Substitute Loan is not less senior than the lien position of the Loan being replaced with respect to the Collateral securing such replaced Loan.

“Substitution Event” shall have occurred if a Loan then held by the Issuer and identified in the related Addition Notice is one of (a) a Prepaid Loan, (b) a Charged–Off Loan, (c) a Loan that has a covenant default, (d) a Delinquent Loan (other than a Loan which has been deemed to be a Delinquent Loan in accordance with Section 5.02(e)(iii)), (e) a Loan that becomes subject to a Material Modification, (f) a Loan that becomes subject to a Specified Amendment or (g) the subject of a breach of a representation or warranty under this Agreement or other provision, which breach or other provision, in the absence of a substitution of a Substitute Loan for such Loan pursuant to Section 2.04, would require the payment of a Transfer Deposit Amount to the Issuer in respect of such Loan pursuant to Section 11.01; provided that the occurrence of a Substitution Event under clauses (a)-(d) above or clause (e) above in the event of a Material Modification contemplated by clause (ii) of the definition of such term shall be subject to the limits set forth in Section 2.08.

“Substitution Period” shall have the meaning given to such term in Section 2.04(a)(ii)(C).

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

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

“SunTrust” means SunTrust Capital Markets, Inc.

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

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

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

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

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

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

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

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

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

“Transfer Deposit Amount” means, with respect to each Ineligible Loan or Loan that is to be purchased pursuant to Section 2.08, on any date of determination, the sum of the Outstanding Loan Balance of such Loan, together with accrued interest thereon through such date of determination at the Loan Rate provided for thereunder, and any outstanding Scheduled Payment Advances thereon that have not been waived by the Servicer entitled thereto.

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

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

“Trust Agreement” means the Trust Agreement, dated on or about February 8, 2006, between the Trust Depositor and the Owner Trustee, as such agreement may be amended, modified, waived, supplemented or restated from time to time.

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

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

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

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

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

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

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

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

“United States” means the United States of America.

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

“Warehouse Facilities” means Acquisition Funding Transaction, the Funding I Transaction, the Funding II Transaction, the Funding III Transaction, the Funding IV Transaction, the Funding V Transaction and the Mariner Funding Transaction.

“Weighted Average LIBOR Spread” means, as of any Determination Date, a fraction (expressed as a percentage and rounded up to the next 0.001%), (a) the numerator of which is the sum of the products determined by multiplying the Outstanding Loan Balance of each Loan (excluding Charged-Off Loans and Delinquent Loans) owned by the Issuer as of such Determination Date by the LIBOR Spread with respect to such Loan, and (b) the denominator of which is the sum of the Outstanding Loan Balances of all Loans (excluding Charged-Off Loans and Delinquent Loans) owned by the Issuer as of such Determination Date.

“Weighted Average LIBOR Spread Test” means a test that will be satisfied if the Weighted Average LIBOR Spread exceeds 5.15%.

“Weighted Average Life” means, on any Cut-Off Date with respect to any Substitute Loan, the number obtained by dividing (a) the sum, for each Loan in the Loan Pool, of the products obtained by multiplying (i) the Average Life at such time of each Loan by (ii) the Outstanding Loan Balance of such Loan by (b) the Aggregate Outstanding Loan Balance as of such date.

“Weighted Average Life Test” means a test that will be satisfied as of any Cut-Off Date with respect to any Substitute Loan if the Weighted Average Life as of such date is less than the value set forth in the cell corresponding to such date in the table attached hereto as Annex A.

Section 1.02. Usage of Terms.

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

Section 1.03. Section References.

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

Section 1.04. Calculations.

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

Section 1.05. Accounting Terms.

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

ARTICLE 2.

ESTABLISHMENT OF ISSUER; TRANSFER OF LOAN ASSETS

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

(a) The Issuer shall be created pursuant to the terms and conditions of the Trust Agreement, upon the execution and delivery of the Trust Agreement and the filing by the Owner Trustee of an appropriately completed Certificate of Trust (as defined in the Trust Agreement) under the Statutory Trust Statute. The Trust Depositor, as settlor of the Issuer, shall fund and convey assets to the Issuer pursuant to the terms and provisions hereof. The Issuer shall be administered pursuant to the provisions of this Agreement and the Trust Agreement for the benefit of the Securityholders and the Hedge Counterparties. The Owner Trustee is hereby specifically recognized by the parties hereto as empowered to conduct business dealings on behalf of the Issuer in accordance with the terms hereof and of the Trust Agreement. The Servicer is hereby specifically recognized by the parties hereto as empowered to act on behalf of the Issuer and the Owner Trustee in accordance with Section 5.02(e) and Section 5.02(h).

(b) Subject to and upon the terms and conditions set forth herein, the Trust Depositor hereby sells, transfers, assigns, sets over and otherwise conveys to the Issuer, for a purchase price consisting of $710,418,422 in cash (less placement expenses and certain other expenses associated with the initial offer and sale of the Offered Notes the proceeds of which represent the

consideration paid by the Issuer herein), $31,290,000 in aggregate principal amount of the Class E Notes, $35,201,764 in aggregate principal amount of the Class F Note, and the Certificate, all the right, title and interest of the Trust Depositor in and to the following, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the following (the Trust Depositor’s interest in items (i)–(vii) below, being collectively referred to herein as the “Initial Loan Assets” but in each case shall exclude any Retained Interest):

(i) the Initial Loans, all payments paid in respect thereof and all monies due, to become due or paid in respect thereof accruing on and after the Initial Cut–Off Date and all Liquidation Proceeds and recoveries thereon, in each case as they arise after the Initial Cut–Off Date, but not including the Retained Interest or Interest Collections received prior to January 31, 2006;

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

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

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

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

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

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

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

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

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

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

(f) If any such transfer of the Loan Assets is deemed to be the mere granting of a security interest to secure a borrowing, the Trust Depositor may, to secure the Trust Depositor’s own borrowing under this Agreement (to the extent that the transfer of the Loan Assets thereunder is deemed to be a mere granting of a security interest to secure a borrowing) repledge and reassign (1) all or a portion of the Loan Assets pledged to Trust Depositor by the Originator and with respect to which the Trust Depositor has not released its security interest at the time of such pledge and assignment, and (2) all proceeds thereof. Such repledge and reassignment may be made by Trust Depositor with or without a repledge and reassignment by Trust Depositor of its rights under any agreement with the Originator, and without further notice to or acknowledgment from the Originator. The Originator waives, to the extent permitted by applicable law, all claims, causes of action and remedies, whether legal or equitable (including any right of setoff), against Trust Depositor or any assignee of Trust Depositor relating to such action by Trust Depositor in connection with the transactions contemplated by this Agreement.

Section 2.02. Conditions to Transfer of Initial Loan Assets to Issuer.

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

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

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

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

(d) the initial List of Loans, certified by an officer of the Trust Depositor, together with an Assignment substantially in the form of Exhibit A (along with the delivery of any instruments and Loan Files as required under Section 2.07);

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

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

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

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

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

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

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

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

Section 2.03. Acceptance by Owner Trustee.

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

Section 2.04. Conveyance of Substitute Loans.

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

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

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

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

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

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

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

(iii) Each Notice of Substitution shall specify the Loan to be substituted, the reasons for such substitution and the amount sufficient to purchase the Loan, which shall be determined in compliance with Section 2.08. On the last day of any Substitution Period, any amounts previously deposited in accordance with clause (a)(i)(B) above which relate to such Substitution Period that have not been applied to purchase one or more Substitute Loans shall be deemed to constitute Principal Collections and shall be transferred on the next Payment Date to the Note Distribution Account and distributed to the Securityholders in accordance with the priority of payments set forth in Section 7.05 (a) or (b), as applicable and prior to the expiration of the related Substitution Period any such amounts shall not be deemed to be Principal Collections and shall remain in the Principal Collection Account.

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

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

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

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

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

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

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

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

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

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

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

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

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

(iii) the Substitute Loan being conveyed to the Issuer satisfy the Substitute Loan Qualification Conditions (and on the date of such substitution, the Servicer shall deliver to the Indenture Trustee a certificate stating that such Loan satisfies each of the Substitute Loan Qualification Conditions); provided, that, notwithstanding that a Substitute Loan shall otherwise satisfy clause (e) of the definition of Substitute Loan Qualification Condition, a Substitute Loan which at the time of delivery of the related

Addition Notice has a Xxxxx’x rating lower than “B3” shall not become part of the Loan Pool on the proposed Subsequent Transfer Date;

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

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

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

(vii) each of the representations and warranties made by the Trust Depositor pursuant to Sections 3.02, 3.03(i), (ii) and (v), and 3.04, applicable to the Substitute Loan (including without limitation that each such Substitute Loan is an Eligible Loan) shall be true and correct as of the related Subsequent Transfer Date;

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

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

(e) The Servicer, the Issuer and the Indenture Trustee shall execute and deliver such instruments, consents or other documents and perform all acts reasonably requested by the Servicer in order to effect the transfer and release of any of the Issuer’s interests in the Loans that are being substituted.

Section 2.05. [Reserved]

Section 2.06. Release of Released Amounts.

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

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

Section 2.07. Delivery of Documents in the Loan File; Recording of Assignments of Mortgage.

(a) Subject to the delivery requirements set forth in Section 2.07(b), the Issuer hereby authorizes and directs the Originator and the Trust Depositor to deliver possession of all the Loan Files to the Indenture Trustee (with copies to be held by the Servicer) on behalf of and for the account of the Securityholders and the Hedge Counterparties. The Originator and the Trust Depositor shall also identify on the List of Loans (including any deemed amendment thereof associated with any Substitute Loans), whether by attached schedule or marking or other effective identifying designation, all Loans that are or are evidenced by such instruments.

(b) With respect to each Loan in the Loan Pool on or before the related Transfer Date, the Trust Depositor will deliver or cause to be delivered to the Indenture Trustee, to the extent not previously delivered, each of the documents in the Loan File with respect to such Loan, except that, as applicable (i) the original recorded Mortgage, in those instances where a copy thereof certified by a Responsible Officer of the Originator was delivered to the Indenture Trustee, will be delivered or caused to be delivered within ten Business Days after receipt thereof, and in any event within one year after the related Transfer Date, and (ii) any intervening Assignments of Mortgage, in those instances where copies thereof certified by the Originator were delivered to the Indenture Trustee, will be delivered or caused to be delivered within ten Business Days after the receipt thereof, and in any event, within one year of the related Transfer Date. Notwithstanding the foregoing in clauses (i) and (ii) of this Section 2.07(b), in those instances where the public recording office retains the original Mortgage or the intervening Assignments of the Mortgage after it has been recorded, the Trust Depositor shall be deemed to have satisfied its obligations hereunder upon delivery to the Indenture Trustee of a copy of such

Mortgage or Assignments of Mortgage certified by the public recording office to be a true copy of the recorded original thereof.

(c) Prior to the occurrence of an Event of Default or a Servicer Default, the Indenture Trustee shall not record the Assignments of Mortgage delivered pursuant to Section 2.07(b). Upon the occurrence of an Event of Default or a Servicer Default, the Indenture Trustee shall cause to be recorded in the appropriate offices each Assignment of Mortgage delivered to it. Each such recording shall be at the expense of the Servicer; provided, however, to the extent the Servicer does not pay such expense then the Indenture Trustee shall be reimbursed pursuant to the provisions of Section 7.05.

Section 2.08. Optional Purchase by the Servicer of Certain Loans; Limitations on Substitution and Repurchase.

(a) Subject to the limitations set forth in Section 2.08(b), the Servicer shall have the right, but not the obligation, to purchase any (i) Prepaid Loan, (ii) Charged–Off Loan, (iii) Delinquent Loan, (iv) Loan that has a material covenant default, (v) Loan which has become subject to a Material Modification of the type specified in clause (ii) of the definition thereof or (vi) Loan that has become subject to a Specified Amendment. In the event of such a purchase, the Servicer shall deposit in the Principal and Interest Account, on the next succeeding Determination Date, an amount equal to the Transfer Deposit Amount for such Loan (or applicable portion thereof) as of the date of such purchase. The Servicer, the Issuer and the Indenture Trustee shall execute and deliver such instruments, consents or other documents and perform all acts reasonably requested by the Servicer in order to effect the transfer and release of any of the Issuer’s interests in the Loans that are being purchased.

(b) In no event may the initial aggregate Outstanding Loan Balance of (i) Prepaid Loans, (ii) Charged–Off Loans, (iii) Delinquent Loans, (iv) Loans that have a material covenant default, and (v) Loans which have become subject to a Material Modification of the type specified in clause (ii) of the definition thereof (without regard to whether such Material Modification may otherwise constitute a Material Modification of a type specified in clause (i) of the definition thereof), purchased pursuant to Section 2.08(a) or substituted pursuant to Section 2.04, exceed an amount equal to 20% of the Initial Aggregate Outstanding Loan Balance.

Section 2.09. Certification by Indenture Trustee; Possession of Loan Files.

(a) On or prior to the applicable Transfer Date, the Indenture Trustee shall review the portion of the Loan File required to be delivered pursuant to Section 2.07(b) on the applicable Transfer Date and shall deliver to the Originator, the Trust Depositor, each Hedge Counterparty and the Servicer a certification in the form attached hereto as Exhibit L–1 on or prior to such Transfer Date. Within two Business Days after the Indenture Trustee receives the portion of the Loan File permitted to be delivered after the applicable Transfer Date pursuant to Section 2.07(b), the Indenture Trustee shall deliver to the Originator, the Trust Depositor, each Hedge Counterparty and the Servicer a certification in the form attached hereto as Exhibit L–1. Within 360 days after each Transfer Date (or, with respect to any Substitute Loan, within 360 days after the assignment thereof), the Indenture Trustee shall deliver to the Originator, the Servicer, the Trust Depositor, each Hedge Counterparty and any Noteholder who requests a copy from the

Indenture Trustee a final certification in the form attached hereto as Exhibit L–2 evidencing the completeness of the Loan Files with respect to the Loans being transferred on such Transfer Date.

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

(c) Release of Entire Loan File Upon Substitution or Repurchase. Subject to Section 5.08(a), upon receipt by the Indenture Trustee of a certification of a Servicing Officer of the Servicer of such substitution or of such purchase and the deposit of the amounts described in Section 2.08 or Section 2.09(b) in the Principal and Interest Account (which certification shall be in the form of Exhibit M hereto), the Indenture Trustee shall release to the Servicer for release to the Originator the related Loan File and the Indenture Trustee and the Issuer shall execute, without recourse, and deliver such instruments of transfer necessary to transfer all right, title and interest in such Loan to the Originator free and clear of any Liens created by the Transaction Documents. All costs of any such transfer shall be borne by the Originator.

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

and the Indenture Trustee shall execute, without recourse, and deliver such instruments of transfer necessary to release all or the requested part of the Collateral from the Lien of the related Loan and/or the Lien under the Transaction Documents.

(e) Annual Certification. On the Payment Date in April of each year, commencing April 20, 2007, the Indenture Trustee shall deliver to the Originator, the Trust Depositor, each Hedge Counterparty and the Servicer a certification detailing all transactions with respect to the Loans for which the Indenture Trustee holds the Loan Files pursuant to this Agreement during the prior calendar year. Such certification shall list all Loan Files which were released by or returned to the Indenture Trustee during the prior calendar year, the date of such release or return and the reason for such release or return.

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES

The Trust Depositor makes, and upon execution of each Subsequent Purchase Agreement is deemed to make, the following representations and warranties in Section 3.01 through Section 3.04, on which the Issuer will rely in purchasing the Initial Loan Assets on the Closing Date (and on any Subsequent Transfer Date), and on which the Securityholders and the Hedge Counterparties will rely.

Such representations and warranties are given as of the execution and delivery of this Agreement and as of the Closing Date (or Subsequent Transfer Date, as applicable), but shall survive the sale, transfer and assignment of the Loan Assets to the Issuer. The repurchase obligation or substitution obligation of the Trust Depositor set forth in Section 11.01 constitutes the sole remedy available for a breach of a representation or warranty of the Trust Depositor set forth in Section 3.01 through Section 3.04 of this Agreement. Except as otherwise provided in Section 2.04(d)(vii), the Trust Depositor shall not be deemed to be remaking any of the representations set forth in Section 3.03 on a Subsequent Transfer Date with respect to the Substitute Loans, as such representations relate solely to the composition of the Initial Loans conveyed on the Closing Date.

Section 3.01. Representations and Warranties Regarding the Trust Depositor.

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

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

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

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

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

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

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

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

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

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

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

(k) Security Interest.

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

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

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

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

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

(vi) other than the security interest granted to the Issuer pursuant to this Agreement, the Trust Depositor has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of such Loan Assets. The Trust Depositor has not

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

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

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

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

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

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

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

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

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

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

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

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

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

The representations and warranties set forth in Section 3.01(k) may not be waived by any Person and shall survive the termination of this Agreement. The Trust Depositor and Issuer (i) shall not, without satisfaction of the S&P Rating Condition with respect thereto, waive any breach of the representations and warranties in Section 3.01(k), and (ii) shall provide S&P with prompt written notice of any breach of the representations and warranties set out in Section 3.01(k).

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

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

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

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

(c) Loans Secured by Real Property. Less than 40% of the Aggregate Outstanding Loan Balance of the Loan Pool as of the Initial Cut–Off Date consists of Loans principally secured by real property, and the Trust Depositor will not effectuate the transfer of a Substitute Loan if such transfer would cause more than 40% of the Aggregate Outstanding Loan Balance of the Loan Pool as of any Subsequent Transfer Date to consist of Loans principally secured by real property.

(d) Underlying Custodial Agreements. With respect to each Pooled Obligor Loan, the underlying loan documents and other collateral pledged by the Underlying Debtors is held by

an Underlying Custodian for the benefit of the Originator and its assignees. The Originator’s rights under each such Underlying Custodial Agreement are fully assignable and have been assigned by it to the Trust Depositor, and assigned by the Trust Depositor to the Issuer in connection with the transfer of the Loan Assets.

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

The Trust Depositor represents and warrants, on the Closing Date, that as of the Initial Cut–Off Date, the Initial Loans have the following additional characteristics: (i) no Loan has a remaining maturity of more than 90 months; (ii) the date of the final Scheduled Payment on the Loan with the latest maturity is not later than August 20, 2013; (iii) no Loan was originated after the Initial Cut–Off Date; and (iv) none of the Initial Loans provide for Scheduled Payments of interest due on a basis other than monthly, quarterly, semi-annually or annually.

Section 3.04. Representations and Warranties Regarding the Loan Files.

The Trust Depositor represents and warrants on the Closing Date with respect to the Initial Loans (or as of the Subsequent Transfer Date, with respect to Substitute Loans), that (i) to the extent any such Loans were pledged under the Funding I Transaction, the Funding II Transaction, the Funding III Transaction, the Funding IV Transaction, the Funding V Transaction, the Acquisition Funding Transaction or any Prior Term Transaction, immediately prior to such date (as applicable), the Originator and/or a collateral custodian under the Funding I Transaction, the Funding II Transaction, the Funding III Transaction, the Funding IV Transaction, the Funding V Transaction, the Acquisition Funding Transaction or such Prior Term Transaction had possession of each original Underlying Note (except in the case of Noteless Loans) and the related complete Loan File, and there were no other custodial agreements relating to the same in effect and (ii) except as otherwise provided in Section 2.07, the complete Loan File for each Loan is in the possession of the Indenture Trustee.

		Section 3.05. [Reserved].

		Section 3.06. Representations and Warranties Regarding the Servicer.

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

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

so qualify would have a material adverse effect on the business, properties, assets, or condition (financial or otherwise) of the Servicer or Issuer.

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

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

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

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

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

Section 3.07. Representations and Warranties of the Backup Servicer.

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

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

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

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

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

(e) No Consent Required. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any Governmental Authority having jurisdiction over it or any of its respective properties is required to be obtained in order for it to enter into this Agreement or perform its obligations hereunder.

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

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

ARTICLE 4.

PERFECTION OF TRANSFER AND
PROTECTION OF SECURITY INTERESTS

Section 4.01. Custody of Loans.

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

Section 4.02. Filing.

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

Section 4.03. Changes in Name, Corporate Structure or Location.

(a) During the term of this Agreement, none of the Originator, the Servicer, the Trust Depositor or the Issuer shall change its name, identity, existence, state of formation or location without first giving at least 30 days’ prior written notice to the Owner Trustee, the Indenture Trustee, each Hedge Counterparty and S&P.

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

preserve and protect the Indenture Trustee’s security interest in the Loan Assets have been filed, and reciting the details of such filing.

Section 4.04. Costs and Expenses.

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

Section 4.05. Sale Treatment.

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

Section 4.06. Separateness from Trust Depositor.

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

ARTICLE 5.

SERVICING OF LOANS

Section 5.01. Appointment and Acceptance.

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

Section 5.02. Duties of the Servicer.

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

(b) Notwithstanding any Subservicing Agreement, any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a Subservicer or

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

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

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

(e) Modifications and Waivers Relating to Loans.

(i) So long as it is consistent with the Credit and Collection Policy, the Servicer may waive, modify or vary any term of any Loan if in the Servicer’s determination such waiver, modification or variance will not be materially adverse to the interests of the Noteholders or the Hedge Counterparties; provided, however, the Servicer may not:

(A) amend, waive, modify or vary any Loan in any manner that would extend the stated maturity date of such Loan beyond the date that is 36 months prior to the Final Maturity Date; or

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

eligible for repurchase or substitution hereunder or to otherwise make such Loan eligible for repurchase pursuant to Section 2.08.

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

(ii) Except as expressly set forth in Section 5.02(e)(i), the Servicer may execute any amendments, waivers, modifications or variances related to such Loan and any documents related thereto on behalf of the Issuer. The Servicer will provide each Rating Agency with a written summary of any such amendment, waiver, modification or variance promptly after its execution and, promptly upon request by any Rating Agency, a copy of any such waiver, modification or variance. Such summary shall set forth a brief description of the reasons for, and the effect of, such waiver, modification or variance, and shall indicate whether such waiver, modification or variance constitutes a Specified Amendment.

(iii) With respect to each of the modifications described in clause (a)(i), (a)(ii), (a)(iv)-(vii) and clause (b) of the definition of Specified Amendment, the Servicer may elect to submit the modified (or overadvanced, as applicable) Loan to S&P to be re-rated. If the Servicer does not elect to have such Loan re-rated by S&P, then such Loan shall be deemed to be a Delinquent Loan as of the date that is 60 days after the effective date of the relevant Specified Amendment; provided that such Loan shall cease to be deemed a Delinquent Loan as of such later date as it may be submitted to S&P for re-rating. Any Loan which is subject to a modification described in clause (a)(iii) of the definition of Specified Amendment will be deemed to be a Delinquent Loan upon the effectiveness of such Specified Amendment. If the Servicer elects to have such Loan re-rated by S&P, then at any time during such process, including up to 90 days after Servicer receives the revised rating of the Loan, the Servicer may repurchase such Loan. The provisions of this Section 5.02(e)(iii) shall not apply to modifications, amendments or variances that do not constitute Specified Amendments.

(iv) No costs incurred by the Servicer or any Subservicer in respect of Servicing Advances shall for the purposes of distributions to Noteholders or Hedge Counterparties be added to the amount owing under the related Loan. Any fees and costs imposed in connection therewith may be retained by the Servicer. Without limiting the generality of the foregoing, so long as it is consistent with the Credit and Collection Policy, the Servicer shall continue, and is hereby authorized and empowered to execute and deliver on behalf of the Indenture Trustee, the Owner Trustee, each Securityholder and each Hedge Counterparty, all instruments of amendment, waiver, satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to the Loans and with respect to any Collateral. Such authority shall include, but not be limited to, the authority to substitute or release items of Collateral consistent with the Credit and Collection Policy and sell participations or assignments in Loans

previously transferred to the Issuer. In connection with any such sale, the Servicer shall deposit in the Principal and Interest Account, pursuant to Section 7.03(b), all proceeds received upon such sale. If reasonably required by the Servicer, the Indenture Trustee, on behalf of the Issuer, shall furnish the Servicer, within five Business Days of receipt of the Servicer’s request, with any powers of attorney and other documents necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement. Any such request to the Indenture Trustee, on behalf of the Issuer, shall be accompanied by a certification in the form of Exhibit L attached hereto signed by a Servicing Officer. In connection with any substitution of Collateral, the Servicer shall deliver to the Indenture Trustee the items, and within the time frame, set forth in Section 2.07, assuming that the date of substitution is the relevant “Transfer Date.”

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

(g) Hedge Covenants.

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

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

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

then, not later than 1:00 p.m. (New York City time) on the Determination Date preceding the next Payment Date, the Servicer will notify the Indenture Trustee, the Hedge Counterparties and the Rating Agencies of such event and, with effect on such next Payment Date, one or more of the Hedge Transactions hedging the Fixed Rate Loans will be reduced or amended in accordance with the terms of the applicable Hedge Agreements so that the Aggregate Notional Amount for each calculation period of the Hedge Transactions hedging the Fixed Rate Loans will not exceed

the Outstanding Loan Balance of the Fixed Rate Loans at the end of the corresponding Due Period or as projected to be outstanding at the end of the corresponding Due Period.

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

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

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

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

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

(A) the then current Aggregate Notional Amount of all Hedge Transactions under all Hedge Agreements then in effect exceeds the then Aggregate Outstanding Principal Balance; or

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

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

(h) In accordance with the power set forth in Section 2.01(a), the Servicer shall perform the duties of the Issuer and the Owner Trustee under the Transaction Documents. In furtherance of the foregoing, the Servicer shall consult with the Owner Trustee as the Servicer

deems appropriate regarding the duties of the Issuer and the Owner Trustee under the Transaction Documents. The Servicer shall monitor the performance of the Issuer and the Owner Trustee and shall advise the Owner Trustee when action is necessary to comply with the Issuer’s or the Owner Trustee’s duties under the Transaction Documents. The Servicer shall prepare for execution by the Owner Trustee or the Issuer or shall cause the preparation by other appropriate Persons of all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to the Transaction Documents.

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

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

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

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

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

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

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

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

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

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

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

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

(t) The Servicer shall notify the Backup Servicer of any material modification to its servicing system.

(u) The initial Servicer shall provide to S&P and Fitch the most recently available financial statements for each Obligor of a Loan included in the Loan Pool, (i) in the case of each Initial Loan, within 13 months after the Closing Date and every 13 months thereafter, and (ii) in the case of each Substitute Loan, within 13 months after the related Subsequent Cut-Off Date and every 13 months thereafter, until, in all cases, such time as the related Loan has been paid in full or is no longer part of the Loan Pool. Any failure by the initial Servicer to provide financial statements with respect to any Obligor at such times shall result in each Loan to the applicable Obligor being deemed to have an S&P rating of “CCC-.”

(v) The initial Servicer shall provide to Xxxxx’x annual financial statements for each Obligor of a Loan included in the Loan Pool as promptly as reasonably practicable after such financial statements are delivered to the Servicer after the end of each Obligor’s fiscal year, until such time as the related Loan has been paid in full or is no longer part of the Loan Pool.

Section 5.03. Liquidation of Loans.

(a) In the event that any payment due under any Loan and not postponed pursuant to Section 5.02 is not paid when the same becomes due and payable, or in the event the Obligor fails to perform any other covenant or obligation under the Loan, the Servicer in accordance with the Credit and Collection Policy shall take such action as shall maximize the amount of recovery thereon and it shall deem to be in the best interests of the Noteholders and the Hedge Counterparties. The Servicer, consistent with its Credit and Collection Policy, may accelerate all payments due thereunder to the extent permitted by the Required Loan Documents and foreclose upon at a public or private sale or otherwise comparably effect the ownership of Collateral relating to defaulted Loans for which the related Loan is still outstanding and as to which no satisfactory arrangements can be made for collection of delinquent payments in accordance with the provisions of Section 5.10 and shall act as sales and processing agent for the Collateral that is repossessed. In connection with such foreclosure or other conversion and any other liquidation action or enforcement of remedies, the Servicer shall exercise collection and foreclosure procedures with the same degree of care and skill in its exercise or use as it would exercise with respect to its own affairs, in accordance with prudent servicing standards, and in accordance with the Credit and Collection Policy. Without limiting the generality of the foregoing, the Servicer may not sell any such Collateral without first using commercially reasonable efforts to obtain bids to purchase such Collateral from at least three Persons (other than the Servicer or any of its Affiliates). The Servicer may sell the Collateral to the highest bidder (if any bids are received) or the Servicer or an Affiliate may purchase the Collateral for a price equal to the highest bid, but in no event may the Servicer sell any Collateral for less than the then fair market value of the Collateral. If no bids are received and the Servicer has used commercially reasonable efforts to obtain such bids, the Servicer or an Affiliate may purchase the Collateral for a price equal to the then fair market value of such Collateral. Any such sale of the Collateral is to be evidenced by a certificate of a Responsible Officer of the Servicer delivered to the Indenture Trustee setting forth the Loan, the Collateral, the sale price of the Collateral and certifying that such sale price is the fair market value of such Collateral. In any case in which any such Collateral has suffered damage, the Servicer will not expend funds in connection with any repair or toward the repossession of such Collateral unless it reasonably determines that such repair and/or repossession will increase the Liquidation Proceeds by an amount greater than the amount of such expenses.

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

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

Section 5.04. Fidelity Bond.

The Servicer shall at all times maintain with a responsible company, and at its own expense, a blanket fidelity bond (the “Fidelity Bond”) in a minimum aggregate amount equal to $2,000,000, and a maximum deductible of $50,000, with coverage on all employees acting in any capacity requiring such persons to handle funds, money, documents or papers relating to the Loans or the Collateral (“Servicer Employees”). The Fidelity Bond shall provide coverage to the Indenture Trustee, the Owner Trustee, the Hedge Counterparties and the Securityholders, their respective officers and employees, against losses resulting from forgery, theft, embezzlement or fraud by such Servicer Employees. The Fidelity Bond shall not relieve the Servicer from its duties or indemnity obligations as set forth in this Sale and Servicing Agreement. Upon the request of the Indenture Trustee, the Owner Trustee, any Securityholder or any Hedge Counterparty, the Servicer shall cause to be delivered to the Indenture Trustee, the Owner Trustee, such Securityholder or such Hedge Counterparty a certified true copy of such Fidelity Bond.

Section 5.05. Maintenance of Hazard Insurance.

(a) The Servicer will use its reasonable best efforts to ensure that each Obligor maintains an Insurance Policy with respect to any tangible, personal property Collateral (other than accounts receivable) in amounts consistent with the Credit and Collection Policy and as required by clause (m) of the definition of Eligible Loan and all of the Originator’s right, title and interest therein will be fully assigned to the Indenture Trustee. Additionally, other than with respect to unsecured Loans and Loans in which the sole collateral is the related Obligor’s accounts receivable, the Servicer will require that each Obligor maintain property damage liability insurance during the term of each Loan in compliance with the Credit and Collection Policy. If an Obligor fails to maintain property damage insurance, the Servicer may in its discretion purchase and maintain such insurance on behalf of, and generally at the expense of, the Obligor to the extent entitled to do so pursuant to the Required Loan Documents. In connection with its activities as Servicer, the Servicer agrees to present, on behalf of the Indenture Trustee, the Securityholders and the Hedge Counterparties, claims to the insurer under each Insurance Policy and any such liability policy, and to settle, adjust and compromise such claims, in each case, consistent with the terms of each Loan. The Servicer’s Insurance Policies with respect to the Collateral will insure against liability for physical damage relating to such Collateral in accordance with the requirements of the Credit and Collection Policy. The Servicer hereby disclaims any and all right, title and interest in and to any Insurance Policy and Insurance Proceeds with respect to any Collateral, including any Insurance Policy with respect to which it is named as loss payee and as an insured, and agrees that it has no equitable, beneficial or other interest in the Insurance Polices and Insurance Proceeds other than being named as loss payee and as an insured. The Servicer acknowledges that with respect to the Insurance Policies and

Insurance Proceeds thereof that it is acting solely in the capacity as agent for the Indenture Trustee.

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

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

Section 5.06. Collection of Certain Loan Payments.

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

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

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

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

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

(a) Upon the payment in full of any Loan, the receipt by the Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes or the deposit into the Principal and Interest Account of the purchase price of any Loan acquired by the Trust Depositor, the Servicer or another Person pursuant to this Agreement, or any other Transaction Document, the Servicer will immediately notify the Indenture Trustee by a certification in the form of Exhibit M attached hereto (which certification shall include a statement to the effect that all amounts received or to be received in connection with such payment which are required to be deposited in the Principal and Interest Account pursuant to Section 7.03(b) have been or will be so deposited) of a Servicing Officer and shall request delivery to it of the Loan File. Upon receipt of such certification and request, the Indenture Trustee shall in accordance with Section 2.09(c) release, within two Business Days (if such request was received by 2:00 p.m. central time), the related Loan File to the Servicer. Expenses incurred in connection with any instrument of satisfaction or deed of reconveyance shall be payable by the Servicer and shall not be chargeable to the Principal and Interest Account or the Note Distribution Account; provided that the Servicer may collect and retain such expenses from the underlying Obligor.

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

Servicing Officer certifying as to the name and address of the Person to whom such Loan File or such document was delivered and the purpose or purposes of such delivery. Upon receipt of a certificate of a Servicing Officer stating that such Loan was liquidated, the servicing receipt relating to such Loan shall be released by the Indenture Trustee to the Servicer.

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

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

Section 5.09. Scheduled Payment Advances.

For each Due Period, if the Servicer determines that any Scheduled Payment (or portion thereof) that was due and payable pursuant to a Loan in the Loan Pool during such Due Period was not received prior to the end of such Due Period or has been received in an Obligor Lock–Box Account but has not yet been transferred to the Lock–Box Account, the Servicer has the right to elect, but is not obligated, to make a Scheduled Payment Advance in an amount up to the amount of such delinquent Scheduled Payment (or portion thereof) if the Servicer believes in good faith that the advance will be reimbursed or subsequently paid by the related Obligor. The Servicer will deposit any Scheduled Payment Advances into the Principal and Interest Account on or prior to 11:00 a.m. (New York City time) on the related Determination Date, in immediately available funds. The Servicer will be entitled to be reimbursed for Scheduled Payment Advances pursuant to Section 7.03, Section 7.05(a) and Section 7.05(b).

Section 5.10. Title, Management and Disposition of Foreclosed Property.

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

(b) The Servicer, subject to the provisions of this ARTICLE 5, shall manage, conserve, protect and operate each Foreclosed Property or other Repossessed Collateral for the Securityholders and the Hedge Counterparties solely for the purpose of its prudent and prompt disposition and sale. The Servicer shall, either itself or through an agent selected by the Servicer, manage, conserve, protect and operate the Foreclosed Property or other Repossessed Collateral in the same manner that it manages, conserves, protects and operates other foreclosed or repossessed property for its own account, and in a similar manner to that of similar property in the same locality as the Foreclosed Property or other Repossessed Collateral is managed. The Servicer shall attempt to sell the same (and may temporarily rent the same) on such terms and conditions as the Servicer deems to be in the best interest of the Securityholders and the Hedge Counterparties.

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

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

Section 5.11. Servicing Compensation.

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

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

Section 5.12. Assignment; Resignation.

The Servicer shall not assign its rights and duties under this Agreement (other than in connection with a subservicing arrangement) nor resign from the obligations and duties hereby imposed on it as Servicer except (a) by mutual consent of the Servicer, the Indenture Trustee, the Majority Noteholders and the Hedge Counterparties, (b) in connection with a merger, conversion or consolidation permitted pursuant to Section 5.13 (in which case the Person resulting from the merger, conversion or consolidation shall be the successor of the Servicer), (c) in connection with an assignment permitted pursuant to Section 5.13 (in which case the Assignee shall be the successor of the Servicer), or (d) upon the Servicer’s determination that its duties hereunder are no longer permissible under Requirements of Law or administrative determination and such incapacity cannot be cured by the Servicer. Any such determination permitting the resignation of the Servicer shall be evidenced by a written Opinion of Counsel (who may be counsel for the Servicer) to such effect delivered to the Indenture Trustee, which Opinion of Counsel shall be in form and substance reasonably acceptable to the Indenture Trustee. No such resignation shall become effective until a successor has assumed the Servicer’s responsibilities and obligations hereunder in accordance with Section 8.03.

Section 5.13. Merger or Consolidation of Servicer.

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

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

Section 5.14. Limitation on Liability of the Servicer and Others.

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

service the Loans in accordance with this Agreement. The Servicer shall not be responsible for the payment of any taxes imposed on or with respect to the Issuer or for the fees of any Successor Servicer.

Section 5.15. The Backup Servicer.

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

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

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

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

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

(iv) If the Servicer disagrees with the report provided under paragraph (iii) above by the Backup Servicer or if the Servicer or any subservicer has not reconciled such discrepancy, the Backup Servicer agrees to confer with the Servicer to resolve such disagreement on or prior to the next succeeding Determination Date and shall settle such discrepancy with the Servicer if possible, and notify the Indenture Trustee, each Hedge Counterparty, the Initial Purchasers and the Rating Agencies of the resolution thereof. The Servicer hereby agrees to cooperate at its own expense with the Backup Servicer in reconciling any discrepancies herein. If within 20 days after the delivery of the report provided under paragraph (iii) above by the Backup Servicer, such discrepancy is not resolved, the Backup Servicer shall promptly notify the Servicer, Indenture Trustee, each Hedge Counterparty, the Initial Purchasers and the Rating Agencies of the continued existence of such discrepancy. Following receipt of such notice by the Indenture Trustee, each Hedge Counterparty, the Initial Purchasers and the Rating Agencies, the Servicer shall deliver to the Indenture Trustee, each Hedge Counterparty, the Initial Purchasers, the Backup Servicer and the Rating Agencies no later than the related Payment Date a certificate describing the nature and amount of such discrepancies and the actions the Servicer proposes to take with respect thereto.

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

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

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

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

becoming the Successor Servicer, (ii) its removal as Backup Servicer, or (iii) the termination of this Agreement.

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

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

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

Section 5.16. Covenants of the Backup Servicer.

The Backup Servicer hereby covenants that:

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

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

ARTICLE 6.

COVENANTS OF THE TRUST DEPOSITOR

Section 6.01. Legal Existence.

During the term of this Agreement, the Trust Depositor will keep in full force and effect its existence, rights and franchises as a limited liability company under the laws of the jurisdiction of its organization and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Agreement, the other Transaction Documents and each other instrument or agreement necessary or appropriate to the proper administration of this Agreement and the transactions contemplated hereby. In addition, all transactions and dealings between the Trust Depositor and its Affiliates will be conducted on an arm’s–length basis.

Section 6.02. Loans Not to Be Evidenced by Promissory Notes.

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

Section 6.03. Security Interests.

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

Section 6.04. Delivery of Principal Collections and Interest Collections.

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

Section 6.05. Regulatory Filings.

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

Section 6.06. Compliance with Law.

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

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

Except as contemplated by this Agreement or the other Transaction Documents, the Trust Depositor shall not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, which is not directly related to the transactions contemplated and authorized by this Agreement or the other Transaction Documents. Notwithstanding anything to the contrary contained herein, the Trust Depositor may assign, transfer, convey or finance all or any portion of any Class of Notes or Certificates owned by it provided such assignment, transfer, conveyance or financing is done in accordance with the terms of Section 4.02 of the Indenture.

Section 6.08. Indebtedness.

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

Section 6.09. Guarantees.

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

Section 6.10. Investments.

The Trust Depositor shall not make or suffer to exist any loans or advances to, or extend any credit to, or make any investments (by way of transfer of property, contributions to capital, purchase of stock or securities or evidences of indebtedness, acquisition of the business or assets, or otherwise) in, any Person except for (a) purchases of Loans from the Originator, (b) for investments in Permitted Investments in accordance with the terms of this Agreement, (c) as may

be necessary to facilitate transactions permitted by Section 6.07 or (d) the receipt of $66,491,764 in aggregate principal amount of the Class E Note, the Class F Note and the Certificate as consideration for the transfer of the Loan Assets to the Issuer. Without limiting the generality of the foregoing, the Trust Depositor shall not (i) provide credit to any Securityholder for the purpose of enabling such Securityholder to purchase any Securities or (ii) lend any money to the Issuer.

Section 6.11. Merger; Sales.

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

Section 6.12. Distributions.

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

Section 6.13. Other Agreements.

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

Section 6.14. Separate Legal Existence.

The Trust Depositor shall:

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

(b) Ensure that, to the extent that it shares the same officers or other employees as any of its members or Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such

entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees.

(c) Ensure that, to the extent that it jointly contracts with any of its members or Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that the Trust Depositor contracts or does business with vendors or service providers when the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods and services are provided, and each such entity shall bear its fair share of such costs. All material transactions between Trust Depositor and any of its Affiliates shall be only on an arm’s length basis.

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

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

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

Section 6.15. Location; Records.

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

Section 6.16. Liability of Trust Depositor.

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

Section 6.17. Bankruptcy Limitations.

The Trust Depositor shall not, without the affirmative vote of a majority of the managers of the Trust Depositor (which must include the affirmative vote of at least two (2) duly appointed Independent managers) (a) dissolve or liquidate, in whole or in part, or institute proceedings to

be adjudicated bankrupt or insolvent, (b) consent to the institution of bankruptcy or insolvency proceedings against it, (c) file a petition seeking or consent to reorganization or relief under any applicable federal or state law relating to bankruptcy, (d) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the limited liability company or a substantial part of its property, (e) make a general assignment for the benefit of creditors, (f) admit in writing its inability to pay its debts generally as they become due, or (g) take any limited liability company action in furtherance of the actions set forth in clauses (a) through (f) above; provided, however, that no manager may be required by any member of the Trust Depositor to consent to the institution of bankruptcy or insolvency proceedings against the Trust Depositor so long as it is Solvent.

Section 6.18. Limitation on Liability of Trust Depositor and Others.

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

Section 6.19. Insurance Policies.

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

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

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

of or instructions with respect to any payments from any Obligor Lock – Box or any Obligor Lock – Box Account or the name in which any Obligor Lock – Box or Obligor Lock – Box Account is maintained.

ARTICLE 7.

ESTABLISHMENT OF ACCOUNTS;
DISTRIBUTIONS; RESERVE FUND

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

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

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

pursuant to Section 7.05. The Trust Depositor and the Issuer agree and acknowledge that the Servicer and Indenture Trustee are to have “control” (within the meaning of the UCC) of collateral comprised of “Investment Property” (within the meaning of the UCC) for all purposes of this Agreement. In the absence of timely written direction from the Servicer or the Trust Depositor, the Indenture Trustee shall invest amounts in the Note Distribution Account and Reserve Fund Account in Permitted Investments of the type specified in clause (vi) of the definition of Permitted Investments herein.

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

Section 7.02. Reserve Fund Deposit.

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

Section 7.03. Principal and Interest Account.

(a) The Servicer shall cause to be established and maintained one or more Principal and Interest Accounts (including for each such account two subaccounts, one designated as the Interest Collection Account and the other designated as the Principal Collection Account), in one or more Eligible Deposit Accounts, in the form of time deposit or demand accounts, which may be interest – bearing or such accounts may be trust accounts wherein the moneys therein are invested in Permitted Investments, titled “CapitalSource Finance LLC, as Servicer, in trust for the Hedge Counterparties and the registered holders of CapitalSource Commercial Loan Trust 2006-1 Notes, Class A, Class B, Class C, Class D, Class E Notes and Class F Notes.” All funds in such Principal and Interest Accounts not so invested shall be insured to the extent and the amount permitted by the BIF or SAIF of the FDIC to the maximum extent provided by law. The creation of any Principal and Interest Account shall be evidenced by a letter agreement in the form of Exhibit E hereto. A copy of such letter agreement shall be furnished to the Indenture Trustee, the Owner Trustee and, upon request, any Securityholder or Hedge Counterparty. The Servicer may, upon written notice to the Indenture Trustee, transfer any Principal and Interest Account to a different Eligible Deposit Account.

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

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

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

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

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

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

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

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

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

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

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

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

reflect such dishonored check or mistake. Any Scheduled Payment in respect of which a dishonored check is received shall be deemed not to have been paid.

(f) The foregoing requirements for deposit in the Principal and Interest Accounts shall be exclusive, it being understood and agreed that, without limiting the generality of the foregoing, Liquidation Expenses may not be deposited by the Servicer in the Principal and Interest Account.

(g) So long as no Servicer Default shall have occurred and be continuing, and consistent with any requirements of the Code, the Principal and Interest Accounts shall either be maintained with an Eligible Deposit Account as an interest – bearing account meeting the requirements set forth in Section 7.03(a), or the funds held therein may be invested by the Servicer (to the extent practicable) in Permitted Investments, as directed in writing by the Servicer, and, in each case, with a stated maturity (giving effect to any applicable grace period) no later than the fourth Business Day immediately preceding the Payment Date next following the Due Period in which the date of investment occurs; provided, however, that Permitted Investments shall not include any interest-only security, any security purchased at a price in excess of 100% of par or any security whose repayment is subject to substantial non-credit related risk as determined by the Servicer. All Permitted Investments must be held by or registered in the name of “CapitalSource, as Servicer, in trust for the Hedge Counterparties and the registered holders of CapitalSource Commercial Loan Trust 2006-1 Notes.” Any Investment Interest Earnings on funds held in the Principal and Interest Account shall be deemed part of the Interest Collection Account and shall be deposited therein pursuant to Section 7.03 and distributed on the next Payment Date pursuant to Section 7.05. The amount of any losses incurred in connection with the investment of funds in the Principal and Interest Account in Permitted Investments shall be deposited in the Principal and Interest Account by the Servicer from its own funds immediately as realized without reimbursement therefor.

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

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

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

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

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

(v) to make investments in Permitted Investments;

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

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

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

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

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

Section 7.04. Securityholder Distributions.

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

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

Section 7.05. Priority of Payments; Allocations and Distributions.

(a) On each Determination Date prior to the occurrence of an Event of Default, a Servicer Default or an Accelerated Amortization Event, (i) the Indenture Trustee shall deposit into the Note Distribution Account all funds on deposit in the Reserve Fund and (ii) the Servicer shall instruct the Indenture Trustee in writing to withdraw, and on the related Payment Date the

Indenture Trustee shall withdraw from the Note Distribution Account (A) the Collections and (B) all amounts deposited therein from the Reserve Fund to make the following payments. The payments listed below will be made only to the extent there are sufficient amounts available on the Payment Date. Payments will be made in the order of priority listed below. With respect to pro rata payments of principal as described herein, payments shall be made pro rata based on the respective original principal amounts of the Class of Notes with respect to which such payments are made. If on any Payment Date the Outstanding Principal Balance of any Class of Notes has been reduced to zero, any pro rata payments of principal on such date shall be distributed pro rata to the Classes of Notes which then remain outstanding based on the respective original principal amounts of such classes of Notes.

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

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

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

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

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

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

Fourth, first, to S&P, an amount equal to any fees due to S&P and second, to the Servicer, an amount equal to the Servicing Fee minus amounts paid to S&P pursuant to this clause Fourth;

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

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

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

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

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

Tenth, to the Reserve Fund, an amount, if any, which when so deposited causes the balance of the Reserve Fund to equal (i) three times the sum of the Class A Interest Amount, the Class B Interest Amount, the Class C Interest Amount , the Class D Interest Amount and the Class E Interest Amount due on the current Payment Date;

Eleventh, (i) on each Payment Date prior to the occurrence of any Sequential Pay Event, to the Holders of the Notes as follows:

	(a)		if on such Payment Date no Principal Distributable Shortfall exists, to the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Note, pro rata, in an amount up to the Total Principal Distributable; and

	(b)		if on such Payment Date a Principal Distributable Shortfall exists, first, to the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, pro rata in an amount up to the Total Principal Distributable until each such class of Offered Notes is paid in full, and second to the Class F Note in an amount up to the Total Principal Distributable until the Class F Note is paid in full;

(ii) on each Payment Date on and after the occurrence of a Sequential Pay Event (other than an Event of Default, a Servicer Default or an Accelerated Amortization Event), unless, solely in the case of a Sequential Pay Event of the type specified in clause

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(f) of the definition thereof, the Rating Agency Condition shall have been satisfied with respect to the payment of principal of the Notes being made in accordance with subclause (i)(a) of this clause Eleventh, sequentially to the holders of Notes as follows:

	(a)		to the Holders of the Class A Notes until paid in full, in an amount up to the Total Principal Distributable;

	(b)		to the Holders of the Class B Notes, the Class B Accrued Payable, if any;

	(c)		to the Holders of the Class B Notes until paid in full, in an amount up to the remaining Total Principal Distributable after payments to the Class A Notes under this clause Eleventh;

	(d)		to the Holders of the Class C Notes, the Class C Accrued Payable, if any;

	(e)		to the Holders of the Class C Notes until paid in full, in an amount up to the remaining Total Principal Distributable after payments to the Class A Notes and the Class B Notes under this clause Eleventh;

	(f)		to the Holders of the Class D Notes, the Class D Accrued Payable, if any;

	(g)		to the Holders of the Class D Notes until paid in full, in an amount up to the remaining Total Principal Distributable after payments to the Class A Notes, the Class B Notes and the Class C Notes under this clause Eleventh;

	(h)		to the Holders of the Class E Notes, the Class E Accrued Payable, if any; and

	(i)		to the Holders of the Class E Notes until paid in full, in an amount up to the remaining Total Principal Distributable after payments to the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes under this clause Eleventh;

Twelfth, to the Reserve Fund, an amount, if any, which when so deposited causes the balance of the Reserve Fund to equal the Required Reserve Amount, and any amounts on deposit in the Reserve Fund in excess of the Required Reserve Amount shall be distributed in accordance with the remaining clauses of the Priority of Payments;

Thirteenth, to the extent not paid pursuant to clause Second above, any amounts due in respect of listing the Listed Notes on the Irish Stock Exchange;

Fourteenth, to the Servicer, to the extent not reimbursed pursuant to clause Third above, reimbursement for the amount of any Scheduled Payment Advances relating to the Loans;

Fifteenth, pro rata, based on the amounts owed to such Persons under this clause Fifteenth, to the Hedge Counterparties, any unpaid Hedge Breakage Costs, together with interest accrued thereon;

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Sixteenth, pro rata, based on the amounts owed to such Persons under this clause Sixteenth, to the Indenture Trustee, the Backup Servicer and the Owner Trustee, to the extent not paid pursuant to clause Second due to the limitations set forth therein, and to the Hedge Counterparties, amounts owed to such parties for fees and expenses and other amounts, including such amounts related to indemnification, and, to a Successor Servicer, any Additional Servicing Fee payable to such Successor Servicer;

Seventeenth, to the Holder of the Class F Note until paid in full, in an amount up to the remaining Total Principal Distributable after payments to the Offered Notes under clause Eleventh; and

Eighteenth, to the Owner Trustee for payment to the Certificateholder, any remaining amounts.

(b) On each Determination Date on and after the occurrence of an Event of Default, a Servicer Default or an Accelerated Amortization Event, the Servicer shall instruct the Indenture Trustee in writing to withdraw, and on the Payment Date the Indenture Trustee will follow the instructions to withdraw, the Collections and all other funds available for distributions on deposit in the Note Distribution Account, to the extent there are sufficient funds, to make the following payments, in the order of priority listed below.

First, pro rata, based on the amounts owed to such Persons under this clause First, to the Hedge Counterparties, any Net Trust Hedge Payments for the current and any prior Payment Dates owing to the Hedge Counterparties under Hedge Agreements (other than Hedge Breakage Costs), together with interest accrued thereon; provided, however, that on each Payment Date on and after the occurrence of an Event of Default, Hedge Breakage Costs in an aggregate amount not to exceed $500,000 shall be payable under this clause First;

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

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

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Fourth, first, to S&P, an amount equal to any fees due to S&P and second, to the Servicer, an amount equal to the Servicing Fee minus amounts paid to S&P pursuant to this Clause Fourth;

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

Tenth, sequentially to the Holders of the Notes as follows:

	(a)		to the Holders of the Class A Notes until the Outstanding Principal Balance of the Class A Notes is reduced to zero;

	(b)		to the Holders of the Class B Notes, the Class B Accrued Payable, if any;

	(c)		to the Holders of the Class B Notes until the Outstanding Principal Balance of the Class B Notes is reduced to zero;

	(d)		to the Holders of the Class C Notes, the Class C Accrued Payable, if any;

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	(e)		to the Holders of the Class C Notes until the Outstanding Principal Balance of the Class C Notes is reduced to zero;

	(f)		to the Holders of the Class D Notes, the Class D Accrued Payable, if any;

	(g)		to the Holders of the Class D Notes until the Outstanding Principal Balance of the Class D Notes is reduced to zero;

	(h)		to the Holders of the Class E Notes, the Class E Accrued Payable, if any; and

	(i)		to the Holders of the Class E Notes until the Outstanding Principal Balance of the Class E Notes is reduced to zero;

Eleventh, to the Servicer, to the extent not reimbursed pursuant to clause Third above, reimbursement for the amount of any Scheduled Payment Advances relating to the Loans;

Twelfth, pro rata, based on the amounts owed to such Persons under this clause Twelfth, to the Hedge Counterparties, to the extent not paid pursuant to clause First above, any unpaid Hedge Breakage Costs, together with interest accrued thereon;

Thirteenth, pro rata, based on the amounts owed to such Persons under this clause Thirteenth, to the Indenture Trustee, the Backup Servicer and the Owner Trustee, to the extent not paid pursuant to clause Second due to the limitations set forth therein, and to the Hedge Counterparties, amounts owed to such parties for fees and expenses and other amounts, including such amounts related to indemnification, and, to a Successor Servicer for any Additional Servicing Fee payable to such Successor Servicer;

Fourteenth, to the extent not paid previously pursuant to clause Second above, any amounts due in respect of listing the Listed Notes on the Irish Stock Exchange;

Fifteenth, to the Holder of the Class F Note until the Outstanding Principal Balance of the Class F Note is reduced to zero; and

Sixteenth, to the Owner Trustee for payment to the Certificateholder, any remaining Collections.

Prior to the Final Maturity Date, amounts to be applied in reduction of the Outstanding Principal Balance of any Note will not be due and payable, although the failure of the Trust Depositor or Servicer to remit any amounts available for payment on the Notes will, after the applicable grace period, constitute an Event of Default under the Indenture.

Section 7.06. Determination of LIBOR.

(a) The Indenture Trustee will determine the interest rate for each Interest Accrual Period by determining the London interbank offered rate (“LIBOR”) for deposits in U.S. Dollars for a period of one month (the “One — Month Index Maturity”) which appears on Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two London Banking Days preceding that

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Interest Accrual Period (“LIBOR Determination Date”). If such rate does not appear on Telerate Page 3750 on the related LIBOR Determination Date, the rate for that Interest Accrual Period will be determined as if the parties had specified “USD — LIBOR — Reference Banks” as the applicable rate. “USD — LIBOR — Reference Banks” means that the interest rate for an Interest Accrual Period will be determined on the basis of the rates at which deposits in U.S. Dollars are offered by the Reference Banks at approximately 11:00 a.m., London time, on the related LIBOR Determination Date to prime banks in the London interbank market for the One — Month Index Maturity commencing on the beginning of that Interest Accrual Period and in a Representative Amount. The Indenture Trustee will request the principal London office of each of the Reference Banks to provide a quotation of its rate. If at least two such quotations are provided, the rate for that Interest Accrual Period will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that Interest Accrual Period will be the arithmetic mean of the rates quoted by major banks in New York City, selected by the Indenture Trustee, at 11:00 a.m. New York City time, on the beginning of that Interest Accrual Period for loans in U.S. Dollars to leading European banks for the One — Month Index Maturity commencing at the beginning of that Interest Accrual Period and in a Representative Amount.

(b) The establishment of LIBOR on the applicable London Banking Day by the Indenture Trustee and the Indenture Trustee’s subsequent calculation of the rates of interest applicable to the Notes for the related Payment Date shall, in the absence of manifest error, be final and binding. Each such rate of interest may be obtained by telephoning the Indenture Trustee at (612) 667 — 8058.

Section 7.07. Monthly Reconciliation.

(a) Except as set forth in Section 7.07(b), on each Business Day during each Due Period that Principal Collections are received in the Principal Collection Account with respect to any Loan in the Loan Pool, the Servicer will determine the Outstanding Loan Balance and the principal amount of the portion of such Loan not owned by the Issuer (if any) with respect to such Loan.

(b) Prior to (i) a payment default on the related Loan (and in the case of Asset Based Revolvers, a payment default shall mean any failure to make a payment on the date such payment is due and such failure continues for more than one calendar day), (ii) a Servicer Default, (iii) an Event of Default or (iv) an Accelerated Amortization Event, on each Monthly Reconciliation Date, the Servicer will determine the Outstanding Loan Balance and principal amount of the portion of such Loan owned by the Originator, its Affiliate special purpose entities under the Wareho use Facilities and any co-lenders under the related facility (if any) with respect to each Revolving Loan secured by Collateral (but specifically excluding any Revolving Loan that is not secured by any Collateral) in the Loan Pool, and on and as of such date will determine the net effect of the Principal Collections received from, and payments from the Principal Collection Account representing new advances made to, the related Obligor during such Due Period. Notwithstanding the foregoing, the Servicer will maintain the underlying data of all Principal Collections received and payments or advances made with respect to any Revolving Loan secured by Collateral from the Principal Collection Account on each day during each Due Period, and shall make such underlying data available pursuant to and in accordance with the provisions of Section 9.03.

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ARTICLE 8.

SERVICER DEFAULT; SERVICER TRANSFER

Section 8.01. Servicer Default.

“Servicer Default” means the occurrence of any of the following:

(a) any failure by the Servicer to remit when due any payment required to be made under the terms of this Agreement or the other Transaction Documents, it being understood that the Servicer shall not be responsible for the failure of either the Owner Trustee or the Indenture Trustee to remit funds that were received by the Owner Trustee or the Indenture Trustee from the Servicer in accordance with this Agreement or the other Transaction Documents; or

(b) failure by the Servicer duly to observe or perform, in any material respect, any other covenants, obligations or agreements of the Servicer set forth in this Agreement or the other Transaction Documents, or any representation or warranty of the Servicer made in this Agreement or the other Transaction Documents or in any certificate or other writing delivered thereto or in connection therewith proves to have been incorrect when made, which failure or breach has a material adverse effect on the rights of the Noteholders or the Hedge Counterparties and continues unremedied for a period of 30 days (if such failure or breach can be cured) after the first to occur of (i) the date on which written notice of such failure requiring the same to be remedied shall have been given to a Responsible Officer of the Servicer by the Indenture Trustee, or a Responsible Officer of the Servicer and the Indenture Trustee by any Securityholder or Hedge Counterparty, and (ii) the date on which a Responsible Officer of the Servicer receives actual knowledge of such failure or breach; or

(c) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any Insolvency Proceedings, or for the winding — up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force, undischarged or unstayed for a period of thirty (30) days; or

(d) the Servicer shall consent to the appointment of a conservator or receiver or liquidator in any Insolvency Proceedings of or relating to the Servicer or of or relating to all or substantially all of the Servicer’s property; or

(e) the Servicer shall admit in writing its inability to pay its debts as they become due, file a petition to take advantage of any applicable Insolvency Laws, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations; or

(f) without the consent of the Majority Noteholders or the Hedge Counterparties, the Servicer agrees or consents to, or otherwise permits to occur, any amendment, modification, change, supplement or rescission of or to the Servicer or the Credit and Collection Policy, in whole or in part, in any manner that would have a material adverse effect on the Loans; or

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(g) failure by the Servicer to observe or perform the Credit and Collection Policy regarding the servicing of the Loans in any manner that would have a material adverse effect on the Loans.

Section 8.02. Servicer Transfer.

(a) If a Servicer Default has occurred and is continuing, the Majority Noteholders may, by written notice (a “Termination Notice”) delivered to the parties hereto and each of the Hedge Counterparties, terminate all (but not less than all) of the Servicer’s management, administrative, servicing, custodial and collection functions; provided, however, no Termination Notice shall be required with respect to any Servicer Default described under Section 8.01(c), Section 8.01(d) and Section 8.01(e).

(b) Upon delivery of the notice required by Section 8.02(a) (or, if later, on a date designated therein), and on the date that a Successor Servicer shall have been appointed pursuant to Section 8.03 (such appointment being herein called a “Servicer Transfer”), all rights, benefits, fees, indemnities, authority and power of the Servicer under this Agreement, whether with respect to the Loans, the Loan Files or otherwise, shall pass to and be vested in such successor (the “Successor Servicer”) pursuant to and under this Section 8.02; and, without limitation, the Successor Servicer is authorized and empowered to execute and deliver on behalf of the Servicer, as attorney — in — fact or otherwise, any and all documents and other instruments, and to do any and all acts or things necessary or appropriate to effect the purposes of such notice of termination. The Servicer agrees to cooperate with the Successor Servicer in effecting the termination of the responsibilities and rights of the Servicer hereunder, including, without limitation, the transfer to the Successor Servicer for administration by it of all cash amounts which shall at the time be held by the Servicer for deposit, or have been deposited by the Servicer, in the Principal and Interest Account, or for its own account in connection with its services hereafter or thereafter received with respect to the Loans. The Servicer shall transfer to the Successor Servicer (i) all records held by the Servicer relating to the Loans in such electronic form as the Successor Servicer may reasonably request and (ii) any Loan Files in the Servicer’s possession. In addition, the Servicer shall permit access to its premises (including all computer records and programs) to the Successor Servicer or its designee, and shall pay the reasonable transition expenses of the Successor Servicer. Upon a Servicer Transfer, the Successor Servicer shall also be entitled to receive the Servicing Fee for performing the obligations of the Servicer. Any indemnities provided in this Agreement or the other Transaction Documents in favor of the Servicer and any fees, costs, expenses, Servicing Advances or Scheduled Payment Advances which have accrued and/or are unpaid to the Servicer shall survive the resignation or termination of the Servicer.

Section 8.03. Appointment of Successor Servicer; Reconveyance; Successor Servicer to Act.

(a) Upon delivery of the notice required by Section 8.02(a) (or, if later, on a date designated therein), the Servicer shall continue to perform all servicing functions under this Agreement until the date specified in the Termination Notice or, if no such date is specified, until a date mutually agreed by the Servicer and the Indenture Trustee. The Indenture Trustee shall as promptly as possible after the giving of or receipt of a Termination Notice, appoint a Successor

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Servicer, which shall be the Backup Servicer, in accordance with Section 5.15(c), and named Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Indenture Trustee and Owner Trustee; provided that no appointment of a Successor Servicer or acceptance and assumption by a proposed Successor Servicer shall be effective without the prior satisfaction of the Rating Agency Condition. If within 60 days of delivery of a Termination Notice a Successor Servicer is not appointed and the Servicer shall have yet to cure the Servicer Default, then the Indenture Trustee shall offer the Trust Depositor, and the Trust Depositor shall offer the Originator, the right, without obligation, to accept retransfer of all the Loan Assets, and such parties may accept retransfer of such Loan Assets in consideration of the Trust Depositor’s delivery to the Principal and Interest Account on or prior to the next upcoming Payment Date of a sum equal to the Aggregate Outstanding Principal Balance of all Securities (other than the Certificates) then outstanding, together with accrued and unpaid interest thereon through such date of deposit and all other amounts due and owing to any Person under the Transaction Documents, including amounts owing to each Hedge Counterparty, including Hedge Breakage Costs, it being a condition precedent to such retransfer that all Hedge Transactions then outstanding under any Hedge Agreements then in effect shall be terminated and all amounts payable to the Hedge Counterparties, including Hedge Breakage Costs, upon such termination shall be paid in full; provided that the Indenture Trustee, if so directed by the Majority Noteholders in writing, need not accept and effect such reconveyance in the absence of evidence (which may include valuations of an investment bank or similar entity) reasonably acceptable to such Indenture Trustee or Majority Noteholders that such retransfer would not constitute a fraudulent conveyance of the Trust Depositor or the Originator.

(b) The Backup Servicer may, in its discretion, or shall, if it is unable to so act or if the Majority Noteholders request in writing to the Backup Servicer, appoint, or petition a court of competent jurisdiction to appoint, any established servicing institution having a net worth of not less than $50,000,000 as the Successor Servicer in the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer.

(c) As compensation, any Successor Servicer (including, without limitation, the Backup Servicer) so appointed shall be entitled to receive the Servicing Fee, together with any other servicing compensation in the form of assumption fees, late payment charges or otherwise as provided herein that accrued prior thereto; including, without limitation, all reasonable costs (including reasonable attorneys’ fees) incurred in connection with transferring the servicing obligations under the Agreement and amending the Agreement to reflect such transfer.

(d) In the event the Backup Servicer is required to solicit bids, the Backup Servicer shall solicit, by public announcement, bids from banks and mortgage servicing institutions meeting the qualifications set forth above. Such public announcement shall specify that the Successor Servicer shall be entitled to the full amount of the Servicing Fee as servicing compensation, together with the other servicing compensation in the form of assumption fees, late payment charges or otherwise that accrued prior thereto. Within 30 days after any such public announcement, the Backup Servicer shall negotiate and effect the sale, transfer and assignment of the servicing rights and responsibilities hereunder to the qualified party submitting the highest qualifying bid. The Backup Servicer shall deduct from any sum received by the Backup Servicer from the successor to the Servicer in respect of such sale, transfer and assignment all costs and expenses of any public announcement and of any sale, transfer and

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assignment of the servicing rights and responsibilities hereunder and the amount of any unreimbursed Servicing Advances. After such deductions, the remainder of such sum shall be paid by the Backup Servicer to the Servicer at the time of such sale, transfer and assignment to the Servicer’s successor. The Backup Servicer and such successor shall take such action, consistent with the Agreement, as shall be necessary to effectuate any such succession. Neither the Backup Servicer nor any other Successor Servicer shall be held liable by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (i) the failure of the Servicer to deliver, or any delay in delivering, cash, documents or records to it, or (ii) restrictions imposed by any regulatory authority having jurisdiction over the Servicer hereunder. No appointment of a successor to the Servicer shall be effective until written notice of such proposed appointment shall have been provided by the Indenture Trustee to each Securityholder and each Hedge Counterparty and the Backup Servicer shall have consented thereto. The Backup Servicer shall not resign as Servicer until a Successor Servicer has been appointed and accepted such appointment.

(e) On or after a Servicer Transfer, the Successor Servicer shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and the terminated Servicer shall be relieved of such responsibilities, duties and liabilities arising after such Servicer Transfer; provided, however, that (i) the Successor Servicer will not assume any obligations of the Servicer described in Section 8.02 and (ii) the Successor Servicer shall not be liable for any acts or omissions of the Servicer occurring prior to such Servicer Transfer or for any breach by the Servicer of any of its representations and warranties contained herein or in any related document or agreement. Notwithstanding anything else herein to the contrary, in no event shall the Indenture Trustee or the Backup Servicer be liable for any Servicing Fee or for any differential in the amount of the servicing fee paid hereunder and the amount necessary to induce any Successor Servicer to act as Successor Servicer under this Agreement and the transactions set forth or provided for herein, including any Additional Servicing Fee. The Owner Trustee, Securityholders and the Indenture Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. To the extent the terminated Servicer has made Servicing Advances, it shall be entitled to reimbursement of the same notwithstanding its termination hereunder, to the same extent as if it had continued to service the Loans hereunder.

Section 8.04. Notification to Securityholders and Hedge Counterparties.

(a) Promptly following the occurrence of any Servicer Default, the Servicer shall give written notice thereof to the Trustees, the Trust Depositor and each Rating Agency at the addresses described in Section 13.04 hereof, to the Noteholders and Certificateholder at their respective addresses appearing on the Note Register and the Certificate Register, respectively, and to each Hedge Counterparty at the address set forth in the register kept by the Issuer, as provided under the Indenture.

(b) Within 10 days following any termination of the Servicer or appointment of a Successor Servicer pursuant to this ARTICLE 8, the Indenture Trustee shall give written notice thereof to each Rating Agency and the Trust Depositor at the addresses described in Section

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13.04 hereof, to the Noteholders and Certificateholder at their respective addresses appearing on the Note Register and the Certificate Register, respectively, and to each Hedge Counterparty at the address set forth for such party in the register kept by the Issuer, as provided under the Indenture.

Section 8.05. Effect of Transfer.

(a) After a Servicer Transfer, the terminated Servicer shall have no further obligations with respect to the management, administration, servicing, custody or collection of the Loans and the Successor Servicer appointed pursuant to Section 8.03 shall have all of such obligations, except that the terminated Servicer will transmit or cause to be transmitted directly to the Successor Servicer for its own account, promptly on receipt and in the same form in which received, any amounts (properly endorsed where required for the Successor Servicer to collect them) received as payments upon or otherwise in connection with the Loans.

(b) A Servicer Transfer shall not affect the rights and duties of the parties hereunder (including but not limited to the indemnities of the Servicer) other than those relating to the management, administration, servicing, custody or collection of the Loans.

Section 8.06. Database File.

Upon reasonable request by the Indenture Trustee or the Backup Servicer, the Servicer will provide the Successor Servicer with a magnetic tape or Microsoft Excel or similar spreadsheet file containing the database file for each Loan (a) as of the Cut-Off Date, (b) the Subsequent Cut-Off Dates, (c) thereafter, as of the last day of the preceding Due Period on the Determination Date prior to a Servicer Default and (d) on and as of the Business Day before the actual commencement of servicing functions by the Successor Servicer following the occurrence of a Servicer Default.

Section 8.07. Waiver of Defaults.

The Majority Noteholders may, on behalf of all the Securityholders, and subject to satisfying the Rating Agency Condition, waive any events permitting removal of the Servicer pursuant to this ARTICLE 8; provided, however, that the Majority Noteholders may not waive a default in making a required distribution to the Hedge Counterparties without the consent of the Hedge Counterparties or on a Note without the consent of each holder of such Note. Upon any waiver or cure of a past default, such default shall cease to exist, and any Servicer Default or Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver or cure shall extend to any subsequent or other default or impair any right consequent thereto except to the extent expressly so waived. No such waivers shall affect any Hedge Transaction that has been terminated in accordance with its terms.

Section 8.08. Responsibilities of the Successor Servicer.

(a) The Successor Servicer will not be responsible for delays attributable to the Servicer’s failure to deliver information, defects in the information supplied by the Servicer or other circumstances beyond the control of the Successor Servicer.

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(b) The Successor Servicer will make arrangements with the Servicer for the prompt and safe transfer of, and the Servicer shall provide to the Successor Servicer, all necessary servicing files and records, including (as deemed necessary by the Successor Servicer at such time): (i) microfiche loan documentation, (ii) servicing system tapes, (iii) Loan payment history, (iv) collections history and (v) the trial balances, as of the close of business on the day immediately preceding conversion to the Successor Servicer, reflecting all applicable Loan information. The current Servicer shall be obligated to pay the costs associated with the transfer of the servicing files and records to the Successor Servicer.

(c) The Successor Servicer shall have no responsibility and shall not be in default hereunder nor incur any liability for any failure, error, malfunction or any delay in carrying out any of its duties under this Agreement if any such failure or delay results from the Successor Servicer acting in accordance with information prepared or supplied by a Person other than the Successor Servicer or the failure of any such Person to prepare or provide such information. The Successor Servicer shall have no responsibility, shall not be in default and shall incur no liability (i) for any act or failure to act by any third party, including the Servicer, the Trust Depositor or the Trustees or for any inaccuracy or omission in a notice or communication received by the Successor Servicer from any third party or (ii) which is due to or results from the invalidity, unenforceability of any Loan with applicable law or the breach or the inaccuracy of any representation or warranty made with respect to any Loan.

(d) If the Indenture Trustee or any other Successor Servicer assumes the role of Successor Servicer hereunder, such Successor Servicer shall be entitled to the benefits of (and subject to the provisions of) Section 5.02 concerning delegation of duties to subservicers.

Section 8.09. Rating Agency Condition for Servicer Transfer.

Notwithstanding the foregoing provisions relating to a Servicer Transfer, no Servicer Transfer shall be effective hereunder unless prior written notice thereof shall have been given to the Rating Agencies, and the Rating Agency Condition shall have been satisfied with respect thereto.

Section 8.10. Appointment of Successor Backup Servicer; Successor Backup Servicer to Act.

(a) The Backup Servicer may be removed, with or without cause, by the Majority Noteholders or the Indenture Trustee, by notice given in writing to the Backup Servicer (the “Backup Servicer Termination Notice”), a copy of which shall be provided to S&P promptly after it is delivered to the Backup Servicer. The Backup Servicer shall continue to perform all backup servicing functions under this Agreement until the date specified in the Backup Servicer Termination Notice or, if no such date is specified, until a date mutually agreed by the Backup Servicer and the Indenture Trustee. The Indenture Trustee shall as promptly as possible after the giving of a Backup Servicer Termination Notice, to appoint a Successor Backup Servicer (the “Successor Backup Servicer”) and such Successor Backup Servicer shall accept its appointment by a written assumption in a form acceptable to the Indenture Trustee and Owner Trustee.

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(b) In the event that a Successor Backup Servicer has not been appointed and has not accepted its appointment at the time when the then Backup Servicer has ceased to act as Backup Servicer, the Indenture Trustee shall petition a court of competent jurisdiction to appoint any established financial institution having a net worth of at least $50,000,000 and whose regular business includes the backup servicing of loans similar to the Loans as the Successor Backup Servicer hereunder and the Successor Backup Servicer shall be the successor in all respects to the Backup Servicer in its capacity as Backup Servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Backup Servicer by the terms and provisions hereof, and the terminated Backup Servicer shall be relieved of such responsibilities, duties and liabilities arising after such backup servicer transfer (the “Backup Servicer Transfer”); provided, however, that the Successor Backup Servicer shall not be liable for any acts or omissions of the Backup Servicer occurring prior to such Backup Servicer Transfer or for any breach by the Backup Servicer of any of its representations and warranties contained herein or in any related document or agreement. As compensation therefor, the Successor Backup Servicer shall be entitled to receive reasonable compensation equal to the monthly Backup Servicing Fee. Notwithstanding anything else herein to the contrary, in no event shall the Indenture Trustee or the Servicer be liable for any Backup Servicing Fee or for any differential in the amount of the backup servicing fee paid hereunder and the amount necessary to induce any Successor Backup Servicer to act as Backup Servicer under this Agreement and the transactions set forth or provided for herein. The Owner Trustee, Securityholders and the Indenture Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession.

ARTICLE 9.

REPORTS

Section 9.01. Monthly Reports.

With respect to each Payment Date and the related Due Period, the Servicer will provide to each Trustee, the Backup Servicer, each Rating Agency, each Hedge Counterparty and the Initial Purchasers, on the related Determination Date, a monthly statement (a “Monthly Report”) substantially in the form of Exhibit H hereto with respect to the preceding Due Period.

Section 9.02. Officer’s Certificate.

Each Monthly Report delivered pursuant to Section 9.01 shall be accompanied by a certificate of a Responsible Officer of the Servicer certifying the accuracy of the Monthly Report and that no Servicer Default or event that with notice or lapse of time or both would become a Servicer Default has occurred, or if such event has occurred and is continuing, specifying the event and its status.

Section 9.03. Other Data; Obligor Financial Information.

(a) The Servicer shall, upon the request of any Trustees, any Hedge Counterparty, the Backup Servicer, or any Rating Agency, furnish such Trustee, Hedge Counterparty, Rating

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Agency or the Backup Servicer, as the case may be, such underlying data used to generate a Monthly Report as may be reasonably requested.

(b) The Servicer will forward to the Indenture Trustee, the Owner Trustee, each Hedge Counterparty, each Rating Agency and Citigroup (a) within 60 days after each calendar quarter (except the fourth calendar quarter), commencing with the quarter beginning April 1, 2006, the unaudited quarterly financial statements of the Servicer and (b) within 90 days after each fiscal year of the Servicer, commencing with the fiscal year ending December 31, 2006, the audited annual financial statements of the Servicer, together with the related report of the independent accountants to the Servicer. On the Payment Date following the receipt of each such financial statements and report, the Indenture Trustee will forward to each Noteholder of record a copy of such financial statements and report.

(c) The Servicer will forward to Xxxxx’x and S&P within 30 days after receipt by the Servicer, copies of all financial statements of Obligors then received by the Servicer with respect to the prior fiscal year of each Obligor.

(d) The Servicer will forward to Xxxxx’x and S&P promptly upon request any additional financial information as Xxxxx’x and S&P shall reasonably request with respect to an obligor as to which any Scheduled Payment is past due for at least 10 days.

(e) The Servicer will forward to Xxxxx’x and S&P promptly upon any Loan becoming a Delinquent Loan, and without any request therefor by Xxxxx’x and S&P, updated financial information with respect to the related Obligor.

(f) The Servicer will provide to the Rating Agencies such financial information, documents and other materials as the Rating Agencies shall reasonably request in connection with any annual review and/or re-grading of the Loans in the Loan Pool and the related Obligors which the Rating Agencies may undertake.

Section 9.04. Annual Report of Accountants.

The Servicer shall cause a firm of nationally recognized independent certified public accountants (the “Independent Accountants”), who may also render other services to the Servicer or its Affiliates, to deliver to the Indenture Trustee, the Owner Trustee, each Hedge Counterparty, the Backup Servicer and each Rating Agency, on or before March 31 of each year, beginning on March 31, 2007, a report addressed to the Board of Managers of the Servicer, the Indenture Trustee and the Owner Trustee indicating that (a) with respect to the 12- months ended the immediately preceding December 31, to the effect that such Independent Accountants have audited the financial statements of the Servicer, that as part of that audit, nothing came to the attention of such Independent Accountants that causes them to believe that the Servicer was not in compliance with any of the terms, covenants, provisions or conditions of the relevant sections of this Agreement, insofar as they relate to accounting matters, except for such exceptions as such Independent Accountants shall believe to be immaterial and such other exceptions as shall be set forth in such report, (b) in connection with the Independent Accountants’ audit of the Servicer, there were no exceptions or errors in records related to Loans serviced by the Servicer, except for such exceptions as such Independent Accountants shall believe to be immaterial and

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such other exceptions as shall be set forth in such report, (c) the payment testing for Asset Based Revolvers has been reviewed and such testing is in compliance with the terms of the related Required Loan Documents and (d) the Independent Accountants have performed certain procedures as agreed by the Servicer, the Indenture Trustee and the Owner Trustee, whereby the Independent Accountants will obtain the Monthly Report for 4-months with respect to the 12 months ended the immediately preceding December 31 and, for each Monthly Report, the Independent Accountants will agree all amounts in the Monthly Report to the Servicer’s computer, accounting and other reports, which will include in such report any amounts which were not in agreement. In the event such firm of Independent Accountants requires the Indenture Trustee to agree to the procedures performed by such firm of Independent Accountants, the Servicer shall direct the Indenture Trustee in writing to so agree; it being understood and agreed that the Indenture Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Servicer, and the Indenture Trustee will not make any independent inquiry or investigation as to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures. The Independent Accountants’ report shall also indicate that the firm is independent of the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants.

Section 9.05. Annual Statement of Compliance from Servicer.

The Servicer will deliver to the Trustees, S&P and each Hedge Counterparty within 90 days of the end of each fiscal year commencing with the year ending December 31, 2006, an Officer’s Certificate stating that (a) the Servicer has fully complied in all material respects with certain provisions of the Agreement relating to servicing of the Loans and payments on the Notes, (b) a review of the activities of the Servicer during the prior calendar year and of its performance under this Agreement was made under the supervision of the officer signing such certificate and (c) to the best of such officer’s knowledge, based on such review, the Servicer has fully performed or caused to be performed in all material respects all its obligations under this Agreement for such year, or, if there has been a default in the fulfillment in all material respects any of its obligations, specifying each such default known to such officer and the nature and status thereof and the steps being taken or necessary to be taken to remedy such event. A copy of such certificate may be obtained by any Securityholder by a request in writing to the Indenture Trustee, with respect to any Noteholder, or the Owner Trustee, with respect to any Certificateholder.

Section 9.06. Reports of Foreclosure and Abandonment of Mortgaged Property.

Each year the Servicer shall make the reports of foreclosures and abandonment of any Mortgaged Property as and to the extent required by § 6050J of the Code. Promptly after filing any such report with the Code, the Servicer shall provide the Indenture Trustee with an Officer’s Certificate certifying that such report has been filed.

Section 9.07. Notices.

(a) The Servicer shall furnish to the Indenture Trustee, S&P and each Hedge Counterparty (i) promptly, copies of any material and adverse notices (including, without limitation, notices of defaults, breaches, potential defaults or potential breaches) given to or

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received from its other lenders and (ii) immediately, notice of the occurrence of any Event of Default or Servicer Default or of any situation which the Servicer reasonably expects to develop into an Event of Default or Servicer Default.

(b) The Servicer also agrees to make available on a reasonable basis to any Noteholder, S&P or Hedge Counterparty a knowledgeable financial or accounting officer for the purpose of answering reasonable questions respecting recent developments affecting the Servicer or the financial statements of the Servicer and to permit any Noteholder or Hedge Counterparty upon reasonable advance notice and subject to reasonable confidentiality restrictions to inspect the Servicer’s servicing facilities during normal business hours and in a manner that does not unreasonably interfere with the Servicer’s normal operations or customer or employee relations for the purpose of satisfying such Noteholder or Hedge Counterparty that the Servicer has the ability to service the Loans in accordance with this Agreement.

Section 9.08. Indenture Trustee’s Right to Examine Servicer Records and Audit Operations.

The Indenture Trustee and each Hedge Counterparty shall have the right upon reasonable prior notice, during normal business hours, in a manner that does not unreasonably interfere with the Servicer’s normal operations or customer or employee relations, and as often as reasonably required, to examine and audit any and all of the books, records or other information of the Servicer, whether held by the Servicer or by another on behalf of the Servicer, which may be relevant to the performance or observance by the Servicer of the terms, covenants or conditions of this Agreement. No amounts payable in respect of the foregoing shall be paid from the Loan Assets.

ARTICLE 10.

TERMINATION

Section 10.01. Optional Repurchase of Offered Notes.

(a) At any time during the Call Period, the Issuer shall have the option to repurchase for the Repurchase Price the Offered Notes then outstanding, in whole but not in part, at the direction of the Holder of the Class F Note, on any Payment Date after the date on which the Holder of the Class F Note provides notice of its election to cause the repurchase of the Notes pursuant to the Indenture and the other Transaction Documents. To exercise such option, the Holder of the Class F Note or the Issuer shall cause the Issuer to deposit in the Note Distribution Account, on or prior to the Payment Date upon which such Repurchase is to occur, an amount equal to the Repurchase Price and such repurchase shall otherwise comply with the requirements of Section 10.01 of the Indenture.

(b) Notice of any repurchase pursuant to Section 10.01(a) shall be given by the Holder of the Class F Note to the Issuer, the Indenture Trustee and the Rating Agencies.

(c) Following the satisfaction and discharge of the Indenture, the payment in full of the principal of and interest on the Notes, the termination of all Hedge Transactions then outstanding under all Hedge Agreements then in effect and the payment in full of all amounts,

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including Hedge Breakage Costs, payable to such Hedge Counterparties upon such terminations, the Certificateholders will succeed to the rights of the Noteholders hereunder and the Owner Trustee will succeed to the rights of the Indenture Trustee pursuant to this Agreement.

Section 10.02. Termination.

(a) This Agreement shall terminate upon notice to the Indenture Trustee of the earlier of the following events: (i) the final payment on or the disposition or other liquidation by the Issuer of the last Loan (including, without limitation, in connection with a purchase by the Servicer of all outstanding Loan Assets pursuant to Section 10.01) or the disposition of all property acquired upon foreclosure or deed in lieu of foreclosure of any Loan and the remittance of all funds due thereunder, or (ii) mutual written consent of the Servicer, the Trust Depositor, Indenture Trustee, the Originator, all Securityholders and all Hedge Counterparties.

(b) Notice of any termination, specifying the Payment Date upon which the Issuer will terminate and that the Noteholders shall surrender their Notes to the Indenture Trustee for payment of the final distribution and cancellation shall be given promptly by the Servicer by letter to all Noteholders mailed during the month of such final distribution before the Determination Date in such month, specifying (i) the Payment Date upon which final payment of the Notes (or Repurchase Price, as applicable) will be made upon presentation and surrender of Notes at the office of the Indenture Trustee therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the Notes at the office of the Indenture Trustee therein specified. The Servicer shall give such notice to the Indenture Trustee and the Hedge Counterparties at the time such notice is given to Noteholders.

ARTICLE 11.

REMEDIES UPON MISREPRESENTATION;
REPURCHASE OPTION

Section 11.01. Repurchases of, or Substitution for, Loans for Breach of Representations and Warranties.

Upon a discovery by a Responsible Officer of the Servicer or any subservicer, a Responsible Officer of the Owner Trustee or the Indenture Trustee of a breach of a representation or warranty as set forth in Section 3.01, Section 3.02, Section 3.03 or Section 3.04 or as made or deemed made in any Addition Notice or any Subsequent Purchase Agreement relating to Substitute Loans that materially and adversely affects the value of the Loans or the interests of the Securityholders or the Hedge Counterparties therein or which materially and adversely affects the interests of the Securityholders or the Hedge Counterparties in the related Loan in the case of a representation or warranty relating to a particular Loan (notwithstanding that such representation or warranty was made to the Originator’s or the Trust Depositor’s best knowledge) (an “Ineligible Loan”), the party discovering the breach shall give prompt written notice to the other parties and to each Hedge Counterparty; provided, that, the Indenture Trustee shall have no duty or obligation to inquire or to investigate the breach of any of such representations or warranties. Within 30 days of the earlier of its discovery or its receipt of

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notice of any breach of a representation or warranty, the Originator or Trust Depositor shall (a) promptly cure such breach in all material respects, (b) repurchase each such Ineligible Loan by depositing in the Principal and Interest Account, within such 30 day period, an amount equal to the Transfer Deposit Amount, or (c) remove such Loan from the Issuer and effect a substitution for such affected Loan with a Substitute Loan in accordance with the substitution requirements set forth in Section 2.04, not later than the date a repurchase of such affected Loan would be required hereunder; provided, however, that with respect to a breach of a representation or warranty relating to the Loans in the aggregate and not to any particular Loan, the Originator may select Loans (without adverse selection) to repurchase (or substitute for) such that had such Loans not been included as part of the Loan Assets (and, in the case of a substitution, had such Substitute Loan been included as part of the Loan Assets instead of the selected Loan) there would have been no breach of such representation or warranty.

Section 11.02. Reassignment of Repurchased or Substituted Loans.

Upon receipt by the Indenture Trustee for deposit in the Principal and Interest Account of the amounts described in Section 11.01 (or upon the Subsequent Transfer Date related to a Substitute Loan described in Section 11.01), and upon receipt of an Officer’s Certificate of the Servicer in the form attached hereto as Exhibit F, the Indenture Trustee shall assign to the Trust Depositor and the Trust Depositor shall assign to the Originator all of the Issuer’s (or Trust Depositor’s, as applicable) right, title and interest in the repurchased or substituted Loan and related Loan Assets without recourse, representation or warranty. Such reassigned Loan shall no longer thereafter be included in any calculations of Outstanding Loan Balances required to be made hereunder or otherwise be deemed a part of the Issuer.

ARTICLE 12.

INDEMNITIES

Section 12.01. Indemnification by Servicer.

The Servicer agrees to indemnify, defend and hold the Indenture Trustee (as such and in its individual capacity), the Owner Trustee (as such and in its individual capacity), the Backup Servicer, the Hedge Counterparties (as such and in their individual capacities) and each Securityholder harmless from and against any and all claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and any other reasonable costs, fees and expenses that such Person may sustain as a result of the Servicer’s fraud or the failure of the Servicer to perform its duties and service the Loans in compliance in all material respects with the terms of this Agreement, except to the extent arising from the gross negligence, willful misconduct or fraud by the Person claiming indemnification. The Servicer shall immediately notify the Indenture Trustee and the Owner Trustee if a claim is made by any party with respect to this Agreement, and the Servicer shall assume (with the consent of the indemnified party) the defense and any settlement of any such claim and pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against the indemnified party in respect of such claim.

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Section 12.02. Indemnification by Trust Depositor.

The Trust Depositor agrees to indemnify, defend, and hold the Indenture Trustee (as such and in its individual capacity), the Owner Trustee (as such and in its individual capacity), the Hedge Counterparties (as such and in their individual capacities) and each Securityholder harmless from and against any and all claims, losses, penalties, fines, forfeitures, reasonable legal fees and related costs, judgments, and any other reasonable costs, fees and expenses that such Person may sustain as a result of the Trust Depositor’s fraud or the failure of the Trust Depositor to perform its duties in compliance with the terms of this Agreement and in the best interests of the Securityholders and Hedge Counterparties, except to the extent arising from the gross negligence, willful misconduct or fraud by the Person claiming indemnification. The Trust Depositor shall immediately notify the Indenture Trustee and the Owner Trustee if a claim is made by a third party with respect to this Agreement, and the Trust Depositor shall assume (with the consent of the indemnified party) the defense and any settlement of any such claim and pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered against the indemnified party in respect of such claim.

ARTICLE 13.

MISCELLANEOUS

Section 13.01. Amendment.

(a) This Agreement may be amended from time to time by the parties hereto by written agreement, with the prior written consent of the Indenture Trustee but without notice to or consent of the Securityholders or Hedge Counterparties, to cure any ambiguity, to correct or supplement any provisions herein, to comply with any changes in the Code, or to make any other provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with the provisions of this Agreement; provided, however, that such action shall not, as evidenced by an Opinion of Counsel delivered to the Indenture Trustee, adversely affect the interests of any Securityholders or Hedge Counterparties; further, provided, that, no such amendment shall amend, modify or vary any provision of Section 5.02(g) or reduce in any manner the amount of, or delay the timing of, any amounts received on Loans which are required to be distributed to the Hedge Counterparties without the consent of the Hedge Counterparties or on any Note or Certificate without the consent of the Holder of such Note or Certificate, or change the rights or obligations of any other party hereto without the consent of such party.

(b) This Agreement may be amended from time to time by the parties hereto by written agreement, with the prior written consent of the Indenture Trustee and with the consent of the Majority Noteholders and each Hedge Counterparty, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders of the Notes or Certificates; provided, however, that (i) no such amendment shall reduce in any manner the amount of, or delay the timing of, any amounts which are required to be distributed on any Note or Certificate without the consent of the Holder of such Note or Certificate or reduce the percentage of Holders of any Note or Certificate which are required to consent to any such amendment without the consent of

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the Holders of 100% of the Notes affected thereby, (ii) no amendment affecting only one Class shall require the approval of the Holders of any other Class and (iii) (A) the consent of each Hedge Counterparty shall be required for any amendment, modification or variance to Section 5.02(g) and (B) as to all other amendments, the consent of each Hedge Counterparty shall be required unless the Issuer obtains an Opinion of Counsel stating that such amendment does not adversely affect in any material respect the interests of the Hedge Counterparties.

(c) Prior to the execution of any such amendment or consent, the Indenture Trustee shall furnish written notification of the substance of such amendment or consent, together with a copy of such amendment or consent, to each Rating Agency. Prior to the execution of any amendment pursuant to Section 13.01, the Issuer shall obtain written confirmation from Moody’s and S&P that entry into such amendment satisfies the Xxxxx’x Rating Condition and the S&P Rating Condition.

(d) Promptly after the execution of any such amendment or consent, the Owner Trustee and the Indenture Trustee, as the case may be, shall furnish written notification of the substance of such amendment or consent to each Securityholder and each Hedge Counterparty. It shall not be necessary for the consent of the Securityholders and the Hedge Counterparties pursuant to Section 13.01(b) to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization by the Securityholders and the Hedge Counterparties of the execution thereof shall be subject to such reasonable requirements as the Owner Trustee or the Indenture Trustee may prescribe.

(e) Prior to the execution of any amendment to this Agreement, the Owner Trustee and the Indenture Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel stating that the execution of such amendment is authorized and permitted by this Agreement. Such Trustee may, but shall not be obligated to, enter into any such amendment that affects such Trustee’s own rights, duties, indemnities or immunities under this Agreement or otherwise.

Section 13.02. Protection of Title to Issuer.

The Servicer shall execute and file such financing statements and cause to be executed and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer, the Securityholders, the Hedge Counterparties, the Indenture Trustee and the Owner Trustee in the Loans and in the proceeds thereof. The Servicer shall deliver (or cause to be delivered) to the Owner Trustee and the Indenture Trustee file – stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing.

Section 13.03. Governing Law.

(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THE AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

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(b) EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. EACH PARTY HERETO (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 13.03(b).

Section 13.04. Notices.

All notices, demands, certificates, requests and communications hereunder (“notices”) shall be in writing and shall be effective (a) upon receipt when sent through the U.S. mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, or (b) one Business Day after delivery to an overnight courier, or (c) on the date personally delivered to an Responsible Officer of the party to which sent, or (d) on the date transmitted by legible telecopier transmission with confirmation of receipt, in all cases addressed to the recipient as follows:


		(i)		if to the Servicer or the Originator:

				CapitalSource Finance LLC
				0000 Xxxxxxx Xxxxxx
				00xx Xxxxx
				Xxxxx Xxxxx, Xxxxxxxx 00000
				Attention: Treasurer
				Facsimile No.: (301) 841 – 2375

		(ii)		if to the Trust Depositor:

				CapitalSource Commercial Loan LLC, 2006-1
				0000 Xxxxxxx Xxxxxx
				00xx Xxxxx
				Xxxxx Xxxxx, Xxxxxxxx 00000
				Attention: Treasurer
				Facsimile No.: (301) 841 – 2375

		(iii)		if to the Indenture Trustee:

				Xxxxx Fargo Bank, National Association
				Sixth Street and Marquette Avenue
				MAC N9311 – 161
				Xxxxxxxxxxx, Xxxxxxxxx 00000
				Attention: Corporate Trust Services/Asset Backed Administration
				Facsimile No.: (612) 667 – 3464

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		(iv)		if to the Owner Trustee:

				Wilmington Trust Company
				0000 Xxxxx Xxxxxx Xxxxxx
				Xxxxxxxxxx, Xxxxxxxx 00000
				Attention: Corporate Trust Administration
				Facsimile No.: (000) 000-0000

				with a copy to:

				the Originator and the Servicer as provided in clause (i) above

		(v)		if to the Issuer:

				CapitalSource Commercial Loan Trust 2006-1
				c/o Wilmington Trust Company
				0000 Xxxxx Xxxxxx Xxxxxx
				Xxxxxxxxxx, Xxxxxxxx 00000
				Attention: Corporate Trust Administration
				Facsimile No.: (302) 427 – 4749

				with a copy to:

				the Originator and the Servicer as provided in clause (i) above

		(vi)		if to S&P:

				Standard and Poor’s Inc.
				00 Xxxxx Xxxxxx
				00xx Xxxxx
				Xxx Xxxx, Xxx Xxxx 00000
				Attention: Surveillance: Asset – Backed Services
				Facsimile No.: (212) 438 – 2662
				Email: xxx_xxxxxxxxxxxx@xxxxx.xxx (all Monthly Reports)

		(vii)		if to Moody’s:

				Xxxxx’x Investors Service
				00 Xxxxxx Xxxxxx
				Xxx Xxxx, Xxx Xxxx 00000
				Attention: CDO Monitoring Department
				Facsimile No.: (212) 553 – 0344
				Email: xxxxxxxxxxxxx@xxxxxx.xxx

		(viii)		if to Fitch:

				Fitch, Inc.
				Xxx Xxxxx Xxxxxx Xxxxx

000


				Xxx Xxxx, Xxx Xxxx 00000
				Attention: CDO Surveillance
				Facsimile No.: (212) 514 – 6501

		(ix)		if to the Initial Purchasers:

				Citigroup Global Markets Inc.
				000 Xxxxxxxxx Xxxxxx
				Xxx Xxxx, XX 00000
				Attention: Asset-Backed Finance
				Facsimile No.: (000) 000-0000;

		(x)		if to the Hedge Counterparties:

At the address set forth for such party in the applicable Hedge Agreement.

Each party hereto may, by notice given in accordance herewith to each of the other parties hereto, designate any further or different address to which subsequent notices shall be sent.

Section 13.05. Severability of Provisions.

If one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement, the Notes or Certificates or the rights of the Securityholders or the Hedge Counterparties, and any such prohibition, invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenants, agreements, provisions or terms in any other jurisdiction.

Section 13.06. Third Party Beneficiaries.

Except as otherwise specifically provided herein, the parties hereto hereby manifest their intent that no third party (other than the Owner Trustee and the Hedge Counterparties) shall be deemed a third party beneficiary of this Agreement, and specifically that the Obligors are not third party beneficiaries of this Agreement.

Section 13.07. Counterparts.

This Agreement may be executed by facsimile signature and in several counterparts, each of which shall be an original and all of which shall together constitute but one and the same instrument.

Section 13.08. Headings.

The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

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Section 13.09. No Bankruptcy Petition; Disclaimer.

(a) Each of the Originator, the Indenture Trustee, the Servicer, the Issuer acting through the Owner Trustee and each Holder (by acceptance of the applicable Securities) covenants and agrees that, prior to the date that is one year and one day (or, if longer, the then applicable preference period and one day) after the payment in full of all amounts owing in respect of all outstanding Classes of Notes rated by any Rating Agency, it will not institute against the Trust Depositor or the Issuer, or join any other Person in instituting against the Trust Depositor or the Issuer, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceedings under the laws of the United States or any state of the United States; provided, however, that nothing herein shall prohibit the Indenture Trustee from filing proofs of claim or otherwise participating in any such proceedings instituted by any other Person. This Section 13.09 will survive the termination of this Agreement.

(b) The Issuer acknowledges and agrees that the Certificates represent a beneficial interest in the Issuer and Loan Assets only and the Securities do not represent an interest in any assets (other than the Loan Assets) of the Trust Depositor (including by virtue of any deficiency claim in respect of obligations not paid or otherwise satisfied from the Loan Assets and proceeds thereof). In furtherance of and not in derogation of the foregoing, to the extent that the Trust Depositor enters into other transactions as contemplated in Section 6.07, the Issuer acknowledges and agrees that it shall have no right, title or interest in or to any assets (or interests therein), other than the Loan Assets, conveyed or purported to be conveyed (whether by way of a sale, capital contribution or by the granting of a Lien) by the Trust Depositor to any Person other than the Issuer (the “Other Assets”).

(c) To the extent that notwithstanding the agreements contained in this Section 13.09, the Issuer, any Securityholder or any Hedge Counterparty, either (i) asserts an interest in or claim to, or benefit from any Other Assets, whether asserted against or through the Trust Depositor or any other Person owned by the Trust Depositor, or (ii) is deemed to have any interest, claim or benefit in or from any Other Assets, whether by operation of law, legal process, pursuant to applicable provisions of Insolvency Laws or otherwise (including without limitation pursuant to Section 1111(b) of the federal Bankruptcy Code, as amended) and whether deemed asserted against or through the Trust Depositor or any other Person owned by the Trust Depositor, then the Issuer, each Securityholder by accepting a Note or Certificate and each Hedge Counterparty further acknowledges and agrees that any such interest, claim or benefit in or from the Other Assets is and shall be expressly subordinated to the indefeasible payment in full of all obligations and liabilities of the Trust Depositor that, under the terms of the documents relating to the securitization of the Other Assets, are entitled to be paid from, entitled to the benefits of, or otherwise secured by such Other Assets (whether or not any such entitlement or security interest is legally perfected or otherwise entitled to a priority of distribution under applicable law, including Insolvency Laws, and whether asserted against the Trust Depositor or any other Person owned by the Trust Depositor) including, without limitation, the payment of post – petition interest on such other obligations and liabilities. This subordination agreement shall be deemed a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code. Each of the Issuer, the Hedge Counterparties and the Securityholders is deemed to have acknowledged and agreed that no adequate remedy at law exists for a breach of this Section 13.09 and that the

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terms and provisions of this Section 13.09 may be enforced by an action for specific performance.

(d) The provisions of this Section 13.09 shall be for the third party benefit of those entitled to rely thereon, including the Securityholders and the Hedge Counterparties, and shall survive the termination of this Agreement.

Section 13.10. Jurisdiction.

Any legal action or proceeding with respect to this Agreement may be brought in the courts of the United States for the Southern District of New York, and by execution and delivery of this Agreement, each party hereto consents, for itself and in respect of its property, to the
non - Exclusive jurisdiction of those courts. Each such party irrevocably waives any objection, including any objection to the laying of venue or based on the grounds of forum non conveniens, which it may now or hereafter have to the bringing of any action or proceeding in such jurisdiction in respect of this Agreement or any document related hereto.

Section 13.11. Tax Characterization.

Notwithstanding the provisions of Section 2.01 and Section 2.04 hereof, the Trust Depositor and Owner Trustee agree that, pursuant to Treasury Regulations Section 301.7701 — 3(b)(1) and for federal income tax purposes, in the event that the Certificates and the Class F Notes are owned by more than one Holder, the Issuer will be treated as a partnership the partners of which are the Certificateholders and the Holders of the Class F Notes, and in the event that the Certificates and the Class F Notes are owned by a single Holder, the Issuer will be treated as a division of such Holder.

Section 13.12. Prohibited Transactions with Respect to the Issuer.

The Originator shall not:

(a) Provide credit to any Noteholder or Certificateholder for the purpose of enabling such Noteholder or Certificateholder to purchase Notes or Certificates, respectively;

(b) Purchase any Notes or Certificates in an agency or trustee capacity; or

Section 13.13. Limitation of Liability of Owner Trustee.

Wilmington Trust Company acts on behalf of the Issuer solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Issuer by reason of the transactions contemplated by this Agreement or any other Transaction Document shall look only to the Trust Estate under the Trust Agreement for payment or satisfaction thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, any other Transaction Document or the Notes, or of any Loan or related documents. The Owner Trustee shall at no time have any responsibility or liability for or

124

with respect to the legality, validity and enforceability of any Loan, or the perfection and priority of any security interest created by any Loan in any Collateral or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Trust Estate under the Trust Agreement or its ability to generate the payments to be distributed to the Certificateholder under the Trust Agreement or the Noteholders under the Indenture, including, without limitation, the existence, condition and ownership of any Collateral; the existence and enforceability of any insurance thereon; the existence and contents of any Loan on any computer or other record thereof; the validity of the assignment of any Loan to the Issuer or of any intervening assignment; the completeness of any Loan; the performance or enforcement of any Loan; the compliance by the Issuer, the Trust Depositor or the Servicer with any covenant, agreement or other obligation or any warranty or representation made under any Transaction Document or in any related document or the accuracy of any such warranty or representation; or any action of the Indenture Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee or the Issuer.

Section 13.14. Allocation of Payments with Respect to Loans.

(a) With respect to any Partially Funded Term Loans and any Revolving Loans, the Issuer will own only the principal portion of such Loans outstanding as of the applicable Cut—Off Date. Principal Collections received by the Servicer on any Revolving Loans (other than Loans to SPE Obligors) will be allocated first to the portion of such Loan owned by the Originator, its Affiliate special purpose entities under the Warehouse Facilities and any co-lenders under the facility, until the principal amount of such portion is reduced to zero, and then to the portion owned by the Issuer; provided, however, if (i) a payment default occurs with respect to any of the related Loans (and in the case of Asset Based Revolvers, a payment default shall mean any failure to make a payment on the date such payment is due and such failure continues for more than one calendar day), (ii) the Originator has determined in its sole discretion that an Obligor’s credit has deteriorated or the Originator has determined in its sole discretion to reduce its commitment to an Obligor, (iii) an Event of Default occurs, (iv) a Servicer Default occurs, or (v) an Accelerated Amortization Event occurs, then Principal Collections received on (A) the applicable Loan (in the case of clause (i) or (ii) above) or (B) all the Revolving Loans (in the case of clauses (iii), (iv) and (v) above) will be allocated between the portion owned by the Originator, its Affiliate special purpose entities under the Warehouse Facilities (or any similar facilities entered into after the date hereof) and any co-lenders under the facility, portions owned by the Issuer in a Prior Term Transaction (or any similar future transactions entered into after the date hereof) and the portion owned by the Issuer pro rata based upon the outstanding principal amount of each such portion. So long as there is no (1) payment default on the related Loans (and in the case of Asset Based Revolvers, a payment default shall mean any failure to make a payment on the date such payment is due and such failure continues for more than one calendar day), (2) Servicer Default, (3) Event of Default, or (4) Accelerated Amortization Event, the Servicer will determine the Outstanding Loan Balance, the Retained Interest (if any) and the Principal Collections received with respect to any Revolving Loan secured by Collateral on each Monthly Reconciliation Date, and all other Loans (including Revolving Loans not secured by any Collateral) and in all other cases on each Business Day, pursuant to Section 7.07.

(b) With respect to any Revolving Loan (other than Loans to SPE Obligors), Interest Collections received by the Servicer on those Loans will be allocated between the portion not

125

owned by the Issuer and the portion owned by the Issuer on a pro rata basis according to the outstanding principal amount of each such portion.

(c) With respect to any Fully Funded Term Loans, Partially Funded Term Loans and Loans to SPE Obligors, Collections received by the Servicer will be allocated between the portion not owned by the Issuer (if any) and the portion owned by the Issuer on a pro rata basis according to the outstanding principal amount of such portion.

Section 13.15. No Partnership.

Nothing herein contained shall be deemed or construed to create a co—partnership or joint venture between the parties hereto, and the services of the Servicer shall be rendered as an independent contractor and not as agent for the Securityholders or the Hedge Counterparties.

Section 13.16. Successors and Assigns.

This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

Section 13.17. Acts of Holders.

Except as otherwise specifically provided herein, whenever Holder action, consent or approval is required under this Agreement, such action, consent or approval shall be deemed to have been taken or given on behalf of, and shall be binding upon, all Holders if the Majority Noteholders agree to take such action or give such consent or approval.

Section 13.18. Duration of Agreement.

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

Section 13.19. Limited Recourse.

(a) The obligations of the Trust Depositor, the Originator, the Issuer and the Servicer under this Agreement are solely the obligations of the Trust Depositor, the Originator, the Issuer and the Servicer. No recourse shall be had for the payment of any amount owing by the Trust Depositor, the Originator, the Issuer or the Servicer under this Agreement or for the payment by the Trust Depositor, the Originator, the Issuer or the Servicer of any fee in respect hereof or any other obligation or claim of or against the Trust Depositor, the Originator, the Issuer or the Servicer arising out of or based upon this Agreement, against any employee, officer, director, Affiliate, shareholder, partner or member of the Trust Depositor, the Originator, the Issuer or the Servicer or against the employee, officer, director, shareholder, partner or member or any Affiliate of such Person. The provisions of this Section 13.19(a) shall survive termination of this Agreement.

(b) Notwithstanding any other provisions of this Agreement or any other Transaction Document, the obligations of the Issuer under this Agreement and any other Transaction Document are limited recourse obligations of the Issuer payable solely from the Indenture

126

Collateral in accordance with the Priority of Payments and, following realization of the Indenture Collateral and distribution in accordance with the Priority of Payments, any claims of the Noteholders, and any other parties to any Transaction Document shall be extinguished.

Section 13.20. Confidentiality.

Each of the Issuer, the Trust Depositor, the Servicer (if other than CapitalSource), the Indenture Trustee and the Backup Servicer shall maintain and shall cause each of its employees, officers, agents and Affiliates to maintain the confidentiality of material non-public information concerning CapitalSource Inc. and its Public Securities or about the Obligors (to the extent CapitalSource Inc. has advised such Person or such Person has actual knowledge that the Loan Documents prohibit disclosure of such information with respect to the Obligors) obtained by it or them in connection with the structuring, negotiating, execution and performance of the transactions contemplated by the Transaction Documents, except that each such party and its employees, officers, agents and Affiliates may disclose such information to other parties to the Transaction Documents and to its external accountants, attorneys, any potential subservicers and the agents of such Persons provided such Persons expressly agree to maintain the confidentiality of such information, and as required by an applicable law or order of any judicial or administrative proceeding.

Section 13.21. Non-Confidentiality of Tax Treatment.

All parties hereto agree that each of them and each of their employees, representatives, and other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to any of them relating to such tax treatment and tax structure. “Tax treatment” and “tax structure” shall have the same meaning as such terms have for purposes of Treasury Regulation Section 1.6011-4.

Section 13.22. Alternative Exchange Listing.

In the event that the Issuer is required to prepare financial statements in accordance with the International Financial Reporting Standards as a condition of the continued listing of the Offered Notes on the Irish Stock Exchange, the Issuer may terminate the listing of the Offered Notes on such exchange and, if such listing is so terminated, the Issuer shall use its best commercially reasonable efforts to obtain the listing of the Offered Notes on an exchange that is a member of the International Federation of Stock Exchanges and is organized or incorporated in a state that is a member of the Organization for Economic Cooperation and Development; provided that the Issuer shall not be required to obtain such a replacement listing if maintaining such a listing would require the Issuer to restate its accounts or would otherwise be unduly burdensome or costly to the Issuer.

[Remainder of Page Intentionally Left Blank]

127

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


		CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, as the Issuer

		By:		WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee on behalf of the Issuer

		By:		/s/ Xxxxxx X. Xxxxxx
		Name:		Xxxxxx X. Xxxxxx
		Title:		Vice President

		CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, as the Trust Depositor

		By:

		Name:

		Title:


		CAPITALSOURCE FINANCE LLC, as the
		Originator and as the Servicer

		By:

		Name:

		Title:

[Signatures Continued on the Following Page]

CapitalSource Commercial Loan Trust 2006-1
Sale and Servicing Agreement

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


		CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, as the Issuer

		By:		WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee on behalf of the Issuer

		By:

		Name:

		Title:


		CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, as the Trust Depositor

		By:		/s/ Xxxxxx X. Xxxx
		Name:		Xxxxxx X. Xxxx
		Title:		Chief Financial Officer & Senior Vice President Finance

		CAPITALSOURCE FINANCE LLC, as the
		Originator and as the Servicer

		By:		/s/ Xxxxxx X. Xxxx
		Name:		Xxxxxx X. Xxxx
		Title:		Chief Financial Officer &
				Senior Vice President Finance

[Signatures Continued on the Following Page]

CapitalSource Commercial Loan Trust 2006-1
Sale and Servicing Agreement

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

CapitalSource Commercial Loan Trust 2006-1
Sale and Service Agreement

ANNEX A

Weighted Average Life Matrix


	Weighted			Weighted			Weighted
Date	Average Life		Date	Average Life		Date	Average Life
4/20/2006		3.00	8/20/2009		1.05	12/20/2012		0.73
5/20/2006		2.92	9/20/2009		0.97	1/20/2013		0.64
6/20/2006		2.83	10/20/2009		0.98	2/20/2013		0.55
7/20/2006		2.76	11/20/2009		0.89	3/20/2013		0.46
8/20/2006		2.67	12/20/2009		0.81	4/20/2013		0.37
9/20/2006		2.59	1/20/2010		0.79	5/20/2013		0.27
10/20/2006		2.52	2/20/2010		0.74	6/20/2013		0.18
11/20/2006		2.43	3/20/2010		0.73	7/20/2013		0.09
12/20/2006		2.34	4/20/2010		0.72	8/20/2013		0.00
1/20/2007		2.39	5/20/2010		0.63
2/20/2007		2.30	6/20/2010		0.58
3/20/2007		2.22	7/20/2010		0.58
4/20/2007		2.15	8/20/2010		0.53
5/20/2007		2.08	9/20/2010		0.53
6/20/2007		1.99	10/20/2010		0.59
7/20/2007		1.96	11/20/2010		0.59
8/20/2007		1.88	12/20/2010		0.54
9/20/2007		1.79	1/20/2011		0.50
10/20/2007		1.72	2/20/2011		0.41
11/20/2007		1.70	3/20/2011		0.31
12/20/2007		1.71	4/20/2011		0.26
1/20/2008		1.65	5/20/2011		0.20
2/20/2008		1.59	6/20/2011		0.21
3/20/2008		1.51	7/20/2011		0.43
4/20/2008		1.47	8/20/2011		0.46
5/20/2008		1.43	9/20/2011		0.37
6/20/2008		1.34	10/20/2011		1.27
7/20/2008		1.39	11/20/2011		1.18
8/20/2008		1.33	12/20/2011		1.09
9/20/2008		1.34	1/20/2012		0.99
10/20/2008		1.29	2/20/2012		0.90
11/20/2008		1.32	3/20/2012		0.81
12/20/2008		1.39	4/20/2012		0.72
1/20/2009		1.40	5/20/2012		0.63
2/20/2009		1.34	6/20/2012		0.54
3/20/2009		1.29	7/20/2012		0.44
4/20/2009		1.26	8/20/2012		1.10
5/20/2009		1.23	9/20/2012		1.01
6/20/2009		1.18	10/20/2012		0.92
7/20/2009		1.13	11/20/2012		0.82

CapitalSource Commercial Loan Trust 2006-1
Sale and Servicing Agreement

EXHIBITS, SCHEDULES AND APPENDIX TO
SALE AND SERVICING AGREEMENT


EXHIBIT A		Form of Assignment

EXHIBIT B		Form of Closing Certificate of Trust Depositor

EXHIBIT C		Form of Closing Certificate of Servicer/Originator

EXHIBIT D		Form of Liquidation Report

EXHIBIT E		Principal and Interest Account Letter Agreement

EXHIBIT F		[Reserved]

EXHIBIT G		List of Loans

EXHIBIT H		Form of Monthly Servicer Report

EXHIBIT I		Form of Subsequent Transfer Agreement

EXHIBIT J		Form of Subsequent Purchase Agreement

EXHIBIT K		Credit and Collection Policy

EXHIBIT L — 1		Form of Initial Certification

EXHIBIT L — 2		Form of Final Certification

EXHIBIT M		Form of Request for Release of Documents

EXHIBIT N		Form of Addition Notice

SCHEDULE I		Lock — Box Banks and Lock — Box Accounts

SCHEDULE II		Obligor Lock — Box Banks and Obligor Lock — Box Accounts

Exhibit A
to Sale and
Servicing Agreement

FORM OF ASSIGNMENT

April 11, 2006

Pursuant to and in accordance with the Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), dated as of April 11, 2006 made by and among CapitalSource Commercial Loan LLC,
2006 — 1, as the Trust Depositor, CapitalSource Finance LLC, as the Originator and as the Servicer, Xxxxx Fargo Bank, Natio nal Association, as the Indenture Trustee and as the Backup Servicer, and CapitalSource Commercial Loan Trust 2006-1, as the Issuer, the undersigned does hereby sell, transfer, assign, set over and otherwise convey to the Issuer all of its right, title and interest in and to the following, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the following:

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

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

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

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

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

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

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

Capitalized terms used herein have the meaning given such terms in the Agreement.

IN WITNESS WHEREOF, the undersigned has caused this assignment to be duly executed as of the date written above.


		CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1

		By:

		Name:

		Title:

Exhibit B
to Sale and
Servicing Agreement

FORM OF CLOSING CERTIFICATE OF TRUST DEPOSITOR

April 11, 2006

The undersigned certifies that he/she is the [___] of CapitalSource Commercial Loan LLC, 2006-1, a Delaware limited liability company, as the Trust Depositor, and that, in the capacity as such officer, is duly authorized to execute and deliver this certificate on behalf of the Trust Depositor in connection with the Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), dated as of April 11, 2006, by and among CapitalSource Commercial Loan Trust 2006-1, as the Issuer, the Trust Depositor, Xxxxx Fargo Bank, National Association, as the Indenture Trustee and as the Backup Servicer, and CapitalSource Finance LLC, as the Originator and as the Servicer (all capitalized terms used herein without definition have the respective meanings set forth in the Agreement), and further certifies in his/her capacity as such officer as follows (it being understood that these certifications are being relied upon by, among others, the Initial Purchasers and their counsel in connection with the Initial Purchasers’ undertakings in connection with the subject transactions):

1. Attached hereto as Annex I is a true and correct copy of the Certificate of Formation of the Trust Depositor, together with all amendments thereto as in effect on the date hereof, which documents were in full force and effect on April 11, 2006, and at all times subsequent thereto, and no other amendments have been authorized by the members or managers of the Trust Depositor.

2. Attached hereto as Annex II is a Certificate of the Secretary of State of the State of Delaware, dated [___] [___], 2006, stating that the Trust Depositor is duly formed under the laws of the State of Delaware and is in good standing, and a Certificate of the State of Maryland, dated [___] [___], 2006 stating that the Trust Depositor is in good standing as a foreign limited liability company in the State of Maryland.

3. Attached hereto as Annex III is a true and correct copy of the Limited Liability Company Operating Agreement of the Trust Depositor, together with all amendments thereto in effect on the date hereof, which documents were in full force and effect on April 11, 2006, and at all times subsequent thereto.

4. Attached hereto as Annex IV is a true and correct copy of resolutions adopted pursuant to the unanimous written consent of the sole Member of the Trust Depositor relating to the authorization, execution, delivery and performance of (among other things) the Agreement and the other Transaction Documents. Said resolutions have not been amended, modified, annulled or revoked, and the same were in full force and effect on April 11, 2006, and at all times subsequent thereto, and said resolutions are the only resolutions relating to these matters which have been adopted by the Board of Managers.

5. Each person named on Annex V attached hereto is a duly elected, qualified and incumbent officer of the Trust Depositor and the signature set forth opposite his or her name on such Annex V is that person’s genuine signature.

6. In connection with the sale of the Offered Notes, the Company has prepared a preliminary confidential offering memorandum dated March 28, 2006 (including any exhibits thereto and all information incorporated therein by reference, the “Preliminary Memorandum”), as supplemented by that preliminary confidential offering memorandum dated March 30, 2006 (including any exhibits thereto and all information incorporated therein by reference, the “Preliminary Memorandum Supplement ”), and all information incorporated therein by reference and a final confidential offering memorandum dated the date hereof (including any exhibits, amendments or supplements thereto and all information incorporated therein by reference, the “Final Memorandum”, and each of the Preliminary Memorandum, the Preliminary Memorandum Supplement and the Final Memorandum, a “Memorandum”) including a description of the terms of the Offered Notes, the terms of the offering, and a description of the Trust. It is understood and agreed that the opening of business on March 31, 2006 constitutes the time of the contract of sale for each purchaser of the Notes offered to the investors for purposes of the Securities and Exchange Commission’s Rule 159 (the “Time of Sale”) and that (i) the Preliminary Memorandum Supplement, which supplements, amends and restates the Preliminary Memorandum, and (ii) the term sheet setting forth the pricing terms relating to each Class of Offered Notes, constitute all of the information conveyed to investors as of the Time of Sale (the “Time of Sale Information”).

7. No event with respect to the Trust Depositor has occurred and is continuing that would constitute an Event of Default or an event that, with notice or the passage of time or both, would become an Event of Default as defined in the Transaction Documents. To the best of my knowledge after reasonable investigation, there has been no material adverse change in the condition, financial or otherwise, or the earnings, business affairs or business prospects, of the Trust Depositor, whether or not arising in the ordinary course of business, since the respective dates as of which information is given in the Time of Sale Information and except as set forth therein, or since the Time of Sale.

8. All federal, state and local taxes of the Trust Depositor due and owing as of the date hereof have been paid or adequate provisions for the payment thereof have been made.

9. All representations and warranties of the Trust Depositor contained in the Transaction Documents or any other related documents, or in any document, certificate or financial or other statement delivered in connection therewith, are true and correct in all material respects as of the date hereof.

10. There is no action, investigation or proceeding pending or, to our knowledge, threatened against the Trust Depositor before any court, administrative agency or other tribunal (a) asserting the invalidity of the Transaction Documents; (b) seeking to prevent the consummation of any of the transactions contemplated by the Transaction Documents; or (c) which is likely to materially and adversely affect the Trust Depositor’s performance of its obligations under, or the validity or enforceability of, the Transaction Documents.

11. No consent, approval, authorization or order of, and no notice to or filing with, any governmental agency or body or state or federal court is required to be obtained by the Trust Depositor for the Trust Depositor’s consummation of the transactions contemplated by the Transaction Documents, except such as have been obtained or made and such as may be required under the blue sky laws of any jurisdiction in connection with the issuance and sale of the Securities.

12. The Trust Depositor is not a party to any agreements or instruments evidencing or governing indebtedness for money borrowed or by which the Trust Depositor or its property is bound (other than the Transaction Documents).

13. Neither (a) the Originator’s transfer and assignment of the Loan Assets to the Trust Depositor; (b) the Trust Depositor’s concurrent transfer and assignment of the Loan Assets to the Issuer; (c) the Trust Depositor’s execution and delivery of the Transaction Documents; nor (d) the Trust Depositor’s consummation of any of the transactions contemplated by the Transaction Documents, will violate or conflict with any agreement or instrument to which the Trust Depositor is a party or by which it or its property is otherwise bound.

14. In connection with the transfer of Loans and related Collateral contemplated in the Transaction Documents, the Trust Depositor (a) has not made such transfer with the actual intent to hinder, delay or defraud any creditor of the Trust Depositor; (b) has not received less than a reasonably equivalent value in exchange for such transfer; (c) is not on the date thereof insolvent (nor will it become insolvent as a result thereof); (d) is not engaged (or about to engage) in a business or transaction for which it has unreasonably small capital; and (e) does not intend to incur or believe it will incur debts beyond its ability to pay when matured.

15. Each of the agreements and conditions of the Trust Depositor to be performed on or before the Closing Date pursuant to the Transaction Documents have been performed in all material respects.

16. CapitalSource Finance LLC has not authorized for filing any UCC financing statements listing the Loan Assets as collateral other than financing statements (a) relating to the transactions contemplated in the Agreement or (b) filed in connection with the Funding I Transaction, the Funding II Transaction, the Funding III Transaction, the Funding IV Transaction, the Funding V Transaction, the Acquisition Funding Transaction and the Prior Term Transactions, which financing statements, with respect to the Loan Assets, shall be released on or before the Closing Date.

17. Since the respective dates as of which information is given in the Time of Sale Information, and since the Time of Sale, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, results of operations, business affairs or business prospects of the Company, whether or not arising in the ordinary course of business, or in the ability of the Company to perform its obligations under the Purchase Agreement or under the Transaction Documents or in the characteristics of the Loans.

18. Nothing has come to the attention of the Trust Depositor that would lead it to believe that (i) the Time of Sale Information (when read in its entirety), assuming conveyance of

the final terms of the offer and sale of the Offered Notes at or prior to the Time of Sale, as of the Time of Sale, or (ii) the Final Memorandum and any amendments thereof or supplement thereto and any Additional Offering Documents, and any oral statements made by the Company to any prospective purchaser of the Offered Notes, each as of their respective dates or date on which such statement was made and as of the Closing Date, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements in each, in light of the circumstances under which they were made, not misleading.

* * * *

IN WITNESS WHEREOF, I have affixed my signature hereto as of the date written above.


		By:

		Name:

		Title:

ANNEX I
to Closing Certificate of
Trust Depositor

CERTIFICATE OF FORMATION

ANNEX II
to Closing Certificate of
Trust Depositor

GOOD STANDING CERTIFICATES

ANNEX III
to Closing Certificate of
Trust Depositor

OPERATING AGREEMENT

ANNEX IV
to Closing Certificate of
Trust Depositor

RESOLUTIONS

ANNEX V
to Closing Certificate of
Trust Depositor

INCUMBENCY OF SIGNING OFFICERS


Name of Officer	Title	Signature

1. Xxxx X. Xxxxxxx	President

2. Xxxxxx X. Xxxx	Chief Financial Officer/Senior
	Vice President

3. Xxxxxx X. Xxxxxxx	Secretary/Executive Vice President

4. Xxxxx X. Xxxxxxx	Chief Accounting Officer

Exhibit C
to Sale and
Servicing Agreement

FORM OF CLOSING CERTIFICATE OF SERVICER/ORIGINATOR

April 11, 2006

The undersigned certifies that he/she is the ___ of CapitalSource Finance LLC, a Delaware limited liability company (“CapitalSource”), and that, in the capacity as such officer, he/she is duly authorized to execute and deliver this certificate on behalf of CapitalSource, as the Originator and as the Servicer, in connection with the Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), dated as of April 11, 2006, by and among CapitalSource, as the Originator and the Servicer, CapitalSource Commercial Loan LLC, 2006-1, as the Trust Depositor, Xxxxx Fargo Bank, National Association, as the Indenture Trustee and as the Backup Servicer, and CapitalSource Commercial Loan Trust 2006-1, as the Issuer (all capitalized terms used herein without definition having the respective meanings set forth in the Agreement) and further certifies in his/her capacity as such officer as follows (it being understood that these certifications are being relied upon by, among others, the Initial Purchasers and their counsel in connection with the Initial Purchasers’ undertakings in connection with the subject transactions ):

1. Attached hereto as Annex I is a true and correct copy of the Certificate of Formation of CapitalSource, together with all amendments thereto as in effect on the date hereof, which documents were in full force and effect on April 11, 2006, and at all times subsequent thereto, and no other amendments have been authorized by the Board of Managers or members of CapitalSource.

2. Attached hereto as Annex II is a Certificate of the Secretary of State of the State of Delaware, dated [___] [___], 2006, stating that CapitalSource is duly formed under the laws of the State of Delaware and is in good standing, and a Certificate of the State of Maryland, dated [___] [___], 2006, stating that CapitalSource is in good standing as a foreign limited liability company in the State of Maryland.

3. Attached hereto as Annex III is a true and correct copy of the Limited Liability Company Operating Agreement of CapitalSource, together with all amendments thereto, which were in full force and effect on April 11, 2006, and at all times subsequent thereto.

4. Attached hereto as Annex IV is a true and correct copy of resolutions adopted pursuant to the unanimous written consent of the Manager of CapitalSource relating to the authorization, execution, delivery and performance of (among other things) the Agreement and the other Transaction Documents. Said resolutions have not been amended, modified, annulled or revoked, and the same were in full force and effect on April 11, 2006, and at all times subsequent thereto, and said resolutions are the only resolutions relating to these matters which have been adopted by the Board of Managers.

5. Each person named on Annex V attached hereto is a duly elected, qualified and incumbent officer of CapitalSource and the signature set forth opposite his or her name on such Annex V is that person’s genuine signature.

6. In connection with the sale of the Offered Notes, the Company has prepared a preliminary confidential offering memorandum dated March 28, 2006 (including any exhibits thereto and all information incorporated therein by reference, the “Preliminary Memorandum”), as supplemented by that preliminary confidential offering memorandum dated March 30, 2006 (including any exhibits thereto and all information incorporated therein by reference, the “Preliminary Memorandum Supplement”), and all information incorporated therein by reference and a final confidential offering memorandum dated the date hereof (including any exhibits, amendments or supplements thereto and all information incorporated therein by reference, the “Final Memorandum”, and each of the Preliminary Memorandum, the Preliminary Memorandum Supplement and the Final Memorandum, a “Memorandum”) including a description of the terms of the Offered Notes, the terms of the offering, and a description of the Trust. It is understood and agreed that the opening of business on March 31, 2006 constitutes the time of the contract of sale for each purchaser of the Notes offered to the investors for purposes of the Securities and Exchange Commission’s Rule 159 (the “Time of Sale”) and that (i) the Preliminary Memorandum Supplement, which supplements, amends and restates the Preliminary Memorandum, and (ii) the term sheet setting forth the pricing terms relating to each Class of Offered Notes, constitute all of the information conveyed to investors as of the Time of Sale (the “Time of Sale Information”).

7. No event with respect to CapitalSource has occurred and is continuing that would constitute an Event of Default or Servicer Default or an event that, with notice or the passage time, would constitute an Event of Default or Servicer Default as defined in the Transaction Documents. To the best of my knowledge after reasonable investigation, there has been material adverse change in the condition, financial or otherwise, or the earnings, business affairs or business prospects, of CapitalSource, whether or not arising in the ordinary course business, since the respective dates as of which information is given in the Time of Sale Information except as set forth therein, or since the Time of Sale.

8. All federal, state and local taxes of CapitalSource due and owing as of the date hereof have been paid or adequate provisions for the payment thereof have been made.

9. All representations and warranties of CapitalSource contained in the Transaction Documents or in any document, certificate or financial or other statement delivered in connection therewith are true and correct in all material respects as of the date hereof.

10. There is no action, investigation or proceeding pending or, to my knowledge, threatened against CapitalSource before any court, administrative agency or other tribunal (a) asserting the invalidity of any Transaction Document to which CapitalSource is a party; (b) seeking to prevent the consummation of any of the transactions contemplated by Transaction Documents; or (c) that is likely to materially and adversely affect CapitalSource’s performance of its obligations under, or the validity or enforceability of, the Transaction Documents.

11. No consent, approval, authorization or order of, and no notice to or filing with, any governmental agency or body or state or federal court is required to be obtained by CapitalSource for its consummation of the transactions contemplated by the Transaction Documents, except such as have been obtained or made and such as may be required under the blue sky laws of any jurisdiction in connection with the issuance and sale of the Securities.

12. Neither (a) CapitalSource’s transfer and assignment of the Loan Assets to the Trust Depositor; (b) CapitalSource’s entering into of the Transaction Documents; nor (c) CapitalSource’s consummation of any of the transactions contemplated in the Transaction Documents, will violate or conflict with any agreement or instrument to which CapitalSource is a party or by which it or its property is otherwise bound.

13. In connection with the transfers of Loans and related Collateral contemplated in the Transaction Documents, CapitalSource (a) has not made such transfer with actual intent to hinder, delay or defraud any creditor of CapitalSource; (b) has not received less than a reasonably equivalent value in exchange for such transfer; (c) is not on the date hereof insolvent (nor will CapitalSource become insolvent as a result thereof); (d) is not engaged (or about to engage) in a business or transaction for which it has unreasonably small capital; and (e) does not intend to incur or believe it will incur debts beyond its ability to pay when matured.

14. Each of the agreements and conditions of CapitalSource to be performed or satisfied on or before the Closing Date under the Transaction Documents has been performed or satisfied in all material respects.

15. CapitalSource has not authorized for filing any UCC financing statements listing the Loan Assets as collateral other than financing statements (a) relating to the transactions contemplated in the Agreement or (b) filed in connection with the Funding I Transaction, the Funding II Transaction, the Funding III Transaction, the Funding IV Transaction, the Funding V Transaction, the Acquisition Funding Transaction and the Prior Term Transactions, which financing statements, with respect to the Loan Assets, shall be released on or before the Closing Date.

16. Since the respective dates as of which information is given in the Time of Sale Information, and since the Time of Sale, there has been no material adverse change in the condition, financial or otherwise, or in the earnings, results of operations, business affairs or business prospects of CapitalSource, whether or not arising in the ordinary course of business, or in the ability of CapitalSource to perform its obligations under the Purchase Agreement or under the Transaction Documents or in the characteristics of the Loans.

17. Nothing has come to the attention of CapitalSource that would lead it to believe that (i) the Time of Sale Information (when read in its entirety), assuming conveyance of the final terms of the offer and sale of the Offered Notes at or prior to the Time of Sale, as of the Time of Sale, or (ii) the Final Memorandum, and any amendments thereof or supplement thereto and any Additional Offering Documents, and any oral statements made by the Company to any prospective purchaser of the Offered Notes, each as of their respective dates or date on which such statement was made and as of the Closing Date, included an untrue statement of a material

fact or omitted to state a material fact necessary in order to make the statements in each, in light of the circumstances under which they were made, not misleading.

* * * * * *

IN WITNESS WHEREOF, I have affixed my signature hereto as of the date written above.


		By:

		Name:

		Title:

ANNEX I
to Closing Certificate of
Servicer/Originator

CERTIFICATE OF FORMATION

ANNEX II
to Closing Certificate of
Servicer/Originator

GOOD STANDING CERTIFICATES

ANNEX III
to Closing Certificate of
Servicer/Originator

OPERATING AGREEMENT

ANNEX IV
to Closing Certificate of
Servicer/Originator

RESOLUTIONS

ANNEX V
to Closing Certificate of
Servicer/Originator

INCUMBENCY OF SIGNING OFFICERS


Name of Officer	Title	Signature

1. Xxxx X. Xxxxxxx	Chief Executive Officer

2. Xxxxxx X. Xxxx	Chief Financial Officer/Senior Vice President

3. Xxxxxx X. Xxxxxxx	Secretary/Executive Vice President

4. Xxxxx X. Xxxxxxx	Chief Accounting Officer

Exhibit D
to Sale and
Servicing Agreement

FORM OF LIQUIDATION REPORT

Obligor Name:
Account number:
Original Outstanding Loan Balance:


1.	Liquidation Proceeds

	Principal Prepayment		$
	Property Sale Proceeds
	Insurance Proceeds
	Other (Itemize)

2.	Servicing Advances	$

3.	Net Liquidation Proceeds	$
	(Line 1 minus Line 2)

4.	Outstanding Loan Balance of the	$
	Loan on date of liquidation

5.	Realized (Loss) or Gain	$
	(Line 3 minus Line 4)

Exhibit E
to Sale and
Servicing Agreement

PRINCIPAL AND INTEREST ACCOUNT LETTER AGREEMENT

April 11, 2006


To:		Xxxxx Fargo Bank, National Association (the “Depository”)
		6th and Marquette
		MAC N9311—161
		Xxxxxxxxxxx, Xxxxxxxxx 00000

As Servicer under the Sale and Servicing Agreement, dated as of April 11, 2006, relating to CapitalSource Commercial Loan Trust 2006-1 (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement”), we hereby authorize and request you to establish an account, as a Principal and Interest Account pursuant to Section 7.03 of the Agreement, to be designated as “CapitalSource Finance LLC, as the Servicer, in trust for the Hedge Counterparties and the registered holders of CapitalSource Commercial Loan Trust 2006-1 Class A, Class B, Class C, Class D, Class E and Class F Asset Backed Notes.” All deposits in the account shall be subject to withdrawal therefrom by order signed by the Servicer. You may refuse any deposit which would result in violation of the requirement that the account be fully insured as described below. This letter is submitted to you in duplicate. Please execute and return one original to us.


		CAPITALSOURCE FINANCE LLC

		By:

		Name:

		Title:

The undersigned, as Depository, hereby (i) certifies that the above described account has been established under Account Number [___], at the office of the depository indicated above, (ii) agrees to honor withdrawals on such account as provided above and (iii) agrees that it will comply with the instructions of the Servicer directing disposition of the funds in the above — described account without the consent of CapitalSource Commercial Loan LLC, 2006-1 or CapitalSource Commercial Loan Trust 2006-1. The amounts deposited at any time in the account will be insured to the maximum amount provided by applicable law by the Federal Deposit Insurance Corporation.


		XXXXX FARGO BANK, NATIONAL ASSOCIATION

		By:

		Name:

		Title:

Exhibit F
to Sale and
Servicing Agreement

[Reserved]

Exhibit G
to Sale and
Servicing Agreement

LIST OF LOANS

SEE ATTACHED


					Business	Entity
Entity		Loan		Borrower	Unit	Pledged	State	Commitment		Pool Balance
	1726		1313	ABP CORPORATION	CFB	CSII	MA		27,000,000.00		1,000,000.00
	1726		1314	ABP CORPORATION	CFB	CSII	MA		10,000,000.00		5,000,000.00
	1726		1353	ABP CORPORATION	CFB	FUND	MA		500,000.00		500,000.00
	1726		1354	ABP CORPORATION	CFB	FUND	MA		235,295.00		235,295.00
	669		1356	ADVANCED NUTRACEUTICAL	CFB	CSII	NY		3,500,000.00		3,500,000.00
	1157		789	AMERICAN PACIFIC ENTERPRISES, LLC	CFB	CSII	OH		37,500,000.00		7,064,980.20
	493		335	INTERNATIONAL LEGWEAR GROUP, INC.	CFB	CSII	NC		23,500,000.00		9,973,686.91
	1353		969	SSHS — IDEA SPHERE INC.	HSB	CSII	NY		30,000,000.00		7,871,942.89
	1450		1090	ALPHA PACKAGING, INC.	CFB	CSII	MO		22,500,000.00		7,750,000.00
	1110		1034	MATRIX SECURITY GROUP, INC.	HSB	CSII	NJ		25,000,000.00		7,481,136.61
	117		630	AMERICAN PSYCH SYSTEMS	CFB	CSII	MD		12,000,000.00		2,700,000.00
	1144		778	THE RENTAL STORE	SFB	CSII	AZ		18,000,000.00		6,171,146.62
	1464		1110	ANESTHESIA HEALTHCARE PARTNERS, INC.	HSB	CSII	GA		4,000,000.00		1,873,210.36
	1713		1263	ASPEN EARTHMOVING LLC	HSB	CSII	CO		4,000,000.00		1,528,638.38
	1713		1303	ASPEN EARTHMOVING LLC	HSB	CSII	CO		2,700,000.00		2,700,000.00
	1713		1304	ASPEN EARTHMOVING LLC	HSB	CSII	CO		1,800,000.02		1,800,000.02
	1713		1305	ASPEN EARTHMOVING LLC	HSB	CSII	CO		1,470,000.00		315,250.00
	1591		1169	AUTOMOTIVE MANAGEMENT SERVICES, INCORPORATED	SFB	CSII	NC		5,000,000.00		2,014,661.04
	1842		1465	AVAIL MEDICAL PRODUCTS, INC.	HSB	CSII	TX		10,000,000.00		10,000,000.00
	1602		1181	BENTEK CORPORATION	CFB	CSII	CA		5,000,000.00		2,992,062.17
	1602		1182	BENTEK CORPORATION	CFB	CSII	CA		4,183,333.28		4,183,333.28
	1602		1183	BENTEK CORPORATION	CFB	CSII	CA		3,000,000.00		3,000,000.00
	1908		1529	CONSOLIDATED SERVICES GROUP, INC.	HSB	CSII	PA		4,000,000.00		4,000,000.00
	1714		1265	BEST PRACTICES, INC.	HSB	CSII	VA		10,000,000.00		6,209,560.71
	1762		1369	BIO-KINETIC CLINICAL APPLICATIONS, INC.	HSB	CSII	MO		7,312,500.00		7,312,500.00
	1762		1375	BIO-KINETIC CLINICAL APPLICATIONS, INC.	HSB	CSF	MO		3,500,000.00		130,000.00
	1836		1457	XXXX XXXXX, L..P.	CFB	CSII	TX		4,800,000.00		4,800,000.00
	1613		1199	C & S FINANCE ORLANDO	SFB	CSII	FL		7,000,000.00		5,401,676.88
	1325		938	CASE LOGIC, INC	CFB	CSII	CO		15,000,000.00		2,523,479.20
	563		373	CASH CORP.	SFB	CSII	GA		12,000,000.00		9,767,023.59
	895		565	CASHCO FINANCIAL SERVICES, INC.	SFB	CSII	OR		5,000,000.00		2,869,219.91
	120		48	HEALTHSTAR COMMUNICATIONS, INC.	CFB	CSII	NJ		63,346,497.70		30,000,000.00
	1732		1326	CORNERSTONE HEALTHCARE GROUP HOLDING, INC.	HSB	CSII	TX		2,965,677.97		2,965,677.97
	1580		1160	CHARTER AMERIFIT ACQUISITION CORPORATION	CFB	CSII	CT		24,200,000.00		9,471,803.53
	1609		1200	CLINTRAK PHARMACEUTICAL SERVICES	CFB	CSII	NY		8,700,000.00		3,262,570.47
	1607		1192	CODEL ENTRY SYSTEMS, INC.	CFB	CSII	WA		2,603,127.18		2,603,127.18

Page 1 of 4


					Business	Entity
Entity		Loan		Borrower	Unit	Pledged	State	Commitment		Pool Balance
	1607		1193	CODEL ENTRY SYSTEMS, INC.	CFB	CSII	WA		2,000,000.00		2,000,000.00
	573		000	XXXX XXXXX XX.	XXX	CSII	TX		3,000,000.00		2,293,138.19
	1128		722	CONSO INTERNATIONAL CORPORATION	CFB	CSII	NJ		4,000,000.00		2,113,995.79
	1324		935	XXXXX INTERNATIONAL INCORPORATED	CFB	CSII	WA		13,000,000.00		5,985,296.29
	1582		1500	DEVCON SECURITY HOLDINGS, INC.	HSB	CSII	FL		70,000,000.00		30,000,000.00
	1763		1371	EQUIBRAND HOLDING CORPORATION	CFB	CSII	TX		7,594,224.30		7,594,224.30
	1328		944	MONDRIAN INVESTMENT PARTNERS	CFB	CSII	IT		53,785,000.00		5,378,500.00
	1112		711	CORRPRO COMPANIES, INC.	CFB	CSII	OH		4,000,000.00		97,089.43
	1641		1236	COUNTRY VILLA SERVICE CORPORATION	HSB	CSII	CA		10,000,000.00		6,841,285.91
	1485		1141	CPC ASSOCIATES, INC.	CFB	CSII	PA		6,093,750.00		6,093,750.00
	1815		1428	DC SAFETY SALES CO., INC.	CFB	CSV	NY		3,000,000.00		500,000.00
	1815		1429	DC SAFETY SALES CO., INC.	CFB	CSII	NY		7,800,000.00		7,800,000.00
	1763		1372	EQUIBRAND HOLDING CORPORATION	CFB	CSII	TX		2,319,968.68		2,319,968.68
	1883		1509	EASTERN CAROLINA AUTO FINANCE CO., LLC	SFB	CSII	NC		10,000,000.00		3,316,868.67
	1492		1147	EEC-CEC HOLDING LLC	CFB	CSV	AL		13,000,000.00		1,715,303.93
	1492		1148	EEC-CEC HOLDING LLC	CFB	CSII	AL		6,375,000.00		6,375,000.00
	1750		1347	EINSTRUCTION	CFB	CSII	TX		10,968,750.00		10,968,750.00
	437		304	ENDURACARE, LLC	HSB	CSII	NV		15,000,000.00		12,854,205.76
	437		305	ENDURACARE, LLC	HSB	CSII	NV		3,056,721.98		3,056,721.98
	971		622	FIRST BROADCASTING CAPITAL PARTNERS	CFB	CSII	TX		27,000,000.00		6,148,745.38
	1794		1407	XXXXXXX , LLC	CFB	CSII	IL		12,626,250.00		12,626,250.00
	1334		948	FIREARMS TRAINING SYSTEMS, INC.	CFB	CSII	GA		12,000,000.00		3,931,534.21
	1450		1091	ALPHA PACKAGING, INC.	CFB	CSII	MO		17,235,000.00		4,847,343.76
	1833		1453	FLIPCHIP INTERNATIONAL, LLC	CFB	CSII	AZ		6,000,000.00		6,000,000.00
	1746		1342	FPL FOOD LLC	HSB	CSII	GA		15,000,000.00		4,299,850.65
	1723		1321	GAMEDAY MEDIA, INC,	CFB	CSII	TN		4,000,000.00		4,000,000.00
	1378		987	GENEZEN HEALTHCARE, INC.	HSB	CSII	TX		5,000,000.00		2,725,469.71
	1063		1266	INSTALLED BUILDING PRODUCTS	CFB	CSII	OH		3,133,928.57		3,133,928.57
	628		404	SOUTHERN AUTOMOTIVE FINANCE	SFB	CSII	FL		48,000,000.00		4,771,770.66
	1914		1535	GREYSTONE BUSINESS CREDIT II , LLC	HSB	CSII	NY		50,000,000.00		3,661,563.15
	1386		995	CFHS HOLDINGS, INC.	HSB	CSII	CA		29,100,000.00		29,100,000.00
	1478		1132	GTS HOLDINGS, INC.	CFB	CSII	NJ		9,291,666.70		9,291,666.70
	1478		1133	GTS HOLDINGS, INC.	CFB	CSII	NJ		7,500,000.00		7,500,000.00
	876		560	HAVEN HEALTH CENTER — NEW ENGLAND	HSB	CSII	CT		5,500,000.00		3,253,497.74
	946		597	HAVEN HEALTHCARE CENTER — OMEGA	HSB	CSII	CT		8,000,000.00		3,842,419.07
	1263		889	HEALTHCARE UNIFORM COMPANY, INC.	CFB	CSII	MO		9,000,000.00		894,591.14
	1263		1010	HEALTHCARE UNIFORM COMPANY, INC.	CFB	CSF	MO		270,000.00		270,000.00

Page 2 of 4


					Business	Entity
Entity		Loan		Borrower	Unit	Pledged	State	Commitment		Pool Balance
	1400		1019	SAVA SENIOR CARE, INC.	HSB	CSII	GA		150,000,000.00		25,000,000.00
	1123		1383	INTERFACE SECURITY SYSTEMS	HSB	CSII	MO		75,000,000.00		30,000,000.00
	1826		1444	ITS ACQUISITION, INC	CFB	FUND	GA		10,000,000.00		1,714,500.00
	1447		1083	K2 INDUSTRIAL	HSB	CSII	IN		15,000,000.00		4,704,625.79
	1826		1445	ITS ACQUISITION, INC	CFB	FUND	GA		36,075,000.00		3,894,225.00
	1826		1446	ITS ACQUISITION, INC	CFB	CSII	GA		17,000,000.00		1,500,000.00
	1838		1460	LEVTRAN ENTERPRISES DBA DOWNTOWN LOCKER ROOM	CFB	FUND	MD		9,500,000.00		4,750,000.00
	1736		1338	XXXXX RADIO HOLDINGS	CFB	CSII	CO		7,000,000.00		7,000,000.00
	239		158	LIGHTHOUSE FINANCIAL GROUP INC	SFB	CSII	FL		10,000,000.00		4,635,784.75
	1447		1213	K2 INDUSTRIAL	HSB	CSII	IN		3,439,172.64		3,439,172.64
	1838		1459	LEVTRAN ENTERPRISES DBA DOWNTOWN LOCKER ROOM	CFB	FUND	MD		10,000,000.00		2,909,274.06
	1838		1461	LEVTRAN ENTERPRISES DBA DOWNTOWN LOCKER ROOM	CFB	CSII	MD		12,000,000.00		6,000,000.00
	1624		1218	SONITROL CORPORATION	HSB	CSII	PA		3,980,000.00		3,980,000.00
	470		961	LIFE GENERATIONS HEALTHCARE, INC.	HSB	CSII	CA		3,635,668.97		3,635,668.97
	1011		649	AMERICAN HOSPICE MANAGEMENT HOLDINGS, LLC	HSB	CSII	FL		20,323,750.00		4,585,490.71
	1011		651	AMERICAN HOSPICE MANAGEMENT HOLDINGS, LLC	HSB	CSII	FL		10,000,000.00		3,796,844.25
	1252		881	XXXXXX TECHNOLOGIES, INC.	CFB	CSII	VA		18,000,000.00		2,582,933.10
	1021		658	XXXXXXX INTERNATIONAL, INC.	CFB	CSII	OR		8,000,000.00		3,768,663.41
	923		584	NEW ALBANY SURGICAL HOSPITAL, LLC	HSB	CSII	TN		10,500,000.00		3,548,138.81
	364		1412	MULTIVEND, LLC	CFB	CSII	NY		4,000,000.00		4,000,000.00
	1146		777	NATIONSHEALTH	HSB	CSIII	FL		10,000,000.00		2,410,763.99
	1034		669	NAVIX DIAGNOSTIX, INC	HSB	CSII	MA		4,000,000.00		2,283,272.66
	1034		1388	NAVIX DIAGNOSTIX, INC	HSB	CSII	MA		2,146,666.68		2,146,666.68
	1128		725	CONSO INTERNATIONAL CORPORATION	CFB	CSII	NJ		13,025,000.00		2,982,558.15
	1761		1365	OBLIO TELECOM, INC.	HSB	CSF	TX		15,000,000.00		3,846,012.13
	1761		1366	OBLIO TELECOM, INC.	HSB	CSII	TX		4,166,666.68		4,166,666.68
	1761		1367	OBLIO TELECOM, INC.	HSB	CSV	TX		5,333,333.32		5,333,333.32
	867		555	XXXXXXX’X, INC	CFB	CSII	NC		10,000,000.00		3,983,843.18
	377		269	GOLDCAR LENDING, INC.	SFB	CSII	GA		5,000,000.00		2,979,236.80
	1881		1523	RCR PLUMBING, INC	HSB	CSII	CA		4,916,666.67		4,916,666.67
	1730		1322	SALUS — XXXXXX CROSSING SURGERY CENTER	HSB	CSII	NJ		4,000,000.00		2,411,551.90
	1728		1317	SALUS — SHORT HILLS SURGERY CENTER	HSB	CSII	NJ		7,000,000.00		5,011,968.87
	1786		1396	STRATEGIC FINANCIAL SOLUTIONS LLC	CFB	CSII	NV		31,000,000.00		30,000,000.00
	364		261	MULTIVEND, LLC	CFB	CSII	NY		3,733,333.36		2,722,222.15
	1633		1230	SELECT MANAGEMENT RESOURCES	SFB	CSII	GA		40,000,000.00		10,332,789.49
	1579		1156	SETECH, INC.	HSB	CSII	TN		95,000,000.00		2,091,013.95
	1599		1179	SILVERLEAF RESORTS, INC.	SFB	CSII	TX		50,000,000.00		9,545,679.42

Page 3 of 4


					Business	Entity
Entity		Loan		Borrower	Unit	Pledged	State	Commitment		Pool Balance
	1620		1212	TMP DIRECTIONAL MARKETING, LLC	CFB	CSII	NY		14,500,000.00		14,500,000.00
	1246		1232	TROVER SOLUTIONS, INC.	HSB	CSII	KY		39,200,000.00		24,500,000.00
	1424		1043	BERGENSONS PROPERTY SERVICES, INC.	CFB	CSII	CA		3,500,000.00		2,694,941.48
	1178		809	PREMIER SALONS, INC	CFB	FUND	IT		4,000,000.00		1,883,035.52
	1922		1545	SSHS — METALDYNE CORPORATION	HSB	CSII	MI		10,000,000.00		5,000,000.00
	1112		710	CORRPRO COMPANIES, INC.	CFB	CSII	OH		15,500,000.00		1,793,248.93
	1703		1467	STP — BRIGHTEN (CHATEAU REALTY)	HSB	CSII	PA		4,250,000.00		3,366,987.32
	1478		1131	GTS HOLDINGS, INC.	CFB	CSII	NJ		9,000,000.00		2,628,594.69
	1465		1111	SUPPLEMENT SCIENCES, INC.	CFB	CSII	WA		5,846,135.00		5,846,135.00
	1465		1112	SUPPLEMENT SCIENCES, INC.	CFB	CSII	WA		3,714,305.00		3,714,305.00
	1474		1123	TECHSKILLS, LLC	HSB	CSII	TX		5,000,000.00		1,124,500.94
	1721		1307	TELTRONICS, INC.	HSB	CSII	FL		8,000,000.00		4,032,865.07
	1721		1309	TELTRONICS, INC.	HSB	CSII	FL		2,749,999.98		2,749,999.98
	1767		1378	TERACO HOLDINGS, INC	CFB	CSF	TX		3,000,000.00		1,350,000.00
	1767		1379	TERACO HOLDINGS, INC	CFB	CSII	TX		7,125,000.00		7,125,000.00
	1767		1380	TERACO HOLDINGS, INC	CFB	CSII	TX		5,373,000.00		5,373,000.00
	1138		771	UNICO HOLDINGS, INC.	CFB	CSII	FL		4,000,000.00		1,667,685.00
	1807		1426	TIMBUK2 DESIGNS, INC.	CFB	CSII	CA		5,000,000.00		5,000,000.00
	510		345	WICKS BROADCAST SOLUTIONS, LLC	CFB	CSII	OR		10,000,000.00		2,803,389.47
	804		517	TOWER CLEANING SYSTEMS, INC. D/B/A U.S. MAINTENANC	CFB	CSII	PA		15,000,000.00		2,269,406.77
	804		1233	TOWER CLEANING SYSTEMS, INC. D/B/A U.S. MAINTENANC	CFB	CSII	PA		20,000,000.00		13,000,000.00
	1645		1308	TOWERCO, INC.	CFB	CSII	NC		35,000,000.00		14,189,344.81
	1580		1159	CHARTER AMERIFIT ACQUISITION CORPORATION	CFB	CSII	CT		23,417,500.00		9,165,597.19
	1877		1503	UCN, INC.	HSB	CSII	UT		10,000,000.00		3,129,713.32
	742		474	SSHS — ACCESS WORLDWIDE COMMUNICATIONS, INC.	HSB	CSII	FL		10,000,000.00		1,418,002.50
	1064		703	UNITED CONSUMER FINANCE, INC.	SFB	CSII	MA		7,500,000.00		4,289,430.97
	1098		1144	UNITED SYSTEMS	HSB	CSII	CO		6,000,000.00		3,920,960.67
	1874		1498	US XXXXX, INC	HSB	CSII	MA		3,000,000.00		1,279,370.38
	1450		1089	ALPHA PACKAGING, INC.	CFB	CSII	MO		8,000,000.00		1,254,969.31

									1,970,417,889.68		782,254,764.44

			139

Page 4 of 4

Exhibit H
to Sale and
Servicing Agreement

FORM OF MONTHLY SERVICER REPORT

[TO BE PROVIDED IN MS EXCEL FORMAT]

CAPITALSOURCE FINANCE LLC
SERVICER’S CERTIFICATE
CAPITALSOURCE COMMERICAL LOAN TRUST 2004-1
ASSET-BACKED NOTES SERIES 2006-1, CLASS A,
CLASS B, CLASS C, CLASS D , CLASS E, CLASS F NOTES


Due Period Ending on:
Record Date:
Determination Date:
Remittance Date:
Days during Interest Accrual Period:
Year Basis
One-Month LIBOR

AGGREGATE OUTSTANDING LOAN BALANCE
Aggregate Outstanding Loan Balance, beginning of Due Period
Less: Scheduled Principal Payments
Less: Curtailments
Less: Payoffs
Less: Aggregate Outstanding Loan Balance of Loans that became Charged-Off Loans during the current Due Period
Less: Repurchased or Substituted
Add: Aggregate Outstanding Loan Balance of Substitute Loan(s)

Aggregate Outstanding Loan Balance, end of Due Period		0.00		OK


AGGREGATE PRINCIPAL BALANCE OF NOTES (post distribution)

	% of O/S Notes
Class A Principal Amount, end of Interest Accrual Period		—			0.00	%

Class B Principal Amount, end of Interest Accrual Period		—			0.00	%

Class C Principal Amount, end of Interest Accrual Period		—			0.00	%

Class D Principal Amount, end of Interest Accrual Period		—			0.00	%

Class E Principal Amount, end of Interest Accrual Period		—			0.00	%

Class F Principal Amount, end of Interest Accrual Period		—			0.00	%

Aggregate Outstanding Principal Balance		—			0.00	%


ADDITIONAL PRINCIPAL AMOUNT		—


DELINQUENT LOANS
Asset Based Loans
1 DPD		—


All Other Loans
1-29 DPD		—

30-59 DPD		—

60-89 DPD		—

90-119 DPD		—

120+ DPD		—


Loans with reductin in interest rate causing breach WALS test

CHARGE -OFF LOANS
Cumulative Aggregate Outstanding Loan Balance of Charged-Off Loans, beginning of Due Period		—

Aggregate Outstanding Loan Balance of Charged-Off Loans that became Charged-Off Loans during the current Due Period		—

Cumulative Aggregate Outstanding Loan Balance of Charged-Off Loans, end of Due Period		—


Loans Rated “D” by S&P

RESERVE FUND
Reserve Fund balance, beginning of Due Period		—
Required Reserve Amount — the sum of
(i) Three times the then current Class A, Class B, Class C, Class D and Class E Interest Amounts		—
(ii) The Outstanding Loan Balance of each Delinquent Loan.		—
Total		—
Deposit from (release to) waterfall		—

Reserve Fund balance, end of Due Period		—


Servicing Fee		—

Unpaid Servicing Fee from prior Due Periods		—

Total Servicing Fee due		—


Servicer Principal Advances		—
Principal Collections		—
Prepayments		—

Total Principal Collections/Advances		—


Servicer Interest Advances		—
Interest Collections		—
Investment Earnings		—
Net Trust Hedge receipts		—

Total Interest Collections/Advances		—


Class A Outstanding Principal Balance, beginning of Interest Accrual Period		—

Class B Outstanding Principal Balance, beginning of Interest Accrual Period		—

Class C Outstanding Principal Balance, beginning of Interest Accrual Period		—

Class D Outstanding Principal Balance, beginning of Interest Accrual Period		—

Class E Outstanding Principal Balance, beginning of Interest Accrual Period		—

Class F Outstanding Principal Balance, beginning of Interest Accrual Period		—

Aggregate Outstanding Principal Balance, beginning of Interest Accrual Period		—

Class A Note Interest Rate		0.00000	%

Class B Note Interest Rate		0.00000	%

Class C Note Interest Rate		0.00000	%

Class D Note Interest Rate		0.00000	%

Class E Note Interest Rate		0.00000	%


Class A Interest Shortfall from previous Interest Accrual Period		—

Class B Interest Shortfall from previous Interest Accrual Period		—

Class C Interest Shortfall from previous Interest Accrual Period		—

Class D Interest Shortfall from previous Interest Accrual Period		—

Class E Interest Shortfall from previous Interest Accrual Period		—
Class A Outstanding Principal Balance as a percent of Aggregate Outstanding Principal Balance		0.00	%

Class B Outstanding Principal Balance as a percent of Aggregate Outstanding Principal Balance		0.00	%

Class C Outstanding Principal Balance as a percent of Aggregate Outstanding Principal Balance		0.00	%

Class D Outstanding Principal Balance as a percent of Aggregate Outstanding Principal Balance		0.00	%

Class E Outstanding Principal Balance as a percent of Aggregate Outstanding Principal Balance		0.00	%

Class F Outstanding Principal Balance as a percent of Aggregate Outstanding Principal Balance		0.00	%


PORTFOLIO RATE / YIELD CALCULATION
Interest Collections, balance as of end of Due Period (annualized)		—
Aggregate Principal Amount of Class A, Class B, Class C , Class D and Class E as of last day of Due Period	#REF!
Portfolio Rate, for current Due Period		0.0000	%
Weighted Average Interest Rate		0.0000	%
Portfolio Yield, current period		0.0000	%

CONCENTRATION CRITERIA
Sum of the Outstanding Loan Balances of Obligors in the same industry (by at least 3 digit NAICS Code) expressed as a Percentage		0.0	%

Sum of the Outstanding Loan Balances of Obligors in the same State expressed as a Percentage		0.0	%

Xxxxx

S&P

Capital Source

Note Holders

PRIOR TO AN EVENT OF DEFAULT, SERVICER DEFAULT OR ACCELERATED AMORTIZATION EVENT

Prior to an Event of Default, a Servicer Default, an Accelerated Amortization Event, Collections on deposit in the Principal and Interest Account, balances as of end of Due Period

Due

Paid

All Investment Earnings and losses on funds held in the Trust Accounts

—

Reserve Account balance

—

Total available for distribution

—

Shortfall

1 Amounts owed to the Hedge Counterparties (other than Hedge Breakage Cost)

—

2 Pro rata, based on the amounts owed to such Persons under this item two, subject to certain limitations, amounts to Indenture Trustee, Backup Servicer, Owner Trustee, Successor Servicer (if any), and Irish Stock Exchange Fees (if applicable) (excluded amounts related to indemnification)

—

3 From the Collections received on the specific Loans for which Scheduled Payment Advances were made, reimbursement for the amount of any Scheduled Payment Advances relating such Loans

—

4 (1) to S&P an amount equal to any accrued and unpaid fees due to S&P

—

(2) to the Servicer an amount equal to its accrued and unpaid Servicing Fee minus amounts paid to S&P pursuant to this clause

—

5 Class A Interest Amount plus any Class A Interest Shortfall (and any interest thereon) and

—

6 Class B Interest Amount plus any Class B Interest Shortfall (and any interest thereon)

—

7 Class C Interest Amount plus any Class C Interest Shortfall (and any interest thereon)

—

8 Class D Interest Amount plus any Class D Interest Shortfall (and any interest thereon)

—

9 Class E Interest Amount plus any Class E Interest Shortfall (and any interest thereon)

—

10 Any amount to the Reserve Fund which will equal (3) times the sum of the Class A, B, C, D and E Interest Amounts for current remittance date

—

a) Available Principal Distributable (amount remaining after 9)

—

#REF!

—

#REF!

11 (i) on each Remittance Date prior to the occurrence of any Sequential Pay Date, to the Holders of the Notes as follows:

Remaining Balance

(a) if on such Remittance Date no Principal Distributable Shortfall exists, to the Holders of the Class A Notes, the Class B Notes, the Class C Notes the Class D Notes, the Class E Notes and the Class F Note, pro rata, in an amount up to the Total Principal Distributable; and

Class A

#REF!

- #REF!

—

Class B

—

Class C

—

Class D

—

Class E

—

Class F

—

(b) if on such Remittance Date a Principal Distributable Shortfall exists, to the Holders of the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes, pro rata in an amount up to the Total Principal Distributable until each such class of Offered Notes is paid in full, and second to the Class F Notes in an amount up to the Total Principal Distributable until the Class F Notes are paid in full;

(ii) on each Remittance Date on and after the occurrence of a Sequential Pay Event (other than an Event of Default, a Servicer Default or an Accelerated Amortization Event), unless, solely in the case of a Sequential Pay Event of the type specified in clause (f) of the definition thereof, the Rating Agency Condition shall have been satisfied with respect to the payment of principal of the Notes being made in accordance with subclause (i)(a) under this item 10, sequentially to the Holders of the Notes as follows

(a) to the Holders of the Class A Notes paid in full, in an amount up to the Total Principal Distributable;

(b) to the Holders of the Class B Notes, the Class B Accrued Payable if any

—

(c) to the Holders of the Class B Notes until paid in full, in an amount up to the remaining Total Principal Distributable after payments to the Class A

Notes under this Item 11

—

(d) to the Holders of the Class C Notes, the Class C Accrued Payable if any

—

(e) to the Holders of the Class C Notes until paid in full, in an amount up to the remaining Total Principal Distributable after payments to the Class A

—

Notes, and the Class B Notes aunder this Item 11

(f) to the Holders of the Class D Notes, the Class D Accrued Payable if any

—

(g) to the Holders of the Class D Notes until paid in full, in an amount up to the remaining Principal Distributable after payments to the Class A Notes, the Class B Notes and the Class C Notes under this Item 11

—

(h) to the Holders of the Class E Notes, the Class E Accrued Payable if any

—

(i) to the Holders of the Class E Notes until paid in full, in an amount up to the remaining Principal Distributable after payments to the Class A Notes, the Class B Notes, the Class C Notes,and the Class D Notes under this Item 11

—

12 To the Reserve Fund until the amount therein equals three (3) time s the sum of the Class A, Class B, Class C, Class D and Class E Interest Amounts for the next Remittance Date plus the Outstanding Loan Balance of each Delinquent Loan

—

13 To the extent not paid by the Originator, any amounts due in respect of the listing of the Class A, the Class B Notes, the Class C Notes the Class D Notes and the Class E Notes on the Irish Stock Exchange

—

14 To the extent not reimbursed under item three above, reimbursement for the amount of any Scheduled Payment Advances relating to such Loans

—

15 Hedge Breakage Costs

—

16 Other amounts to the Indenture Trustee, Backup Servicer, Hedge Counterparty and Owner Trustee plus Additional Servicing Fee

—

17 To the Holder of the Class F Notes, the remaining Principal Distributable

—

18 To the Owner Trustee for payment to the holdes of the Certificates, any excess remaining after application of amounts under item 17

—

AFTER AN EVENT of DEFAULT, SERVICER DEFAULT OR ACCELERATED AMORTIZATION EVENT

—

Following an Event of Default, Servicer Default, an Accelerated Amortization Event

—

Collections on deposit in the Principal and Interest Account,

—

Balance as of end of Due Period

—

Total Available for Distribution

—

Remaining

Balance

1 Amounts owed to Hedge Counterparties (other than Hedge Breakage Costs and after an Event of Default, Hedge Breakage Costs not to exceed $500,000)

—

2 Pro rata, based on the amounts owed to such Persons under this item 2, subject to applicable limitations, amounts to Indenture Trustee, Backup Service, Owner Trustee, Successor Servicer (if any), and Irish Stock Exchange Fees (if applicable) (excluded amounts related to indemnification)

—

3 From the Collections received on the specific loans or which Scheduled Payment Advances were made, reimbursement for the amount of any Scheduled Payment Advances relating to such loans

—

4 (1) to S&P an amount equal to any accrued and unpaid fees due to S&P

—

(2) to the Servicer an amount equal to its accrued and unpaid Servicing Fee minus amounts paid to S&P pursuant under this item 4

—

5 Class A Interest Amount plus any Class A Interest Shortfall (and any interest thereon)

—

6 Class B Interest Amount plus any Class B Interest Shortfall

—

7 Class C Interest Amount plus any Class C Interest Shortfall

—

8 Class D Interest Amount plus any Class D Interest Shortfall

—

9 Class E Interest Amount plus any Class E Interest Shortfall

—

10 (a) to the Holders of the Class A Notes until the Outstanding Principal Balance of the Class A Notes is reduced to zero;

—

(b) to the Holders of the Class B Notes, the Class B Accrued Payable if any

—

(d) to the Holders of the Class C Notes, the Class C Accrued Payable if any

—

(e) to the Class C Notes until Outstanding Principal Balance is reduced to zero;

—

(f) to the Holders of the Class D Notes, the Class D Accrued Payable if any

—

(g) to the Class D Notes until Outstanding Principal Balance is reduced to zero;

—

(h) to the Holders of the Class E Notes, the Class E Accrued Payable if any

(i) to the Class E Notes until Outstanding Principal Balance is reduced to zero;

11 To the extent not reimbursed under paragraph 3 above, reimbursement for the amount of any Scheduled Payment Advances relating to interest on such Loans

—

12 Hedge Breakage Costs

—

13 Other amounts related indemnification to the Indenture Trustee, Backup Servicer, Hedge Counterparty and Owner Trustee plus Additional Servicing Fee

—

14 To the extent not paid above, any amounts due in respect to listing on the Irish Stock Exchange

—

15 To the Holders of the Class F Note, the Total Principal Distributable

—

16 To the Owner Trustee for payment to the holders of the Certificates, any remaining Collections

—


Signature


Title

CAPITALSOURCE FINANCE LLC
SERVICER’S CERTIFICATE
COMMERCIAL LOAN BACKED NOTES
SERIES 2006-1 January 0, 1900

SUBSTITUTIONS TO DATE

2006-1 Original

2006-1 Current

Name

Close Date

Maturity Date

Amount

Collateral Type

Period of Substitution

Reason for Substitution

Total

Percentage of Original Aggregate Loan Balance 0.00%

DELINQUENT LOANS

Asset-Based Loans

2006-1 Original

2006-1 Current

Name

Close Date

Maturity Date

Amount

Collateral Type

Period of Delinquency

Days Past Due

All Other Loan Types

2006-1 Original

2006-1 Current

Name

Close Date

Maturity Date

Amount

Collateral Type

Period of Delinquency

Days Past Due

CHARGED-OFF LOANS

2006-1 Original

2006-1 Current

Recoveries on Charged-Off Loans to

Name

Close Date

Maturity Date

Amount

Collateral Type

Period of Charge-Off

Date

LOANS SUBJECT TO SPECIFIED AMENDMENTS (1)

2006-1 Original

2006-1 Current

Name

Close Date

Maturity Date

Amount

Collateral Type

Period of Amendment

Reason for Restructure


(1)		Provide in separate attachment in tabular format; Coupon Prior to Amendment, Coupon Post Amendment Amortization Schedule Prior to Amendment; Amortization Schedule Post Amendment ; Maturity Date Prior to Amendment; Maturity Date Post Amendment

SERVICER ADVANCES

2006-1 Original

2006-1 Current

Name

Close Date

Maturity Date

Amount

Collateral Type

Number of Days Outstanding

Amount of Servicer Advance

OVERADVANCES

2006-1 Original

2006-1 Current

Name

Close Date

Maturity Date

Amount

Collateral Type

Number of Days Outstanding

Amount of Overadvance

LOAN RATING CHANGES


			2006-1 Original	2006-1 Current
Name	Close Date	Maturity Date	Amount	Amount	Collateral Type	Original Loan Rating	Revised Loan Rating
1
2
3
4
5
6
7
8
9

As of the date hereof, there has been no change to the ratings scale or underlying methodology of the Loan Rating system set forth in the Credit and Collection Policy other than as has been previously provided to each Rating Agency.


Signature


Title


Distribution by NAICS Code		Distribution by States
236		AL
311		AZ
313		CA
314		CO
315		CT
322		DE
323		FL
325		GA
326		IL
332		IN
336		IT
337		KS
339		KY
423		MA
424		MD
442		ME
454		MI
488		MN
511		MO
515		NC
517		ND
522		NH
524		NJ
531		NV
532		NY
541		OH
561		OR
562		PA
611		RI
621		SC
622		SD
623		TN
713		TX
721		UT
811		VA

812		WA

—		—


	Prior Month		Current Month

Asset based loans	$	—
Non-asset based loans		—

	$	—	$	—

Total CS Portfolio


Risk Rating	Total Portfolio % of Obligors	% of Par Outstanding
1
2
3
4
5
6

Performing Loans

Loans Delinquent

Loan Charge-Offs

CapitalSource Loan Tape 2006-1

Original

Risk

Current Risk

Loan #

Name on Note

State

NAICS

Initial Pool Balance

Pool Balance

Obligor Balance

Loan Collateral

Lien

Type

Loan Category

Closing

Maturity

Pricing Index

Interest Frequency

Coupon

Industry

Rating

Status

Asset Based
All Other

SERVICER’S MONTHLY COMPUTER TAPE FORMAT

The computer tape to be delivered in electronic format shall contain the following information for each Loan transferred to the Issuer as of the related Transfer Date:

1.		Loan Number

2.		State

3.		Industry

4.		Loan Category (i.e., asset based financed, healthcare secured, senior cash flow, subordinate cash flow or Pooled Obligor)

5.		Total Commitment

6.		Principal Balance

7.		Lending Type

8.		Loan Type

9.		Origination Date

10.		Maturity Date

11.		Pricing Index

12.		Margin

13.		Interest Rate

14.		Any additional information reasonably requested by the Indenture Trustee

15.		Current Loan Rating of the Loan

16.		Original Loan Rating of the Loan

17.		Statement Date

18.		Prior Month Risk Rating

19.		Current Month Risk Rating

20.		Initial Month Risk Rating

21.		Cash & Marketable Security^*

22.		Total Current Assets^*

23.		Total Intangible Assets^*

24.		Total Assets^*

25.		Total Current Liabilities^*

26.		Total Debt^*

27.		Retained Earnings^*

28.		Net Sales^*

29.		Cost of Goods Sold^*

30.		XXXX^*

00.		Total Interest Expense^*

32.		Net Income^*

33.		Depreciation & Amortization^*

34.		Electronic Excel file for the Fitch CRS model^*

For Total CS Portfolio


Risk Rating	Total Portfolio % of Obligors	% of Par Outstanding
	1
	2
	3
	4
	5

Performing Loans

Loans Delinquent

Loan Charge-Offs


*		To the extent reasonably available, to be updated on a quarterly basis.

Exhibit I
to Sale and
Servicing Agreement

FORM OF SUBSEQUENT TRANSFER AGREEMENT

SUBSEQUENT TRANSFER AGREEMENT (the “Agreement”), dated as of [___] [___], 20[___], by and among CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1, as the Issuer (the “Issuer”), CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, a Delaware limited liability company, as the Trust Depositor (the “Trust Depositor”), XXXXX FARGO BANK, NATIONAL ASSOCIATION, as the Indenture Trustee (the “Indenture Trustee”) and as the Backup Servicer (the “Backup Servicer”), and CAPITALSOURCE FINANCE LLC, a Delaware limited liability company, as the Servicer (the “Servicer”) and as the Originator (the “Originator”), is entered into pursuant to the Sale and Servicing Agreement referred to below.

WITNESSETH:

WHEREAS, the Issuer, the Trust Depositor, the Servicer, the Originator, the Indenture Trustee, and the Backup Servicer are parties to the Sale and Servicing Agreement, dated as April 11, 2006 (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Sale and Servicing Agreement”);

WHEREAS, pursuant to the Sale and Servicing Agreement, the Trust Depositor wishes to sell the Substitute Loans to the Issuer, and the Issuer wishes to purchase the same, for the consideration described in the Sale and Servicing Agreement; and

WHEREAS, the Servicer has timely delivered an Addition Notice related to such conveyance as required in the Sale and Servicing Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

Defined Terms.

Capitalized terms used herein shall have the meanings ascribed to them in the Sale and Servicing Agreement unless otherwise defined herein.

“Subsequent Cutoff Date” shall mean, with respect to the Substitute Loans transferred hereby, [___] [___], 20[___].

“Substitute Loans” shall mean, for purposes of this Agreement, the Substitute Loans listed in the Subsequent List of Loans attached hereto as Exhibit A.

“Subsequent Transfer Date” shall mean, with respect to the Substitute Loans transferred hereby, [___] [___], 20[___].

Subsequent List of Loans.

The Subsequent List of Loans attached hereto as Exhibit A is an amendment to the initial List of Loans attached as Exhibit G to the Sale and Servicing Agreement, as contemplated in the definition of List of Loans set forth therein. The Subsequent List of Loans separately identifies the Substitute Loans to be transferred pursuant to this Agreement on the Subsequent Transfer Date, and also further separately identifies the related Loan or Loans with respect to which a Substitution Event has occurred and which Loans are being deleted from the List of Loans by virtue of the delivery of the Subsequent List of Loans.

Transfer of [Substitute Loans][Additional Loans].

(a) Subject to and upon the terms and conditions set forth in Section 2.04 of the Sale and Servicing Agreement and this Agreement, the Trust Depositor hereby sells, transfers, assigns, sets over and otherwise conveys to the Issuer all of the Trust Depositor’s rights, title and interest in and to the following, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the following:

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

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

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

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

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

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

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

(b) It is the intention of the Trust Depositor and Owner Trustee that the transfer contemplated by this Agreement shall constitute an absolute assignment and sale of the Substitute Loans from the Trust Depositor to the Issuer, conveying good title thereto free and clear of any Liens (other than Permitted Liens).

Representations and Warranties of the Trust Depositor.

(a) The Trust Depositor hereby represents and warrants to the Issuer that the representations and warranties of the Trust Depositor required by Section 2.04 of the Sale and Servicing Agreement are true and correct as of the date such representations and warranties are required to be made.

(b) The Trust Depositor hereby represents and warrants that (a) the Outstanding Loan Balance of the Substitute Loans listed on the Subsequent List of Loans and conveyed to the Trust Depositor pursuant to this Agreement is $[___] as of the Subsequent Cutoff Date, and (b) the conditions set forth in Section 2.04 of the Sale and Servicing Agreement have been satisfied as of the Subsequent Transfer Date.

Ratification of Agreement.

As supplemented by this Agreement, the Sale and Servicing Agreement is in all respects ratified and confirmed and, as so supplemented by this Agreement, shall be read, taken and construed as one and the same instrument.

Counterparts.

This Agreement may be executed by facsimile signatures and in one or more counterparts (and by different parties in separate counterparts), each of which shall be an original but all of which together shall constitute one and the same instrument.

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.

Authorization of Servicer.

Pursuant to the terms of the Sale and Servicing Agreement, the Servicer has the power and authority to execute and deliver this Agreement on behalf of the Issuer.

* * * * * *

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


		CAPITALSOURCE COMMERCIAL LOAN
		LLC, 2006-1, as the Trust Depositor

		By:

		Name:

		Title:


		CAPITALSOURCE FINANCE LLC, as the
		Originator and as the Servicer

		By:

		Name:

		Title:


		CAPITALSOURCE COMMERCIAL LOAN TRUST 2006-1

		By:		CapitalSource Finance LLC, as Servicer

		By:

		Name:

		Title:


		XXXXX FARGO BANK, NATIONAL
		ASSOCIATION, not in its individual capacity but solely as the Indenture Trustee and as Backup Servicer

		By:

		Name:

		Title:

Exhibit J
to Sale and
Servicing Agreement

FORM OF SUBSEQUENT PURCHASE AGREEMENT

SUBSEQUENT PURCHASE AGREEMENT (the “Agreement”), dated as of [___________] [___], 20[___], by and between CAPITALSOURCE COMMERCIAL LOAN LLC, 2006-1, a Delaware limited liability company (the “Trust Depositor”), and CAPITALSOURCE FINANCE LLC, a Delaware limited liability company (“CapitalSource” or the “Originator”), entered into pursuant to the Loan Sale Agreement referred to below.

WITNESSETH:

WHEREAS, the Trust Depositor and the Originator are parties to the Commercial Loan Sale Agreement, dated as of April 11, 2006 (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Loan Sale Agreement”);

WHEREAS, pursuant to the Loan Sale Agreement, the Originator wishes to sell the Substitute Loans to the Trust Depositor, and the Trust Depositor wishes to purchase the same, for the purchase price set forth in Section 3 below; and

WHEREAS, the Originator has timely delivered an Addition Notice related to such conveyance as required in the Loan Sale Agreement.

NOW, THEREFORE, the Originator and the Trust Depositor hereby agree as follows:

Defined Terms.

Capitalized terms used herein shall have the meanings ascribed to them in the Sale and Servicing Agreement unless otherwise defined herein.

“Subsequent Cutoff Date” shall mean, with respect to the Substitute Loans transferred hereby, [___________] [___], 20[___].

“Substitute Loans” shall mean, for purposes of this Agreement, the Substitute Loans listed in the Subsequent List of Loans attached hereto as Exhibit A.

“Subsequent Transfer Date” shall mean, with respect to the Substitute Loans transferred hereby, [___________] [___], 20[___].

Subsequent List of Loans.

The Subsequent List of Loans attached hereto as Exhibit A is an amendment to the initial List of Loans attached as Exhibit G to the Sale and Servicing Agreement, as contemplated in the definition of List of Loans set forth therein. The Subsequent List of Loans separately identifies (by attached schedule, or marking or other effective identifying designation) the Substitute Loans to be transferred pursuant to this Agreement on the Subsequent Transfer Date, and also further

separately identifies (by attached schedule, or marking or other effective identifying designation) the related Loan or Loans with respect to which a Substitution Event has occurred and which Loans are being deleted from the List of Loans by virtue of the delivery of the Subsequent List of Loans.

Transfer of Substitute Loans.

(a) Subject to and upon the terms and conditions set forth in Section 2.04 of the Loan Sale Agreement and this Agreement, the Originator hereby sells, transfers, assigns, sets over and otherwise conveys to the Trust Depositor, in consideration of the Trust Depositor’s (x) payment of $ [___________] as the purchase price therefor, representing the prepayment proceeds received with respect to the related Substitution Event (if applicable) or (y) release and redelivery to the Originator of the related Loan Assets with respect to which a Substitution Event has occurred (if applicable), all of the Originator’s rights, title and interests in and to the following, including but not limited to, all accounts, cash and currency, chattel paper, electronic chattel paper, tangible chattel paper, copyrights, copyright licenses, equipment, fixtures, general intangibles, instruments, commercial tort claims, deposit accounts, inventory, investment property, letter of credit rights, software, supporting obligations, accessions, and other property consisting of, arising out of, or related to the following:

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

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

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

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

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

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

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

(b) It is the intention of the Originator and the Trust Depositor that the transfer contemplated by this Agreement shall constitute a sale of the Substitute Loans from the

Originator to the Trust Depositor, conveying good title thereto free and clear of any Liens (other than Permitted Liens), and that the Substitute Loans shall not be part of the Originator’s estate in the event of the filing of a bankruptcy petition by or against the Originator under any bankruptcy or similar law.

Representations and Warranties of the Originator.

(a) The Originator hereby represents and warrants to the Trust Depositor that the representations and warranties of the Originator required by [Section 2.04][Section 2.05] of the Loan Sale Agreement are true and correct as of the date such representations and warranties are required to be made.

(b) The Originator hereby represents and warrants that (i) the Outstanding Loan Balance of the Substitute Loans listed on the Subsequent List of Loans and conveyed to the Trust Depositor pursuant to this Agreement is $[___] as of the Subsequent Cutoff Date, and (ii) the conditions set forth in Section 2.04 of the Loan Sale Agreement have been satisfied as of the Subsequent Transfer Date.

Ratification of Agreement.

As supplemented by this Agreement, the Loan Sale Agreement is in all respects ratified and confirmed and, as so supplemented by this Agreement, shall be read, taken and construed as one and the same instrument.

Counterparts.

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.

* * * * * *

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


		CAPITALSOURCE COMMERCIAL LOAN
		LLC, 2006-1
		By:

		Name:

		Title:


		CAPITALSOURCE FINANCE LLC

		By:

		Name:

		Title:

Exhibit K
to Sale and
Servicing Agreement

CREDIT AND COLLECTION POLICY

(SEE ATTACHED)

CapitalSource Finance LLC

CREDIT POLICY MANUAL

For Internal Use Only

CREDIT POLICY MANUAL

TABLE OF CONTENTS


INTRODUCTION		I

LENDING GUIDELINES		II

ORGINATION		III

UNDERWRITING STANDARDS		IV

PORTFOLIO MONITORING		V

LOAN RATING/SERVICING		VI

FILE MAINTENANCE/RECORD KEEPING		VII

APPENDICES

INTRODUCTION

This Credit Policy and Procedure Manual (the “Manual”) governs the extension of any form of credit by CapitalSource Finance LLC (“Company” or CapitalSource”). The Manual can be updated based on recommendation of the Chief Credit Officer and approval by the credit committee.

This manual is to be used by CapitalSource employees exclusively. Any unauthorized use or reproduction is prohibited.

OBJECTIVES

The objective of the Manual is to establish standard procedures for originating, underwriting and monitoring assets. Creating standard credit and investment policies helps ensure consistency in approach and documentation, which leads to improved overall asset quality.

I-1

EXCEPTIONS TO POLICY

Management believes that close adherence to this credit policy is conducive to generating high asset quality. Therefore, credit decisions should be made based on adherence to the policy.

Credits that fail to comply with policy, that is, contain material exceptions to policy, must be so noted in the loan underwriting. The justification for the exceptions must be fully detailed and reflect careful analysis of the mitigants that justify the exception and must be approved by the credit committee.

I-2

LENDING GUIDELINES


LOAN SIZE		II- 1
LOAN APPROVAL AUTHORITIES		II-3
PRICING		II-4

LOAN SIZE

The maximum credit limits set forth have been established as a guideline. Any changes to the lending limits, or delegation of authority will be documented as an amendment to policy. Please refer to loan approval policy.

Equity and Debt Hold Limits

Set forth below are proposed policies with respect to: (1) direct equity investments, (2) fund commitments, and (3) maximum hold limits for loans:

Overall Equity Allocation:

Without the approval of a majority of the Board of Directors, management will not cause the Company to make an equity investment or a capital commitment to any fund that would cause the Company’s total commitment to fund investments plus direct equity investments to exceed 10% of the then tangible book value of the Company.

Sub limit on Fund Investments and Approval of Fund Investments:

Without the approval of a majority of the Board of Directors, management will not cause the Company to commit to a fund investment if that commitment would cause the total of all fund commitments to exceed 2.5% of the then tangible book value of the Company. All fund investments will require the approval of a majority of the Board of Directors.

Limit on any Individual Equity Investment:

Without the approval of a majority of the Board of Directors, management will not cause the company to commit to an individual equity investment of greater than $2.5 million.

Maximum Hold Limits for Loans:

Without the approval of a majority of the Board of Directors, the following hold limits shall apply for the different types of loans made by the Company:


Asset Based Loans and First Mortgage Real Estate Loans:		$55 Million.

Cash Flow Senior Loans:		$40 Million.

Cash Flow Term B Loans:		$30 Million.

Cash Flow Mezzanine Loans:		$25 Million.

Mezzanine Real Estate Loans:		$30 Million.

II-1


Asset Based Loans with a “Stretch Piece” that does not exceed 10% of the Asset Based Loan:		$50 Million.

Cash Flow Loans with a Highly Confident Syndication Bridge (the Company needs to be highly confident that the Maximum Hold Limit will be met within 60 days).		$80 Million.

Asset Based Loans and Real Estate with a Highly Confident Syndication Bridge (the Company needs to be highly confident that the Maximum Hold Limit will be met within 60 days).		$100 Million.

II-2

LOAN APPROVAL AUTHORITIES FOR NEW TRANSACTIONS

All transactions must have unanimous approval by the following officers, who together comprise the credit committee:


CEO		Xxxx Xxxxxxx

President		Xxxxx Xxxx

Chief Credit Officer		Xxxxx Xxxxxxx

Chief Legal Officer		Xxxxxx Xxxxxxx

CapitalSource Mortgage Finance LLC

Generally, CapitalSource Mortgage Finance underwrites and simultaneously places HUD mortgages. In the event a mortgage needs to be warehoused for over 45 days, approval is required by the Chief Credit Officer. Loans to be warehoused for more than 90 days require full credit committee approval.

PrivateSource Mortgage LLC

Consumer Loans generated by PrivateSource for the purpose of providing fractional mortgage financing. The credit committee has approved underwriting guidelines for this product. Loans that are within these guidelines do not require separate approval. These guidelines are included in this manual in section IV.

II-3

PRICING

The following sets forth guidelines in structuring pricing for transactions. If questions arise over appropriate pricing on a particular transaction, it is advisable to discuss the situation with the Managing Director, CEO or President prior to moving forward with a term sheet.

PRICING GUIDELINES

The Company should price all transactions on a floating rate basis. Generally, all senior loans are to be charged at a spread over the base rate (prime or libor). Fixed rates may be used. The client will always be liable for any and all hedging fees associated with fixed rate pricing.

Maximum pricing should be obtained through the combination of commitment fees, floating base rate, servicing and monitoring fees, float days, success fees, warrants and legal fees.

On all transactions, a fee or audit fee will be charged to offset costs. Term sheets where this element of pricing is negotiated must be pre-approved by the Managing Director of the respective business unit.

REVOLVING LOANS

Pricing should include either collection float days or clearance fees to enhance our yield.

Revolving loans or other loans where all or a portion of the Company’s committed facility remains un-drawn at closing should include an unused commitment fee.

Annual service fees or a loan-servicing fee should be part of the overall pricing.

Up-front fees for commitments will be charged.

Finally, all out of pocket expenses such as UCC filings, legal, audit and any other ongoing expense required to monitor the loan must be reimbursed by the customer.

Generally, a non-refundable deposit of at least 50% of the negotiated commitment fee should be collected upon issuing a commitment to a prospective borrower.

The Managing Directors have the discretion to adjust these guidelines as specific situations arise.

II-4

SENIOR TERM LOANS

Senior term loans should be priced on a floating basis. Any fixed rate accommodation should be match funded, the costs of which should the responsibility of our customer. This includes any break-up fees for early termination.

Up-front fees for commitments will be charged.

Finally, all out of pocket expenses need to reimbursed such as UCC filings, legal, audit along with any other on-going expense required to monitor the loan.

Generally, a non-refundable deposit of at least 50% of the negotiated commitment fee should be collected upon issuing a commitment to a prospective borrower.

MEZZANINE/SUBORDINATED LOANS

For mezzanine loans, the all-in rate is comprised of up-front fees, servicing fees, coupon, PIK, equity warrants, and/or success fees. A satisfactory yield should be obtained assuming no incremental value is ascribed to the warrants.

If a portion of a mezzanine loan is secured by excess collateral from a revolving loan or some other term facility, the all-in interest rate should be adjusted to factor in the portion of the loan that is secured.

II-5

ORIGINATION


GENERAL		III-l

DEAL FLOW CHART		III-2

NEW BUSINESS APPROVAL FORM		III-3

TERM SHEETS		III-5

DUE DILIGENCE PLANNING		III-6

EVALUATION OF MANAGEMENT		III-7

CLOSING PROCEDURES/DEVIATIONS		III-9

DELAY BETWEEN APPROVAL AND CLOSING		III-11

III

GENERAL

This portion of the Manual summarizes the origination process. The process begins with sourcing a transaction and ends with the ultimate funding of the transaction. On the next page is a flow chart that summarizes the Company’s deal process. Essentially, once a deal is originated, an Investment Officer reviews whatever package of information is supplied, analyzes financial information and then prepares a term sheet. Once the term sheet is approved internally (this internal approval process is dictated by the Managing Director of each respective business unit), it is sent to the prospective client for review. Once any negotiation issues are resolved and a term sheet is accepted, the Investment Officer prepares an initial client memo (see DealTracker for various examples).

When a term sheet is accepted, Underwriting is notified, and an Underwriting Officer is assigned. Due diligence is then planned, scoped and coordinated between Underwriting and the Investment Officer, except for certain real estate transactions. The Underwriting Officer will perform all field due diligence and will issue an independent report, again, except in certain real estate transactions. The Investment Officer will perform independent analysis simultaneously and will also complete a report. The two reports are the basis for seeking approval from the Credit Committee.

It should be noted the content and scope of the due diligence performed by an underwriter or investment officer can vary. In certain cases, such as in commercial real estate transactions, it may be determined that a separate underwriting report and/or separate due diligence is not required. The rational for these situations must be explained to the credit committee and will be considered in the loan approval process.

The following page illustrates this process in a process flow chart.

III-1

III-2

NEW BUSINESS APPROVAL FORM
[NAME OF BORROWER]
[$ AMOUNT]
[TYPE OF LOAN]

Approval Date:

Date of Credit Committee Memorandum:

Date of Underwriting Memorandum:

Approved By:


*Title*	*Name*	*Signature*
*Credit Officer*	Xxxxx Xxxxxxx
*General Counsel*	Xxxxxx X. Xxxxxxx
*President*	Xxxxx X. Xxxx
*CEO*	Xxxx X. Xxxxxxx

We do not have the greatest risk of loss related to this loan, and, therefore, do not consider it necessary to consolidate the operations of this loan in accordance with FIN #46.

III-3

Approval Conditions:


		Condition Met
	Conditions	(Y/N)
1.
2.
3.
4.

Review of Approval Conditions prior to Closing:

The loan documents accurately reflect the transaction as approved by the Credit Committee (including all conditions set forth above), all deviations have been duly authorized, and I have reviewed the background check(s) on the principals of the borrower and have determined that no material issues were identified therein.



		CS Legal

III-4

Term Sheet

All proposals on new business should be documented in writing with a term sheet. The term sheet should document the negotiated aspects of the deal including, but not limited to, pricing, length of contract, structure of various debt traunches, advance rates, amortization, fees, responsibility for due diligence costs, terms of warrants, or other equity. The sheet should include appropriate disclaimers as to not bind the Company. A copy of the countersigned term sheet should be included in the credit package that is submitted to the Credit Committee for approval. Please refer to deal tracker for multiple examples of term sheet formats and language.

A nonrefundable deposit should be received as part of the acceptance of the term sheet. These fees will range from $10,000 to $75,000 to reflect the size and scope of the transaction.

III-5

DUE DILIGENCE PLANNING

The planning and coordination of all due diligence is the responsibility of the Investment Officer and assigned Underwriting Officer. Scope of the due diligence will vary depending on the deal structure, industry, and reliance on assets or cash flow for source of repayment.

Due diligence will be conducted in accordance with the standards established by CapitalAnalytics. Due diligence by an outside party must be pre-approved by the Chief Credit Officer. A full due diligence report must be included in the credit package, which is submitted to the Credit Committee for approval.

III-6

EVALUATION OF MANAGEMENT

A critical area of the underwriting is the accurate assessment of management’s strengths and weaknesses. Past performance of the company, past experience of management, references, how management reacts under stress and to poor business conditions and the quality of a company’s MIS are important indicators of the quality of management. Management needs to be capable of making the difficult decisions that may be necessary to get a company through difficult times. Equally important is determining management’s commitment to the business.

The Investment Officer and Underwriter are always to be involved in this analysis. When necessary, Senior Management of the Company should supplement this process.

In the case of an LBO, we should evaluate not only the buying or sponsor group but also the management who will be executing the business plan.

The qualities that should be addressed in making this evaluation are as follows:

Performance-What has been management’s track record in delivering projected performance?

Accountability-Are key aspects of the business plan identified and assigned to specific persons for execution?

Decisiveness-Is management capable of making timely decisions?

Industry Knowledge-Does management possess an in-depth knowledge of their industry? Are they capable of quickly adapting to changes in the industry?

Commitment-Is management sufficiently committed (subject to non-competition agreement) to the business so that if a downturn should occur they will remain in place?

Communication-Does management do a good job of openly communicating with customers, vendors, employees, lenders, etc.? Keeping all parties informed of good and bad news?

Organization Intelligence-Does management have the MIS in place to intelligently run its business? Is management sufficiently informed about its competitors, customers, vendors, etc. in order to anticipate problems?

III-7

Incentive. Is management motivated and committed to the business?

The underwriting should identify who has met with senior management of prospect customers and the conclusions of the evaluation. When Senior Management of the Company are involved, it is preferable for meetings to take place at the customer’s location so those Senior Managers are seeing the operation they are being asked to finance.

Without exception, a background check must be performed on the principals and senior management team of all borrowers. The legal department will review the results prior to closing of the transaction.

III-8

CLOSING PROCEDURES

Responsibility for closing new loans rests with the assigned Loan Officer and the Investment Officer. Consideration should be given to the location of the Loan Officer or Investment Officer as well as his/her relative experience. Various factors will dictate the responsibility of each in the loan negotiation/documentation process such as timing, complexity, client relationship, etc.

At a minimum, procedures should provide for the following:

	1.		Any changes in financial covenants on non-asset based loans require the written approval of the Chief Credit Officer.

	2.		Final documentation, including third party agreements must be in a form acceptable to Legal Counsel. To the extent that any documents or other matters remain open and will be completed on a post-closing basis, Counsel is responsible for tracking any open items.

It is legal’s responsibility to determine that the loan has been closed in accordance with the approval. This includes completing all subject to’s. Any material modification in the approved conditions must be communicated to the Credit Committee and approvals, as appropriate, obtained in writing

Closing Memos

Deviations Memoranda from this point forward will be referred to as “Closing Memoranda.” These memos must be prepared for all transactions and signed by the relevant Managing Director. The Closing Memo must also be signed by three members of the Credit Committee if any of the following situations occur:

1. A material change to any aspect of the transaction or the business prospects of the borrower;

2. Any asset based deals are modified to include an “air ball” or overline in the amount of $500,000 or more;

3. Any transactions that have material changes in lien position;

4. If the amount of equity (or capital junior to CapitalSource) proposed to be invested in an acquisition (real estate or cash flow) is reduced by more than 10% from that set forth in the CCM; or

5. If specific Approval Conditions set forth on the New Business Approval Form are not satisfied.

If there is any change to financial covenants on cash flow loans, the Chief Credit Officer’s signature is required.

Materiality determinations for items 1 and 3 above shall be made by the relevant Managing Director.

III-9

Initial Fundings

Initial fundings require the following signatures:

1. Account Executive responsible for the transaction;

2. Two loan officers from the relevant business group; and

3. Second page of New Business Approval Form to be signed by CS internal attorney.

The Managing Director of each business group may add further signature requirements, in their discretion.

The CEO, President, Managing Directors and Chief Legal Officer will have the authority to execute loan documents, amendments, etc. on behalf of the company. This signing authority can be delegated on a deal by deal basis or in general as evidenced in writing.

Financial performance subsequent to approval should be tracked prior to funding. This tracking should be evidenced, and significant deviations should be communicated to the Credit Committee prior to funding.

III-10

DELAYS BETWEEN APPROVAL AND CLOSING

If a transaction is closed more than 90 days after approval, then the underwriting, in the discretion of the Chief Credit Officer, must be updated. Depending on the scope of the original due diligence and underwriting, this may require an updated field examination. The Chief Credit Officer must approve the scope of any update work. The results of the update should be evidenced in writing and attached to the closing memo.

If a material deviation in the security, cashflow or other performance is detected, a memo addressed to all key persons in the process is required. If a review of the transaction does not note any significant issues, a memo must still be provided by the Investment Officer and approved by the Managing Director

III-11

UNDERWRITING STANDARDS


GENERAL GUIDELINES		IV-1

ETHICS IN LENDING		IV-2

CONFLICTS OF INTEREST		IV-3

UNDERWRITING OBJECTIVES		IV-4

GENERAL GUIDELINES

All loans and other extensions of credit including, without limitation, leases and repurchase agreements, shall be underwritten in compliance with Company and CapitalAnalytics policy. It is the responsibility of the underwriter to insure that appropriate policy and procedures of CapitalAnalytics have been applied to each transaction. All underwriting is to be evidenced in writing and filed in the credit file.

All due diligence on transactions is to be performed by CapitalAnalytics unless it is pre-approved by the Chief Credit Officer.

All underwriting must address the quality and depth of management. In addition, the character of management, including their personal and business dealings is of utmost importance. Background searches are required. At a minimum management of prospective customers will be credit checked as well as subject to a background search. The scope of the background check must be discussed and decided upon during the planning process. Any firm used for this purpose must be approved by the Managing Directors of each business unit. Any reports prepared by such firms are to be reviewed by Legal prior to closing.

All fundamental terms and conditions of a credit as well as covenants must be included in the credit write-up for approval.

Speculative, high-tech and start-up companies should be avoided without the presence of sufficient collateral.

Borrowers in regulated industries should be subject to in depth diligence regarding the current regulatory environment and, if deemed appropriate, by Legal, special regulatory counsel should be engaged.

IV-1

ETHICS IN LENDING

CapitalSource Finance LLC places considerable trust, responsibility and authority in management, officers and account officers. Accordingly, all employees involved in the credit process are expected to keep the highest ethical standards. Furthermore, the Company requires everyone to adhere to the spirit as well as the letter of the local laws and regulations governing the extension of credit.

Anyone who has any doubts as to the ethical or legal probity of a course of action or situation should consult Legal.

Ethical Lending

All employees of the Company are required to place in the file and make known to appropriate approval bodies all material information necessary to make informed credit decisions.

It is unethical and could result in civil suit/criminal prosecution should any employee of the Company or CapitalAnalytics withhold detrimental information that, if known, would result in the decline or withdrawal of a credit.

Xxxxxxx Xxxxxxx/Loans and Kickbacks:

Xxxxxxx Xxxxxxx:

Employees are absolutely prohibited from buying or selling stock (or options) of any company to which the Company lends or to which the Company is considering a loan.

Loans and Kickbacks:

Employees are absolutely forbidden to accept any gratuity, monetary, or otherwise, as an inducement to provide credit or conceal the status of a current credit. Employees are prohibited from accepting any inducement by borrowers to grant credit on more favorable terms than is warranted by the credit of the borrower.

Any instances of “kickbacks” or (offers thereof) must be reported immediately to Legal.

IV-2

Conflicts of Interest:

Each employee occupies a position of trust and confidence with respect to the Company. Each person has a fiduciary duty to act for the primary benefit of the Company in all manners pertaining to that person’s employment. Accordingly, each employee must conduct him or herself in such a manner as to avoid any actual or apparent conflict of interest between such individual’s personal financial interests and the best interest of the Company.

Confidential Information:

The Company is the recipient of much information, which must, for a variety of reasons, be strictly confidential and used for only legitimate internal purposes.

Information is invariably presented to the Company by customers on the basis of confidentiality and shall not be disclosed outside the Company without the consent of the customer, except that:

The exchange of commercial credit information (i.e. status inquiry) between banks and other credit institutions shall be permitted, as well as information necessary for review by outside legal and /or consultants.

Any information that might possibly be used for improper monetary gain or unfair advantage by Company personnel or third parties shall be considered strictly confidential and privileged. Personnel are strictly forbidden to use or disclose information in their possession for personal gain. This injunction extends to family, personal acquaintances, and business relationships.

IV-3

UNDERWRITING OBJECTIVES

The purpose of underwriting is to:

Support a transaction based on known facts, industry information, and analysis of books and records, field examinations, thorough financial analysis, legal opinions and evaluation of management.

Underwriting should be based on supporting collateral, supporting financial performance, enterprise value, sound judgment and expert opinions. Time constraints (drop dead clauses) budgetary factors or referral source pressures should not affect a thorough underwriting. Where appropriate, the final funding of a transaction could be postponed for the addition of current information (e.g. year-end audited financial statements, updated budget, etc.) or the resolution of unknown outcomes (i.e. lawsuits).

IV-4

UNDERWRITING PROCESS

The initial underwriting process begins when a deal is sourced and entered into the CapitalSource Deal Tracker (“DT”). The information gathered at this point includes, but is not limited to, financial statements, management profile, projections, need for financing, sponsor or buying group profile (if applicable). Once a deal is sourced, either a Development Officer or Investment Officer prepares a term sheet. See origination section for a discussion on term sheets.

When the decision to issue a term sheet is made, Underwriting should be notified by entering the information on the DT so that the progress of the term sheet can be tracked. All term sheets, along with other pertinent deal flow information should be communicated to Underwriting such that appropriate staffing decisions and planning can be accomplished.

Once a term sheet is executed by a potential customer, the Investment Officer and assigned Underwriting Officer should go through a planning process. This process will include setting the expectations for timing of delivery of a closing, and then working backwards, determine a date for approval, a date that the credit write-up needs to be completed, date the field exam needs to be completed, etc. Any scheduling of appraisals, outside research, background checks etc. should be determined, and responsible parties determined at that time.

The majority of all new transactions will require a field examination. The scope will vary depending on whether there is a reliance on collateral, cashflow, or both. The scope of this fieldwork would be determined in the planning process. Obviously, as fieldwork is being performed, adjustments to the scope of the work are often necessary. The underwriter and Investment Officer must be kept appraised of the process so that any adjustments to the timing, structure, etc. can be considered and communicated back to the customer as necessary.

Field examination work is to be summarized in a comprehensive document in a standard format as determined by CapitalAnalytics. This report is to be included in the credit package submitted to the credit committee for approval.

The accumulation of the due diligence/underwriting process will be documented in the form of an underwriting report. An underwriter must prepare this document. This report has a standardized format as determined by CapitalAnalytics. The Investment Officer will prepare a separate credit memorandum with his/her analysis of the transaction. These documents have a standardized format. The credit committee format is dictated by the respective Managing Directors. The underwriting report is dictated by CapitalAnalytics. In general, an underwriting file should contain information/analysis on a company’s years in business, company history, management team experience, industry, capital structure, financial performance and discussion of collateral.

IV-5

The completed credit package shall be the basis for approving each transaction. Material omissions of information such as final year-end financial statements, budgets, etc. will be noted as open items on the approval sheet. Any and all conditions of approval will also be included on the approval sheet so that the legal department administration will have a record of all approval conditions in order to resolve them at closing.

The Credit Committee will make approvals for new loans. Meetings will take place no less frequently than weekly either in person or via teleconference. Approval is to be evidenced by signatures on the approval page and will be retained in the credit file. Facsimile copies or email approvals are adequate. A verbal approval by a Credit Committee member must be evidenced by signature subsequently and filed in the credit file.

IV-6

RISK ACCEPTANCE CRITERIA

The company has developed Risk Acceptance Criteria, (“RAC’s) to be used as a guide in structuring and evaluating loan transactions. These criteria must be considered when underwriting a transaction. The underwriting officer is responsible for summarizing compliance with the RACs and noting exceptions. Any and all exceptions must be considered in determining whether a transaction should be recommended for approval.

While there are common considerations when considering loans of all types such as credit, collateral, etc, the separate business units contain their own unique sets of risks and credit considerations. Therefore, RAC’s have been developed for each business unit for various types of transactions within those units.

The following pages show the current risk acceptance criteria developed for each group. Healthcare transactions are evaluated using three sets of RACs. One for term loans, one for revolvers and one for equipment leases. For Corporate Finance, three sets of RACs have been developed. The RAC’s are for ABL, Senior Term Loans and Mezzanine/Subdebt transactions. Finally, Structured Finance has three sets of RACs, Vacation Ownership, Real Estate and Rediscount.

IV-7

HealthCare Finance — Secured Term Deals Risk Acceptance Criteria


Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Market Segment	Healthcare service companies including Skilled Nursing Facilities, Assisted Living Facilities, Congregate Care Retirement Communities, Acute Care and Long-Term Acute Care Hospitals, Ambulatory Surgery Centers, Home Health Providers, and Mental Health Providers

Borrower Size	$5MM annual revenues

Loan Size (hold)	Minimum SIMM, maximum $55MM

Geographic Region	No Restrictions

Borrower Recourse	Normal and customary non-recourse carve-outs

Interest Rate	Prime or Libor Based

Term Loan Maturity	Up to seven years

Term Loan Amortization	Negotiable; Typically 25 year with balloon

Use of Proceeds	Business Acquisition, Real Estate Financing

Collateral	First Mortgage on Real Property and all available assets

Loan to Value	Loan to value should not exceed 80% of M.A.I, appraised value and also a multiple of underwritten cash flows.

Debt Service Coverage	Stabilized should support Debt Service in excess of CapitalSource Facility

Appraisals	Required

Personal Guarantees	Negotiable

Evaluation of Management	Must be performed by an Investment Officer and Underwriting Officer

IV-8

HealthCare Finance — Asset Based Deals Risk Acceptance Criteria


Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Market Segment	Healthcare service companies including Skilled Nursing Facilities, Assisted Living Facilities, Congregate Care Retirement Communities, Site Maintenance Organizations, Contract Research Organizations, Acute Care and Long-Term Acute Care Hospitals, Ambulatory Surgery Centers, Durable Equipment Manufacturers, Physician Practice Management Companies, Home Health Providers, Mental Health Providers, Healthcare Technology companies and other Healthcare Service Companies

Borrower Size	$5MM annual revenues

Loan Size (hold)	Minimum $1MM, maximum $55MM

Geographic Region	No Restrictions

Borrower Recourse	Required

Use of Proceeds	Working Capital, Business Acquisition

Collateral	First perfected lien on Accounts Receivable / Inventory and all available assets, as applicable

Advance Rates	Advance rate, 70-85% of net collectible collateral value for accounts receivable and 45-60% for inventory

Eligibility Period	Typically, Current- 180 days dependant on industry

Loan Turn	Industry Specific, Generally 20-90 days

Lockbox Control	Required

Loan Term	2-3 Years

Interest Rate	Prime or Libor Based Rate

Debt Service Coverage	Stabilized Debt Service Coverage supports CapitalSource Facility

Covenants	Negotiable; typically include census and fixed charge coverage ratios.

Personal Guarantee	Negotiable

Evaluation of Management	Must be performed by an Investment Officer and Underwriting Officer

IV-9

HealthCare Finance — Equipment Leases


Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Market Segment	Healthcare service companies including Skilled Nursing Facilities, Assisted Living Facilities, Congregate Care Retirement Communities, Acute Care and Long-Term Acute Care Hospitals, Ambulatory Surgery Centers, Home Health Providers, and Mental Health Providers

Borrower Size	$5MM annual revenues

Loan Size (hold)	Minimum $1MM, maximum $5MM

Geographic Region	No Restrictions

Borrower Recourse	Normal and customary non-recourse carve-outs

Interest Rate	Prime or Libor Based. Can be fixed

Term Loan Maturity	Up to seven years

Term Loan Amortization	Up to 84 months

Use of Proceeds	The related equipment with respect to the lease is not a fixture. Lease arises under a contract pursuant to the installation of the equipment.

Collateral	Equipment securing the lease.

Loan to Value	Loan to value should not exceed 80% of M.A.I. appraised value and also a multiple of underwritten cash flows,(i.e. applicable for example in an MRI center, or other such treatment center).

Debt Service Coverage	Stabilized should support Debt Service in excess of CapitalSource Facility

Appraisals	Not required

Personal Guarantees	Negotiable

Evaluation of Management	Must be performed by an Investment Officer and Underwriting Officer

IV-10


Senior Secured Deals
Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Market Segment	Manufacturers, Wholesalers, Distributors, Service Organizations, Retailers, Healthcare companies, and companies undergoing recapitalization/leveraged buyout, turnaround, restructuring, DIP, growth, acquisitions, modernization.

	Discouraged Industries: General Contractors, Construction

Borrower Size	$10MM minimum annual revenues

Loan Size (hold)	Minimum $1MM, maximum $40MM hold.

Geographic Region	No Restrictions

Term Loan Amortization	No material term loan collateral exposure at end of contract using scheduled amortization.

Term Loan Maturity	5-7 years

Work-in-process (WIP) advances	Limited unless supported by firm purchase orders or customer releases.

Accounts Receivable Advances	Limited to 90% based upon dilution.

Principal Moratorium	Interest only period for term loans limited to one year

Evaluation of Management	Must be performed by a Investment Officer and Underwriting Officer at a minimum.

IV-11

Corporate Finance


Sr. Cash Flow Term Loan
Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Market Segment	Manufacturers, Wholesalers, Distributors, Service Organizations, Retailers, Healthcare companies, and companies undergoing recapitalization, leveraged buyout and acquisitions.

	Discouraged Industries: General Contractors, Construction, Hi-Tech, Cyclical, Oil& Gas

Borrower Size	$20MM minimum annual revenues $3MM minimum EBITDA

Loan Size (hold)	$40MM maximum loan

Geographic Region	No Restrictions

Leverage — Senior Debt	Maximum Senior debt to operating cashflow (EBITDA less maintenance capex) of 3.50x.

Interest Coverage	EBITDA to Senior interest of 3:1 at a minimum.

Capitalization	Senior debt (senior, subordinated, seller notes) limited to 60% of the capital structure.

Concentrations	Sales concentrations with one customer in excess of 30% or a major single product (in excess of 30% of sales).

Term Loan Amortization	Within first three years 30% of total term loans should amortize.

Term Loan Maturity	Maximum 10 years.

IV-12

Corporate Finance


Mezzanine/Sub Debt
Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Market Segment	Manufacturers, Wholesalers, Distributors, Service Organizations, Retailers, Healthcare companies, and companies undergoing recapitalization, leveraged buyout and acquisitions.

	Discouraged Industries: General Contractors, Construction, Hi-Tech, Cyclical, Oil& Gas

Borrower Size	$30MM minimum annual revenues $7.5MM minimum EBITDA

Loan Size	$25MM

Loan Size	$25MM maximum loan

Geographic Region	No Restrictions

Leverage — Total Debt	Maximum total debt to operating cashflow (EBITDA less maintenance capex) of 4.5x.

Interest Coverage	EBITDA to total interest of 2:1 at a minimum.

Capitalization	Total debt (senior, subordinated, seller notes) limited to 75% of the capital structure.

Concentrations	Sales concentrations with one customer in excess of 30% or a major single product (in excess of 30% of sales.)

Term Loan Amortization	Within five years 90% of senior term loans should amortize.

Term Loan Maturity	Maximum 7 years.

IV-13

VACATION OWNERSHIP

Table I — Asset Based Transaction


Asset Secured Deals
Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Loan Size	Maximum $55MM

Geographic Region	United States

Market Segment	Borrower shall be involved in the financing of notes receivable to consumers associated with the purchase of vacation ownership intervals or the sale of marketable vacation ownership intervals.

Advance Rate	Maximum of 90% of Eligible Accounts Receivable; maximum of 90% of Eligible Inventory

Eligibility Criteria	Receivables: secured by a first mortgage lien on a timeshare interest; payable in US dollars; carrying minimum interest rate higher than that charged by CapitalSource; matures in no more than 84 months from origination date; current with no more than 90 days past due on contractual basis; maintains acceptable title insurance; maintains acceptable property insurance; properly documented with original note in CapitalSource’s possession.


	Inventory: secured by a first mortgage lien on the timeshare interval; located in the US, Caribbean, Canada or Mexico; maintains acceptable title insurance; maintains acceptable property insurance.

Loan Amortization	Amortization shall be based on the sale of assets based on a pre-determined release price.

Loan Term	No longer than five (5) years

Delinquency History	Historical data must reflect acceptable delinquency characteristics.

Credit Underwriting & Asset Management	Borrower must maintain documented credit underwriting and asset management procedures.

File Maintenance	Credit and legal files should be maintained in good order and exhibit consistent compliance with credit underwriting and asset management guidelines

Evaluation of Management	Must be performed by an Investment Officer and Underwriting Officer at a minimum.

IV-14

REDISCOUNT


Asset Secured Deals
Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Loan Size	Maximum $55MM

Geographic Region	United States

Market Segment	Borrower shall be involved in the financing of consumer and/or commercial notes receivable secured by a first lien on underlying collateral.

Advance Rate	Maximum of 90% of Eligible Accounts Receivable

Eligibility Criteria	Receivables: secured by a first lien on underlying collateral; payable in US dollars; originated in a state approved by CapitalSource; carrying minimum interest rate higher than that charged by CapitalSource; current with no more than 90 days past due on contractual basis; properly documented with original note and other applicable instruments in the possession of CapitalSource or a third-party approved by CapitalSource.

Loan Amortization	Maintain either (i) the Borrowing Base, as certified by the Borrower or (ii) the amortization schedule if loan is a term loan or liquidity asset pool.

Loan Term	No longer than five (5) years

Delinquency History	Historical data must reflect acceptable delinquency characteristics.

Credit Underwriting & Asset Management	Borrower must maintain documented credit underwriting and asset management procedures.

File Maintenance	Credit and legal files should be maintained in good order and exhibit consistent compliance with credit underwriting and asset management guidelines

Evaluation of Management	Must be performed by an Investment Officer and Underwriting Officer at a minimum.

Financial Reporting	To be provided monthly. Annual financial statements to be reviewed if outstanding loan is less than $5MM and audited if greater than $5MM.

IV-15

REAL ESTATE


Asset Secured Deals
Risk Acceptance Criteria	Risk Acceptance Description	Comment on Compliance
Loan Size	Maximum $55MM/$30MM for mezzanine

Geographic Region	United States

Advance Rate	Maximum of 90% loan-to-value

Eligibility Criteria	Commercial property located within the United States.

Loan Amortization	Loans are structured as either (i) interest only or (ii) amortizing per a preset schedule.

Loan Term	No longer than five (5) years

Delinquency History	Historical data must reflect acceptable delinquency characteristics.

Credit Underwriting & Asset Management	Borrower must maintain documented credit underwriting and asset management procedures.

File Maintenance	Credit and legal files should be maintained in good order and exhibit consistent compliance with credit underwriting and asset management guidelines

Evaluation of Management	Must be performed by an Investment Officer.

Financial Reporting	To be provided monthly. Annual financial statements to be reviewed.

IV-16

PrivateSource

PrivateSource Mortgage LLC (“PrivateSource”), a wholly-owned subsidiary of CapitalSource Inc., has successfully obtained its California Lender’s License, which was a prerequisite to provide fractional mortgage financing in the State of California. As a result, PrivateSource has now begun soliciting loan applications from individuals.. Each loan application will be evaluated according to the following minimum underwriting criteria.


Minimum Credit Score (i.e. FICO)		650
Maximum Monthly Debt Payments to Monthly Net Income Ratio		50.00%
Minimum Down Payment		15.00% *
Maximum Loan-to-Cost/Value		85.00% *
Maximum Loan Length		30 years
Minimum Loan Length		15 years
Approved Resort		Must be approved by PrivateSource, either through (i) an inventory financing that has obtained separate Credit Committee approval or (ii) independent approval by PrivateSource following, among other items, an on-site visit and a review of Developer’s financial statements and business plan.
Approved Credit Bureau Processor		NCO Credit Services will electronically transmit a tri-merge credit report from all three credit agencies (i.e. Equifax, Experian and Trans Union), complete with a “Bankruptcy Model Score” to enhance applicant screening.
Minimum Information Required from Each Prospect		See attached Exhibit A
Appraisal		Each funded loan for each fractional unit will require a FNMA 2065 Appraisal Report.
Approved State		PrivateSource has satisfied (i) the necessary state qualifications to do business and, where applicable, (ii) the necessary state licensing requirements to originate mortgage loans. As the need arises, PrivateSource will coordinate with Xxxxxxxxx Xxxxxxxx to satisfy these requirements prior to initiating loan origination activity in any new state.
Approved Legal Documentation		PrivateSource has assembled near full loan documentation at the direction and guidance of Xxxxxxxxx Xxxxxxxx. Each Approved State will have a tailored Deed of Trust and Promissory Note, the content of which will be reviewed and approved by local counsel at the direction of Xxxxxxxxx Xxxxxxxx.
Approved Custodian		BNY Midwest Trust (or other approved third-party custodian).
Approved Servicing Agent		Concord Servicing Corporation

IV-17

PORTFOLIO MONITORING


PORTFOLIO MEETINGS		X-x

CONTRACT EXTENSIONS/AMENDMENTS		V-2

TERM LOAN RELOADS		V-3

OVERADVANCES/OVERLINES		V-4

COVENANT DEFAULTS		V-5

FIELD EXAMINATION REPORTS		V-6

PROBLEM LOAN REPORTING		V-7

LOSS RESERVES		V-9

PORTFOLIO MEETINGS

Portfolio meetings generally will take place once per week. During this meeting, selected loans in the portfolio will be reviewed by the loan officers responsible for the accounts. All members of the Credit Committee will be present each week for these meetings. The purpose of a portfolio meeting is to provide a status up-date of pertinent, material events and information on applicable accounts. The responsibility for overall portfolio management and monitoring will reside within the various business units as dictated by the Managing Directors of those units. The frequency and scope of detailed portfolio meetings as part of the overall objective of portfolio management will therefore be developed and recommended by the Managing Directors and documented in their respective servicing manuals. In addition, the credit committee will conduct periodic portfolio meetings to encompass the entire portfolio on an as needed basis, but no less than quarterly.

V-1

CONTRACT EXTENSIONS/AMENDMENTS

The extension/amendment of a contract and release of an obligor without repayment requires approval by the Chief Credit Officer. A credit memorandum prepared by the loan officer must be completed and submitted.

The following are items that would not require approval by the Chief Credit Officer:

1.		Reductions in a line of credit.

2.		Reductions in eligible collateral.

3.		Addition of a new entity in the borrowing base provided the information has been audited, and the addition does not increase the overall line of credit.

4.		Extension of an existing line of credit provided there is no deterioration in the financial performance of the borrower or in the collateral.

5.		Release of collateral due to sale.

The Managing Director must approve the changes listed above. Additionally, any extension, modification, amendment or forbearance on any transactions with a four rating or greater must be approved by the Chief Credit Officer, regardless of aforementioned items.

Finally, all modifications, amendments, extensions, waivers, consents, collateral releases, etc. must be approved by the legal department with copies of executed documents promptly furnished to the legal department.

V-2

TERM LOAN RELOADS

Term loans can be reloaded on existing contracts provided the customer’s credit performance and collateral has not deteriorated. The contract term, pricing and possible fees must be considered in conjunction with the request. The Credit Committee must approve any reloads of a term facility. An approval memorandum must be prepared and approval signatures retained for the file.

V-3

OVERADVANCES/OVERLINES

Advances beyond the authorized credit line should be discouraged, as that procedure would be in direct contradiction of our approval process. However, the expectation of having all loans fall within their available collateral base or credit line is unrealistic.

Any overadvance or overline that extends beyond 30 days and/or exceed $500,000 requires approval by either the President, Chief Credit Officer or the CEO. Amounts under $500,000 and less than 30 days will adhere to the schedule proposed by each Managing Director as documented in the respective servicing guidelines for each group. These approval authorities are to be reviewed periodically, and changes and/or additions should be approved by the CEO and/or the Chief Credit Officer. Any overadvance to a borrower with a four rated credit or lower must be approved by the Chief Credit Officer.

All overadvances/overlines must be approved in writing. The reasons for the accommodation, along with a repayment schedule, financial spreadsheet and reporting status must be attached to the approval form.

V-4

COVENANT DEFAULTS

All material violations of loan covenant defaults should be communicated to the credit committee.

The respective Managing Director for each group must approve any waivers of covenant defaults. The scope of the allowable waivers shall be documented in each group’s respective service manuals. The Legal Department should be consulted prior to granting the waiver and their advice followed with respect to the wording of any waiver. The Chief Credit Officer must be consulted with respect to covenant default for four rated credits or lower.

It is important that when we become informed of covenant defaults, we promptly address these defaults by either granting waivers, negotiating terms of forbearance, or notifying the client that we are aware of the default and are reserving all our rights to pursue remedies. Again, the Legal Department should be consulted as circumstances dictate.

V-5

FIELD EXAMINATION REPORTS

Capital Analytics must conduct field examinations. This procedure should entail an independent impartial review of a customer’s financial/collateral position. This assessment will be made from the company’s books and records as well as physical observation of the business.

Standardized forms shall be used for field examinations. These forms should in no way limit the field examiner in his/her examination. Prior to embarking on a field examination, the field examiner must discuss the current status of the customer he/she is about to visit with the loan officer. The loan officer should mention any particular areas of concern during the planning phase. Fieldwork will not be scheduled in absence of a pre-audit conference.

The Chief Credit Officer or his designee will approve all field examination reports prior to distribution. Initials from the loan officer will evidence the review of the field examination reports by loan administration. Any recommendations or exceptions noted in the examination must be addressed in writing within 15 working days from distribution of the report. Responses to the examinations will be copied to the Chief Credit Officer, and the Managing Director of the respective business unit. The original will be filed in the credit file.

V-6

PROBLEM LOAN REPORTING
Overview

Over the lifecycle of any borrower, there may be periods where operational and financial problems may negatively affect the repayment of a loan. It is important that we proactively manage these situations to try and preserve our relationship with our borrower while managing the increasing level of risk in a particular loan.

Once a loan is rated 4 or higher, it is considered a problem loan. Loans rated 3 or higher may be experiencing negative trends in financial or operational performance, cash flow and debt service capability or collateral value. In these cases the loan officer should consider consulting with the Problem Loan Manager as to strategy and tactics in managing the loan before the situation deteriorates further. When a loan is downgraded to a 4 it is the responsibility of the loan officer to arrange a meeting with the respective MD and Problem Loan Manager to determine:

	•		what level of supervision will be required by the Problem Loan Manager or other representatives from Capital Analytics (CA)

	•		what strategy and tactics will be adopted to prevent further deterioration and ultimately lead to an upgrade of the risk rating to 3 or better?

Problem Loan Manager/Capital Analytics Supervision

Loans rated 4 or higher will require the supervision of the Problem Loan Manager or other representative from CA. The level of supervision will be determined in a meeting between the loan officer, the respective MD and the Problem Loan Manager. This meeting is to be held on a timely basis, but no more than 5 days after the downgrade. The level of supervision will be determined based upon the specific circumstance for a particular loan. Consideration will be given to the severity and speed of the deterioration, the strength of the loan documentation, our collateral position and the likelihood of a bankruptcy filing. The levels of supervision are:

	•		Shadow Supervision

	•		Active Involvement

	•		Direct Management

Shadow Supervision: the loan officer will provide frequent, detailed updates on the (i) progress of the company’s turnaround efforts, (ii) any deterioration in collateral coverage, (iii) any deterioration of repayment ability, (iv) the status of covenant or payment defaults, (v) status of pertinent negotiations, (vi) other relevant issues.

Active Involvement: the Loan Officer will (i) include the Problem Loan Manager or other representative from CA in all negotiations and discussions with management, sponsor groups or other relevant third parties, (ii) provide the Problem Loan Manager or other representative from CA with all relevant financial analysis and financial information, (iii) consult with the Problem Loan Manager or other representative from CA in establishing loan management strategies and/or action plans.

V-7

Direct Management: the Problem Loan Manager or other representatives from CA will take full responsibility for the day to day management of a loan under certain circumstances. In these cases the loan officer will ensure that there is a proper transition in the management of the loan and will remain available to provide historical perspective as needed.

Loan Administration Procedures

When a loan is downgraded to a 4, in addition to the procedures outlined in section V-7 of the Credit Policy Manual, the Loan Officer must request an updated field exam and updated appraisals of inventory and fixed assets. Consideration should be given to reviewing the legal file in detail and/or transferring the legal file to outside legal counsel, under the supervision of in-house counsel, with a strong background in working with problem loans for a comprehensive legal file review. The Problem Loan Manager should be consulted for a recommendation. Please note that whenever the decision to utilize outside counsel is considered, that the legal department must approve it.

For all loans rated 4 or lower, the Loan Officer is required to report on a regular basis on the status of the loan. This report should focus on the root cause problems and the corrective actions being taken. This reporting will also address repayment capability, both current and projected, and collateral valuation based on fully funded loan facilities. In addition, the loan officer should track the key performance indicators (occupancy, census, payor mix, backlog, book to xxxxxxxx ratio, achievement of synergies, etc.) along with the trends. In addition, if there are guarantors, the loan officer must request updated personal financial statements on the CA format signed by all of the guarantors as well as copies of the signed and filed federal income tax returns for the last two tax years. The loan officer should prepare a detailed analysis of these documents.

When a loan is downgraded to a 5, if not already done, consideration should be given to assigning the legal file to outside legal counsel with a strong background in handling problem loans. If collateral includes real estate the Loan Officer must determine if Phase I or Phase II environmental reports are necessary. For those loans where enterprise value is the primary source of repayment, the account officer should consider engaging an investment banker to perform a business valuation.

The Loan Officer is responsible for recommending downgrades and upgrades of risk ratings as well as changes to accrual status and loan loss reserves on a timely basis.

When a loan is downgraded to a 4 or lower every effort should be made improve our ability to manage the risk related to this loan. The following steps are recommended:

	1.		obtain full control of cash including a lockbox and the daily sweep of cash against revolving loans

	2.		monthly financial reporting and monthly covenant reporting

	3.		daily collateral reporting

	4.		eliminate any limitations on the frequency of field exams and caps on expenses which can be passed along

V-8

LOSS RESERVES

Overview

CapitalSource’s most significant asset is its loan portfolio, which accounts for approximately 90% of the total assets on the balance sheet. Accordingly, a loan loss reserve policy has been established to record appropriate reserves based on the risk inherent in the type of loan and the risk rating assigned to it by the credit committee. The risk inherent in the loan is based on the seniority of CapitalSource’s position, senior loans are less risky than subordinated loans, and the type of collateral supporting the loan, asset based, cash flow or real estate. Asset based loans are considered lower risk, real estate loans are considered moderate risk, and cash flow loans are considered higher risk. These risk factors are combined and a risk factor is assigned to every loan in each class in order to calculate the loan loss reserve on the current loan portfolio.

Accounting Technical Literature

Generally accepted accounting principles for recognition of loan losses is provided by Statement of Financial Accounting Standards No. 5, Accounting for Contingencies (“SFAS No. 5”) and No. 114, Accounting by Creditors for Impairment of a Loan (“SFAS No. 114”). SFAS 5 deals with the general reserve booked to all loans in the portfolio and SFAS 114 deals with specific reserve, which are applied to loans classified as a 6 or troubled debt restructurings.

General Reserve

Per paragraph 85 of SFAS 5; the conditions for accrual are not “intended to be so rigid that they require virtual certainty before a loss is accrued. They require only that it is probable that an asset has been impaired or a liability has been incurred and that the amount of loss be reasonably estimable”. Applying this statement to CapitalSource’s loan portfolio, it is probable the portfolio will experience some loss prior to maturity although it is not certain to the extent of the loss and to which loans. Therefore, CapitalSource will apply a general reserve to the loans in the portfolio in which there is no measurable impairment. These loans will be assigned a loan rating between 1 and 5, depending on the likelihood of any future impairment. Those loans with a lower loan rating, 1, will be assessed a lower reserve factor than those loans assigned a higher loan rating, up to 5.

Specific Reserve-6 Rated Loans

SFAS 114 should be applied to those loans that are either assigned a 6 loan rating, which occurs when it is likely CapitalSource will incur a loss on the principal of the loan, or those determined as troubled debt restructurings, as defined in Statement of Financial Accounting Standards No. 15, Accounting by Debtors and Creditors for Troubled Debt Restructurings. Per SFAS 114, “a loan is impaired when, based on current information and events, it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement”. Since CapitalSource rates all loans in which a loss pf principal is likely a 6, a specific reserve is calculated in accordance with the definition of SFAS 144 above. The impairment is calculated per

V-9

paragraph 13, which states, “regardless of the measurement method, a creditor shall measure impairment based on the fair value of the collateral when the creditor determines that foreclosure is probable”. Thus, the loan is valued based on the proceeds CapitalSource will expect to receive in a liquidation of the business or underlying collateral. Since CapitalSource will base the value and allocate a specific reserve based on the value of the underlying asset or the expected proceeds from liquidation, a reserve factor is not assigned to the 6 rated loans. Therefore, the entire loss should be booked as a specific reserve,

Specific Reserve-Troubled Debt Restructurings

Per SFAS 15, a “troubled debt restructuring may include, but is not limited to:

	1.		Transfer from the debtor to the creditor of receivables from third parties, real estate or other assets to satisfy or partially satisfy a debt;

	2		Issuance or granting of an equity interest to the creditor by the debtor to satisfy fully or partially a debt unless the equity interest is granted pursuant to existing terms for converting the debt into equity interest; and

	3.		Modification of terms of the debt including a change in the interest rate, extension of the maturity date at a lower rate of interest, a reduction in the face amount or a reduction in accrued interest.

In the above situations, a specific reserve is calculated, “based on the present value of the expected future cash flows discounted at the loan’s effective interest rate, except that as a practical expedient, a creditor may measure impairment based on a loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent”. The difference between the present value and the carrying value of the asset, which is the face value less any non-amortized fees, results in a specific reserve to the loan. When the specific reserve is applied to the loan, the general reserve is first backed-out of the impairment calculation. Since these loans are typically a 4 or 5, a general reserve is already calculated on the outstanding principal balance and should be considered when calculating a specific reserve.

Reserve Policy

On a current basis, CapitalSource will maintain a reserve based on the formula applied to each loan set forth below. “Reserve Factor” is the percentage allocation for each Loan Type as further segmented by Loan Rating. The loan loss reserve will be calculated at the end of each month based on the reserve factors below:

V-10


*For Senior Loans:*
Loan Type	Loan Ratine	Reserve Factor
Asset Based	1	0.00%
Asset Based	2&3	0.25%
Asset Based	4&5	0.50%
Asset Based	6	Discount the loan as appropriate

Real Estate	1	0.00%
Real Estate	2&3	0.50%
Real Estate	4&5	1.00%
Real Estate	6	Discount the loan as appropriate

Cash Flow	1	0.00%
Cash Flow	2&3	1.00%
Cash Flow	4&5	2.00%
Cash Flow	6	Discount the loan as appropriate

*For Subordinate (Term “B” or Mezzanine Loans:*
Real Estate	1	0.00%
Real Estate	2&3	1.00%
Real Estate	4&5	200%
Real Estate	6	Discount the loan as appropriate

Cash Flow	1	0.00%
Cash Flow	2&3	1.25%
Cash Flow	4&5	2.50%
Cash Flow	6	Discount the loan as appropriate

Loan Rating Process

As noted above, loans assigned a lower loan rating are assessed a lower reserve factor and those assessed a higher loan rating receive a higher reserve factor. As a result, CapitalSource’s ability to manage the loan rating process in a consistent and accurate manner is important to the success of this Reserve Policy. Accordingly, CapitalSource established the following procedures for assessing and approving the loan rating on a monthly basis as of January 1, 2003:

	1.		Each quarter all Loan Officers will suggest a rating for each loan in their portfolio (due by the end of the month for the prior month to allow for the receipt of financial information from the borrower, etc).

	2.		The Portfolio Review Specialist within the Credit Services and Operation Group will review the loan rating worksheet submitted by each Loan Officer. The Specialist will check for data and calculation errors and review the subjective assumptions (as applicable). The Portfolio Review Specialist reports to the Chief Credit Officer.

V-11

The Chief Credit Officer will review any exceptions suggested by the Portfolio Review Specialist with the Loan Officer and approve the loan rating accordingly.

Appropriateness of Reserve Percentages

CapitalSource was formed on September 7, 2000 and has experienced very few losses during the relatively short operating history. As a result, it is necessary for CapitalSource to look outside of the portfolio to determine the loan loss reserve factors. As of December 31, 2002, CapitalSource gathered financial data regarding the loan loss reserve and the total assets from a range of competitors over the various lending groups. This information was utilized to establish reserve factors for each asset class, which are used to calculate the loan loss reserve on a monthly basis. CapitalSource has updated the analysis as of December 31, 2003 and noted that the ranges continue to support our reserve factor as noted below:


Loan Type	CapitalSource Range*			Competitor Range
Asset Based		.25%-.50	%		.47%-2.92	%
Mortgage Debt		.50%-2.0	%		.48%-2.68	%
Cash Flow		1.0%-2.5	%		.72%-1.65	%


*		CapitalSource has a range for each loan type that is based on the loan rating each month.

Based on the analysis above, CapitalSource will continue to utilize the same reserve factors when calculating the monthly loan loss reserve. The analysis will be updated annually and changes will be made when necessary.

Calculating Specific Reserves for 6 Rated Loans

Loans rated 6 are loans that considered troubled and have a reasonable probability for loss. Each quarter, the loan officer (in consultation with the Managing Director and Chief Credit Officer) will determine (or revise) the appropriate specific reserve amount according to the following methodology.

The Loan Officer will then prepare and distribute a memorandum to the Credit Committee setting forth his or her analysis and the basis for the amount of the specific reserve. The Credit Committee will meet with the Loan Officer and the relevant Managing Director to consider the memorandum and will determine the amount of the specific reserve for the loan at issue.

I.		For Asset-Backed, Real Estate or other Collateral-based Loans:

		The specific reserve amount shall be determined by discounting remaining cash flows as required by FAS 114.

V-12

II.		For Cash Flow Loans :

		A “Maximum Loss Exposure” or “MLE” will be calculated by the loan officer for each 6 rated loan. The MLE is the loan officer’s estimate of the maximum potential loss exposure for the loan assuming a worst-case event scenario. Generally, the MLE should be the amount of the loan balance less the likely recovery value for the enterprise and/or collateral securing the loan based on the current facts of the case (i.e. ignoring “upside” surprises associated with the borrower and collateral).

		Each 6 rated loan should be classified into one of the following categories for specific reserve purposes:


Category 1		“Some loss is a reasonable possibility”

		The borrower is experiencing significant financial difficulties or the collateral is impaired or a serious threat exists to the collateral. It is extremely difficult to assess the amount of the loss based on the facts of the case.

Category 2		“Some loss is likely”

		The borrower is experiencing significant financial difficulties or the collateral is impaired or a serious threat exists to the collateral. It is difficult to assess the amount of the loss based on the facts of the case.

Category 3		“Some loss is certain”

		The borrower is experiencing significant financial difficulties and collateral is being liquidated and some loss is certain The exact amount of recovery is still not precisely determinable, but is highly likely to exceed 50% of the MLE.

Category 4		“Amount of loss is known, but probability of collection is remote”

		The borrower is experiencing significant financial difficulties and collateral is being liquidated, the amount of maximum loss exposure can be precisely determined and the probability of any greater recovery is remote.

The Specific Reserve for each 6 rated loan shall be determined by multiplying a “loss factor” by the Loss Scenario. Set forth below are the loss factors for each category.


Category 1:	25	%
Category 2:	50	%

V-13


Category 3:	75	%
Category 4:	100	%

V-14

LOAN RATING/SERVICING


LOAN SERVICING GENERAL		VI-1

LOAN RATING MATRIX GENERAL		VI-2

CLIENT TREND REPORTING		VI-3

DELINQUENCY REPORTING		VI-4

LOAN SERVICING GENERAL

The purpose of this section is to establish a system that identifies for Management and Loan Administration the quality of the loan and the level of servicing required. To accomplish this, the detailed daily monitoring is delegated to the loan-servicing department within each respective business unit. The Managing Director for each business unit is responsible for establishing and documenting appropriate reporting criteria based upon the risk profile of the respective portfolios. Exceptions and delinquency should be established to highlight areas needing immediate attention and/or action.

The objectives of the loan servicing system for each business unit are as follows:

	1.		To establish standards, needs and priorities of loan servicing and control, resulting in reduced loss experience and improved client service/relationships.

	2.		To maintain continuity and uniformity in client collateral and financial reporting.

	3.		To keep management informed of credit and collateral changes.

	4.		To identify trends in workloads and to improve productivity.

	5.		To notify all departments of a rating change as it occurs so that servicing changes and modifications can be implemented on a timely basis if appropriate.

The parts, which make up the loan servicing system, are as follows:

	1		Loan Rating Matrix — A chart designed to identify appropriate loan scoring based on credit and collateral factors.

	2.		Loan Servicing Standards — A listing of required minimum servicing levels. This is documented in servicing manuals as appropriate by each individual business unit.

	3.		Trend Report — A report to identify patterns and/or changes in reported information.

	4.		Delinquency report — Used to identify delinquencies in reported client information.

VI-1

LOAN RATING MATRIX GENERAL

Management has designed a rating system to quantify the risk associated with each loan in the portfolio. These ratings range from 1 (most creditworthy) through 6 (least creditworthy). Ratings are calculated using various performance criteria for each borrower, including but not limited to financial condition, financial performance, operating characteristics and collateral performance. The risk rating templates are located on the server.

For each performance criteria within the matrix, the loan officer should (i) grade the borrower’s performance on a scale of 1 (best) through 5; (ii) assign a weighting to each of the performance criteria, indicating the relative importance of the individual criteria in evaluating the loan; (iii) multiply the grades by the weighting to determine the rating for each performance criteria; and (iv) sum the ratings for each criteria to arrive at an overall rating for the loan.

Each loan must be rated at closing through the submission of a matrix to CapitalAnalytics. Only after the matrix has been reviewed and approved by the Chief Credit Officer can the assigned rating be entered into CAM. Loans are then rated quarterly thereafter. Changes to a risk rating may also be recommended by a loan officer at any time through the submission of an updated matrix to CapitalAnalytics for review and approval by the Chief Credit Officer.

On occasion, factors not quantified within the matrix may over ride the calculated rating. Such factors might be strong guarantors, abundant collateral, bankruptcy, etc. These factors must be identified and explained in the Factors for Facility Rating section of the matrix. When one of these factors is bankruptcy, the rating for a bankrupt borrower can not exceed 5. If a bankruptcy is a non-DIP situation, or a Ch. 7 or Ch. 11 liquidation the loan must be rated a 6. The 5 and 6 ratings must be applied regardless of the mathematical calculation of the rating, unless waived in writing by the Chief Credit Officer.

Upon receiving a rating of 4 or lower, the Workout Manager must be involved in the management of the loan. See page V-8 for policy thereon.

VI-2

Client Trend Reporting

Trend Information should be updated by the loan administration areas of each group as well as through direct interface by our clients. The trend data captures client data on a month-to-month basis to reveal any trends, which may impact client performance.

VI-3

Delinquency Reporting

The items noted in the standard loan servicing requirements for both ABL and Mezzanine/Subordinated Debt loans will be tracked as part of the Company’s MIS system. Delinquency reports will be accumulated periodically to be reviewed with the Credit Committee..

VI-4


FILE MAINTENANCE/RECORD KEEPING

CREDIT/UNDERWRITING FILES		VII-1

INSURANCE		VII-2

UCC FILINGS		VII-3

TAX PAYMENTS		VII-4

NOTIFICATIONS LETTERS		VII-7

VII

CREDIT/UNDERWRITING FILES

In general, two sets of files should be retained for each account. Credit files will be retained by the loan administration areas for each business group. Legal files will be retained by the legal department. Underwriting reports and associated work papers are stored electronically on the LAN.

All original underwriting files are to be maintained by loan administration. This file will contain the original approval sheet, credit write-up, etc. Please refer to underwriting section for the contents of this file. It is important that the original file be maintained as a reference point for closing, amendments in the future, etc.

For each customer, a separate legal file is to be maintained. This file should contain all of the loan agreements, (including all amendments, waivers, extensions, consents, etc.) notes, insurance information, UCC filings, open items lists and legal correspondence.

For each account, a separate credit file is to be maintained. This file should be as comprehensive as possible so that a trail of activity for each customer is recorded. The following items are to be maintained in each credit file:

Approval forms for any amendments, overadvances, overlines, forbearance agreements, etc.

Call reports or memorandums recording client visits.

Correspondence

Any retention memos or strategy memos.

Financial statements (last thirteen monthly and latest year-end).

Personal Financial Statements of Guarantors if applicable.

Industry studies, articles, research, newspaper clippings, etc.

Latest appraisal

Credit agency report on Customer/Principals

VII-1

INSURANCE

GENERAL

Prior to closing a new loan, and on all existing loans, where real property, inventory, equipment, machinery, furniture & fixtures and any other insurable assets are taken as collateral on a first priority basis, the loan officer has responsibility for determining that adequate property insurance is in force and is maintained.

REQUIREMENTS:

The insurance policy must provide for adequate coverage.

The insurer must be satisfactory and must carry a rating by Best’s of B or higher

The policy must contain a Lender’s Loss Payable Endorsement acceptable to CS.

In the event the policy is canceled, the policy must continue in force for the benefit of CS for tens days after notice to CS of the cancellation.

DOCUMENTATION

A copy of the policy and all applicable riders, endorsements, etc. is to obtained and filed in the legal file

A master insurance listing will be kept for the portfolio. A tickler will be established to track policy expirations, annual premiums, property covered, etc.

On an annual basis, the loan officer will review the adequacy of the insurance and will document this review in the file. Amount of coverage, carrier, proper loss payee, etc. must be reviewed annually.

CHANGE OF INSURER

Whenever a client changes insurance carriers, a complete review of coverage, endorsements, etc. must be performed and documented for the file.

VII-2

UCC FILINGS

All secured loan transactions will have UCC financing statements filed in the borrower’s jurisdiction of incorporation and as otherwise required by article 9 of the UCC.. A confirmation of CapitalSource’s UCC filing and priority must occur before funding, where practical.

TRACKING

The loan administration department in conjunction with legal will maintain a UCC Tickler Sheet indicating the date and place of the next re-filing required under the Uniform Commercial Code. Once new filings are made, the tickler should be updated. UCC searches should be performed periodically to detect the presence of any further liens.

VII-3

TAX PAYMENTS

When a field examination or other information reveals a potential tax delinquency problem, loan administration needs to require reporting of appropriate tax information.

In accordance with our loan and security agreements, it is incumbent upon request that each client provides CS with proof of payment of all FICA and Withholding Taxes. The intent of this provision is to avoid the risk of federal tax liens, which could jeopardize the priority of Capital Source’s security interest.

See page VII-6 for a sample schedule, which should be utilized to track proper tax payments. Usage of this form will highlight skipped payments not readily discernible otherwise.

It is important that tax payments be further verified by canceled checks or per review of a bank statement. The check should be reviewed for the appropriate teller stamp. Proof of deposit by the customer could be negated by a check being returned due to insufficient funds.

In addition, review of tax payments should be part of ongoing field examination work where appropriate.

VII-4

Date:

CapitalSource Finance LLC
Applicable office address

RE: FICA Payments and Withholding Taxes

Gentlemen

Pursuant to the provisions of our loan agreement dated we (Customer’s name) are enclosing a photocopy of our Federal Depository Receipt, stamped to indicate the name and address of the Depository and the date of the deposit.

The payment of our deposit, as shown on this receipt, was for $ which represents our entire liability for FICA payments and withholding taxes for the period to , during which time we employed a total of personnel to whom we paid aggregate wages in the total amount of $ .

Sincerely,

Authorized Signature and Title

VII-5

Client Tax Payment Summary

Sheet

Number

Date of

Deposit

Payment

Total

Receipt

Date

Period Covered

Amount

Employees

Wages

VII-6

NOTIFICATION LETTERS

In the event it becomes necessary to put a client’s customer on notification, the following sample letters should be used:

The first letter shown on page VII-8 is a direct notification from the CapitalSource to our client’s customers. This should be sent certified mail.

The second letter on page VII-9 is sent directly from our client to their customers. This should be sent at the same time as the first letter.

The third example incorporates the client’s acknowledgment of our direct notification. This letter is preferable, as the customer is made immediately aware that this action has the client’s consent.

Obviously, during liquidation, CapitalSource should receive all of a customer’s mail. It is imperative to fill out a change of address card at the post office. When a loan is called, it is often difficult to get the client’s cooperation on this point. It is advisable to obtain a signed change of address form at closing and maintain it in the legal file.

VII-7

(Sample — Letter of Notification)

CapitalSource Finance LLC
Sending Office Address

Date

Client’s Customer Address
ATTN: Accounts Payable Supervisor

Gentlemen:

All accounts receivable presently due (our client) together with all accounts receivable represented by invoice rendered by (our client) subsequent to this date have been assigned to CapitalSource, LLC. This assignment of our receivable from (our client) has been perfected under law.

Our records indicate and unpaid balance of $ per the attached statement. Payment of all such accounts is to be made directly to:

CapitalSource
C/O P.O.
(Sending Office Address)

If a discrepancy exists in the stated amount due, please notify CapitalSource Finance, LLC within five days of any reasons for said discrepancy.

This notification of assignment of accounts receivable is being given to you in accordance with the provisions of the Uniform Commercial Code. Under the provisions of the Uniform Commercial Code, if you should make payment to (our client) instead of CapitalSource Finance, LLC, such payment will not constitute settlement of this account, and may subject you to double liability for the amount due on your account.

Sincerely,
CapitalSource Finance, LLC

VII-8

(Sample Confirmation Letter from Debtor)

(Placed on Debtor’s Stationary)

Date

To all customers and Accounts of (our Client)

Gentlemen:

This letter confirms that all accounts receivable of the undersigned has been assigned by us to Capital Source, LLC. You should have received prior notification from CapitalSource of this assignment. All payments on any and all accounts due the undersigned must be made directly to:

CapitalSource Finance, LLC
C/O P/O
(Sending Office)

Your cooperation is appreciated.

Sincerely,

(Our Client)

By:

Its:

VII-9

(Sample — Letter of Notification with Acknowledgment)

Date

CapitalSource Finance, LLC
Sending Office Address

Date

Client’s Customer Address
ATTN: Accounts Payable Supervisor

Gentlemen:

All accounts receivable presently due (our client) together with all accounts receivable represented by invoice rendered by (our client) subsequent to this date have been assigned to CapitalSource Finance, LLC. This assignment of receivables from (our client) has been perfected under the Uniform Commercial Code.

Our records indicate an unpaid balance of $ per the attached statement. Payment of all such accounts should be made directly to:

CapitalSource Finance LLC
C/O P/O
(Sending Office)

If a discrepancy exists in the stated amount due, notification of any defense you may claim should be furnished to CapitalSource Finance, LLC, within five days subsequent of this letter.

This notification of assignment of accounts receivable is being given to you in accordance with the provisions of the Uniform Commercial Code. If you should make payment to (our client), such payment will not constitute settlement of this account and may subject you to double liability for the amount due on your account.

Sincerely,
CapitalSource Finance, LLC

We acknowledge the above procedure. Please make payment to CapitalSource Finance, LLC

Client Name
President

VII-10

Exhibit L–1
to Sale and
Servicing Agreement

FORM OF INITIAL CERTIFICATION

April 11, 2006


CapitalSource Commercial Loan LLC, 0000-0,		Xxxxxxxx Bank, National Association
as the Trust Depositor		as Hedge Counterparty
CapitalSource Finance LLC,		000 Xxxxx Xxxxxxx Xxxxxx, XX-0
as the Originator and Servicer		Xxxxxxxxx, XX 00000-0000
0000 Xxxxxxx Xxxxxx		Attention: Xxxxx X. Xxxxx
12th Floor		Senior Vice President, Risk
Chevy Xxxxx, Xxxxxxxx 00000		Management
Attention: Treasurer
		Citigroup Global Markets Inc.,
CapitalSource Finance LLC,		Wachovia Capital Markets, LLC,
as the Originator and Servicer		Xxxxxx Xxxxxxx Corp.,
0000 Xxxxxxx Xxxxxx		X.X. Xxxxxx Securities Inc.,
12th Floor		SunTrust Capital Markets, Inc.,
Xxxxx Xxxxx, Xxxxxxxx 00000		XX Americas Securities, LLC,
Attention: Treasurer		Barclays Capital Inc.,
		as the Initial Purchasers
		000 Xxxxxxxxx Xxxxxx
		Xxx Xxxx, Xxx Xxxx 00000
		Facsimile No.: (000) 000-0000
		Attention: Asset-Backed Finance


Re:		Sale and Servicing Agreement dated April 11, 2006 – CapitalSource Commercial Loan Trust 2006-1

Ladies and Gentlemen:

The Indenture Trustee has made no independent examination of any such documents beyond the review specifically required in the
above–referenced Agreement.

The Indenture Trustee makes no representations as to: (i) the validity, legality, sufficiency, enforceability or genuineness of any such documents or any of the Loans identified on the List of Loans, or (ii) the collectibility, insurability, effectiveness or suitability of any such Loan.


		XXXXX FARGO BANK, NATIONAL
		ASSOCIATION, as the Indenture Trustee

		By:

		Name:

		Title:

Exhibit L–2
to Sale and
Servicing Agreement

FORM OF FINAL CERTIFICATION

[date]


CapitalSource Commercial Loan LLC, 0000-0,		Xxxxxxxx Bank, National Association
as the Trust Depositor		as Hedge Counterparty
0000 Xxxxxxx Xxxxxx		000 Xxxxx Xxxxxxx Xxxxxx, XX-0
00xx Xxxxx		Xxxxxxxxx, XX 00000-0000
Chevy Xxxxx, Xxxxxxxx 00000		Attention: Xxxxx X. Xxxxx
Attention: Treasurer		Senior Vice President, Risk
		Management
CapitalSource Finance LLC,
as the Originator and Servicer		Citigroup Global Markets Inc.,
0000 Xxxxxxx Xxxxxx		Wachovia Capital Markets, LLC,
12th Floor		Xxxxxx Xxxxxxx Corp.,
Chevy Xxxxx, Xxxxxxxx 00000		X.X. Xxxxxx Securities Inc.,
Attention: Treasurer		SunTrust Capital Markets, Inc.,
		SG Americas Securities, LLC,
		Barclays Capital Inc.
		as the Initial Purchasers,
		000 Xxxxxxxxx Xxxxxx
		Xxx Xxxx, Xxx Xxxx 00000
		Facsimile No.: (000) 000-0000
		Attention: Asset-Backed Finance


Re:		Sale and Servicing Agreement dated April 11, 2006 – CapitalSource Commercial Loan Trust 2006-1

Ladies Gentlemen:

In accordance with Section 2.09 of the above–captioned Sale and Servicing Agreement (such agreement as amended, modified, waived, supplemented or restated from time to time, the “Agreement ”), the undersigned, as the Indenture Trustee, hereby certifies that, except as noted on the attachment hereto, as to each Loan listed in the List of Loans (other than any Loan paid in full or listed on the attachment hereto), it has reviewed the documents delivered to it pursuant to Section 2.07 of the Agreement and has determined that (i) all such documents are in its possession, (ii) such documents have been reviewed by it and have not been mutilated, damaged, torn or otherwise physically altered and relate to such Loan and (iii) based on its examination, and only as to the foregoing documents, the information set forth in the List of Loans respecting such Loan is correct. The Indenture Trustee has made no independent examination or inquiry of such documents beyond the review specifically required in the Agreement.

The Indenture Trustee makes no representations as to: (i) the validity, legality, enforceability or genuineness of any such documents contained in each or any of the Loans identified on the List of Loans, (ii) the collectibility, insurability, effectiveness or suitability of any such Loan, or (iii) the compliance by such documents with statutory or regulatory guidelines.


		XXXXX FARGO BANK, NATIONAL
		ASSOCIATION, as the Indenture Trustee

		By:

		Name:

		Title:

Exhibit M
to Sale and
Servicing Agreement

REQUEST FOR RELEASE OF DOCUMENTS


To:		Xxxxx Fargo Bank, National Association,
		as the Indenture Trustee
		Sixth Street and Marquette Avenue
		MAC N9311–161
		Xxxxxxxxxxx, Xxxxxxxxx 00000
		Attention: Corporate Trust Services/Asset Backed
		Administration

Re:		Sale and Servicing Agreement dated April 11, 2006 – CapitalSource Commercial Loan Trust 2006-1

In connection with the administration of the pool of Loans held by you, we request the release, and acknowledge receipt, of the (Indenture Trustee’s Document File/[specify document]) for the Loan described below, for the reason indicated.

Obligor’s Name, Address & Zip Code:

Loan Number:

Reason for Requesting Documents (check one)

1.		Loan paid in full (Servicer hereby certifies that all amounts received in connection therewith have been credited to the Principal and Interest Account.)

2.		Loan liquidated (Servicer hereby certifies that all proceeds of foreclosure, insurance or other liquidation have been finally received and credited to the Principal and Interest Account.)

3.		Loan in foreclosure

4.		Loan repurchased or substituted pursuant to Article II or XI of the Sale and Servicing Agreement (Servicer hereby certifies that the repurchase price to the extent required has been credited to the Principal and Interest Account and/or remitted to the Indenture Trustee for deposit into the Note Distribution Account pursuant to the Sale and Servicing Agreement.)

5.		Collateral being released for servicing purposes pursuant to Sections 2.09(d) or 5.02 of the Sale and Servicing Agreement.

Loan Collateral or associated loan document being substituted, released, revised or subordinated.

If box 1, 2 or 4 above is checked, and if all or part of the Indenture Trustee’s document file was previously released to us, please release to us our previous receipt on file with you, as well as any additional documents in your possession relating to the above specified Loan.

If box 3, 5 or 6 above is checked, upon our return of all of the above documents (or the appropriate substitutes therefor, if applicable) to you, please acknowledge your receipt by signing in the space indicated below, and returning this form.


		CAPITALSOURCE FINANCE LLC, as the Servicer

		By:

		Name:

		Title:

		Date:


Documents returned to Indenture Trustee:

Xxxxx Fargo Bank, National Association,
as the Indenture Trustee

By:

Name:

Title

Date:

Exhibit N
to Sale and
Servicing Agreement

FORM OF ADDITION NOTICE

[Date]

Xxxxx Fargo Bank, National Association,
  as the Indenture Trustee
Sixth Street and Marquette Avenue
MAC N9311–161
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention:      Corporate Trust Services/Asset Backed
                     Administration

Wilmington Trust Company,
as the Owner Trustee
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Administration


Re:		Sale and Servicing Agreement (as amended, modified, restated, replaced, waived, substituted, supplemented or extended from time to time, the “Agreement ”), dated April 11, 2006, by and among CapitalSource Commercial Loan Trust 2006-1, as the Issuer, CapitalSource Commercial Loan LLC, 2006-1, as the Trust Depositor, CapitalSource Finance LLC, as the Originator and Servicer, and Xxxxx Fargo Bank, National Association, not in its individual capacity but as the Indenture Trustee and the Backup Servicer (capitalized terms used but not defined herein shall have the meanings given to such terms in the Agreement).

Pursuant to Section 2.04 of the Transfer and Servicing Agreements, we hereby give notice of the substitution of the following Loans and the information required in respect thereof

1.		Loan(s) to be removed by substitution:

2.		Substitute Loan(s):

3.		The Subsequent Transfer Date:

4.		The Outstanding Loan Balance of each Substitute Loan:

5.		The related Substitution Event for each Loan to be removed by substitution:

6.		(a) The purchase price paid for the Substitute Loan pursuant to Section 2.04(a)(iii) (i.e., the Transfer Deposit Amount in respect of such Loan):

(b)The remaining balance of the deposit made to the Principal Collection Account pursuant to Section 2.04(a)(B), after subtracting purchase price in Item 5(a) hereof:

All information set forth herein is true, correct and complete as of the date hereof.


		CAPITALSOURCE COMMERCIAL LOAN
		LLC, 2006-1, as Trust Depositor

		By:

		Name:

		Title:


		CAPITALSOURCE FINANCE LLC, as the
		Originator and Servicer

		By:

		Name:

		Title:

Schedule I
to Sale and
Servicing Agreement

LOCK–BOX BANKS AND LOCK–BOX ACCOUNTS


1.		Bank: Bank of America, N.A.
		X.X. Xxx 000000
		Xxxxxxx, XX 00000-0000

		Account No.: 003930559738

		ABA: 0000-0000-0

		Account Name: CapitalSource Funding LLC – HFG

2.		Bank: Bank of America, N.A.
		X.X. Xxx 000000
		Xxxxxxx, XX 00000-0000

		Account No.: 003938703751

		ABA: 0000-0000-0

		Account Name: CapitalSource Funding LLC – SFG

3.		Bank: Bank of America, N.A.
		X.X. Xxx 000000
		Xxxxxxx, XX 00000-0000

		Account No.: 003939396662

		ABA: 0000-0000-0

		Account Name: CapitalSource Funding LLC – CFG


4.		Bank: Bank of America, N.A.
		X.X. Xxx 000000
		Xxxxxxx, XX 00000-0000

		Account No.: 003922575610

		ABA: 0000-0000-0

		Account Name: CapitalSource Funding LLC

Schedule II
to Sale and
Servicing Agreement

OBLIGOR LOCK–BOX BANKS AND OBLIGOR LOCK–BOX ACCOUNTS

Fourth Amended and Restated Three Party Agreement Relating to Lockbox Services and Control

XXXXX FARGO BANK, NATIONAL ASSOCIATION, not in its individual capacity but as the Indenture Trustee and as the Backup Servicer

/s/ Xxx Xxxxx

Vice President