Document:

Exhibit 10.5

 

RESTRICTED STOCK AWARD AGREEMENT

(Non-Employee Director)

 

THIS AGREEMENT (the “Agreement”) is made, effective as
of the              day of               (the “Date of Grant”), between
KKR Financial Corp., a Maryland corporation (hereinafter called the “Company”),
and                          (hereinafter
called the “Participant”).

 

R
E  C  I  T  A  L  S:

 

WHEREAS,
the Company has adopted the Amended and Restated 2004 Stock Incentive Plan for
KKR Financial Corp. (the “Plan”), which Plan is incorporated herein by
reference and made a part of this Agreement; capitalized terms not otherwise
defined herein shall have the same meanings as in the Plan; and

 

WHEREAS,
the Committee has determined that it would be in the best interests of the
Company and its stockholders to grant the restricted stock award provided for
herein to the Participant pursuant to the Plan and the terms set forth herein.

 

NOW
THEREFORE, in consideration of the mutual covenants hereinafter set forth, the
parties hereto agree as follows:

 

1.             Grant
of the Restricted Shares.  Subject to
the terms and conditions of the Plan and the additional terms and conditions
set forth in this Agreement, the Company hereby grants to the Participant a
restricted stock award (the “Restricted Stock Award”) consisting of                           Shares (hereinafter
called the “Restricted Shares”). The Restricted Shares shall vest and become
nonforfeitable in accordance with Section 2 hereof.  

 

2.             Vesting.

 

(a)  Subject
to the Participant’s continued service with the Company, the Restricted Shares
shall vest and become nonforfeitable with respect to one- hundred percent
(100%) of the Shares initially granted hereunder on the day immediately
preceding the first anniversary of the Date of Grant.

 

(b)  If
the Participant’s service with the Company terminates or is terminated for any
reason, the Restricted Shares shall, to the extent not then vested, be
forfeited by the Participant without consideration.

 

(c)  Notwithstanding
any other provision of this Agreement to the contrary, in the event a Change in
Control occurs during the period the Participant is providing services to the
Company, the Restricted Shares shall, to the extent not then vested and not
previously forfeited, immediately become fully vested, subject to Section 9(b) of
the Plan.

 

(d)  For
purposes of this Agreement, “service” means service provided by the Participant
to the Company as a member of the company’s board of directors.

 

3.             Certificates.  Certificates evidencing the Restricted Shares
shall be issued by the Company and shall be registered in the Participant’s
name on the stock transfer books of the Company promptly after the date hereof,
but shall remain in the physical custody of the Company or its designee at all
times prior to the vesting of such Restricted Shares pursuant to Section 2.  As a condition to the

 

 

receipt
of this Restricted Stock Award, the Participant shall deliver to the Company a
stock power, duly endorsed in blank, relating to the Restricted Shares. No
certificates shall be issued for fractional Shares.

 

4.             Rights
as a Stockholder.  The Participant
shall be the record owner of the Restricted Shares until or unless such
Restricted Shares are forfeited pursuant to Section 2 hereof, and as
record owner shall be entitled to all rights of a common stockholder of the
Company, including, without limitation, voting rights with respect to the
Restricted Shares and the Participant shall receive, when paid, any dividends
on all of the Restricted Shares granted hereunder as to which the Participant
is the record holder on the applicable record date; provided that the
Restricted Shares shall be subject to the limitations on transfer and
encumbrance set forth in Section 7. As soon as practicable following the
vesting of any Restricted Shares pursuant to Section 2, certificates for
the Restricted Shares which shall have vested shall be delivered to the
Participant or to the Participant along with the stock powers relating thereto.

 

5.             Legend
on Certificates.  The certificates
representing the vested Restricted Shares delivered to the Participant shall be
subject to such stop transfer orders and other restrictions as the Committee
may deem advisable under the Plan or the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which such Shares are listed, and any applicable Federal or state laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.

 

6.             No
Right to Continued Service.  The
granting of the Restricted Shares evidenced by this Agreement shall impose no
obligation on the Company or any Affiliate to continue the service of the
Participant and shall not lessen or affect the Company’s or any Affiliate’s
right to terminate the service of such Participant.

 

7.             Transferability.  The Restricted Shares may not, at any time
prior to becoming vested pursuant to Section 2, be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by the
Participant and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any Affiliate.

 

8.             Withholding.  The Participant may be required to pay to the
Company and the Company shall have the right and is hereby authorized to
withhold, any applicable withholding taxes in respect of the Restricted Shares,
their grant or vesting or any payment or transfer with respect to the
Restricted Shares and to take such action as may be necessary in the opinion of
the Committee to satisfy all obligations for the payment of such withholding
taxes.  Without limiting the generality of the foregoing, to
the extent permitted by the Committee, the Participant may satisfy, in whole or
in part, the foregoing withholding liability by delivery of Shares held by the
Participant (which are not subject to any pledge or other security interest and
which have been vested and held by the Participant for no less than six months
(or such other period as established from time to time by the Committee or
United States generally accepted accounting principles)) or by having the
Company withhold from the number of Restricted Shares otherwise deliverable to
the Participant hereunder Restricted Shares with a Fair Market Value not in
excess of the statutory minimum withholding liability.

 

9.             Securities
Laws.  Upon the vesting of any
Restricted Shares, the Participant will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.

 

2

 

10.           Notices.  Any
notice necessary under this Agreement shall be addressed to the Company in care
of its Secretary at the principal executive office of the Company and to the
Participant at the address appearing in the corporate records of the Company
for such Participant or to either party at such other address as either party
hereto may hereafter designate in writing to the other.  Any such notice shall be deemed effective
upon receipt thereof by the addressee.

 

11.           Choice of Law. 
THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICTS OF LAWS.

 

12.           Restricted Stock Award Subject to Plan.  By entering into this Agreement the
Participant agrees and acknowledges that the Participant has received and read
a copy of the Plan.  The Restricted Stock
Award and the Restricted Shares granted hereunder are subject to the Plan.  The terms and provisions of the Plan as it
may be amended from time to time are hereby incorporated herein by
reference.  In the event of a conflict
between any term or provision contained herein and a term or provision of the
Plan, the applicable terms and provisions of the Plan will govern and prevail.

 

13.           Signature in Counterparts.  This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

3

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement.

 

	
   

  	
  KKR FINANCIAL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Agreed and acknowledged as of the date
  first above written:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
					

 

4Exhibit
10.6

 

 

 

KKR FINANCIAL CLO
2005-1, LTD.

Issuer

 

 

and

 

 

KKR FINANCIAL CLO
2005-1, CORP.

Co-Issuer

 

 

and

 

 

JPMORGAN CHASE
BANK, NATIONAL ASSOCIATION

Trustee

 

 

 

INDENTURE

 

 

 

Dated as of March
30, 2005

 

 

COLLATERALIZED
LOAN OBLIGATIONS

 

 

 

See
included Term Sheet and Supplement for certain key terms.

 

 

TABLE OF CONTENTS

 

	
  PRELIMINARY STATEMENT

  	
   

  
	
  GRANTING
  CLAUSES

  	
   

  
	
   

  	
   

  
	
  ARTICLE 1

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
  Definitions

  	
   

  
	
  Section
  1.2.

  	
  Assumptions
  as to Collateral Debt Securities

  	
   

  
	
  Section
  1.3.

  	
  Definitional
  Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  2

  	
   

  
	
  THE
  NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  2.1.

  	
  Forms
  Generally

  	
   

  
	
  Section
  2.2.

  	
  Forms
  of Securities; Certificate of Authentication

  	
   

  
	
  Section
  2.3.

  	
  Authorized
  Amount; Interest Rate; Stated Maturity; Denominations

  	
   

  
	
  Section
  2.4.

  	
  Execution,
  Authentication, Delivery and Dating

  	
   

  
	
  Section
  2.5.

  	
  Registration,
  Registration of Transfer and Exchange

  	
   

  
	
  Section
  2.6.

  	
  Mutilated,
  Defaced, Destroyed, Lost or Stolen Securities

  	
   

  
	
  Section
  2.7.

  	
  Payment
  in Respect of the Securities; Rights Preserved

  	
   

  
	
  Section 2.8.

  	
  Persons Deemed
  Owners

  	
   

  
	
  Section 2.9.

  	
  Cancellation

  	
   

  
	
  Section
  2.10.

  	
  Global
  Securities; Temporary Securities

  	
   

  
	
  Section
  2.11.

  	
  Securities
  Beneficially Owned by Non-Permitted Holders

  	
   

  
	
  Section
  2.12.

  	
  Draws
  Under Delayed Draw Notes

  	
   

  
	
  Section
  2.13.

  	
  Draws
  Under Revolving Notes

  	
   

  
	
  Section
  2.15.

  	
  Voting
  Rights Register

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
   

  
	
  CONDITIONS
  PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  General
  Provisions

  	
   

  
	
  Section 3.2.

  	
  Security for
  Notes

  	
   

  
	
  Section
  3.3.

  	
  Delivery
  of Pledged Securities

  	
   

  
	
  Section
  3.4.

  	
  Purchase
  and Delivery of Collateral Debt Securities and Other Actions During the
  Initial Investment Period

  	
   

  
	
  Section 3.5.

  	
  Representations
  and Warranties Concerning Collateral

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
   

  
	
  SATISFACTION
  AND DISCHARGE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.1.

  	
  Satisfaction
  and Discharge of Indenture

  	
   

  

 

 

	
  Section
  4.2.

  	
  Application
  of Trust Money

  	
   

  
	
  Section
  4.3.

  	
  Repayment
  of Monies Held by Paying Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
   

  
	
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Events of Default

  	
   

  
	
  Section
  5.2.

  	
  Acceleration
  of Maturity; Rescission and Annulment

  	
   

  
	
  Section
  5.3.

  	
  Collection
  of Indebtedness and Suits for Enforcement by Trustee

  	
   

  
	
  Section 5.4.

  	
  Remedies

  	
   

  
	
  Section
  5.5.

  	
  Optional
  Preservation of Collateral

  	
   

  
	
  Section
  5.6.

  	
  Trustee
  May Enforce Claims Without Possession of Securities

  	
   

  
	
  Section
  5.7.

  	
  Application
  of Money Collected

  	
   

  
	
  Section 5.8.

  	
  Limitation on
  Suits

  	
   

  
	
  Section
  5.9.

  	
  Unconditional
  Rights of Holders of Securities to Receive Principal and Interest

  	
   

  
	
  Section
  5.10.

  	
  Restoration
  of Rights and Remedies

  	
   

  
	
  Section
  5.11.

  	
  Rights
  and Remedies Cumulative

  	
   

  
	
  Section
  5.12.

  	
  Delay
  or Omission Not Waiver

  	
   

  
	
  Section
  5.13.

  	
  Control
  by Securityholders

  	
   

  
	
  Section 5.14.

  	
  Waiver of Past
  Defaults

  	
   

  
	
  Section 5.15.

  	
  Undertaking
  for Costs

  	
   

  
	
  Section
  5.16.

  	
  Waiver
  of Stay or Extension Laws

  	
   

  
	
  Section 5.17.

  	
  Sale of
  Collateral

  	
   

  
	
  Section
  5.18.

  	
  Action on
  the Securities

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
   

  
	
  THE TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.1.

  	
  Certain
  Duties and Responsibilities

  	
   

  
	
  Section 6.2.

  	
  Notice of Default

  	
   

  
	
  Section
  6.3.

  	
  Certain
  Rights of Trustee

  	
   

  
	
  Section
  6.4.

  	
  Not
  Responsible for Recitals or Issuance of Securities

  	
   

  
	
  Section
  6.5.

  	
  May Hold
  Securities

  	
   

  
	
  Section 6.6.

  	
  Money Held in
  Trust

  	
   

  
	
  Section
  6.7.

  	
  Compensation
  and Reimbursement

  	
   

  
	
  Section
  6.8.

  	
  Corporate
  Trustee Required; Eligibility

  	
   

  
	
  Section
  6.9.

  	
  Resignation
  and Removal; Appointment of Successor

  	
   

  
	
  Section
  6.10.

  	
  Acceptance
  of Appointment by Successor

  	
   

  
	
  Section
  6.11.

  	
  Merger,
  Conversion, Consolidation or Succession to Business of Trustee

  	
   

  
	
  Section 6.12.

  	
  Co-Trustees

  	
   

  
	
  Section
  6.13.

  	
  Certain
  Duties of Trustee Related to Delayed Payment of Proceeds

  	
   

  
	
  Section 6.14.

  	
  Authenticating
  Agents

  	
   

  
	
  Section
  6.15.

  	
  Fiduciary
  for Noteholders Only; Agent for all other Secured Parties

  	
   

  
	
  Section
  6.16.

  	
  Representations
  and Warranties of the Bank

  	
   

  

 

ii

 

	
  ARTICLE 7

  	
   

  
	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  7.1.

  	
  Payment
  of Principal and Interest

  	
   

  
	
  Section
  7.2.

  	
  Maintenance
  of Office or Agency

  	
   

  
	
  Section
  7.3.

  	
  Money
  for Payments to be Held in Trust

  	
   

  
	
  Section 7.4.

  	
  Existence of
  Co-Issuers

  	
   

  
	
  Section 7.5.

  	
  Protection
  of Collateral

  	
   

  
	
  Section
  7.6.

  	
  Opinions
  as to Collateral

  	
   

  
	
  Section
  7.7.

  	
  Performance
  of Obligations

  	
   

  
	
  Section 7.8.

  	
  Negative
  Covenants

  	
   

  
	
  Section
  7.9.

  	
  Statement
  as to Compliance

  	
   

  
	
  Section
  7.10.

  	
  Co-Issuers
  May Consolidate, etc., Only on Certain Terms

  	
   

  
	
  Section 7.11.

  	
  Successor
  Substituted

  	
   

  
	
  Section 7.12.

  	
  No Other Business

  	
   

  
	
  Section 7.13.

  	
  Listing

  	
   

  
	
  Section
  7.14.

  	
  Reaffirmation
  of Ratings; Annual Rating Review

  	
   

  
	
  Section 7.15.

  	
  Reporting

  	
   

  
	
  Section 7.16.

  	
  Calculation Agent

  	
   

  
	
  Section 7.17

  	
  Certain Tax
  Matters

  	
   

  
	
  Section
  7.18.

  	
  Hedge
  Agreement Provisions

  	
   

  
	
  Section 7.19.

  	
  Purpose Credit

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
   

  
	
  SUPPLEMENTAL
  INDENTURES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  8.1.

  	
  Supplemental
  Indentures Without Consent of Securityholders

  	
   

  
	
  Section
  8.2.

  	
  Supplemental
  Indentures with Consent of Securityholders

  	
   

  
	
  Section
  8.3.

  	
  Execution
  of Supplemental Indentures

  	
   

  
	
  Section
  8.4.

  	
  Certain
  Further Limitations Supplemental Indentures

  	
   

  
	
  Section
  8.5.

  	
  Effect
  of Supplemental Indentures

  	
   

  
	
  Section
  8.6.

  	
  Reference
  in Securities to Supplemental Indentures

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
   

  
	
  REDEMPTION OF NOTES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  9.1.

  	
  Optional
  Redemption; Election to Redeem

  	
   

  
	
  Section
  9.2.

  	
  Notice
  to Trustee of Optional Redemption

  	
   

  
	
  Section 9.3.

  	
  Redemption
  Procedures

  	
   

  
	
  Section
  9.4.

  	
  Notes
  Payable on Redemption Date

  	
   

  
	
  Section 9.5.

  	
  Mandatory
  Redemption

  	
   

  
	
  Section
  9.6.

  	
  Effective
  Date Ratings Downgrade

  	
   

  
	
  Section
  9.7.

  	
  Repurchase
  of Securities

  	
   

  
	
  Section
  9.8.

  	
  Reduction
  of Commitments of Delayed Draw Notes

  	
   

  
	
  Section
  9.9.

  	
  Repayments
  and Reduction of Commitments of Revolving Notes

  	
   

  

 

iii

 

	
  ARTICLE
  10

  	
   

  
	
  ACCOUNTS,
  ACCOUNTINGS AND RELEASES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  10.1.

  	
  Collection
  of Money; General Account Requirements

  	
   

  
	
  Section 10.2.

  	
  Collection
  Account

  	
   

  
	
  Section
  10.3.

  	
  Payment
  Account, Unused Proceeds Account, Custodial Account; Revolver Funding
  Account; Synthetic Security Reserve Account; Hedge Collateral Account;
  Securities Lending Account; Commitment Notes Funding Account; Interest
  Reserve Account; Expense Reserve Account

  	
   

  
	
  Section 10.4.

  	
  Reports by
  Trustee

  	
   

  
	
  Section 10.5.

  	
  Accountings

  	
   

  
	
  Section 10.6.

  	
  Release of
  Securities

  	
   

  
	
  Section
  10.7.

  	
  Reports
  by Independent Accountants

  	
   

  
	
  Section
  10.8.

  	
  Reports
  to Rating Agencies; Ratings Changes

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
   

  
	
  APPLICATION OF
  MONIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  11.1.

  	
  Disbursements
  of Monies from Payment Account

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
   

  
	
  SALE OF COLLATERAL
  DEBT SECURITIES; SUBSTITUTION

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  12.1.

  	
  Sale
  of Collateral Debt Securities and Reinvestment

  	
   

  
	
  Section
  12.2.

  	
  Purchase
  of Additional Collateral Debt Securities and Eligible Investments

  	
   

  
	
  Section 12.3.

  	
  Securities
  Lending

  	
   

  
	
  Section 12.4.

  	
  Synthetic
  Securities

  	
   

  
	
  Section
  12.5.

  	
  Conditions
  Applicable to all Transactions Under Article 12

  	
   

  
	
  Section 12.6.

  	
  Short Positions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
   

  
	
  NOTEHOLDERS’
  RELATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 13.1.

  	
  Subordination

  	
   

  
	
  Section 13.2.

  	
  Standard of
  Conduct

  	
   

  
	
  Section
  13.3.

  	
  Right to
  List of Holders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  14.1.

  	
  Form
  of Documents Delivered to Trustee

  	
   

  
	
  Section
  14.2.

  	
  Acts of
  Securityholders

  	
   

  
	
  Section
  14.3.

  	
  Notices,
  etc., to Trustee, the Co-Issuers, the Collateral Manager, the Managers,
  Moody’s and S&P

  	
   

  
	
  Section
  14.4.

  	
  Notices
  to Holders; Waiver

  	
   

  
	
  Section
  14.5.

  	
  Effect
  of Headings and Table of Contents

  	
   

  
	
  Section
  14.6.

  	
  Successors
  and Assigns

  	
   

  

 

iv

 

	
  Section 14.7.

  	
  Separability

  	
   

  
	
  Section
  14.8.

  	
  Benefits of
  Indenture

  	
   

  
	
  Section 14.9.

  	
  Governing Law

  	
   

  
	
  Section
  14.10.

  	
  Submission
  to Jurisdiction

  	
   

  
	
  Section 14.11.

  	
  Counterparts

  	
   

  
	
  Section
  14.12.

  	
  Pass-Through
  Conduit Non-Petition; Limited Recourse

  	
   

  
	
  Section
  14.13.

  	
  Liability
  of Co-Issuers

  	
   

  
	
  Section 14.14.

  	
  Acts of Issuer.

  	
   

  
	
  Section 14.15.

  	
  Waiver of
  Jury Trial

  	
   

  
	
  Section 14.16.

  	
  Escheat

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  15

  	
   

  
	
  ASSIGNMENT
  OF COLLATERAL MANAGEMENT AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  15.1.

  	
  Assignment
  of Collateral Management Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Term Sheet

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule
  A

  	
  Collateral
  Debt Securities as of the Closing Date

  	
   

  
	
  Schedule
  B-1

  	
  S&P
  Industry Classification Group List

  	
   

  
	
  Schedule
  B-2

  	
  Moody’s
  Industry Classification Group List

  	
   

  
	
  Schedule
  C

  	
  LIBOR
  Formula

  	
   

  
	
  Schedule
  D

  	
  Diversity
  Score Table

  	
   

  
	
  Schedule
  E

  	
  Moody’s
  Rating Definitions

  	
   

  
	
  Schedule
  F

  	
  S&P
  Rating Definition

  	
   

  
	
   

  	
   

  	
   

  
	
  APPENDICES

  	
   

  
	
   

  	
   

  	
   

  
	
  Appendix
  A

  	
  Supplement

  	
   

  
	
  Appendix
  B

  	
  Term
  Sheet

  	
   

  
	
  Appendix C

  	
  Content of Monthly
  Report

  	
   

  
	
  Appendix D

  	
  Content of Security
  Valuation Report

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Forms of Notes

  	
   

  
	
  Exhibit B

  	
  Section 2.5 Transfer
  Certificate to Regulation S Global Security

  	
   

  
	
  Exhibit C

  	
  Section 2.5 Transfer
  Certificate to Rule 144A Global Security

  	
   

  
	
  Exhibit D

  	
  Section 2.5 Transfer
  Certificate to Physical Security

  	
   

  
	
  Exhibit E

  	
  Section 2.5 Transfer
  Certificate of Commitment Note to Regulation S Global Security

  	
   

  
	
  Exhibit F

  	
  Section 2.5 Transfer
  Certificate of Commitment Note to Rule 144A Global Security

  	
   

  
	
  Exhibit G

  	
  Form of Security Owner
  Certificate

  	
   

  
	
  Exhibit H

  	
  Form of Account
  Agreement

  	
   

  
	
  Exhibit I-1

  	
  Form of Voting Rights
  Assignment

  	
   

  

 

v

 

	
  Exhibit I-2

  	
  Form of Revocation of
  Voting Rights Assignment

  	
   

  

 

vi

 

INDENTURE, dated as of March 30, 2005, among KKR
FINANCIAL CLO 2005-1, LTD., an exempted company incorporated under the laws of
the Cayman Islands (the “Issuer”), KKR FINANCIAL CLO 2005-1 CORP., a company
organized under the laws of the State of Delaware (the “Co-Issuer,” and
together with the Issuer, the “Co-Issuers”), and JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, a national banking association organized under the laws of the
United States, as trustee (herein, together with its permitted successors in
the trusts hereunder, called the “Trustee”).

 

PRELIMINARY STATEMENT 

 

The Co-Issuers are duly authorized to execute and
deliver this Indenture to provide for the Securities issuable as provided in
this Indenture.  All covenants and
agreements made by the Co-Issuers herein are for the benefit of the
Securityholders and the Trustee and security of the Secured Parties.  The Co-Issuers are entering into this
Indenture, and the Trustee is accepting the trusts created hereby, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.

 

All things necessary to make this Indenture a valid
agreement of the Co-Issuers in accordance with the agreement’s terms have been
done.

 

GRANTING CLAUSES

 

Subject to the priorities
and the exclusions, if any, specified below in these Granting Clauses, the
Issuer hereby Grants to the Trustee, for the benefit and security of the
Secured Parties, including any Person that was formerly a Hedge Counterparty
(to the extent of its interest hereunder, including under the Priority of
Payments or the Special Priority of Payments, as applicable), all of its right,
title and interest in, to and under, in each case, whether now owned or
existing, or hereafter acquired or arising, all securities, loans, investments,
accounts, chattel paper, deposit accounts, instruments, financial assets,
investment property, general intangibles, letter of credit rights, and other
supporting obligations (in each case, as defined in the UCC), and other
property of any type or nature in which the Issuer has an interest relating
thereto and all proceeds with respect to the foregoing (subject to the
exclusions noted below, the “Collateral”).  Such Grants include, but are not limited to:

 

(a)           the Collateral Debt Securities, Equity
Securities which the Issuer causes to be delivered to the Trustee (directly or
through an Intermediary or bailee) on or after the Closing Date, all payments
thereon or with respect thereto, and all Synthetic Security Collateral (subject
to any prior lien of the related Synthetic Security Counterparty);

 

(b)           each Account (excluding the Commitment
Notes Funding Account and subject, in the case of the Securities Lending
Account, to the terms of the applicable Securities Lending Agreement and, in
the case of the Hedge Collateral Account, to the terms of the applicable Hedge
Agreement) and all Eligible Investments purchased with funds on deposit
therein, and all income from the investment of funds therein;

 

(c)           the Hedge Agreements and all payments
thereunder or with respect thereto;

 

1

 

(d)           the Collateral Management Agreement and
the Collateral Administration Agreement;

 

(e)           all Securities Lending Agreements;

 

(f)            Cash and Money
delivered to the Trustee (directly or through an Intermediary or bailee); and

 

(g)           all proceeds
with respect to the foregoing.

 

Such Grants exclude the
Excepted Property.  Such Grants are made in trust to secure the
Notes equally and ratably without prejudice, priority or distinction between
any Note and any other Note by reason of difference of time of issuance or
otherwise, except as expressly provided in this Indenture, and to secure, in
accordance with the priorities set forth in the Priority of Payments or the
Special Priority of Payments, as applicable, (A) the payment of all amounts due
on the Securities in accordance with their terms, (B) the payment of all
other sums payable under this Indenture, including without limitation, amounts
payable to any Hedge Counterparty under a Hedge Agreement and (C) compliance
with the provisions of this Indenture, all as provided in this Indenture.

 

The Trustee acknowledges such Grants, accepts the
trusts hereunder in accordance with the provisions hereof and agrees to hold
the Collateral in trust as provided herein.

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.1.            Definitions.

 

Except as otherwise specified herein or as the context
may otherwise require, the following terms have the respective meanings set
forth below for all purposes of this Indenture, and the definitions of such
terms are equally applicable both to the singular and plural forms of such
terms and to the masculine, feminine and neuter genders of such terms. Whenever
any reference is made to an amount the determination of which is governed by
Section 1.2, the provisions of Section 1.2 shall be applicable to such
determination or calculation, whether or not reference is specifically made to
Section 1.2, unless some other method of calculation or determination is
expressly specified in the particular provision.

 

“Account”: 
The Collection Account, the Payment Account, the Custodial Account, the
Unused Proceeds Account, the Commitment Notes Funding Account (if any), the
Revolver Funding Account, the Synthetic Security Reserve Account, the Hedge
Collateral Account, the Securities Lending Account, the Interest Reserve
Account, the Expense Reserve Account and the Closing Expenses Reserve Account.

 

“Account Agreement”:  An agreement in substantially the form of
Exhibit H hereto.

 

2

 

“Accountants’ Letter”:  A letter regarding the application of agreed
upon procedures provided by a firm of Independent certified public accountants
of national reputation appointed by the Issuer pursuant to Section 10.7(a),
which may be the firm of accountants that reviews or performs procedures with
respect to the financial reports prepared by the Issuer or the Collateral
Manager.

 

“Accredited Investor”:  The meaning specified in Rule 501(a) under
Regulation D under the Securities Act.

 

“Act” and “Act of Securityholders”:  The meanings specified in Section 14.2.

 

“Administration Agreement”:  The Corporate Services Agreement between the
Administrator and the Issuer, as such may be amended from time to time.

 

“Administrative Expense Limit”:  As set forth in the Supplement.

 

“Administrative Expense Payment Sequence”:  On each Payment Date, Administrative Expenses
payable pursuant to the Priority of Payments or the Special Priority of
Payments, as applicable, and with respect to Interest Proceeds as set forth in
the Priority of Interest Payments or the Special Priority of Payments, as
applicable, not previously paid will be applied (a) first, to the payment of
any governmental fee, charge or tax of the Co-Issuers, (b) second, to the
payment of amounts due to the Trustee, as such, (c) third, to the payment of
amounts due to the Collateral Administrator, (d) fourth, to the payment of
amounts due to any Revolving Note Agent, (e) fifth, to the payment of amounts
due to any Delayed Draw Note Agent, (f) sixth, pro
rata to the payment of fees and expenses (excluding payments in the
nature of indemnification or contribution and the Collateral Management Fees)
of the Collateral Manager, the Rating Agencies, the Administrator and the
Independent accountants, agents and counsel of the Issuer, as directed in
writing by the Collateral Manager based on their respective amounts due, and
(g) seventh, pro rata to the
payment of all other Administrative Expenses (including indemnities) as
directed in writing by the Collateral Manager based on their respective amounts
due.

 

“Administrative Expenses”:  Amounts due or accrued with respect to any
Payment Date to (i) the Trustee pursuant to Section 6.7; (ii) the
Independent accountants, agents and counsel of the Issuer for fees and
expenses, including amounts payable to any Revolving Note Agent and any Delayed
Draw Note Agent, the Collateral Administrator pursuant to the Collateral
Administration Agreement and amounts payable to the Collateral Manager pursuant
to the Collateral Management Agreement (other than the Collateral Management
Fees); (iii) Moody’s and S&P for fees and expenses in connection with
any rating of the Securities, including any on-going surveillance fees and
expenses; (iv) the Administrator’s fees and expenses pursuant to the
Administration Agreement; (v) any Person in respect of any governmental fee,
charge or tax; and (vi) any Person in respect of any other fees, expenses,
payments or indemnities permitted under this Indenture and the documents
delivered pursuant to or in connection with the Indenture and the Securities.

 

“Administrator”:  Maples Finance Limited or any successor
administrator under the Administration Agreement, solely in its capacity as
administrator.

 

3

 

“Affiliate” or “Affiliated”:  With respect to a Person, (i) any other
Person who, directly or indirectly, is in control of, or controlled by, or is
under common control with, such Person or (ii) any other Person who is a
director, Officer or employee (a) of such Person, (b) of any
subsidiary or parent company of such Person or (c) of any Person described
in clause (i) above.  For the
purposes of this definition, control of a Person shall mean the power, direct
or indirect, (i) to vote more than 50% of the securities having ordinary
voting power for the election of directors of such Person or (ii) to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise; provided,
that with respect to each Co-Issuer, the definition of “Affiliate” shall not
include the Administrator or any other special purpose company controlled by
the Administrator.

 

“Agent Members”:  Members of, or participants in, a Depository.

 

“Aggregate Excess Funded Spread”:  As of any Measurement Date, the amount
obtained by multiplying:

 

(a)           the amount (not less than zero) equal to
LIBOR applicable to the Rated Notes during the Interest Accrual Period in which
such Measurement Date occurs minus
a certain number (as set forth in the Term Sheet) (such number, the Excess
Funded Spread Threshold);

 

by

 

(b)            
the amount (not less than zero) equal to (i) the Aggregate Principal
Balance of the Collateral Debt Securities (excluding Defaulted Securities and
any PIK Security and any Partial PIK Security to the extent of any non-cash
interest) as of such Measurement Date minus
(ii) the Effective Date Target Par.

 

“Aggregate Funded Spread”:  As of any Measurement Date, the sum of:

 

(a)           in the case of each floating rate
Collateral Debt Security (excluding any Defaulted Security, any REIT Preferred
Security, any PIK Security and any Partial PIK Security to the extent of any
non-cash interest and the unfunded portion of any Delayed Drawdown Debt
Security and Revolving Collateral Debt Security) that bears interest at a
spread over a London interbank offered rate based index, (i) the stated
interest rate spread on such Collateral Debt Security above such index times
(ii) the Principal Balance of such Collateral Debt Security (excluding the
unfunded portion of any Delayed Drawdown Debt Security or Revolving Collateral
Debt Security);

 

(b)           in the case of each floating rate
Collateral Debt Security (excluding any Defaulted Security, any REIT Preferred
Security, any PIK Security and Partial PIK Security to the extent of any
non-cash interest and the unfunded portion of any Delayed Drawdown Debt
Security and Revolving Collateral Debt Security) that bears interest at a
spread over an index other than a London interbank offered rate based index,
(i) the excess of the sum of such spread and such index as of the immediately
preceding LIBOR Determination Date (which spread or excess may be expressed as
a negative percentage) times (ii) the Principal Balance of each such Collateral

 

4

 

Debt Security (excluding the unfunded portion of any
Delayed Drawdown Debt Security or Revolving Collateral Debt Security);

 

(c)           in the case of each REIT Preferred
Security (excluding any Defaulted Security), (i) the spread by which the
dividend rate on such Collateral Debt Security exceeds LIBOR as of the
immediately preceding LIBOR Determination Date times (ii) the Principal Balance
of such Collateral Debt Security; and

 

(d)           in the case of each fixed rate Collateral
Debt Security (excluding any Defaulted Security, any REIT Preferred Security,
any PIK Security and Partial PIK Security to the extent of any non-cash
interest and the unfunded portion of any Delayed Drawdown Debt Security and
Revolving Collateral Debt Security), (i) the excess of the coupon rate on such
fixed rate Collateral Debt Security above LIBOR as of the immediately preceding
LIBOR Determination Date (which spread or excess may be expressed as a negative
percentage) times (ii) the Principal Balance of each such Collateral Debt
Security (excluding the unfunded portion of any Delayed Drawdown Debt Security
or Revolving Collateral Debt Security).

 

For purposes of calculating the Aggregate Funded
Spread, (i) the rate or spread referred to in subclause (i) of clauses (a),
(b), (c) and (d) above shall be net of any withholding tax on interest or
dividend payments, as applicable, on the related Collateral Debt Security that
is not subject to gross-up (determined using withholding tax rates in effect as
of the date of determination); and (ii) any fixed rate Collateral Debt Security
that is subject to an asset specific hedge shall be considered a floating rate
Collateral Debt Security bearing interest at a floating rate equal to the
implied spread over LIBOR to be received by the Issuer pursuant to such hedge.

 

“Aggregate Outstanding Amount”:  On any date of determination, when used with
respect to (i) any Class of Notes (other than any Commitment Notes), the
aggregate outstanding principal amount of such Notes (in the case of the
Mezzanine Notes, including any Deferred Interest previously added to the
principal amount of such Notes that remains unpaid) and (ii) any Commitment
Notes, until the end of the Draw Period, the Commitment (except that the Drawn
Amount shall be used for purposes of any Overcollateralization Test) and
thereafter the aggregate outstanding principal amount of such Notes.

 

“Aggregate Principal Balance”:  When used with respect to Collateral Debt
Securities, the sum of the Principal Balances of all the Collateral Debt
Securities.

 

“Aggregate Undrawn Amount”: At any time, with
respect to any Commitment Notes, the excess, if any, of (i) the aggregate
amount of the Commitments in respect of all Commitment Notes over (ii) the
aggregate Drawn Amount.

 

“Aggregate Unfunded Amount”:  At any time, with respect to Delayed Drawdown
Debt Securities and Revolving Collateral Debt Securities, the excess, if any,
of (i) the aggregate amount of the commitments with respect to such securities
over (ii) the aggregate funded principal amount outstanding on such securities.

 

5

 

“Aggregate Unfunded Spread”:  As of any Measurement Date, the sum of the
products obtained by multiplying (i) for each Delayed Drawdown Debt Security
and Revolving Collateral Debt Security (other than Defaulted Debt Securities),
the commitment fee then in effect as of such date and (ii) the undrawn
commitments of each such Delayed Drawdown Debt Security and Revolving
Collateral Debt Security as of such date.

 

“Annualized Short Premium”:  As of any Measurement Date, the aggregate
amounts payable by the Issuer on the next four Payment Dates on all Short
Positions.

 

 “Applicable
Advance Rate”:  For each Collateral
Debt Security and for the applicable number of Business Days between the
certification date for a sale required by Section 9.3 and the expected date
of such sale, the percentage specified below (unless otherwise set forth in the
Supplement):

 

	
   

  	
   

  	
  1-2 days

  	
   

  	
  3-5 days

  	
   

  	
  6-15 days

  	
   

  
	
  Cash and
  Eligible Investments

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Senior Secured
  Loans with a Market Value: 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  of 90% or more 

  	
   

  	
  93 

  	
  %

  	
  92 

  	
  %

  	
  88 

  	
  %

  
	
  below 90%

  	
   

  	
  80

  	
  %

  	
  73

  	
  %

  	
  60

  	
  %

  
	
  Performing bonds
  and Non-Senior Secured Loans with a Moody’s Rating of at least “B3” and a
  Market Value of 90% or more

  	
   

  	
  89

  	
  %

  	
  85

  	
  %

  	
  75

  	
  %

  
	
  All other
  Collateral Debt Securities

  	
   

  	
  75

  	
  %

  	
  65

  	
  %

  	
  45

  	
  %

  

 

“Applicable Issuer”:  With respect to (a) the Co-Issued
Securities, the Co-Issuers and (b) the Issued Securities, the Issuer.

 

“Assumed Reinvestment
Rate”:  LIBOR (as determined on the
most recent Interest Determination Date in accordance with Schedule C, with
respect to Securities having an Index Maturity of three months) minus 0.50% per
annum (unless otherwise set forth in the Supplement).

 

“Authenticating Agent”:  With respect to the Securities or a Class of
the Securities, the Person designated by the Trustee to authenticate such
Securities on behalf of the Trustee pursuant to Section 6.14 hereof.

 

“Authorized Denomination”:  The meaning specified in Section 2.3.

 

“Authorized Officer”:  With respect to the Issuer or the Co-Issuer,
any Officer or other Person (including any duly appointed attorney-in-fact) who
is authorized to act for the Issuer or the Co-Issuer, as applicable, in matters
relating to, and binding upon, the Issuer or the Co-Issuer or, in respect of
particular matters for which the Collateral Manager has authority to act on
behalf of the Issuer and in respect of which matters the Collateral Manager has
determined to act on behalf of the Issuer, any officer, employee or agent of
the Collateral Manager who is authorized to act for the Collateral Manager.  With respect to the Collateral Manager, any
officer, employee or agent of the Collateral Manager who is authorized to act
for the Collateral Manager in matters 

 

6

 

relating to, and binding upon, the Collateral Manager
with respect to the subject matter of the request, certificate or order in
question.  With respect to the Trustee,
the Bank or any other bank or trust company acting as trustee of an express
trust or as custodian, a Trust Officer. 
With respect to any Delayed Draw Note Agent (other than the Bank), any
officer, employee or agent of the Delayed Draw Note Agent who is authorized to
act for the Delayed Draw Note Agent in matters relating to, and binding upon,
the Delayed Draw Note Agent with respect to the subject matter of the request,
certificate or order in question.  With
respect to any Revolving Note Agent (other than the Bank), any officer,
employee or agent of the Revolving Note Agent who is authorized to act for the
Revolving Note Agent in matters relating to, and binding upon, the Revolving
Note Agent with respect to the subject matter of the request, certificate or
order in question.  Each party may
receive and accept a certification of the authority of any other party as
conclusive evidence of the authority of any Person to act, and such
certification may be considered as in full force and effect until receipt by
such other party of written notice to the contrary.

 

“Balance”: 
On any date, with respect to Cash or Eligible Investments in any
account, the aggregate of the (i) current balance of Cash, demand
deposits, time deposits, certificates of deposit and federal funds;
(ii) principal amount of interest-bearing corporate and government
securities, money market accounts, repurchase obligations and Reinvestment
Agreements; and (iii) purchase price (but not greater than the face
amount) of non-interest-bearing government and corporate securities and
commercial paper.

 

“Bank”: 
JPMorgan Chase Bank, National Association, a national banking
association, in its individual capacity, and not as Trustee.

 

“Bankruptcy Code”:  The U.S. Bankruptcy Code, Title 11 of the
United States Code, as amended from time to time.

 

“Bankruptcy Law”:  The Bankruptcy Code and Part V of
the Companies Law (2004 Revision) of the Cayman Islands, as amended from time
to time.

 

“Benefit Plan Investor”:  Any (i) ”employee benefit plan” (as
defined in Section 3(3) of ERISA), whether or not it is subject to Title I of
ERISA, and including, without limitation, foreign and governmental plans, (ii)
any “plan” described in Section 4975(e)(1) of the Code, including, without
limitation, individual retirement accounts and Keogh plans, or (iii) any entity
whose underlying assets include “plan assets” by reason of the investment by an
“employee benefit plan” or other “plan” in the entity within the meaning of the
Plan Asset Regulation or otherwise.

 

“Board of Directors”:  With respect to the Issuer, the directors of
the Issuer duly appointed by the holders of the ordinary shares of the Issuer
or the directors of the Issuer and with respect to the Co-Issuer, the directors
of the Co-Issuer duly appointed by the stockholders of the Co-Issuer.

 

7

 

“Board Resolution”:  With respect to the Issuer, a resolution of
the Board of Directors of the Issuer and with respect to the Co-Issuer, a
resolution of the Board of Directors of the Co-Issuer.

 

“Business Day”: 
Any day other than (i) Saturday or Sunday or (ii) a day on
which commercial banks in New York, New York or the city in which the Corporate
Trust Office is located are authorized or required by applicable law,
regulation or executive order to close or, for final payment of principal, in
the relevant place of presentation.

 

“Calculation Agent”:  The meaning specified in Section 7.16(a).

 

“Cash”: 
Such coin or currency of the United States of America as at the time
shall be legal tender for payment of all public and private debts.

 

“CCC Obligations”:  Collateral Debt Securities (other than
Defaulted Securities and Current Pay Obligations) with a Moody’s Rating of “Caa1”
or lower or an S&P Rating of “CCC+” or lower.

 

“Certificatable Securities”:  The Commitment Notes and the Subordinated
Notes.

 

“Certificate of Authentication”:  The meaning specified in Section 2.1.

 

“Certificated Security”:  The meaning specified in Section 8-102(a)(4)
of the UCC.

 

“Certifying Holder”:  Each Holder (or its designee) submitting a
certificate substantially in the form of Exhibit G.

 

“Change in Law”:  The enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs after the
Closing Date.

 

“Class”: 
All of the Securities having the same payment terms and Interest Rate
(if any), ratings (if any) and Stated Maturity. 
For voting purposes, Notes of different Classes that are pari passu in right of payment of interest
will vote together as a single Class.

 

“Class A Notes”:  The meaning specified in the Supplement.

 

“Class B Notes”:  The meaning specified in the Supplement.

 

“Class Break-Even Default Rate”:  As of any Measurement Date and with respect
to any Class of Rated Notes, the maximum percentage of defaults that the
Current Portfolio or the Proposed Portfolio, as applicable, can sustain, as
determined by S&P, from time to time, through application of the S&P
CDO Monitor, that, after giving effect to S&P’s assumptions on recoveries,
defaults and timing and to the Priority of Payments or the Special Priority of
Payments, as applicable, will result in sufficient funds remaining for the
timely payment of interest and principal on such Class of Senior Notes and the
ultimate payment of interest and principal on such Class of Mezzanine Notes.

 

8

 

“Class C Notes”:  The meaning specified in the Supplement.

 

“Class C/D Coverage Tests”:  The Class C/D Overcollateralization Test and
the Class C/D Interest Coverage Test.

 

“Class C/D
Interest Coverage Ratio”:  The
ratio (expressed as a percentage) obtained by dividing:

 

(a)           the aggregate amount of Interest Proceeds
(net of any applicable withholding tax to the extent that the Collateral
Manager knows or reasonably expects that taxes will be withheld from such
payments) that have been received or are expected to be received (other than
Interest Proceeds expected to be received from Defaulted Securities, Partial
PIK Securities and PIK Securities but including Interest Proceeds actually
received from Defaulted Securities, Partial PIK Securities and PIK Securities),
in each case during the Due Period in which such Measurement Date occurs, and any net
payments (excluding termination payments) expected to be received by the Issuer
in respect of any Hedge Agreements on or before the related Payment Date; by

 

(b)           the sum of (i)
amounts payable (or expected as of the Measurement Date to be payable) on the
following Payment Date as set forth in the Priority of Interest Payments clauses (A)
through and including the clause in which all interest and Deferred Interest on
the Class D Notes, if any, is to be paid (without regard to payments as a
result of failure of any Coverage Test) plus (ii) amounts payable (or expected
as of the Measurement Date to be payable) on the following Payment Date on any
Short Positions.

 

“Class C/D
Interest Coverage Test”:  A
test satisfied if, as of each Measurement Date on or after a certain date (such
date, the Class C/D Interest Coverage Test Start Date) set forth in the
Term Sheet, the Class C/D Interest Coverage Ratio is equal to or greater than
the Class C/D Interest Coverage Ratio Minimum set forth in the Term
Sheet.

 

“Class C/D
Overcollateralization Ratio”: 
The ratio (expressed as a percentage) obtained by dividing:

 

(i)            the Principal Collateral Value (excluding
the Aggregate Unfunded Amount); by

 

(ii)           the sum of the Aggregate Outstanding
Amount of the Senior Notes, Class C Notes and Class D Notes.

 

“Class C/D
Overcollateralization Test”: 
A test satisfied if, as of each Measurement Date on or after a certain
date (such date, the Class C/D Overcollateralization Test Start Date)
set forth in the Term Sheet, the Class C/D Overcollateralization Ratio is equal
to or greater than the Class C/D Overcollateralization Ratio Minimum set
forth in the Term Sheet.

 

“Class D Notes”:  The meaning specified in the Supplement.

 

“Class E Notes”:  The meaning specified in the Supplement.

 

9

 

“Class E
Overcollateralization Ratio”: 
The ratio (expressed as a percentage) obtained by dividing:

 

(i)            the Principal Collateral Value (excluding
the Aggregate Unfunded Amount); by

 

(ii)           the sum of the Aggregate Outstanding
Amount of the Senior Notes, Class C Notes, Class D Notes and Class
E Notes.

 

“Class E Overcollateralization Test”:  A test satisfied if, as of each Measurement
Date on or after a certain date (such date, the Class E
Overcollateralization Test Start Date) set forth in the Term Sheet, the
Class E Overcollateralization Ratio is equal to or greater than the Class E
Overcollateralization Ratio Minimum set forth in the Term Sheet.

 

“Class F Notes”:  The meaning specified in the Supplement.

 

“Class Default Differential”:  As of any Measurement Date and for any Class
of Rated Notes, the rate calculated by subtracting the Class Scenario Default
Rate for such Class of Rated Notes at such time from the Class Break-Even
Default Rate for such Class of Rated Notes at such time.

 

“Class Scenario Default Rate”:  As of any Measurement Date and for any Class
of Rated Notes, an estimate of the cumulative default rate for the Current
Portfolio or the Proposed Portfolio, as applicable, consistent with the initial
S&P Rating of such Class of Rated Notes, determined by application by the
Issuer of the S&P CDO Monitor at such time.

 

“Clearing Agency”:  An organization registered as a “clearing
agency” pursuant to Section 17A of the Exchange Act.

 

“Clearing Corporation”:  Any entity included within the meaning of “clearing
corporation” under the UCC.

 

“Clearing Corporation Security”:  A Collateral Debt Security that is a “financial
asset” (as defined in the UCC) that is (i) in bearer form or
(ii) registered in the name of a Clearing Corporation or the nominee of
such Clearing Corporation and, if a Certificated Security, is in either case
held in the custody of such Clearing Corporation.

 

“Clearstream”:  Clearstream Banking Luxembourg, S.A., a
corporation organized under the laws of the Grand Duchy of Luxembourg.

 

“Closing Date”: 
As set forth in the Term Sheet.

 

“Closing Date Invested
Par Percentage”:  As set forth in the
Term Sheet.

 

“Closing Expenses Reserve
Account”:  The trust account established pursuant to
Section 10.3(k).

 

“Closing Expenses Reserve Account Amount”:  As set forth in the Term Sheet.

 

10

 

“Code”: 
The United States Internal Revenue Code of 1986, as amended.

 

“Co-Issued Securities”:  Unless otherwise set forth in the Supplement,
Notes rated “Baa3” or higher by Moody’s or “BBB-” or higher by S&P as of
the date of issuance.

 

“Co-Issuer”: 
The Person identified as the Co-Issuer in the first paragraph of this
Indenture until a successor Person shall have become the Co-Issuer pursuant to
the applicable provisions of this Indenture, and thereafter “Co-Issuer” shall
mean such successor Person.

 

“Co-Issuers”: 
The Issuer and the Co-Issuer.

 

“Collateral”: 
The meaning specified in the Granting Clauses.

 

“Collateral Administration Agreement”:  The Collateral Administration Agreement,
dated as of the Closing Date, among the Issuer, the Collateral Manager and the
Collateral Administrator, as amended from time to time in accordance with the
terms thereof.

 

“Collateral Administrator”:  The Bank (or such other Person named as
Collateral Administrator in the Supplement) or any successor under the
Collateral Administration Agreement.

 

“Collateral Debt Security”:  Any debt obligation (including an interest in
a bank loan acquired directly by way of sale or assignment), Participation
Interest, Synthetic Security or REIT Preferred Security that, as of the time of
purchase (or commitment to purchase) by the Issuer:

 

(A)          is:

 

(1)           a
Registered U.S. Dollar denominated debt security (including Structured
Finance Securities) issued by a corporation, limited liability company,
partnership or trust that is organized in an Eligible Country;

 

(2)           an
assignment of a Registered U.S. Dollar denominated bank loan on which the
borrower is a corporation, limited liability company, partnership or trust that
is organized in an Eligible Country or is guaranteed by an entity organized in
an Eligible Country, or a Registered Participation Interest in such a loan in
which the participating entity is organized in an Eligible Country (or the
obligations of the participating entity under the Participation Interest are
guaranteed by an entity organized in an Eligible Country) (each, a “Loan”);

 

(3)           a unit
consisting of a debt obligation described in clause (1) or (2) above and an
Equity Security (provided that such Equity Security does not constitute Margin
Stock);

 

(4)           a
Synthetic Security; or

 

(5)           a REIT
Preferred Security; and

 

11

 

(B)           which in each case:

 

(1)           is a Zero
Coupon Bond or provides for periodic payments in cash no less frequently than
annually (although it may
provide that such periodic payments be deferred and capitalized);

 

(2)           with the
exception of REIT Preferred Securities, matures on or before the Stated
Maturity of the Notes; provided that a
certain percentage (as set forth in the Term Sheet) of the Principal Collateral
Value (such percentage, the “Extended Maturity Obligations Percentage”)
may mature after the Stated Maturity of the Notes;

 

(3)           with the
exception of REIT Preferred Securities, provides for payment of a fixed amount
of principal (or the economic equivalent) in cash, final cash payment or return
of collateral by the maturity or scheduled expiration thereof;

 

(4)           except for
Delayed Drawdown Debt Securities, Revolving Collateral Debt Securities and
Credit-Linked Obligations, does not require future advances to be made to the
borrower in accordance with its Underlying Instrument;

 

(5)           is
eligible to be sold, assigned or participated to the Issuer and, if the consent
of the obligor thereunder is required in order for such obligation to be
acquired by the Issuer, such consent has been obtained;

 

(6)           is not a
Defaulted Security (other than a Purchased Defaulted Security) or a Credit Risk
Security;

 

(7)           with the
exception of REIT Preferred Securities, is not subject to U.S. or foreign
withholding tax unless the obligor thereof is required to make “gross-up”
payments that cover the full amount of any such withholding tax;

 

(8)           is not
subject to substantial non-credit related risk with respect to repayment as
determined by the Collateral Manager in its reasonable business judgment;

 

(9)           (a) is
unconditionally guaranteed as to the payment of principal and interest by the
U.S. government or any agency or instrumentality thereof, or (b) if it is not a
Purchased Defaulted Security or a Current Pay Obligation, has a Moody’s Rating
of at least “Caa2” and an S&P Rating of at least “CCC” and such S&P
Rating does not have a “p,” “pi,” “q,” “t” or an “r” subscript;

 

(10)         cannot be
converted at the option of the obligor thereof (and the Issuer may not exercise
any right it may have as holder thereof to convert) from payment in U.S.
Dollars to payment in another currency;

 

12

 

(11)         will not
cause the Issuer (or the Collateral 
Manager acting on behalf of the Issuer) to be deemed for tax purposes to
have participated in a primary loan origination;

 

(12)         is not
Margin Stock;

 

(13)         will not
cause the Issuer to be deemed to own 5% or more of the voting securities of any
Person or any securities that are immediately convertible into or immediately
exercisable or exchangeable for 5% or more of the voting securities of any
Person, as determined by the Collateral Manager;

 

(14)         is not
acquired for the purpose of accommodating a request from a Securities Lending
Counterparty to borrow such obligation;

 

(15)         is not an
Eligible Investment;

 

(16)         is not a
participation in a Participation Interest; and

 

(17)         if such
Collateral Debt Security is a Synthetic Security, the Counterparty Criteria are
satisfied.

 

Notwithstanding the foregoing, the failure of
obligations to meet the definition of Collateral Debt Security at any time
shall not prevent an obligation which would otherwise be a Collateral Debt
Security from being a Collateral Debt Security so long as at the time of
purchase (or commitment to purchase) such obligation met the definition of
Collateral Debt Security.

 

“Collateral Management Agreement”:  The Collateral Management Agreement, dated as
of the Closing Date, between the Issuer and the Collateral Manager, as amended
from time to time in accordance with its terms.

 

“Collateral Management Fee”:  The Senior Collateral Management Fee, the
Intermediate Collateral Management Fee, the Subordinated Collateral Management
Fee and, without duplication, the Cumulative Deferred Management Fee.

 

“Collateral Manager”:  KKR Financial Advisors II, LLC (or such other
Person named as Collateral Manager in the Supplement) or any successor under
the Collateral Management Agreement.

 

“Collateral
Manager Securities”:  All Securities beneficially owned
by the Collateral Manager or any of its Affiliates or by an account or fund for
which the Collateral Manager or any of its Affiliates acts as the investment
adviser and for which the Collateral Manager or any of its Affiliates is
exercising its discretionary voting authority.

 

“Collateral Quality Test”:  A test satisfied if, as of any Measurement
Date, the Collateral Debt Securities (in the aggregate) satisfy each of the
requirements set forth below, calculated in each case as required by Section
1.2 herein:

 

(i)            the Moody’s Weighted Average Rating Factor
Test;

 

13

 

(ii)           the Weighted Average Life Test;

 

(iii)          the Weighted Average Spread Test;

 

(iv)          the Moody’s Minimum Weighted Average
Recovery Rate Test;

 

(v)           the S&P Minimum Weighted Average
Recovery Rate Test;

 

(vi)          the S&P CDO Monitor Test; and

 

(vii)         the Moody’s Diversity Test.

 

For purposes of the calculation of the Collateral
Quality Test at any time, Synthetic Securities will have the treatment set
forth in the definition of “Synthetic Security”, and except as otherwise
provided herein, Defaulted Securities will not be included in the calculation
of the Collateral Quality Test.

 

“Collection Account”:  The trust account established pursuant to
Section 10.2(a).

 

“Commitment”: At any time in respect of any Commitment
Note, the maximum aggregate outstanding principal amount of advances (whether
at the time funded or unfunded) that the Holder of such Commitment Note is
obligated under the Note Purchase Agreement to make to the Issuer from time to
time, as specified in the Term Sheet, provided
that upon the conversion of any drawn portion of a Delayed Draw Note to a Note
of the same Tranche during the Draw Period in accordance with Section 2.5(k),
such Commitment will be deemed to be permanently reduced by the principal
amount converted into such Note.

 

“Commitment Fee”: The Commitment Fee with
respect to any Commitment Notes specified in the Term Sheet.

 

“Commitment Fee Amount”: With respect to any
Commitment Notes as of any Payment Date, the sum of (i) the aggregate amount of
Commitment Fee accrued and unpaid as of such Payment Date plus (ii) interest
accrued for the Interest Accrual Period for such Payment Date at the Interest
Rate of such Commitment Notes on any accrued and unpaid Commitment Fees that
became payable on any prior Payment Date, in each case calculated on the basis
of the actual number of days elapsed in a year of 360 days.

 

“Commitment Notes”:  Revolving Notes and Delayed Draw Notes (if
any).

 

“Controlling Class”: Unless otherwise specified
in the Supplement, the Class A Notes, so long as any Class A Notes are
Outstanding, then the Class B Notes, so long as any Class B Notes are
Outstanding, then the Class C Notes, so long as any Class C Notes are
Outstanding, then the Class D Notes, so long as any Class D Notes are
Outstanding, then the Class E Notes, so long as any Class E Notes are
Outstanding, then the Class F Notes, so long as any Class F Notes are
Outstanding, then the Subordinated Notes.

 

14

 

“Corporate Trust Office”:  The corporate trust office of the Trustee
currently located at 600 Travis Street, 50th Floor, Houston, Texas 77002,
Attention: Institutional Trust Services — KKR CLO Financial 2005-1, Ltd.,
telephone number (713) 216—4181, or such other address as the Trustee may
designate from time to time by notice to the Noteholders, the Collateral
Manager and the Issuer or the principal corporate trust office of any successor
Trustee.

 

“Counterparty Criteria”:  Unless otherwise specified in the Supplement,
with respect to any (i) Participation Interest, (ii) Synthetic Security,
(iii) Collateral Debt Security issued by an obligor Domiciled in a country
whose foreign currency issuer credit rating by S&P is below “AA”, or
(iv) Securities Lending Agreement, a criterion that will be met if
immediately after giving effect to such acquisition in the case of (i), (ii) or
(iii), or giving effect to such loan in the case of (iv), the percentage of the
Principal Collateral Value that consists in the aggregate of (A) Participation
Interests with Selling Institutions that have the same or a lower credit
rating, (B) Synthetic Securities with Synthetic Security Counterparties that
have the same or a lower credit rating, (C) Collateral Debt Securities
with obligors located in a country whose foreign currency issuer credit rating
by S&P is below “AA” and whose S&P Rating is the same or lower and
(D) Securities Lending Agreements with Securities Lending Counterparties
that have the same or lower credit rating, does not exceed the “Aggregate
Percentage Limit” or “Individual Percentage Limit” set forth below for such
credit rating: 

	
  Credit Rating of Entity

  (at or below)

  	
   

  	
  Aggregate

  	
   

  	
  Individual

  	
   

  
	
  Moody’s

  	
   

  	
  S&P

  	
   

  	
  Percentage Limit

  	
   

  	
  Percentage Limit

  	
   

  
	
  Aaa

  	
   

  	
  AAA

  	
   

  	
  20

  	
  %

  	
  10

  	
  %

  
	
  Aa1

  	
   

  	
  AA+

  	
   

  	
  10

  	
  %

  	
  10

  	
  %

  
	
  Aa2

  	
   

  	
  AA

  	
   

  	
  10

  	
  %

  	
  10

  	
  %

  
	
  Aa3

  	
   

  	
  AA-

  	
   

  	
  10

  	
  %

  	
  5

  	
  %

  
	
  A1(1)

  	
   

  	
  A+

  	
   

  	
  5

  	
  %

  	
  5

  	
  %

  
	
  A2(1)

  	
   

  	
  A

  	
   

  	
  5

  	
  %

  	
  5

  	
  %

  

 

(1)   If the applicable Moody’s short-term unsecured debt
rating is below “P-1” or is on any ratings watch list with negative
implications, then such Moody’s rating for calculating the Counterparty
Criteria will be below A2.

 

“Coverage Tests”:  The Senior Coverage Tests, the Class C/D
Coverage Tests and the Class E Overcollateralization Test.

 

“Credit Event”: 
With respect to a Credit-Linked Obligation, as defined in such Credit-Linked
Obligation.

 

“Credit Improved Criteria”:  The criteria that will be met if (i) with
respect to Collateral Debt Securities other than Loans, the change in price
(stated as a percentage) of such Collateral Debt Security during the period
from the date on which it was acquired by the Issuer to the date of
determination either is more positive, or less negative as the case may be,
than the percentage change in the Merrill Lynch High Yield Index, Bloomberg
ticker JOAO, Average Price Option plus 3.00%, over the same period or
(ii) with respect to Loans, the change in price (stated as a percentage)
of such Collateral Debt Security during the period from the date on which it
was acquired by the Issuer to the date of determination either is more
positive, or less negative, as the 

 

15

 

case may be, than the percentage change in the average
price of an Eligible Loan Index plus 0.50% over the same period.

 

“Credit Improved Security”:  Any Collateral Debt Security that, in the
Collateral Manager’s reasonable business judgment, has significantly improved
in credit quality after it was acquired by the Issuer; provided, however,
that on a day on which the Restricted Trading Condition is applicable, a
Collateral Debt Security will qualify as a Credit Improved Security only if,
since it was acquired by the Issuer, one or both of the following conditions
are satisfied (i) its issuer, obligor or other rating has been upgraded by any
Rating Agency at least one rating subcategory or has been placed and remains on
credit watch for possible upgrade by any Rating Agency or (ii) the applicable
Credit Improved Criteria are satisfied with respect to such Collateral Debt
Security.

 

“Credit-Linked Obligation”:  A Synthetic Security that is one or more swap
transactions (other than a Short Position), securities or instruments that,
taken together,

 

(a)           (i)            are classified as debt for U.S.
federal income tax purposes,

 

(ii)           are entered into or
acquired pursuant to guidelines that were prepared by counsel and with respect
to which the Issuer has obtained an opinion of counsel to the effect that, if
the Issuer complies with such guidelines, the Issuer will not be treated as
providing a guarantee or engaging in a trade or business within the United
States, or

 

(iii)          with respect to
which the Issuer has obtained an opinion of counsel to the effect that the
Issuer will not be treated as providing a guarantee or engaging in a trade or
business within the United States as a result of the acquisition, disposition
or ownership by the Issuer of such swap transaction, security or instrument, and

 

(b)           provide for:

 

(i)            periodic cash payments from the Synthetic
Security Counterparty to the Issuer calculated at a stated rate or spread on an
amount stated therein,

 

(ii)           early termination, redemption or maturity
thereof upon the occurrence of a Credit Event,

 

(iii)          upon such early termination, redemption
or maturity as a result of a Credit Event,

 

(A)          a final cash settlement payment (or release of
Collateral) by the Issuer to the Synthetic Security Counterparty or by the
Synthetic Security Counterparty to the Issuer in a stated amount calculated by
reference to the change in the market value thereof or the market value or a
stated reference price of the related Reference Obligation at the time of
termination, redemption or maturity and/or

 

(B)           physical delivery by the Synthetic Security
Counterparty to the Issuer of one or more Deliverable Obligations, and

 

16

 

(iv)          if no Credit Event has occurred, a
final cash settlement payment or return of collateral, as applicable, by the
Synthetic Security Counterparty to the Issuer (or, in the case of
clause (B) below, by the Issuer to the Synthetic Security
Counterparty, if applicable) in a stated amount equal to:

 

(A)          an initial payment or initial posting of collateral,
as applicable, if any, made at the time of purchase thereof or other stated
amount if there is no early termination or

 

(B)           a termination amount or redemption payment determined
in accordance with a specified methodology if an early termination, redemption
or maturity occurs for any reason other than as a result of a Credit Event.

 

“Credit Risk Criteria”:  The criteria that will be met if (i) with
respect to Collateral Debt Securities other than Loans, the change in price
(stated as a percentage) of such Collateral Debt Security during the period
from the date on which it was acquired by the Issuer to the date of
determination either is more negative, or less positive, as the case may be,
than the percentage change in the Merrill Lynch High Yield Index, Bloomberg
ticker JOAO, Average Price Option less 3.00%, over the same period or
(ii) with respect to Loans, the change in price (stated as a percentage)
of such Collateral Debt Security during the period from the date on which it
was acquired by the Issuer to the date of determination either is more
negative, or less positive, as the case may be, than the percentage change in
the average price of an Eligible Loan Index less 0.50% over the same period.

 

“Credit Risk Security”:  Any Collateral Debt Security that, in the
Collateral Manager’s reasonable business judgment, has a significant risk of
declining in credit quality or price related to the credit risk of the
Collateral Debt Security or, with the passage of time, becoming a Defaulted
Security; provided, however, that on a day on which the
Restricted Trading Condition is applicable, a Collateral Debt Security will
qualify as a Credit Risk Security only if, since its acquisition date, one or
both of the following conditions are satisfied: 
(i) its issuer, obligor or other rating has been downgraded at least one
rating subcategory by any Rating Agency or has been placed and remains on credit
watch for possible downgrade by any Rating Agency or (ii) the applicable Credit
Risk Criteria are satisfied with respect to such Collateral Debt Security.

 

“Cumulative Deferred Management Fee”:  With respect to any Payment Date,
(i) the aggregate amount of all Current Deferred Management Fees deferred
by the Collateral Manager on or prior to such Payment Date, minus (ii) the
aggregate amount of all Cumulative Deferred Management Fees distributed to the
Collateral Manager in accordance with the Priority of Payments or the Special
Priority of Payments prior to such Payment Date.

 

“Current Deferred Management Fee”:  With respect to any Payment Date, the amount
of all or any portion of the Senior Collateral Management Fee, Intermediate
Collateral Management Fee, or Subordinated Collateral Management Fee, as
applicable, then due and owing to the Collateral Manager in accordance with the
Priority of Payments or the Special Priority of Payments, which the Collateral
Manager elects to defer by delivery of an election notice to the 

 

17

 

Trustee on or before the immediately preceding
Determination Date preceding such Payment Date.

 

“Current Pay Obligation”:  Except as otherwise specified in the
Supplement, a Collateral Debt Security that would otherwise satisfy clauses
(b), (c), (d) or (g) of the definition of “Defaulted Security,” but as to which
(a) no prior unpaid interest remains outstanding, the most recent interest
payment due was paid in Cash and the Collateral Manager has certified to the
Trustee that it expects that subsequent scheduled interest and principal
payments will be paid in Cash when due and principal will be paid at maturity,
(b) the Moody’s Rating of such Collateral Debt Security is at least “Caa2,”
(c) if the obligor of such Collateral Debt Security is subject to a
bankruptcy, insolvency, receivership or similar proceeding, the relevant court
has authorized the payment of interest due and payable on such Collateral Debt
Security, and (d) its Market Value at the time of purchase was greater than or
equal to (i) 85% of its outstanding principal amount, in the case of a
Collateral Debt Security with a Moody’s Rating of Caa2,” or (ii) 80% of its
outstanding principal amount, in the case of any other Collateral Debt
Security.    For purposes of the S&P
CDO Monitor Test, that portion of Current Pay Obligations up to and including
10% of the Principal Collateral Value (with the highest aggregate Market Value)
will be treated as having an S&P Rating of the higher of (i) the rating
assigned to such Collateral Debt Security by S&P or (ii) “CCC-,” and that
portion of Current Pay Obligations in excess of 10% of the Principal Collateral
Value will be treated as having an S&P Rating of “D.”

 

“Current Portfolio”:  At any Measurement Date, the portfolio of
Collateral Debt Securities and Eligible Principal Investments then held by the
Issuer.

 

“Current Portfolio Annual Interest”:  As of any date of determination, the sum of
the products obtained by multiplying (i) the Principal Balance of each
Collateral Debt Security (excluding Defaulted Securities, PIK Securities and
Partial PIK Securities) and each Eligible Investment by (ii) the per annum
coupon rate in effect with respect to such Collateral Debt Security or Eligible
Investment as of such date.

 

“Current Portfolio Minimum Interest”:  As of any date of determination, the sum of
the products obtained by multiplying (a) the Principal Balance of each
Collateral Debt Security (excluding Defaulted Securities, PIK Securities and
Partial PIK Securities) and each Eligible Investment by (b) LIBOR as of the
immediately preceding LIBOR Determination Date plus the Minimum Spread.

 

“Current Voting Rights Assignee”: The meaning
specified in Section 2.14(b).

 

“Custodial Account”:  The account established pursuant to
Section 10.3(c).

 

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

 

“Defaulted Interest”:  Any interest (and in the case of any
Commitment Notes, any Commitment Fee Amount) due and payable in respect of any
Senior Notes or, if no Senior Notes are Outstanding, in respect of the Tranche
of Outstanding Mezzanine Notes that ranks highest in 

 

18

 

the Order of Priority or any interest on such
Defaulted Interest which is not punctually paid or duly provided for on the
applicable Payment Date or at the Stated Maturity of the applicable Note.

 

“Defaulted Loaned Collateral Debt Security”:  Any Collateral Debt Security which is subject
to a Securities Lending Agreement, under which Securities Lending Agreement an
event of default (as such term is defined by the applicable Securities Lending
Agreement) has occurred.

 

“Defaulted Participation Security”:  As defined in clause (g) of the
definition of Defaulted Security.

 

“Defaulted Security”:  Unless otherwise specified in the Supplement,
any Collateral Debt Security or any other obligation included in the Collateral
(including a Deliverable Obligation delivered upon the early termination of a
Synthetic Security) for which:

 

(a)           (i) the obligor thereof has defaulted in
the payment of principal and/or interest for five Business Days (without regard
to any waiver or grace period provided in the related Underlying Instrument)
(the “Cure Period”), but only until such default has been cured through
the payment of all past due interest and/or principal; provided, however, that such Cure Period
shall only be available if the Collateral Manager has certified to the Trustee
in writing that, in the Collateral Manager’s reasonable business judgment such
default resulted from non-credit related causes, or (ii) the maturity of all or
a portion of the principal amount of such Collateral Debt Security (excluding
Current Pay Obligations) has been accelerated as a consequence of a default
(other than a payment default) under the related Underlying Instrument and such
acceleration has not been rescinded or any applicable default or event of
default has not been cured or waived; provided,
that a Collateral Debt Security shall not constitute a Defaulted
Security under this clause (a) if it is a Partial PIK Security or PIK
Security that in each case is current in the payment of principal; provided further, however, that a PIK Security for which
interest has been deferred or capitalized for more than two consecutive
interest accrual periods shall constitute a Defaulted Security under this
clause (a);

 

(b)           any bankruptcy, insolvency or
receivership proceeding has been initiated in connection with the obligor of
such Collateral Debt Security and is unstayed and undismissed; provided, however, that, if such
proceeding is an involuntary proceeding, the condition of this clause (b) will
not be applicable and such Collateral Debt Securities will not be a Defaulted
Security until the earliest of the following: 
(A) the related obligor consents to such proceeding, (B) an order for
relief under the Bankruptcy Code, or any substantially similar order under a
proceeding not taking place under the Bankruptcy Code, has been entered and (C)
such proceeding remains unstayed and undismissed for 60 days; provided, further, that a Current Pay
Obligation or DIP Collateral Debt Security will not constitute a Defaulted
Security under this clause (b) notwithstanding such bankruptcy, insolvency or
receivership proceeding;

 

(c)           the Collateral Manager has actual
knowledge that the obligor thereof is in default (without giving effect to any
applicable grace period or waiver) as to payment of principal and/or interest
on another obligation of such obligor (and such default has not been cured),
and at least one of the  following
conditions is met:  (A) both such other
obligation and the Collateral Debt 

 

19

 

Security are full recourse unsecured obligations and
the other obligation is senior to or pari
passu with the Collateral Debt Security in right of payment or (B)
all of the following conditions (1), (2) and (3) are satisfied:  (1) both such other obligation and the
Collateral Debt Security are full recourse secured obligations secured (in
whole or in part) by identical collateral, (2) the security interest securing
the other obligation is senior to or pari
passu with the security interest securing the Collateral Debt
Security and (3) the other obligation is senior to or pari passu with the Collateral Debt
Security in right of payment; provided,
however, that a Collateral Debt Security shall not constitute a
Defaulted Security under this clause (c) if it is a Current Pay Obligation or
DIP Collateral Debt Security;

 

(d)           such Collateral Debt Security (i) has an
S&P Rating of  “D” or “SD,” (ii) an
S&P Rating cannot be determined by reference to Schedule F and is not
expected to be determinable within 30 days, (iii) if it is a Structured Finance
Security, (A) it has an S&P Rating of 
“CC” or lower or had an S&P Rating of “CC” or lower that was
withdrawn or (B) it has a Moody’s Rating below “Caa3”, or (iv) has any
obligation that is senior or pari passu
in right of payment to such Collateral Debt Security that has an S&P Rating
of  “D” or “SD”; provided, however, that a Collateral Debt
Security shall not constitute a Defaulted Security under this clause (d) if it
is a Current Pay Obligation or it is a DIP Collateral Debt Security with a
rating or a rating estimate by S&P higher than “D” or “SD” or with respect
to which the Issuer has requested a rating estimate from S&P;

 

(e)           such Collateral Debt Security is a
Synthetic Security referencing a Reference Obligation with respect to which a
Credit Event has occurred and is continuing, which Credit Event is, or with
notice or passage of time or both, will be, the basis for (A) a reduction in
the principal amount payable to the Issuer under such Synthetic Security (in
the case of a credit-linked note) or (B) a Cash settlement or delivery of
a related Deliverable Obligation to the Issuer (in the case of a Credit-Linked
Obligation) (a “Defaulted Synthetic Security”);

 

(f)            such Collateral Debt Security is a
Synthetic Security (other than a Defaulted Synthetic Security) with respect to
which the Synthetic Security Counterparty has defaulted in the performance of
any of its payment obligations under the Synthetic Security;

 

(g)           such Collateral Debt Security is a
Participation Interest in a loan or other debt security that would, if such
loan or other debt security were a Collateral Debt Security, constitute a
Defaulted Security under any other clause of this definition (a “Defaulted
Participation Security”);

 

(h)           such Collateral Debt Security is a
Participation Interest in a loan or in a security (other than a Defaulted
Participation Security) with respect to which the Selling Institution has
defaulted in the performance of any of its payment obligations under the
related participation agreement;

 

(i)            the principal balance of such Collateral
Debt Security (or the relevant portion thereof) comprises all or part of that
portion of the aggregate principal balance of Current Pay Obligations (with the
highest aggregate Market Value) that exceeds 10% of the Principal Collateral
Value; or

 

20

 

(j)            there has been effected any distressed
exchange or other distressed debt restructuring where the obligor of such
Collateral Debt Security has offered the holder or holders of such Collateral
Debt Security a new security or package of securities that, in the reasonable
business judgment of the Collateral Manager, amounts to a diminished financial
obligation.

 

Notwithstanding clauses (a) through (j) of this
definition, the Collateral Manager may declare any Collateral Debt Security to
be a Defaulted Security if, in Collateral Manager’s reasonable business
judgment, (i) the credit quality of the obligor of such Collateral Debt
Security (or, in the case of a Synthetic Security, the credit quality of the
Reference Obligor with respect thereto) has significantly deteriorated such
that there is a reasonable expectation of payment default as of the next
scheduled payment date with respect to such Collateral Debt Security, (ii) the
terms of such Collateral Debt Security were amended while such Collateral Debt
Security was in default and such amendments resulted in a materially diminished
value of such Collateral Debt Security or (iii) collateral received in exchange
for collateral securing a Collateral Debt Security that has been restructured
has materially diminished in value as compared to the value of the collateral
surrendered in the restructuring.

 

“Defaulted Synthetic Security”:  As defined in clause (e) of the
definition of Defaulted Security.

 

“Deferred Interest”:  With respect to
any Class of Mezzanine Notes, interest that is deferred and added to the
outstanding principal balance of the Notes of such Class pursuant to Section
2.7(a).

 

“Delayed Draw Note Agent”:  The Bank (or such other Person named as
Delayed Draw Note Agent in the Term Sheet) pursuant to the Note Purchase
Agreement, or any successor under the Note Purchase Agreement.

 

“Delayed Draw Notes”:  As defined in the Supplement, if any.

 

“Delayed Draw Rating Criteria”:  Criteria that will be satisfied on any date
with respect to any purchaser of any Delayed Draw Notes if the short-term debt,
deposit or similar obligations of such purchaser (or its guarantor) are on such
date rated at least “P-1” by Moody’s and “A-1” by S&P.

 

“Delayed Drawdown Debt Security”:  A Collateral Debt Security that (i) requires
the Issuer to make one or more future advances to the obligor under the
Underlying Instruments relating thereto, (ii) specifies a maximum amount that
can be borrowed on one or more fixed borrowing dates, and (iii) does not permit
the re-borrowing of any amount previously repaid by the obligor thereof; provided, however, that any such
Collateral Debt Security will be a Delayed Drawdown Debt Security only until
all commitments by the Issuer to make advances to the obligor thereof are fully
funded, expire or are terminated or reduced to zero.

 

“Deliver” or “Delivered”:  The taking of the following steps:

 

(i)            in the case of each Certificated Security
or Instrument (other than a Clearing Corporation Security or an Instrument
referred to in clause (vii) below), (A) causing the delivery 

 

21

 

of such Certificated Security or Instrument to an
Intermediary registered in the name of the Intermediary or its affiliated
nominee or endorsed to an Intermediary or in blank, (B) causing the
Intermediary to continuously identify on its books and records that such
Certificated Security or Instrument is credited to the relevant Account and
(C) causing the Intermediary to maintain continuous possession of such
Certificated Security or Instrument;

 

(ii)           in the case of each Uncertificated
Security (other than a Clearing Corporation Security), (A) causing such
Uncertificated Security to be continuously registered on the books of the
obligor thereof to an Intermediary and (B) causing the Intermediary to
continuously identify on its books and records that such Uncertificated
Security is credited to the relevant Account;

 

(iii)          in the case of each Clearing Corporation Security,
causing (A) the relevant Clearing Corporation to continuously credit such
Clearing Corporation Security to the securities account of an Intermediary at
such Clearing Corporation and (B) the Intermediary to continuously
identify on its books and records that such Clearing Corporation Security is
credited to the relevant Account;

 

(iv)          in the case of any Financial Asset that
is maintained in book-entry form on the records of an FRB, causing (A) the
continuous crediting of such Financial Asset to a securities account of an
Intermediary at any FRB and (B) the Intermediary to continuously identify
on its books and records that such Financial Asset is credited to the relevant
Account;

 

(v)           in the case of each Financial Asset not
covered by the foregoing clauses (i) through (iv), causing the transfer of such
Financial Asset to an Intermediary in accordance with applicable law and
regulation and causing the Intermediary to continuously credit such Financial
Asset to the relevant Account;

 

(vi)          in the case of each general intangible
(including any participation interest that is not, or the debt underlying which
is not, evidenced by an Instrument or Certificated Security) notifying the
obligor thereunder of the Grant to the Trustee (unless no applicable law requires
such notice);

 

(vii)         in the case of each Participation as to
which the underlying debt is represented by an Instrument, obtaining the
acknowledgment of the Person in possession of such Instrument (which may not be
the Issuer) that it holds such Instrument for the benefit of the Trustee;

 

(viii)        in the case of any “deposit account” as
defined in Article 9 of the UCC, causing the institution with which such
deposit account is maintained to maintain such deposit account in accordance
with the Account Agreement; and

 

(ix)           in all cases, the filing of an
appropriate Financing Statement in the appropriate filing office in accordance
with the Uniform Commercial Code as in effect in any relevant jurisdiction.

 

“Deliverable Obligation”:  A debt obligation or other security that is
to be delivered to the Issuer upon the occurrence of certain Credit Events
under a Synthetic Security that satisfies the definition of “Collateral Debt
Security” at the time it is delivered to the Issuer, except that such 

 

22

 

debt obligation or other security may be a Defaulted
Security at the time delivered to the Issuer; provided
that with respect to any Credit-Linked Obligation, such security may, if
specified therein, (a) consist of a class of securities or indebtedness of
a specific seniority or a specific issuance of outstanding securities and/or
(b) be subject to replacement with other obligations of the issuer of such
security upon specified conditions.  An
obligation that is delivered to the Issuer under a Synthetic Security that does
not satisfy the definition of “Collateral Debt Security” will be treated as a
Defaulted Security.

 

“Depository”: 
The Depository Trust Company, its nominees, and their respective
successors.

 

“Determination Date”:  The last day of each Due Period.

 

“DIP Collateral Debt Security”:  Unless otherwise specified in the Supplement,
any interest in a loan or financing facility having a rating or rating estimate
by S&P or for which a rating estimate has been requested from S&P and
that is explicitly rated by Moody’s (including any estimated rating by Moody’s)
that is purchased directly by way of assignment which is (i) an obligation of
(a) a debtor in possession as described in §1107 of the Bankruptcy Code or any
similar provision of any other applicable bankruptcy law, including, without
limitation, any bankruptcy, insolvency, reorganization or similar law enacted
by any other applicable jurisdiction or (b) any Person for whom a trustee has
been appointed (if appointment of such trustee has been ordered pursuant to
§1104 of the Bankruptcy Code or any similar provision of any other applicable
bankruptcy law, including, without limitation, any bankruptcy, insolvency,
reorganization or similar law enacted by any other applicable jurisdiction) (in
either such case, a “Debtor”)
organized under the laws of the United States or any state therein, (ii) the
terms of which have been approved by an order of the United States Bankruptcy
Court, the United States District Court, or any other court of competent
jurisdiction, the enforceability of which order is not subject to any pending
contested matter or proceeding (as such terms are defined in the Federal Rules
of Bankruptcy Procedure) and which order provides that:  (a) (1) such DIP Collateral Debt Security is
fully secured by liens on the Debtor’s otherwise unencumbered assets pursuant
to §364(c)(2) of the Bankruptcy Code or any similar provision of any other
applicable bankruptcy law, including, without limitation, any bankruptcy,
insolvency, reorganization or similar law enacted by any other applicable
jurisdiction; or (2) such DIP Collateral Debt Security is secured by liens of
equal or senior priority on property of the Debtor’s estate that is otherwise
subject to a lien pursuant to §364(d) of the Bankruptcy Code or any similar
provision of any other applicable bankruptcy law, including, without
limitation, any bankruptcy, insolvency, reorganization or similar law enacted
by any other applicable jurisdiction; and (b) such DIP Collateral Debt Security
is fully secured based upon a current valuation or appraisal report, and (iii)
if such DIP Collateral Debt Security is publicly rated by S&P, such rating
is not lower than “CCC-.” 
Notwithstanding the foregoing, such a loan will not be deemed to be a
DIP Collateral Debt Security following the emergence of the related obligor
from bankruptcy protection under the Bankruptcy Code or any similar provision
of any other bankruptcy law, including, without limitation, any bankruptcy, insolvency,
reorganization or similar law enacted by any other applicable
jurisdiction.  Any notices related to the
restructuring or amendment of any DIP Collateral Debt Security will be
forwarded to each Rating Agency.  If the
Issuer has requested a rating estimate on a DIP Collateral Debt Security from
S&P and such rating estimate has not

 

23

 

been received, such DIP Collateral Debt Security shall
be treated as having an S&P rating estimate of “CCC-” until a rating
estimate is received.

 

“Discount Obligation”:  A Collateral Debt Security having a purchase
price of less than (i) a certain percentage (as set forth in the Term Sheet) in
the case of loans (such percentage, the Discount Loan Minimum Price) or
less than a certain percentage (as set forth in the Term Sheet) in the case of
debt securities (such percentage, the Discount Bond Minimum Price) if
such obligation is rated “B3” or higher by Moody’s at the time of purchase or
(ii) a certain percentage (as set forth in the Term Sheet) in the case of loans
(such percentage, the Discount Below B3 Loan Minimum Price) or less than
a certain percentage (as set forth in the Term Sheet) in the case of debt
securities (such percentage, the Discount Below B3 Bond Minimum Price)
if such Collateral Debt Security was rated less than “B3” by Moody’s at the
time of purchase, of the outstanding principal amount thereof (or in the case
of a Synthetic Security, where the Reference Obligation has a market value of
less than 80% at the time of acquisition).

 

“Discretionary Sales”:  The meaning specified in Section 12.1(f).

 

“Distribution”: 
Any payment of principal or interest or any dividend or premium payment
made on, or any other distribution in respect of, a Pledged Security.

 

“Diversity Score”:  A single number that indicates collateral
concentration in terms of both obligor and industry concentration, calculated
as set forth in Schedule D or such other schedule provided to the Issuer and
the Trustee by the Collateral Manager for which Rating Agency Confirmation has
been obtained from Moody’s.  For the
purposes of the calculation of the Diversity Score, obligors that are
Affiliates will be considered one obligor; provided,
however, that an Affiliate of an obligor that is in a different
industry from such obligor will be treated as a separate obligor if Rating
Agency Confirmation has been obtained from Moody’s.  If Moody’s modifies its industrial
classification groups, the Collateral Manager may elect to have any or all of
the Collateral Debt Securities reallocated among such modified industrial
classification groups for purposes of determining the Industry Diversity Score
(as defined in Schedule D) and the Diversity Score so long as (i) the
Collateral Manager has provided written notice of such election to Moody’s, the
Trustee and the Collateral Administrator and (ii) Rating Agency
Confirmation has been obtained from Moody’s.

 

“Dollar” or “$”:  A dollar or other equivalent unit in such
coin or currency of the United States of America as at the time shall be legal
tender for all debts, public and private.

 

“Domicile”: 
With respect to any Collateral Debt Security obligor, either (a) if
it is organized in the Netherlands Antilles, Bermuda, the
Cayman Islands, the Bahamas, Guernsey, Jersey, the Isle of Man or the British
Virgin Islands, the
country in which a majority of its assets are located, directly or through
subsidiaries, as determined by the Collateral Manager or (b) otherwise,
its country of incorporation or organization.

 

“Draw”: 
With respect to (i) any Delayed Draw Notes, the meaning specified in
Section 2.12(a) and (ii) any Revolving Notes, the meaning specified in Section
2.13(a).

 

24

 

“Draw Date”: 
With respect to (i) any Delayed Draw Notes, the meaning specified in
Section 2.12(a) and (ii) any Revolving Notes, the meaning specified in Section
2.13(a).

 

“Draw Period”: The period commencing on the
Closing Date and ending on the earlier of (i) the date set forth in the Term
Sheet (the Draw Period End Date) or (ii) the date the Commitment
terminates.

 

“Drawn Amount”: At any time, with respect to
any Commitment Notes, the aggregate principal amount of the Commitment Notes
funded on the Closing Date or by one or more Draws after the Closing Date and,
in the case of Revolving Notes, not repaid.

 

“DTC”: 
The Depository Trust Company, its nominees, and their respective
successors.

 

“Due Date”: 
Each date on which a distribution is due on a Pledged Security in
accordance with its terms.

 

“Due Period”: 
With respect to any Payment Date, the period commencing immediately
following the 10th day prior to the preceding Payment Date (or, on the Closing
Date, in the case of the Due Period relating to the first Payment Date) and
ending on the 10th day prior to such Payment Date (or, in the case of a Due
Period that is applicable to the Payment Date relating to the Stated Maturity
of any Note, or the Maturity of all Outstanding Notes, ending on the day
preceding such Payment Date); provided,
however, that in any case, if the last day of the Due Period falls
on a day that is not a Business Day, the last day of such Due Period shall be
the immediately preceding Business Day.

 

“Effective Date”:  The earlier of a certain date set forth in
the Term Sheet (the Outside Effective Date) (or the next succeeding
Business Day if such date is not a Business Day) or the date selected by the
Collateral Manager and upon which the Collateral Debt Securities purchased by
the Issuer (including binding commitments to purchase) have an Aggregate
Principal Balance greater than or equal to the Effective Date Target Par.

 

“Effective Date Target Par”:  As set forth in the Term Sheet.

 

“Effective Date Target Par Ratio”:  The ratio obtained by dividing the Effective
Date Target Par by the sum of the aggregate original principal amounts of the
Senior Notes, Class C Notes and Class D Notes.

 

“Eligible Country”:  Any of the United States, Canada, a European
Country, Bermuda or the Cayman Islands or any other country that has a Moody’s
foreign currency rating of at least “Aa2” and an S&P foreign issuer credit
rating of at least “AA.”

 

“Eligible Investment”:  Any Dollar-denominated investment that, at
the time it is delivered to the Trustee (directly or through a securities
intermediary or bailee), is one or more of the following obligations or
securities:

 

(a)           direct Registered obligations, and
Registered obligations of, the timely payment of principal and interest on
which is fully and expressly guaranteed by, the United States of 

 

25

 

America or any agency or instrumentality of the United
States of America the obligations of which are expressly backed by the full
faith and credit of the United States of America;

 

(b)           demand and time deposits in, certificates
of deposit of trust accounts with bankers’ acceptances issued by, or federal
funds sold by any depositary institution or trust company incorporated under
the laws of the United States of America or any state thereof (including the Bank
or the commercial department of any successor Trustee, as the case may be; provided, however,
that such Person otherwise meets the criteria specified herein) and subject to
supervision and examination by federal and/or state banking authorities so long
as the commercial paper and/or the debt obligations of such depositary
institution or trust company (or, in the case of the principal depositary
institution in a holding company system, the commercial paper or debt
obligations of such holding company) at the time of such investment or
contractual commitment providing for such investment have the Eligible
Investment Required Ratings; provided,
however, that any investment in commercial paper or bankers’
acceptances will not have a maturity in excess of 183 days;

 

(c)           unleveraged repurchase or forward
obligations with respect to (A) any security described in clause (a) above or
(B) any other Registered security issued or guaranteed by an agency or
instrumentality of the United States of America, in either case entered into
with a depositary institution or trust company (acting as principal) described
in clause (b) above (including, the Bank or the commercial department of any
successor Trustee, as the case may be; provided,
however, that such Person
otherwise meets the criteria specified herein) or entered into with an entity
(acting as principal) with, or whose parent company has, the Eligible
Investment Required Ratings; provided,
further, that no such repurchase obligation will extend for a term
in excess of 183 days;

 

(d)           Registered debt securities bearing
interest or sold at a discount issued by any corporation incorporated under the
laws of the United States of America or any state thereof that have a credit
rating of not less than the Eligible Investment Required Ratings at the time of
such investment or contractual commitment providing for such investment;

 

(e)           commercial paper or other short-term
obligations of an obligor (including the Bank or the commercial department of
any successor Trustee, as the case may be, or any Affiliate thereof) with the
Eligible Investment Required Ratings and that either are bearing interest or
are sold at a discount from the face amount thereof and have a maturity of not
more than 183 days from their date of issuance;

 

(f)            a Reinvestment Agreement issued by any
bank (if treated as a deposit by such bank), including the Bank, or a
Reinvestment Agreement or guaranteed investment issued by any insurance company
or other corporation or entity, in each case with the Eligible Investment
Required Ratings;

 

(g)           shares or other securities of non-United
States money market funds which funds have, at all times, credit ratings of “Aaa”
or “MR1+” by Moody’s and “AAAm” or “AAAm-G” by S&P, respectively; and

 

26

 

(h)           Cash;

 

which, in each case (x) is purchased at par or below
and (y) matures or is putable at par to the obligor thereof (after giving
effect to any applicable grace period) no later than the Business Day prior to
the next Payment Date, unless such Eligible Investments are issued by the
Trustee in its capacity as a banking institution, in which event such Eligible
Investments may mature on such Payment Date; provided,
however, that:

 

(i)            Eligible Investments on deposit in the Revolver Funding
Account will be invested in overnight funds that are Eligible Investments;

 

(ii)           Eligible Investments purchased with funds in the
Collection Account will be held until maturity except as otherwise specifically
provided herein; and

 

(iii)           none of the foregoing obligations or securities will
constitute Eligible Investments if:

 

(A)          such
obligation or security has a “p,” “pi,” “q,” “r” or “t” subscript assigned to
any rating by S&P,

 

(B)           all, or
substantially all, of the remaining amounts payable thereunder consist of
interest and not principal payments,

 

(C)           such
obligation or security is subject to U.S. withholding tax,

 

(D)          such
obligation or security is subject to any withholding tax unless the obligor of
the obligation or security is required to make “gross-up” payments that cover
the full amount of such withholding tax on an after-tax basis pursuant to the
Underlying Instrument with respect thereto,

 

(E)           such
obligation or security is a mortgage-backed security or is secured by real
property, or

 

(F)           such
obligation or security is the subject of an Offer.

 

Any investment which otherwise qualifies as an
Eligible Investment, may (1) be made by the Trustee with or through the Bank or
any of its Affiliates, and (2) be made in securities of any entity for which
the Bank or any of its Affiliates serves as offeror, distributor, advisor or
other service provider.

 

“Eligible Investment Required Ratings”:  Unless otherwise specified in the Supplement,
short-term credit ratings of “P-1” from Moody’s and “A-1+” from S&P or, in
the case of any Eligible Investment with a maturity of longer than 91 days,
long-term credit ratings of at least “Aa2” from Moody’s and “AAA” from S&P
(or, in the case of Registered debt securities bearing interest or sold at a
discount issued by any corporation incorporated under the laws of the United
States of America or any state thereof, “AA” by S&P); provided,
however, that on any date of 

 

27

 

purchase of an Eligible Investment, up to 20% of the
Principal Collateral Value may consist of Eligible Investments with a
short-term credit rating of “A-1” (rather than “A-1+”) by S&P after giving
effect to such purchase.

 

“Eligible Loan Index”:  With respect to each Collateral Debt Security
that is a Senior Secured Loan, one of the following indices as selected by the
Collateral Manager in writing delivered to the Trustee upon acquisition of such
Collateral Debt Security:  CSFB Leveraged
Loan Indices (formerly DLJ Leveraged Loan Index Plus), the Deutsche Bank
Leveraged Loan Index, the Goldman Sachs/Loan Pricing Corporation Liquid
Leveraged Loan Index, the Banc of America Securities Leveraged Loan Index, the
S&P/LSTA Leveraged Loan Indices or any other loan index for which Rating
Agency Confirmation has been obtained.

 

“Eligible Principal Investments”:  Eligible Investments purchased with Principal
Proceeds (including amounts designated as Principal Proceeds pursuant to the
Priority of Payments) or the proceeds of the offering of the Notes.

 

“Equity Security”:  (i) Any equity security or other security
that is not eligible for purchase by the Issuer as a Collateral Debt Security
or (ii) any security purchased as part of a “unit” with a debt obligation that
otherwise meets the definition of Collateral Debt Security and that itself is
not eligible for purchase by the Issuer as a Collateral Debt Security; provided that an Equity Security will be
deemed to have a principal balance and an interest rate of zero for purposes of
the Portfolio Profile Test, any Coverage Test and the Collateral Quality Test.

 

“ERISA”: 
The United States Employee Retirement Income Security Act of 1974, as
amended.

 

“ERISA Section”:  With respect to any representation letter or
certificate required to be provided hereunder, the section or sections of such
letter or certification pertaining to matters related to ERISA, Benefit Plan
Investors, Plans, Controlling Persons, “employee benefit plans” (within the
meaning of Section 3(3) of ERISA) or in any way addressing matters in any way similar
to the foregoing.

 

“ERISA Securities”:  The Issued Securities.

 

“Euroclear”: 
Euroclear Bank S.A./N.V. as the operator of the Euroclear system and any
successor or successors thereto.

 

“European Countries”:  Any Group I European Country, Group II European
Country, Group III European Country or Group IV European Country.

 

“Event of Default”:  The meaning specified in Section 5.1.

 

“Excepted Property”: $500 (comprised of $250 of proceeds in connection with the issuance of
the ordinary shares of the Issuer and $250 received as a fee for issuing the
Securities), together with the bank account of the Issuer in the Cayman Islands
in which such money is deposited and any interest thereon.

 

28

 

“Excess Interest”:  As of any date of determination, the greater
of (i) zero and (ii) Current Portfolio Annual Interest as of such date minus
Current Portfolio Minimum Interest as of such date.

 

“Excess Weighted Average Spread”:  As of any Measurement Date, an amount equal
to the product obtained by multiplying (a) the excess, if any, of the Weighted
Average Spread over the Minimum Spread by (b) the sum of (i) the Principal
Balance of each Collateral Debt Security (excluding any Defaulted Security and
any PIK Security or Partial PIK Security to the extent of any non-cash
interest) that is not a Revolving Collateral Debt Security or a Delayed
Drawdown Debt Security, plus (ii) the outstanding principal amount of each such
Revolving Collateral Debt Security or Delayed Drawdown Debt Security, and
subtracting from such product the Annualized Short Premium.

 

“Exchange Act”: 
The United States Securities Exchange Act of 1934, as amended.

 

“Exchange Class”:  The meaning specified in Section 2.5(g)(i).

 

“Exchange Transaction”:  A transaction pursuant to Section 12.2(b).

 

“Exchanged Defaulted Security”:  The meaning specified in Section 12.2(b).

 

“Expense Reserve Account”:  The trust account established pursuant to
Section 10.3(j).

 

“Expense Reserve Account Amount”:  As set forth in the Term Sheet.

 

“Extended Maturity Obligations Percentage”:  As set forth in the Term Sheet.

 

“Federal Funds Effective Rate”:  With respect to Revolving Notes (if any), for
any period, a fluctuating interest rate equal for each day during such period
to the weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds brokers,
as published for such day (or, if such day is not a Business Day, for the
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Revolving Note
Agent from three Federal Funds brokers of recognized standing selected by the
Revolving Note Agent.

 

 “Fee Basis
Amount”:  On any Payment Date, the
sum of (i) the Aggregate Principal Balance of the Collateral Debt Securities,
(ii) the aggregate principal amount of Eligible Principal Investments, and
(iii) amounts on deposit in the Unused Proceeds Account, in each case as of the
first day of the related Due Period.

 

“Financial Asset”: The meaning specified in the
UCC.

 

“Financial Market Publisher”:  Publishers of financial data designated by
the Collateral Manager on behalf of the Issuer from time to time.

 

29

 

“Financing Agreement”:  An agreement or agreements among the Issuer,
the Financing Party and other parties pursuant to which the Financing Party
provides financing for the acquisition of debt obligations prior to the Closing
Date.

 

“Financing Party”:  One or more parties (which may be the Manager
or the Collateral Manager or one or more of their Affiliates) that provides
funds to the Issuer pursuant to a Financing Agreement.

 

“Financing Statement”:  The meaning specified in the UCC.

 

“Fixed Rate Notes”:  As of any date of determination, all Rated
Notes that bear interest at a fixed rate during the related Interest Accrual
Period.

 

“Floating Amounts”:  With respect to each Class of Floating Rate
Notes, the Interest Amount applicable to such Class.

 

“Floating Rate Notes”:  As of any date of determination, all Rated
Notes that bear interest at a floating rate during the related Interest Accrual
Period.

 

“Floating Rates”:  With respect to each Class of Floating Rate
Notes, the Interest Rate applicable to such Class.

 

“FRB”: 
Any Federal Reserve Bank.

 

“Funding Rate”: 
With respect to the Revolving Notes held by a Pass-Through CP Conduit
and any Interest Accrual Period, the sum of (x)(i) if such Notes are funded
through the issuance of commercial paper by such Pass-Through CP Conduit,
the weighted daily averaged interest rate payable in respect of such
Pass-Through CP Conduit’s commercial paper during such Interest Accrual
Period (determined in the case of discount commercial paper notes by converting
the discount to an interest bearing equivalent rate per annum), or (ii) if such
Notes are funded under a Pass-Through CP Conduit’s committed program-wide
liquidity loan agreement or otherwise than through the issuance of commercial
paper, Pass-Through CP Conduit LIBOR plus a certain spread (the CP Conduit
Spread) as set forth in the Term Sheet, and (y) (without duplication) the
commissions and charges charged by the applicable placement agent or commercial
paper dealer with respect to such commercial paper expressed as a percentage of
the face amount thereof and converted to an interest-bearing equivalent rate
per annum.

 

“Global Certificatable Securities”:  The meaning specified in Section 2.5(e)(iv).

 

“Global Rated Notes”:  Rated Notes held in the form of Global
Securities.

 

“Global Security”:  Each Rule 144A Global Security and Regulation
S Global Security.

 

“Global Subordinated Notes”:  Subordinated Notes held in the form of Global
Securities.

 

“Grant”: 
To grant, bargain, sell, alienate, convey, assign, transfer, mortgage,
pledge, create and grant a security interest in and right of set-off
against.  A Grant of the Pledged 

 

30

 

Securities, or of any other instrument, shall include
all rights, powers and options (but none of the obligations) of the granting
party thereunder, including without limitation the immediate and continuing
right to claim for, collect, receive and receipt for principal and interest
payments in respect of the Pledged Securities, and all other Monies payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring legal
or other proceedings in the name of the granting party or otherwise, and
generally to do and receive anything that the granting party is or may be
entitled to do or receive thereunder or with respect thereto.

 

“Group I European Countries”:  Unless otherwise specified in the Supplement,
the United Kingdom.

 

“Group II European Countries”:  Unless otherwise specified in the Supplement,
Germany, Ireland, Sweden, Switzerland and the Netherlands.

 

“Group III European Countries”:  Unless otherwise specified in the Supplement,
Austria, Belgium, Denmark, Finland, France, Liechtenstein, Luxembourg, Norway
and Spain.

 

“Group IV European Countries”:  Unless otherwise specified in the Supplement,
Italy, Portugal and Greece and any other member states of the European Union
not included in the definition of Group I European Countries, Group II European
Countries or Group III European Countries.

 

“Hedge Agreements”:  The interest rate cap and swap agreements
entered into between the Issuer and each Hedge Counterparty, as amended from
time to time, and any additional or replacement interest rate cap or swap
agreements or other agreements that address interest rate exposure entered into
between the Issuer and each Hedge Counterparty in accordance with the terms
hereof, as amended from time to time, provided
that Rating Agency Confirmation has been received.

 

“Hedge Collateral Account”:  Each trust account established pursuant to
Section 10.3(f).

 

“Hedge Counterparty”:  Any institution or institutions with whom the
Issuer enters into interest rate cap or swap agreements or other agreements
that address interest rate exposure and with respect to which Rating Agency
Confirmation shall have been received, or any permitted assignees or successors
of such institutions under any Hedge Agreements with respect to which Rating
Agency Confirmation shall have been received; provided
that each Hedge Counterparty or its credit support provider shall have ratings
not less than the Hedge Counterparty Minimum Ratings (as set forth in
the Term Sheet).

 

“Hedge Payment Amount”:  With respect to the Hedge Agreements and any
Payment Date, the amount, if any, of any payments (other than termination
payments) including any amounts deferred from the previous Payment Date
together with interest thereon at the rate set forth in the applicable Hedge
Agreement then payable by the Issuer to the Hedge Counterparties.

 

“Holder” or “Securityholder”:  With respect to any Security, the Person in
whose name such Security is registered in the Security Register.

 

31

 

“Indemnifiable Tax”:  Any Tax imposed by any governmental authority
of the Cayman Islands by withholding or deduction from a payment under a
Revolving Note other than (a) a Tax that would not have been imposed but for
(i) a present or former connection between the Cayman Islands and the Holder of
the Revolving Note, any Person holding an interest in the Revolving Note
through a partnership, trust, financial intermediary or otherwise or any Person
related to the Holder or Person holding an interest in the Revolving Note
(other than a connection arising solely from having received a payment under,
or enforced, a Revolving Note) or (ii) presentation of a Revolving Note for
payment (where presentation is required) on a day more than 30 Business Days
after the date on which such payment became due except to the extent that
additional amounts would have been payable on account of the withholding or
deduction of Taxes had presentation been made on such thirtieth Business Day,
(b) any Tax imposed on account of the location of the paying agent, (c) any
estate, inheritance, gift, sales, transfer, personal property, wealth or
similar Tax, (d) any Tax imposed due to the inability or the failure of the
affected Holder or Person to deliver, to the Issuer and Trustee or to such
governmental authority as the Issuer may direct, any document, form or
certification required or reasonably requested in writing in order to allow the
Issuer to make a payment without any deduction or withholding for or on account
of any Tax, (e) any Tax imposed with respect to a payment to a Holder that is
not the beneficial owner of the Revolving Notes that would not have been
imposed had the beneficial owner directly held such Revolving Notes, (f) any
Tax which is collectible otherwise than by withholding or deduction from
payments of principal, interest, redemption amount or Commitment Fee Amount or
(g) any combination of (a), (b), (c), (d), (e) and (f) above.

 

“Indenture”: 
This instrument, including all Schedules, Appendices (including, for the
avoidance of doubt, the Supplement and the Term Sheet) and Exhibits hereto, as
originally executed and, if from time to time supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, as so supplemented or amended.

 

“Independent”: 
As to any Person, any other Person (including, in the case of an
accountant, or lawyer, a firm of accountants or lawyers or any investment bank
and any member thereof) who (i) does not have and is not committed to
acquire any material direct or any material indirect financial interest in such
Person or in any Affiliate of such Person, and (ii) is not connected with
such Person as an Officer, employee, promoter, underwriter, voting trustee,
partner, director or Person performing similar functions.  “Independent” when used with respect to any
accountant may include an accountant who audits the books of such Person if in
addition to satisfying the criteria set forth above the accountant is
independent with respect to such Person within the meaning of Rule 101 of the
Code of Ethics of the American Institute of Certified Public Accountants.

 

Whenever any Independent Person’s opinion or
certificate is to be furnished to the Trustee, such opinion or certificate
shall state that the signer has read this definition and that the signer is
Independent within the meaning hereof.

 

“Index Maturity”:  With respect to the first Payment Date, the
number of months for which the London interbank offered rate for Eurodollar deposits is quoted that
is closest to but less than the period of time from the Closing Date to the end
of the first Interest Accrual Period,

 

32

 

and with respect to each
Payment Date thereafter, three months; provided,
that in the case of the Interest Accrual Period applicable to any Draw of
Commitment Notes, the Index Maturity shall be the related Interest Accrual
Period.

 

“Initial Investment Period”:  The period from the Closing Date to and
including the Effective Date.

 

“Instrument”: 
The meaning specified in Article 9 of the UCC.

 

“Interest Accrual Period”:  The period from and including the Closing
Date to but excluding the first Payment Date (or, with respect to any Draw with
respect to any Commitment Notes, the period from and including such Draw to,
but excluding, the Payment Date immediately following such Draw) and each
succeeding period from and including each Payment Date to but excluding the
following Payment Date until Stated Maturity (unless the Notes are redeemed
earlier).

 

In determining any Interest Accrual Period, (i) in the
case of Floating Rate Notes, if any Payment Date is not a Business Day, then
the Interest Accrual Period ending on such Payment Date shall be extended to
but excluding the date on which payment is required to be made pursuant to this
Indenture and the succeeding Interest Accrual Period shall begin on and include
such date, and (ii) in the case of Fixed Rate Notes, the Payment Date shall be
assumed to be the date of the month set forth in the definition of Payment Date
without regard to whether such day is a Business Day.

 

“Interest Amount”:  With respect to each Floating Rate Note and
each LIBOR Determination Date, the amount of interest for the related Interest
Accrual Period payable in respect of each $100,000 principal amount of such
Class of Notes.

 

“Interest Distribution Amount”:  With respect to any Class or Classes of Rated
Notes on any Payment Date, (i) the aggregate amount of interest accrued, at the
applicable Interest Rate, during the related Interest Accrual Period on the
Aggregate Outstanding Amount of the applicable Rated Notes on the first day of
such Interest Accrual Period (after giving effect to any redemption of such Rated
Notes on any preceding Payment Date) and (ii) any Defaulted Interest with
respect to such Class of Rated Notes.

 

“Interest Proceeds”:  With respect to any Payment Date, the sum of
the following amounts received during the related Due Period:

 

(i)            all Cash payments of interest (including
capitalized interest and amounts that are the economic equivalent of interest)
or dividends on the Pledged Securities (other than Credit-Linked Obligations),
including in the Collateral Manager’s judgment (determined as of the trade
date), accrued interest (other than Principal Financed Accrued Interest)
received in connection with a sale of Pledged Securities (to the extent such
accrued interest was not applied to the purchase of Collateral Debt
Securities);

 

(ii)           all amendment and waiver fees (unless
otherwise designated as Principal Proceeds by the Collateral Manager in writing
to the Trustee), all late payment fees, prepayment fees, call 

 

33

 

premiums, commitment fees and all other fees and
commissions received during such Due Period in connection with the Pledged
Securities (other than fees and commissions received in connection with the
purchase, sale, restructuring or default of Pledged Securities);

 

(iii)          all payments pursuant to any Hedge
Agreements scheduled to be received on or prior to such Payment Date (other
than payments in connection with termination (including reduction of the
notional amount) of a Hedge Agreement);

 

(iv)          all periodic payments received pursuant
to Credit-Linked Obligations during such Due Period (other than payments in
respect of termination, maturity or redemption);

 

(v)           Unused Proceeds designated by the
Collateral Manager as Interest Proceeds prior to the end of the first Due
Period in accordance with Section 10.3(b); and

 

(vi)          all payments of principal on Eligible
Investments purchased with Interest Proceeds;

 

provided, however, that Interest Proceeds shall not include the
following amounts:

 

(i)            that portion of the aggregate amounts
received with respect to a Defaulted Security that does not exceed the
outstanding principal amount of such Defaulted Security;

 

(ii)           the sum of amounts transferred or to be
transferred from the Interest Reserve Account to the Payment Account on or
about the Business Day preceding such Payment Date;

 

(iii)          all amounts received with respect to
Short Positions;

 

(iv)          any upfront payments received upon entry
into a Synthetic Security;

 

(v)           any portion of Interest Proceeds that
were applied to make payments with respect to Synthetic Securities (other than
Short Positions);

 

(vi)          with respect to the first interest
payment after acquisition of a Collateral Debt Security, that portion of such
interest payment that constitutes Principal Financed Accrued Interest;

 

(vii)         amounts designated as Principal Proceeds
by the Collateral Manager in connection with confirmation of the ratings on the
Rated Notes as of the Effective Date; and

 

(viii)        amounts that were accrued with respect to
the period ending on the Closing Date and are required to be paid to the
Financing Party under the Financing Agreement.

 

“Interest Rate”:  With respect to each Class of Notes, as set
forth in the Term Sheet.

 

“Interest Reserve Account”:  The trust account established pursuant to
Section 10.3(i).

 

“Interest Reserve Amount”:  Unless otherwise specified in the Supplement,
with respect to each Payment Date, to the extent that the aggregate Principal
Balance of Non-Quarterly Pay 

 

34

 

Obligations as of the related Determination Date is
greater than a certain percentage (as set forth in the Term Sheet) of the
Principal Collateral Value (such percentage, the Interest Reserve Threshold),
one-half of the amount of interest received during the related Due Period on
Non-Quarterly Pay Obligations in excess of the Interest Reserve Percentage of
the Principal Collateral Value (as selected and determined by the Collateral
Manager).

 

“Interim Target”:  As set forth in the Supplement.

 

“Interim Target Date”:  As set forth in the Supplement.

 

“Intermediary”: 
The entity maintaining an Account pursuant to an Account Agreement.

 

“Intermediate Assignee”:  The specified meaning in Section 2.14(b).

 

“Intermediate Collateral Management Fee”:  The intermediate collateral management fee
payable to the Collateral Manager in arrears on each Payment Date in accordance
with the Priority of Payments or the Special Priority of Payments, as
applicable, in an amount equal to such percentage per annum as set forth in the Term Sheet (such percentage,
the Intermediate Collateral Management Fee Percentage) of the Fee Basis
Amount.

 

“Investment Company Act”:  The United States Investment Company Act of
1940, as amended.

 

“Investment Criteria”:  The meaning specified in Section 12.2(a).

 

“Issued Securities”:  Unless otherwise set forth in the Supplement,
Securities other than the Co-Issued Securities.

 

“Issuer”: 
The Person identified as the Issuer in the first paragraph of this
Indenture until a successor Person shall have become the Issuer pursuant to the
applicable provisions of this Indenture, and thereafter “Issuer” shall mean
such successor Person.

 

“Issuer Order”: 
A written order or request (which may be in the form of a standing order
or request) dated and signed in the name of the Issuer by an Authorized Officer
of the Issuer or the Co-Issuer, or by an Authorized Officer of the Collateral
Manager where permitted pursuant to the Collateral Management Agreement, as the
context may require or permit.

 

“Knowledgeable Employee”:  The meaning given such term in Rule 3c-6
under the Investment Company Act.

 

“LIBOR”: 
The meaning set forth in Schedule C attached hereto.

 

“LIBOR Business Day”:  The meaning set forth in Schedule C attached
hereto.

 

“LIBOR Determination Date”:  The meaning set forth in Schedule C attached
hereto.

 

“Loan”: 
As defined in clause (A)(2) of the definition of Collateral Debt
Security.

 

35

 

“Lowest CCC Obligations”:  CCC Obligations (including, in no more than
one case, a portion of a CCC Obligation) (a) with an aggregate principal
balance equal to the excess, if any, of the aggregate principal balance of all
CCC Obligations as of such date over a certain percentage (as is set forth in
the Term Sheet) of the Principal Collateral Value (such percentage, the Lowest
CCC Threshold) and (b) with the lowest possible aggregate Market Value
among such CCC Obligations.

 

“Majority”:  With respect to any Class or Classes, the
Holders of more than 50% of the Aggregate Outstanding Amount of the Securities
of such Class or Classes, as the case may be. 
With respect to the Securities collectively, the Holders of more than
50% of the sum of the Aggregate Outstanding Amount of all Outstanding Notes; provided that, in any case where any
Commitment Notes are voting together with any other Class or Classes of Notes,
the Aggregate Outstanding Amount of such Commitment Notes shall mean the
Commitment of such Notes at such time; and
provided further that, in any case where
any Commitment Notes are voting as a separate Class and the Drawn Amount is
zero (other than as the result of an “Event of Default” as defined in the Note
Purchase Agreement) the Aggregate Outstanding Amount of such Commitment Notes
shall mean the Commitment.

 

“Make Whole Amount”:  Except as otherwise specified in the
Supplement, with respect to the Fixed Rate Notes, an amount, expressed in U.S.
Dollars, equal to the present value of the remaining payments of the principal
amount of and interest (exclusive of payments that otherwise would have been
payable on the Redemption Date and Deferred Interest) on such Note, as
applicable, calculated on a 30/360 day count basis (i) assuming that the
entire remaining outstanding principal amount (exclusive of payments that
otherwise would have been payable on the Redemption Date and Deferred Interest)
of each such Class of Notes will be paid on the Payment Date following the
Remaining Average Life Date, and that each payment of interest is made on its
related Payment Date, including interest from the Payment Date prior to the
Remaining Average Life Date up to the end of such Remaining Average Life (that
is, that no such interest is deferred), and (ii) using a discount factor
equal to the Reinvestment Yield.

 

“Managers”: 
As set forth in the Term Sheet.

 

“Managers Addresses”:  The meaning specified in the Supplement.

 

“Mandatory Redemption”:  Any redemption of Notes, in whole or in part,
required in accordance with the Priority of Payments as a result of failure (i)
to satisfy any Coverage Test, or (ii) to obtain Rating Agency Confirmation in
connection with the Effective Date.

 

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

 

“Market Value”: 
On any Measurement Date, for any Collateral Debt Security (and in all
cases as shall be certified in writing by the Collateral Manager to the
Trustee), (i) the average bid price value determined by a Qualified
Pricing Service selected by the Collateral Manager; or (ii) (A) if a Qualified
Pricing Service is not available or, if the bid price determined by such
service is deemed by the Collateral Manager in its reasonable discretion to be
unreliable, based 

 

36

 

on the Collateral Manager’s knowledge of the current
market for such Collateral Debt Security, then either (1) the average of the
bid side prices determined by three Independent broker-dealers selected by the
Collateral Manager who are active in the trading of such securities, or (2) if
only two such bid prices are available, the lower of such two bid prices, provided, that if only one such bid price
is available, the Market Value shall be such bid price or (B) if the determinations of such
broker-dealers are not made available, then for up to 30 days the bid side
market value of such Collateral Debt Security as determined by the Collateral
Manager, using its reasonable business judgment consistent with customary
market practice, and thereafter zero.  Equity
Securities will be deemed to have a Market Value of zero.

 

“Maturity”: 
With respect to any Security, the date on which the outstanding
principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration, call
for redemption or otherwise.

 

“Measurement Date”:  Each of the following:  (i) the Effective Date, (ii) after
the Effective Date, any date on which there is a sale, purchase, substitution
or other disposition of any Collateral Debt Security (or, if earlier, the date
the Issuer enters into an irrevocable commitment with respect to any such sale,
purchase, substitution or other disposition), (iii) each Determination
Date, (iv) the date of determination of the Monthly Report, and
(v) with reasonable notice, any other Business Day requested by either
Rating Agency.

 

“Merging Entity”:  The meaning specified in Section 7.10.

 

“Mezzanine Notes”:  As specified in the Supplement.

 

“Minimum Denominations”:  Unless otherwise specified in the Supplement,
the meaning specified in Section 2.3.

 

“Minimum Spread”:  As set forth in the Term Sheet.

 

“Money”: 
The meaning specified in Article 1 of the UCC.

 

“Monthly Report”:  Each report containing the information set
forth on Appendix C, as the same may be modified and amended by mutual
agreement between the Trustee and the Collateral Manager, that is delivered
pursuant to Section 10.5(a).

 

“Monthly Report Date”:  As specified in the Supplement.

 

“Monthly Report Period”:  With respect to (i) the first Monthly Report
following a Payment Date, the period commencing immediately following last day
of the preceding Due Period and ending on the first Monthly Report Date
thereafter, and (ii) the second Monthly Report following a Payment Date, the
period commencing immediately following last day of the preceding Monthly
Report Period and ending on the first Monthly Report Date thereafter.

 

“Moody’s”: 
Moody’s Investors Service, Inc. and its successors and assigns.

 

37

 

“Moody’s Actual Weighted
Average Rating Factor”:  The number determined by summing the products
obtained by multiplying the Principal Balance of each Collateral Debt Security
by its Moody’s Rating Factor, dividing such sum by the aggregate of the
Principal Balances of all such Collateral Debt Securities and rounding the
result up to the nearest whole number.

 

“Moody’s Default Probability Rating”:  Unless otherwise specified in the Supplement,
with respect to any Collateral Debt Security as of any date of determination,
the rating determined for such Collateral Debt Security as set forth on
Schedule E or such other schedule provided by Moody’s to the Issuer, the
Trustee and the Collateral Manager for which Rating Agency Confirmation has
been obtained from Moody’s.

 

“Moody’s Derived Rating”:  Unless otherwise specified in the Supplement,
with respect to any Collateral Debt Security whose Moody’s Rating or Moody’s
Default Probability Rating cannot otherwise be determined pursuant to the
definitions thereof, the rating determined for such Collateral Debt Security as
set forth on Schedule E or such other schedule provided by Moody’s to the
Issuer, the Trustee and the Collateral Manager for which Rating Agency
Confirmation has been obtained from Moody’s.

 

“Moody’s Diversity Test”:  A test satisfied if as of any Measurement
Date the Diversity Score is greater than or equal to a certain number set forth
in the Term Sheet (such number, the Moody’s Minimum Diversity Score).

 

“Moody’s Industry Classification”:  The industry classification set forth in
Schedule B-2, as such industry classification will be updated at the option of
the Collateral Manager if Moody’s publishes revised industry classifications
and Moody’s or the Collateral Manager provides written notice thereof to the
Trustee.

 

“Moody’s Maximum Weighted Average Rating Factor”:  As of any Measurement Date, the Applicable
Moody’s Rating Factor applicable to the Diversity Score as of such Measurement
Date, determined by reference to Moody’s Weighted Average Rating Factor Matrix
set forth in the Supplement, plus
the Moody’s Weighted Average Rating Factor Adjustment as of such date; provided, that notwithstanding the
foregoing, the Moody’s Maximum Weighted Average Rating Factor as of any
Measurement Date will not exceed the factor set forth in the Supplement (such
factor, the Moody’s Weighted Average Rating Factor Ceiling).

 

“Moody’s Minimum Weighted Average Recovery Rate
Test”:  A test satisfied if as of any
Measurement Date the Moody’s Weighted Average Recovery Rate is greater than or
equal to a certain percentage set forth in the Term Sheet (such percentage, the
Moody’s Minimum Recovery Rate).

 

“Moody’s Rating”:  Unless otherwise specified in the Supplement,
with respect to any Collateral Debt Security as of any date of determination,
the rating determined for such Collateral Debt Security as set forth on
Schedule E or such other schedule provided by Moody’s to the Issuer, the
Trustee and the Collateral Manager for which Rating Agency Confirmation has
been obtained from Moody’s.

 

38

 

“Moody’s Rating Factor”:  Unless otherwise specified in the Supplement,
for each Collateral Debt Security, a number set forth to the right of the
applicable Moody’s Default Probability Rating below:  

 

	
  Moody’s

  	
   

  	
  Moody’s

  	
   

  
	
  Rating

  	
   

  	
  Rating Factor

  	
   

  
	
  Aaa

  	
   

  	
  1

  	
   

  
	
  Aa1

  	
   

  	
  10

  	
   

  
	
  Aa2

  	
   

  	
  20

  	
   

  
	
  Aa3

  	
   

  	
  40

  	
   

  
	
  A1

  	
   

  	
  70

  	
   

  
	
  A2

  	
   

  	
  120

  	
   

  
	
  A3

  	
   

  	
  180

  	
   

  
	
  Baa1

  	
   

  	
  260

  	
   

  
	
  Baa2

  	
   

  	
  360

  	
   

  
	
  Baa3

  	
   

  	
  610

  	
   

  
	
  Ba1

  	
   

  	
  940

  	
   

  
	
  Ba2

  	
   

  	
  1,350

  	
   

  
	
  Ba3

  	
   

  	
  1,766

  	
   

  
	
  B1

  	
   

  	
  2,220

  	
   

  
	
  B2

  	
   

  	
  2,720

  	
   

  
	
  B3

  	
   

  	
  3,490

  	
   

  
	
  Caa1

  	
   

  	
  4,770

  	
   

  
	
  Caa2

  	
   

  	
  6,500

  	
   

  
	
  Caa3

  	
   

  	
  8,070

  	
   

  
	
  Ca, not rated or withdrawn

  	
   

  	
  10,000

  	
   

  

 

For purposes of calculating the Moody’s Weighted
Average Rating Factor Test and the Moody’s Weighted Average Rating Factor
Adjustment, (i) each Defaulted Security will be excluded, and (ii) if a
Collateral Debt Security is not rated by Moody’s and no other security or
obligation of the obligor is rated by Moody’s, and the Issuer or the Collateral
Manager has requested a rating or rating estimate from Moody’s, then until such
rating or rating estimate is received, the Moody’s Rating Factor of such
security will be deemed to be the lesser of (a) the Moody’s Rating Factor
corresponding to such security’s rating as determined pursuant to the
definition of Moody’s Default Probability Rating and (b) 10,000.

 

“Moody’s Recovery Amount”:  With respect to any Collateral Debt Security,
the amount equal to the product of (i) the applicable Moody’s Recovery Rate and
(ii) the Principal Balance of such Collateral Debt Security.

 

“Moody’s Recovery Rate”:  Unless otherwise specified in the Supplement,
with respect to any Collateral Debt Security, as of any Measurement Date, the
recovery rate specified in Table I below corresponding to such type of
Collateral Debt Security:

 

Table I

Moody’s Recovery Rates

 

	
  Type of Collateral Debt Security

  	
   

  	
  Recovery Rate

  
	
  Senior Secured Loans

  	
   

  	
  The recovery rate
  determined by reference to Table II below

  
	
  Non-Senior Secured Loans

  	
   

  	
  The recovery rate
  determined by reference to Table III below

  
	
  Debt securities

  	
   

  	
  The recovery rate
  determined by reference to Table IV below

  
	
  Synthetic Securities and
  Structured Finance Securities

  	
   

  	
  As determined by Moody’s
  on a case by case basis

  
	
  DIP Collateral Debt Securities

  	
   

  	
  50%

  
	
  REIT Preferred Securities

  	
   

  	
  The recovery rate specified in the Supplement (such rate, the REIT
  Preferred Securities Recovery Rate).

  

 

39

 

Table
II

 

Moody’s
Recovery Rates for Senior Secured Loans

 

	
  Number of rating sub-categories
  by

  which the Moody’s Rating exceeds the

  Moody’s Default Probability Rating

  	
   

  	
  Recovery Rate

  	
   

  
	
  -3 or less

  	
   

  	
  20

  	
  %

  
	
  -2

  	
   

  	
  30

  	
  %

  
	
  -1

  	
   

  	
  40

  	
  %

  
	
  0

  	
   

  	
  45

  	
  %

  
	
  1

  	
   

  	
  50

  	
  %

  
	
  2 or more

  	
   

  	
  60

  	
  %

  

 

Table
III

 

Moody’s
Recovery Rates for Non-Senior Secured Loans

 

	
  Number of rating sub-categories
  by

  which the Moody’s Rating exceeds the

  Moody’s Default Probability Rating

  	
   

  	
  Recovery Rate

  	
   

  
	
  -3 or less

  	
   

  	
  10.0

  	
  %

  
	
  -2

  	
   

  	
  15.0

  	
  %

  
	
  -1

  	
   

  	
  30.0

  	
  %

  
	
  0

  	
   

  	
  40.0

  	
  %

  
	
  1

  	
   

  	
  42.5

  	
  %

  
	
  2 or more

  	
   

  	
  45.0

  	
  %

  

 

Table
IV

 

Moody’s
Recovery Rates for Debt Securities 

 

	
  Number of rating sub-categories
  by

  which the Moody’s Rating exceeds the

  Moody’s Default Probability Rating

  	
   

  	
  Recovery Rate*

  	
   

  
	
  -3 or less

  	
   

  	
  2

  	
  %

  
	
  -2

  	
   

  	
  10

  	
  %

  
	
  -1

  	
   

  	
  15

  	
  %

  
	
  0

  	
   

  	
  30

  	
  %

  
	
  1

  	
   

  	
  35

  	
  %

  
	
  2 or more

  	
   

  	
  40

  	
  %

  

 

*      The recovery rate for a
subordinated debt security will be 15% if its Moody’s Rating has been
determined by reference to the definition of “Moody’s Derived Rating.”

 

40

 

“Moody’s Weighted Average
Rating Factor Adjustment”:  As set
forth in the Supplement.

 

“Moody’s Weighted Average Rating Factor Matrix”:
As set forth in the Supplement.

 

“Moody’s Weighted Average Rating Factor Test”:  A test that is satisfied on any Measurement
Date if the Moody’s
Actual Weighted Average Rating Factor of the Collateral Debt Securities is
equal to or less than the Moody’s Maximum Weighted Average Rating Factor.

 

“Moody’s Weighted Average Recovery Rate”:  As of any Measurement Date, the number,
expressed as a percentage, obtained by (i) summing the Moody’s Recovery
Amount for each Collateral Debt Security (excluding Defaulted Securities),
(ii) dividing such sum by the Aggregate Principal Balance of all
Collateral Debt Securities (excluding Defaulted Securities), and
(iii) rounding up to the nearest tenth of a percent.

 

“Moody’s Weighted Average Spread Adjustment”:  As of any Measurement Date, the number
obtained by dividing:

 

(i)            the amount equal to (A) the Aggregate
Funded Spread, plus (B) the
Aggregate Unfunded Spread, minus
(C) the Annualized Short Premium,

 

by

 

(ii)           the Aggregate Principal Balance of the
Collateral Debt Securities (excluding Defaulted Securities and any PIK Security
and any Partial PIK Security to the extent of any non-cash interest).

 

“Non-Call Period”:  As set forth in the Term Sheet.

 

“Non-Permitted Holder”: The meaning specified
in Section 2.11(b).

 

“Non-Quarterly Pay Obligations”:  Debt obligations (excluding Eligible
Principal Investments) the terms of which provide for the payment of interest
less frequently than quarterly.

 

“Non-Senior Secured Loans”:  Any assignment of or Participation Interest
in or other interest (including a Synthetic Security) in a loan that is not a
Senior Secured Loan.

 

“Non-Voting Class A-1 Notes”: The meaning
specified in Section 2.14(a).

 

“Non-Voting Commitment Notes”: The meaning
specified in Section 2.14(a).

 

“Non-Voting Notes”: The meaning specified in
Section 2.14(a).

 

“Note Payment Sequence”:  The application in accordance with the
Priority of Payments, in the following order, to the payment of:

 

(i)            principal of the Class A Notes until the
Class A Notes have been paid in full;

 

41

 

(ii)           principal of the Class B Notes until the
Class B Notes have been paid in full;

 

(iii)          any accrued and unpaid interest on the
Class C Notes, and then to payment of any Deferred Interest with respect to the
Class C Notes and interest thereon, until such amounts have been paid in full;

 

(iv)          principal of the Class C Notes until the
Class C Notes have been paid in full;

 

(v)           any accrued and unpaid interest on the
Class D Notes, and then to payment of any Deferred Interest with respect to the
Class D Notes and interest thereon, until such amounts have been paid in full;

 

(vi)          principal of the Class D Notes until the
Class D Notes have been paid in full;

 

(vii)         any accrued and unpaid interest on the
Class E Notes, and then to payment of any Deferred Interest with respect to the
Class E Notes and interest thereon, until such amounts have been paid in full;

 

(viii)        principal of the Class E Notes until the
Class E Notes have been paid in full;

 

(ix)           any accrued and unpaid interest on the
Class F Notes, and then to payment of any Deferred Interest with respect to the
Class F Notes and interest thereon, until such amounts have been paid in full;
and

 

(x)            principal of the Class F Notes until the
Class F Notes have been paid in full.

 

“Note Purchase Agreement”:  The Note Purchase Agreement among the
Co-Issuers and (i) in the case of Revolving Notes, the Revolving Note Agent and
the Holders of the Revolving Notes (if any) and (ii) in the case of Delayed
Draw Notes, the Delayed Draw Note Agent and the Holders of the Delayed Draw
Notes (if any), in each case as of the Closing Date.

 

“Noteholder”: 
With respect to any Note, the Person in whose name such Note is
registered in the Security Register.

 

“Notes”: 
The Senior Notes, the Mezzanine Notes and the Subordinated Notes and any
other Class of Notes, collectively, authorized by, and authenticated and
delivered under, this Indenture or any supplemental indenture.

 

“Notice of Revocation”: The meaning specified
in Section 2.14(c).

 

“Offer”: 
With respect to any debt obligation, (i) any offer by the issuer of
such debt obligation or by any other Person made to all of the holders of such
debt obligation to purchase or otherwise acquire such debt obligation (other
than pursuant to any redemption in accordance with the terms of the related
Underlying Instruments) or to convert or exchange such debt obligation into or
for Cash, securities or any other type of consideration or (ii) any
solicitation by the issuer of such debt obligation or any other Person to
amend, modify or waive any provision of such debt obligation or any related
Underlying Instrument.

 

42

 

“Offering Memorandum”:  As specified in the Supplement.

 

“Officer”: 
With respect to the Issuer, the Co-Issuer and any other corporation, the
Chairman of the Board of Directors, any Director, the President, any Vice
President, the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer of such entity or other Person authorized by such entity; with
respect to any partnership, any general partner thereof; and with respect to
any bank or trust company acting as trustee of an express trust or as
custodian, any Trust Officer.

 

“Opinion of Counsel”:  A written opinion addressed to the Trustee
and each Rating Agency (except as otherwise provided herein), in form and
substance reasonably satisfactory to the Trustee and each applicable Rating
Agency, of an attorney at law admitted to practice before the highest court of
any state of the United States or the District of Columbia (or the Cayman
Islands, in the case of an opinion relating to the laws of the Cayman Islands),
which attorney may, except as otherwise expressly provided in this Indenture,
be counsel for the Issuer or the Collateral Manager, and which attorney shall
be reasonably satisfactory to the Trustee.

 

“Optional Redemption”:  A redemption in accordance with
Section 9.1.

 

“Outstanding”:

 

(i)            With respect to each Class of Securities,
as of any date of determination, all of such Class of Securities theretofore
authenticated and delivered under this Indenture except:

 

(a)           Securities theretofore canceled by the
Security Registrar or delivered to the Security Registrar for cancellation;

 

(b)           Securities or portions thereof for whose
payment or redemption funds in the necessary amount have been theretofore
irrevocably deposited with the Trustee or any Paying Agent in trust for the
Holders of such Securities; provided,
that, if such Securities or portions thereof are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;

 

(c)           Securities in exchange for or in lieu of
which other Securities have been authenticated and delivered pursuant to this
Indenture, unless proof satisfactory to the Trustee is presented that any such
Securities are held by a holder in due course; and

 

(d)           Securities alleged to have been
mutilated, destroyed, lost or stolen for which replacement Securities have been
issued as provided in Section 2.6; and

 

(ii)           with respect to all Securities, in
determining whether the Holders of the requisite Aggregate Outstanding Amount
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, the following shall be disregarded and deemed not to be
Outstanding: (A) Securities owned by the Issuer or the Co-Issuer, or by
any other obligor upon the Securities; and (B) Collateral Manager
Securities, but only with respect to a vote to terminate the Collateral Manager
for “cause” (as defined in the Collateral Management Agreement).  In determining whether the Trustee shall be
protected in relying upon any such request, demand, 

 

43

 

authorization, direction,
notice, consent or waiver, only Securities that the Trustee knows to be so
owned shall be so disregarded. 
Securities so owned that have been pledged in good faith may be regarded
as Outstanding if the pledgee establishes to the satisfaction of the Trustee
the pledgee’s right so to act with respect to such Securities and that the
pledgee is not the Issuer, the Co-Issuer or any other obligor upon the
Securities or any Affiliate of the Issuer, the Co-Issuer or such other obligor.

 

“Overcollateralization Ratios”:  The Senior Overcollateralization Ratio, the Class C/D
Overcollateralization Ratio and the Class E Overcollateralization Ratio.

 

“Overcollateralization Tests”:  The Senior Overcollateralization Test, the Class C/D
Overcollateralization Test and the Class E Overcollateralization Test.

 

“Partial PIK Security”:  A Collateral Debt Security on which the
interest, in accordance with its Underlying Instrument, is currently being (i) partly
paid in Cash and (ii) partly deferred, or paid by the issuance of
additional debt securities identical to such debt security or through additions
to the principal amount thereof; provided,
however, that such Collateral Debt Security will cease to be a
Partial PIK Security at such time as it (a) ceases to defer interest or to
pay any interest through the issuance of additional debt securities or through
additions to the principal amount thereof, (b) pays in Cash all accrued
interest that was previously paid-in-kind and (c) commences payment of all
current interest in Cash, or it ceases paying any interest in Cash.

 

“Participation Interest”:  Unless otherwise specified in the Supplement,
a participation interest in a loan that is represented by a contractual
obligation of a Selling Institution that at the time of acquisition by the
Issuer has at least a short-term rating of “A-1” (or a long-term rating of “A”)
by S&P and a short-term rating of “P-1” (and is not on negative credit
watch) by Moody’s, or a long-term rating of “A2” and a short-term rating of “P-1”
by Moody’s (if such Selling Institution has both a long-term and a short-term
rating by Moody’s) or a long-term rating of “A2” by Moody’s (if such Selling
Institution has only a long-term rating by Moody’s); provided that the underlying loan would otherwise satisfy
the definition of Collateral Debt Security if it were acquired directly by the
Issuer.

 

“Pass-Through
CP Conduit”: A Holder of Revolving Notes (if any) that (i) is a
special purpose conduit entity that obtains a portion of its financing, either
directly or indirectly, through the issuance of commercial paper notes, (ii) has
requested the Issuer to designate it as a “Pass-Through CP Conduit,” (iii) has
been designated by the Issuer as a “Pass-Through CP Conduit” and (iv) has
entered into a liquidity agreement with one or more financial institutions
whose short-term certificates of deposit and/or commercial paper are rated at
least P-1 by Moody’s and A-1+ by S&P, which agreement shall (a) be in
form and substance satisfactory to the Revolving Note Agent, the Issuer and the
Co-Issuer, (b) provide for the draw down of all funds available from such
liquidity lender under such agreement if such liquidity lender refuses to
extend such agreement and (c) provide for commitments by such financial
institution(s) to make funds available to such Pass-Through CP Conduit to fund
any Draw requested from such Pass-Through CP Conduit pursuant to the terms of
the Indenture.

 

44

 

“Pass-Through
CP Conduit LIBOR”: With respect to a Pass-Through CP Conduit (if
any), the rate determined by the Pass-Through CP Conduit to be the applicable
rate for the Draw during any period or for any one or more days therein,
calculated on the basis of the offered rates of the reference banks for United
States dollar deposits for periods or days selected by the Pass-Through CP
Conduit on the basis of the duration of such Draw, as such rates appear on the
Telerate Page 3750, as of 11:00 a.m. (London time) on the date or
dates selected by the Pass-Through CP Conduit for purposes of making such
calculation. If such rate does not appear on Telerate Page 3750, the rate
for such date or dates will be determined on the basis of the rates at which
deposits in United States dollars are offered by the reference banks at
approximately 11:00 a.m., London time, on such date or dates to prime
banks in the London interbank market for a period equal to the relevant period
or portions thereof as selected by the Pass-Through CP Conduit.  The Pass-Through CP Conduit 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 such date or dates will be the arithmetic mean of the quotations.  If fewer than two quotations are provided as
requested, the rate for such date or dates will be the arithmetic mean of the
rates quoted by major banks in New York, selected by the Pass-Through CP
Conduit, at approximately 11:00 a.m., New York time, on such date or dates
for loans in United States dollars to leading European banks for a period equal
to the relevant period or portions thereof as selected by the Pass-Through CP
Conduit. In calculating the rate that shall be Pass-Through CP Conduit LIBOR
hereunder, when rates are not offered or quoted for an individual day or more
than one individual day during any period in a timely manner for purposes of
making the necessary calculation, the Pass-Through CP Conduit may (a) estimate
the rate that would be offered or quoted for such day or days by any method it
deems fair and reasonable or (b) elect to have the Federal Funds Effective
Rate apply as the quoted or offered rate for such day or days. The reasonable
establishment of Pass-Through CP Conduit LIBOR by a Pass-Through CP Conduit
shall be final and binding, absent manifest error.

 

“Paying Agent”: 
Any Person authorized by the Issuer to pay any amounts to be paid on any
Securities on behalf of the Issuer as specified in Section 7.2.

 

“Payment Account”:  The trust account established pursuant to Section 10.3(a).

 

“Payment Date”: 
As set forth in the Term Sheet.

 

“Permissible Replacement Collateral Debt Security”:  Unless otherwise specified in the Supplement,
any debt obligation or REIT Preferred Security (a) with a Moody’s Default
Probability Rating of “Caa1” or below that is purchased with the Sale Proceeds
of a Collateral Debt Security with a Moody’s Default Probability Rating of “Caa1”
or below and that has a Moody’s Default Probability Rating no lower than the
Collateral Debt Security that was sold or otherwise disposed of (provided that if 10% or more of the
Principal Collateral Value consists of Collateral Debt Securities with a Moody’s
Default Probability Rating of “Caa1” or below, such replacement obligation must
have a rating of “Caa1”); or (b) with an S&P Rating of “CCC+” or below
that is purchased with the Sale Proceeds of a Collateral Debt Security with an
S&P Rating of “CCC+” or below and that has an S&P Rating no lower than
the Collateral Debt Security that was sold or otherwise disposed of (provided that if 10% or more of the
Principal Collateral Value consists of Collateral Debt Securities with an
S&P Rating of “CCC+” or below, such

 

45

 

replacement debt obligation
must have a rating of “CCC+”); and (c) in each case, the credit quality of
which, in the Collateral Manager’s reasonable business judgment is better than
the credit quality of the Collateral Debt Security that was sold or otherwise
disposed of.

 

“Person”: 
An individual, corporation (including a business trust or a limited
liability company), partnership, joint venture, association, joint stock
company, trust (including any beneficiary thereof), unincorporated association
or government or any agency or political subdivision thereof.

 

“Physical Commitment Notes”:  Commitment Notes held in the form of Physical
Securities.

 

“Physical Securities”:  Physical Commitment Notes and Physical
Subordinated Notes.

 

“Physical Subordinated Notes”:  The meaning specified in Section 2.2(b).

 

“PIK Security”: 
An obligation that is currently deferring all interest or paying all
interest “in kind,” which interest is otherwise payable in Cash.

 

“Placement Agents”:  As set forth in the Term Sheet.

 

“Plan Asset Regulation”:  The U.S. Department of Labor’s regulation
29 C.F.R. Section 2510.3-101.

 

“Plans”: 
Any “employee benefit plan” (as defined in Section 3(3) of
ERISA) subject to the fiduciary responsibility provisions of Title I of ERISA,
any “plan” described in Section 4975(e)(1) of the Code subject to Section 4975
of the Code and any entity whose underlying
assets include the assets of any such employee benefit plan and/or plan.

 

“Pledged Securities”:  On any date of determination, the Collateral
Debt Securities, Eligible Investments and Equity Securities that have been
Granted to the Trustee and form part of the Collateral.

 

“Portfolio Profile Test”:  A test satisfied if, as of any Measurement
Date with respect to each of the requirements set forth below, the Collateral
Debt Securities as a whole comply with all of the requirements set forth below
(or if any requirement is not satisfied, compliance with such requirement must
be maintained or improved):

 

(1)           at least a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Minimum Senior Secured Loan Percentage) will consist of Senior
Secured Loans; provided that for purposes of
these calculations, Eligible Principal Investments will be considered to be
Loans; and provided further, that
if a Loan satisfies the definition of Second Lien Loan, such Loan shall not be
treated as a Senior Secured Loan for purposes of this clause (1);

 

(2)           no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Convert Percentage) will consist of securities

 

46

 

that provide for
conversion into or exchange for an Equity Security at the option of the holder
thereof, (and with respect to each such security, on the date of acquisition by
the Issuer the value of such right to conversion or exchange does not account
for more than a certain percentage (as set forth in the Term Sheet) of the
purchase price (such percentage, the Convert Right Price Percentage); provided that the Issuer will not exercise such conversion
right unless it simultaneously sells the resulting Equity Security, and provided, further, that no such security may provide for conversion into or
exchange for an Equity Security at the option of the issuer thereof at any time
over its life;

 

(3)           (A) no more than a certain
percentage (as set forth in the Term Sheet) of the Principal Collateral Value
(such percentage, the Maximum Zero Coupon Percentage) will consist of
Zero Coupon Bonds (provided that
such percentage shall be reduced by the percentage of the Principal Collateral
Value represented by Defaulted Securities that have not been sold within 36
months of the date they became Defaulted Securities); and (B) no more than
a certain percentage (as set forth in the Term Sheet) of the Principal
Collateral Value (such percentage, the Maximum PIK Percentage) will
consist in the aggregate of PIK Securities and Partial PIK Securities; provided that no such Collateral Debt
Security is deferring and capitalizing such payments on the date of purchase
(or commitment to purchase) by the Issuer and, in the reasonable business
judgment of the Collateral Manager, no deferred interest will be outstanding as
of the next scheduled payment distribution date for such Collateral Debt
Securities;

 

(4)           no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Short-Term Obligations Percentage) will consist of
Short-Term Obligations;

 

(5)           no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Revolver Percentage) will consist of the aggregate
commitment amount of Delayed Drawdown Debt Securities and Revolving Collateral
Debt Securities;

 

(6)           no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Bond and Second Lien Loan Percentage) will consist of debt
securities and Second Lien Loans;

 

(7)           if it has a Moody’s Rating of “Caa1” (or
such other rating as set forth in the Term Sheet) (such rating, the Moody’s
Caa Threshold) or below or an S&P Rating of “CCC+” (or such other
rating as set forth in the Term Sheet) (such rating, the S&P CCC
Threshold) or below, (1) if it is not a Permissible Replacement
Collateral Debt Security, no more than a certain percentage (as set forth in
the Term Sheet) of the Principal Collateral Value (such percentage, the Maximum
CCC Purchase Percentage) will consist of Collateral Debt Securities
(excluding Defaulted Securities, Current Pay Obligations and DIP Collateral
Debt Securities) with a Moody’s Rating of the Moody’s Caa Threshold or below or
an S&P Rating of the S&P CCC Threshold or below as a result of such
purchase and (2) no more than a certain percentage (as set forth in the
Term Sheet) of the Principal Collateral Value (such percentage, the Maximum
CCC Replacement Percentage) will consist of Collateral Debt Securities
(excluding Defaulted Securities but

 

47

 

including Permissible
Replacement Collateral Debt Securities) with a Moody’s Rating of the Moody’s
Caa Threshold or below;

 

(8)           no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Equity Exposure Percentage) will consist of (A) securities
that provide for conversion into or exchange for an Equity Security at the
option of the holder thereof and (B) units
comprised of a Collateral Debt Security and an Equity Security, and the Equity
Security in each such unit shall have a valuation at the time of purchase not
exceeding a certain percentage (as set forth in the Term Sheet) of the
purchase price of such unit (such percentage, the Warrants Price Percentage), except that up to a certain percentage
(as set forth in the Term Sheet) of the Principal Collateral Value (such
percentage, the Maximum Warrants Exceptions Percentage) may consist of units with Equity Securities
having a valuation at the time of purchase in excess of the Warrants
Price Percentage, but not exceeding a
certain percentage (as set forth in the Term Sheet) of the Principal Collateral
Value (such percentage, the Maximum Warrants Price Percentage), of the purchase price of such unit; which
valuation, in each case, shall be based upon the reasonable business judgment
of the Collateral Manager (without regard to the issuer’s valuation of such
unit or the related Equity Security under generally accepted accounting principles
or for federal income tax purposes);

 

(9)           no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Offers Percentage) will consist of Collateral Debt
Securities that are subject to an offer or notice of redemption of which the
Collateral Manager has actual knowledge; provided that
any such offer must include payment in cash of an amount at least equal to the
par amount of the Collateral Debt Security (or accreted value, in the case of a
Zero Coupon Bond);

 

(10)         no more than (A) a certain
percentage (as set forth in the Term Sheet) of the Principal Collateral Value
(such percentage, the Maximum Single Obligor Percentage) will consist of
obligations of any one obligor (together with its Affiliates); provided that in up to a certain number of cases (as set
forth in the Term Sheet) (such number, the Single Obligor Exception), a
certain percentage (as set forth in the Term Sheet) of the Principal Collateral
Value (such percentage, the Maximum Single Obligor Exception Percentage)
may consist of obligations of any one obligor (together with its Affiliates); (B) a
certain percentage (as set forth in the Term Sheet) of the Principal Collateral
Value (such percentage, the Maximum Structured Finance Single Obligor
Percentage) will consist of Structured Finance Securities of the same
obligor (together with its Affiliates); and (C) a certain percentage (as
set forth in the Term Sheet) of the Principal Collateral Value (such
percentage, the Maximum Single Obligor High Yield Percentage) will
consist of high-yield debt securities of the same obligor (together with its
Affiliates) that (i) are senior unsecured and have a Moody’s Rating below
a certain level (as set forth in the Term Sheet) (such level, the Moody’s
High Yield Minimum Rating) or an S&P Rating below a certain level (as
set forth in the Term Sheet) (such level, the S&P High Yield Minimum
Rating) or (ii) are subordinated (regardless of rating);

 

(11)         no more than (A) a certain
percentage (as set forth in the Term Sheet) of the Principal Collateral Value
(such percentage, the Maximum S&P Single Industry Percentage) will
consist of obligations issued by obligors in any one industry determined by the
S&P Industry

 

48

 

Classification; provided, that in up to a certain number
of cases (as set forth in the Term Sheet) (such number, the Maximum S&P
Industry Exceptions), a certain percentage (as set forth in the Term Sheet)
of the Principal Collateral Value (such percentage, the Maximum S&P
Industry Exceptions Percentage) may consist of obligations issued by
obligors in such number of industries determined by the S&P Industry
Classification and (B) a certain percentage (as set forth in the Term
Sheet) of the Principal Collateral Value (such percentage, the Maximum Moody’s
Single Industry Percentage) will consist of obligations issued by obligors
in any one industry determined by the Moody’s Industry Classification; provided, that in up to a certain number
of cases (as set forth in the Term Sheet) (such number, the Maximum Moody’s
Industry Exceptions), a certain percentage (as set forth in the Term Sheet)
of the Principal Collateral Value (such percentage, the Maximum Moody’s
Industry Exceptions Percentage) may consist of obligations issued by
obligors in such number of industries determined by the Moody’s Industry
Classification;

 

(12)         (A) all of the Collateral Debt
Securities must be issued by obligors Domiciled in Eligible Countries and no
more than the percentage of the Principal Collateral Value set forth in the
table entitled Maximum Country Exposure Percentages in the Term Sheet
may have obligors or guarantors that are Domiciled in the country or countries
set forth opposite the corresponding percentages in such table and (B) no
more than a certain percentage (as set forth in the Term Sheet) of the
Principal Collateral Value (such percentage, the Maximum Non-Senior Secured
Eligible Country Percentage) may consist of Non-Senior Secured Loans issued
by obligors Domiciled in Eligible Countries other than the United States,
Canada and Group I European Countries;

 

(13)         for so long as any Notes rated by S&P
are Outstanding, (i) no more than a certain percentage (as set forth in
the Term Sheet) of the Principal Collateral Value (such percentage, the Maximum
S&P Foreign Obligor Risk Percentage) may consist of obligations issued
by obligors organized in a country (other than the United States) whose foreign
currency issuer credit rating from S&P is less than “AAA,” and (ii) no
more than a certain percentage (as set forth in the Term Sheet) of the
Principal Collateral Value (such percentage, the Maximum S&P Bi-Variant
Risk Percentage) may consist of (A) Synthetic Securities with
Synthetic Security Counterparties (or the guarantors under the Synthetic
Security) whose rating from S&P is less than “AAA,” (B) Participation
Interests with Selling Institutions (or guarantors under the Participation
Interests) with an S&P Rating lower than “AAA,” and (C) loaned
Collateral Debt Securities subject to a Securities Lending Agreement with a
term greater than one year;

 

(14)         no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Small Obligor Percentage) will consist of obligations (other
than Structured Finance Securities) of a single obligor where the total
potential indebtedness of such obligor under all loan agreements, indentures
and other underlying instruments is less than a certain amount (as set forth in
the Term Sheet) (such amount, the Small Obligor Threshold);

 

(15)         no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Fixed Rate Percentage) will consist of obligations bearing
interest (or dividends in the case of REIT Preferred Securities) at a fixed
rate;

 

49

 

(16)         no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Non-Quarterly Pay Percentage) (or such greater percentage
for which Rating Agency Confirmation is obtained) will consist of Non-Quarterly
Pay Obligations;

 

(17)         no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum DIP and Current Pay Percentage) will consist of DIP
Collateral Debt Securities and Current Pay Obligations; provided
that no more than a certain percentage (as set forth in the Term Sheet) of the
Principal Collateral Value (such percentage, the Maximum Single Obligor DIP
and Current Pay Percentage) may consist of DIP Collateral Debt Securities
and Current Pay Obligations from any one obligor; and provided further that Collateral Debt
Securities representing no more than a certain percentage (as set forth in the
Term Sheet) of the Principal Collateral Value (such percentage, the Maximum
Purchased Current Pay Percentage) may consist of Current Pay Obligations
that were Current Pay Obligations at the time of their purchase (or commitment
to purchase) by the Issuer;

 

(18)         Collateral Debt Securities representing
no more than a certain percentage (as set forth in the Term Sheet) of the
Principal Collateral Value (such percentage, the Maximum PIK and Partial PIK
Percentage) may consist of PIK Securities and Partial PIK Securities;

 

(19)         (A) no more than a certain
percentage (as set forth in the Term Sheet) of the Principal Collateral Value
(such percentage, the Maximum Structured Finance and REIT Preferred Percentage)
will consist of Structured Finance Securities and REIT Preferred Securities;
and (B) no Structured Finance Securities will have a Moody’s Rating below
a certain level (as set forth in the Term Sheet) (such level, the Moody’s
Structured Finance Minimum Rating) or an S&P Rating below a certain
level (as set forth in the Term Sheet) (such level, the S&P Structured
Finance Minimum Rating) at the time of acquisition by the Issuer;

 

(20)         no more than a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum REIT Preferred Percentage) will consist of REIT Preferred
Securities; and

 

(21)         the Counterparty Criteria are satisfied.

 

For purposes of the foregoing calculations with
respect to this definition, the numerator used to calculate the applicable
percentages will be calculated using the Principal Balances of the applicable
Collateral Debt Securities, unless otherwise specified.

 

“Prepaid Collateral Debt Security”:  A Collateral Debt Security that has been
prepaid, in whole or in part, whether by tender, redemption prior to the stated
maturity of such Collateral Debt Security, exchange or other prepayment.

 

“Principal
Balance”:  Unless otherwise
specified in the Supplement, as of any date of determination, the Principal
Balance of any Collateral Debt Security will equal the outstanding principal
amount of such Collateral Debt Security, except that:

 

50

 

(i)            the Principal Balance of a Revolving
Collateral Debt Security or a Delayed Drawdown Debt Security (including any
Revolving Collateral Debt Security or a Delayed Drawdown Debt Security which is
also a DIP Collateral Debt Security) will be the outstanding principal amount
of such Revolving Collateral Debt Security or Delayed Drawdown Debt Security,
plus any undrawn commitments that have not been irrevocably reduced with
respect to such Revolving Collateral Debt Security or Delayed Drawdown Debt
Security;

 

(ii)           the Principal Balance of any Equity Security
and any Short Position will be zero;

 

(iii)          the Principal Balance of a Synthetic
Security will be the actual outstanding principal amount or notional amount of
such Synthetic Security, unless the Collateral Manager determines otherwise and
receives Rating Agency Confirmation;

 

(iv)          the Principal Balance of a REIT Preferred
Security (A) during the Reinvestment Period will be its liquidation
preference unless its Market Value
is less than a certain percentage (as set forth in the Term Sheet) of its liquidation
preference (such percentage, the REIT Market Value Percentage), in which
case it will be its Market Value, and (B) after the Reinvestment Period
will be its Market Value;

 

(v)           the Principal Balance of a Zero Coupon
Bond will be its accreted value; and

 

(vi)          solely for purposes of (1) Discretionary
Sales and sales of Credit Improved Securities after the Reinvestment Period, (2) clauses
(v) and (vi) of the definition of Investment Criteria, (3) determination
of whether a Purchased Defaulted Security may be purchased with the proceeds of
an Exchanged Defaulted Security (except with respect to determination of the
Portfolio Profile Test in connection therewith) and (4) calculation of the
Overcollateralization Tests:

 

(A)          the Principal Balance of any Collateral
Debt Security that has become a PIK Security or Partial PIK Security will be
the outstanding principal amount thereof excluding any capitalized interest; provided, however,
that, solely for purposes of calculating the Coverage Tests, if such PIK Security
or Partial PIK Security has been paying interest through the issuance of
additional debt securities identical to such PIK Security or Partial PIK
Security or through an addition to the principal amount thereof for (A) the
lesser of six consecutive months and one missed payment period, if such PIK
Security or Partial PIK Security has a rating of “Ba1” or lower from Moody’s or
“BB+” or lower from S&P or (B) the lesser of 12 consecutive months and
two missed payment periods, if such PIK Security or Partial PIK Security has a
rating higher than “Ba1” from Moody’s or “BB+” from S&P, the Principal
Balance of such PIK Security or Partial PIK Security shall be the lower of (1) the
Market Value and (2) the Recovery Value of such PIK Security or Partial
PIK Security;

 

(B)           the Principal Balance of a Defaulted
Security will be the lower of (1) the Market Value and (2) the
Recovery Value of such Defaulted Security; provided,
however, that the Principal Balance of any Defaulted Security held
longer than three years after it became a Defaulted Security shall be zero;

 

51

 

(C)           to the extent that the aggregate
outstanding principal amount of Current Pay Obligations exceeds 5% of the
Principal Collateral Value (as measured without giving effect to this
provision), each Current Pay Obligation comprising such excess shall be treated
as a Defaulted Security for purposes of this definition;

 

(D)          with respect to any Collateral Debt
Security (other than a Defaulted Security) having a purchase price of less than
(A) in the case of a Collateral Debt Security that has a Moody’s Rating of
“B3” or higher at the time of purchase (i) in the case of loans, the
Discount Loan Minimum Price (as set forth in the definition of Discount
Obligation) of its par amount and (ii) in the case of bonds, the Discount
Bond Minimum Price (as set forth in the definition of Discount Obligation) of
its par amount or (B) in the case of a Collateral Debt Security that does
not have a Moody’s Rating of “B3” or higher at the time of purchase (i) in
the case of loans, the Discount Below B3 Loan Minimum Price (as set forth in
the definition of Discount Obligation) and (ii) in the case of debt
securities, the Discount Below B3 Bond Minimum Price (as set forth in the definition
of Discount Obligation), such Collateral Debt Security will have a Principal
Balance equal to its Market Value until after it trades for a period of 30
consecutive calendar days at (i) in the case of loans, a certain
percentage (as set forth in the Term Sheet) of its par amount (such percentage,
the Discount Loan Reset Percentage) and (ii) in the case of debt
securities, a certain percentage (as set forth in the Term Sheet) of its par
amount (such percentage, the Discount Bond Reset Percentage);

 

(E)           to the extent that the aggregate
principal balance of CCC Obligations exceeds the Lowest CCC Threshold
percentage (as set forth in the definition of Lowest CCC Obligation) of the
Principal Collateral Value as of the current Determination Date, the Principal
Balance of the Lowest CCC Obligations shall be their Market Value;

 

(F)           the Principal Balance of any Defaulted
Loaned Collateral Debt Security shall be the outstanding amount of the related
Securities Lending Collateral;

 

(G)           the Principal Balance of any REIT
Preferred Security with respect to which Interest Proceeds have not been
received for two consecutive payment dates shall be a certain percentage (as
set forth in the Term Sheet) of its liquidation preference (such percentage,
the REIT Unpaid Interest Percentage); and

 

(H)          to the extent that Collateral Debt
Securities (other than Collateral Debt Securities that include a “put option”
by the holder thereof at a price of at least par prior to the Stated Maturity
of the Notes) consisting of obligations that mature after the Stated Maturity
exceed the Extended Maturity Obligations Percentage of the Principal Collateral
Value (as measured without giving effect to this provision), the Principal
Balance of each such Collateral Debt Security comprising such excess (as
determined pursuant to the last paragraph of this definition) will equal the
Market Value of each such Collateral Debt Security.

 

Notwithstanding the foregoing, the Principal Balance
of any Collateral Debt Security will include any Principal Financed Accrued
Interest with respect to such Collateral Debt Security.  For purposes of determining which Collateral
Debt Securities constitute the excess amounts referred to above in clause (vi)(C) above,
the Collateral Manager shall select the applicable Collateral

 

52

 

Debt Securities based on their Market Values
(expressed as a percentage of par), beginning with the Collateral Debt
Securities having the lowest such Market Values (expressed as a percentage of
par).  If a Collateral Debt Security
meets the criteria set forth in more than one clause of this definition, its
Principal Balance shall be the lowest applicable Principal Balance.

 

“Principal Collateral Value”:  As of any date of determination, the sum of (i) the
Aggregate Principal Balance of the Collateral Debt Securities and (ii) the
aggregate principal amount of all Eligible Principal Investments; provided, however, that with respect to a
date of determination on or after a Determination Date and before the related
Payment Date, such calculation shall, except as otherwise expressly provided
for herein, give effect to any distribution to be made on such Payment Date
pursuant to the Priority of Payments or the Special Priority of Payments, as
applicable.

 

“Principal
Financed Accrued Interest”: 
With respect to any Collateral Debt Security, an amount equal to the
amount of Principal Proceeds or proceeds of the offering of the Notes, if any,
applied towards the purchase of accrued interest with respect to such
Collateral Debt Security.

 

“Principal
Proceeds”:  With respect to
any Payment Date, all amounts received during the Due Period (and not
designated for reinvestment or required to be deposited in the Synthetic
Reserve Account or the Revolver Funding Account) that do not constitute
Interest Proceeds (and are not used or designated for use to purchase accrued
interest in connection with the purchase of a Collateral Debt Security).

 

“Priority of Interest Payments”:  The priority of payment of Interest Proceeds
specified in Section 11.1(a)(i).

 

“Priority of Payments”:  The meaning specified in Section 11.1(a).

 

“Priority of Principal Payments”:  The priority of payment of Principal Proceeds
specified in Section 11.1(a)(ii).

 

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

 

“Proposed Portfolio”:  As of any Measurement Date, the portfolio of
Collateral Debt Securities and Eligible Principal Investments resulting from
the proposed acquisition, sale, maturity or other disposition of a Collateral
Debt Security or a proposed reinvestment in an additional Collateral Debt
Security, as the case may be.

 

“Protected Purchaser”:  A protected purchaser as defined in Article 8
of the UCC.

 

“Purchased Defaulted Security”:  The meaning specified in Section 12.2(b).

 

“QIB”: 
Any Person that, at the time of its acquisition, purported acquisition
or proposed acquisition of Securities, is a qualified institutional buyer
within the meaning of Rule 144A under the Securities Act.

 

53

 

“QIB/QP”: 
Any Person that, at the time of its acquisition, purported acquisition
or proposed acquisition of Securities, is both a QIB and a Qualified Purchaser.

 

“Qualified Pricing Service”:  In the case of loans (including Participation
Interests), LPC, LoanX and DebtX, and in the case of debt securities,
Interactive Data Corporation (in each case if Independent from the Collateral
Manager) or any other pricing service Independent from and selected by the Collateral
Manager for which Rating Agency Confirmation has been obtained.

 

“Qualified Purchaser”:  Any Person that, at the time of its
acquisition, purported acquisition or proposed acquisition of Securities, is a
qualified purchaser for purposes of Section 3(c)(7) of the Investment
Company Act.

 

“Rated Notes”: 
Unless otherwise set forth in the Supplement, all Notes other than the
Subordinated Notes.

 

“Rating Agency”:  Each of Moody’s and S&P, in each case
only for so long as Securities rated by such entity on the Closing Date are
Outstanding and rated by such entity.

 

“Rating Agency Confirmation”:  Confirmation in writing (which may be
evidenced by an exchange of electronic messages or facsimiles) from each Rating
Agency (or the specified Rating Agency) that any proposed action or designation
will not cause the then-current ratings of the Rated Notes to be reduced or
withdrawn by such Rating Agency.

 

“Record Date”: 
With respect to any Payment Date, the date on which the Holders of
Securities entitled to receive a payment on such Payment Date are determined,
such date as to any Payment Date being the 15th day (whether or not a Business
Day) prior to the applicable Payment Date.

 

“Recovery Value”:  With respect to any Collateral Debt Security
as of any date of determination, the Recovery Value will be the lower of Moody’s
Recovery Amount and the S&P Recovery Amount.

 

“Redemption by Liquidation”:  The meaning specified in Section 9.1(b).

 

“Redemption by Refinancing”:  The meaning specified in Section 9.1(b).

 

“Redemption Date”:  Any date on which an optional redemption
occurs pursuant to Article 9.

 

“Redemption Date Statement”:  The meaning specified in Section 10.5(e).

 

“Redemption Price”:  In the case of (i) Floating Rate Notes, (a) 100%
of the aggregate outstanding principal amount of such Notes plus (b) accrued
and unpaid interest thereon (including any Defaulted Interest and Deferred
Interest and interest thereon) plus (c) in the case of any Commitment
Notes only, (1) the accrued and unpaid Commitment Fee Amount, (2) any
accrued and unpaid Revolving Note Increased Costs, and (3) any Revolving
Note Tax Gross-Up Amounts, in each case as of the Redemption Date; (ii) Fixed
Rate Notes, (a) 100% of the

 

54

 

aggregate outstanding
principal amount of such Notes that would otherwise have been payable on the
Redemption Date in accordance with the Priority of Payments or the Special
Priority of Payments, as applicable if redemption did not occur, plus (b) accrued
and unpaid interest thereon (including any Defaulted Interest and Deferred
Interest and interest thereon) plus (c) the greater of (i) 100% of
the principal amount of such Notes to be redeemed only because of such optional
redemption and (ii) the applicable Make Whole Amount; and (iii) each
Subordinated Note, its pro rata
share of all remaining proceeds of the Collateral after giving effect to the
payment of the Redemption Prices of the Rated Notes and all other amounts
payable senior to the Subordinated Notes under the Special Priority of
Payments.

 

“Reference Banks”:  The meaning specified in Schedule C
attached hereto.

 

“Reference Obligation”:  A debt security or other obligation upon
which a Synthetic Security is based, which debt security or other obligation (i) is
not itself a Synthetic Security, (ii) satisfies (and, if owned by the
Issuer, would satisfy) the definition of Collateral Debt Security except it may
be payable in a currency other than U.S. Dollars and may be subject to
withholding tax that is not “grossed-up” and (iii) could be purchased
directly by the Issuer under the Investment Criteria (without regard to the
definition of Collateral Debt Security other than in the previous clause (ii));
provided, however,
that with respect to any Credit-Linked Obligation, such security may, if
specified therein, (i) consist of a class of securities or indebtedness of
a specific seniority rather than a specific issuance of outstanding securities
and/or (ii) be subject to replacement with other obligations of the issuer
of such security upon specified conditions.

 

“Reference Obligor”:  Any reference obligor specified in a
Synthetic Security.

 

“Registered”: 
With respect to any debt obligation, a debt obligation that is issued
after July 18, 1984 and that is in registered form for purposes of the
Code.

 

“Registered Holder”:  With respect to any Security, the Person
whose name appears on the Security Register as the registered Holder of such
Security.

 

“Registered Office”:  The registered office of the Issuer, which
shall be located outside of the United States.

 

“Regulation S”: 
Regulation S under the Securities Act.

 

“Regulation S Global Security”:  The meaning specified in Section 2.2(b).

 

“Regulation U”: 
Regulation U issued by the Board of Governors of the Federal Reserve
System.

 

“Reinvestment Agreement”:  A guaranteed reinvestment agreement from a
bank, insurance company or other corporation or entity; provided, however, that such agreement
provides that it is terminable by the purchaser, without penalty, in the event
that the rating assigned to such agreement by either Rating Agency is at any
time lower than the rating required pursuant to the terms of this Indenture to
be assigned to such agreement in order to permit the purchase thereof.

 

55

 

“Reinvestment Period”:  As set forth in the Term Sheet.

 

“Reinvestment Yield”:  With respect to each Class of Fixed Rate
Notes, a certain percentage (as defined in the Supplement) (such percentage,
the Reinvestment Yield Percentage with respect to such Class) above the
yield to maturity implied by (i) the yields reported, as of 10:00 a.m.
(New York City time) on the tenth Business Day preceding the related Redemption
Date on the display designated as “Page 7677” on the Telerate Access
Service (or such other display as may replace Page 7677 on the Telerate
Access Service) for actively traded U.S. Treasury securities having a maturity
equal to the Remaining Average Life or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable, the Treasury Constant Maturity Series Yields reported for
the latest day for which such yields have been so reported as of the tenth
Business Day preceding the Redemption Date, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for actively
traded U.S. Treasury securities having a constant maturity equal to the
Remaining Average Life.  Such implied
yield will be determined, if necessary, by (a) converting U.S. Treasury
bill quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between (1) the actively
traded U.S. Treasury security with the maturity closest to and greater than the
Remaining Average Life and (2) the actively traded U.S. Treasury security
with the maturity closest to and less than the Remaining Average Life.

 

“REIT Preferred Security”:  A preferred security issued by a
publicly-traded real estate investment trust organized under the laws of the
United States, or any state or the District of Columbia.

 

“Remaining Average Life”:  With respect to each Class of Fixed Rate
Notes and any proposed Redemption Date, the number of years (calculated to the
nearest one-twelfth year) from such Redemption Date to the Remaining Average
Life Date.

 

“Remaining Average Life Date”:  With respect to each Class of Fixed Rate
Notes, the date that corresponds to the end of the expected weighted average
life of such Class of Notes, assuming that no Collateral Debt Securities
or Eligible Investments experience defaults and that all of the Collateral Debt
Securities and Eligible Investments mature in accordance with their respective
then current maturity schedules.

 

“Replacement Notes”:  The meaning specified in Section 9.1(b).

 

“Restricted Trading Condition”:  So long as any Rated Notes are rated by Moody’s,
unless otherwise specified in the Supplement, each day during which (i) the
Moody’s rating of any Class of Senior Notes is one or more subcategories
below its initial rating, (ii) the Moody’s rating of any Class of Class C
Notes is two or more subcategories below its initial rating, (iii) the
Moody’s rating of any Class of Class D Notes is three or more
subcategories below its initial rating, (iv) the Moody’s rating of any Class of
Class E Notes or Class F Notes is four or more subcategories below
its initial rating or (v) the Moody’s rating of any Class of Rated
Notes has been withdrawn and not reinstated;
provided, however,
that if the Restricted Trading Condition is in effect, the Majority of the
Notes of the Controlling Class may elect to waive such condition, which
waiver shall remain in effect until the earlier of (A) revocation of such
waiver by the

 

56

 

Majority of the Notes of
the Controlling Class and (B) a further downgrade or withdrawal of
the rating of any Class of Notes that, notwithstanding such waiver, would
cause the Restricted Trading Condition.

 

“Revolver Funding Account”:  The trust account established pursuant to Section 10.3(d).

 

“Revolver Funding Reserve Amount”:  An amount equal to (i) the aggregate
principal amounts of the undrawn and outstanding commitments under each
Revolving Collateral Debt Security and Delayed Drawdown Debt Security minus (ii) the
Aggregate Undrawn Amount of any Revolving Notes.

 

“Revolving Collateral Debt Security”:  Any Collateral Debt Security (other than a
Delayed Drawdown Debt Security) that is an obligation (including funded and
unfunded portions of revolving credit lines and letter of credit facilities,
unfunded commitments under specific facilities and other similar loans and
investments) that under the Underlying Instruments relating thereto may require
one or more future advances to be made to the obligor by the Issuer; provided, however, that any such
Collateral Debt Security will be a Revolving Collateral Debt Security only
until all commitments by the Issuer to make advances to the obligor thereof
expire, are terminated, or are irrevocably reduced to zero.

 

“Revolving
Note Agent”:  JPMorgan Chase
Bank, National Association (or such other Person named as Revolving Note Agent
in the Term Sheet) pursuant to the Note Purchase Agreement, or any successor
under the Note Purchase Agreement.

 

“Revolving Notes”:  As defined in the Supplement, if any.

 

“Revolving
Note Rating Criteria”:  As
defined in the Supplement.

 

“Revolving Note Increased Costs”: With respect
to any Payment Date, the amount (other than any amount that is a tax or a
stamp, registration, documentation or similar tax), as set forth in a
certificate of a Holder of a Revolving Note, or in the case of any Pass-Through
CP Conduit, of any of its Support Providers, delivered to the Issuer and the
Trustee on or prior to the related Determination Date, necessary to compensate
such Holder or Support Provider, for (a) any increase in the cost of
making or maintaining any loan or asset purchase under the Note Purchase
Agreement relating to such Revolving Notes (or of maintaining its obligation to
make any such loan or asset purchase) resulting from a Change in Law applicable
to such Holder or Support Provider, (b) any reduction in any amount
received or receivable by such Holder under the Note Purchase Agreement
resulting from a Change in Law applicable to such Holder or Support Provider,
and (c) any reduction in the rate of return on the capital of such Holder
or Support Provider or its bank holding company resulting from a Change in Law
applicable to such Holder or bank holding company to a level below that which
such Holder or Support Provider or bank holding company could have achieved but
for such Change in Law.

 

“Revolving Note Tax Gross-Up Amount”: The
meaning specified in Section 7.1(c).

 

“Rule 144A”:  Rule 144A under the Securities Act.

 

57

 

“Rule 144A Global Security”:  The meaning specified in Section 2.2(b).

 

“Rule 144A Information”:  The meaning specified in Section 7.15.

 

“S&P”: 
Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors and assigns.

 

“S&P CDO Monitor”:  (i) A dynamic, analytical computer model
developed by S&P, made available to the Collateral Manager and the
Collateral Administrator and used to calculate the default frequency in terms
of the amount of debt assumed to default as a percentage of the original
principal amount of the Collateral Debt Securities consistent with a specified
benchmark rating level based upon certain assumptions and S&P’s proprietary
corporate default studies or (ii) any other model used similarly for which
Rating Agency Confirmation as has been obtained from S&P.

 

“S&P
CDO Monitor Test”:  A test
that, on any Measurement Date on which Rated Notes rated by S&P are
outstanding, after giving effect to the sale of a Collateral Debt Security (excluding
Defaulted Securities) or the purchase of an additional Collateral Debt Security
(excluding Defaulted Securities), will be (i) satisfied if each Class Default
Differential of the Proposed Portfolio is positive and (ii) improved if
each Class Default Differential of the Proposed Portfolio is greater than
the corresponding Class Default Differential of the Current Portfolio.

 

“S&P
Derived Rating”:  An S&P
Rating derived by reference to a Moody’s rating.

 

“S&P Industry Classification”:  The S&P Industry Classifications set
forth in Schedule B–1, which industry classifications may be updated at
the option of the Collateral Manager if S&P publishes revised industry
classifications and S&P or the Collateral Manager provides written notice
thereof to the Trustee.

 

“S&P Minimum Weighted Average Recovery Rate
Test”:  A test satisfied if as of any
Measurement Date the S&P Weighted Average Recovery Rate is greater than or
equal to a certain percentage set forth in the Term Sheet (such percentage, the
S&P Minimum Recovery Rate).

 

“S&P Non-Notching Security”:  Unless otherwise specified in the Supplement,
any non-U.S. structured finance security, guaranteed security, CDO of
structured finance and/or real estate security, CDO of CBO security, CLO of
distressed debt security, mutual fund fee security, catastrophe bond, first
loss tranche of any securitization, synthetic, synthetic CBO security,
combination security, Re-REMIC security, market value CDO security, net
interest margin security (NIM) synthetic security, debtor-in-possession loan or
other security, or repackaged security (including but not limited to DIP
Collateral Debt Securities, Structured Finance Securities and Synthetic
Securities).

 

“S&P Preferred Format”:  An electronic file format which specifies the
data elements and constraints for asset and transactional information that
S&P requires for its surveillance and analysis as shall be mutually agreed
between S&P and the Trustee; provided
that such format

 

58

 

shall not result in
unreasonable additional expense to the Issuer without the agreement of the
Issuer and the Collateral Manager.

 

“S&P Rating”:  Unless otherwise specified in the Supplement,
the S&P Rating of any Collateral Debt Security will be determined as set
forth on Schedule F or such other schedule provided to the Issuer,
the Trustee and the Collateral Manager for which Rating Agency Confirmation is
obtained from S&P.

 

“S&P Recovery Amount”:  With respect to any Collateral Debt Security,
the amount equal to the product of (i) the applicable S&P Recovery
Rate and (ii) the Principal Balance of such Collateral Debt Security.

 

“S&P
Recovery Rate”:  The meaning
specified in the Supplement.

 

“S&P Weighted Average Recovery Rate”:  As of any Measurement Date, the number,
expressed as a percentage, obtained by (i) summing the S&P Recovery
Amount of each Collateral Debt Security (excluding Defaulted Securities), (ii) dividing
such sum by the Aggregate Principal Balance of all Collateral Debt Securities
(excluding Defaulted Securities) and (iii) rounding to the nearest tenth
of a percent.

 

“Sale”: 
The meaning specified in Section 5.17(a).

 

“Sale Proceeds”:  All proceeds (including Principal Financed
Accrued Interest but excluding any accrued interest purchased with Interest
Proceeds) that are received with respect to sales or other dispositions of
Collateral Debt Securities, Eligible Principal Investments and Equity
Securities net of any amounts expended by the Collateral Manager or the Trustee
in connection with such sale or other disposition that are reimbursable
pursuant to this Indenture.

 

“Schedule of Collateral Debt Securities”:  The Collateral Debt Securities listed on Schedule A
hereto and supplemented by Collateral Debt Securities delivered on or before
the Effective Date, which Schedule shall include the Principal Balance,
interest rate (if the obligation bears interest at a fixed rate) or the spread
(if the obligation bears interest at a floating rate), the stated maturity and
the Moody’s Default Probability Rating and S&P Rating of each Collateral
Debt Security on such date.

 

“Scheduled Distribution”:  With respect to any Pledged Security, for
each Due Date, the scheduled payment of principal and/or interest due on such
Due Date with respect to such Pledged Obligation, determined in accordance with
the assumptions specified in Section 1.2 hereof.

 

“Second Lien Loan”:  An assignment of, a Participation Interest
in, or other interest (including a Synthetic Security) in a loan that (i) is
not (and cannot by its terms become) subordinate in right of payment to any
other obligation of the obligor of such loan (other than a Senior Secured Loan)
with respect to the liquidation of such obligor or the collateral for such loan
and (ii) is secured by a valid second priority lien or security interest
on specified assets securing the obligor’s obligations with respect to such
loan, which specified assets do not consist solely of intangibles or common
stock issued by the obligor or any of its Affiliates.

 

59

 

“Secured Parties”:  Unless otherwise specified in the Supplement (i) each
Securityholder and (ii) any Hedge Counterparty, in each case, to the
extent provided in the Granting Clauses of this Indenture.

 

“Securities”: 
The Securities described in the Supplement and any Replacement Notes.

 

“Securities Act”:  The United States Securities Act of 1933, as
amended.

 

“Securities Lending Account”:  Each trust account established pursuant to Section 10.3(g).

 

“Securities Lending Agreement”:  A securities lending agreement that satisfies
the requirements of Section 12.3 and is substantially in the form of the
then-current standard Bond Market Association Master Securities Loan Agreement
or such other agreement (or master agreement) for which Rating Agency
Confirmation is obtained.

 

“Securities Lending Collateral”:  As defined in Section 12.3(a).

 

“Securities Lending Counterparty”:  Any bank, broker-dealer or other financial
institution (other than an insurance company) that has the following ratings at
the time of entering into the Securities Lending Agreement (provided that any actively monitored Moody’s
rating of such counterparty (x) on watch for upgrade shall be treated as
upgraded by one rating subcategory or (y) on watch for downgrade shall be
treated as downgraded by one rating subcategory):

 

(a)           in the case of a loan with a term of 90
days or less, a short-term rating of “P-1” by Moody’s and “A-1” by S&P; or

 

(b)           in the case of a loan with a term of
longer than 90 days but no more than one year, (i) either (x) a long-term
rating of at least “A1” by Moody’s or (y) both a long-term rating of “A2” by
Moody’s and a short-term rating of “P-1” by Moody’s, and (ii) either (x) a
long-term rating of at least “A+” by S&P or (y) both a long-term rating of “A”
by S&P and a short-term rating of “A-1” by S&P; or

 

(c)           in the case of a loan for a term of more
than one year, a long-term senior unsecured debt rating at least equal to the
long-term ratings set forth in the table below; provided that the Aggregate Principal Balance of Collateral
Debt Securities loaned to any one Securities Lending Counterparty for more than
one year may not exceed the percentage set forth opposite the long-term rating
of such Securities Lending Counterparty under the caption “Individual
Securities Lending Counterparty Percentage”; provided, further, that the Aggregate Principal Balance of
Collateral Debt Securities loaned to all Securities Lending Counterparties for
more than one year with the same long-term rating may not exceed the percentage
set forth below opposite such rating under the caption “Aggregate Securities
Lending Counterparty Percentage”:

 

60

 

	
  Minimum
  Long-Term Senior Unsecured

  Debt Rating of Securities

  Lending Counterparty

  	
   

  	
  Individual

  Securities Lending

  Counterparty Percentage

  	
   

  	
  Aggregate

  Securities Lending

  Counterparty Percentage

  	
   

  
	
   

  	
  Term of More Than

  	
   

  	
  Term of More Than

  	
   

  
	
  Moody’s

  	
   

  	
  S&P

  	
   

  	
  1 year

  	
   

  	
  2 years

  	
   

  	
  1 year

  	
   

  	
  2 years

  	
   

  
	
  Aaa

  	
   

  	
  AAA

  	
   

  	
  10.0

  	
  %

  	
  10.0

  	
  %

  	
  20.0

  	
  %

  	
  10.0

  	
  %

  
	
  Aa1

  	
   

  	
  AA+

  	
   

  	
  10.0

  	
  %

  	
  10.0

  	
  %

  	
  20.0

  	
  %

  	
  10.0

  	
  %

  
	
  Aa2

  	
   

  	
  AA

  	
   

  	
  10.0

  	
  %

  	
  10.0

  	
  %

  	
  20.0

  	
  %

  	
  10.0

  	
  %

  
	
  Aa3

  	
   

  	
  AA-

  	
   

  	
  10.0

  	
  %

  	
   

  	
  ***

  	
  15.0

  	
  %

  	
  7.5

  	
  %

  
	
  A1

  	
   

  	
  A+

  	
   

  	
  10.0

  	
  %

  	
   

  	
  ***

  	
  10.0

  	
  %

  	
  5.0

  	
  %

  
	
  A2*

  	
   

  	
  A**

  	
   

  	
  5.0

  	
  %

  	
   

  	
  ***

  	
  5.0

  	
  %

  	
  2.5

  	
  %

  
	
  Below A2

  	
   

  	
  Below A

  	
   

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  	
   

  	
  ***

  

 

*      Applies only if
the counterparty has a Moody’s short-term rating of “P-1.”

**   Applies only if
the counterparty has an S&P short-term rating of “A-1.”

*** Rating Agency
Confirmation required.

 

“Security Register” and “Security Registrar”:  The respective meanings specified in Section 2.5(a).

 

“Security Valuation
Report”:  Each report containing the
information set forth on Appendix D, as the same may be modified and amended by
mutual agreement between the Trustee and the Collateral Manager, that is
delivered pursuant to Section 10.5(b).

 

“Securityholder”:  See “Holder,” above.

 

“Selling Institution”:  The entity obligated to make payments to the
Issuer under the terms of a Participation Interest.

 

“Senior Collateral Management Fee”: The senior
fee payable to the Collateral Manager in arrears on each Payment Date in
accordance with the Priority of Payments or the Special Priority of Payments,
as applicable, in an amount equal to such percentage per annum as set forth in
the Term Sheet (such percentage, the Senior Collateral Management Fee
Percentage) of the Fee Basis Amount.

 

“Senior Coverage Tests”:  The Senior Overcollateralization Ratio Test
and the Senior Interest Coverage Test.

 

“Senior Interest Coverage Ratio”:  The ratio (expressed as a percentage)
obtained by dividing:

 

(a)           the aggregate amount of Interest Proceeds
(net of any applicable withholding tax to the extent that the Collateral
Manager knows or reasonably expects that taxes will be withheld from such
payments) that have been received or are expected to be received (other than
Interest Proceeds expected to be received from Defaulted Securities, Partial
PIK Securities and PIK Securities but including Interest Proceeds actually
received from Defaulted Securities, Partial PIK Securities and PIK Securities),
in each case during the Due Period in which such Measurement Date occurs, or
any net payments (excluding termination payments) expected to be received by the Issuer in
respect of any Hedge Agreements on or before the related Payment Date; by

 

(b)           the sum of (i) amounts payable (or
expected as of the Measurement Date to be payable) on the following Payment
Date as set forth in the Priority of Interest Payments, clauses 

 

61

 

(A) through and including
the clause in which all interest (and Deferred Interest, if any) on the most
junior Tranche of Senior Notes is to be paid (without regard to payments as a
result of failure of any Coverage Test) plus (ii) amounts payable (or
expected as of the Measurement Date to be payable) on the following Payment
Date on any Short Positions.

 

“Senior Interest Coverage Test”:  A test satisfied if, as of each Measurement
Date on or after a certain date (such date, the Senior Interest Coverage
Test Start Date) set forth in the Term Sheet, the Senior Interest Coverage
Ratio is equal to or greater than the Senior Interest Coverage Ratio Minimum
set forth in the Term Sheet.

 

“Senior Notes”: 
The meaning specified in the Supplement.

 

“Senior Overcollateralization Ratio”:  The ratio (expressed as a percentage)
obtained by dividing:

 

(i)            the Principal Collateral Value (excluding
the Aggregate Unfunded Amount); by

 

(ii)           the Aggregate Outstanding Amount of the
Senior Notes.

 

“Senior Overcollateralization Test”:  A test satisfied if, as of each Measurement
Date on or after a certain date (such date, the Senior Overcollateralization
Test Start Date) set forth in the Term Sheet, the Senior
Overcollateralization Ratio is equal to or greater than the Senior
Overcollateralization Ratio Minimum set forth in the Term Sheet.

 

“Senior Secured Loan”:  Any assignment of, Participation Interest in
or other interest (including a Synthetic Security) in a loan (i) that is
not (and cannot by its terms become) subordinate in right of payment to any
unsecured obligation of the obligor in any bankruptcy, reorganization,
arrangement, insolvency, moratorium or liquidation proceedings, (ii) that
is secured by the pledge of collateral and (iii) unless secured by a first
priority security interest, (a) with respect to which the Collateral
Manager determines in good faith that the value of the collateral securing the
loan on or about the time of origination equals or exceeds the outstanding
principal balance of the loan plus the aggregate outstanding balances of all
other loans of equal or higher seniority secured by the same collateral, and (b) if
the obligation is rated by Moody’s, such rating is not lower than the senior
implied Moody’s rating of such issuer (if any); provided that for purposes of the definition of “S&P
Recovery Rate,” clause (b) shall not apply.

 

“Short Position”:  Unless otherwise specified in the Supplement,
a credit default swap with a stated notional amount where the Issuer is the
purchaser of credit protection and with a term no longer than five years, provided that (i) if the Reference
Obligation is a bank loan that otherwise satisfies clause (A)(2) of the
definition of Collateral Debt Security, it need not be an assignment or a
Participation Interest, (ii) the terms thereof provide for cash settlement
and may provide for physical settlement at the option of the Issuer only, (iii) the
obligor of the Reference Obligation is organized in a country rated at least “Aa2”
by Moody’s and (iv) with respect to which Rating Agency Confirmation has
been received, provided, however,
that if a proposed Short Position is documented on a Form-Approved Short
Agreement, Rating Agency

 

62

 

Confirmation
shall be deemed to have been received when the Issuer provides a copy of such documentation
to the applicable Rating Agency.

 

“Short Settlement Draws”:  As defined in the Note Purchase Agreement.

 

“Short-Term Obligation”:  Any Collateral Debt Security (i) that is
incurred in connection with a merger, acquisition, consolidation, sale of all
or substantially all of the assets of a Person, restructuring or similar
transaction, (ii) that, by its terms, is required to be repaid within one
year of the incurrence thereof with proceeds from additional borrowings or
other refinancings (other than any additional borrowing or refinancing if one
or more financial institutions shall have provided the underlying borrower or
other obligor of such debt obligation with a binding written commitment to
provide the same) and (iii) that, prior to its purchase by the Issuer, has
been assigned a Moody’s Default
Probability Rating and an S&P Rating,
neither of which shall be an implied rating.

 

 “Similar Law” means any applicable
federal, state or local laws, rules or regulations that are substantially
similar to the fiduciary responsibility provisions of ERISA or Section 4975
of the Code.

 

“Special Priority of Payments”:  The priority of payments specified in Section 5.7
hereof.

 

“Stated Maturity”:  With respect to any obligation, the date
specified in such obligation, and with respect to any Note, the date specified
in such Note and in the Term Sheet, as the fixed date on which the final
payment of the principal amount of such obligation or Note, as the case may be,
is due and payable, or, if such date is not a Business Day, the next following
Business Day.

 

“Structured Finance Security”:  A non-recourse or limited-recourse debt
obligation issued by a special purpose vehicle and secured solely by the assets
thereof (including, without limitation, a mortgage backed security, an asset
backed security, a collateralized bond obligation or a collateralized loan
obligation (or any combination thereof)).

 

The Moody’s Default Probability Rating and the Moody’s
Rating of a Structured Finance Security shall be determined pursuant to clause (i) of
the definition of “Moody’s Rating.”  For
purposes of determining the S&P Rating of a Structured Finance Security,
the Structured Finance Security shall be deemed to have a rating equal to the
S&P rating of such Structured Finance Security or, if such Structured
Finance Security is not rated by S&P, the S&P Rating of such Structured
Security shall be the rating as may be assigned by S&P upon request of the
Issuer or Collateral Manager.

 

“Subordinate Interests”:  The meaning specified in Section 13.1.

 

“Subordinated Collateral Management Fee”:  The subordinate fee payable to the Collateral
Manager in arrears on each Payment Date in accordance with the Priority of
Payments or the Special Priority of Payments, as applicable, in an amount equal
to such percentage per annum as
set forth in the Term Sheet (such percentage, the Subordinated Collateral
Management Fee Percentage) of the Fee Basis Amount.

 

63

 

“Subordinated Notes”:  The meaning specified in the Supplement.

 

“Subscription and Private Placement Agency
Agreement”:  One or more agreements
dated on or prior to the Closing Date by and among the Co-Issuers, the Managers
and/or the Placement Agents, relating to the offer, sale and placement of the
Securities, as amended from time to time.

 

“Subsequent Assignee”:  The meaning specified in Section 2.14(b).

 

“Successor”: 
The meaning specified in Section 7.10(a).

 

“Supplement”: 
The Supplement to this Indenture attached hereto as Appendix A.

 

“Support Provider”:  Any Person providing liquidity or credit
enhancement support for a Pass-Through CP Conduit in connection with the
transactions contemplated pursuant to the Indenture or any Affiliate thereof; provided that (a) such Person or
Affiliate, or a Person providing a guarantee of the obligations of such Person
or Affiliate in respect of such liquidity or enhancement support for such
Pass-Through CP Conduit, shall have a commercial paper or certificate of
deposit rating of at least “A-1+” from S&P, or at least “P-1” from Moody’s
and (b) such Person has been approved by the Collateral Manager (which
approval shall not be unreasonably withheld).

 

“Synthetic Security”:  Unless otherwise set forth in the Supplement,
any U.S. Dollar denominated swap transaction, debt security, security issued by
a trust or similar vehicle or other investment (Registered, in the case of a
U.S. obligor) (including Credit-Linked Obligations and Short Positions)
purchased from or entered into by the Issuer with a Synthetic Security
Counterparty, the returns on which (as determined by the Collateral Manager)
are linked to the credit performance of one or more Reference Obligations, but
which may provide for a different currency, maturity, payment dates, interest
rate, credit exposure or other credit or non-credit related characteristics
than such Reference Obligation (including a credit default swap entered into to
offset a Short Position); and that meets the following requirements:

 

(i)            other than Credit-Linked Obligations and
Short Positions, it will not require the Issuer to make any payment to the
Synthetic Security Counterparty after the initial purchase by the Issuer (other
than the payments to the Synthetic Security Counterparty of any Synthetic
Security Collateral);

 

(ii)           its ownership and disposition will not
subject the Issuer to net income tax or cause the Issuer to be treated as
engaged in a United States trade or business;

 

(iii)          all scheduled payments are at a fixed
interest rate, are at a variable interest rate based on an interest rate used
for borrowings or financings in domestic or international markets or are linked
to the payments on one or more Reference Obligations (which payments are
themselves at a fixed interest rate or a variable interest rate based on an
interest rate used for borrowings or financings in domestic or international
markets);

 

64

 

(iv)          it will not constitute a commodity
option, leverage transaction or futures contract that is subject to the jurisdiction
of the U.S. Commodities Futures Trading Commission;

 

(v)           its documentation will provide
non-petition and limited recourse protection with respect to the Issuer;

 

(vi)          (i) Rating Agency Confirmation from
S&P is received for the purchase of such Synthetic Security unless such
Synthetic Security conforms to a form for which Rating Agency Confirmation from
S&P has been obtained and (ii) it (A) is publicly rated by Moody’s
or a rating, rating estimate or Moody’s Rating Factor has been assigned by Moody’s
upon the request of the Issuer or the Collateral Manager and (B) has been
assigned a Moody’s Recovery Rate;

 

(vii)         any Credit Event thereunder is limited to
either “bankruptcy” and/or “failure to pay”;

 

(viii)        other than Short Positions, it must provide
for both cash and physical settlement at the option of the Issuer only;

 

(ix)           if the Reference Obligation is a Senior
Secured Loan, the Deliverable Obligation must also be a Senior Secured Loan
that ranks at least pari passu
with the Reference Obligation; and

 

(x)            the Deliverable Obligation is denominated
in U.S. Dollars.

 

For purposes of the Coverage Tests, the definition of
Collateral Debt Security, and clauses (3), (7), (13), (15) and (16) of the
Portfolio Profile Test, a Synthetic Security shall be included as a Collateral
Debt Security having the relevant characteristics of the Synthetic Security and
not of the related Reference Obligation and the amount thereof shall be equal
to the applicable notional amount (provided,
that the maturity of a Credit-Linked Obligation shall be the stated date of the
final payment described in clause (b)(iv) of the definition of
Credit-Linked Obligation), unless the Collateral Manager determines otherwise
and receives Rating Agency Confirmation.

 

For purposes of the Collateral Quality Test and the
Portfolio Profile Test (other than clauses (3), (7), (13), (15) and (16)), a
Synthetic Security shall be included as a Collateral Debt Security having the
relevant characteristics of the related Reference Obligation (and the issuer of
such Synthetic Security shall be deemed to be the issuer of the related
Reference Obligation) and not of the Synthetic Security, unless the Collateral
Manager determines otherwise and receives Rating Agency Confirmation.

 

The Moody’s Default Probability Rating and the Moody’s
Rating of a Synthetic Security shall be determined pursuant to clause (i) of
the definition of “Moody’s Rating.”  For
purposes of determining the S&P Rating of a Synthetic Security, the
Synthetic Security shall be deemed to have a rating equal to the S&P rating
of such Synthetic Security or, if such Synthetic Security is not rated by
S&P, the S&P Rating of such Synthetic Security shall be the rating as
may be assigned by S&P upon request of the Issuer or Collateral Manager.

 

65

 

The interest rate or coupon of a fixed rate Synthetic
Security shall be a fraction, expressed as a percentage and annualized, the
numerator of which is the current stated periodic payments scheduled to be received
by the Issuer from the related Synthetic Security Counterparty (in the case of
a Credit-Linked Obligation, as described in clause (b)(i) of the
definition thereof) and the denominator of which is the notional balance of
such Synthetic Security.  The interest
rate or spread of a floating rate Synthetic Security shall be a fraction,
expressed as a percentage and annualized, the numerator of which is the current
stated periodic spread over LIBOR scheduled to be received by the Issuer from
the related Synthetic Security Counterparty and the denominator of which is the
notional balance of such Synthetic Security (in the case of a Credit-Linked
Obligation, as described in clause (b)(i) of the definition thereof).

 

“Synthetic Security Collateral”: With respect
to any Synthetic Security, collateral required to be acquired or transferred,
or specified rights of the Issuer under such Synthetic Security required to be
assigned, by the Issuer to secure the payment obligations of the Issuer to a
Synthetic Security Counterparty under such Synthetic Security and that must be
applied in accordance with the terms of such Synthetic Security.

 

“Synthetic Security Counterparty”:  Unless otherwise specified in the Supplement,
any entity (other than the Issuer) (a) required to make payments on a
Synthetic Security (including any guarantor), which entity or guarantor, or the
long-term senior unsecured debt of such entity or guarantor (or its secured
debt if such entity or guarantor is a trust and its debt is secured by a Reference
Obligation), at the date of purchase or execution thereof, has a short-term
rating of at least “A-1” (or a long-term rating of at least “A-”) by S&P or
(b) in the case of a Synthetic Security that represents an ownership
interest in debt obligations of a special purpose vehicle, required to make
payments to such special purpose vehicle.

 

“Synthetic Security Reserve Account”:  Each trust account established pursuant to Section 10.3(e).

 

“Tax”: Any present or future tax, levy, impost,
duty, charge, assessment, deduction, withholding or fee of any nature
(including interest, penalties and additions thereto) that is imposed by any
government or other taxing authority other than a stamp, registration,
documentation or similar tax.

 

“Term Sheet”: 
The Term Sheet set forth in Appendix B to this Indenture.

 

“Terminated Loss Short Position”:  With respect to each Payment Date, each Short
Position that was sold, assigned or terminated on or prior to such Payment Date
where (i) the Issuer was required to make a payment in connection with
such sale, assignment or termination, and (ii) as of the date of such
sale, assignment or termination, the Class C/D Overcollateralization Ratio
was less than or equal to the Terminated Loss Short Position Threshold
(as set forth in the Term Sheet).

 

“Terminated Loss Short Position Payment”:  With respect to each Terminated Loss Short
Position, the amount of Principal Proceeds the Issuer paid in connection with
the sale, assignment or termination of such Short Position.

 

66

 

“Terminated Loss Short Recapture Amount”:  With respect to each Payment Date and each
Terminated Loss Short Position, the lesser of (i) the excess of the
Terminated Loss Short Position Payment over the aggregate amounts actually
deposited into the Collection Account as Principal Proceeds with respect to
such Terminated Loss Short Position on all prior Payment Dates pursuant to the
Priority of Payments or the Special Priority of Payments, as applicable, and (ii) the
quarterly payment the Issuer was required to make with respect to such
Terminated Loss Short Position, without regard to its sale, assignment,
termination, expiration or maturity.

 

“Tranche”: 
All Notes of all Classes of Notes bearing the same alphabetic designation
and ranking pari passu with
respect to principal payments; for example Class B-1 Notes and Class B-2
Notes, if any, would be of the same Tranche. 
The Subordinated Notes shall constitute a separate Tranche.

 

“Transfer Agent”:  The Person or Persons, which may be the
Issuer, authorized by the Issuer to exchange or register the transfer of
Securities.

 

“Transfer Certificate”:  A duly executed transfer certificate
substantially in the form of Exhibit B, C, D, E, or F, as applicable.

 

“Trust Officer”:  When used with respect to the Trustee, any
officer within the Corporate Trust Office (or any successor group of the
Trustee) authorized to act for and on behalf of the Trustee, including any vice
president, assistant vice president, officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred at the Corporate Trust Office because of his or her knowledge of and
familiarity with the particular subject.

 

“Trustee”: 
The Person identified as the Trustee in the first paragraph of this
Indenture until a successor Person shall have become the Trustee pursuant to
the applicable provisions of this Indenture, and thereafter “Trustee” shall
mean such successor Person.

 

“UCC”: 
The Uniform Commercial Code as in effect from time to time in the State
of New York.

 

“U.S. Person”: 
For purposes of Article 7 and Section 2.5(c), a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate that is subject to United States federal income
tax regardless of the source of its income, or a trust if a court within the
United States is able to exercise primary supervision of the administration of
the trust and one or more U.S. Persons have the authority to control all
substantial decisions of the trust.

 

“Uncertificated Security”:  The meaning specified in Article 8 of
the UCC.

 

“Underlying Instrument”:  The indenture or other agreement pursuant to
which a Pledged Security has been issued or created and each other agreement
that governs the terms of or secures the obligations represented by such
Pledged Security or of which the holders of such Pledged Security are the
beneficiaries.

 

67

 

“Unregistered Securities”:  The meaning specified in Section 5.17(c).

 

“Unused
Proceeds”:  That portion of
the net proceeds of the sale of Securities on the Closing Date that was not
deposited in the Closing Expenses Reserve Account, Interest Reserve Account,
Expense Reserve Account, the Synthetic Security Reserve Account or the Revolver
Funding Account on the Closing Date or used to pay the purchase price of
Collateral Debt Securities purchased on the Closing Date and to repurchase
participations sold and repay indebtedness incurred to finance the acquisition
of Collateral Debt Securities prior to the Closing Date.

 

“Unused Proceeds Account”:  The trust account established pursuant to Section 10.3(b).

 

“Voting Rights Assignment”:  The meaning specified in Sections 2.14(a) and
2.14(b), respectively.

 

“Voting Rights Assignee”:  The meaning specified in Section 2.14(a) and
2.14(b), respectively.

 

“Voting Rights Register”:  The meaning specified in Section 2.15.

 

“Voting Rights Registrar”:  The meaning specified in Section 2.15.

 

“Weighted Average Life”:  As of any Measurement Date, the number
obtained for each Collateral Debt Security (other than a Defaulted Security or
a REIT Preferred Security) by (i) summing the products of (A) the
number of years from such date of determination to the respective dates of each
successive scheduled payment of principal of a Collateral Debt Security and (B) the
related amounts of the principal of such scheduled payment and (ii) dividing
such sum by the sum of all successive scheduled payments of principal of such
Collateral Debt Security.  For Structured
Finance Securities, the projections of payment amounts and dates prepared by
the Collateral Manager shall be deemed to be the scheduled payments on such
securities.

 

“Weighted
Average Life Test”:  A test
that will be satisfied (i) on the Effective Date, if the weighted average
(by outstanding principal amount) of the Weighted Average Lives of all
Collateral Debt Securities (excluding Defaulted Securities and REIT Preferred
Securities) is less than or equal to a certain number of years set forth in the
Term Sheet (such number of years, the Weighted Average Life Maximum) and
(ii) after the Effective Date, if the weighted average (by outstanding
principal amount) of the Weighted Average Lives of all Collateral Debt
Securities (excluding Defaulted Securities and REIT Preferred Securities) is
less than or equal to (A) the Weighted Average Life Maximum minus (B) (1) the
number of months that have elapsed since the Effective Date divided by (2) 12.

 

“Weighted Average Spread”:  As of any Measurement Date, the number
obtained by dividing:

 

68

 

(i)            the amount equal to (A) the
Aggregate Funded Spread, plus (B) the
Aggregate Unfunded Spread, plus (C) the
Aggregate Excess Funded Spread, minus
(D) the Annualized Short Premium;

 

by

 

(ii)           an amount equal to the lesser of (A) the
Effective Date Target Par and (B) the Aggregate Principal Balance of the
Collateral Debt Securities (excluding Defaulted Securities and any PIK Security
and any Partial PIK Security to the extent of any non-cash interest).

 

“Weighted Average Spread Test”:  A test that is satisfied, as of any
Measurement Date, if the Weighted Average Spread is greater than or equal to
the Minimum Spread.

 

“Withholding Tax Event”:  Any new, or change in any, U.S. or foreign
tax statute, treaty, regulation, rule, ruling, practice, procedure or judicial
decision or interpretation which results in any portion of any payment due from
any issuer or obligor under any Collateral Debt Security becoming properly
subject to the imposition of U.S. or foreign withholding tax (other than withholding
taxes with respect to commitment fees associated with Collateral Debt
Securities constituting a Revolving Collateral Debt Security or Delayed
Drawdown Debt Security), which withholding tax is not compensated for by a “gross
up” provision under the terms of the Collateral Debt Securities, and such a tax
or taxes amount, in the aggregate, to five percent (5%) or more of the
aggregate interest payments for the related Due Period on all of the Collateral
Debt Securities during the related Due Period.

 

“Zero Coupon Bond”:  A debt obligation that does not bear interest
for all or part of the period that it is outstanding or that provides for
periodic payments in cash less frequently than semi-annually or that pays
interest only at its stated maturity.

 

Section 1.2.            Assumptions
as to Collateral Debt Securities.

 

(a)           In connection with all calculations
required to be made pursuant to this Indenture with respect to Scheduled
Distributions on any Pledged Security, or any payments on any other assets
included in the Collateral, with respect to the sale of and reinvestment in
Collateral Debt Securities, and with respect to the income that can be earned
on Scheduled Distributions on such Pledged Securities and on any other amounts
that may be received for deposit in the Collection Account, the provisions set
forth in this Section 1.2 shall be applied.  The provisions of this Section 1.2 shall
be applicable to any determination or calculation that is covered by this Section 1.2,
whether or not reference is specifically made to Section 1.2, unless some
other method of calculation or determination is expressly specified in the
particular provision.

 

(b)           All calculations with respect to
Scheduled Distributions on the Pledged Securities securing the Securities shall
be made on the basis of information as to the terms of each such Pledged
Security and upon report of payments, if any, received on such Pledged Security
that are furnished by or on behalf of the issuer of such Pledged Security and,
to the extent they are not manifestly in error, such information or report may
be conclusively relied upon in making such calculations.

 

69

 

(c)           For purposes of calculating the Coverage
Tests, except as otherwise specified in the Coverage Tests, such calculations
will not include scheduled interest and principal payments on Defaulted
Securities or scheduled interest on PIK Securities or payments (including under
any Hedge Agreement) as to which the Collateral Manager or the Issuer has actual
knowledge that such payments will not be made unless or until such payments are
actually made.

 

(d)           For each Due Period and as of any date of
determination, the Scheduled Distribution on any Pledged Security (other than a
Defaulted Security or a PIK Security, which, except as otherwise provided
herein, shall be assumed to have a Scheduled Distribution of zero) shall be the
sum of (i) the total amount of payments and collections to be received
during such Due Period in respect of such Pledged Security (including the Sale
Proceeds from the sale of such Pledged Security received and, in the case of
sales which have not yet settled, to be received during the Due Period and not
reinvested in additional Collateral Debt Securities or Eligible Investments or retained
in the Collection Account for subsequent reinvestment pursuant to Section 12.2)
that, if paid as scheduled, will be available in the Collection Account at the
end of the Due Period and (ii) any such amounts received in prior Due
Periods that were not disbursed on a previous Payment Date.

 

(e)           Each Scheduled Distribution receivable
with respect to a Pledged Security (other than a PIK Security) shall be assumed
to be received on the applicable Due Date, and each such Scheduled Distribution
shall be assumed to be immediately deposited in the Collection Account to earn
interest at the Assumed Reinvestment Rate. 
All such funds shall be assumed to continue to earn interest until the
date on which they are required to be available in the Collection Account for
application, in accordance with the terms hereof, to payments of principal of
or interest on the Notes or other amounts payable pursuant to this
Indenture.  Except as otherwise specified
herein, for purposes of the applicable determinations required by Section 10.5(b),
Article 12, the Senior Interest Coverage Ratio and Class C/D Interest
Coverage Ratio, the expected interest on Floating Rate Notes and floating rate
Collateral Debt Securities will be calculated using the then current interest
rates applicable thereto.  If a
Collateral Debt Security provides for a decrease in (i) the scheduled
interest rate (in the case of a Collateral Debt Security that bears interest at
a fixed rate) or (ii) the spread above a stated index (in the case of a
Collateral Debt Security that bears interest at a floating rate) at
predetermined dates (without regard to the occurrence of future events), the
lowest permissible rate or spread with respect to such predetermined dates
applicable to such Collateral Debt Security shall be used for purposes of the
Collateral Quality Tests, the Investment Criteria and the calculation of Excess
Interest.

 

(f)            For purposes of any vote, request,
demand, authorization, direction, notice, consent or waiver, each Holder of a
Security will vote, request, demand, authorize, direct, or give notice, consent
or waiver with respect to the Aggregate Outstanding Amount of such Security.

 

(g)           Except as otherwise provided herein,
Defaulted Securities, PIK Securities and any Partial PIK Security to the extent
of any non-cash interest will not be included in the calculation of the
Collateral Quality Test (other than the S&P CDO Monitor Test).

 

70

 

(h)           For purposes of calculating the Coverage
Tests during the three Business Days commencing on and including the date of
any Short Settlement Draw, the Interest Rate for any Commitment Notes shall be
calculated without regard to the proviso thereto.

 

(i)            In calculating whether Collateral Debt
Securities represent a given percentage of the Principal Collateral Value, the
Principal Balance of such Collateral Debt Securities shall be divided by the
Principal Collateral Value.

 

(j)            Whenever the term “principal amount” is
used with respect to Subordinated Notes, such term shall mean amounts
distributable to Holders of Subordinated Notes from Principal Proceeds or in
connection with redemption of the Subordinated Notes, and whenever the term “interest”
is used with respect to Subordinated Notes, such term shall mean that portion
of Interest Proceeds distributable to Holders of Subordinated Notes pursuant to
the Priority of Interest Payments.

 

Section 1.3.            Definitional
Provisions.

 

All references in this
instrument to designated “Articles,” “Sections,” “Subsections” and other
subdivisions are to the designated Articles, Sections, Subsections and other
subdivisions of this instrument as originally executed.  Unless otherwise specified, the words “herein,”
“hereof,” “hereunder” and other words of similar import refer to this Indenture
as a whole and not to any particular Article, Section, Subsection or other
subdivision.  The words “include,” “including”
and “included” shall be illustrative and shall not imply any limitation or
exclusion unless the context clearly indicates otherwise; and the word “or”
shall not indicate exclusivity and shall be interpreted to mean both “and” and “or”
unless the context clearly indicates otherwise. 
To the extent any Class or Tranche of Notes referred to herein is
not issued under this Indenture on the Closing Date, all references herein to
such Class or Tranche shall be deemed stricken from this Indenture and all
cross-references shall be deemed modified accordingly.

 

To the extent that there is
any inconsistency between anything set forth in a Section of this
Indenture and anything set forth in the Supplement or the Term Sheet, the
information set forth in the Supplement or the Term Sheet shall prevail.

 

ARTICLE 2

 

THE NOTES

 

Section 2.1.            Forms
Generally.

 

The Notes and the Trustee’s or Authenticating Agent’s
certificate of authentication thereon (the “Certificate of Authentication”)
shall be in substantially the forms required by this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon,
as may be consistent herewith, determined by the Authorized Officers of the
Applicable Issuer executing such Securities as evidenced by their execution of
such Securities.  Any portion of the text
of any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.

 

71

 

Section 2.2.            Forms
of Securities; Certificate of Authentication.

 

(a)           The forms of the Securities (including
the Certificate of Authentication) shall be as set forth in Exhibit A.

 

(b)           Global and Physical Securities. 
Except as provided below, the Securities shall be issued in either
global or certificated form.  All of the
Securities may be Global Securities except for (i) Commitment Notes, (ii) Subordinated
Notes sold to Accredited Investors or Knowledgeable Employees and (iii) purchasers
requesting or required to hold a Physical Security, which, in each case, must
be Physical Securities.

 

The Global Rated Notes and the Global Subordinated
Notes sold outside the United States to non-U.S. Persons (as defined in
Regulation S) in reliance on Regulation S shall be issued initially
in the form of one or more permanent global securities in definitive, fully
registered form without interest coupons with the applicable legends set forth
in Exhibit A hereto (with appropriate modifications thereto),
respectively, added to the form of such Securities (each, a “Regulation S
Global Security”), which shall be deposited on behalf of the subscribers
for such Securities represented thereby with the Trustee as custodian for the
Depository and registered in the name of a nominee of the Depository for the
respective accounts of Euroclear and Clearstream, duly executed by the
Applicable Issuer and authenticated by the Trustee as hereinafter
provided.  The aggregate principal amount
of the Regulation S Global Securities may from time to time be increased
or decreased by adjustments made on the records of the Trustee or the
Depository or its nominee, as the case may be, as hereinafter provided.

 

The Global Rated Notes and the Global Subordinated
Notes sold in reliance on Rule 144A shall be issued initially in the form,
respectively, of one or more permanent global securities in definitive, fully
registered form without interest coupons with the applicable legends set forth
in Exhibit A hereto (with appropriate modifications thereto),
respectively, added to the form of such Securities (each, a “Rule 144A
Global Security”), which shall be deposited on behalf of the subscribers
for such Securities represented thereby with the Trustee as custodian for the
Depository and registered in the name of a nominee of the Depository, duly
executed by the Co-Issuers and authenticated by the Trustee as hereinafter
provided.  The aggregate principal amount
of the Rule 144A Global Securities may from time to time be increased or
decreased by adjustments made on the records of the Trustee or the Depository
or its nominee, as the case may be, as hereinafter provided.

 

Commitment Notes, if any, shall be issued in the form
of one or more Physical Commitment Notes in definitive, fully registered form
without interest coupons with the applicable legend set forth in Exhibit A
(with appropriate modifications thereto) added to the form of such Commitment
Note (each, a “Physical Commitment Note”), which shall be registered in
the name of the beneficial owner or a nominee thereof, duly executed by the
Issuer and authenticated by the Trustee as hereinafter provided.

 

Subordinated Notes may, and in the case of
Subordinated Notes held by Accredited Investors or Knowledgeable Employees
shall, be issued initially in the form of one or more certificated Subordinated
Notes in definitive, fully registered form without interest coupons with

 

72

 

the applicable legend set
forth in Exhibit A added to the form of such certificated Security (each,
a “Physical Subordinated Note”), which shall be registered in the name
of the beneficial owner or a nominee thereof, duly executed by the Co-Issuers
and authenticated by the Trustee as hereinafter provided.

 

(c)           Book-Entry Provisions. 
This Section 2.2(c) shall apply only to Global Securities
deposited with or on behalf of the Depository.

 

The Applicable Issuer shall execute and the Trustee
shall, in accordance with this Section 2.2(c), authenticate and deliver
initially one or more Global Securities that (i) shall be registered in
the name of the nominee of the Depository for such Global Security or Global
Securities and (ii) shall be delivered by the Trustee to such Depository
or pursuant to such Depository’s instructions or held by the Trustee’s agent as
custodian for the Depository.

 

Agent Members shall have no rights under this
Indenture with respect to any Global Security held on their behalf by the
Trustee, as custodian for the Depository or under the Global Security, and the
Depository may be treated by the Applicable Issuer, the Trustee, and any agent
of the Co-Issuers or the Trustee as the absolute owner of such Global Security
for all purposes whatsoever. 
Notwithstanding the foregoing, nothing herein shall prevent the
Applicable Issuer, the Trustee, or any agent of the Co-Issuers or the Trustee,
from giving effect to any written certification, proxy or other authorization
furnished by the Depository or impair, as between the Depository and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a Holder of any Global Security.

 

(d)           Physical Securities. 
Except as provided in Sections 2.5(e)(iv), 2.5(e)(v) and 2.10
hereof, owners of beneficial interests in Global Securities will not be
entitled to receive physical delivery of certificated Securities.

 

Section 2.3.            Authorized
Amount; Interest Rate; Stated Maturity; Denominations.

 

The aggregate principal amount of Notes that may be
authenticated and delivered under this Indenture is limited to the sum total of
the original principal amount of the Notes set forth in the Term Sheet, except
for Securities authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities pursuant to Section 2.5,
2.6, 2.10 or 8.6 of this Indenture and Securities issued pursuant to
supplemental indentures in accordance with Article 8 and a Redemption by
Refinancing in accordance with Article 9.

 

The Securities shall be divided into Classes having
designations, original principal amounts, Interest Rates (if any), ratings (if
any) and Stated Maturities as set forth in the Term Sheet.

 

73

 

Except as otherwise set forth in the Supplement, the
Securities shall be issuable in the minimum denominations and integral
multiples in excess thereof set forth in the following table (each, an “Authorized
Denomination”).

 

	
  Securities

  	
   

  	
  Minimum

  Denomination

  	
   

  	
  Integral Multiples

  in Excess Thereof

  	
   

  
	
  Global Rated Notes

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  1

  	
   

  
	
  Physical Commitment Notes

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  1

  	
   

  
	
  Global Subordinated Notes

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  1

  	
   

  
	
  Physical Subordinated Notes

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  1

  	
   

  

 

Transfers of Securities will not be permitted unless,
following such transfer, both the transferee and the transferor (if the
transferor retains any Securities) will each hold Securities in an Authorized
Denomination; provided, however that a limited number of exceptions to the
required Minimum Denominations may be made on the Closing Date as set forth in
the Supplement.  In such event, the
Holder of such Securities may not transfer less than 100% of its holdings, and
if the transferee of any Securities in an amount less than the required Minimum
Denominations combines such Securities with other Securities of the same Class held
by it, subsequent transfers will be required to satisfy the Authorized
Denominations.

 

Section 2.4.            Execution,
Authentication, Delivery and Dating.

 

The Securities shall be executed on behalf of the
Applicable Issuer by one of the Authorized Officers of the Applicable
Issuer.  The signature of such Authorized
Officer may be manual or facsimile.

 

Securities bearing the manual or facsimile signatures
of individuals who were at any time the Authorized Officers of the Applicable
Issuer shall bind the Applicable Issuer, notwithstanding the fact that such
individuals or any of them have ceased to hold such offices prior to the
authentication and delivery of such Securities or did not hold such offices at
the date of issuance of such Securities.

 

At any time and from time to time after the execution
and delivery of this Indenture, the Applicable Issuer may deliver Securities
executed by it, to the Trustee or the Authenticating Agent for authentication
and the Trustee or the Authenticating Agent, upon Issuer Order, shall
authenticate and deliver such Securities as provided in this Indenture and not
otherwise.

 

Each Security authenticated and delivered by the
Trustee or the Authenticating Agent to or upon Issuer Order on the Closing Date
shall be dated as of the Closing Date. 
All other Securities that are authenticated after the Closing Date for
any other purpose under the Indenture shall be dated the date of their
authentication.

 

Securities issued upon transfer, exchange or
replacement of other Securities shall be issued in Authorized Denominations
reflecting the original aggregate principal amount of the Securities so
transferred, exchanged or replaced, but shall represent only the current
outstanding principal amount of the Securities so transferred, exchanged or
replaced.  In the event that any

 

74

 

Security is divided into
more than one Security in accordance with this Article 2, the original
principal amount of such Security shall be proportionately divided among the
Securities delivered in exchange therefor and shall be deemed to be the
original aggregate principal amount of such subsequently issued Securities.

 

No Security shall be entitled to any benefit under
this Indenture or be valid or obligatory for any purpose, unless there appears
on such Security a Certificate of Authentication, substantially in the form
provided for herein, executed by the Trustee or by the Authenticating Agent by
the manual signature of one of their Authorized Officers, and such certificate
upon any Security shall be conclusive evidence, and the only evidence, that
such Security has been duly authenticated and delivered hereunder.

 

Section 2.5.            Registration,
Registration of Transfer and Exchange.

 

(a)           The Issuer shall cause to be kept a
register (the “Security Register”) in which, subject to such reasonable
regulations as it may prescribe, the Issuer shall provide for the registration
of Securities and the registration of transfers of Securities.  The Trustee is hereby initially appointed “Security
Registrar” for the purpose of registering Securities and transfers of such
Securities.  Upon any resignation or
removal of the Security Registrar, the Issuer shall promptly appoint a
successor or, in the absence of such appointment, assume the duties of Security
Registrar.  The Security Registrar shall
provide the Issuer with a copy of the Security Register promptly following its
request and promptly following any change thereto.  The Issuer may rely conclusively upon any
information contained in the Security Register. 
The Security Registrar shall provide to the Issuer any information it
has with respect to Holders of any Commitment Notes upon request.

 

If a Person other than the Trustee is appointed by the
Issuer as Security Registrar, the Issuer will give the Trustee prompt notice of
the appointment of a Security Registrar and of the location, and any change in
the location, of the Security Registrar, and the Trustee shall have the right
to inspect the Security Register at all reasonable times and to obtain copies
thereof and the Trustee shall have the right to rely upon a certificate
executed on behalf of the Security Registrar by an Officer thereof as to the
names and addresses of the Holders and the principal amounts and numbers of
such Securities.

 

Subject to this Section 2.5, upon surrender for
registration of transfer of any Securities at the office or agency of the Co-Issuers
to be maintained as provided in Section 7.2, the Applicable Issuer shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
Authorized Denomination and of like terms and a like aggregate principal
amount.

 

At the option of the Holder, Securities may be
exchanged for Securities, of like terms, in any Authorized Denominations and of
like aggregate principal amount upon surrender of the Securities to be
exchanged at such office or agency. 
Whenever any Security is surrendered for exchange, the Applicable Issuer
shall execute and the Trustee shall authenticate and deliver the Securities
that the Securityholder making the exchange is entitled to receive.

 

75

 

All Securities issued and authenticated upon any
registration of transfer or exchange of Securities shall be the valid
obligations of the Applicable Issuer, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Securities surrendered upon such
registration of transfer or exchange.

 

Except in the case of a transfer of an interest in
Commitment Notes registered in the name of the Administrative Agent (as defined
in the Note Purchase Agreement) made pursuant to a participation or assignment
of an interest under the Note Purchase Agreement, every Security presented or
surrendered for registration of transfer or exchange shall be duly endorsed, or
be accompanied by a written instrument of transfer in form satisfactory to the
Applicable Issuer and the Security Registrar, duly executed by the Holder thereof
or its attorney duly authorized in writing.

 

No service charge shall be made to a Holder for any
registration of transfer or exchange of Securities, but the Trustee or Transfer
Agent may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.

 

The Co-Issuers shall not be required to issue,
register the transfer of or exchange any Security beginning at the opening of
business on the Record Date for any redemption (unless the notice of redemption
is withdrawn).

 

(b)           No Security may be sold or transferred
(including, without limitation, by pledge or hypothecation) unless such sale or
transfer is exempt from the registration requirements of the Securities Act and
is exempt under applicable state securities laws.

 

No Security may be offered, sold or delivered (i) as
part of the distribution by the Managers at any time or (ii) otherwise
until 40 days after the Closing Date, within the United States or to, or for
the benefit of, U.S. Persons (as defined in Regulation S) except in
accordance with Rule 144A or an exemption from the registration
requirements of the Securities Act, to Persons purchasing for their own account
or for the accounts of one or more QIBs, for which the purchaser is acting as
fiduciary or agent.  Securities may be
sold or resold, as the case may be, in offshore transactions to non-U.S.
Persons in reliance on Regulation S. 
In addition, no Rule 144A Global Security may at any time be held
by or on behalf of U.S. Persons that are not QIB/QPs, and no Regulation S
Global Security may at any time be held by or on behalf of
U.S. Persons.  None of the Co-Issuers,
the Trustee or any other Person may register the Securities under the
Securities Act or any state securities laws.

 

Until the end of the Draw Period, transfers of
beneficial interests in any Commitment Notes will be permitted only to
transferees that satisfy the Delayed Draw Rating Criteria or the Revolving Note
Rating Criteria, as applicable.  In
addition to the requirements of this Section 2.5 and Section 2.4, all
transfers of beneficial interests in any Commitment Notes prior to the end of
the Draw Period shall be made in accordance with the Note Purchase Agreement
relating to such Commitment Notes.

 

76

 

A proposed transfer will not be permitted, and the
Trustee shall not register any such proposed transfer, of an ERISA Security to
a proposed transferee that has represented that it is a Benefit Plan Investor.

 

(c)           For so long as any of the Securities are
Outstanding, the Issuer shall not register the transfer of any ordinary shares
of the Issuer to U.S. Persons and the Co-Issuer shall not register the transfer
of any stock of the Co-Issuer to U.S. Persons.

 

(d)           Upon final payment due on the Maturity of
a Security, the Holder thereof shall present and surrender such Security at the
Corporate Trust Office of the Trustee or at the office of any Paying Agent
(outside the United States if then required by applicable law in the case of a
definitive Note issued in exchange for a beneficial interest in the
Regulation S Global Security pursuant to Section 2.5(e)(iv) or Section 2.10);
provided, however, that if there
is delivered to the Applicable Issuer and the Trustee such security or
indemnity as may be required by them to save each of them harmless and an
undertaking thereafter to surrender such certificate, then, in the absence of
notice to the Applicable Issuer or the Trustee that the applicable Security has
been acquired by a Protected Purchaser, such final payment shall be made
without presentation or surrender.

 

(e)           So long as a Global Security remains
Outstanding and is held by or on behalf of the Depository, transfers of a
Global Security, in whole or in part, shall only be made in accordance with Section 2.2(c) and
this Section 2.5(e).

 

(i)            Subject to clauses (ii), (iii) and (iv) of
this Section 2.5(e), transfers of a Global Security shall be limited to
transfers of such Global Security in whole, but not in part, to nominees of the
Depository or to a successor of the Depository or such successor’s nominee.

 

(ii)           Rule 144A Global Security to
Regulation S Global Security.  If a Holder
of a beneficial interest in a Rule 144A Global Security deposited with the
Depository wishes at any time to exchange its interest in such Rule 144A
Global Security for an interest in a Regulation S Global Security, or
to transfer its interest in such Rule 144A Global Security to a Person who
wishes to take delivery thereof in the form of an interest in a Regulation S
Global Security, such Holder, provided such Holder or, in the case of a
transfer, the transferee is not a U.S. Person, may, subject to the rules and
procedures of the Depository, exchange or transfer, or cause the exchange or
transfer of, such interest for an equivalent beneficial interest in the
Regulation S Global Security.  Upon
receipt by the Trustee, as Security Registrar, of:

 

(A)          instructions given in accordance with the
Depository’s procedures from an Agent Member directing the Trustee, as Security
Registrar, to cause to be credited a beneficial interest in a Regulation S
Global Security in an amount equal to the beneficial interest in such Rule 144A
Global Security, in an Authorized Denomination, to be exchanged or transferred,

 

(B)           a written order given in accordance with
the Depository’s procedures containing information regarding the participant
account of the Depository and, in the case of an exchange or transfer pursuant
to and in accordance with 

 

77

 

Regulation S, the Euroclear or Clearstream
account to be credited with such increase and

 

(C)           a Transfer Certificate in the form of Exhibit B
given by the Holder of such beneficial interest stating that the exchange or
transfer of such interest has been made in compliance with the transfer
restrictions applicable to the Global Securities including that the Holder or
the transferee, as applicable, is not a U.S. Person, and is obtaining such
beneficial interest in a transaction pursuant to and in accordance with
Regulation S, and in the case of ERISA Securities, is not a Benefit Plan
Investor,

 

the Trustee, as Security Registrar, shall instruct the
Depository to reduce the principal amount of the Rule 144A Global Security
and to increase the principal amount of the Regulation S Global Security
by the aggregate principal amount of the beneficial interest in the Rule 144A
Global Security to be exchanged, and to credit or cause to be credited to the
securities account of the Person specified in such instructions a beneficial
interest in the Regulation S Global Security equal to the reduction in the
principal amount of the Rule 144A Global Security.

 

(iii)          Regulation S Global Security to Rule 144A
Global Security.  If a Holder of a beneficial interest in a
Regulation S Global Security deposited with the Depository wishes at any
time to exchange its interest in a Regulation S Global Security for an
interest in a Rule 144A Global Security or to transfer its interest in
such Regulation S Global Security to a Person who wishes to take delivery
thereof in the form of an interest in a Rule 144A Global Security, such
Holder may, subject to the rules and procedures of Euroclear, Clearstream
or the Depository, as the case may be, exchange or transfer or cause the exchange
or transfer of such interest for an equivalent beneficial interest in a Rule 144A
Global Security.  Upon receipt by the
Trustee, as Security Registrar, of:

 

(A)          instructions from Euroclear, Clearstream
or the Depository, as the case may be, directing the Trustee, as Security
Registrar, to cause to be credited a beneficial interest in a Rule 144A
Global Security in an amount equal to the beneficial interest in such
Regulation S Global Security, in an Authorized Denomination, to be
exchanged or transferred, such instructions to contain information regarding
the participant account with the Depository to be credited with such increase,
and

 

(B)           a Transfer Certificate in the form of Exhibit C
given by the Holder of such beneficial interest and stating, among other
things, that, in the case of a transfer, the Person transferring such interest
in such Regulation S Global Security reasonably believes that the Person
acquiring such interest in a Rule 144A Global Security is a QIB, is
obtaining such beneficial interest in a transaction meeting the requirements of
Rule 144A and in accordance with any applicable securities laws of any
state of the United States or any other jurisdiction, and is also a Qualified
Purchaser or that, in the case of an exchange, the Holder is a QIB/QP and, in
the case of ERISA Securities, is not a Benefit Plan Investor,

 

78

 

then Euroclear or Clearstream or the Trustee, as
Security Registrar, as the case may be, will instruct the Depository to reduce
the Regulation S Global Security by the aggregate principal amount of the
beneficial interest in the Regulation S Global Security to be transferred
or exchanged and the Trustee, as Security Registrar, shall instruct the
Depository, concurrently with such reduction, to credit or cause to be credited
to the securities account of the Person specified in such instructions a
beneficial interest in the Rule 144A Global Security equal to the
reduction in the principal amount of the Regulation S Global Security.

 

(iv)          Global Certificatable Security to
Physical Security.  If a Holder of a beneficial interest in a
Certificatable Security represented by an interest in a Global Security
(together, “Global Certificatable Securities”) wishes at any time to
transfer its interest in such Security to a Person who wishes to take delivery
thereof in the form of a Physical Security of the same Class, as applicable,
such Holder may, subject to the rules and procedures of Euroclear,
Clearstream or the Depository, as the case may be, transfer or cause the
transfer of such interest for an equivalent beneficial interest in one or more
such Physical Securities of the same Class as described below.  Upon receipt by the Trustee, as Security
Registrar, of:

 

(A)          instructions given in accordance with the
Depository’s procedures from an Agent Member, or instructions from Euroclear,
Clearstream or the Depository, as the case may be, directing the Trustee to
deliver one or more such Physical Securities, designating the registered name
or names, address, payment instructions, the Class and the number and
principal amounts of the Physical Securities to be executed and delivered (the Class and
the aggregate principal amounts of such Physical Securities being equal to the
aggregate principal amount of the Global Security to be transferred), in an
Authorized Denomination, and

 

(B)           a Transfer Certificate in the form of Exhibit D
given by the transferee of such beneficial interest, and

 

the Trustee, as Security Registrar, will instruct the
Depository to reduce the applicable Global Security by the aggregate principal
amount of the beneficial interest in such Global Security to be transferred and
the Trustee, as Security Registrar, shall record the transfer in the Security
Register in accordance with Section 2.5(a) and shall instruct the
Applicable Issuer to execute the Physical Securities and the Trustee shall
authenticate and deliver the Physical Securities of the appropriate Class registered
in the names specified in the Transfer Certificate above in principal amounts
designated by the transferee (the aggregate of such amounts being equal to the
beneficial interest in the Global Securities to be transferred) and an
Authorized Denomination.  Any purported
transfer in violation of the foregoing requirements shall be null and void ab initio, and the Trustee shall not register any such
purported transfer and shall not authenticate and deliver such Physical
Securities.

 

If a Holder of a beneficial interest in a Global
Certificatable Security wishes at any time to exchange such interest for an
interest in one or more Physical Securities of the applicable Class, such
Holder may exchange or cause the exchange of such interest for an equivalent
beneficial interest in one or more such Physical Securities as provided
below.  Upon receipt by the Trustee, as
Security Registrar, of:

 

79

 

(A)          instructions given in accordance with the
Depository’s procedures from an Agent Member, or instructions from Euroclear,
Clearstream or the Depository, as the case may be, directing the Trustee to
deliver one or more Physical Securities and

 

(B)           written instructions from such Holder
designating the registered name or names, address, payment instructions, the Class and
the number and principal amounts of the applicable Physical Securities to be
executed and delivered (the Class and the aggregate principal amounts of
such Physical Securities being the same as the beneficial interest in the
Global Certificatable Security to be exchanged),

 

the Trustee, as Security Registrar, shall instruct the
Depository to reduce the Global Security by the aggregate principal amount of
the beneficial interest in the Global Security to be exchanged, shall record
the exchange in the Security Register in accordance with Section 2.5(a) and
shall instruct the Applicable Issuer to execute the Physical Securities and the
Trustee shall authenticate and deliver the Physical Securities of the
appropriate Class registered as specified in the instructions described in
clause (B) above, in an Authorized Denomination.  Any purported exchange in violation of the
foregoing requirements shall be null and void ab initio,
and the Trustee shall not register any such purported exchange and shall not
authenticate and deliver such Physical Securities.

 

(v)           Other Exchanges. 
In the event that a Global Security is exchanged for Securities in
definitive registered form without interest coupons pursuant to Section 2.5(e)(iv) or
Section 2.10 hereof, such Securities may be exchanged for one another only
in accordance with such procedures as are substantially consistent with the
provisions above or in Section 2.5(f)(iv), as applicable (including
certification requirements intended to insure that such transfers are made only
to Holders who are Qualified Purchasers and comply with Rule 144A or to
non-U.S. Persons, or otherwise comply with Regulation S, as the case
may be), and as may be from time to time adopted by the Applicable Issuer and
the Trustee.

 

(vi)          Restrictions on U.S. Transfers. 
Transfers of interests in Regulation S Global Securities and Physical
Securities sold pursuant to Regulation S to “U.S. persons” (as defined in
Regulation S) shall be restricted. 
Transfers may only be made pursuant to the provisions of Section 2.5(e)(iii) from
a Regulation S Global Security to a Rule 144A Global Security and Section 2.5(e)(iv) from
a Global Security to a Physical Security.

 

(f)            So long as a Physical Security remains
outstanding, transfers and exchanges of a Physical Security, in whole or in
part, shall only be made in accordance with this Section 2.5(f).

 

(i)            Physical Security to Regulation S
Global Security.  If a Holder of a beneficial interest in one
or more Physical Securities representing a Security that may be held in the
form of a Global Security wishes at any time to exchange its interest in such
Physical Security for an interest in the Regulation S Global Security of
the same Class, or to transfer its interest in such Physical Security to a
Person who wishes to take delivery thereof in the form of an interest in the
Regulation S Global Security of the same Class, such Holder, (provided such

 

80

 

Holder or, in the case of
a transfer, the transferee is not a U.S. Person and, in the case of ERISA
Securities, is not a Benefit Plan Investor), may exchange or transfer or cause
the exchange or transfer of such interest for an equivalent beneficial interest
in the Regulation S Global Security of the same Class.  Upon receipt by the Trustee, as Security
Registrar, of:

 

(A)          such Physical Security properly endorsed
for such transfer and written instructions from such Holder directing the
Trustee, as Security Registrar, to cause to be credited a beneficial interest
in the Regulation S Global Security of the same Class in an amount
equal to the beneficial interest in the Physical Security and in an Authorized
Denomination, to be exchanged or transferred,

 

(B)           a written order containing information
regarding the Euroclear or Clearstream account to be credited with such
increase and

 

(C)           a Transfer Certificate in the form of Exhibit B
by the transferor of such beneficial interest stating that the exchange or
transfer of such interest has been made in compliance with the transfer
restrictions applicable to the Global Securities (including that the Holder or
the transferee, as applicable, is not a U.S. Person and, in the case of ERISA
Securities, is not a Benefit Plan Investor) and pursuant to and in accordance
with Regulation S,

 

the Trustee, as Security Registrar, shall cancel such
Physical Security in accordance with Section 2.9, record the transfer in
the Security Register in accordance with Section 2.5(a) and instruct
the Depository to increase the principal amount of the applicable
Regulation S Global Security by the aggregate principal amount of the
beneficial interest in the Physical Security to be exchanged or transferred,
and to credit or cause to be credited to the securities account of the Person
specified in such instructions a beneficial interest in the Regulation S
Global Security of the same Class equal to the amount specified in the
instructions received pursuant to clause (A) above.

 

(ii)           Physical Security to Rule 144A
Global Security.  If a Holder of a beneficial interest in one
or more Physical Securities representing a Security that may be held in the
form of a Global Security wishes at any time to exchange its interest in such
Physical Security for an interest in the Rule 144A Global Security of the
same Class, or to transfer its interest in such Physical Security to a Person
who wishes to take delivery thereof in the form of an interest in the Rule 144A
Global Security of the same Class, such Holder may exchange or transfer or
cause the exchange or transfer of such interest for an equivalent beneficial
interest in the Rule 144A Global Security of the same Class.  Upon receipt by the Trustee, as Security
Registrar, of:

 

(A)          such Physical Security properly endorsed
for such transfer and written instructions from such Holder directing the
Trustee, as Security Registrar, to cause to be credited a beneficial interest
in the Rule 144A Global Security of the same Class in an amount equal
to the beneficial interest in the Physical Security and in an Authorized
Denomination, to be exchanged or transferred,

 

81

 

(B)           a written order containing information
regarding the DTC account to be credited with such increase, and

 

(C)           a Transfer Certificate in the form of Exhibit C
by the transferor of such beneficial interest and stating, among other things,
that, in the case of a transfer, the Person transferring such interest in such
Physical Security reasonably believes that the Person acquiring such interest
in a Rule 144A Global Security is a QIB, is obtaining such beneficial
interest in a transaction meeting the requirements of Rule 144A and in
accordance with applicable securities laws of any state of the United States or
any other jurisdiction, and is also a Qualified Purchaser or that, in the case
of an exchange, the Holder is a QIB/QP and, in the case of ERISA Securities, is
not a Benefit Plan Investor,

 

the Trustee, as Security Registrar, shall cancel such
Physical Security in accordance with Section 2.9, record the transfer in
the Security Register in accordance with Section 2.5(a) and instruct
the Depository to increase the principal amount of the applicable Rule 144A
Global Security by the aggregate principal amount of the beneficial interest in
the Physical Security to be exchanged or transferred, and to credit or cause to
be credited to the securities account of the Person specified in such
instructions a beneficial interest in the Rule 144A Global Security of the
same Class equal to the amount specified in the instructions received
pursuant to clause (A) above.

 

(iii)          Transfer of Physical Securities. 
If a Holder of a beneficial interest in a Physical Security wishes at
any time to transfer its interest in such Physical Security to a Person who
wishes to take delivery thereof in the form of one or more Physical Securities
of the same Class, such Holder may transfer or cause the transfer of such
interest for an equivalent beneficial interest in one or more such Physical
Securities of the same Class as provided below.  Upon receipt by the Issuer and the Trustee,
as Security Registrar, of:

 

(A)          such Holder’s Physical Security properly
endorsed for assignment to the transferee (except in the case of a transfer of
an interest in a Commitment Note registered in the name of the Administrative
Agent (as defined in the Note Purchase Agreement) made pursuant to a
participation or an assignment of an interest under the Note Purchase
Agreement),

 

(B)           a Transfer Certificate in the form of Exhibit D
given by the transferee of such beneficial interest, and

 

(C)           in the case of a transfer of a
Subordinated Note to an Accredited Investor that is not also a Qualified
Institutional Buyer, an opinion of counsel that such transfer would not be
required to be registered under the Securities Act,

 

the Trustee, as Security Registrar, shall cancel such
Physical Security (except in the case of a transfer of an interest in a
Commitment Note registered in the name of the Administrative Agent (as defined
in the Note Purchase Agreement) made pursuant to a participation or an assignment
of an interest under the Note Purchase Agreement) in accordance with Section 2.9,
record the

 

82

 

transfer in the Security Register in accordance with Section 2.5(a) and
shall instruct the Applicable Issuer to execute the Physical Securities (except
in the case of a transfer of an interest in a Commitment Note registered in the
name of the Administrative Agent (as defined in the Note Purchase Agreement)
made pursuant to a participation or an assignment of an interest under the Note
Purchase Agreement) and the Trustee shall authenticate and deliver Physical
Securities (except in the case of a transfer of an interest in a Commitment
Note registered in the name of the Administrative Agent (as defined in the Note
Purchase Agreement) made pursuant to a participation or an assignment of an
interest under the Note Purchase Agreement) bearing the same designation as the
Physical Securities of the appropriate Class endorsed for transfer,
registered in the names specified in the assignment described in clause (A) above,
in principal amounts designated by the transferee (the Class and the
aggregate of such amounts being the same as the beneficial interest in the
Physical Securities surrendered by the transferor), and in Authorized
Denominations.  Any purported transfer in
violation of the foregoing requirements shall be null and void ab initio, and the Trustee shall not register any such
purported transfer and shall not authenticate and deliver such Physical
Securities.

 

(iv)          Exchange of Physical Securities. 
If a Holder of a beneficial interest in one or more Physical Securities
wishes at any time to exchange such Physical Securities for one or more such
Physical Securities of different principal amounts in the same Class, such
Holder may exchange or cause the exchange of such interest for an equivalent
beneficial interest in the Physical Securities of the same Class bearing
the same designation as the Physical Securities endorsed for exchange as
provided below.  Upon receipt by the
Trustee, as Security Registrar, of:

 

(A)          such Holder’s Physical Securities
properly endorsed for such exchange and

 

(B)           written instructions from such Holder
designating the number and principal amounts of the applicable Physical
Securities to be issued (the Class and the aggregate principal amounts of
such Physical Securities being the same as the Physical Securities surrendered
for exchange),

 

the Trustee, as Security Registrar, shall cancel such
Physical Securities in accordance with Section 2.9, record the exchange in
the Security Register in accordance with Section 2.5(a) and shall
instruct the Co-Issuers or the Issuer, as applicable, to execute the Physical
Securities and the Trustee shall authenticate and deliver one or more Physical
Securities of the same Class bearing the same designation as the Physical
Securities endorsed for exchange, registered in the same names as the Physical
Securities surrendered by such Holder or such different names as are specified
in the endorsement described in clause (A) above, in different principal
amounts designated by such Holder (the Class and the aggregate principal
amounts being the same as the beneficial interest in the Physical Securities
surrendered by such Holder), and in Authorized Denominations.

 

(g)           If Securities are issued upon the
transfer, exchange or replacement of Securities bearing the applicable legends
set forth in Exhibit A hereto, and if a request is made to remove such
applicable legend on such Securities, the Securities so issued shall bear such
applicable legend, or such applicable legend shall not be removed, as the case
may be, unless there is

 

83

 

delivered to the Trustee
and the Applicable Issuer such satisfactory evidence, which may include an
opinion of counsel, as may be reasonably required by the Applicable Issuer to
the effect that neither such applicable legend nor the restrictions on transfer
set forth therein are required to ensure that transfers thereof comply with the
provisions of Rule 144A, Section 4(2) of the Securities Act or
Regulation S, as applicable, or the Investment Company Act.  Upon provision of such satisfactory evidence,
the Trustee, at the direction of the Applicable Issuer, shall authenticate and deliver
Securities that do not bear such applicable legend.

 

(h)           Each Person who becomes a Holder of a
beneficial interest in a Rule 144A Global Security will be deemed to have
represented and agreed as follows (terms used in this subsection that are
defined in Rule 144A or Regulation S are used herein as defined
therein):

 

(1)           The Holder (i) is a Qualified
Institutional Buyer that is not a broker-dealer that owns and invests on a
discretionary basis less than $25 million in securities of issuers that are not
Affiliated Persons of the dealer and is not a plan referred to in paragraph
(a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A or a trust fund
referred to in paragraph (a)(1)(i)(F) of Rule 144A that holds the
assets of such a plan, if investment decisions with respect to the plan are
made by the beneficiaries of the plan, (ii) is aware that the sale of the
Securities to it is being made in reliance on the exemption from registration
provided by Rule 144A under the Securities Act and (iii) is acquiring
the Securities for its own account or for one or more accounts, each of which
is a Qualified Institutional Buyer, and as to each of which the Holder
exercises sole investment discretion, and in an Authorized Denomination for
such Security for the Holder and for each such account.  The Holder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment in the Securities, and the Holder and any accounts for
which it is acting are each able to bear the economic risk of its investment.

 

(2)           The Holder understands that the
Securities are being offered only in a transaction not involving any public
offering in the United States within the meaning of the Securities Act, the
Securities have not been and will not be registered under the Securities Act,
and, if in the future the Holder decides to offer, resell, pledge or otherwise
transfer the Securities, such Securities may be offered, resold, pledged or
otherwise transferred only in accordance with the legend on such
Securities.  The Holder acknowledges that
no representation is made by the Applicable Issuer, the Placement Agents, or
the Managers as to the availability of any exemption under the Securities Act
or any state securities laws for resale of the Securities.

 

(3)           The Holder and each account for which the
Holder is acquiring Securities is a Qualified Purchaser for purposes of Section 3(c)(7) of
the Investment Company Act, the Holder (or if the Holder is acquiring
Securities for any account, each such account) is acquiring the Securities as
principal for its own account for investment and not for sale in connection
with any distribution thereof, the Holder and each such account was not formed
solely for the purpose of investing in the Securities and is not a (i) partnership,
(ii) common trust fund or (iii) special trust, pension fund,
or  retirement plan in which the
partners, beneficiaries or participants, as applicable, may designate the
particular investments to be made, and the Holder and each such account agrees
that it shall not hold such Securities for the benefit of any other Person and
shall be the sole beneficial owner thereof for all purposes and that it shall
not sell participation

 

84

 

interests in the Securities
or enter into any other arrangement pursuant to which any other Person shall be
entitled to a beneficial interest in the distributions on the Securities and
further that the Securities purchased directly or indirectly by it constitute
an investment of no more than 40% of the Holder’s and each such account’s
assets.  The Holder understands and
agrees that any purported transfer of the Securities to a Holder that does not
comply with the requirements of this paragraph shall be null and void ab initio.

 

(4)           The Securities may not at any time be
held by or on behalf of U.S. Persons that are not Qualified Institutional
Buyers.  Before any interest in a Rule 144A
Global Security may be offered, resold, pledged or otherwise transferred to a
Person who takes delivery in the form of an interest in a Regulation S
Global Security, the transferor will be required to provide the Trustee with a
Transfer Certificate, as to compliance with the transfer restrictions.

 

(5)           The Holder understands that an investment
in the Securities involves certain risks, including the risk of loss of a
substantial part of its investment under certain circumstances.  The Holder has had access to such financial
and other information concerning the Co-Issuers or the Issuer, as applicable,
and the Securities as it deemed necessary or appropriate in order to make an
informed investment decision with respect to its acquisition of such
Securities, including an opportunity to ask questions of and request
information from the Co-Issuers or the Issuer, as applicable.

 

(6)           In connection with the purchase of the
Securities (provided that no such
representation is made with respect to the Collateral Manager by any Affiliate
of the Collateral Manager):  (i) none
of the Co-Issuers or the Issuer as applicable, the Placement Agents, the
Managers or the Collateral Manager or any of their respective Affiliates is
acting as a fiduciary or financial or investment adviser for the Holder; (ii) the
Holder is not relying (for purposes of making any investment decision or
otherwise) upon any advice, counsel or representations (whether written or
oral) of the Co-Issuers or the Issuer, as applicable, the Placement Agents, the
Managers or the Collateral Manager or any of their respective Affiliates other
than any in a current offering memorandum for such Securities and any
representations expressly set forth in a written agreement with such party; (iii) none
of the Co-Issuers or the Issuer, as applicable, the Placement Agents, the
Managers or the Collateral Manager or any of their respective Affiliates has
given to the Holder (directly or indirectly through any other Person) any
assurance, guarantee, or representation whatsoever as to the expected or
projected success, profitability, return, performance, result, effect,
consequence, or benefit (including legal, regulatory, tax, financial,
accounting, or otherwise) of its purchase or the documentation for the
Securities; (iv) the Holder has consulted with its own legal, regulatory,
tax, business, investment, financial, and accounting advisers to the extent it
has deemed necessary, and it has made its own investment decisions (including
decisions regarding the suitability of any transaction pursuant to the
documentation for the Securities) based upon its own judgment and upon any
advice from such advisers as it has deemed necessary and not upon any view
expressed by the Co-Issuers or the Issuer, as applicable, the Placement Agents,
the Managers or the Collateral Manager or any of their respective Affiliates; (v) the
Holder has determined that the rates, prices or amounts and other terms of the
purchase and sale of the Securities reflect those in the relevant market for
similar transactions; (vi) the Holder is purchasing the Securities with a
full understanding of all of the terms, conditions and risks thereof (economic
and otherwise), and it is capable of

 

85

 

assuming and willing to
assume (financially and otherwise) those risks; and (vii) the Holder is a
sophisticated investor familiar with transactions similar to its investment in
the Securities.

 

(7)           If such Global Security represents
Securities other than ERISA Securities, on each day that the Holder holds such
Securities, the Holder, and any account on behalf of which the Holder is
acquiring the Securities, either (i) is not and will not be a Plan, an
entity whose underlying assets include the assets of any such Plan, or a
governmental plan that is subject to any federal, state or local law that is
substantially similar to the provisions of Section 406 of ERISA or Section 4975
of the Code or (ii) its purchase, holding and disposition of such
Securities will not result in a prohibited transaction under Section 406
of ERISA or Section 4975 of the Code (or, in the case of a governmental
plan, any substantially similar federal, state or local law) unless an
exemption is available (all of the conditions of which have been satisfied) or
in any other violation of an applicable requirement of ERISA, the Code or other
applicable law.

 

(8)           The Holder will not, at any time, offer
to buy or offer to sell the Securities by any form of general solicitation or
advertising, including, but not limited to, any advertisement, article, notice
or other communication published in any newspaper, magazine or similar medium
or broadcast over television or radio or seminar or meeting whose attendees
have been invited by general solicitations or advertising.

 

(9)           The Holder is not purchasing such
Securities with a view to the resale, distribution or other disposition thereof
in violation of the Securities Act.

 

(10)         The Holder will provide notice to each
Person to whom it proposes to transfer any interest in the Securities of the
transfer restrictions and representations set forth in this Section 2.5,
including the exhibits referenced herein.

 

(11)         The Holder understands that the Issuer
has the right under the Indenture to compel any Non-Permitted Holder to sell
its interest in the Securities or may sell such interest in the Securities on
behalf of such owner.

 

(12)         The Holder is aware that each Global
Security will bear the applicable legend set forth in Exhibit A and will
be represented by one or more Global Securities.

 

(13)         The Holder is not a member of the public
in the Cayman Islands.

 

(14)         The Holder understands that the Issuer
may receive a list of participants holding positions in the Securities from one
or more book-entry depositories.

 

(15)         If such Global Security represents ERISA
Securities, on each day that the Holder holds such Securities, the Holder, and
any account on behalf of which the Holder is acquiring the Securities, is not
and will not be (i) an “employee benefit plan” (as defined in Section 3(3) of
ERISA) whether or not subject to the fiduciary responsibility provisions of
Title I of ERISA, including any U.S. governmental plan or foreign governmental
or private pension plan, (ii) a “plan” described in Section 4975(e)(1) of
the Code (the Persons or entities described in clauses (i) and (ii) being
referred to herein as “Benefit Plans”) or (iii) any Person or entity that
is, or would be deemed to be, using the assets of any Benefit Plan to purchase
or hold its interest

 

86

 

in any Applicable
Securities (the Persons and entities described in this clause (iii), together
with Benefit Plans, being referred to as “Benefit Plan Investors”).  The Holder and any fiduciary of the Holder
causing the Holder to acquire such Securities agrees to indemnify and hold
harmless the Co-Issuers, the Collateral Manager, the Trustee, the
Administrator, the Placement Agents and the Managers and their respective
Affiliates from any cost, damage or loss incurred by them as a result of the
Holder being or being deemed to be a Benefit Plan Investor.  The Holder understands and agrees that any
purported transfer of such Securities to a purchaser that does not comply with
the requirements of this paragraph shall be null and void ab initio.

 

(16)         If such Global Security represents
Subordinated Notes, the Holder understands that an investment in the Securities
involves certain risks, including the risk of loss of all or a substantial part
of its investment under certain circumstances. 
The Holder understands that the Securities will be highly illiquid and
are not suitable for short term trading. 
The Securities are a leveraged investment in a portfolio of high yield
debt securities and loans, which may expose the Securities to
disproportionately large changes in value. 
Payments with respect to the Securities are not guaranteed as they are
dependent on the performance of the portfolio of Collateral Debt
Securities.  The Holder understands that
it is possible that, due to the structure of the transaction and the
performance of the portfolio, payments on the Securities may be deferred,
reduced or eliminated entirely. 
Furthermore, the Securities will rank below the Securities that have a
superior prior claim on the portfolio. 
The Securities will rank behind certain creditors of the Issuer,
including, without limitation, the Holders of certain other Securities and any
Hedge Counterparties, as specified in the Priority of Payments or Special
Priority of Payments.  The Issuer has
assets limited to the Collateral Debt Securities and the Eligible Investments
for payment of all Classes of the Securities and the Securities bear the first
risk of loss.  The Holder has had access
to such financial and other information concerning the Issuer and the
Securities as it deemed necessary or appropriate in order to make an informed
investment decision with respect to its purchase of the Securities, including
an opportunity to ask questions of and request information from the Issuer.

 

(17)         If such Global Security represents
Subordinated Notes and if the Holder is a bank organized outside the United States,
(i) it is acquiring the Securities as a capital markets investment and
will not for any purpose treat the assets of the Issuer as loans acquired in
its banking business; (ii) it has not proposed or identified, and will not
propose or identify, any security or loan for inclusion in the assets of the
Issuer, (iii) it and its affiliates have not originated, and will not
originate, any of the loans to be acquired by the Issuer, (iv) it and its
affiliates have not sold, and will not sell, directly or indirectly, any loans
to the Issuer, (v) none of the loans to be acquired by the Issuer have
been or will be selected in consultation with, or with the knowledge of, the
Holder or any of its affiliates because of a client relationship between the
obligor on the loans and the Holder or any of its affiliates, and (vi) any
funding that is arranged by it or its affiliates in connection with the
acquisition or holding of the Securities either (a) will be obtained from
an unrelated party on market terms that are not affected by the terms on which
it acquires the Securities or (b) will not be obtained as part of a plan
having as one of its principal purposes the avoidance of U.S. withholding
taxes.

 

87

 

(i)            Each Person who becomes a Holder of
Securities represented by an interest in a Regulation S Global Security
will be deemed to have made the representations set forth in clauses (5) through
(17) of Section 2.5(h) and to have further represented and agreed as
follows:

 

(1)           The Holder and each beneficial owner of
the Securities that it holds is not, and will not be, a U.S. Person as defined
in Regulation S under the Securities Act or a U.S. resident for purposes
of the Investment Company Act, and its purchase of the Securities will comply
with all applicable laws in any jurisdiction in which it resides or is
located.  The Holder is aware that the
sale of such Securities to it is being made in reliance on the exemption from
registration provided by Regulation S.

 

(2)           The Securities may not at any time be
held by or on behalf of U.S. Persons as defined in Regulation S under the
Securities Act.  Before any interest in a
Regulation S Global Security may be offered, resold, pledged or otherwise
transferred to a Person who takes delivery in the form of an interest in a Rule 144A
Global Security or a Physical Security, the transferor (or the transferee) will
be required to provide the Trustee with a Transfer Certificate hereto as to
compliance with the transfer restrictions.

 

(j)            Any purported transfer of a Security not
in accordance with Section 2.5 shall be null and void and shall not be
given effect for any purpose hereunder.

 

(k)           After the Draw Period, a Holder of a
Delayed Draw Note, so long as no Voting Rights Assignment is outstanding and
unrevoked with respect to such Note, may convert such Note into a Note of
another Class in the same Tranche of the same Interest Rate and
outstanding principal amount, by written request to the Trustee, as Security
Registrar, and upon compliance with the conversion and transfer provisions of
this Section 2.5(k).  In addition,
at any time during the Draw Period, if 100% of the Holders of Delayed Draw
Notes so request, such Holders may convert the outstanding principal amount of
all funded Draws of such Delayed Draw Notes into the corresponding Notes of
another Class in the same Tranche, in each case of the same outstanding
principal amount, by written request to the Trustee, as Security Registrar, and
upon compliance with the conversion and transfer provisions of this Section 2.5(k).  Upon such conversion, such Notes may only be
held in the form of Global Securities. 
Delayed Draw Notes may not at any time be held in the form of Global
Securities.

 

(i)            Physical Security to Regulation S
Global Security.  If a Holder of a beneficial interest in one
or more Delayed Draw Notes wishes at any time to convert the outstanding
principal amount of such Notes into Notes of a different Class of the same
Tranche with the same Interest Rate and simultaneously exchange its interest in
such Note for an interest in the Regulation S Global Security of the
converted Class, or to convert its interest into Notes of a different Class of
the same Tranche and simultaneously transfer its interest in such Note to a
Person who wishes to take delivery of such converted Note in the form of an
interest in the Regulation S Global Security of the converted Class, such
Holder, (provided such Holder or,
in the case of a transfer, the transferee is not a U.S. Person), may convert
such Delayed Draw Note into Notes of a different Class of the same Tranche
and simultaneously exchange or transfer or cause the exchange or transfer of
such interest for an equivalent beneficial interest in the

 

88

 

Regulation S Global
Security of Notes of the converted Class, upon receipt by the Trustee, as
Security Registrar, of:

 

(A)          such Physical Security properly endorsed
for such transfer and written instructions from such Holder directing the
Trustee, as Security Registrar, to convert such Delayed Draw Note into Notes of
a different Class of the same Tranche with the same Interest Rate (or the
outstanding principal amount thereof in the case of a conversion during the
Draw Period) and to cause to be credited a beneficial interest in the
Regulation S Global Security of the converted Class in an amount
equal to the outstanding principal amount of the beneficial interest in the
Physical Security and in an Authorized Denomination, to be converted and
exchanged or transferred,

 

(B)           a written order containing information
regarding the Euroclear or Clearstream account to be credited with such
increase, and

 

(C)           if applicable, a Transfer Certificate in
the form of Exhibit E by the transferor of such beneficial interest
stating that the exchange or transfer of such interest has been made in
compliance with the transfer restrictions applicable to the Global Securities
(including that the Holder or the transferee, as applicable, is not a U.S.
Person) and pursuant to and in accordance with Regulation S,

 

the Trustee, as Security Registrar, shall (i) cancel
such Physical Security in accordance with Section 2.9, (ii) in the
case of a conversion during the Draw Period, issue a new Physical Security
reflecting the reduced Commitment and maximum outstanding principal amount, (iii) record
the transfer in the Security Register in accordance with Section 2.5(a) and
(iv) instruct the Depository to increase the principal amount of the
applicable converted Class Regulation S Global Security by the
aggregate principal amount of the beneficial interest in the Delayed Draw Note
Physical Security to be converted and exchanged or transferred, and to credit
or cause to be credited to the securities account of the Person specified in
such instructions a beneficial interest in the Regulation S Global
Security of the applicable converted Class equal to the amount specified
in the instructions received pursuant to clause (A) above.

 

(ii)           Physical Security to Rule 144A
Global Security.  If a Holder of a beneficial interest in one
or more Delayed Draw Notes wishes at any time to convert the outstanding
principal amount of such Notes into Notes of a different Class of the same
Tranche with the same Interest Rate and simultaneously exchange its interest in
such Note for an interest in the Rule 144A Global Security of the
converted Class, or to convert its interest into Notes of a different Class of
the same Tranche and simultaneously transfer its interest in such Note to a
Person who wishes to take delivery of such converted Note in the form of an
interest in the Rule 144A Global Security of the converted Class, such
Holder may convert such Delayed Draw Note into Notes of the different Class of
the same Tranche with the same Interest Rate and simultaneously exchange or
transfer or cause the exchange or transfer of such interest for an equivalent
beneficial interest in the Rule 144A Global Security of the Notes of such
different Class of the same Tranche, upon receipt by the Trustee, as
Security Registrar, of:

 

89

 

(A)          such Physical Security properly endorsed
for such transfer and written instructions from such Holder directing the
Trustee, as Security Registrar, to convert such Delayed Draw Note into Notes of
a different Class of the same Tranche with the same Interest Rate (or the
outstanding principal amount thereof in the case of a conversion during the
Draw Period) and to cause to be credited a beneficial interest in the Rule 144A
Global Security of the converted Class in an amount equal to the
outstanding principal amount of the beneficial interest in the Physical
Security and in an Authorized Denomination, to be converted and exchanged or
transferred,

 

(B)           a written order containing information
regarding the DTC account to be credited with such increase and

 

(C)           a Transfer Certificate in the form
of  Exhibit F by the transferor of
such beneficial interest stating, among other things, that, in the case of a
transfer, the Person transferring such interest in such Physical Security
reasonably believes that the Person acquiring such interest in a Rule 144A
Global Security is a QIB, is obtaining such beneficial interest in a
transaction meeting the requirements of Rule 144A and in accordance with
an applicable securities laws of any state of the United States or any other
jurisdiction, and is also a Qualified Purchaser or that, in the case of an
exchange, the Holder is a QIB/QP,

 

the Trustee, as Security Registrar, shall (i) cancel
such Physical Security in accordance with Section 2.9, (ii) in the
case of a conversion during the Draw Period, issue a new Physical Security
reflecting the reduced Commitment and maximum outstanding principal amount, (iii) record
the transfer in the Security Register in accordance with Section 2.5(a) and
(iv) instruct the Depository to increase the principal amount of the
applicable Rule 144A Global Security by the aggregate principal amount of
the beneficial interest in the Delayed Draw Note Physical Security to be
converted and exchanged or transferred, and to credit or cause to be credited
to the securities account of the Person specified in such instructions a
beneficial interest in the Rule 144A Global Security of the applicable
converted Class of Notes equal to the amount specified in the instructions
received pursuant to clause (A) above.

 

(l)            A Pass-Through CP Conduit that is a
Holder of a beneficial interest in Revolving Notes shall be permitted to
transfer or agree to transfer a participation interest or to make an assignment
of all or a portion of its interest in such Revolving Notes to a Support
Provider without providing a Transfer Certificate to the Trustee and without
giving rise to any required registration, surrender, exchange or replacement of
Notes hereunder; provided that
the transfer of the participation interest or assignment interest complies with
the requirements of Section 2.5(b) (as if such participation interest
or assignment interest were a Revolving Note for purposes of such
requirements).  In addition, a Support
Provider may transfer its right, title, interest and obligations in, to, and
under its participation interest or make an assignment of all or a portion of
its interest in a Revolving Note to another Support Provider of the same
Pass-Through CP Conduit without providing a Transfer Certificate to the Trustee
and without giving rise to any required registration, surrender, exchange or
replacement of Notes hereunder, provided
that the transfer complies with the requirements of this Section 2.5(l)
and Section 2.5(b) (as if such

 

90

 

participation interest or
assignment interest were a Revolving Note for purposes of such
requirements).  No transfer of a
participation interest or assignment interest pursuant to this Section 2.5(l)
shall be made unless such participation interest or assignment interest
entitles such transferee Support Provider to all of the payments on such
Revolving Notes in a principal amount not less than the Authorized Denomination
of the Revolving Notes.  All transfers
made pursuant to this Section 2.5(l) shall be made in accordance with the
Note Purchase Agreement.

 

By making or agreeing to make a transfer of a
participation interest or assignment interest under this Section 2.5(l), a
Pass-Through CP Conduit shall be deemed to have represented, as of the earlier
of the date of transfer of the participation interest or assignment interest or
the date of agreement to transfer the participation interest or assignment
interest, (i) that each such Support Provider has been advised of the
requirements of Section 2.4 and 2.5 and has acknowledged that such
transfer complies with the requirements of this Section 2.5(l) as to each
such Support Provider and (ii) that each such Support Provider has made
the representations contained in the Transfer Certificate as to such Support
Provider (as if such participation interest or assignment interest were a
Revolving Note for purposes of such requirements).  By making or agreeing to make a transfer of a
participation interest to another Support Provider of a Pass-Through CP
Conduit, a Support Provider of such Pass-Through CP Conduit shall be deemed to
have represented, as of the earlier of the date of transfer of the
participation interest or assignment interest or the date of agreement to
transfer the participation interest or assignment interest, (i) that each
such transferee Support Provider has been advised of the requirements of Section 2.4
and 2.5 and has acknowledged that such transfer complies with the requirements
of this Section 2.5(l) as to each such Support Provider and (ii) that
each such transferee Support Provider has made the representations contained in
the applicable Transfer Certificate as to such transferee Support Provider (as
if such participation interest or assignment interest were a Revolving Note for
purposes of such requirements).

 

The transfer of a participation interest under this Section 2.5(l)
shall vest in the transferee no rights against the Collateral, the Issuer, the
Co-Issuer, the Trustee or any of their respective agents.  No participation interest in a Note may be
transferred except in accordance with this Section 2.5(l).

 

Notwithstanding anything contained herein to the
contrary, neither the Trustee nor the Securities Registrar shall be responsible
for ascertaining whether any transfer complies with the registration provisions
of or exemptions from the Securities Act, applicable state securities laws, the
rules of any Depositary, ERISA, the Code or the Investment Company Act; provided that if a certificate is
specifically required by the express terms of this Section 2.5 to be
delivered to the Trustee or the Securities Registrar by a purchaser or
transferee of a Note, the Trustee or the Securities Registrar, as the case may
be, shall be under a duty to receive and examine the same to determine whether
the certificate thereby substantially complies on its face with the express
terms of this Indenture and shall promptly notify the party delivering the same
if such certificate does not comply with such terms.

 

91

 

Section 2.6.            Mutilated,
Defaced, Destroyed, Lost or Stolen Securities.

 

If (i) any mutilated or defaced Security is
surrendered to a Transfer Agent, or if there shall be delivered to the
Applicable Issuer, the Trustee and the relevant Transfer Agent evidence to
their reasonable satisfaction of the destruction, loss or theft of such
Security, and (ii) there is delivered to the Applicable Issuer, the
Trustee and such Transfer Agent such security or indemnity as may be required
by them to save each of them and any agent of any of them harmless, then, in
the absence of notice to the Applicable Issuer, the Trustee or such Transfer
Agent that such Security has been acquired by a Protected Purchaser, the
Applicable Issuer shall execute and, upon Issuer Order, the Trustee shall
authenticate and deliver, in lieu of any such mutilated, defaced, destroyed,
lost or stolen Security, a new Security, of like tenor (including the same date
of issuance) and equal principal amount registered in the same manner, dated
the date of its authentication, bearing interest from the date to which
interest has been paid on the mutilated, defaced, destroyed, lost or stolen
Security and bearing a number not contemporaneously outstanding.

 

If, after delivery of such new Security, a Protected
Purchaser of the predecessor Security presents for payment, transfer or
exchange such predecessor Security, the Applicable Issuer, the Transfer Agent
and the Trustee shall be entitled to recover such new Security from the Person
to whom it was delivered or any Person taking therefrom, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of
any loss, damage, cost or expense incurred by the Applicable Issuer, the
Trustee and the Transfer Agent in connection therewith.

 

In case any such mutilated, defaced, destroyed, lost
or stolen Security has become due and payable, the Applicable Issuer may in its
discretion, instead of issuing a new Security pay such Security without
requiring surrender thereof except that any mutilated Security shall be
surrendered.

 

Upon the issuance of any new Security under this Section 2.6,
the Applicable Issuer or the Trustee or any Transfer Agent may require the
payment by the registered Holder thereof of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith.

 

Every new Security issued pursuant to this Section 2.6
in lieu of any mutilated, defaced, destroyed, lost or stolen Security shall
constitute an original additional contractual obligation of the Applicable
Issuer, and such new Security shall be entitled, subject to the second paragraph
of this Section 2.6, to all the benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.

 

The provisions of this Section 2.6 are exclusive
and shall preclude (to the extent lawful) all other rights and remedies with
respect to the replacement or payment of mutilated, defaced, destroyed, lost or
stolen Securities.

 

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Section 2.7.            Payment
in Respect of the Securities; Rights Preserved.

 

(a)           Interest shall accrue on the outstanding
principal amount of the Rated Notes (other than any Commitment Notes) and, in
the case of any Commitment Notes, the Drawn Amount, during each Interest
Accrual Period at the applicable Interest Rate specified in the Term Sheet and
will be payable in arrears on each Payment Date.  The Commitment Fee, if any, shall also accrue
during each Interest Accrual Period and will be payable on each Payment Date,
as applicable.  Any Revolving Note
Increased Costs shall accrue as specified in the definition thereof and shall
be payable in arrears on each Payment Date in accordance with the Priority of
Payments or the Special Priority of Payments, as applicable.  Any Revolving Note Tax Gross-Up Amounts shall
accrue as specified in the definition thereof and shall be payable in arrears
on each Payment Date in accordance with the Priority of Payments.  Any portion of any Revolving Notes held by a
Pass-Through CP Conduit shall bear interest on the Drawn Amount at a rate equal
to the spread applicable to such Notes as set forth in the Term Sheet plus the
lesser of (i) that Pass-Through Conduit’s Funding Rate for the Interest
Accrual Period and (ii) LIBOR for such Interest Accrual Period.

 

Interest on the Rated Notes shall be due and payable
on each Payment Date immediately following the related Interest Accrual Period;
provided, however, that payments of
interest (including Defaulted Interest and Deferred Interest, if any) and any
Commitment Fees are subordinated to the payment on each Payment Date of other
amounts (including payments on more senior Classes of Notes) due in accordance
with the Priority of Payments or the Special Priority of Payments, as
applicable.

 

With respect to interest on
each Class of Mezzanine Notes, so long as the Notes of such Class are
not all or part of the Controlling Class, any portion of the interest due on the Notes of such
Class that is not available to be paid in accordance with the Priority of
Payments or the Special Priority of Payments, as applicable, on any Payment
Date shall not be considered “due and payable” for the purposes of Section 5.1(a) (and
the failure to pay such interest shall not be an Event of Default) and shall be
added to the outstanding principal amount of the Notes of such Class.

 

Payment of interest on the Subordinated Notes is
subordinated to the payment on each Payment Date of the interest due and
payable on the Rated Notes (including Defaulted Interest and Deferred Interest,
if any), and other amounts in accordance with the Priority of Payments or the
Special Priority of Payments, as applicable. 
So long as any Rated Notes are Outstanding, the Subordinated Notes will
receive that portion of the Interest Proceeds payable in accordance with the
Priority of Payments or the Special Priority of Payments, as applicable, unless
Holders of two-thirds or more of the aggregate principal amount of such Notes
direct the Issuer and the Trustee to treat such amounts as Principal Proceeds
as described in the Priority of Interest Payments.  The failure to pay any amounts to the Holders
of the Subordinated Notes on any Payment Date shall not be an Event of Default
unless sufficient funds are available therefor in accordance with the Priority
of Payments or the Special Priority of Payments, as applicable.

 

Interest will cease to accrue on each Rated Note or,
in the case of a partial repayment, on such part, from the date of repayment or
Stated Maturity unless payment of principal is

 

93

 

improperly withheld or unless Default is otherwise made with respect to
such payments of principal.  To the
extent lawful and enforceable, interest on any Deferred Interest and on any
Defaulted Interest shall accrue at the applicable Interest Rate until paid as
provided herein.

 

(b)           The principal amount of each Note (other
than the Commitment Notes) and in the case of any Commitment Notes, the Drawn
Amount, shall be due and payable no later than the Stated Maturity thereof
unless the unpaid principal of such Note becomes due and payable at an earlier
date by declaration of acceleration, call for redemption or otherwise, all in
accordance with the Priority of Payments or Special Priority of Payments, as
applicable (or, with respect to the Revolving Notes, as a repayment in
accordance with the provisions of this Indenture).  Except in the case of a
redemption pursuant to Section 9.5, payments of principal are subordinated
to the payment on each Payment Date of other amounts (including payments on
more senior Classes of Notes) due in accordance with the Priority of Payments
or, if applicable, the Special Priority of Payments.  The payment of principal of the Subordinated Notes may only occur
after principal of the Rated Notes has been paid in full.

 

(c)           As a condition to payments on any
Security without the imposition of U.S. withholding tax, the Trustee or the
Applicable Issuer shall require certification acceptable to them to enable the
Applicable Issuer, the Trustee and any Paying Agent to determine their duties
and liabilities with respect to any taxes or other charges that they may be
required to deduct or withhold from payments in respect of such Security under
any present or future law or regulation of the United States or any present or
future law or regulation of any political subdivision thereof or taxing
authority therein or to comply with any reporting or other requirements under
any such law or regulation.

 

(d)           Payments on any Security other than the
Physical Securities shall be payable by wire transfer in immediately available
funds to a Dollar account maintained by the Depository or its nominee or, if a
wire transfer cannot be effected, by a Dollar check in immediately available
funds delivered to the Depository or its nominee.  Payments, if any, on the Physical Securities
shall be made by the Issuer by wire transfer in immediately available funds to
a Dollar account maintained by the Holder or as otherwise directed by the
Holder, or its nominee; provided, that
the Holder thereof shall have provided wiring instructions to the Trustee on or
before the related Record Date.  The
Co-Issuers expect that the Depository or its nominee, upon receipt of any
payment of any of the principal amount of and interest on a Global Security
held by the Depository or its nominee, will immediately credit the applicable
Agent Members’ accounts with payments in amounts proportionate to the
respective beneficial interests in such Global Security as shown on the records
of the Depository or its nominee.  The
Co-Issuers also expect that payments by Agent Members to owners of beneficial
interests in such Global Security held through Agent Members will be governed
by standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers.  Such
payments will be the responsibility of the Agent Members.  Upon final payment due on the Maturity of a
Note, the Holder thereof shall present and surrender such Note at the Corporate
Trust Office of the Trustee or at the office of any Paying Agent on or prior to
such Maturity; provided, however,
that if there is delivered to the Applicable Issuer and the Trustee such
security or indemnity as may be required by them to save each of them harmless
and an undertaking thereafter to surrender such certificate, then, in the
absence of notice to the

 

94

 

Applicable Issuer or the Trustee that the applicable Note has been
acquired by a Protected Purchaser, such final payment shall be made without
presentation or surrender.

 

If any Global Securities remain
Outstanding 15 Business Days prior to the Stated Maturity, the Trustee, in
consultation with the Collateral Manager shall determine if all liquidation proceeds
will be received such that final payments will be made with respect to such
Global Securities on the Stated Maturity in accordance with the Priority of
Payments.  If the Trustee, together with
the Collateral Manager, determines that (due to delayed payment of certain
liquidation proceeds or otherwise) full and final payment may be delayed beyond
the Stated Maturity, the Trustee shall promptly notify the Depository and shall
request the Depository to post on its system notices deemed to be acceptable and
appropriate under the circumstances by the Collateral Manager and the Trustee
and subject to Depository procedures and take such other action that the
Trustee, in consultation with the Collateral Manager deems to be appropriate
under the circumstances, to ensure that final payments will be distributed to
the Depository for payment to the Holders of such Global Securities in
accordance with the Priority of Payments when the funds become available. 
None of the Co-Issuers, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspects of the records maintained by the
Depository or its nominee or any of the Agent Members relating to or for
payments made thereby on account of beneficial interests in, a
Regulation S Global Security or a Rule 144A Global Security.  In the case where any final payment of any of
the principal amount of and interest on any Note (other than on the Stated
Maturity thereof) is to be made, the Applicable Issuer or, upon Issuer Order,
the Trustee, in the name and at the expense of the Applicable Issuer shall, not
more than 30 nor less than 10 days prior to the date on which such payment is
to be made, mail to the Persons entitled thereto at their addresses appearing
on the Security Register, a notice which shall state the date on which such
payment will be made, the amount of such payment per $100,000 initial principal
amount of Notes and shall specify the place where such Notes may be presented
and surrendered for such payment.

 

(e)           Subject to the provisions of Sections
2.7(a) and (b) hereof, the Holders of Securities as of the Record
Date in respect of a Payment Date shall be entitled to all amounts payable to
such Holders on such Payment Date in accordance with the Priority of Payments
or the Special Priority of Payments, as applicable.  All such payments that are mailed or wired
and returned to the Paying Agent shall be held for payment as herein provided
at the office or agency of the Applicable Issuer, to be maintained as provided
in Section 7.2.

 

(f)            Payments on any Rated Note (which are
payable and punctually paid or duly provided for on any Payment Date) shall be
paid to the Person in whose name that Security (or one or more predecessor
Security) is registered at the close of business on the Record Date in respect
of such Payment Date.  Payments (other
than repayments on any Revolving Notes) on the Notes of each Class shall
be made to Holders in the proportion that the Aggregate Outstanding Amount of
the Notes of such Class registered in the name of each such Holder on such
Record Date bears to the Aggregate Outstanding Amount of all Notes of such
Class on such Record Date. 
Repayments to Holders of any Revolving Notes shall be made in the
proportion that the portion of the Drawn Amount in respect of the Revolving
Note registered on the Record Date for such repayment bears to the aggregate
Drawn Amount of the Revolving Notes on such date.

 

95

 

(g)           Payment of any Defaulted Interest may be
made in any other lawful manner in accordance with the Priority of Payments or
the Special Priority of Payments, as applicable, if notice of such payment is
given by the Trustee to the Co-Issuers and the Holders of the applicable
Classes of Notes, and such manner of payment shall be deemed practicable by the
Trustee.

 

(h)           Interest accrued with respect to the
Floating Rate Notes and any Commitment Fee, Revolving Note Increased Costs and
Revolving Note Tax Gross-Up Amounts shall be calculated on the basis of the
actual number of days elapsed in the applicable Interest Accrual Period divided
by 360.  Interest accrued with respect to
Fixed Rate Notes (if any) shall be calculated on the basis of a 360-day year
consisting of twelve 30-day months.  To
the extent that any Notes bear interest at a floating rate for a period of time
and at a fixed rate for a period of time, interest will be calculated in
accordance with the method for Floating Rate Notes for the period at which such
Notes bear interest at a floating rate and in accordance with the method for
Fixed Rate Notes for the period at which such Notes bear interest at a fixed
rate.

 

(i)            All reductions in the principal amount of
a Note (or one or more predecessor Notes) effected by payments made on any
Payment Date shall be binding upon all future Holders of such Securities and of
any Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, whether or not such payment is noted on such
Security.

 

(j)            Notwithstanding any other provision
herein, the obligations of the Applicable Issuer with respect to the Securities
and this Indenture are limited recourse obligations of the Applicable Issuer
payable solely from the Collateral and following realization of the Collateral,
any claims of the Trustee and the Secured Parties shall be extinguished.  No recourse shall be had for the payment of
any amount owing in respect of the Securities against any Officer, director,
employee, stockholder or incorporator of the Co-Issuers, the Securityholders,
the Collateral Manager, the Trustee, the Managers, the Administrator, their
respective Affiliates or any of their successors or assigns for any amounts
payable under the Securities or this Indenture. 
It is understood that the foregoing provisions of this paragraph shall
not (i) prevent recourse to the Collateral for the sums due or to become
due under any security, instrument or agreement which is part of the Collateral
or (ii) constitute a waiver, release or discharge of any indebtedness or
obligation evidenced by the Securities or secured by this Indenture until such
Collateral has been realized, whereupon any outstanding indebtedness or
obligation shall be extinguished.  It is
further understood that the foregoing provisions of this paragraph shall not
limit the right of any Person to name the Issuer or the Co-Issuer as a party
defendant in any Proceeding or in the exercise of any other remedy under the
Securities or this Indenture, so long as no judgment in the nature of a
deficiency judgment or seeking personal liability shall be asked for or (if
obtained) enforced against any such Person or entity.

 

(k)           Subject to the foregoing provisions of
this Section 2.7, each Security delivered under this Indenture and upon
registration of transfer of or in exchange for or in lieu of any other Security
shall carry the rights to unpaid interest, principal, premium, fees and
expenses (if any) that were carried by such other Securities.

 

96

 

Section 2.8.            Persons
Deemed Owners.

 

The Applicable Issuer, the Trustee, and any of their
respective agents may treat the Person in whose name any Security is registered
as the owner of such Security on the Security Register on the applicable Record
Date for the purpose of receiving payments on such Security and on any other
date for all other purposes whatsoever (whether or not such payments are
overdue), and neither the Applicable Issuer nor the Trustee nor any of their
respective agents shall be affected by notice to the contrary; provided, however, that the Depository, or
its nominee, shall be deemed the owner of the Global Securities, and owners of
beneficial interests in Global Securities will not be considered the owners of
any Securities for the purpose of receiving notices.

 

Section 2.9.            Cancellation.

 

All Securities surrendered for payment, registration
of transfer, exchange or redemption, or deemed lost or stolen, shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee,
shall be promptly canceled by it and may not be reissued or resold.  No Securities shall be authenticated in lieu
of or in exchange for any Securities canceled as provided in this
Section 2.9, except as expressly permitted by this Indenture.  All canceled Securities held by the Trustee
shall be destroyed or held by the Trustee in accordance with its standard
retention policy unless the Applicable Issuer shall direct by an Issuer Order
that they be returned to it.  Any
Securities purchased by the Issuer pursuant to Section 9.7 hereof shall be
immediately delivered to the Trustee for cancellation.

 

Section 2.10.          Global
Securities; Temporary Securities.

 

(a)           Except as provided in
Section 2.5(e)(iv), a Global Security deposited with the Depository
pursuant to Section 2.2 shall be transferred to the beneficial owners
thereof only if such transfer complies with Section 2.5 of this Indenture
and the Depository notifies the Applicable Issuer that it is unwilling or
unable to continue as Depository for such Global Security or if at any time such
Depository ceases to be a “Clearing Agency” registered under the Exchange Act
and a successor depository is not appointed by the Applicable Issuer within 90
days after such notice.

 

(b)           Any Global Security that is transferable
to the beneficial owners thereof pursuant to this Section 2.10 shall be
surrendered by the Depository to the Trustee’s office located in the Borough of
Manhattan, The City of New York, to be so transferred, in whole or from time to
time in part, without charge, and the Trustee shall authenticate and deliver,
upon such transfer of each portion of such Global Security, an equal aggregate
principal amount of Securities of Authorized Denominations.  Any portion of a Rule 144A Global
Security transferred pursuant to this Section 2.10 shall be executed,
authenticated and delivered only in Authorized Denominations.  Any Security delivered in exchange for an
interest in a Global Security shall, except as otherwise provided by
Section 2.5(g), bear the applicable legend and shall be subject to the transfer
restrictions referred to in such applicable legends.  The Holder of such a registered individual
Security may transfer such Security by surrendering it at the office or agency
maintained by the Co-Issuers for this purpose in New York, New York, which
initially will be the Corporate Trust Office of the Trustee or at the office of
any Paying Agent.

 

97

 

(c)           Subject to the provisions of
Section 2.10(b) above, the registered Holder of a Global Security may
grant proxies and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take any action which
a Holder is entitled to take under this Indenture or the Securities.

 

(d)           If either of the events specified in
paragraph (a) of this Section 2.10 occur, the Applicable Issuer will
promptly make available to the Trustee a reasonable supply of certificated
Securities in definitive, fully registered form without interest coupons.  The definitive Securities shall be printed,
lithographed or engraved, or provided by any combination thereof, or in any
other manner permitted by the rules and regulations of any applicable
securities exchange, all as determined by the Officers executing such
definitive Securities.  Pending the
preparation of such definitive Securities, the Applicable Issuer may execute,
and upon Issuer Order the Trustee shall authenticate and deliver, temporary
Securities, which temporary Securities shall be exchanged for definitive
Securities as soon as reasonably practicable.

 

Section 2.11.          Securities
Beneficially Owned by Non-Permitted Holders.

 

(a)           Notwithstanding anything to the contrary
elsewhere in this Indenture, any transfer of a beneficial interest in any
Securities to a Non-Permitted Holder shall be null and void ab initio and any such purported transfer of which the
Issuer, the Co-Issuer or the Trustee shall have notice may be disregarded by
the Issuer, the Co-Issuer, the Trustee and any Paying Agent, Revolving Note
Agent or Delayed Draw Note Agent for all purposes.

 

(b)           If any Person that is not a non-U.S.
person for purposes of Regulation S or a QIB/QP (or in the case of Subordinated
Notes, an Accredited Investor and Qualified Purchaser or Knowledgeable
Employee) becomes the beneficial owner of any Security or, with respect to any
ERISA Securities, any Person for which deemed representations or
representations made by such Person in the ERISA Section in any
representation letter or Transfer Certificate required to be delivered by such Person
are untrue (each, a “Non-Permitted Holder”), the Issuer shall, promptly
after discovery of any such Non-Permitted Holder by the Issuer, the Co-Issuer
or the Trustee (and notice by the Trustee or the Co-Issuer to the Issuer, if
either of them makes the discovery), send notice to such Non-Permitted Holder
demanding that such Non-Permitted Holder transfer the applicable Securities or
interest to a Person that is not a Non-Permitted Holder within 30 days of the
date of such notice.  If such
Non-Permitted Holder fails to so transfer the applicable Securities or
interest, the Issuer shall have the right, without further notice to the
Non-Permitted Holder, to sell such Securities or interest in Securities to a
purchaser selected by the Issuer that is not a Non-Permitted Holder on such
terms as the Issuer may choose.  The
Issuer, or the Trustee acting on behalf of the Issuer, may select the purchaser
by soliciting one or more bids from one or more brokers or other market
professionals that regularly deal in securities similar to the Securities, and
selling such Securities or interest to the highest such bidder.  However, the Issuer or the Trustee may select
a purchaser by any other means determined by it in its sole discretion.  The Holder of each Security, the
Non-Permitted Holder and each other Person in the chain of title from the
Holder to the Non-Permitted Holder, by its acceptance of an interest in the
applicable Securities, agrees to cooperate with the Issuer and the Trustee to
effect such transfers.  The proceeds of
such sale, net of any commissions, expenses and taxes due in connection with
such sale shall be remitted to the Non-Permitted Holder.  The terms and conditions of any sale

 

98

 

under this subsection shall be determined in the sole discretion
of the Issuer, and neither the Issuer nor the Trustee shall be liable to any
Person having an interest in the Securities sold as a result of any such sale
or the exercise of such discretion.

 

Section 2.12.          Draws
Under Delayed Draw Notes.

 

(a)           If Delayed Draw Notes have been issued,
on any Business Day during the Draw Period, amounts may be drawn by the Issuer
under the Delayed Draw Notes (together with any amounts paid by Holders of
Delayed Draw Notes on the Closing Date, each a “Draw”) at the direction
of the Collateral Manager acting pursuant to the Collateral Management
Agreement; provided, in each case
that (i) the applicable conditions to such Draw specified in the Note
Purchase Agreement are satisfied on the date of such Draw (a “Draw Date”),
except as may otherwise be provided in such Note Purchase Agreement, and
(ii) in no event may the aggregate amount of Draws outstanding under the
Delayed Draw Notes exceed the aggregate amount of Commitments to fund Draws in
respect of the Delayed Draw Notes.  If
Delayed Draw Notes have been issued, the Aggregate Undrawn Amount will be drawn
on the last day of the Draw Period and deposited into the Collection Account as
Principal Proceeds.  The total number of
Draws shall not exceed the Maximum Number of Draws set forth in the Term
Sheet, and such Draws shall occur on or about the dates specified in the Term
Sheet.

 

(b)           Notice of any Draw with respect to any
Delayed Draw Note shall be given by the Issuer to the Delayed Draw Note Agent,
the Collateral Manager and the Trustee in accordance with the Note Purchase
Agreement.

 

(c)           Except as otherwise provided by the Note
Purchase Agreement, any Draw shall be made pro
rata according to the unfunded Commitments in respect of any Delayed
Draw Notes.

 

(d)           If any Holder of an interest in Delayed
Draw Notes shall at any time during the Draw Period fail to satisfy the Delayed
Draw Rating Criteria, the Issuer will enforce its rights under the Note
Purchase Agreement relating to such Delayed Draw Notes.

 

(e)           If the Trustee has actual knowledge that
a Holder of a Delayed Draw Note does not satisfy the Delayed Draw Rating
Criteria, it shall promptly notify the Issuer and the Collateral Manager.  Notwithstanding any provision to the contrary
herein, the Trustee shall not have any obligations with respect to the failure
of a Delayed Draw Note Holder to meet the Delayed Draw Rating Criteria other
than to provide such notice and, in its capacity as Trustee, accept any Cash
delivered by a Delayed Draw Note Holder in accordance with the Note Purchase
Agreement.

 

(f)            The Issuer will not issue Delayed Draw
Notes if it issues Revolving Notes.

 

Section 2.13.          Draws
Under Revolving Notes.

 

(a)           On any Business Day during the Draw
Period, amounts may be borrowed by the Issuer under the Revolving Notes
(together with amounts paid by Holders of Revolving Notes on the Closing Date,
each a “Draw”) at the direction of the Collateral Manager acting
pursuant to the Collateral Management Agreement; provided, in each case that (i) each applicable
condition to such Draw specified in the Note Purchase Agreement is satisfied on
the date of such Draw (a

 

99

 

“Draw Date”), except as otherwise provided in the Note Purchase
Agreement, (ii) in no event may the aggregate amount of Draws outstanding
under the Revolving Notes exceed the aggregate amount of Commitments to make
advances in respect of the Revolving Notes; and (iii) Aggregate Draws
under the Revolving Notes must not exceed the aggregate Commitment.  The Issuer may not make any Draws unless,
after giving effect to the Draw and the portion of such Draw deposited to the
Revolver Funding Account, the amount on deposit in such account plus the amount
of any unfunded Commitments will equal or exceed the Revolver Funding Reserve
Amount.

 

(b)           Notice of any Draw shall be given by the
Issuer to the Revolving Note Agent, the Collateral Manager and the Trustee in
accordance with the Note Purchase Agreement. 
The Note Purchase Agreement shall provide that each Holder of Revolving
Notes will fund its pro rata
share of each Draw within two Business Days of request.

 

(c)           The aggregate principal amount of any
Draw in respect of the Revolving Notes (taken as a whole) shall be an integral
multiple of U.S.$1 and at least U.S.$1,000,000 (or the remaining unfunded
Commitment, if less).  Except as
otherwise provided by the Note Purchase Agreement, any Draw shall be allocated
among the Holders of Revolving Notes pro
rata to the unfunded Commitments in respect of the Revolving Notes.

 

(d)           If any Holder of an interest in Revolving
Notes shall at any time during the Draw Period fail to satisfy the Revolving
Note Rating Criteria, then pursuant to the Note Purchase Agreement, such Holder
will be required to immediately give written notice of such fact to the Issuer
(with a copy to the Collateral Manager), the Revolving Note Agent, the Trustee
and each Rating Agency and to transfer its rights and obligations in respect of
the Revolving Notes to a Qualified Purchaser that satisfies the Revolving Note
Rating Criteria not later than 60 days after such Holder first obtains
knowledge that it does not satisfy the Revolving Note Rating Criteria.

 

(e)           The Note Purchase Agreement shall provide
that if at any time during the Draw Period, regardless of any pending transfer
to a purchaser that satisfies the Revolving Note Rating Criteria, a Holder of
an interest in Revolving Notes shall have (i) a short-term rating of “P2”
or lower from Moody’s, then (A) the Issuer (or the Collateral Manager on
its behalf) must request a Borrowing from such Holder in an amount equal to the
lesser of (x) the aggregate principal amounts of the undrawn and outstanding
commitment amounts under each Revolving Collateral Debt Security and Delayed
Drawdown Debt Security minus the Cash on deposit in the Revolver Funding
Account and (y) the undrawn portion of such Holder’s Commitment (a “Ratings
Failure Draw”) or (B) the Holder must post collateral in an amount
equal to the undrawn portion of such Holder’s Commitment or must take other
measures necessary to receive Rating Agency Confirmation within 30 Business
Days of the date the Holder ceases to meet the Revolving Note Rating Criteria
(such collateral or measures, “Credit Support”) or (ii) a
short-term rating lower than “A-1” from S&P, then (A) the Issuer (or
the Collateral Manager on its behalf) must request a Borrowing from such Holder
in an amount equal to the undrawn portion of such Holder’s Commitment or
(B) the Holder must transfer its entire Commitment (both funded and
unfunded) to a transferee that is rated at least “A-1” by S&P and meets all
other transfer requirements under this Indenture and the Note Purchase
Agreement.  A Holder must maintain any
Credit Support until (a) the Holder has come into compliance with the
Revolving Note Rating Criteria; (b) the

 

100

 

Holder has transferred its entire Commitment (both funded and unfunded)
to a transferee that satisfies the Revolving Note Rating Criteria and meets all
other transfer requirements under this Indenture and the Note Purchase
Agreement; (c) the Issuer reduces the Commitment of such Holder to zero;
or (d) the Draw Period expires.

 

(f)            If the Trustee has actual knowledge that
a Holder of a Revolving Note does not satisfy the Revolving Note Rating
Criteria, it shall promptly notify the Issuer and the Collateral Manager.  Notwithstanding any provision to the contrary
herein, the Trustee shall not have any obligations with respect to the failure
of a Revolving Note Holder to meet the Revolving Note Rating Criteria other
than to provide such notice and, in its capacity as Trustee, accept any Cash
delivered by a Revolving Note Holder in accordance with the Note Purchase
Agreement.

 

Section 2.14.          Voting
Rights Assignment.

 

(a)           On or about the Closing Date, the
Managers may assign the voting and consent rights of all or a portion of the
Class A Notes under this Indenture (a “Voting Rights Assignment”)
to any Person (each such Person, a “Voting Rights Assignee” with respect
to which the representations set forth in Section 2.5(h) or
Section 2.5(i) hereunder are true (or if such Person is a trust, such
representations are true with respect to the trustee and the settlor thereof)
by notice to the Issuer and the Voting Rights Registrar, which notice shall be
in the form of Exhibit I-1.

 

With respect to the aggregate principal balance of Class A-1
Notes that is assigned to each Voting Rights Assignee on or about the Closing
Date, the Issuer shall issue, and upon Issuer Order, the Trustee shall
authenticate a Rule 144A Global Security and a Regulation S Global
Security which shall have a unique securities identification number (i.e. CUSIP and ISIN) and descriptions
(collectively, the “Non-Voting Class A-1 Notes”).  Such Global Security shall be deposited on
behalf of the beneficial owners as subscribers for such Securities represented
thereby with the Trustee as custodian for the Depository and registered in the
name of a nominee of the Depository, duly executed by the Applicable Issuer and
authenticated by the Trustee as herein provided.  The aggregate principal amount of such Global
Securities may from time to time be decreased by adjustments made on the
records of the Trustee or the Depository or its nominee, as the case may be, as
herein provided.

 

With respect to the aggregate principal balance and
Commitment of Commitment Notes that are assigned to each Voting Rights Assignee
on or about the Closing Date, the Issuer shall issue, and upon Issuer Order,
the Trustee shall authenticate a Physical Commitment Note registered in the
name of the Holder, which shall have a unique securities identification number
(i.e. CUSIP and ISIN).  All such Commitment Notes in the form of
Physical Securities shall be referred to as the “Non-Voting Commitment Notes.”  If any such Physical Commitment Note is
converted into a Class A-1 Note pursuant to Section 2.5(k), a new Rule 144A
Global Security and Regulation S Global Security shall be issued by the
Co-Issuers with unique securities identification numbers (i.e. CUSIP and ISIN) and descriptions and
such converted Class A-1 Note shall also be referred to as “Non-Voting Class A-1
Notes.”  The Non-Voting Class A-1  Notes and the Non-Voting Commitment Notes
together constitute the “Non-Voting Notes”

 

101

 

On the Closing Date, (i) the aggregate principal
amount of the Class A-1 Notes (including the Non-Voting Class A-1
Notes) shall not exceed the aggregate original principal amount for the Class A-1
Notes and (ii) the aggregate principal amount of and the Commitment with
respect to the Commitment Notes (including the Non-Voting Commitment Notes)
shall not exceed the aggregate original principal amount of and the original
Commitment with respect to the Commitment Notes, in each case as set forth in Section 2.3.  For purposes of this Indenture, unless
otherwise provided in this Section 2.14 or the context otherwise requires
it, reference to the Class A-1 Notes and the Commitment Notes shall
include the Non-Voting Class A-1 Notes and Non-Voting Commitment Notes,
respectively.  Payments on the Class A-1
Notes (including the Non-Voting Class A-1 Notes) shall be made pro-rata and payments on the Commitment
Notes (including the Non-Voting Commitment Notes) shall be made pro-rata.

 

(b)           Each initial Voting Rights Assignee may
assign all or part of its voting rights in Non-Voting Notes (also a “Voting
Rights Assignment”) to any Person with respect to which the representations
set forth in Section 2.5(h) or Section 2.5(i) hereunder are
true (or if such Person is a trust, such representations are true with respect
to the trustee and the settlor thereof) by delivering to the Voting Rights
Registrar notice in the form of Exhibit I-1 executed by such Voting Rights
Assignee (in such capacity, an “Intermediate Assignee”) and the Person
to whom it is assigning such rights (each such Person, a “Subsequent
Assignee” and also a “Voting Rights Assignee”).  For the avoidance of doubt, a Subsequent
Assignee may not assign its voting rights in Non-Voting Notes to any
Person.  The last Person registered in
the Voting Rights Register as a Voting Rights Assignee shall be referred to as
the “Current Voting Rights Assignee”.

 

(c)           A Voting Rights Assignment shall remain
in effect until revoked by the Holder (in case of Physical Notes), the
beneficial owner (in the case of Global Securities) or the Current Voting
Rights Assignee by delivery to the Voting Rights Registrar of a notice in the
form of Exhibit I-2 (“Notice of Revocation”) and such other
information as the Trustee and the Security Registrar may require (including,
without limitation, a Medallion signature guarantee).  Upon receipt of the Notice of Revocation, the
Voting Rights Registrar shall forward such Notice of Revocation of the Current
Voting Rights Assignee registered in the Voting Rights Register.  The Notice of Revocation shall not become
effective until a copy of such Notice of Revocation is delivered to the Current
Voting Rights Assignee.

 

(d)           Upon receipt of a Notice of Revocation
and such other documents as the Voting Rights Registrar or the Trustee may
request pursuant to this Indenture, the Voting Rights Registrar shall:

 

(i)            With respect to a Notice of Revocation by
the beneficial owner:

 

(A)          cancel the Voting Rights Assignment in
the Voting Rights Register; and

 

(B)           (x) 
after the beneficial owner gives appropriate instructions to the
Depository, in accordance with the Depository’s standard procedures to reduce
its position on the applicable Non-Voting Note and to increase its position on
the applicable Rule 144A Global Security or Regulation S Global Security
(without the unique securities identifying number established pursuant to Section 2.14(a)),

 

102

 

as the
case may be, and (y) in accordance with the Revocation Notice, to decrease
the principal amount of the applicable Non-Voting Note and to increase the
principal amount of the applicable Rule 144A Global Security or Regulation
S Global Security, as the case may be.

 

(ii)           with respect to a revocation by an
Intermediate Assignee, cancel the Voting Rights Assignment in the Voting Rights
Register and reinstate the Intermediate Assignee as the Current Voting Rights
Assignee;

 

(iii)          with respect to a revocation by a Holder
of a Physical Commitment Note, upon surrender of the duly endorsed Non-Voting
Commitment Note:

 

(A)          cancel the Voting Right Assignment in the
Voting Rights Register;

 

(B)           cause the Securities Registrar to cancel
the registration of the Non-Voting Commitment Note in the Security Register;
and

 

(C)           instruct the Co-Issuers to execute, and
the Trustee to authenticate and deliver, a new Commitment Note in the
applicable principal amount (and with the same Commitment amount) registered in
accordance with Notice of Revocation and cause the Securities Registrar to
register the new Commitment Note (without the unique securities identifying
number established pursuant to Section 2.14(a)) in the Securities
Register.

 

The Security Registrar shall not register any transfer
or exchange of Non-Voting Notes, except as provided above.

 

(e)           If the Trustee is required to provide any
notice, including a notice of a vote, or request the consent, waiver or other
similar exercise of rights of a Holder of any Class A Notes with respect
to which a Voting Rights Assignment shall be in effect in accordance with this Section 2.14,
the Trustee shall provide such notice and request such consent, vote, waiver or
other similar exercise of rights from the applicable Current Voting Rights
Assignee of the Non-Voting Notes.  The
Co-Issuers and the Trustee shall only abide by the vote, consent, waiver or
other similar exercise of rights received from the Current Voting Rights
Assignee with respect to the Non-Voting Notes, and shall disregard any vote,
consent, waiver or other similar exercise of rights by any Intermediate
Assignee (if not the Current Voting Rights Assignee), the Holder or beneficial
owner of the applicable Non-Voting Notes.

 

(f)            If a Voting Rights Assignment is revoked
in accordance with Section 2.14(c), other than a revocation by a
Subsequent Assignee, no Voting Rights Assignment with respect to such Notes may
thereafter be made by the Voting Rights Assignee or any Holder or beneficial
owner of the Notes.  Revocations of
Voting Rights Assignments by Subsequent Assignees will not prevent future
assignments to Subsequent Assignees by a Voting Rights Assignee.

 

(g)           Subject to Section 2.14(h), in the
case of a dispute between or among instructions received from a Holder or
beneficial owner of a Non-Voting Note and any related Voting Rights Assignee,
Intermediate Assignee or Subsequent Assignee, the Co-Issuers, the Voting Rights

 

103

 

Registrar, the Securities Registrar and the Trustee shall be fully
protected in acting in accordance with the instructions received from the
Current Voting Rights Assignee registered in the Voting Rights Register, and
shall not be liable to any Person for following such instructions.

 

(h)           Notwithstanding the foregoing clause (g),
for avoidance of doubt, the Voting Rights Registrar, the Securities Registrar
and the Trustee shall be fully protected in complying with a Revocation Notice
provided in accordance with Section 2.14(c), even if a Voting Rights
Assignee (including the initial Voting Rights Assignee, any Intermediate
Assignee or any Subsequent Assignee) objects to such Revocation Notice after
notice is given in accordance with Section this 2.14.  Such Voting Rights Assignee, Holder or beneficial
owner, as applicable, will reimburse, indemnify and hold harmless the Voting
Rights Registrar, the Trustee and their respective Affiliates, directors,
officers, shareholders, partners, members, managers, agents and employees with
respect to all expenses, losses, damages, liabilities, demands, charges and
claims of any nature (including the reasonable fees and expenses of counsel and
other experts) in respect of or arising from any acts or omissions performed or
omitted by the Voting Rights Registrar, the Trustee and their respective
affiliates, directors, officers, shareholders, agents or employees hereunder in
good faith and without willful misfeasance, negligence or reckless disregard of
its duties under this Section 2.14.

 

(i)            Notwithstanding anything contained herein
to the contrary, none of the Trustee, the Voting Rights Registrar or the
Securities Registrar shall be responsible for ascertaining whether any Person
is the actual beneficial owner of a Non-Voting Note; provided, that if a
certificate is specifically required by the express terms of this Section 2.14
to be delivered to the Trustee or the Voting Right Registrar by a Holder,
beneficial owner or Voting Rights Assignee, the Trustee or the Voting Right
Registrar, as the case may be, shall be under a duty to receive and examine the
same to determine whether such certificate substantially complies on its face
with the express terms of this Indenture and shall promptly notify the party
delivering the same if such certificate does not comply with such terms

 

Section 2.15.          Voting
Rights Register.

 

The Issuer shall cause to be kept a register (the “Voting
Rights Register”) in which, subject to such reasonable regulations as it
may prescribe, the Issuer shall provide for the registration of Voting Rights
Assignments.  The Trustee is hereby
initially appointed “Voting Rights Registrar” for the purpose of
registering any Voting Rights Assignment. 
Upon any resignation or removal of the Voting Rights Registrar, the
Issuer shall promptly appoint a successor. 
The Voting Rights Registrar shall not register any Voting Rights
Assignment or the revocation thereof in the Voting Rights Register except as
provided in Section 2.14.  For the
avoidance of doubt, the Voting Rights Registrar shall be afforded the same
rights, protections and prerogatives as the Trustee is afforded under this
Indenture.

 

104

 

ARTICLE 3

 

CONDITIONS
PRECEDENT

 

Section 3.1.            General
Provisions.

 

The Securities to be issued on the Closing Date shall
be executed by the Applicable Issuer and delivered to the Trustee for
authentication and thereupon the same shall be authenticated and delivered by
the Trustee upon Issuer Order, upon compliance with Section 3.2 and upon
receipt by the Trustee of the following:

 

(a)           Officer Certificate. 
An Officer’s certificate of each of the Co–Issuers (A) evidencing
the authorization by Board Resolution of the execution and delivery of this
Indenture, and in the case of the Issuer, the Note Purchase Agreement (if any
Commitment Notes have been issued), the Collateral Management Agreement, the
Collateral Administration Agreement, the Hedge Agreements and the execution,
authentication and delivery of the Securities applied for by it and specifying
the Stated Maturity, the principal amount and the Interest Rate for each Class of
Notes issued by it, and (B) certifying that (1) the attached copy of
the Board Resolution is a true and complete copy thereof, (2) such
resolutions have not been rescinded and are in full force and effect on and as
of the Closing Date and (3) the Officers authorized to execute and deliver
such documents hold the offices and have the signatures indicated thereon;

 

(b)           No Governmental Approvals Required. 
Either (A) a certificate of each of the Co-Issuers or other
official document evidencing the due authorization, approval or consent of any
governmental body or bodies, at the time having jurisdiction in the premises,
together with an Opinion of Counsel of the Issuer satisfactory in form and
substance to the Trustee that the Trustee is entitled to rely thereon and that
no other authorization, approval or consent of any governmental body is
required for the valid issuance of such Securities applied for by it, or (B) an
Opinion of Counsel of the Issuer satisfactory in form and substance to the
Trustee that no such authorization, approval or consent of any governmental
body is required for the valid issuance of such Securities except as may have
been given; and

 

(c)           U.S. Counsel Opinion. 
Opinions of Cleary Gottlieb Steen & Hamilton LLP, special U.S.
counsel to the Co-Issuers (which opinions shall be limited to the laws of the
State of New York, the federal law of the United States and the corporate law
of the State of Delaware and may assume, among other things, the correctness of
the representations and warranties deemed made by the Holders of Securities
pursuant to Sections 2.5(h) and (i)), satisfactory in form and substance
to the Trustee, dated the Closing Date;

 

(d)           Cayman Counsel Opinion. 
An opinion of Maples and Calder, Cayman Islands counsel to the Issuer
(which shall be limited to the laws of the Cayman Islands), satisfactory in
form and substance to the Trustee, dated the Closing Date;

 

(e)           No Default.  An Officer’s
certificate of each of the Co–Issuers stating that it is not in Default under
this Indenture and that the issuance of the Securities applied for by it will
not

 

105

 

result in a breach of any of the terms, conditions or provisions of, or
constitute a Default under, the Memorandum of Association or Articles of
Association (in the case of the Issuer) or Certificate of Incorporation and
By-Laws (in the case of the Co–Issuer), any indenture or other agreement or
instrument to which the Issuer is a party or by which it is bound, or any order
of any court or administrative agency entered in any Proceeding to which the
Issuer is a party or by which it may be bound or to which it may be subject;
that all conditions precedent provided in this Indenture relating to the
authentication and delivery of the Securities applied for by it have been
complied with; and that all expenses due or accrued with respect to the
offering of the Securities or relating to actions taken on or in connection
with the Closing Date have been paid or provided for;

 

(f)            Accountants’ Certificate. 
An accountants’ certificate (i) confirming the information with
respect to each Collateral Debt Security set forth on the Schedule of
Collateral Debt Securities attached hereto as Schedule A, by reference to
such sources as shall be specified therein, (ii) specifying the procedures
undertaken by them to review data and computations relating to the Collateral
Debt Securities and confirming that, except as noted in such Accountants’ Certificate,
the composition of the Collateral Debt Securities included in the Collateral on
the Closing Date satisfies the requirements of Section 3.2(e) and (iii) setting
forth the Moody’s Actual Weighted Average Rating Factor, the Weighted Average
Spread, the Moody’s Weighted Average Recovery Rate and the Diversity Score, in
each case, as of the Closing Date; and

 

(g)           Executed Agreements. 
An executed counterpart of the Collateral Management Agreement, the
Collateral Administration Agreement, the Hedge Agreement (if any), the Note
Purchase Agreement (if any Commitment Notes have been issued) and such other
documents as the Trustee may reasonably require.

 

Section 3.2.            Security
for Notes.

 

The Securities shall be executed by the Applicable
Issuer and delivered to the Trustee for authentication and thereupon the same
shall be authenticated and delivered by the Trustee upon Issuer Order and upon
delivery by the Issuer to the Trustee, and receipt by the Trustee, of the
following:

 

(a)           Grant of Collateral Debt Securities. 
The Grant pursuant to the Granting Clauses of this Indenture of all of
the Issuer’s right, title and interest in and to the Collateral Debt Securities
and Equity Securities purchased by the Issuer on the Closing Date (as set forth
in the Schedule of Collateral Debt Securities) to the Trustee.  By the Closing Date the Issuer shall have
purchased or entered into agreements to purchase Collateral Debt Securities
with an aggregate principal balance representing a percentage of the Effective
Date Target Par that is not less than the Closing Date Invested Par Percentage
(as set forth in the Term Sheet).

 

(b)           Certificate of the Issuer. 
A certificate of an Authorized Officer of the Issuer, dated as of the
Closing Date, to the effect that, in the case of each Collateral Debt Security
and Equity Security pledged to the Trustee for inclusion in the Collateral on
the Closing Date and immediately prior to the delivery thereof on the Closing
Date:

 

106

 

(i)            the Issuer is the owner of such
Collateral Debt Security and Equity Security free and clear of any liens,
claims or encumbrances of any nature whatsoever except for those which are
being released on the Closing Date and except for those Granted pursuant to this
Indenture and encumbrances arising from due bills, if any, with respect to
interest, or a portion thereof, accrued on such Collateral Debt Security or
Equity Security prior to the first Payment Date and owed by the Issuer to the
seller of such Collateral Debt Security or Equity Security;

 

(ii)           the Issuer has acquired its ownership in
such Collateral Debt Security and Equity Security in good faith without notice
of any adverse claim as defined in Article 8 of the UCC, except as
described in paragraph (i) above;

 

(iii)          the Issuer has not assigned, pledged or
otherwise encumbered any interest in such Collateral Debt Security or Equity
Security (or, if any such interest has been assigned, pledged or otherwise
encumbered, it has been released) other than interests Granted pursuant to this
Indenture;

 

(iv)          the Issuer has full right to Grant a
security interest in and assign and pledge such Collateral Debt Security and
Equity Security to the Trustee;

 

(v)           the information set forth with respect to
such Collateral Debt Security or Equity Security in the Schedule of
Collateral Debt Securities is correct;

 

(vi)          as of its date of purchase or commitment
to purchase, each such Collateral Debt Security satisfied the requirements of
the definition of “Collateral Debt Security” and, together with any Equity
Security, is transferred to the Trustee as required by Section 3.2(a); and

 

(vii)         upon Grant by the Issuer, the Trustee has
a first priority perfected security interest in the Collateral, (assuming that
any Clearing Corporation, Intermediary or other entity not within the control
of the Issuer involved in the Delivery of Collateral takes the actions required
of it for perfection of such security interest).

 

(c)           Rating
Letters.  An Officer’s certificate of
the Issuer to the effect that attached thereto are true and correct copies of
letters signed by Moody’s and S&P and confirming the ratings for the
Securities set forth in the Term Sheet.

 

(d)           Accounts.  Evidence of the establishment of each of the
Accounts.

 

(e)           Purchase
of Collateral Debt Securities. 
Evidence that, as of the Closing Date, the Issuer has purchased or
entered into agreements to purchase Collateral Debt Securities with an
aggregate principal balance representing a percentage of the Effective Date
Target Par that is not less than the Closing Date Invested Par Percentage (as
set forth in the Term Sheet).

 

Section 3.3.            Delivery
of Pledged Securities.

 

(a)           Subject
to the limited right to remove or transfer Pledged Securities set forth in Section 7.5(b) and
to lend Pledged Securities set forth in Section 12.3, the Trustee shall
hold all Cash and Pledged Securities purchased in accordance with this Indenture
in the relevant Account

 

107

 

established and maintained pursuant to Article 10, as to which in
each case the Trustee and the Issuer shall have entered into an Account
Agreement, providing, inter alia,
that the establishment and maintenance of such Account will be governed by the
law of a jurisdiction satisfactory to the Issuer and the Trustee.

 

(b)           Each time that the Issuer, or the
Collateral Manager on behalf of the Issuer, shall direct or cause the
acquisition of any Collateral Debt Security, Equity Security or Eligible
Investment, the Issuer or the Collateral Manager on behalf of the Issuer shall,
if such Collateral Debt Security, Equity Security or Eligible Investment has
not already been transferred to the relevant Account, cause such Collateral
Debt Security, Equity Security or Eligible Investment to be Delivered.  The security interest of the Trustee in the
funds or other property utilized in connection with such acquisition shall,
immediately and without further action on the part of the Trustee, be released.  The security interest of the Trustee shall
nevertheless come into existence and continue in such Collateral Debt Security,
Equity Security or Eligible Investment so acquired, including all rights of the
Issuer in and to any contracts related to and proceeds of such Collateral Debt
Security, Equity Security or Eligible Investment.

 

Section 3.4.            Purchase
and Delivery of Collateral Debt Securities and Other Actions During the Initial
Investment Period.

 

(a)           The Issuer will use its commercially
reasonable efforts to have purchased or to have entered into binding agreements
to purchase, by the Effective Date, Collateral Debt Securities in accordance
with the provisions hereof.

 

(b)           On or prior to the 15th Business Day
after each Interim Target Date:

 

(i)            the Collateral Manager will report to the
Rating Agencies and the Trustee the aggregate principal amount of Collateral
Debt Securities purchased as of such Interim Target Date; and

 

(ii)           the Collateral Manager shall submit to
the Rating Agencies (A) a statement showing compliance with the Interim
Target for such Interim Target Date or (B) if the Interim Target is not
satisfied, a plan which the Collateral Manager certifies is, in its reasonable
business judgment, sufficient to result in the acquisition of Collateral Debt
Securities having an aggregate outstanding principal amount equal to the
Effective Date Target Par on or before the Effective Date.

 

(c)           Within
15 Business Days following the Effective Date, the Issuer (or the Collateral
Manager on behalf of the Issuer) will request each Rating Agency to provide
Rating Agency Confirmation and promptly provide a copy of such confirmation to
the Trustee.  If the Issuer fails to
obtain Rating Agency Confirmation from any Rating Agency before the next
Determination Date, the Issuer will use its reasonable commercial efforts to
take one or more of the following actions if such actions would permit each
Rating Agency to provide Rating Agency Confirmation:  (a) payment of principal on the Notes,
in accordance with the Note Payment Sequence on the following Payment Date, (b) designation
of a portion of Interest Proceeds as Principal Proceeds; provided that, after giving effect to such
designation as of the Effective Date,

 

108

 

the Class C/D Interest Coverage Test would be satisfied, and
application of such redesignated proceeds to the purchase of additional
Collateral Debt Securities, or (c) the imposition of any additional
conditions to the purchase by the Issuer of Collateral Debt Securities.

 

(d)           The Issuer (or the Collateral Manager on
its behalf) shall obtain and deliver to the Trustee and each Rating Agency an
Accountants’ Letter dated as of the Effective Date (a) confirming the
information with respect to each Collateral Debt Security on the Schedule of
Collateral Debt Securities and the information provided by the Issuer with
respect to every other asset included in the Collateral, by reference to such
sources as shall be specified therein, (b) confirming (1) the
Collateral Quality Test was satisfied and (2) the Collateral Debt
Securities complied with all of the requirements of the Portfolio Profile Test;
and (c) specifying the procedures undertaken by them to review data and
computations relating to the foregoing statement.

 

(e)           The Issuer shall cause to be delivered to
the Trustee an Opinion of Counsel dated as of the Effective Date confirming the
matters set forth in the Opinion of Counsel regarding perfection of security
interests furnished on the Closing Date with respect to the Collateral Debt
Securities Granted to the Trustee after the Closing Date.

 

Section 3.5.            Representations
and Warranties Concerning Collateral.

 

The Issuer represents and warrants on the Closing Date
(which representations and warranties shall (except as otherwise provided)
survive the execution of this Indenture and be deemed to be repeated on each
date on which Collateral is Delivered as if made at and as of that time and may
not be waived except with the approval of S&P) that:

 

(a)           This Indenture creates a valid and
continuing security interest (as defined in the applicable Uniform Commercial
Code) in the Collateral in favor of the Trustee for the benefit of the Secured
Parties, which security interest is prior to all other liens, claims and
encumbrances and is enforceable as such as against creditors of and purchasers
from the Issuer.

 

(b)           The Issuer owns the Collateral free and
clear of any lien, claim or encumbrance of any Person, other than the security
interest created under this Indenture.

 

(c)           The Issuer has received all consents and
approvals required by the terms of any item of Collateral to the transfer to
the Trustee of its interest and rights in the Collateral hereunder.

 

(d)           All Collateral other than the Accounts
has been credited to one or more Accounts other than any “general intangibles”
within the meaning of the applicable Uniform Commercial Code and any
instruments evidencing debt underlying a participation.

 

(e)           The Intermediary for each Account has
agreed to treat all assets credited to each Account as “financial assets”
within the meaning of the applicable Uniform Commercial Code.

 

(f)            The Issuer has taken all steps necessary
to cause the Intermediary to identify in its records the Trustee as the person
having the security entitlement against the Intermediary in each

 

109

 

of the Accounts.  The Accounts
are not in the name of any person other than the Issuer or the Trustee.  The Issuer has not consented for the
Intermediary of any Account to comply with entitlement orders of any person other
than the Trustee.

 

(g)           The counterparty under any participation
interest evidenced by an instrument that is not credited to an Account has
possession of any such instrument, and the Issuer has received a written
acknowledgment from such counterparty that such counterparty is holding such
instrument for the benefit of the Trustee.

 

(h)           None of the promissory notes that
constitute or evidence the Collateral has any marks or notations indicating
that they have been pledged, assigned or otherwise conveyed to any Person other
than to the Trustee.

 

(i)            The Issuer has caused or will have
caused, within ten days of the Closing Date, the filing of all appropriate
Financing Statements in the proper filing offices in the appropriate
jurisdictions under applicable law in order to perfect the security interest in
the Collateral Granted to the Trustee hereunder.

 

(j)            Other than pursuant to this Indenture,
the Issuer has not pledged, assigned, sold, granted a security interest in, or
otherwise conveyed any of the Collateral except for those which are being
released on or prior to the Closing Date. 
The Issuer has not authorized the filing of and is not aware of any
Financing Statements against the Issuer other than any Financing Statement
relating to the security interest granted to the Trustee under this Indenture
and any Financing Statement which is being terminated or released on or prior
to the Closing Date.  The Issuer is not
aware of any judgment, tax lien filing or Pension Benefit Guaranty Corporation
lien filing against the Issuer.

 

ARTICLE 4

 

SATISFACTION AND
DISCHARGE

 

Section 4.1.            Satisfaction
and Discharge of Indenture.

 

This Indenture shall be discharged and shall cease to
be of further effect with respect to the Collateral except as to:

 

(i)            rights of registration of transfer and
exchange,

 

(ii)           substitution of mutilated, defaced,
destroyed, lost or stolen Securities,

 

(iii)          rights of Holders of Securities to
receive payments of principal thereof and interest thereon and any Commitment
Fees, Revolving Note Increased Costs and Revolving Note Tax Gross-Up Amounts as
provided herein,

 

(iv)          the rights, obligations and immunities of
the Trustee hereunder,

 

110

 

(v)           the rights and obligations of the
Collateral Manager hereunder and under the Collateral Management Agreement, and

 

(vi)          the rights of Secured Parties and Hedge
Counterparties as beneficiaries hereof with respect to the property deposited
with the Trustee and payable to all or any of them; and the Trustee, on demand
of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when:

 

(A)          either:

 

(1)           all Securities theretofore authenticated and delivered
(other than (x) Securities which have been mutilated, defaced, destroyed,
lost or stolen and which have been replaced or paid as provided in Section 2.6
and (y) Securities for whose payment Money has theretofore irrevocably
been deposited in trust and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 7.3) have been delivered to the Trustee
for cancellation; or

 

(2)           all Securities not theretofore delivered to the
Trustee for cancellation (x) have become due and payable, or (y) will
become due and payable at their Stated Maturity within one year, or
(z) are to be called for redemption pursuant to Section 9.1 under an
arrangement satisfactory to the Trustee for the giving of notice of redemption
by the Applicable Issuer pursuant to Section 9.3 and the Issuer or the Co-Issuer,
in the case of this subsection (2), has irrevocably deposited or caused to
be deposited with the Trustee, in trust for such purpose, Cash, non-callable
direct obligations of the United States of America; provided, that the obligations are entitled to the full
faith and credit of the United States of America or are debt obligations which
are rated “Aaa” by Moody’s and “AAA” by S&P, in an amount sufficient, as
verified by a firm of certified public accountants which are internationally
recognized, to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for principal and
interest and any Commitment Fees, Revolving Note Increased Costs and Revolving
Note Tax Gross-Up Amounts to the date of such deposit (in the case of
Securities which have become due and payable), or to the Stated Maturity or
their Redemption Date, as the case may be; provided,
however, that this subsection (2) shall not apply if an
election to act in accordance with the provisions of Section 5.5(a) shall
have been made and not rescinded;

 

(B)           the Co-Issuers have paid or caused to be
paid all other sums payable hereunder and under the Collateral Management
Agreement by the Co-Issuers; and

 

(C)           the Co-Issuers have delivered to the
Trustee Officer’s certificates and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.

 

Notwithstanding the satisfaction and discharge of this
Indenture, the rights and obligations of the Co-Issuers, the Trustee, any
Delayed Draw Note Agent, any Revolving Note

 

111

 

Agent and, if applicable, the Securityholders, as the case may be, under
Sections 2.7, 2.14, 4.2, 5.4(d), 5.9, 5.18, 6.7, 7.1, 13.1, 14.12 and 14.13
hereof shall survive.

 

(D)          Notwithstanding the satisfaction and
discharge of this Indenture pursuant to Section 4.1, to the extent that
any Collateral remains in the possession of the Trustee, the Trustee shall
change the names of record with respect to any Accounts to delete any reference
in such names that indicate such Accounts are held in trust, and shall (1) retain
possession of the Collateral, (2) administer the Collateral in accordance
with the terms of this Indenture and (3) make payments of any fees and
expenses (including fees and expenses payable to the Trustee, the Collateral
Administrator, any Delayed Draw Note Agent, any Revolving Note Agent and the
Collateral Manager), until such time as the Issuer by Issuer Order directs the
Trustee to transfer all Collateral in the possession of the Trustee to or at
the direction of the Issuer and to discontinue performing the duties set forth
herein.  To the extent the Trustee is
obliged to take any action or perform any duties pursuant to this Section 4.1,
such actions and duties shall be in the capacity as agent for the Issuer and
not as trustee.  The Trustee shall not be
required to take any action or perform any duties pursuant to this Section 4.1
if it shall have reasonable grounds to believe that the Issuer will be unable
to continue to pay the amounts due to the Trustee pursuant to Section 6.7.

 

Section 4.2.            Application
of Trust Money.

 

All Monies deposited with the Trustee pursuant to Section 4.1
shall be held in trust and applied by it in accordance with the provisions of
the Securities and this Indenture, including, without limitation, the Priority
of Payments or the Special Priority of Payments, as applicable, to the payment
of principal and interest and any Commitment Fees, Revolving Note Increased
Costs and Revolving Note Tax Gross-Up Amounts, either directly or through any
Paying Agent, as the Trustee may determine, to the Person entitled thereto of
such amounts for whose payment such Money has been deposited with the Trustee;
but such Money shall be segregated from other funds to the extent required
herein or required by law.

 

Section 4.3.            Repayment
of Monies Held by Paying Agent.

 

In connection with the satisfaction and discharge of
this Indenture with respect to the Securities, all Monies then held by any
Paying Agent other than the Trustee under the provisions of this Indenture
shall, upon demand of the Applicable Issuer, be paid to the Trustee to be held
and applied pursuant to Section 7.3 hereof and in accordance with the
Priority of Payments or the Special Priority of Payments, as applicable, and
thereupon such Paying Agent shall be released from all further liability with
respect to such Monies.

 

ARTICLE 5

 

REMEDIES

 

Section 5.1.            Events
of Default.

 

“Event of Default,” wherever used herein, means
any one of the following events (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary

 

112

 

or be effected by operation of law or pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any
administrative or governmental body):

 

(a)           a default in the payment when the same
becomes due and payable of any interest on any Senior Note or any Commitment
Fee Amount, so long as Senior Notes are Outstanding, and thereafter on any Note
of the Controlling Class, in each case which default continues for a period of
three Business Days;

 

(b)           a default in the payment of any principal
amount (including Deferred Interest) of any (i) Rated Note at Stated
Maturity or the Redemption Date or (ii) Subordinated Note at Stated
Maturity;

 

(c)           the failure on any Payment Date to
disburse amounts available in the Payment Account in accordance with the
Priority of Payments or Special Priority of Payments, as applicable, and
continuation of such failure for a period of five Business Days;

 

(d)           on any Measurement Date, failure to
maintain a Principal Collateral Value at least equal to 100% of the Aggregate
Outstanding Amount of the Senior Notes;

 

(e)           either of the Co-Issuers or the
Collateral becomes an investment company required to be registered under the
Investment Company Act;

 

(f)            except as otherwise
provided in this Section 5.1, a default in the performance, or breach, of
any other covenant, warranty or other agreement of the Issuer or the Co-Issuer in this Indenture (it being understood, without limiting the generality
of the foregoing, that any failure to satisfy the limits set forth in the
definition of Interim Target during the Initial Investment Period or to meet
the Portfolio Profile Test, the Collateral Quality Test and the Coverage Tests
shall not constitute an Event of Default under this clause), or the failure of
any representation or warranty of the Issuer or the Co-Issuer made in this Indenture or in any certificate or
other writing delivered pursuant hereto or in connection herewith to be correct
in all material respects when the same shall have been made, and the continuation
of such default, breach or failure for a period of 30 days after notice thereof
shall have been given by registered or certified mail or overnight courier to
the Co-Issuers and the Collateral
Manager by the Trustee, or to the Applicable Issuer, the Collateral Manager and
the Trustee by a Majority of the Notes of the Controlling Class, specifying
such default, breach or failure and requiring it to be remedied and stating
that such notice is a “Notice of Default” hereunder;

 

(g)           the entry of a decree or order by a court
having competent jurisdiction adjudging the Issuer or the Co-Issuer as bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Issuer or the Co-Issuer
under the Bankruptcy Law or any other applicable law, or appointing a receiver,
liquidator, assignee, or sequestrator (or other similar official) of the Issuer
or the Co-Issuer or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 60 consecutive days; or

 

113

 

(h)           the institution by the Issuer or the Co-Issuer
of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it
to the institution of bankruptcy or insolvency proceedings against it, the
passing of a resolution for the Issuer to be wound up voluntarily or the filing
by it of a petition or answer or consent seeking reorganization or relief under
the Bankruptcy Law or any other similar applicable law, or the consent by it to
the filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of
the Issuer or the Co-Issuer or of any substantial part of its property,
respectively, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of any action by the Issuer or the
Co-Issuer in furtherance of any such action.

 

Upon the occurrence of an Event of Default, the Co-Issuers
shall promptly notify the Trustee, the Collateral Manager, the Holders of
Securities and each Rating Agency.

 

Section 5.2.            Acceleration
of Maturity; Rescission and Annulment.

 

(a)           If an Event of Default occurs and is
continuing (other than an Event of Default specified in Section 5.1(g) and
(h)), the Trustee may, and shall, upon the written direction of a Majority of
the Notes of the Controlling Class, by notice to the Co-Issuers (with a copy to
the Collateral Manager and each Hedge Counterparty) declare the principal of
all the Securities to be immediately due and payable, and upon any such
declaration such principal, together with all accrued and unpaid interest (if
any) thereon, any accrued and unpaid Commitment Fee Amount, any Revolving Note
Increased Costs and Revolving Note Tax Gross-Up Amount and other amounts
payable hereunder, shall become immediately due and payable and the
Reinvestment Period shall terminate.  If
an Event of Default specified in Sections 5.1(g) or (h) occurs, all
unpaid principal, together with all accrued and unpaid interest thereon, of all
the Securities, any Commitment Fee Amount, Revolving Note Increased Costs and
Revolving Note Tax Gross-Up Amount and other amounts payable hereunder shall
automatically become due and payable in accordance with Section 5.7 and
without any declaration or other act on the part of the Trustee or any
Securityholder.

 

(b)           At any time after such a declaration of
acceleration of maturity has been made and before a judgment or decree for
payment of the Money due has been obtained by the Trustee as hereinafter
provided in this Article 5, a Majority of the Notes of the Controlling
Class, by notice to the Issuer and the Trustee, may rescind and annul such
declaration and its consequences if:

 

(i)            the Applicable Issuer has paid or
deposited with the Trustee a sum sufficient to pay:

 

(A)          all unpaid installments of interest on and the
principal amount of the Securities and any Commitment Fees, Revolving Note
Increased Costs and Revolving Note Tax Gross-Up Amounts then due (other than as
a result of the acceleration), and

 

(B)           all unpaid taxes and Administrative Expenses and other
sums paid or advanced by the Trustee hereunder and any other amounts then
payable by the Co-Issuers hereunder; or

 

114

 

(ii)           the Trustee has determined that all
Events of Default, other than the non-payment of the interest on or principal
amount of Securities and any Commitment Fee that have become due solely by such
acceleration, have been cured and a Majority of the Notes of the Controlling Class by
notice to the Trustee has agreed with such determination (which agreement shall
not be unreasonably withheld) or waived as provided in Section 5.14.

 

In addition, the Trustee
shall rescind and annul any acceleration of maturity of the Securities and its
consequences if neither of the conditions set forth in Section 5.5(a)(i) or
5.5(a)(ii) is satisfied; provided,
however, that if the conditions specified in either of Section 5.5(a)(i) or
5.5(a)(ii) are satisfied at any time before such Event of Default is cured
or waived, the Securities may be accelerated pursuant to the first paragraph of
this Section 5.2, notwithstanding any previous rescission and annulment of
a declaration of acceleration pursuant to this paragraph.  At any such time as the Trustee shall rescind and
annul such declaration and its consequences, the Trustee shall preserve the
Collateral in accordance with the provisions of Section 5.5.

 

No such rescission shall affect any subsequent Default
or impair any right consequent thereon.

 

(c)           Any Hedge Agreement existing at the time
of an acceleration pursuant to paragraph (a) may not be terminated unless
and until liquidation of the Collateral has commenced or any annulment or
rescission of such acceleration pursuant to paragraph (b) is no longer
possible.

 

Section 5.3.            Collection
of Indebtedness and Suits for Enforcement by Trustee.

 

The Applicable Issuer covenants that if a Default
shall occur in respect of the payment of any principal, interest or the
Commitment Fee, if any, the Applicable Issuer, will, upon demand of the Trustee
or any affected Holder of such Security, pay to the Trustee, for the benefit of
the Holder of such Security, the whole amount, if any, then due and payable for
the principal amount of and interest on such Security and any Commitment Fee,
Revolving Note Increased Costs and Revolving Note Tax Gross-Up Amounts, with
interest upon the overdue principal and, to the extent that payments of such
interest shall be legally enforceable, upon overdue installments of interest
and any Commitment Fee, Revolving Note Increased Costs and Revolving Note Tax
Gross-Up Amounts, at the applicable Interest Rate and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee and its agents and counsel.

 

If the Applicable Issuer fails to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as Trustee of an
express trust, may, and shall upon direction of a Majority of the Notes of the
Controlling Class, institute a Proceeding for the collection of the sums so due
and unpaid, and may prosecute such Proceeding to judgment or final decree, and
may enforce the same against the Applicable Issuer or any other obligor upon
the Securities and collect the Monies adjudged or decreed to be payable in the
manner provided by law out of the Collateral.

 

115

 

If an Event of Default occurs and is continuing, the
Trustee may in its discretion, and shall upon written direction of a Majority
of the Notes of the Controlling Class (and, if the action of the
Applicable Issuers pursuant to such written direction would have a material
adverse affect on the Hedge Counterparty, with the consent of the Hedge
Counterparty), proceed to protect and enforce its rights and the rights of the
Securityholders by such appropriate Proceedings as the Trustee shall deem most
effectual (if no such direction is received by the Trustee or as the Trustee may
be directed by a Majority of the Notes of the Controlling Class), to protect
and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Trustee by this Indenture or by law.

 

In case there shall be pending Proceedings relative to
the Issuer or the Co-Issuer or any other obligor upon the Securities under
Bankruptcy Law or any other applicable bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer, the Co-Issuer or their
respective property or such other obligor or its property, or in case of any
other comparable Proceedings relative to the Issuer, the Co-Issuer or other
obligor upon the Securities, or the creditors or property of the Issuer, the Co-Issuer
or such other obligor, the Trustee, regardless of whether the principal of any
Securities shall then be due and payable as therein expressed or by declaration
or otherwise and regardless of whether the Trustee shall have made any demand
pursuant to the provisions of this Section 5.3, shall be entitled and
empowered, by intervention in such Proceedings or otherwise:

 

(a)           to file and prove a claim or claims for
the whole amount of principal and interest owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
reasonable expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee, except as a result of negligence or bad
faith) and of the Holders of the Securities allowed in any Proceedings relative
to the Issuer, the Co-Issuer or other obligor upon the Securities or to the
creditors or property of the Issuer, the Co-Issuer or such other obligor;

 

(b)           unless prohibited by applicable law and
regulations, to vote on behalf of the Holders of the Securities, upon the
direction of such Holders, in any election of a trustee or a standby trustee in
arrangement, reorganization, liquidation or other bankruptcy or insolvency
Proceedings or Person performing similar functions in comparable Proceedings; and

 

(c)           to collect and receive any Monies or
other property payable to or deliverable on any such claims, and to distribute
all amounts received with respect to the claims of the Holders of the
Securities and of the Trustee on their behalf; and any trustee, receiver or
liquidator, custodian or other similar official is hereby authorized by each of
the Holders of the Securities to make payments to the Trustee, and, in the
event that the Trustee shall consent to the making of payments directly to the
Holders of the Securities, to pay to the Trustee such amounts as shall be
sufficient to cover reasonable compensation to the Trustee, each predecessor
Trustee and their respective agents, attorneys and counsel, and all other reasonable
expenses and liabilities

 

116

 

incurred, and all advances made, by the Trustee and each predecessor
Trustee except as a result of negligence or bad faith.

 

Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or vote for or accept or adopt on behalf
of any Holder of the Securities, any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder of the Securities in any such Proceeding except, as aforesaid, to vote
for the election of a trustee in bankruptcy or similar Person.

 

All rights of action and of asserting claims under
this Indenture, or under any of the Securities, may be enforced by the Trustee
without the possession of any of the Securities or the production thereof in
any trial or other Proceedings relative thereto, and any action or Proceedings
instituted by the Trustee shall be brought in its own name as trustee of an
express trust, and any recovery of judgment, subject to the payment of the
reasonable expenses, disbursements and compensation of the Trustee, each
predecessor trustee and their respective agents and attorneys and counsel,
shall be for the ratable benefit of the Secured Parties in accordance with the
Priority of Payments or the Special Priority of Payments, as applicable.

 

In any Proceedings brought by the Trustee on behalf of
the Holders of the Securities (including any Proceedings involving the
interpretation of any provision of this Indenture to which the Trustee shall be
a party) the Trustee shall be held to represent all such Holders.

 

Notwithstanding anything in this Section 5.3 to
the contrary, the Trustee may sell or liquidate the Collateral or institute
Proceedings in furtherance thereof pursuant to this Section 5.3 only in
accordance with Section 5.5(a).

 

Section 5.4.            Remedies.

 

(a)           If an Event of Default shall have
occurred and be continuing, and the Securities have been declared due and
payable and such declaration and its consequences have not been rescinded and
annulled, the Co-Issuers agree that the Trustee may (after notice to the
Holders of Securities), and shall, upon direction by a Majority of the Notes of
the Controlling Class (and, if the action required of the
Applicable Issuers or the Trustee pursuant to such direction would have a
material adverse affect on the Hedge Counterparty, with the consent of the
Hedge Counterparty),
to the extent permitted by applicable law, exercise one or more of the
following rights, privileges and remedies:

 

(i)            institute Proceedings for the collection
of all amounts then payable on the Securities or otherwise payable under this
Indenture, whether by declaration or otherwise, enforce any judgment obtained,
and collect from the Collateral Monies adjudged due;

 

(ii)           sell or cause the sale of all or a
portion of the Collateral or rights of interest therein, at one or more public
or private sales called and conducted in any manner permitted by law and in
accordance with Section 5.17;

 

117

 

(iii)          institute Proceedings from time to time
for the complete or partial foreclosure of this Indenture with respect to the
Collateral;

 

(iv)          exercise any remedies of a secured party
under the UCC and take any other appropriate action to protect and enforce the
rights and remedies of the Trustee and the Secured Parties hereunder; and

 

(v)           exercise any other rights and remedies
that may be available at law or in equity.

 

Notwithstanding the above remedies, the Trustee may
sell or liquidate the Collateral or institute Proceedings in furtherance
thereof pursuant to this Section 5.4 only in accordance with Section 5.5(a).

 

The Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking firm of national reputation as to
the feasibility of any action proposed to be taken in accordance with this Section 5.4
and as to the sufficiency of the proceeds and other amounts receivable with
respect to the Collateral to make the payments required hereunder and any
amounts due to the Hedge Counterparties, which opinion shall be conclusive
evidence as to such feasibility or sufficiency.

 

(b)           If an Event of Default as described in Section 5.1(f) hereof
shall have occurred and be continuing the Trustee may, and at the direction of
the Holders of not less than 25% of the Aggregate Outstanding Amount of the
Notes of the Controlling Class shall, institute a Proceeding solely to
compel performance of the covenant or agreement or to cure the representation
or warranty, the breach of which gave rise to the Event of Default under such
Section, and enforce any equitable decree or order arising from such
Proceeding.

 

(c)           Upon any sale, whether made under the
power of sale hereby given or by virtue of judicial Proceedings, any
Securityholder or other Secured Party may bid for and purchase the Collateral
or any part thereof and, upon compliance with the terms of sale, may hold,
retain, possess or dispose of such property in its or their own absolute right
without accountability.

 

Upon any sale, whether made under the power of sale
hereby given or by virtue of judicial Proceedings, the receipt of the Trustee,
or of the Officer making a sale under judicial Proceedings, shall be a
sufficient discharge to the purchaser or purchasers at any sale for its or
their purchase Money, and such purchaser or purchasers shall not be obliged to
see to the application thereof.

 

Any such sale, whether under any power of sale hereby
given or by virtue of judicial Proceedings, shall bind the Co-Issuers, the
Trustee and the Securityholders, shall operate to divest all right, title and
interest whatsoever, either at law or in equity, of each of them in and to the
property sold, and shall be a perpetual bar, both at law and in equity, against
each of them and their successors and assigns, and against any and all Persons
claiming through or under them.

 

(d)           Notwithstanding any other provision of
this Indenture, the Trustee may not, prior to the date which is one year and
one day or, if longer, the applicable preference period then in

 

118

 

effect, after the payment in full of all Securities and the reduction
of the Commitment to zero in the case of any Commitment Notes, institute
against, or join any other Person in instituting against, the Issuer or the Co-Issuer
any bankruptcy, reorganization, arrangement, insolvency, moratorium or
liquidation Proceedings, or other Proceedings under Cayman Islands or U.S.
federal or state bankruptcy or similar laws. 
Nothing in this Section 5.4 shall preclude, or be deemed to stop,
the Trustee (i) from taking any action prior to the expiration of the
aforementioned one year and one day period (or, if longer, the applicable
preference period then in effect) in (A) any case or Proceeding
voluntarily filed or commenced by the Issuer or the Co-Issuer or (B) any
involuntary insolvency Proceeding filed or commenced by a Person other than the
Trustee, or (ii) from commencing against the Issuer or the Co-Issuer or
any of its properties any legal action which is not a bankruptcy,
reorganization, arrangement, insolvency, moratorium or liquidation Proceeding.

 

Section 5.5.            Optional
Preservation of Collateral.

 

(a)           Notwithstanding
anything to the contrary herein, if an Event of Default shall have occurred and
be continuing, the Trustee shall not sell or liquidate the Collateral (except
as otherwise expressly permitted or required by Article 10 and Article 12,),
shall collect and cause the collection of the proceeds thereof and make and
shall apply all payments and deposits and maintain all accounts in respect of
the Collateral and the Securities in accordance with the Special Priority of
Payments and the provisions of Article 10, Article 12 and Article 13
unless:

 

(i)            the Trustee determines that the
anticipated proceeds of a sale or liquidation of the Collateral would be
sufficient to discharge in full the amounts then due and unpaid on the Rated
Notes for principal and interest (including Deferred Interest) and any accrued
and unpaid Commitment Fee Amount, any Revolving Note Increased Costs and
Revolving Note Tax Gross-Up Amount, any Hedge Payment Amount (including the
cost of terminating Hedge Agreements), any unpaid Administrative Expenses and
any other fees and expenses of the Co-Issuers (including amounts due and
payable to the Collateral Manager under the Collateral Management Agreement
other than Collateral Management Fees) as limited by subclause (A) of the
Priority of Interest Payments and the Collateral Management Fee (unless
approved otherwise by the Collateral Manager), and the Holders of at least
two-thirds of the Aggregate Outstanding Amount of the Controlling Class agree
with such determination; or

 

(ii)           the liquidation of the Collateral is
directed (subject to the provisions of this Indenture) by (a) the Holders
of at least two-thirds of the Aggregate Outstanding Amount of the Controlling Class if
an Event of Default related to payments on the Securities has occurred and is
continuing and has not been cured or waived or (b) the Holders of at least
two-thirds of the Aggregate Outstanding Amount of each Class of the Rated
Notes (voting separately) with respect to all other Events of Default;

 

provided, however, that, notwithstanding clauses (i) and
(ii) above, the Collateral Manager, on behalf of the Issuer, may direct
the Trustee, and the Trustee shall in the manner directed, deliver assets in
connection with the terms of any contractual arrangement entered into prior to the
occurrence of an Event of Default and accept any Offer or tender offer made to
all holders of any Collateral Debt Securities at a price equal to or greater
than its par amount (or accreted value, in

 

119

 

the case of zero coupon bonds) plus accrued interest;
and provided, further, that the
Issuer must continue to hold funds on deposit in the Revolver Funding Account
and the Synthetic Reserve Account to the extent required to meet the Issuer’s
obligations in connection with the Aggregate Unfunded Amount with respect to
Revolving Collateral Debt Securities, Delayed Drawdown Debt Securities or
Synthetic Securities, as the case may be.

 

The Trustee shall give notice of the retention of the
Collateral to the Issuer with a copy to the Co-Issuer and the Collateral
Manager.  So long as such Event of
Default is continuing, any prohibition against selling or liquidating the
Collateral pursuant to this Section 5.5(a) may be rescinded at any
time when the conditions specified in clause (i) or (ii) exist.  Until all Events of Default shall have been
cured or waived, if the Collateral is sold or liquidated, the proceeds thereof
shall be applied in accordance with the Special Priority of Payments.

 

(b)           Nothing contained in Section 5.5(a) shall
be construed to require the Trustee to sell the Collateral if the conditions
set forth in Section 5.5(a) are not satisfied.  Nothing contained in Section 5.5(a) shall
be construed to require the Trustee to preserve the Collateral if prohibited by
applicable law or if the Trustee is directed to liquidate the Collateral by the
Holders of at least two-thirds of the Aggregate Outstanding Amount of each Class of
Rated Notes pursuant to Section 5.5(a)(ii).

 

(c)           In determining whether the condition
specified in Section 5.5(a)(i) exists, the Trustee shall obtain
prices with respect to each obligation contained in the Collateral by reference
to (i) the prices or values provided by an Independent pricing service (as
specified by the Collateral Manager), (ii) if no such information is
available from an Independent pricing service, than the average of the
indicative bid prices for such security provided by at least two Independent
nationally-recognized dealers (as specified by the Collateral Manager in
writing), or (iii) if no such dealer bid prices are available for such
security, then the price or value of such security as determined in good faith
by the Collateral Manager consistent with customary market practice.  The Trustee shall then compute the
anticipated proceeds of sale or liquidation on the basis of such prices for
each such security.  In addition, for the
purposes of determining issues relating to the execution of a sale or
liquidation of the Collateral in connection with a determination whether the
condition specified in Section 5.5(a)(i) exists, the Trustee may
retain, and rely on an opinion of, an Independent investment banking firm of
national reputation.

 

The Trustee shall deliver to
the Noteholders and the Collateral Manager a report stating the results of any
determination made pursuant to Section 5.5(a)(i) no later than ten
days after any sale or liquidation of the Collateral.  The Trustee shall make the determinations
required by Section 5.5(a)(i) within 30 days after an Event of Default
and, at the request of a Majority of the Controlling Class, at any time during
which the Trustee is prohibited from liquidating the Collateral by Section 5.5(a);
provided, however, that once the
Trustee has made a determination as to whether the condition specified in Section 5.5(a)(i) exists
following an Event of Default, the Trustee need not make another determination
following a subsequent Event of Default caused by the same or similar facts and
circumstances occurring as of or continuing through a subsequent date, until
the earlier of (i) two years following the most recent determination or (ii) within
30 days after the Trustee receives a request to make such a determination from
the Holders of a Majority of any Class of Notes.

 

120

 

Section 5.6.            Trustee
May Enforce Claims Without Possession of Securities.

 

All rights of action and claims under this Indenture
or the Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any Proceeding
relating thereto, and any such Proceeding instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment shall be applied as set forth in Section 5.7 hereof.

 

Section 5.7.            Application
of Money Collected.

 

Any Money collected by the Trustee with respect to the
Securities pursuant to this Article 5 and any Money that may then be held
or thereafter received by the Trustee with respect to the Securities hereunder
shall be applied subject to Section 13.1 and on the date or dates fixed by
the Trustee in accordance with the following provisions of this Section 5.7.

 

Notwithstanding the provisions of the Priority of
Payments, (i) if the Collateral has been or is being liquidated following
an Event of Default pursuant to Sections 5.4 or 5.5 hereof, (ii) declaration
of acceleration of the maturity of the Notes has occurred following an Event of
Default and such Event of Default is continuing and has not been cured or
waived (regardless of whether such declaration of acceleration has been
rescinded) or (iii) in connection with a Redemption by Liquidation (including any auction
of the Collateral) pursuant to Section 9.1 hereof, proceeds in respect of
the Collateral will be applied in the following order of priority (the “Special
Priority of Payments“) to the payment of:

 

(1)           accrued
and unpaid Administrative Expenses in accordance with the Administrative
Expense Payment Sequence, up to an aggregate limit paid pursuant to this clause
(1) on such Payment Date and on the previous three Payment Dates equal to
the Administrative Expense Limit;

 

(2)           (i) the
amounts required to be paid to any Hedge Counterparty under any Hedge Agreement
(other than any payments due in respect of the complete or partial termination
of such Hedge Agreement) and scheduled payments due with respect to any Short
Positions; and then (ii) all
amounts due to any Hedge Counterparty or Short Position counterparty with
respect to termination (or partial termination) of any Hedge Agreement or any
Short Position where the Issuer is the sole affected or defaulting party (in
each case, pro rata based upon
the amounts due);

 

(3)           (i) the
Senior Collateral Management Fee for such Payment Date, and then (ii) any
Senior Collateral Management Fee due on an earlier Payment Date that was not
paid because funds were not available in accordance with the Priority of
Payments or the Special Priority of Payments, as applicable;

 

(4)           accrued
and unpaid interest on the Class A
Notes and any Commitment Fee Amount;

 

(5)           principal
of the Class A Notes until the Class A Notes have been paid in full;

 

121

 

(6)           accrued
and unpaid interest on the Class B Notes;

 

(7)           principal
of the Class B Notes until the Class B Notes have been paid in full;

 

(8)           (i) the
Intermediate Collateral Management Fee for such Payment Date, and then (ii) any
Intermediate Collateral Management Fee due on an earlier Payment Date that was
not paid because funds were not available in accordance with the Priority of
Payments or the Special Priority of Payments, as applicable;

 

(9)           (i) any
accrued and unpaid interest on the Class C Notes, and then (ii) any
Deferred Interest with respect to the Class C Notes and interest thereon,
until such amounts have been paid in full;

 

(10)         principal
of the Class C Notes until the Class C Notes have been paid in full;

 

(11)         (i) any
accrued and unpaid interest on the Class D Notes, and then (ii) any
Deferred Interest with respect to the Class D Notes and interest thereon,
until such amounts have been paid in full;

 

(12)         principal
of the Class D Notes until the Class D Notes have been paid in full;

 

(13)         (i) any
accrued and unpaid interest on the Class E Notes, and then (ii) any
Deferred Interest with respect to the Class E Notes and interest thereon,
until such amounts have been paid in full;

 

(14)         principal
of the Class E Notes until the Class E Notes have been paid in full;

 

(15)         (i) any
accrued and unpaid interest on the Class F Notes, and then (ii) any
Deferred Interest with respect to the Class F Notes and interest thereon,
until such amounts have been paid in full;

 

(16)         principal
of the Class F Notes until the Class F Notes have been paid in full;

 

(17)         (i) any
accrued and unpaid Administrative Expenses to the extent not paid pursuant to
clause (1) above as a result of the Administrative Expense Limit in
accordance with the Administrative Expense Payment Sequence, and then (ii) any
Revolving Note Increased Costs and Revolving Note Tax Gross-Up Amounts,
(allocated pro rata based upon
the amounts due);

 

(18)         (i) the
Subordinated Collateral Management Fee for such Payment Date, minus the amount
of any Current Deferred Management Fee with respect to such Subordinated Collateral
Management Fee for such Payment Date, and then (ii) any Subordinated
Collateral Management Fee due on an earlier Payment Date that was not paid
because funds were not available in accordance with the Priority of Payments or
the Special Priority of Payments, as applicable;

 

122

 

(19)         all amounts due to a Hedge Counterparty or a
Short Position counterparty with respect to termination (or partial
termination) of any Hedge Agreement or any Short Position where the Issuer is
not the sole affected or defaulting party, (pro
rata based upon the amounts due);

 

(20)         any
Cumulative Deferred Management Fee that the Collateral Manager has not elected
to waive; and

 

(21)         all
remaining amounts to the Holders of Subordinated Notes.

 

Section 5.8.            Limitation
on Suits.

 

No Holder of any Security shall have any right to
institute any Proceedings, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:

 

(a)           such Holder has previously given to the
Trustee written notice of an Event of Default;

 

(b)           except as otherwise provided in Section 5.9,
the Trustee also has received a written request from the Holders of at least
25% of the then Aggregate Outstanding Amount of the Notes of the
Controlling Class to institute Proceedings in respect of such Event of
Default in its own name as Trustee hereunder and such Holder or Holders have
offered to the Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;

 

(c)           the Trustee for 30 days after its receipt
of such notice, request and offer of indemnity has failed to institute any such
Proceeding; and

 

(d)           no direction inconsistent with such request
has been given to the Trustee during such 30-day period by a Majority of the
Notes of the Controlling Class;

 

it being understood and
intended that no one or more Holders of Securities shall have any right in any
manner whatever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders of
Securities of the same Class or to obtain or to seek to obtain priority or
preference over any other Holders of the Securities of the same Class or
to enforce any right under this Indenture, except in the manner herein provided
and for the equal and ratable benefit of all the Holders of Securities of the
same Class subject to and in accordance with Section 13.1, the
Priority of Payments and the Special Priority of Payments.

 

If the Trustee receives conflicting or inconsistent
requests and indemnity from two or more groups of Holders of the Notes of the
Controlling Class, each representing less than a Majority of the Notes of the
Controlling Class, the Trustee in its sole discretion may determine what
action, if any, shall be taken, notwithstanding any other provisions of this
Indenture.

 

123

 

Section 5.9.            Unconditional
Rights of Holders of Securities to Receive Principal and Interest.

 

(a)           Notwithstanding any other provision in
this Indenture (other than Section 2.7), the Holder of any Rated Note
shall have the right, which is absolute and unconditional, to receive payment
of the principal of and interest on such Security (and any Commitment Fee,
Revolving Note Increased Costs and Revolving Note Tax Gross-Up Amounts), as
applicable, as such principal and interest and any Commitment Fee, Revolving
Note Increased Costs and Revolving Note Tax Gross-Up Amounts become due and
payable in accordance with the Priority of Payments or the Special Priority of
Payments, as applicable, and Section 13.1, and subject to the provisions
of Section 5.8, to institute Proceedings for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.

 

(b)           Notwithstanding any other provision in
this Indenture (other than Section 2.7), the Holder of any Subordinated
Note shall have the right, which is absolute and unconditional, to receive
payment of the principal amount of such Subordinated Note and Interest
Proceeds, as such principal amounts and Interest Proceeds become due and
payable in accordance with Section 13.1 and the Priority of Payments or
the Special Priority of Payments, as applicable.  Holders of Subordinated Notes shall have no
right to institute Proceedings for the enforcement of any such payment until
such time as no Rated Notes remain Outstanding, which right shall be subject to
the provisions of Section 5.8, and shall not be impaired without the
consent of any such Holder.

 

(c)           Only the Holders of Notes of the
Controlling Class shall be entitled to any payment on a claim against the
Issuer.

 

Section 5.10.          Restoration
of Rights and Remedies.

 

If the Trustee or any Securityholder has instituted
any Proceeding to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Securityholder, then and in every
such case the Co-Issuers, the Trustee and the Securityholder shall, subject to
any determination in such Proceeding, be restored severally and respectively to
their former positions hereunder, and thereafter all rights and remedies of the
Trustee and the Securityholder shall continue as though no such Proceeding had
been instituted.

 

Section 5.11.          Rights
and Remedies Cumulative.

 

No right or remedy herein conferred upon or reserved
to the Trustee or to the Securityholders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

 

124

 

Section 5.12.          Delay
or Omission Not Waiver.

 

No delay or omission of the Trustee or any
Securityholder to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein or of a subsequent Event of
Default.  Every right and remedy given by
this Article 5 or by law to the Trustee or to the Securityholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Securityholders, as the case may be.

 

Section 5.13.          Control
by Securityholders.

 

A Majority of the Notes of the Controlling Class shall have the right following the occurrence, and during the
continuance of, an Event of Default to cause the institution of and direct the time, method and place of conducting any Proceedings
for any remedy available to the Trustee; provided,
that:

 

(a)           such direction shall not conflict with
any rule of law or with any express provision of this Indenture;

 

(b)           the Trustee may take any other action
deemed proper by the Trustee that is not inconsistent with such direction; provided, however, that, subject to Section 6.1,
the Trustee need not take any action that it determines might involve it in
liability (unless the Trustee has received indemnity as set forth below);

 

(c)           the Trustee shall have been provided with
indemnity reasonably satisfactory to it; and

 

(d)           notwithstanding the foregoing, any
direction to the Trustee to undertake a Sale of the Collateral shall be made
pursuant to and in accordance with Sections 5.4 and 5.5.

 

Section 5.14.          Waiver
of Defaults.

 

Prior to the time a judgment or decree for payment of
the Money due has been obtained by the Trustee, as provided in this Article 5,
a Majority of the Notes of the Controlling Class may on behalf of the
Holders of all the Securities waive any Default and its consequences, except a
Default:

 

(a)           in the payment of principal of any
Security, interest on the Controlling Class or the Commitment Fee; or

 

(b)           in respect of a covenant or provision
hereof that under Section 8.2 cannot be modified or amended without the
waiver or consent of the Holder of each Outstanding Security or each Hedge
Counterparty adversely affected thereby; or

 

(c)           arising under Section 5.1(g) or
(h).

 

125

 

In the case of any such waiver, the Co-Issuers, the
Trustee and the Holders of the Securities shall be restored to their former
positions and rights hereunder, respectively, but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereto.  The Trustee shall promptly give notice of any
such waiver to the Collateral Manager and each Holder and, in
respect of any waiver of a Default relating to a breach of representations in Section 3.5,
each Rating Agency.

 

Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture, but no such waiver shall extend to
any subsequent or any other Default or impair any right consequent thereto.

 

Section 5.15.          Undertaking
for Costs.

 

All parties to this Indenture agree, and each Holder
of any Security by its acceptance thereof shall be deemed to have agreed, that
any court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for
any action taken, or omitted by it as Trustee, the filing by any party litigant
in such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys’
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.15 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Securityholder, or group of
Securityholders, holding in the aggregate more than 10% in Aggregate
Outstanding Amount of the Notes of the Controlling Class, or to any suit
instituted by any Securityholder for the enforcement of the payment of amounts
due and payable with respect to any Securities on or after the Stated Maturity
(or, in the case of redemption, on or after the applicable Redemption
Date).

 

Section 5.16.          Waiver
of Stay or Extension Laws.

 

The Co-Issuers covenant (to the extent that they may
lawfully do so) that they will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or extension
law wherever enacted, now or at any time hereafter in force, which may affect
the covenants, the performance of or any remedies under this Indenture; and the
Co-Issuers (to the extent that they may lawfully do so) hereby expressly waive
all benefit or advantage of any such law, and covenant that they will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.

 

Section 5.17.          Sale
of Collateral.

 

(a)           The power to effect any sale (a “Sale”)
of any portion of the Collateral pursuant to Sections 5.4 and 5.5 shall not be
exhausted by any one or more Sales as to any portion of such Collateral
remaining unsold, but shall continue unimpaired until the entire Collateral
shall have been sold or all amounts secured by the Collateral shall have been
paid.  The Trustee may upon notice to the
Holders of Securities and shall, upon direction of a Majority of the Notes of
the

 

126

 

Controlling Class from time to time postpone any Sale by public
announcement made at the time and place of such Sale.  The Trustee hereby expressly waives its
rights to any amount fixed by law as compensation for any Sale; provided, that the Trustee shall be
authorized to deduct the reasonable costs, charges and expenses incurred by it
in connection with such Sale from the proceeds thereof notwithstanding the
provisions of Section 6.7 hereof.

 

(b)           The Trustee may bid for and acquire any
portion of the Collateral in connection with a public Sale thereof, and may
deduct the reasonable costs, charges and expenses incurred by the Trustee in
connection with such Sale notwithstanding the provisions of Section 6.7
hereof.  The Securities need not be
produced in order to complete any such Sale, or in order for the net proceeds
of such Sale to be credited against amounts owing on the Securities.  The Trustee may hold, lease, operate, manage or
otherwise deal with any property so acquired in any manner permitted by law in
accordance with this Indenture.

 

(c)           If any portion of the Collateral consists
of securities issued without registration under the Securities Act (“Unregistered
Securities”), the Trustee may seek an Opinion of Counsel, or, if no such
Opinion of Counsel can be obtained, seek a no-action position from the
Securities and Exchange Commission or any other relevant federal or state
regulatory authorities, regarding the legality of a public or private sale of
such Unregistered Securities.

 

(d)           The Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any portion
of the Collateral in connection with a sale thereof.  In addition, the Trustee is hereby irrevocably
appointed the agent and attorney-in-fact of the Issuer to transfer and convey
its interest in any portion of the Collateral in connection with a sale
thereof, and to take all action necessary to effect such sale.  No purchaser or transferee at such a sale
shall be bound to ascertain the Trustee’s authority, to inquire into the
satisfaction of any conditions precedent or see to the application of any
Monies.

 

Section 5.18.          Action
on the Securities.

 

The Trustee’s right to seek and recover judgment on
the Securities or under this Indenture shall not be affected by the seeking or
obtaining of or application for any other relief under or with respect to this
Indenture.  Neither the lien of this
Indenture nor any rights or remedies of the Trustee or the Securityholders
shall be impaired by the recovery of any judgment by the Trustee against the
Issuer or by the levy of any execution under such judgment upon any portion of
the Collateral or upon any of the assets of the Issuer or the Co-Issuer.

 

ARTICLE 6

 

THE TRUSTEE

 

Section 6.1.            Certain
Duties and Responsibilities.

 

(a)           Except during the continuance of an Event
of Default:

 

127

 

(i)            the Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this Indenture,
and no implied covenants or obligations shall be read into this Indenture
against the Trustee; and

 

(ii)           in the absence of bad faith on its part,
the Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture; provided, however, that in the case of any
such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they substantially conform to the
requirements of this Indenture and shall promptly, but in any event within
three Business Days in the case of an Officer’s certificate furnished by the
Collateral Manager, notify the party delivering the same if such certificate or
opinion does not conform.  If a corrected
form shall not have been delivered to the Trustee within 15 days after such notice
from the Trustee, the Trustee shall so notify the Holders of Securities.

 

(b)           In case an Event of Default known to the
Trustee has occurred and is continuing, the Trustee shall, prior to the receipt
of directions, if any, from a Majority of the Notes of the Controlling Class,
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in its exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person’s own
affairs.

 

(c)           No provision of this Indenture shall be
construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act, or its own willful misconduct, except that:

 

(i)            this subsection shall not be
construed to limit the effect of subsection (a) of this Section 6.1;

 

(ii)           the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer, unless it shall be
proven that the Trustee was negligent in ascertaining the pertinent facts;

 

(iii)          the Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Issuer or the Co-Issuer or the Collateral
Manager in accordance with this Indenture and/or a Majority (or such other
percentage as may be required by the terms hereof) of the Notes of the
Controlling Class (or other Class if required or permitted by the
terms hereof) relating to the time, method and place of conducting any
Proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under this Indenture; and

 

(iv)          no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers contemplated hereunder, if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it (if
the amount of such funds or risk or

 

128

 

liability does not exceed the amount payable to the Trustee pursuant to
subclause (A) of the Priority of Interest Payments net of the amounts
specified in Section 6.7(a) and any other Administrative Expenses for
which the Trustee is then entitled to payment, the Trustee shall be deemed to
be reasonably assured of such repayment) unless such risk or liability relates
to its ordinary services, including under Article 5.

 

(d)           For all purposes under this Indenture,
the Trustee shall not be deemed to have notice or knowledge of any Event of
Default described in Section 5.1(d), 5.1(e), 5.1(g) or 5.1(h) or
any Default described in Section 5.1(f) unless a Trust Officer
assigned to and working in the Corporate Trust Office has actual knowledge
thereof or unless written notice of any event which is in fact such an Event of
Default or Default is received by the Trustee at the Corporate Trust Office,
and such notice references the Securities generally, the Issuer, the Co-Issuer,
the Collateral or this Indenture.  For
purposes of determining the Trustee’s responsibility and liability hereunder,
whenever reference is made in this Indenture to such an Event of Default or a
Default, such reference shall be construed to refer only to such an Event of
Default or Default of which the Trustee is deemed to have notice as described
in this Section 6.1.

 

(e)           Whether or not therein expressly so
provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 6.1.

 

Section 6.2.            Notice
of Default.

 

Promptly (and in no event later than three Business Days)
after the occurrence of any Default known to the Trustee or after any
declaration of acceleration has been made or delivered to the Trustee pursuant
to Section 5.2, the Trustee shall give notice to the Collateral Manager,
each Rating Agency and all Holders (and, upon request, Certifying Holders) of
all Defaults hereunder known to the Trustee, unless such Default shall have
been cured or waived.

 

Section 6.3.            Certain
Rights of Trustee.

 

Except as otherwise provided in Section 6.1:

 

(a)           the Trustee may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, note or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;

 

(b)           any request or direction of the Issuer or
the Co-Issuer mentioned herein shall be sufficiently evidenced by an Issuer
Order;

 

(c)           whenever in the administration of this
Indenture the Trustee shall (i) deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, rely upon an Officer’s certificate or (ii) be
required to determine the value of any Collateral or funds hereunder or the
cashflows projected to be received therefrom, the Trustee may, in the absence
of bad faith on its part, rely on reports of nationally

 

129

 

recognized accountants, investment bankers or other Persons qualified
to provide the information required to make such determination, including
nationally recognized dealers in securities of the type being valued and securities
quotation services;

 

(d)           as a condition to the taking or omitting
of any action by it hereunder, the Trustee may consult with counsel and the
advice of such counsel or any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken or omitted by it
hereunder in good faith and in reliance thereon;

 

(e)           the Trustee shall be under no obligation
to exercise or to honor any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Securityholders pursuant to
this Indenture, unless such Securityholders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might reasonably be incurred by it in compliance with such request or
direction;

 

(f)            the Trustee shall not be bound to make
any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, note or other paper documents, but the Trustee, in
its discretion, may and, upon the direction of a Majority of the Notes of the
Controlling Class, and each Rating Agency shall make such further inquiry or
investigation into such facts or matters as it may see fit or as it shall be
directed, and, the Trustee shall be entitled, on reasonable prior notice to the
Co-Issuers and the Collateral Manager, to examine the books and records
relating to the Securities and the Collateral and the premises of the Co-Issuers
and the Collateral Manager, personally or by agent or attorney during the Co-Issuers’
or the Collateral Manager’s normal business hours; provided, that the Trustee shall, and shall cause its
agents, to hold in confidence all such information, except (i) to the
extent disclosure may be required by law by any regulatory authority and (ii) to
the extent that the Trustee, in its sole judgment, may determine that such
disclosure is consistent with its obligations hereunder;

 

(g)           the Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys; provided,
that the Trustee shall not be responsible for any misconduct or negligence on
the part of any non-affiliated agent appointed and supervised, or non-affiliated
attorney appointed, with due care by it hereunder;

 

(h)           the Trustee shall not be liable for any
action it takes or omits to take in good faith that it reasonably believes to
be authorized or within its rights or powers hereunder; and

 

(i)            the permissive rights of the Trustee to
take or refrain from taking any action enumerated in this Indenture shall not
be treated as a duty.

 

Section 6.4.            Not
Responsible for Recitals or Issuance of Securities.

 

The recitals contained herein and in the Securities,
other than the Certificate of Authentication thereon, shall be taken as the
statements of the Applicable Issuer and the Trustee assumes no responsibility
for their correctness.  The Trustee makes
no representation as to the validity or sufficiency of this Indenture (except
as may be made with respect to the validity of the

 

130

 

Trustee’s obligations hereunder), the Collateral or the
Securities.  The Trustee shall not be
accountable for the use or application by the Co-Issuers of the Securities or
the proceeds thereof or any Money paid to the Co-Issuers pursuant to the
provisions hereof.

 

Section 6.5.            May Hold
Securities.

 

The Trustee, any Paying Agent, Security Registrar or
any other agent of the Co-Issuers, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal with the Co-Issuers
or any of their Affiliates with the same rights it would have if it were not
Trustee, Paying Agent, Security Registrar or such other agent.

 

Section 6.6.            Money
Held in Trust.

 

Money held by the Trustee hereunder shall be held in
trust to the extent required herein.  The
Trustee shall be under no liability for interest on any Money received by it
hereunder except as otherwise agreed upon with the Issuer and except to the
extent of income or other gain on investments which are deposits in or
certificates of deposit of the Trustee in its commercial capacity and income or
other gain actually received by the Trustee on Eligible Investments.

 

Section 6.7.            Compensation
and Reimbursement.

 

(a)           The Issuer agrees:

 

(i)            to pay the Trustee on each Payment Date
reasonable compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);

 

(ii)           except as otherwise expressly provided
herein, to reimburse the Trustee (subject to any written agreement between the
Issuer and the Trustee) in a timely manner upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including securities
transaction charges and the reasonable compensation and expenses and
disbursements of its agents and legal counsel and of any accounting firm or
investment banking firm employed by the Trustee pursuant to Section 5.4,
5.5 or 10.7, except any such expense, disbursement or advance as may be
attributable to its negligence, willful misconduct or bad faith); provided, that the securities transaction
charges referred to above shall, in the case of certain Eligible Investments
specified by the Collateral Manager, be waived to the extent of any amounts
received by the Trustee during a Due Period from a financial institution in
consideration of purchasing such Eligible Investments;

 

(iii)          to indemnify the Trustee and its
Officers, directors, employees and agents for, and to hold them harmless
against, any loss, liability or expense incurred without negligence, willful misconduct
or bad faith on their part, arising out of or in connection with the acceptance
or administration of this trust, including the costs and expenses of defending
themselves against any claim or liability in connection with the exercise or
performance of any of their powers or duties hereunder; and

 

131

 

(iv)          to pay the Trustee reasonable additional
compensation together with its expenses (including reasonable counsel fees) for
any collection action taken pursuant to Section 6.13 hereof.

 

(b)           The Trustee shall receive amounts
pursuant to this Section 6.7 as provided in Priority of Payments and the
Special Priority of Payments only to the extent that funds are available for
the payment thereof.  Subject to Section 6.9,
the Trustee shall continue to serve as Trustee under this Indenture
notwithstanding the fact that the Trustee shall not have received amounts due
it hereunder and hereby agrees not to cause the filing of a petition in
bankruptcy against the Co-Issuers for the nonpayment to the Trustee of any
amounts provided by this Section 6.7 until at least one year and one day
(or, if longer, the applicable preference period then in effect) after the
payment in full of all Securities (and the reduction of the Commitment in
respect of any Commitment Notes to zero) issued under this Indenture.  No direction by a Securityholder shall affect
the right of the Trustee to collect amounts owed to it under this Indenture.

 

If on any date when a fee shall be payable to the
Trustee pursuant to this Indenture insufficient funds are available for the
payment thereof, any portion of a fee not so paid shall be deferred and payable
on such later date on which a fee shall be payable and sufficient funds are
available therefor.

 

Section 6.8.            Corporate
Trustee Required; Eligibility.

 

There shall at all times be a Trustee hereunder which
shall be a corporation organized and doing business under the laws of the
United States of America or of any state thereof, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of at
least $200,000,000, subject to supervision or examination by federal or state
authority, having a long-term debt rating of at least “Baa1” by Moody’s and a
long-term debt rating of at least “BBB+” by S&P, and having an office
within the United States.  If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section 6.8, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.8, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article 6.

 

Section 6.9.            Resignation
and Removal; Appointment of Successor.

 

(a)           No resignation or removal of the Trustee
and no appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Trustee
under Section 6.10.  The
indemnification in favor of the Trustee in Section 6.7 hereof shall
survive any resignation or removal (to the extent of any indemnified
liabilities, costs, expenses and other amounts arising or incurred prior to, or
arising out of actions or omissions occurring prior to such resignation or
removal).

 

(b)           The Trustee may resign at any time by
giving notice thereof to the Co-Issuers, the Collateral Manager, the Holders of
Securities and each Rating Agency.  Upon
receiving such

 

132

 

notice of resignation, the Co-Issuers shall promptly appoint a
successor trustee or trustees by written instrument, in duplicate, executed by
an Authorized Officer of the Issuer and an Authorized Officer of the Co-Issuer,
one copy of which shall be delivered to the Trustee so resigning and one copy
to the successor trustee or trustees, together with a copy to each Holder of
Securities and the Collateral Manager; provided,
that such successor Trustee shall be appointed only upon the consent of a
Majority of the Securities or at any time when an Event of Default shall have
occurred and be continuing or when a successor trustee is appointed pursuant to
Section 6.10.  If no successor
trustee shall have been appointed and an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee, or any
Holder, on behalf of himself and all others similarly situated, may petition
any court of competent jurisdiction for the appointment of a successor Trustee
satisfying the requirements of Section 6.8.

 

(c)           The Trustee may be removed at any time by
Act of a Majority of the Notes at any time when an Event of Default shall have
occurred and be continuing or when a successor Trustee has been appointed pursuant
to Section 6.10, by Act of a Majority of the Notes of the Controlling
Class, delivered to the Trustee and to the Co-Issuers with a copy to S&P.

 

(d)           If at any time:

 

(i)            the Trustee shall cease to be eligible
under Section 6.8 and shall fail to resign after request therefor by the
Co-Issuers or by a Majority of the Notes of the Controlling Class; or

 

(ii)           the Trustee shall become incapable of
acting or shall be adjudged as bankrupt or insolvent or a receiver or
liquidator of the Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation,

 

then, in any such case (subject to Section 6.9(a)),
(A) the Co-Issuers, by Issuer Order, may remove the Trustee, or (B) subject
to Section 5.15, any Holder may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.

 

(e)           If the Trustee shall resign, be removed
or become incapable of acting, or if a vacancy shall occur in the office of the
Trustee for any reason, the Co-Issuers, by Issuer Order, shall promptly appoint
a successor Trustee.  If the Co-Issuers
shall fail to appoint a successor Trustee within 60 days after such
resignation, removal or incapability or the occurrence of such vacancy, a
successor Trustee may be appointed by Act of a Majority of the Notes of the
Controlling Class delivered to the Issuer and the retiring Trustee.  The successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede any successor Trustee proposed by the Co-Issuers.  If no successor Trustee shall have been so
appointed by the Co-Issuers or such Holders and shall have accepted appointment
in the manner hereinafter provided, subject to Section 5.15, any Holder
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee.

 

133

 

(f)            The Co-Issuers shall give prompt notice
of each resignation and each removal of the Trustee and each appointment of a
successor Trustee by mailing notice of such event by first class mail, postage
prepaid, to each Rating Agency and to the Holders of the Securities.  Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.  If the Co-Issuers fail to mail such notice
within 10 days after acceptance of appointment by the successor Trustee, the
successor Trustee shall cause such notice to be given at the expense of the
Co-Issuers.

 

Section 6.10.          Acceptance
of Appointment by Successor.

 

Every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to the Co-Issuers and the retiring Trustee an
instrument accepting such appointment. 
Upon delivery of the required instruments, the resignation or removal of
the retiring Trustee shall become effective and such successor Trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, trusts, duties and obligations of the retiring Trustee; but, on request
of the Co-Issuers or a Majority of any Class of Notes or the successor
Trustee, such retiring Trustee shall, upon payment of its charges then unpaid,
execute and deliver an instrument transferring to such successor Trustee all
the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer
and deliver to such successor Trustee all property and Money held by such
retiring Trustee hereunder, subject nevertheless to its lien, if any, provided
for in Section 6.7(b). Upon request of any such successor Trustee, the
Co-Issuers shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.

 

Section 6.11.          Merger,
Conversion, Consolidation or Succession to Business of Trustee.

 

Any corporation into which the Trustee may be merged
or converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the corporate
trust business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this Article 6,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided,
that the Trustee shall give notice thereof to the Co-Issuers, the Collateral
Manager, the Holders of Securities, and each Rating Agency.  In case any of the Securities have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.

 

Section 6.12.          Co-Trustees.

 

(a)           At any time or times, for the purpose of
meeting the legal requirements of any jurisdiction in which any part of the
Collateral may at the time be located, the Co-Issuers and the Trustee shall
have power to appoint one or more
Persons to act as co-trustee (subject to the written approval of the Rating
Agencies), jointly with the Trustee, of all or any part of the Collateral, with
the power to file such proofs of claim and take such other actions pursuant to

 

134

 

Section 5.6 herein and to make such claims and enforce such rights
of action on behalf of the Holders, as such Holders themselves may have the
right to do, subject to the other provisions of this Section 6.12.

 

The Co-Issuers shall join with the Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint a co-trustee.  If
the Co-Issuers do not join in such appointment within 15 days after the receipt
by them of a request to do so, the Trustee shall have the power to make such
appointment.

 

Should any written instrument from the Co-Issuers be
required by any co-trustee so appointed,
more fully confirming to such co-trustee such property, title, right or power,
any and all such instruments shall, on request, be executed, acknowledged and
delivered by the Co-Issuers.  The
Co-Issuers agree to pay (but only from and to the extent of the Collateral), to
the extent funds are available therefor under the Priority of Payments or the
Special Priority of Payments for any reasonable fees and expenses in connection
with such appointment.

 

(b)           Every co-trustee shall,
to the extent permitted by law, but to such extent only, be appointed subject
to the following terms:

 

(i)            the Notes shall be authenticated and
delivered and all rights, powers, duties and obligations hereunder in respect
of the custody of securities, Cash and other personal property held by, or
required to be deposited or pledged with, the Trustee hereunder, shall be
exercised solely by the Trustee;

 

(ii)           the rights, powers, duties and
obligations hereby conferred or imposed upon the Trustee in respect of any
property covered by the appointment of a co-trustee shall be conferred or
imposed upon and exercised or performed by the Trustee or by the Trustee and
such co-trustee jointly as shall be provided in the instrument appointing such
co-trustee;

 

(iii)          the Trustee at any time, by an instrument
in writing executed by it, with the concurrence of the Co-Issuers evidenced by
an Issuer Order, may accept the resignation of or remove any co-trustee
appointed under this Section 6.12, and in case an Event of Default has
occurred and is continuing, the Trustee shall have the power to accept the
resignation of, or remove, any such co-trustee without the concurrence of the
Co-Issuers.  A successor to any co-trustee so resigned or removed may be appointed in the manner
provided in this Section 6.12;

 

(iv)          no co-trustee hereunder
shall be personally liable by reason of any act or omission of the Trustee
hereunder;

 

(v)           the Trustee shall not be liable by reason
of any act or omission of a co-trustee; and

 

(vi)          any Act of Securityholders delivered to
the Trustee shall be deemed to have been delivered to each co-trustee.

 

135

 

Section 6.13.          Certain
Duties of Trustee Related to Delayed Payment of Proceeds.

 

In the event that in any month the Trustee shall not
have received a payment with respect to any Pledged Security on its Due Date, (a) the
Trustee shall promptly notify the Issuer and the Collateral Manager and (b) unless
within three Business Days (or the end of the applicable grace period for
such payment, if longer) after such notice such payment shall have been
received by the Trustee, or the Issuer, in its absolute discretion (but only to
the extent permitted by Section 10.2(a)), shall have made provision for
such payment satisfactory to the Trustee in accordance with Section 10.2(a),
the Trustee shall request the issuer of such Pledged Security, the trustee
under the related Underlying Instrument or paying agent designated by either of
them, as the case may be, to make such payment as soon as practicable after
such request but in no event later than three Business Days after the date of
such request.  In the event that such
payment is not made within such time period, the Trustee, subject to the
provisions of clause (iv) of Section 6.1(c), shall take such action
as the Collateral Manager shall direct. 
Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture.  In the event that the Issuer or the
Collateral Manager requests a release of a Pledged Security and/or delivers a
Collateral Debt Security in connection with any such action under the
Collateral Management Agreement, such release and/or substitution shall be
subject to Section 10.6 and Article 12 of this Indenture, as the case
may be.  Notwithstanding any other
provision hereof, the Trustee shall deliver to the Issuer or its designee any
payment with respect to any Pledged Security or any substituted Collateral Debt
Security received after the Due Date thereof to the extent the Issuer
previously made provisions for such payment satisfactory to the Trustee in accordance
with this Section 6.13 and Section 10.2(a) and such payment
shall not be deemed part of the Collateral.

 

Section 6.14.          Authenticating
Agents.

 

Upon the request of the Co-Issuers, the Trustee shall,
and if the Trustee so chooses the Trustee may, appoint one or more
Authenticating Agents with power to act on its behalf and subject to its
direction in the authentication of Securities in connection with issuance,
transfers and exchanges under Sections 2.4, 2.5, 2.6 and 8.5, as fully to all
intents and purposes as though each such Authenticating Agent had been
expressly authorized by such Sections to authenticate such Securities.  For all purposes of this Indenture, the
authentication of Securities by an Authenticating Agent pursuant to this Section 6.14
shall be deemed to be the authentication of Securities “by the Trustee.”

 

Any corporation into which any Authenticating Agent
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to the
corporate trust business of any Authenticating Agent, shall be the successor of
such Authenticating Agent hereunder, without the execution or filing of any further
act on the part of the parties hereto or such Authenticating Agent or such
successor corporation.

 

Any Authenticating Agent may at any time resign by
giving written notice of resignation to the Trustee and the Co-Issuers.  The Trustee may at any time terminate the
agency of any Authenticating Agent by giving written notice of termination to
such Authenticating Agent and

 

136

 

the Applicable Issuer.  Upon
receiving such notice of resignation or upon such a termination, the Trustee
shall promptly appoint a successor Authenticating Agent and shall give written
notice of such appointment to the Co-Issuers.

 

The Trustee agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services, and reimbursement
for its reasonable expenses relating thereto and the Trustee shall be entitled
to be reimbursed for such payments, subject to Section 6.7.  The provisions of Sections 2.9, 6.4 and 6.5
shall be applicable to any Authenticating Agent.

 

Section 6.15.          Fiduciary
for Noteholders Only; Agent for all other Secured Parties.

 

With respect to the security interests created
hereunder, the pledge of any item of Collateral to the Trustee is to the
Trustee as representative of the Noteholders and agent for each of the other
Secured Parties; in furtherance of the foregoing, the possession by the Trustee
of any item of Collateral, the endorsement to or registration in the name of
the Trustee of any item of Collateral (including as entitlement holder of the
Accounts) are all undertaken by the Trustee in its capacity as representative
of the Noteholders and agent for each of the other Secured Parties.  The Trustee shall have no fiduciary duties to
any of the other Secured Parties.  The
foregoing shall not limit any of the express obligations of the Trustee under
this Indenture.

 

Section 6.16.          Representations and Warranties of the Bank.

 

The Bank hereby represents and warrants as follows:

 

(a)           Organization.  The
Bank has been duly organized and is validly existing as a national banking
association and has the power to conduct its business and affairs as a trustee.

 

(b)           Authorization; Binding Obligations.  The
Bank has the corporate power and authority to perform the duties and
obligations of Trustee under this Indenture. 
The Bank has taken all necessary corporate action to authorize the
execution, delivery and performance of this Indenture, and all of the documents
required to be executed by the Bank pursuant hereto.  Upon execution and delivery by the Bank, this
Indenture will constitute the legal, valid and binding obligation of the Bank
enforceable in accordance with its terms.

 

137

 

(c)           Eligibility.  The Bank is eligible under Section 6.8
hereof to serve as Trustee hereunder.

 

(d)           No Conflict.  Neither the execution,
delivery and performance of this Indenture, nor the consummation of the
transactions contemplated by this Indenture, (i) is prohibited by, or
requires the Bank to obtain any consent, authorization, approval or
registration under, any law, statute, rule, regulation, judgment, order, writ,
injunction or decree that is binding upon the Bank or any of its properties or
assets, or (ii) will violate any provision of, result in any default or acceleration
of any obligations under, result in the creation or imposition of any lien
pursuant to, or require any consent under, any material agreement to which the
Bank is a party or by which it or any of its property is bound.

 

ARTICLE 7

 

COVENANTS

 

Section 7.1.            Payment
of Principal and Interest.

 

(a)           The Applicable Issuer will duly and
punctually pay the principal of and interest (including Interest Proceeds on
the Subordinated Notes) on the Securities and any Commitment Fees, Revolving
Note Increased Costs and Revolving Note Tax Gross-Up Amounts in accordance with
the terms of such Securities and this Indenture.  Amounts properly withheld under the Code or
other applicable law by any Person from a payment to any Holder of such amounts
shall be considered as having been paid by the Issuer and the Co-Issuer, as
applicable, to such Holder for all purposes of this Indenture.

 

(b)           Failure of a Holder of a Security to
provide the Trustee or any Paying Agent and the Issuer with appropriate tax
certifications may result in amounts being withheld from the payment to such
Holders.

 

(c)           All payments under any Revolving Notes to
any Holder thereof will be made by the Issuer without any deduction or
withholding for or on account of any Tax unless such deduction or withholding
is required by any applicable law, as modified by the practice of any relevant
governmental revenue authority, then in effect. If the Issuer is so required to
deduct or withhold, then the Issuer will: (i) notify the Trustee (which
will notify each affected Holder) of such requirement no later than ten days
prior to the date of the payment from which amounts are required to be withheld
(provided that, despite the
failure of the Issuer to give such notice, amounts withheld pursuant to
applicable laws shall be considered as having been paid by the Co-Issuers as
provided above); (ii) pay to the relevant authorities the full amount
required to be deducted or withheld (including the full amount required to be
deducted or withheld from any additional amount paid by the Issuer to an
affected Holder by reason of clause (iv) below) promptly upon the earlier
of determining that such deduction or withholding is required or receiving
notice that such amount has been assessed against the affected Holder; (iii) promptly
forward to the affected Holder documentation reasonably acceptable to the
affected Holder evidencing such payment to such authorities; and (iv) if
such Tax is an Indemnifiable Tax, pay to the affected Holder the additional
amount (a “Revolving Note Tax Gross-Up Amount”)

 

138

 

necessary to ensure that the net amount received by the affected Holder
after deduction or withholding of such Indemnifiable Tax equals the full amount
the affected Holder would have received had no such deduction or withholding
been required.

 

Section 7.2.            Maintenance
of Office or Agency.

 

The Co-Issuers hereby appoint the Trustee as a Paying
Agent for payments with respect to the Securities and the Co-Issuers hereby
appoint the Bank, at its New York City office located at 4 New York Plaza,
Ground Floor, New York, NY 10004, Attention: 
Institutional Trust Services (Houston) – KKR Financial CLO 2005-1, as
their agent where notices and demands to or upon the Issuer or the Co-Issuer in
respect of the Securities or this Indenture may be served and where Securities
may be surrendered for registration of transfer or exchange.

 

The Issuer shall, upon listing of any Securities on
the Irish Stock Exchange, appoint RSM Robson Rhodes LLP in Dublin, Ireland as a
Paying Agent in Ireland for the payment of amounts due on the Securities; provided, that unless such Paying Agent
shall be rated “P-1” by Moody’s and “A-1+” by S&P, it may not hold funds
pursuant to this Indenture overnight.

 

The Issuer may at any time and from time to time vary
or terminate the appointment of any such agent or appoint any additional agents
for any or all of such purposes; provided,
however, that the Issuer will maintain in the Borough of Manhattan,
The City of New York, an office or agency where notices and demands to or upon
the Issuer in respect of the Securities and this Indenture may be served and,
where the Securities may be presented and surrendered for payment; provided, further, that no paying agent
shall be appointed in a jurisdiction which subjects payments on the Securities
to withholding tax; and provided, further,
that so long as any of the Securities are listed on the Irish Stock Exchange
and such stock exchange shall so require, the Co-Issuers shall maintain a Paying
Agent in Ireland.  The Co-Issuers shall give prompt notice to
the Trustee, each Rating Agency, and the Holders of Securities of the
appointment or termination of any such Paying Agent or agent for notices and of
the location and any change in the location of any such office or agency.

 

If at any time the Co-Issuers shall fail to maintain
any such required office or agency in the Borough of Manhattan, The City of New
York, or shall fail to furnish the Trustee with the address thereof,
presentations and surrenders may be made (subject to the limitations described
in the preceding paragraph) at and notices and demands may be served on the
Co-Issuers, and Securities may be presented and surrendered for payment to the
appropriate Paying Agent at its main office and the Co-Issuers hereby appoint
each Paying Agent as their agent to receive such respective presentations,
surrenders, notices and demands.

 

Section 7.3.            Money
for Payments to be Held in Trust.

 

All payments of amounts due and payable with respect to
any Securities that are to be made from amounts withdrawn from the Payment
Account shall be made on behalf of the Applicable Issuer by the Trustee or a
Paying Agent with respect to payments on the Securities.

 

139

 

When the Applicable Issuer shall have a Paying Agent
that is not also the Security Registrar, they shall furnish, or cause the
Security Registrar to furnish, no later than the fifth calendar day after each
Record Date a list, if necessary, in such form as such Paying Agent may
reasonably request, of the names and addresses of the Holders and of the
certificate numbers of individual Securities held by each such Holder.

 

Whenever the Applicable Issuer shall have a Paying
Agent other than the Trustee, they shall, on or before the Business Day next
preceding each Payment Date or Redemption Date, as the case may be, direct the
Trustee to deposit on such Payment Date with such Paying Agent, if necessary,
an aggregate sum sufficient to pay the amounts then becoming due with respect
to the Classes of Securities for which it acts as Paying Agent (to the extent
funds are then available for such purpose in the Payment Account), such sum to
be held in trust for the benefit of the Persons entitled thereto and (unless
such Paying Agent is the Trustee) the Applicable Issuer shall promptly notify
the Trustee of its action or failure so to act. 
Any Monies deposited with a Paying Agent with respect to the Classes of
Securities for which it acts as Paying Agent (other than the Trustee) in excess
of an amount sufficient to pay the amounts then becoming due on the applicable
Securities with respect to which such deposit was made shall be paid over by
such Paying Agent to the Trustee for application in accordance with Article 10.

 

The initial Paying Agent for the Securities shall be
as set forth in Section 7.2.  Any
additional or successor Paying Agents shall be appointed by Issuer Order with
written notice thereof to the Trustee; provided,
however, that, so long as any Securities are rated by a Rating
Agency, with respect to any additional or successor Paying Agent, either (i) such
Paying Agent has a rating of “Aa3” or higher or “P–1” by Moody’s and “AA” or
higher or “A-1+” by S&P, or (ii) Rating Agency Confirmation shall have
been received.  In the event that such
successor Paying Agent ceases to have any such rating, and Rating Agency
Confirmation is not received, the Co-Issuers shall promptly remove such Paying
Agent and appoint a successor Paying Agent. The Co-Issuers shall not appoint
any Paying Agent (other than the initial Paying Agent or any Paying Agent in
Ireland) that is not, at the time of such appointment, a depository institution
or trust company subject to supervision and examination by federal and/or state
and/or national banking authorities.  The
Co-Issuers shall cause each Paying Agent other than the Trustee to execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee (and if the Trustee acts as Paying Agent, it hereby so
agrees), subject to the provisions of this Section 7.3, that such Paying
Agent will:

 

(a)           allocate all sums received for payment to
the Holders of Securities for which it acts as Paying Agent on each Payment
Date and Redemption Date among such Holders in the proportion specified in the
applicable report to the extent permitted by applicable law;

 

(b)           hold all sums held by it for the payment
of amounts due with respect to the Securities in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such Persons as
herein provided;

 

(c)           if such Paying Agent is not the Trustee,
immediately resign as a Paying Agent and forthwith pay to the Trustee all sums
held by it in trust for the payment of Securities if at any

 

140

 

time it ceases to meet the standards set forth above required to be met
by a Paying Agent at the time of its appointment;

 

(d)           if such Paying Agent is not the Trustee,
immediately give the Trustee notice of any Default by the Issuer or the Co-Issuer
(or any other obligor upon the Securities) in the making of any payment
required to be made; and

 

(e)           if such Paying Agent is not the Trustee
at any time during the continuance of any such Default, upon the request of the
Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying
Agent.

 

The Applicable Issuer may at any time, for the purpose
of obtaining the satisfaction and discharge of this Indenture or for any other
purpose, pay, or by Issuer Order direct any Paying Agent to pay, to the Trustee
all sums held in trust by the Applicable Issuer or such Paying Agent, such sums
to be held by the Trustee upon the same trusts as those upon which such sums
were held by the Applicable Issuer or such Paying Agent; and, upon such payment
by any Paying Agent to the Trustee, such Paying Agent shall be released from
all further liability with respect to such Money.

 

Any Money deposited with the Trustee or any Paying
Agent in trust for the payment on any Securities and remaining unclaimed for
two years after such amounts have become due and payable will be paid to the
Applicable Issuer on Issuer Order; and the Holder of such Security will
thereafter, as an unsecured general creditor, look only to the Applicable
Issuer for payment of such amounts and all liability of the Trustee or such
Paying Agent with respect to such trust Money (but only to the extent of the
amounts so paid to the Applicable Issuer) shall thereupon cease.  The Trustee or such Paying Agent, before
being required to make any such release of payment, may, but shall not be
required to, adopt and employ, at the expense of the Co-Issuers, any reasonable
means of notification of such release of payment, including, but not limited
to, mailing notice of such release to Holders whose Securities have been called
but have not been surrendered for redemption or whose right to or interest in
Monies due and payable but not claimed is determinable from the records of any
Paying Agent, at the last address of record of each such Holder.

 

Section 7.4.            Existence
of Co-Issuers.

 

(a)           To the extent possible under applicable
laws, the Issuer and the Co-Issuer shall maintain in full force and effect
their existence and rights as companies incorporated under the laws of the
Cayman Islands and organized under the laws of the State of Delaware,
respectively, and shall obtain and preserve their qualification to do business
as foreign corporations in each jurisdiction in which such qualifications are
or shall be necessary to protect the validity and enforceability of this
Indenture, the Securities or any of the Collateral; provided, however, that the Issuer and the Co-Issuer shall
be entitled to change its jurisdiction of incorporation from the Cayman Islands
and the State of Delaware, respectively, to any other jurisdiction reasonably
selected by the Issuer or the Co-Issuer, respectively, so long as (i) such
change is not disadvantageous in any material respect to any of the Holders of
the Securities, (ii) notice of such change shall have been given by the
Trustee to the Holders of the Securities and each Rating

 

141

 

Agency and (iii) on or prior to the fifteenth Business Day
following such notice the Trustee shall not have received notice from a
Majority of the Notes of the Controlling Class objecting to such change;
and provided, further,
that the Issuer shall be entitled to take any action required by this Indenture
within the United States notwithstanding any provision of this Indenture
requiring the Issuer to take such action outside of the United States so long
as prior to taking any such action the Issuer receives a legal opinion from
nationally recognized counsel to the effect that it is not necessary to take
such action outside of the United States or any political subdivision thereof
in order to prevent the Issuer from becoming subject to any United States
federal, state or local withholding or other taxes.

 

(b)           The Issuer and the Co-Issuer shall ensure
that all corporate or other formalities regarding their respective existences
(including holding regular board of directors’ and shareholders’ meetings) are
followed.  Neither the Issuer nor the Co-Issuer
shall take any action, or conduct its affairs in a manner, that is likely to
result in its separate existence being ignored or its assets and liabilities
being substantively consolidated with any other Person in a bankruptcy,
reorganization or other insolvency proceeding. 
Without limiting the foregoing, (i) the Issuer shall not have any
subsidiaries, (ii) the Co-Issuer shall not have any subsidiaries, and (iii) the
Issuer and the Co-Issuer shall not (A) have any employees (other than
their respective directors) or (B) except as contemplated by the
Collateral Management Agreement or the Administration Agreement, engage in any
transaction with any shareholder that would constitute a conflict of interest.

 

Section 7.5.            Protection
of Collateral.

 

(a)           The Collateral Manager, on behalf of the
Issuer, shall take or cause to be taken such action within the Collateral
Manager’s control as is reasonably necessary in order to maintain the
perfection and priority of the security interest of the Trustee in the Collateral
and shall from time to time execute and deliver all such supplements and
amendments hereto and all such Financing Statements, continuation statements,
instruments of further assurance and other instruments, and shall take such
other action as may be necessary or advisable or desirable to secure the rights
and remedies of the Secured Parties hereunder and to:

 

(i)            Grant more effectively all or any portion
of the Collateral;

 

(ii)           maintain, preserve and perfect any Grant
made or to be made by this Indenture including, without limitation, the first
priority nature of the lien or to carry out more effectively the purposes
hereof;

 

(iii)          perfect, publish notice of or protect the
validity of any Grant made or to be made by this Indenture (including, without
limitation, any and all actions necessary or desirable as a result of changes
in law or regulations);

 

(iv)          enforce any of the Pledged Securities or
other instruments or property included in the Collateral;

 

142

 

(v)           preserve and defend title to the
Collateral and the rights therein of the Trustee, and the Secured Parties
against the claims of all Persons and parties; or

 

(vi)          pay or cause to be paid any and all taxes
levied or assessed upon all or any part of the Collateral.

 

The Issuer hereby appoints the Trustee its agent and
attorney-in-fact for the purpose of preparing, executing and filing (i) a
Financing Statement in connection with the Grant pursuant to this Indenture
identifying as collateral “all assets in which the Issuer now or hereafter has
rights” and (ii) any other Financing Statement, continuation statement or
other instrument, as such may be required pursuant to an Issuer Order; provided that such appointment shall not
impose upon the Trustee any of the Issuer’s or Collateral Manager’s obligations
under this Section 7.5.

 

(b)           The Trustee shall not, except in
accordance with Section 10.6(a), (b) or (c), as applicable, permit
the removal of any portion of the Collateral or transfer any portion of the
Collateral from the Account to which it is credited, or cause or permit any
change in the notice, delivery or registration made pursuant to Section 3.3
with respect to any general intangible or participation, as applicable, if
after giving effect thereto the jurisdiction governing the perfection of
security interest by the Trustee in such Collateral is different from the
jurisdiction governing perfection at the time of delivery of the most recent
Opinion of Counsel pursuant to Section 7.6 (or, if no Opinion of Counsel
has yet been delivered pursuant to Section 7.6, the Opinion of Counsel
delivered at the Closing Date pursuant to Section 3.1(c)), unless the
Trustee shall have first received an Opinion of Counsel to the effect that the
lien and security interest created by this Indenture with respect to such
property will continue to be maintained after giving effect to such action or
actions.

 

(c)           The Issuer shall pay or cause to be paid
taxes, if any, levied on account of the beneficial ownership by the Issuer of
any Pledged Securities that secure the Securities.

 

(d)           The Issuer shall enforce all of its
material rights and remedies under the Collateral Management Agreement, Note
Purchase Agreement (if any) and the Collateral Administration Agreement.

 

Section 7.6.            Opinions
as to Collateral.

 

For so long as any Rated Notes are Outstanding, on or
before March 31 in each calendar year, commencing in the calendar
year that begins at least nine months after Closing Date, the Issuer shall furnish to the Trustee
and Moody’s an Opinion of Counsel stating that, in the opinion of such counsel,
as of the date of such opinion, the lien and security interest created by this
Indenture with respect to the Collateral remains in effect, confirming the
matters set forth in the Opinion of Counsel furnished pursuant to Section 3.1(c),
with regard to the perfection and priority of such security interest and
stating that no further action (other than as specified in such Opinion of
Counsel) needs to be taken (under the UCC) to ensure the continued
effectiveness and perfection of such lien and security interest until June 30
in the following calendar year.

 

143

 

Section 7.7.            Performance
of Obligations.

 

The Co-Issuers may contract with other Persons,
including the Collateral Manager and the Collateral Administrator, for the
performance of actions and obligations to be performed by the Co-Issuers
hereunder by such Persons and the performance of the actions and other
obligations with respect to the Collateral as set forth in the Collateral
Management Agreement and the Collateral Administration Agreement, respectively. 
Notwithstanding any such arrangement, the Co-Issuers shall remain
primarily liable with respect thereto. 
In the event of such contract, the performance of such actions and
obligations by such Persons shall be deemed to be performance of such actions
and obligations by the Co-Issuers; and the Co-Issuers will punctually perform,
and use their best efforts to cause the Collateral Manager, the Collateral
Administrator or such other Person to perform, all of its obligations and
agreements contained in the Collateral Management Agreement, the Collateral Administration
Agreement or such other agreement.

 

Section 7.8.            Negative
Covenants.

 

(a)           The Issuer will not and, with respect to
clauses (ii), (iii), (iv) and (v) hereof, the Co-Issuer will not,
except, in each case, as expressly permitted by this Indenture:

 

(i)            sell, transfer, exchange or otherwise
dispose of, or pledge, mortgage, hypothecate or otherwise encumber (or permit
such to occur or suffer such to exist), any part of the Collateral;

 

(ii)           claim any credit on, or make any
deduction from, or dispute the enforceability of the amounts payable in respect
to the Securities (other than amounts withheld in accordance with the Code or
any applicable laws of the Cayman Islands) or assert any claim against any
present or future Securityholder, by reason of the payment of any taxes levied
or assessed upon any part of the Collateral;

 

(iii)          (A) incur or assume or guarantee any
indebtedness, other than the Securities (including any Replacement Notes) and
this Indenture and the transactions contemplated hereby, or (B)(1) issue
any additional class of securities (other than any Replacement Notes), or (2) issue
any additional shares, in the case of the Issuer, or shares of stock, in the
case of the Co-Issuer;

 

(iv)          (A) permit the validity or
effectiveness of this Indenture or any Grant hereunder to be impaired, or
permit the lien of this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to this Indenture or the Securities,
except as may be expressly permitted hereby, or by the Collateral Management
Agreement, (B) permit any lien, charge, adverse claim, security interest,
mortgage or other encumbrance (other than the lien of this Indenture and, in
the case of Synthetic Security Collateral, the lien in favor of the related
Synthetic Security Counterparty) to be created on or extend to or otherwise
arise upon or burden the Collateral or any part thereof, any interest therein
or the proceeds thereof, or (C) take any action that would permit the lien
of this Indenture not to constitute a valid first priority security

 

144

 

interest in the Collateral (or, in the case of Synthetic Security
Collateral, a second priority security interest subject only to the lien in
favor of the related Synthetic Security Counterparty);

 

(v)           for so long as any of the Securities are
Outstanding, the Issuer shall not register the transfer of any ordinary shares
of the Issuer to U.S. persons and the Co-Issuer shall not transfer any stock of
the Co-Issuers to U.S. Persons; or

 

(vi)          except for any agreements involving the
purchase and sale of Collateral Debt Securities having customary purchase or
sale terms and documented with customary loan trading documentation (but not
excepting any investment in a Synthetic Security or any Hedge Agreement), enter
into any agreements that provide for a material financial obligation on the
part of the Issuer unless such agreements contain “non-petition” and “limited
recourse” provisions, or amend any such provisions unless Rating Agency
Confirmation is received from S&P.

 

(b)           Neither the Issuer nor the Trustee shall
sell, transfer, exchange or otherwise dispose of Collateral, or enter into or
engage in any business with respect to any part of the Collateral except as
expressly permitted by this Indenture and the Collateral Management Agreement.

 

(c)           The Co-Issuer will not invest any of its
assets in “Securities” as such term is defined in the Investment Company Act,
and will keep all of its assets in Cash.

 

Section 7.9.            Statement
as to Compliance.

 

On or before March 31 in each calendar year, commencing in
the calendar year that begins at least nine months after Closing Date, or immediately if there has been a Default
under this Indenture, the Issuer shall deliver to the Trustee, the Collateral
Manager, each Holder or Certifying Holder upon request, and each Rating Agency,
an Officer’s certificate stating, as to each signer thereof, that:

 

(a)           a review of the activities of the Issuer
and of the Issuer’s performance under this Indenture during the prior calendar
year (or from the Closing Date until the following December 31st, in the
case of the first such Officer’s certificate) has been made under his or her
supervision; and

 

(b)           to the best of his or her knowledge,
based on such review, no Default, Event of Default, or other matter required to
be brought to the Trustee’s attention has occurred during such year, or, if
there has been a Default, Event of Default, or other matter required to be
brought to the Trustee’s attention, specifying each such Default, Event of
Default or other matter known to him and the nature and status thereof.

 

Section 7.10.          Co-Issuers
May Consolidate, etc., Only on Certain Terms.

 

Neither the Issuer nor the Co–Issuer (as applicable,
the “Merging Entity”) shall consolidate or merge with or into any other
Person or transfer or convey all or substantially all of its assets to any
Person, unless permitted by Cayman Islands law (in the case of the Issuer) or
United States and Delaware law (in the case of the Co–Issuer) and unless:

 

145

 

(a)           the Merging Entity shall be the surviving
corporation, or the Person (if other than the Merging Entity) formed by such
consolidation or into which the Merging Entity is merged or to which all or
substantially all of the assets of the Merging Entity are transferred (the “Successor”)
shall be a company incorporated and existing under the laws of the Cayman
Islands (in the case of the Issuer) or Delaware (in the case of the Co–Issuer)
or such other jurisdiction approved by a Majority of the Notes of the
Controlling Class; provided, that
no such approval shall be required in connection with any such transaction
undertaken solely to effect a change in the jurisdiction of incorporation
pursuant to Section 7.4; provided,
further, that such Person shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, each Securityholder
and the Collateral Manager, the due and punctual payment of principal, interest
on, any Commitment Fees, any Revolving Note Increased Costs and any Revolving
Note Tax Gross-Up Amounts and other payments on all Securities and the
performance of every covenant of this Indenture on its part to be performed or
observed, all as provided herein;

 

(b)           with respect to such consolidation or
merger, the Trustee shall have received Rating Agency Confirmation;

 

(c)           if the Merging Entity is not the
surviving corporation, the Successor shall have agreed with the Trustee (A) to
observe the same legal requirements for the recognition of such formed or
surviving corporation as a legal entity separate and apart from any of its
Affiliates as are applicable to the Merging Entity with respect to its
Affiliates and (B) not to consolidate or merge with or into any other
Person or transfer or convey  the
Collateral or all or substantially all of its assets to any other Person except
in accordance with the provisions of this Section 7.10;

 

(d)           if the Merging Entity is not the
surviving corporation, the Successor shall have delivered to the Trustee and
each Rating Agency an Officer’s certificate and an Opinion of Counsel each
stating that such Person shall be duly organized, validly existing and in good
standing in the jurisdiction in which such Person is organized; that such
Person has sufficient power and authority to assume the obligations set forth
in subsection (a) above and to execute and deliver an indenture
supplemental hereto for the purpose of assuming such obligations; that such
Person has duly authorized the execution, delivery and performance of an
indenture supplemental hereto for the purpose of assuming such obligations and
that such supplemental indenture is a valid, legal and binding obligation of
such Person, enforceable in accordance with its terms, subject to bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors’
rights generally and to general principles of equity (regardless of whether in
a proceeding in equity or at law); that, if the Merging Entity is the Issuer,
immediately following the event which causes such Person to become the
successor to the Merging Entity, (A) such Person has good and marketable
title, free and clear of any lien, security interest or charge, other than the
lien and security interest of this Indenture, to the Collateral (or in the case
of Synthetic Security Collateral, a second priority security interest subject
only to the lien in favor of the related Synthetic Security Counterparty)
securing, in the case of a consolidation or merger of the Issuer, all of the
Securities or, in the case of any transfer or conveyance of the Collateral
securing any of the Securities, such Securities, (B) the Trustee continues
to have a valid perfected first priority security interest in the Collateral
and (C) such other matters as the Trustee or any Holder of Securities may
reasonably require;

 

146

 

(e)           immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;

 

(f)            the Merging Entity shall have notified
each Rating Agency of such consolidation, merger, transfer or conveyance and
shall have delivered to the Trustee and each Holder of Securities an Officer’s
certificate and an Opinion of Counsel each stating that such consolidation,
merger, transfer or conveyance and such supplemental indenture comply with this
Article 7 and that all conditions precedent in this Article 7
relating to such transaction have been complied with and that no adverse tax
consequences will result therefrom to the Holders of the Securities;

 

(g)           after giving effect to such transaction,
neither of the Co-Issuers will be required to register as an investment company
under the Investment Company Act; and

 

(h)           after giving effect to such transaction,
the outstanding stock of the Merging Entity 
will not be beneficially owned within the meaning of the Investment
Company Act by any U.S. Person.

 

Section 7.11.          Successor
Substituted.

 

Upon any consolidation or merger, or transfer or
conveyance of all or substantially all of the assets of the Issuer or the
Co-Issuer, in accordance with Section 7.10 hereof, in which the Merging
Entity is not the surviving entity, the Successor shall succeed to, and be
substituted for, and may exercise every right and power of, and shall be bound
by each obligation and covenant of, the Merging Entity, under this Indenture
with the same effect as if such Person had been named as the Issuer or the
Co-Issuer, as the case may be, herein. 
In the event of any such consolidation, merger, transfer or conveyance,
the Person named as the “Issuer” or the “Co-Issuer” in the first paragraph of
this Indenture or any successor which shall theretofore have become such in the
manner prescribed in this Article 7 may be dissolved, wound-up and
liquidated at any time thereafter, and such Person thereafter shall be released
from its liabilities as obligor and maker on all the Securities and from its
obligations under this Indenture.

 

Section 7.12.          No
Other Business.

 

From and after the Closing Date, the Issuer shall not
engage in any business or activity other than issuing and selling the
Securities (including any Replacement Notes) pursuant to this Indenture and
acquiring, owning, holding and pledging Collateral Debt Securities and other
Collateral in connection therewith and lending Collateral Debt Securities
pursuant to a Securities Lending Agreement, and the Co-Issuer shall not engage
in any business or activity other than issuing and selling the Securities
(including any Replacement Notes) pursuant to this Indenture, and with respect
to the Issuer and the Co-Issuer, such other activities which are necessary,
suitable or convenient to accomplish the foregoing or are incidental thereto or
connected therewith.  The Issuer and the
Co-Issuer will not amend their Memorandum of Association or Articles of
Association and Certificate of Incorporation or By-laws, respectively, without
receiving Rating Agency Confirmation.

 

147

 

Section 7.13.          Listing.

 

So long as any listed Securities remain Outstanding,
the Co-Issuers shall use all reasonable efforts to maintain the listing of such
listed Securities on the Irish Stock Exchange (and/or such other stock exchange
on which Securities are issued in connection with the initial offering of the
Securities or any Replacement Notes); provided,
however, that the Issuer will not be required to maintain a listing
on a stock exchange in the European Union if compliance with requirements of
the European Commission or a relevant member state becomes burdensome in the
sole judgment of the Collateral Manager.

 

Section 7.14.          Reaffirmation
of Ratings; Annual Rating Review.

 

(a)           The Issuer will request each Rating
Agency to confirm, within 15 Business Days after the Effective Date, that it
has not reduced or withdrawn the ratings assigned by it on the Closing Date to
the Rated Notes.

 

(b)           So long as any
of the Rated Notes remain Outstanding, on or before March 31 in each
calendar year, commencing in the calendar year that begins at least nine months
after Closing Date, the Co-Issuers shall request and pay for the ongoing
surveillance of the rating of the Rated Notes by each of the Rating Agencies.  The Co-Issuers shall notify promptly each of
the Trustee (which shall notify promptly the Holders) and the Irish Stock
Exchange (if and for so long as any Class of Securities is listed on the
Irish Stock Exchange) if at any time the rating of any of the Classes of Rated
Notes has been changed or withdrawn.

 

Section 7.15.          Reporting.

 

At any time when the Co-Issuers are not subject to Section 13
or 15(d) of the Exchange Act and are not exempt from reporting pursuant to
Rule 12g3-2(b) under the Exchange Act, upon the request of a Holder
or beneficial owner of a Security, the Co-Issuers shall promptly furnish or
cause to be furnished Rule 144A Information to such Holder or beneficial
owner, to a prospective purchaser of such Security designated by such Holder or
beneficial owner or to the Trustee for delivery to such Holder or beneficial
owner or a prospective purchaser designated by such Holder or beneficial owner,
as the case may be, in order to permit compliance by such Holder or beneficial
owner with Rule 144A in connection with the resale of such Security by
such Holder or beneficial owner.  “Rule 144A
Information” shall be such information as is specified pursuant to Rule 144A(d)(4) under
the Securities Act (or any successor provision thereto).

 

Section 7.16.          Calculation
Agent.

 

(a)           The Co-Issuers hereby agree that for so
long as any Floating Rate Notes remain Outstanding there will at all times be
an agent (which is not an Affiliate of the Issuer or the Collateral Manager) appointed to calculate LIBOR in respect
of each Interest Accrual Period in accordance with the terms of Schedule C
hereto (the ”Calculation Agent”). 
The Co-Issuers have initially appointed the Trustee as Calculation Agent
for purposes of determining LIBOR for each Interest Accrual Period.  The Calculation Agent may be removed by the
Co-Issuers at any time.

 

148

 

If the Calculation Agent is unable or unwilling to act as such or is
removed by the Co-Issuers or fails to determine any of the information required
to be calculated pursuant to subsection (b), the Co-Issuers will promptly
appoint a replacement Calculation Agent that does not control or is not
controlled by or under common control with the Co-Issuers or their
Affiliates.  No resignation or removal of
the Calculation Agent shall be effective without a successor having been duly
appointed.

 

(b)           The Calculation Agent shall be required
to agree that, as soon as possible after 11:00 a.m. (London time) on each
LIBOR Determination Date (as defined in Schedule C hereto), but in no
event later than 11:00 a.m. (London time) on the LIBOR Business Day
immediately following each LIBOR Determination Date, the Calculation Agent will
calculate the Floating Rates for the Interest Accrual Period and the Floating
Amounts (rounded to the nearest cent, with half a cent being rounded upwards)
on the related Payment Date, and will communicate such rates and amounts to the
Co-Issuers, the Trustee, the Collateral Manager, Euroclear, Clearstream and
each Paying Agent.  The Calculation Agent
will also specify to the Co-Issuers and the Collateral Manager the quotations
upon which the Floating Rates are based, and in any event the Calculation Agent
shall notify the Co-Issuers and the Collateral Manager before 5:00 p.m.
(London time) on each LIBOR Determination Date that either:  (i) it has determined or is in the
process of determining the Floating Rates and the Floating Amounts, or (ii) it
has not determined and is not in the process of determining the Floating Rates
and the Floating Amounts, together with its reasons therefor.

 

(c)           The Calculation Agent will cause the
Floating Rates, Floating Amounts, Interest Accrual Period and Payment Date to
be communicated to Euroclear, Clearstream and the Irish Stock Exchange (as long
as any of the Notes are listed thereon) by the LIBOR Business Day immediately
following each LIBOR Determination Date. 
The determination of the Floating Rates and Floating Amounts by the
Calculation Agent shall (in the absence of manifest error) be final and binding
upon all parties (including the Holders of the Securities).

 

Section 7.17.          Certain
Tax Matters.

 

(a)           The Issuer shall provide to any Holder
(or Certifying Holder) of an interest in either Subordinated Notes or, if
requested, Issued Securities other than the Subordinated Notes (or such Holder’s
designee), within 90 days of the end of the Issuer’s tax year (i) all
information that a U.S. shareholder making a “qualified electing fund” election
(as defined in the Code) is required to obtain for U.S. federal income tax
purposes and (ii) a “PFIC Annual Information Statement” as described in
Treasury Regulation 1.1295-1 (or any successor Internal Revenue Service release
or Treasury Regulation), including all representations and statements required
by such statement, and will take any other reasonable steps necessary to
facilitate such election by such Holder.

 

(b)           The Issuer will not elect to be treated
as a partnership for U.S. federal income tax purposes.

 

(c)           The Issuer shall not file, or cause to be
filed, any income or franchise tax return in any state of the United States
unless it shall have obtained an Opinion of Counsel prior to such

 

149

 

filing that, under the laws of such jurisdiction, the Issuer is
required to file such income or franchise tax return.

 

(d)           The Issuer will provide, upon request of
a Holder of Issued Securities, any information that such Holder reasonably
requests to assist such Holder with regard to any filing requirements the
Holder may have as a result of the controlled foreign corporation rules under
the Code.

 

(e)           Notwithstanding anything to the contrary
in this Indenture, the Co-Issuer shall not have any legal, equitable or
beneficial interest in the Collateral.

 

(f)            The Issuer (or the
Collateral Manager acting on behalf of the Issuer) will not acquire a
Collateral Debt Security if the purpose of the acquisition of such Collateral
Debt Security is to accommodate a request from a Securities Lending
Counterparty to borrow such Collateral Debt Security under a Securities Lending
Agreement.

 

(g)           The Issuer will treat each purchase of
Collateral Debt Securities as a “purchase” for tax accounting and reporting
purposes.

 

(h)           The Issuer shall not (i) become the
owner of any asset (A) that is treated as an equity interest in an entity
that is treated as a partnership or other fiscally transparent entity for
United States federal income tax purposes, (B) the gain from the
disposition of which will be subject to United States federal income or
withholding tax under section 897 or section 1445, respectively, of
the Code or (C) if the ownership or disposition of such asset would cause
the Issuer to be engaged, or deemed to be engaged, in a trade or business
within the United States for United States federal income tax purposes or (ii) engage
in any activity that would cause the Issuer to be subject to United States
federal income tax on a net income basis; provided, that the Issuer
shall be entitled to receive, and shall be fully protected in relying on, an
Opinion of Counsel in making each such determination.

 

(i)            The Security Registrar shall provide to
the Independent accountants of the Issuer such information contained in the
Security Register as is requested by them to comply with this Section 7.17.

 

Section 7.18.          Hedge
Agreement Provisions.

 

(a)           Unless otherwise set forth in the
Supplement, the Issuer, with the consent of each Hedge Counterparty (other than
counterparties to Hedge Agreements that are concurrently being terminated or
assigned), may enter into one or more Hedge Agreements for which Rating Agency
Confirmation has been obtained or pursuant to a form for which Rating Agency
Confirmation has been obtained.  The
Issuer also must obtain Rating Agency Confirmation prior to amendment or
termination of any Hedge Agreement.

 

(b)           The Issuer will not enter into any
replacement hedge agreement unless, in the event of any early termination of a
Hedge Agreement with respect to which the Hedge Counterparty is the sole “defaulting
party” or “affected party” (each, as defined in the Hedge Agreements), (i) any
termination payment paid by the Hedge Counterparty to the Issuer up to the

 

150

 

cost of entering into any replacement Hedge Agreement will be paid
directly to the replacement counterparty and any excess will be paid to the
Issuer and (ii) any proceeds received from a replacement counterparty up
to the amount of the required termination payment will be paid directly to the
counterparty to the Hedge Agreement being terminated and any excess will be
paid to the Issuer.

 

(c)           Following an early termination of a Hedge
Agreement, the Collateral Manager will use commercially reasonable efforts to
cause the Issuer to enter into a replacement Hedge Agreement unless Rating
Agency Confirmation is obtained.

 

(d)           The Trustee, as directed by the Issuer
(or the Collateral Manager on behalf of the Issuer) shall, upon receiving
written notice of the exposure calculated under a credit support annex to any Hedge
Agreement, if applicable, make a demand to the relevant Hedge Counterparty and
its credit support provider, if applicable, for securities having a value under
such credit support annex equal to the required credit support amount.

 

(e)           Each Hedge Agreement will, at a minimum,
permit the Issuer to terminate such agreement (with the Hedge Counterparty
bearing the costs of any replacement Hedge Agreement) if:

 

(i)            the Hedge Counterparty does not provide
credit support within five local business days (as defined in the Hedge
Agreement) of any date on which such Hedge Counterparty (or its guarantor)
ceases to satisfy the Hedge Collateralization Ratings (as set forth in
the Term Sheet); and

 

(ii)           the Hedge Counterparty does not assign
the Hedge Agreement within a certain number of days (as set forth in the Term
Sheet) (such number of days, the Hedge Substitution Period) after the
date on which such Hedge Counterparty (or its guarantor) ceases to satisfy the Hedge
Substitution Ratings (as set forth in the Term Sheet).

 

In addition, if the Hedge Agreement has not been
assigned during the Hedge Substitution Period, the Hedge Counterparty must
provide credit support with respect to which Rating Agency Confirmation has
been obtained from S&P while a replacement Hedge Counterparty is being
sought.

 

The Issuer will give prompt notice to each Rating
Agency of any such assignment or termination or provision of credit
support.  Any Collateral received from a
Hedge Counterparty under a Hedge Agreement shall be deposited in the Hedge
Collateral Account.  Notwithstanding the
foregoing, the Issuer may waive such requirements under a Hedge Agreement if
the Issuer receives Rating Agency Confirmation with respect to the waiver of
such requirements.

 

(f)            The Issuer will enter into Hedge
Agreements solely for the purpose of managing interest rate and other risks in
connection with the Issuer’s issuance of, and payments on, the Notes and the
Issuer’s ownership and disposition of the Collateral Debt Securities.

 

(g)           The amounts payable to the Hedge
Counterparties shall be limited to the amounts payable under the Priority of
Payments or the Special Priority of Payments, as applicable, and

 

151

 

under Section 7.18(b)(ii) and the claims of each Hedge
Counterparty (if there is more than one) shall rank equally.

 

Section 7.19.                             Purpose Credit.

 

No proceeds of any Draw shall be used in violation of
applicable law or, directly or indirectly, (i) to extend Purpose Credit
(as defined in Regulation U) or (ii) to purchase, otherwise acquire or
carry Margin Stock in any manner that would result in a violation of U.S.
margin requirements.

 

ARTICLE 8

 

SUPPLEMENTAL
INDENTURES

 

Section 8.1.            Supplemental
Indentures Without Consent of Securityholders.

 

Without the consent of the Holders of any Securities
(except as provided below), the Co-Issuers, when authorized by Board
Resolutions, and the Trustee, at any time and from time to time subject to the
requirement provided below in this Section 8.1 with respect to the ratings
on the Notes, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee for any of the following purposes:

 

(a)           to evidence the succession of another
Person to the Issuer or the Co-Issuer and the assumption by any such successor
Person of the covenants of the Issuer or the Co-Issuer herein and in the
Securities; provided, that in the
event of an amendment to the Indenture evidencing the succession of another
person as Issuer or Co-Issuer, a new application to list the listed Securities
shall be filed with the Irish Stock Exchange;

 

(b)           to add to the covenants of the Issuer and
the Co-Issuer, if applicable, or the Trustee for the benefit of the Holders of
the Securities or to surrender any right or power herein conferred upon the
Co-Issuers;

 

(c)           to convey, transfer, assign, mortgage or
pledge any property to or with the Trustee, or add to the conditions,
limitations or restrictions on the authorized amount, terms and purposes of the
issue, authentication and delivery of the Securities;

 

(d)           to evidence and provide for the
acceptance of appointment hereunder by a successor Trustee and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one trustee,
pursuant to the requirements of Sections 6.9, 6.10 and 6.12 hereof;

 

(e)           to correct or amplify the description of
any property at any time subject to the lien of this Indenture, or to better
assure, convey and confirm unto the Trustee any property subject or required to
be subjected to the lien of this Indenture (including, without limitation, any
and all actions necessary or desirable as a result of changes in law or
regulations) or to subject to the lien of this Indenture any additional
property;

 

152

 

(f)            to reduce the permitted Authorized
Denominations;

 

(g)           to take any action necessary or advisable
to prevent the Issuer or the Trustee from being subject to withholding or other
taxes, fees or assessments or to prevent the Issuer from being treated as
engaged in a United States trade or business or otherwise being subjected to
United States federal, state or local income tax on a net income tax basis;

 

(h)           to take any action necessary or advisable
to prevent the Issuer, the Co-Issuer or the pool of Collateral from being
required to register under the Investment Company Act;

 

(i)            to enter into any additional agreements
not expressly prohibited by the Indenture as well as any amendment,
modification or waiver if the Issuer determines that such amendment,
modification or waiver would not, upon or after becoming effective, materially
and adversely affect the rights or interests of Holders of any Class of
Securities;

 

(j)            subject to
continued exemption from registration of the Securities under the Securities
Act and of the Co-Issuers under the Investment Company Act, to make such
changes as shall be necessary or advisable in order for the listed Securities
to be listed on an exchange, including the Irish Stock Exchange;

 

(k)           subject to Section 9.7, to make such
changes as may be necessary to permit the Issuer to enter into transactions to
purchase or tender for the Notes in the order of most senior to most junior as
set forth in Article 13 or as otherwise contemplated by this Indenture;

 

(l)            to amend, modify, enter into or
accommodate the execution of any contract relating to a Synthetic Security if
such amendment, modification or waiver would not, upon or after becoming
effective, materially and adversely affect the rights or interest of Holders of
any Class of Securities;

 

(m)          with the consent of the Holders of a
Majority of any Commitment Notes, to amend any requirements relating solely to
the manner, timing and conditions of Draws;

 

(n)           to modify Sections 3.3 or 3.5 to conform
with applicable law and/or Rating Agency requirements;

 

(o)           to correct any
inconsistency or manifest error or cure any ambiguity or defect in this
Indenture or to conform this Indenture to the final Offering Memorandum;

 

(p)           with the
consent of the applicable Rating Agency, to modify Schedule E or Schedule F
hereto; or

 

(q)           to make any other change that does not
materially and adversely affect the rights of the Holders of any Class of
Securities.

 

The Trustee is hereby authorized to join in the
execution of any such supplemental indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to enter into any such supplemental indenture

 

153

 

which affects the Trustee’s own rights, duties, liabilities or
immunities under this Indenture or otherwise, except to the extent required by
law.

 

If any Class of Rated Notes is Outstanding and rated
by S&P, the Trustee shall not enter into any such supplemental indenture
until (i) it has received Rating Agency Confirmation from S&P or (ii) it
has received the consent of each Holder of each Outstanding Security of each Class materially
and adversely affected thereby.  The
Trustee may, or may rely on an Opinion of Counsel to, determine whether or not
the Holders of Securities would be materially and adversely affected by such
change if such a determination is a condition of such change.  At the cost of the Co-Issuers, the Trustee
shall provide to each Securityholder and, if any Class of Rated Notes is
Outstanding, each Rating Agency, a copy of any proposed supplemental indenture
(or a description of the substance thereof) at least ten days prior to the
execution thereof by the Trustee and a copy of the executed supplemental
indenture after its execution.

 

Section 8.2.            Supplemental
Indentures with Consent of Securityholders.

 

(a)           With the consent of a Majority of any Class of
Securities materially and adversely affected thereby, by Act of said Holders
delivered to the Trustee and the Co-Issuers, the Trustee and Co-Issuers may
enter into one or more indentures supplemental hereto to add any provisions to,
or change in any manner or eliminate any of the provisions of, this Indenture
or modify in any manner the rights of the Holders of the Securities of such Class under
this Indenture; provided that notwithstanding anything in this Indenture to the
contrary, no such proposed supplemental indenture shall, without the consent of
each Hedge Counterparty materially and adversely affected and each Holder of
each Outstanding Security of each Class materially and adversely affected
thereby:

 

(i)            change the Stated Maturity of the Notes
or the due date of any installment of interest or any Commitment Fee Amount,
Revolving Note Increased Costs or Revolving Note Tax Gross-Up Amount; reduce
the principal amount thereof or the Interest Rate (if any) thereon or the
Redemption Price with respect thereto; change the earliest date on which any
Notes may be redeemed pursuant to Section 9.1(a); change the provisions of
this Indenture relating to the application of proceeds of any Collateral to the
payment of principal, interest, any Commitment Fee Amount, Revolving Note
Increased Costs or Revolving Note Tax Gross-Up Amount, or any other amounts
payable with respect to Notes; change any place where, or the coin or currency
in which, any Security or the principal thereof, interest thereon or any
Commitment Fee Amount, Revolving Note Increased Costs or Revolving Note Tax
Gross-Up Amount is payable; or impair the right to institute suit for the
enforcement of any such payment on or after the Stated Maturity thereof (or, in
the case of redemption, on or after the applicable Redemption Date);

 

(ii)           reduce the percentage of the Aggregate
Outstanding Amount of Securities of each Class whose consent is required
for the authorization of any such supplemental indenture or for any waiver of
compliance with certain provisions of this Indenture or certain Defaults
hereunder or their consequences provided for in this Indenture;

 

(iii)          materially impair or materially and
adversely affect the Collateral except as otherwise permitted in this
Indenture;

 

154

 

(iv)          except as permitted by the Indenture,
permit the creation of any lien ranking prior to or on a parity with the lien
of this Indenture with respect to any part of the Collateral (other than
Synthetic Security Collateral) or terminate such lien on any property at any
time subject hereto or deprive any Secured Party of the security afforded by
the lien of this Indenture;

 

(v)           reduce the percentage of the Aggregate
Outstanding Amount of Holders of Notes of each Class whose consent is
required to request the Trustee to sell or liquidate the Collateral pursuant to
Section 5.4 or 5.5;

 

(vi)          modify any of the provisions of this Section 8.2,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the consent
of the Holder of each outstanding Security adversely affected thereby;

 

(vii)         modify the definition of the term “Outstanding,”
the Special Priority of Payments set forth in Section 5.7, the Priority of
Payments set forth in Section 11.1(a), or any of Sections 7.18(b),
8.4(b) or 13.1; or

 

(viii)        modify any of the provisions of this
Indenture in such a manner as to affect the methodology for calculation of the
amount of any payment with respect to any Security on any Payment Date or to
modify Article 9 so as to affect the rights of the Holders of Securities
to the benefit of any provisions for the redemption of the Notes contained in
this Indenture.

 

Notwithstanding the foregoing, after the Non-Call
Period, the consent of Noteholders of any particular Class shall not be
required (regardless of whether such Noteholders are affected) with respect to
any amendments that facilitate redemption in whole of such Class simultaneously
with all other Classes of Notes Outstanding (if any) of the same Tranche; provided that such amendment does not (i) in
the reasonable business judgment of the Collateral Manager, materially and
adversely affect the likelihood that the Issuer will have sufficient proceeds
available on the Redemption Date to redeem such Class in whole, (ii) alter
the Reinvestment Period, (iii) reduce the Redemption Price applicable to
such Class or any other amounts such Class is entitled to receive
upon redemption, (iv) reduce the principal amount or Make-Whole Amount (if
any) of such Class, or (v) alter the priority of or allocation to such Class relative
to other Classes (if any) of the same Tranche with respect to interest,
principal or other amounts due.

 

Not later than ten Business Days prior to the
execution of any proposed supplemental indenture pursuant to this Section 8.2(a),
the Trustee, at the expense of the Issuer and the Co-Issuer, if applicable,
shall mail to the Holders of the Securities, any Delayed Draw Note Agent, any
Revolving Note Agent, the Collateral Manager and, if any Class of Rated
Notes is Outstanding, each Rating Agency, a copy of such supplemental indenture
and a notice reciting in substance the provisions of the next following
sentence.  The Trustee may, or may rely
on an Opinion of Counsel to, determine whether or not the Holders of Securities
would be affected or materially and adversely affected, as applicable, by such
change (after giving notice of such change to the Holders of such
Securities).  Such determination shall be
conclusive and binding

 

155

 

on all present and future Holders. 
The Trustee shall not be liable for any such determination made in good
faith and in reliance upon an Opinion of Counsel delivered to the Trustee as
described in Section 8.3 hereof.

 

Promptly after the execution by the Co-Issuers and the
Trustee of any supplemental indenture pursuant to this Section 8.2(a), the
Trustee, at the expense of the Issuer and the Co-Issuer, if applicable, shall
mail to the Holders of the Securities, any Delayed Draw Note Agent, any
Revolving Note Agent, the Collateral Manager and, if any Class of Rated
Notes is Outstanding, each Rating Agency, a copy thereof.  Any failure of the Trustee to publish or mail
such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such supplemental indenture.

 

If any Class of Rated Notes is Outstanding and
rated by S&P, the Trustee shall not enter into any such supplemental
indenture until (i) it has received Rating Agency Confirmation by S&P
or (ii) it has received the consent of each Holder of each Outstanding
Security of each Class materially and adversely affected thereby.

 

(b)           In connection with a Redemption by
Refinancing as described in Section 9.1(b) hereof, with the consent
of two-thirds of the Aggregate Outstanding Amount of the Subordinated Notes and
a Majority of each other Class of Notes that will remain Outstanding
following such a Redemption by Refinancing to the extent such Class is
materially and adversely affected thereby, by Act of the Holders of such Notes
delivered to the Trustee and the Co-Issuers, the Trustee and Co-Issuers may
enter into one or more indentures supplemental hereto to permit the issuance of
Replacement Notes and to fix the terms of such notes.

 

If any Class of Rated Notes is Outstanding and
rated by S&P, the Trustee shall not enter into any such supplemental
indenture until it has received Rating Agency Confirmation from S&P with
respect to any Class of Rated Notes not being redeemed in connection with
the Redemption by Refinancing.

 

Not later than ten Business Days prior to the
execution of any proposed supplemental indenture pursuant to this Section 8.2(b),
the Trustee, at the expense of the Issuer and the Co-Issuer, if applicable, shall
mail to the Holders of the Securities, the Collateral Manager and, if any Class of
Rated Notes is Outstanding, each Rating Agency, a copy of such supplemental
indenture.

 

Promptly after the execution by the Co-Issuers and the
Trustee of any supplemental indenture pursuant to this Section 8.2(b), the
Trustee, at the expense of the Issuer and the Co-Issuer, if applicable, shall
mail to the Holders of the Securities, any Delayed Draw Note Agent, any
Revolving Note Agent, the Collateral Manager and each Rating Agency, a copy
thereof.  Any failure of the Trustee to
publish or mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture substantially
in the form to be executed.

 

156

 

Section 8.3.            Execution
of Supplemental Indentures.

 

It shall not be necessary for any Act of
Securityholders under Section 8.1 or 8.2 to approve the particular form of
any proposed supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.

 

In executing or accepting the additional trusts
created by any supplemental indenture permitted by this Article 8 or the
modifications thereby of the trusts created by this Indenture, the Trustee
shall be entitled to receive, and (subject to Sections 6.1 and 6.3 hereof)
shall be fully protected in relying upon an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture and that all conditions precedent thereto have been complied
with.  The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee’s own rights, duties or immunities under this Indenture or otherwise; provided,
however, that with respect to any amendment or supplement to this Indenture
which would (i) increase the duties or liabilities of, or adversely change
the economic consequences to, the Collateral Manager, (ii) modify the
restrictions on the sales of Collateral Debt Securities described under Article 12
or (iii) materially expand or restrict the Collateral Manager’s
discretion, the Collateral Manager shall not be bound thereby unless the
Collateral Manager shall have consented thereto in writing, such consent not to
be unreasonably withheld, delayed or conditioned.

 

Section 8.4.            Certain
Further Limitations on Supplemental Indentures. 

 

(a)           Notwithstanding anything to the contrary
herein, the Issuer and the Co-Issuer agree that they will not consent to or
enter into any indenture supplemental hereto or any amendment to any other
document related hereto that:

 

(i)            amends any provision of this Indenture or
such other document relating to the institution of proceedings for the Issuer
or the Co-Issuer to be adjudicated as bankrupt or insolvent, or the consent by
the Issuer or the Co-Issuer to the institution of bankruptcy or insolvency
proceedings against it, or the filing with respect to the Issuer or the Co-Issuer
of a petition or answer or consent seeking reorganization or relief under the
Bankruptcy Law or any other similar applicable law, or the consent by the
Issuer or the Co-Issuer to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee or sequestrator (or
other similar official) of the Issuer or the Co-Issuer or of any substantial
part of its property, respectively; or

 

(ii)           amends any provision of this Indenture or
such other document that provides that the obligations of the Co-Issuers or the
Issuer, as the case may be, are limited recourse obligations of the Co-Issuers
or the Issuer, respectively, payable solely from the Collateral in accordance
with the terms of the Indenture.

 

(b)           Notwithstanding anything to the contrary
in this Indenture, no supplemental indenture hereto shall be effective, and the
Issuer and the Co-Issuer agree that they will not consent to or enter into any
indenture supplemental hereto, that would have a material adverse effect (i) on
any Hedge Counterparty to a then existing Hedge Agreement without the consent
of

 

157

 

such Hedge Counterparty, (ii) on the Delayed Draw Note Agent
without the consent of the Delayed Draw Note Agent or (iii) on the
Revolving Note Agent without the consent of the Revolving Note Agent.

 

Section 8.5.            Effect
of Supplemental Indentures.

 

Upon the execution of any supplemental indenture under
this Article 8, this Indenture shall be modified in accordance therewith,
and such supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Securities theretofore and thereafter
authenticated and delivered hereunder shall be bound thereby.

 

Section 8.6.            Reference
in Securities to Supplemental Indentures.

 

Securities authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article 8 may,
and if required by the Trustee shall, bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental indenture.  If the Applicable Issuer shall so determine,
new Securities, so modified as to conform in the opinion of the Trustee and the
Applicable Issuer, to any such supplemental indenture, may be prepared and
executed by the Applicable Issuer, and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.

 

ARTICLE 9

 

REDEMPTION OF
NOTES

 

Section 9.1.            Optional
Redemption; Election to Redeem.

 

(a)           Each Class of Rated Notes shall be
redeemable, in whole but not in part, at the Redemption Price by the Co-Issuers
at the direction of at least two-thirds of the Aggregate Outstanding Amount of
the Subordinated Notes from Sale Proceeds and all other funds available for
such purpose (i) on any Payment Date after the Non-Call Period and (ii) on
any Payment Date, whether during or after the Non-Call Period, following the
occurrence of a Withholding Tax Event. 
Any Revolving Notes may be repaid on any Payment Date during the Draw
Period.

 

(b)           If the
Subordinated Noteholders direct an optional redemption in accordance with Section 9.1(a),
a Majority of the Subordinated Noteholders may direct that the redemption of Rated Notes be
achieved by either (i) directing the Collateral Manager to liquidate a
sufficient amount of the Collateral to redeem the Rated Notes in full (a “Redemption
by Liquidation“) or (ii) directing the Trustee, the Issuer and the
Collateral Manager to issue additional notes (the “Replacement Notes”),
the proceeds of which will be used to fully redeem the Classes of Rated Notes
to be redeemed (a “Redemption by Refinancing“).  A Redemption by Liquidation shall result in
the redemption of all of the Rated Notes. 
A Redemption by Refinancing may result in the redemption of all or only
specified Classes of Rated Notes; provided,
that such redemption must include all Notes of a particular Class if any
Notes of such Class are to be redeemed. 
In connection with a redemption, this Indenture may be amended in any
way appropriate to facilitate the sale of the Collateral and the issuance of
Replacement Notes with the consent of a Majority of each Class of Notes
that is not redeemed (to the extent such consent is required by

 

158

 

Article 8 of the Indenture), and all Classes of Notes that are
redeemed shall be deemed to not be affected by such amendments so long as such
Notes are redeemed on the Redemption Date at their applicable Redemption
Prices.  Any Replacement Notes may have
such terms and priorities as are determined at the time of issuance and as are
set forth in a supplemental indenture.

 

(c)           On any Payment Date on or after the Rated
Notes are retired or redeemed, the Subordinated Notes may be redeemed, in whole
but not in part, at the direction of the Holders of at least two-thirds of the
Aggregate Outstanding Amount of the Subordinated Notes.  The Redemption Price of each
Subordinated Note will be its proportionate share of the proceeds (if any) of
the Collateral remaining after payment in full of all amounts senior in
priority to the Subordinated Notes in accordance with the Special Priority of
Payments; provided, however, that
at the direction of the Holders of at least two-thirds of the Aggregate
Outstanding Amount of the Subordinated Notes, payment of the Redemption Price
may be made by distributing to each Holder of Subordinated Notes its
proportionate share of the Collateral (as determined by the Collateral Manager)
remaining after payment in full of all amounts senior in priority to the
Subordinated Notes in accordance with the Special Priority of Payments.

 

(d)           Upon receipt of a notice of Redemption by
Liquidation, the Collateral Manager will direct the sale of that portion of
Pledged Securities (without regard to the restrictions set forth in Section 12.1)
such that the Sale Proceeds therefrom and all other funds subject to this
Indenture, including in the Collection Account and the Payment Account (after
the payment of, or establishment of a reasonable reserve for, all other amounts
payable under the Special Priority of Payments, including all Administrative Expenses
and any termination payments due to any Hedge Counterparties) are expected to
be at least sufficient to redeem the Classes of Rated Notes in whole but not in
part in accordance with the terms hereof; provided,
that such Sale Proceeds must be received by the Trustee at least one
Business Day prior to the scheduled Redemption Date and shall be used, to the
extent necessary, to redeem the Rated Notes. 
If such Sale Proceeds and other available funds would not be sufficient
to redeem the Rated Notes and to pay all Administrative Expenses and such fees
and expenses, the Rated Notes may not be redeemed.  If only the Rated Notes are to be redeemed on
the Redemption Date, the Collateral Manager will direct the liquidation of the
Collateral only to the extent required to redeem the Rated Notes and to pay
other fees and expenses in connection therewith.

 

(e)           Upon receipt of a notice of Redemption by
Refinancing, the Issuer and, to the extent required, the Co-Issuer shall issue
Replacement Notes having the terms, priorities and conditions set forth in a
supplement to the Indenture approved by a Majority of each Class of Notes
that is not to be redeemed (to the extent such consent is required by this
Indenture).  The issuance of Replacement
Notes, and the redemption of Rated Notes, will be contingent on receipt by the
Issuer of sufficient funds from the issuance of the Replacement Notes to fully
redeem the Rated Notes and to pay all fees and expenses associated with such
redemption and the issuance of Replacement Notes.  If this condition is not met, the Replacement
Notes may not be issued and the Rated Notes may not be redeemed unless the
Holders of the Subordinated Notes then elect to effect a Redemption by
Liquidation.

 

159

 

Section 9.2.            Notice
to Trustee of Optional Redemption.

 

In the event of any redemption pursuant to Section 9.1,
the Issuer shall, at least 30 days prior to the Redemption Date (unless the
Trustee shall agree to a shorter notice period), notify the Trustee and each
Rating Agency of such Redemption Date, the applicable Record Date, the
principal amount of Notes to be redeemed on such Redemption Date and the
Redemption Price of such Notes, as determined by the Collateral Manager, in
accordance with Section 9.1 hereof.

 

Section 9.3.            Redemption
Procedures.

 

(a)           In the event of any redemption pursuant
to Section 9.1, a notice of redemption shall be given by first class mail,
postage prepaid, mailed not later than 10 Business Days prior to the applicable
Redemption Date, to each Holder of Securities, the Administrator and each
Rating Agency.  In addition, for so long
as any Securities are listed on the Irish Stock Exchange and so long as the rules of
such exchange so require, notice of such redemption shall also be given to the
Irish Stock Exchange.

 

(b)           All notices of redemption delivered
pursuant to this Section 9.3 shall state:

 

(i)            the applicable Redemption Date;

 

(ii)           the Redemption Price of the Securities to
be redeemed;

 

(iii)          that interest on the Rated Notes shall
cease to accrue on the Payment Date specified in the notice; and

 

(iv)          the place or places where Securities are
to be surrendered for payment of the Redemption Price, which shall be the
office or agency of the Co-Issuers to be maintained as provided in Section 7.2
and, so long as any Securities are listed on the Irish Stock Exchange, the
Irish Paying Agent.

 

The Co-Issuers will have the option to withdraw any
such notice of redemption up to the fourth Business Day prior to the scheduled
Redemption Date by written notice to the Trustee and the Collateral Manager (x)
if the Collateral Manager does not deliver the sale agreement or agreements or
certifications described in clause (c) below or (y) if directed by the
same percentage of Holders as was required to direct the redemption pursuant to
Section 9.1(a); provided
that no irrevocable steps have been taken with respect to such redemption.  If the Issuer so withdraws any notice of
redemption or is otherwise unable to complete any redemption of the Notes, the
Sale Proceeds received from the sale of any Collateral Debt Securities and
other Collateral may, at the Collateral Manager’s discretion, be reinvested
during the Reinvestment Period in accordance with the Article 12.

 

Notice of redemption shall be given by the Co-Issuers
or, upon an Issuer Order, by the Trustee in the name and at the expense of the
Co-Issuers.  Failure to give notice of
redemption, or any defect therein, to any Holder of any Security selected for
redemption shall not impair or affect the validity of the redemption of any
Securities.

 

160

 

(c)           In the event of any optional redemption
pursuant to Section 9.1, no Securities may be redeemed pursuant to a
Redemption by Liquidation unless (i) at least ten Business Days before the
scheduled Redemption Date the Collateral Manager shall have furnished to the
Trustee evidence, in form satisfactory to the Trustee, that the Collateral
Manager on behalf of the Issuer has entered into one or more binding agreements
with one or more financial or other institutions whose short-term unsecured
debt obligations (other than such obligations whose rating is based on the
credit of a Person other than such institution) have a short-term credit rating
of at least “A-1+” from S&P and “P-1” from Moody’s to purchase, not later
than the Business Day immediately preceding the scheduled Redemption Date in
immediately available funds, all or part of the Collateral at a sale price at
least equal to an amount sufficient, together with all other funds expected to
be available on such Redemption Date, to pay (x) Redemption Prices of the
Rated Notes to be redeemed and (y) all Administrative Expenses and to
terminate all Hedge Agreements and Short Positions, or (ii) prior to
selling any Collateral in connection with such redemption, the Collateral
Manager shall certify to the Trustee that, in its judgment, the aggregate sum
of (A) expected proceeds from the liquidation or disposition of Eligible
Investments and any Hedge Agreements, together with any other funds available
for such purpose, and (B) with respect to each Collateral Debt Security,
the product of the lesser of its Principal Balance or its Market Value
multiplied by its Applicable Advance Rate, shall exceed the sum of
the Redemption Prices of the Rated Notes to be redeemed and all
Administrative Expenses and any payments required in connection with the
termination of any Hedge Agreements and Short Positions.

 

Section 9.4.            Notes
Payable on Redemption Date.

 

Notice of redemption having been given as aforesaid
and not withdrawn pursuant to Section 9.3, the Notes to be redeemed shall,
on the Redemption Date, become due and payable at the Redemption Price therein
specified, and from and after the Redemption Date (unless the Issuer shall
default in the payment of the Redemption Price and accrued interest) such Rated
Notes shall cease to bear interest on the Redemption Date.  Upon final payment on a Security to be
redeemed, the Holder shall present and surrender such Security at the place
specified in the notice of redemption on or prior to such Redemption Date; provided, however, that if there is
delivered to the Applicable Issuer and the Trustee such security or indemnity
as may be required by them to save each of them harmless (an unsecured
indemnity agreement delivered to the Co-Issuers and the Trustee by an
institutional investor with a net worth of at least $200,000,000 being deemed to satisfy
such security or indemnity requirement) and an undertaking thereafter to surrender such
Security, then, in the absence of notice to the Applicable Issuer or the
Trustee that the applicable Security has been acquired by a Protected
Purchaser, such final payment shall be made without presentation or surrender.  Payments of interest on a Class so to be
redeemed whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more predecessor
Securities, registered as such at the close of business on the relevant Record
Date.

 

If any Rated Notes called for redemption shall not be
paid upon surrender thereof for redemption, the principal amount thereof shall,
until paid, bear interest from the Redemption Date at the applicable Interest
Rate for each successive Interest Accrual Period the Rated Notes

 

161

 

remain Outstanding; provided, that the
reason for such non-payment is not the fault of such Noteholder.

 

Section 9.5.            Mandatory
Redemption.

 

On any Payment Date on which any of the Coverage Tests
was not met on the immediately preceding Determination Date, principal payments
on the Rated Notes will be made in accordance with the Priority of Payments.

 

Section 9.6.            Effective
Date Ratings Downgrade.

 

At the option of the Collateral Manager, if any Rating
Agency has failed to confirm its original ratings on any Class of Rated
Notes in connection with the Effective Date, an amount (as determined by the
Collateral Manager in its sole discretion) of Interest Proceeds remaining after
payments of interest (and payments of principal in connection with failure of
any Coverage Tests) in respect of the Rated Notes will be applied to either or
both of the following:  (i) such
Interest Proceeds may be designated as Principal Proceeds and applied in accordance
with the Priority of Principal Proceeds to invest in Eligible Investments or
Collateral Debt Securities, or (ii) to payments in accordance with the
Note Payment Sequence until confirmation of the original ratings on each Class of
Rated Notes is received from each Rating Agency or such Notes are paid in
full.  Any Interest Proceeds so
designated as Principal Proceeds will be used to purchase additional Collateral
Debt Securities.

 

Section 9.7.            Repurchase
of Securities.

 

The Collateral Manager, on behalf of the Issuer, may (a) at
any time repurchase Securities from Holders thereof; provided that Rating Agency Confirmation is obtained and (b) at
any time repurchase Notes of the Controlling Class at a purchase price
less than the Aggregate Outstanding Amount of such purchased Notes, so long as
an equivalent offer is extended to all Holders of the Notes of the same
Tranche, pro rata to the Aggregate Outstanding
Amount of such Notes held thereby and all Coverage Tests and the Moody’s
Weighted Average Rating Factor Test are satisfied.

 

Section 9.8.            Reduction
of Commitments of Delayed Draw Notes.

 

The Commitments in respect of any Delayed Draw Notes
may be reduced at any time by the Collateral Manager on behalf of the Issuer in
accordance with the Note Purchase Agreement relating to such Delayed Draw Notes
and will be automatically reduced upon payment of principal of Notes of the
same Tranche as a result of a Mandatory Redemption pursuant to Section 9.5.  Any such reduction will be final and will be
applied on a pro rata basis based
on the respective amounts thereof.

 

Section 9.9.            Repayments
and Reduction of Commitments of Revolving Notes.

 

(a)           During the Draw Period, any Revolving
Notes may be repaid (in whole or in part) without premium on any Payment Date
at the option of the Issuer (at the direction of the Collateral Manager) from
Principal Proceeds to the extent available for such application pursuant

 

162

 

to the Priority of Payments.  Any
Revolving Notes may also be repaid at any time during the Non-Call Period and
the Reinvestment Period.  Amounts repaid
may be redrawn at any time during the Draw Period.  In connection with any such repayment, the
Collateral Manager, on behalf of the Issuer, shall give the Trustee and the
Revolving Note Agent the notice required by the Note Purchase Agreement in
respect of any Revolving Notes.

 

(b)           Except with respect to any repayment
required to be made in accordance with the Priority of Payments, the aggregate
principal amount of any repayment of the Revolving Notes (taken as a whole)
shall be an integral multiple of U.S.$1,000 (or the remaining outstanding
amount, if less).  Any repayment shall be
made pro rata according to the
Drawn Amount of the Revolving Notes.

 

(c)           The Issuer will duly and punctually
perform each of its obligations under the Note Purchase Agreement in respect of
any Revolving Notes.

 

(d)           Subject to Section 10.3(d), the
Commitments in respect of the Revolving Notes may be reduced at any time by the
Collateral Manager on behalf of the Issuer; provided,
that the Commitment will reduce automatically to the extent that principal is
paid on the Revolving Notes as the result of a Mandatory Redemption or
redemption in connection with a Withholding Tax Event.  Any such reduction will be permanent and will
be applied to the Commitments pro rata according to the respective amounts
thereof.  At the end of the last day of
the Draw Period, any undrawn Commitments in respect of the Revolving Notes will
be fully drawn and deposited into the Collection Account as Principal Proceeds
unless otherwise set forth in the Supplement. 
On the last day of the Draw Period, the Commitments in respect of the
Revolving Notes will be reduced to zero after any Draw on such date.

 

ARTICLE 10

 

ACCOUNTS,
ACCOUNTINGS AND RELEASES

 

Section 10.1.          Collection
of Money; General Account Requirements.

 

(a)           Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all Money and other property payable to or receivable by
the Trustee pursuant to this Indenture, including all payments due on the
Pledged Securities, in accordance with the terms and conditions of such Pledged
Securities.  The Trustee shall segregate
and hold all such Money and property received by it in trust for the benefit of
the Secured Parties and shall apply it as provided in this Indenture.

 

(b)           The accounts established by the Trustee
pursuant to this Article 10 may include any number of sub-accounts deemed
necessary by the Trustee or requested by the Collateral Manager for convenience
in administering the Collateral.  In
addition, all Cash deposited in the accounts established pursuant to this Article 10
shall be invested in Eligible Investments in accordance with the procedures set
forth in Sections 10.2(b) and 10.2(c) and any restrictions applicable
to such accounts.

 

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(c)           Each Account shall
be established with the securities intermediary in the name of the Trustee and
maintained pursuant to an Account Agreement providing, inter alia,
that the establishment and maintenance of such Account will be governed by the
law of a jurisdiction satisfactory to the Issuer and the Trustee.  All Monies held by or deposited with the
Trustee in any Account shall be deposited in one or more trust accounts of a federal depository institution or
state-chartered depository institution subject to regulations regarding
fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations, Section 9.10(b), which, in either case, has corporate trust
powers, acting in its fiduciary capacity and having a long-term debt rating of
at least “Baa2” by Moody’s and “BBB” by S&P to be held in trust for the benefit of the Secured Parties.  The Trustee agrees to give the Co-Issuers
and any Hedge Counterparty, immediate notice if any Account or any funds on
deposit therein, or otherwise to the credit of such Account, shall become
subject to any writ, order, judgment, warrant of attachment, execution or
similar process.  The Co-Issuer shall not
have any legal, equitable or beneficial interest in any Account other than in
accordance with the Priority of Payments and Special Priority of Payments.

 

Section 10.2.          Collection
Account.

 

(a)           The Trustee shall, prior to the Closing
Date, establish a single, segregated trust account which shall be designated as
the Collection Account into which the Trustee shall from time to time deposit,
in addition to the deposits required pursuant to Section 10.6(d):

 

(A)          any amounts received under a Hedge
Agreement,

 

(B)           any amounts received as a result of a
Draw,

 

(C)           all proceeds received from the
disposition of any Collateral (unless simultaneously reinvested in Collateral
Debt Securities, subject to the Investment Criteria, or in Eligible
Investments) and

 

(D)          all Interest Proceeds and Principal
Proceeds.

 

In addition, the Issuer may, but under no
circumstances shall be required to, deposit from time to time such Monies in
the Collection Account as it deems, in its sole discretion, to be
advisable.  All Monies deposited from
time to time in the Collection Account pursuant to this Indenture shall be held
by the Trustee as part of the Collateral and shall be applied to the purposes
herein provided.

 

(b)           All amounts described in Section 10.2(a) received
by the Trustee shall be immediately deposited in the Collection Account.  Subject to Sections 10.2(d) and 10.2(e),
all such amounts, together with any securities in which funds included in such
property are or will be invested or reinvested during the term of this
Indenture, and any income or other gain realized from such investments, shall
be held by the Trustee in the Collection Account as part of the Collateral
subject to disbursement and withdrawal as provided in this Section 10.2.  By Issuer Order executed by an Authorized
Officer of the Collateral Manager (which may be in the form of standing
instructions), the Issuer shall at all times direct the Trustee to, and, upon
receipt of such Issuer Order, the Trustee shall, invest all funds received into
the Collection Account during a

 

164

 

Due Period, and amounts received in prior Due Periods and retained in
the Collection Account, as so directed in Eligible Investments having Stated
Maturities no later than the Business Day immediately preceding the next
Payment Date.  The Trustee, within one
Business Day after receipt of any Distribution or other proceeds which is not
Cash, shall so notify the Issuer and the Issuer shall, within five Business
Days after receipt of such notice from the Trustee, sell such Distribution or
other proceeds for Cash in an arm’s length transaction to a Person which is not
an Affiliate of the Issuer or the Collateral Manager and deposit the proceeds
thereof in the Collection Account for investment pursuant to this Section 10.2;
provided, however, that the
Issuer need not sell such Distributions or other proceeds if it delivers an
Officer’s certificate to the Trustee certifying that such Distributions or
other proceeds constitute Collateral Debt Securities, Equity Securities or
Eligible Investments.

 

(c)           If, prior to the occurrence of an Event
of Default, the Issuer shall not have given any investment directions pursuant
to Section 10.2(b), the Trustee shall seek instructions from the
Collateral Manager within three Business Days after transfer of such funds to
the Collection Account.  If the Trustee
does not thereupon receive written instructions from the Issuer or the
Collateral Manager within five Business Days after transfer of such funds to
the Collection Account, it shall invest and reinvest the funds held in the
Collection Account, as fully as practicable, but only in one or more Eligible
Investments of its selection maturing no later than the Business Day
immediately preceding the next Payment Date. 
If, after the occurrence of an Event of Default, the Issuer shall not
have given investment directions to the Trustee pursuant to Section 10.2(b) for
three consecutive days, the Trustee shall invest and reinvest such Monies as
fully as practicable in Eligible Investments of its selection maturing not
later than the earlier of (i) 30 days after the date of such investment or
(ii) the Business Day immediately preceding the next Payment Date.  All interest and other income from such
investments shall be deposited in, any gain realized from such investments
shall be credited to, and any loss resulting from such investments shall be
charged to the Collection Account.  The
Trustee shall not in any way be held liable by reason of any insufficiency of
the Collection Account resulting from any loss relating to any such investment,
except with respect to investments in obligations of the Bank or any Affiliate
thereof.

 

(d)           During the Reinvestment Period, the
Issuer may by Issuer Order direct the Trustee to, and upon receipt of such
Issuer Order the Trustee shall, reinvest Principal Proceeds in Collateral Debt
Securities (as permitted under and in accordance with the requirements of Article 12
and such Issuer Order).  After the end of
the Reinvestment Period, the Issuer may by Issuer Order direct the Trustee to,
and upon receipt of such Issuer Order the Trustee shall, reinvest (1) Principal
Proceeds of the Credit Improved Security or a Prepaid Collateral Debt Security
and (2) any Current Deferred Management Fee deposited into a Collection
Account during a Due Period which is not invested in Eligible Investments
pursuant to Section 10.2(b), in Collateral Debt Securities as permitted
under and in accordance with the requirements of Article 12 and such
Issuer Order.  At any time, the Issuer
may by Issuer Order direct the Trustee to, and upon receipt of such Issuer
Order the Trustee shall, apply Principal Proceeds towards any payments required
to be made by the Issuer in connection with the sale, assignment, termination
or offset of a Short Position (as permitted under and in accordance with the
requirements of Article 12 and such Issuer Order).

 

165

 

(e)           An Authorized Officer of the Issuer shall
direct the Trustee to, and upon the receipt of such written instructions, the
Trustee shall, transfer to the Payment Account, for application pursuant to the
Priority of Payments or the Special Priority of Payments, as applicable, on or
about the Business Day prior to each Payment Date, any amounts then held in the
Collection Account other than proceeds received after the end of the Due Period
with respect to such Payment Date and the Interest Reserve Amount; except that,
to the extent that Principal Proceeds in the Collection Account as of such date
are in excess of the amounts required to be distributed pursuant to the
Priority of Payments or the Special Priority of Payments, as applicable, on the
next Payment Date as shown in the Security Valuation Report with respect to
such Payment Date, the Issuer may direct the Trustee to retain such excess
amounts in the Collection Account and not to transfer such excess amounts to
the Payment Account.

 

(f)            An Authorized Officer of the Issuer shall
direct the Trustee to, and upon the receipt of such written instructions, the
Trustee shall, transfer to the Interest Reserve Account, on or about the
Business Day prior to each Payment Date, the Stated Maturity or any Redemption
Date, the Interest Reserve Amount.

 

Section 10.3.          Payment Account, Unused Proceeds
Account, Custodial Account; Revolver Funding Account; Synthetic Security
Reserve Account; Hedge Collateral Account; Securities Lending Account;
Commitment Notes Funding Account; Interest Reserve Account; Expense Reserve
Account; Closing Expenses Reserve Account.

 

(a)           Payment Account. 
The Trustee shall, prior to the Closing Date, establish a single,
segregated trust account which shall be designated as the Payment Account.  Except as provided in the Priority of
Payments, the only permitted withdrawals from or application of funds on
deposit in, or otherwise to the credit of, the Payment Account shall be to pay
amounts due and payable on the Securities in accordance with their terms and
the provisions of this Indenture and, upon Issuer Order, to pay the Hedge
Payment Amount, Administrative Expenses, Collateral Management Fees and other
amounts specified therein, all in accordance with the Priority of Payments or
Special Priority of Payments and to make repayments on any Revolving Notes in
accordance with Section 9.9.

 

(b)           Unused Proceeds Account. 
The Trustee shall, prior to the Closing Date, establish a single,
segregated trust account which shall be designated as the Unused Proceeds
Account.  During the Reinvestment Period,
the Collateral Manager on behalf of the Issuer may direct the Trustee to, and
the Trustee shall, use Unused Proceeds (including Unused Proceeds held in the
form of Eligible Investments which may be sold for such purpose) as permitted
under and in accordance with the requirements of Article 12.  Prior to the first Payment Date, the only
permitted withdrawals from or application of funds on deposit in, or otherwise
to the credit of, the Unused Proceeds Account shall be as so directed, upon
Issuer Order, for the purchase of Collateral Debt Securities (including, in the
case of a purchase of a Revolving Collateral Debt Security or Delayed Drawdown
Debt Security, for deposit into the Revolver Funding Account).

 

Up to a certain dollar amount (as set forth in the
Supplement, such amount the Maximum Returnable Excess Equity) of the
amounts remaining in the Unused Proceeds Account at the end

 

166

 

of the first Due Period may, at the option of the Collateral Manager,
be designated as Interest Proceeds (in an amount equal to the lesser of (a) the
excess (if any) of all accrued and unpaid interest on the Rated Notes on such
Payment Date over Interest Proceeds otherwise available for payment of such
interest on the Rated Notes on such Payment Date in accordance with the
Priority of Payments without regard to this designation and (b) an amount
that the Collateral Manager reasonably expects to be available for distribution
pursuant to subclause (P) of the Priority of Interest Payments on the second
Payment Date) for payment on the first Payment Date in accordance with the
Priority of Payments.  Any Unused
Proceeds not so designated by the Collateral Manager shall, during the
Reinvestment Period, be either (a) invested in Eligible Investments and
treated as Principal Proceeds in accordance with the definition of such term,
or (b) used to purchase Collateral Debt Securities during the Reinvestment
Period.  Any amounts remaining in the
Unused Proceeds Account at the end of the Reinvestment Period will become
Principal Proceeds to be distributed in accordance with the Priority of
Payments.

 

(c)           Custodial Account. 
The Trustee shall, prior to the Closing Date, establish a single,
segregated trust account which shall be designated as the Custodial
Account.  The only permitted withdrawals
from the Custodial Account shall be in accordance with this Indenture.

 

(d)           Revolver Funding Account. 
The Trustee shall, prior to the Closing Date, establish a single,
segregated trust account which shall be designated as the Revolver Funding
Account.  By Issuer Order executed by an
Authorized Officer of the Collateral Manager (which may be in the form of
standing instructions), the Issuer shall at all times direct the Trustee to,
and, upon receipt of such Issuer Order, the Trustee shall, invest all funds
received into the Revolver Funding Account as so directed in Eligible
Investments maturing on the next Business Day. 
All interest and other income from such investments shall be deposited
in the Collection Account.  Any gain
realized from such investments shall be credited to the Collection Account, and
any loss resulting from such investments shall be charged to the Collection
Account.  Subject to the last sentence of
this Section 10.3(d), funds in the Revolver Funding Account shall be
available solely to cover any future drawdowns on Collateral Debt Securities
that are either Revolving Collateral Debt Securities or Delayed Drawdown Debt
Securities, and only funds in the Revolver Funding Account shall be used for
such purposes.  Upon the purchase of any
Collateral Debt Security that is a Revolving Collateral Debt Security or a
Delayed Drawdown Debt Security, additional funds from the Unused Proceeds
Account or Principal Proceeds in the Collection Account will be deposited, and
at all times funds will be maintained, in the Revolver Funding Account such
that the amount of funds on deposit in the account will be at least equal to
100% of the Revolver Funding Reserve Amount. 
Upon initial purchase, such funds will be treated as part of the
purchase price for the related Collateral Debt Security.  After the initial purchase, all principal
payments received on any Revolving Collateral Debt Security will be deposited
into the Revolver Funding Account (and will not be available for distribution
as Principal Proceeds) to the extent required to maintain the Revolver Funding
Reserve Amount (including with respect to the amount of such principal payments
that may be re-borrowed under such Revolving Collateral Debt Security).  All Distributions in respect of principal
payable under any Revolving Collateral Debt Security (up to the amount required
to maintain the Revolver Funding Reserve Amount) received by the Trustee shall
be deposited into the Revolver Funding Account. 
Upon the sale, maturity or termination of a Revolving Collateral Debt
Security or Delayed Drawdown Debt Security or termination of the related commitment,
any funds in the Revolver Funding Account

 

167

 

in excess of the amount needed to maintain the Revolver Funding Reserve
Amount will be transferred to the Collection Account and treated as Sale
Proceeds.

 

(e)           Synthetic Security Reserve Account. 
The Trustee shall, prior to the Closing Date, establish a single,
segregated trust account which shall be designated as the Synthetic Security
Reserve Account.  Subject to Section 12.4,
funds in the Synthetic Security Reserve Account shall be available solely to
cover any unfunded amount with respect to Synthetic Securities for which the
Issuer was not required to post Synthetic Security Collateral and only funds in
the Synthetic Security Reserve Account shall be used for such purposes.

 

(f)            Hedge Collateral Account. 
The Trustee shall, at any time that a Hedge Agreement is entered into,
establish a single, segregated trust account which shall be designated as the
Hedge Collateral Account.  The Trustee
shall deposit all collateral received from a Hedge Counterparty under a Hedge
Agreement in the Hedge Collateral Account. 
The only permitted withdrawal from or application of funds on deposit
in, or otherwise to the credit of, the Hedge Collateral Account shall be (i) for
application to obligations of a Hedge Counterparty to the Issuer under a Hedge
Agreement if such Hedge Agreement becomes subject to early termination or (ii) to
return collateral to such Hedge Counterparty when and as required by such Hedge
Agreement.

 

(g)           Securities Lending Account. 
The Trustee shall, at any time that a Securities Lending Agreement is
entered into, establish a single, segregated trust account which shall be
designated as a Securities Lending Account. 
No funds shall be permitted to be deposited in the Securities Lending
Account other than Securities Lending Collateral.  By Issuer Order executed by an Authorized
Officer of the Collateral Manager (which may be in the form of standing
instructions), the Issuer shall at all times direct the Trustee to, and, upon
receipt of such Issuer Order, the Trustee shall invest all Cash received into
the Securities Lending Account (subject to the terms of the Securities Lending
Agreement) in the type of obligations described in the definition of Eligible
Investments, but such investments shall not constitute Eligible Investments for
any purpose hereunder.

 

Notwithstanding Section 10.1(c), the Securities
Lending Account must be maintained with an intermediary with a long-term debt
rating of at least “Baa2” by Moody’s and a short-term debt rating of at least “A-1”
by S&P and a capital surplus of at least $100,000,000.  The account agreement must contain, in
addition to terms set forth in Exhibit H, agreements by the Intermediary
that it will (i) comply with “entitlement orders” (as defined in Article 8
of the UCC) issued by the Trustee without further consent by either the Issuer
or the related Securities Lending Counterparty pursuant to which agreement it
has agreed to comply with “entitlement orders” made by such Person; (ii) credit
all Securities Lending Collateral to the applicable Securities Lending Account;
(iii) not accept for credit to any Securities Lending Account any
Securities Lending Collateral which is registered in the name of, or payable to
the order of, or specially endorsed to, any Person other than the related
securities intermediary unless it has been endorsed to such securities
intermediary or is endorsed in blank and (iv) waive any right of set-off
unrelated to its fees for such Securities Lending Account.  The Intermediary must also agree to provide
prompt notice to the Trustee if any Securities Lending Account or any funds on

 

168

 

deposit therein, or otherwise to the credit of such Account, shall
become subject to any writ, order, judgment, warrant of attachment, execution
or similar process.

 

(h)           Commitment Notes Funding Account. 
If Commitment Notes have been issued, the Trustee shall, prior to the
Closing Date, establish a segregated trust account designated the Commitment
Notes Funding Account.  Any Aggregate
Undrawn Amount deposited with the Trustee pursuant to Section 2.12(e) as
a result of the failure of a Holder of a beneficial interest in a Commitment
Note to satisfy the Revolving Note Rating Criteria or the Delayed Draw Rating
Criteria, as applicable, and any subsequent repayments in respect of any such
Holder’s Revolving Notes, shall be placed in the Commitment Notes Funding
Account and shall be used by the Trustee to fund such Holder’s pro rata portion of any subsequent Draw on the Commitment
Notes.  Amounts so placed in the
Commitment Notes Funding Account shall, for all other purposes under this
Indenture, be part of the Aggregate Undrawn Amount and such Holder shall be
entitled to receive the applicable Commitment Fee thereon.

 

(i)            Interest Reserve Account. 
The Trustee shall, prior to the Closing Date, establish a single,
segregated trust account which shall be designated as the Interest Reserve
Account.  Amounts shall be deposited into
the Interest Reserve Account pursuant to Section 10.2(f).  On or about the Business Day preceding each
Payment Date, the Trustee shall transfer the entire balance in the Interest
Reserve Account as of the Determination Date immediately preceding such Payment
Date to the Payment Account for application pursuant to the Priority of
Interest Payments or the Special Priority of Payments, as applicable.

 

(j)            Expense Reserve Account. 
The Trustee shall, prior to the Closing Date, establish a segregated trust
account designated the Expense Reserve Account. 
On the Closing Date, the Issuer will deposit into the Expense Reserve
Account an amount equal to the Expense Reserve Account Amount.  On each Payment Date, the Trustee will
deposit available Interest Proceeds into the Expense Reserve Account in
accordance with the Priority of Payments in an amount sufficient to cause the
balance of such account to equal the Expense Reserve Account Amount.  Funds in the Expense Reserve Account will be
applied from time to time between Payment Dates to pay expenses of the
Co-Issuers.

 

(k)           Closing Expenses Reserve Account. 
The Trustee shall, prior to the Closing Date, establish a single,
segregated trust account designated as the Closing Expenses Reserve
Account.  On the Closing Date, the Issuer
will deposit into the Closing Expenses Reserve Account an amount equal to the
Closing Expenses Reserve Account Amount. 
On any Business Day from the Closing Date to and including the Determination
Date relating to the third Payment Date, the Trustee shall apply funds from the
Closing Expenses Reserve Account, as directed by the Collateral Manager, to pay
certain expenses of the Co-Issuers incurred in connection with the
establishment of the Co-Issuers, the structuring and consummation of the
offering of the Securities and the issuance of the Securities.  On the Determination Date relating to the
third Payment Date following the Closing Date, all funds remaining in the
Closing Expenses Reserve Account (after deducting any expenses paid on such
Determination Date) will be deposited in the Collection Account as Principal
Proceeds and the Closing Expenses Reserve Account will be closed.  Any income earned on amounts deposited in the
Closing Expenses Reserve Account will be deposited in the Collection Account as
Interest Proceeds as received.

 

169

 

Section 10.4.          Reports
by Trustee.

 

The Trustee shall supply in a timely fashion to the
Co-Issuers, the Collateral Administrator, the Administrator and the Collateral
Manager any information regularly maintained by the Trustee that the Co-Issuers
or the Collateral Manager may from time to time request with respect to the
Pledged Securities, each Account and any other information reasonably needed to
complete the Monthly Report or the Security Valuation Report.  In addition, the Trustee shall promptly
provide any other information reasonably available to the Trustee by reason of
its acting as Trustee hereunder and required to be provided by Section 10.5
or to permit the Collateral Manager to perform its obligations under the
Collateral Management Agreement.  The
Trustee shall forward to the Collateral Manager copies of notices and other
writings received by it from the issuer of any Collateral Debt Security or from
any Clearing Agency with respect to any Collateral Debt Security advising the
holders of such security of any rights that the holders might have with respect
thereto (including, without limitation, notices of calls and redemptions of
securities) as well as all periodic financial reports received from such issuer
and Clearing Agencies with respect to such issuer.  The Trustee shall also cause the amount of
interest paid on the Securities on each Payment Date to be communicated to
Euroclear, Clearstream and the Irish Stock Exchange (as long as any of the
Securities are listed thereon) by the Business Day immediately following such
Payment Date.

 

Nothing in this Section 10.4 shall be construed
to impose upon the Trustee any duty to prepare any report or statement required
under Section 10.5 or to calculate or compute information required to be
set forth in any such report or statement other than information regularly
maintained by the Trustee by reason of its acting as Trustee hereunder.

 

Section 10.5.          Accountings.

 

(a)           Monthly.  Each month
(other than a month in which a Payment Date occurs) commencing in the month in
which a Monthly Report Date occurs, the Issuer shall cause a Monthly Report to
be compiled, determined as of the Monthly Report Date for the Monthly Report
Period, and shall provide such Monthly Report to the Trustee, the Holders (and,
upon request, Certifying Holders) of the Securities, the Collateral Manager,
the Paying Agent in Ireland, each Rating Agency and the Depositary (accompanied
by a request that it be transmitted to the Holders of Securities on the books
of the Depositary) not later than eight Business Days following the Monthly
Report Date.

 

Upon receipt of each Monthly Report, the Trustee shall
compare the information contained therein to the information contained in its
records with respect to the Collateral and shall, within three Business Days
after receipt of such Monthly Report, notify the Issuer and the Collateral
Manager if the information contained in the Monthly Report does not conform to
the information maintained by the Trustee with respect to the Collateral and
detail any discrepancies.  In the event
that any discrepancy exists, the Trustee and the Issuer, or the Collateral Manager
on behalf of the Issuer, shall attempt to resolve the discrepancy.  If such discrepancy cannot be promptly
resolved, the Trustee shall within five Business Days cause the Independent
accountants appointed pursuant to Section 10.7 to review such Monthly
Report and the Trustee’s records to determine the cause of such
discrepancy.  If such review reveals an
error in the

 

170

 

Monthly Report or the Trustee’s records, the Monthly Report or the
Trustee’s records shall be revised accordingly and, as so revised, shall be
utilized in making all calculations pursuant to this Indenture.  The Issuer may cause an electronic copy of
the information from the Monthly Report that the Collateral Manager deems
appropriate to be delivered to each Financial Market Publisher.

 

(b)           Payment Date Accounting. 
The Issuer shall cause the Security Valuation Report to be rendered,
determined as of each Determination Date, and delivered to the Trustee (who
shall deliver such Security Valuation Report to any Holder (or, upon request,
Certifying Holder) of a beneficial interest in any Security, the Collateral
Manager, each Rating Agency and the Depositary (accompanied by a request that
it be transmitted to the Holders of Securities on the books of the Depositary)
not later than the second Business Day preceding the related Payment Date.  Upon receipt of each Security Valuation
Report, the Trustee, in the name and at the expense of the Co-Issuers, shall
notify the Irish Stock Exchange, so long as any
Securities are listed thereon, of the Aggregate Outstanding Amount of the
Securities of each Class after giving effect to the principal payments, if
any, on the next Payment Date.  The
Issuer may cause an electronic copy of the information from the Security
Valuation Report that the Collateral Manager deems appropriate to be delivered
to each Financial Market Publisher.

 

(c)           Required Notice. 
If the Trustee shall not have received any accounting provided for in
this Section 10.5 on the first Business Day after the date on which such
accounting is due to the Trustee, the Trustee shall use its best efforts to
cause such accounting to be made by the applicable Payment Date.  Each Monthly Report and Security Valuation
Report sent to any Holder or beneficial owner shall contain, or be accompanied
by, the following notice:

 

The Securities may be
beneficially owned only by Persons that (a) are not U.S. persons (within
the meaning of Regulation S under the United States Securities Act of
1933, as amended), or are U.S. persons that are also (i) (A) qualified
purchasers for purposes of Section 3(c)(7) of the United States
Investment Company Act of 1940 (“Qualified Purchasers”) or (B) in the case
of the Subordinated Notes only, Knowledgeable Employees (as defined in Rule 3c-6
under the Investment Company Act) (“Knowledgeable Employees”) of either the
Collateral Manager, an affiliate of the Collateral Manager or a corporation,
partnership, limited liability company or other entity (other than a trust)
each shareholder, partner, member or other equity owner of which is either (x)
a Knowledgeable Employee of the Collateral Manager or an affiliate of the
Collateral Manager or (y) a Qualified Purchaser that, in the case of (A) and
(B) are either (1) (in the case of the Subordinated Notes only)
accredited investors (“Accredited Investors”) meeting the requirements of Rule 501(a) under
the Securities Act who, in the case of individual Accredited Investors that are
not Knowledgeable Employees, have a minimum of $10,000,000 in investable assets
or (2) qualified institutional buyers (“Qualified Institutional Buyers”)
within the meaning of Rule 144A under the

 

171

 

Securities Act and (b) can
make the representations set forth in Section 2.5 of the Indenture or the
appropriate Exhibit to the Indenture and (ii) in the case of any
interest in a Global Security, qualified institutional buyers within the
meaning of Rule 144A and (b) can make the representations set forth
in Section 2.5 of the Indenture or the appropriate Exhibit to the
Indenture.  A beneficial ownership
interest in the Securities may be transferred only to a Person that meets the
qualifications set forth in clause (a) of the preceding sentence and
that can make the representations referred to in clause (b) of the
preceding sentence.  The Issuer has the
right to compel any beneficial owner that does not meet the qualifications set
forth in clause (a) sell its interest in the Securities, or may sell
such interest on behalf of such owner, pursuant to Section 2.11 of the
Indenture.

 

(d)           Payment Date Instructions. 
Each Security Valuation Report shall contain instructions to the Trustee
to withdraw on the related Payment Date from the Payment Account and pay or
transfer the amounts set forth in such report in the manner specified in, and
in accordance with the Priority of Payments or the Special Priority of
Payments, as applicable.

 

(e)           Redemption Date Instructions. 
Not later than five Business Days after receiving an Issuer Order
requesting information regarding a redemption of the Notes of a Class as
of a proposed Redemption Date set forth in such Issuer Order, the Trustee shall
provide the necessary information (to the extent it is available to the
Trustee) to the Co-Issuers and the Co-Issuers shall compute the following
information and provide such information in a statement (the “Redemption
Date Statement”) delivered to the Trustee:

 

(i)            the Aggregate Outstanding Amount of the
Notes of the Class or Classes to be redeemed as of such Redemption Date;

 

(ii)           the amount of accrued interest and any
Commitment Fees, Revolving Note Increased Costs and Revolving Note Tax Gross-Up
Amounts due on such Notes as of the last day of the Interest Accrual Period
immediately preceding such Redemption Date; and

 

(iii)          the amount in the Collection Account
available for application to the redemption of such Notes and the payment of
expenses pursuant to the Priority of Payments or the Special Priority of
Payments, as applicable.

 

(f)            Trustee to Provide Information. 
To the extent the Trustee is required to provide any information or
reports pursuant to this Section 10.5 as a result of the failure of the
Issuer, the Co-Issuer or the Collateral Manager to provide such information or
reports, the Trustee shall be entitled to retain an Independent certified
public accountant in connection therewith and the reasonable costs incurred by
the Trustee for such Independent certified public accountant shall be
reimbursed pursuant to Section 6.7.

 

172

 

(g)           Annual Reminder. 
On each anniversary of the Closing Date (or the next Business Day, if
such anniversary is not a Business Day), the Trustee will send to the
Depository a notice in the form required by Section 10.5(c) accompanied
by a request that it be transmitted to the Holders of Securities on the books
of the Depository, identifying the Securities to which it relates.

 

(h)           Each Monthly Report and Security
Valuation Report provided to S&P shall be in the S&P Preferred Format.

 

Section 10.6.          Release
of Securities.

 

(a)           The Collateral Manager may, by Issuer
Order delivered to the Trustee at least two Business Days prior to the
settlement date for any sale of a Pledged Security certifying that the
applicable conditions set forth in Article 12 (and Section 3.3 prior
to the Effective Date) have been met, direct the Trustee to deliver such
obligation against receipt of payment therefor.

 

(b)           Subject to Article 12, the
Collateral Manager may, by Issuer Order delivered to the Trustee at least two
Business Days prior to the date set for redemption or payment in full of a
Pledged Security certifying that such obligation is being redeemed or paid in
full, direct the Trustee or, at the Trustee’s instruction, the Intermediary, to
deliver such obligation, if in physical form, duly endorsed, or, if such
obligation is a Clearing Corporation Security, to cause it to be presented (or
in the case of a general intangible or a participation, cause such actions as
are necessary to transfer such obligation to the designated transferee free of
liens, claims or encumbrances created by this Indenture), to the appropriate
paying agent therefor on or before the date set for redemption or payment, in
each case against receipt of the Redemption Price or payment in full thereof.

 

(c)           Subject to Article 12, the
Collateral Manager may, by Issuer Order delivered to the Trustee at least two
Business Days prior to the date set for an exchange, tender or sale, certifying
that a Pledged Security is subject to an Offer and setting forth in reasonable
detail the procedure for response to such Offer, direct the Trustee or, at the
Trustee’s instructions, to the Intermediary to deliver such obligation, if in
physical form, duly endorsed, or, if such obligation is a Clearing Corporation
Security, to cause it to be delivered, in accordance with such Issuer Order, in
each case against receipt of payment therefor.

 

(d)           The Trustee shall deposit any sale
proceeds received by it from the disposition of a Pledged Security in the
Collection Account, unless such sale proceeds are simultaneously applied to the
purchase of Collateral Debt Securities or Eligible Investments as permitted
under and in accordance with requirements of Article 12.

 

(e)           Subject to Article 12, the Issuer
may, by Issuer Order (delivered to the Trustee at least two Business Days prior
to the settlement date under a Securities Lending Agreement), direct the
Trustee to deliver any such obligation, if in physical form, duly endorsed to
the broker or borrower designated in such Issuer Order or, if such obligation
is a Clearing Corporation Security or other non-physical form, to cause an
appropriate transfer thereof to be made, in each case against receipt of the
Securities Lending Collateral therefor by the Trustee or any collateral

 

173

 

agent in the manner specified by the Collateral Manager in such Issuer
Order; provided, however, that
the Trustee may deliver any such obligation in physical form for examination in
accordance with street delivery custom.

 

(f)            The Trustee shall, upon receipt of an
Issuer Order at such time as there are no Notes Outstanding (and the Commitment
of any Commitment Notes has been reduced to zero) and all obligations of the Co-Issuers
hereunder have been satisfied, release the Collateral.

 

(g)           Following delivery of any obligation
pursuant to clauses (a) through (c), (e) and (f), such obligation
shall be released from the lien of this Indenture without further action by the
Trustee or the Issuer.

 

Section 10.7.          Reports
by Independent Accountants.

 

(a)           On the Closing Date, the Collateral
Manager on behalf of the Issuer shall appoint a firm of Independent certified
public accountants of recognized international reputation for purposes of
preparing and delivering any Accountants’ Letters required by this
Indenture.  Upon any removal of or
resignation by such firm, the Collateral Manager on behalf of the Issuer shall
promptly appoint by Issuer Order delivered to the Trustee and each Rating Agency
a successor thereto that shall also be a firm of Independent certified public
accountants of recognized international reputation.  If the Collateral Manager shall fail to
appoint a successor to a firm of Independent certified public accountants that
has resigned within 30 days after such resignation, the Collateral Manager
shall promptly notify the Trustee of such failure.  If the Collateral Manager shall not have
appointed a successor within 10 days thereafter, the Trustee shall promptly
appoint a successor firm of Independent certified public accountants of
recognized international reputation.  The
fees of such Independent certified public accountants and its successor shall
be payable by the Issuer in accordance with the Priority of Payments or the
Special Priority of Payments, as applicable.

 

(b)           On or before May 31 of each year,
commencing in the year following the Closing Date, the Collateral Manager on
behalf of the Issuer shall cause to be delivered to the Trustee and each Rating
Agency an Accountants’ Letter indicating (i) that such firm has reviewed
the Security Valuation Reports received since the last review and applicable
information from the Trustee; (ii) that the calculations within such
Security Valuation Reports have been performed in accordance with the
applicable provisions of this Indenture; (iii) the aggregate principal
balance of the Pledged Securities and the aggregate principal balance of the
Collateral Debt Securities and any Eligible Principal Investments as of the
immediately preceding Determination Date; and (iv) whether the remaining
Scheduled Distributions will be sufficient to pay the principal of each Class of
Securities by its Stated Maturity together with interest due thereon at the
applicable Interest Rate; provided, however,
that in the event of a conflict between such firm of Independent certified
public accountants and the Collateral Manager or the Issuer with respect to any
matter in this Section 10.7, the determination by such firm of Independent
public accountants shall be conclusive.

 

(c)           Any Accountants’ Letter delivered to the
Trustee pursuant to clause (b) above shall be delivered by the Trustee to
any Holder or Certifying Holder upon request.

 

174

 

Section 10.8.          Reports
to Rating Agencies; Ratings Changes.

 

In addition to the information and reports
specifically required to be provided to each Rating Agency pursuant to the
terms of this Indenture, the Issuer shall provide each Rating Agency with all
information or reports delivered to the Trustee hereunder, and such additional
information as each Rating Agency may from time to time reasonably request and
the Issuer determines in its sole discretion may be obtained and provided
without unreasonable burden or expense. 
The Issuer shall promptly notify the Trustee if the rating on any Class of
Notes has been, or it is known by the Issuer that such rating will be, changed
or withdrawn.  Upon receipt of such
notice, the Trustee, in the name and at the expense of the Co-Issuers, shall
notify the Irish Stock Exchange, so long as any
Securities are listed on such exchange, of any reduction or withdrawal in the
rating on the Securities.

 

ARTICLE 11

 

APPLICATION OF
MONIES

 

Section 11.1.          Disbursements
of Monies from Payment Account.

 

(a)           Notwithstanding any other provision in
this Indenture other than Article 5, but subject to the other subsections
of this Section 11.1 and Section 13.1, on or before each Payment
Date, the Trustee shall disburse amounts, if any, in the Payment Account as
follows and for application by the Trustee in accordance with the following
priorities (the “Priority of Payments”) set forth in clauses (i) and
(ii) below.

 

Unless otherwise specified
in the Supplement, if any clause in the Priority of Payments, Note Payment
Sequence or Special Priority of Payments requires payment to more than one Class of
Notes, such payments will be allocated (i) in the case of principal, pro
rata based upon the outstanding principal amounts thereof, and (ii) in the
case of interest, Deferred Interest, Defaulted Interest and other amounts (if
any), pro rata based upon the amounts due.

 

(i)            On each Payment Date, Interest Proceeds
will be applied as follows to the payment of:

 

(A)          accrued and
unpaid Administrative Expenses in accordance with the Administrative Expense Payment
Sequence, and then to deposit into the Expense Reserve Account an amount
sufficient to cause the balance in such account to equal the Expense Reserve
Account Amount, up to an aggregate limit paid pursuant to this clause (A) on
such Payment Date and on the previous three Payment Dates equal to the
Administrative Expense Limit;

 

(B)           (i) the
amounts required to be paid to any Hedge Counterparty under any Hedge Agreement
(other than any payments due in respect of the complete or partial termination
of such Hedge Agreement) and scheduled payments due with respect to any Short
Positions; and then (ii), all amounts
due to any Hedge Counterparty or Short Position counterparty with respect to
termination (or partial termination) of any Hedge

 

175

 

Agreement
or any Short Position where the Issuer is the sole affected or defaulting party
(in each case, pro rata
based upon the amounts due);

 

(C)           (i) the
Senior Collateral Management Fee for such Payment Date, minus the amount of any
Current Deferred Management Fee with respect to such Senior Collateral
Management Fee for such Payment Date, and then (ii) any Senior Collateral
Management Fee due on an earlier Payment Date that was not paid because funds
were not available in accordance with the Priority of Payments;

 

(D)          accrued and
unpaid interest on the Class A
Notes and any Commitment Fee Amount;

 

(E)           accrued
and unpaid interest on the Class B Notes;

 

(F)           (i) the
Intermediate Collateral Management Fee for such Payment Date, minus the amount
of any Current Deferred Management Fee with respect to such Intermediate
Collateral Management Fee for such Payment Date, and then (ii) any
Intermediate Collateral Management Fee due on an earlier Payment Date that was
not paid because funds were not available in accordance with the Priority of
Payments;

 

(G)           if either
Senior Coverage Test is not met on the related Determination Date, principal on
the Class A Notes, and then principal on the Class B Notes, in each
case until each such test is satisfied as of such Determination Date or such
Notes are paid in full;

 

(H)          (i) accrued
and unpaid interest on the Class C Notes, and then (ii) any Deferred
Interest with respect to the Class C Notes;

 

(I)            (i) accrued
and unpaid interest on the Class D Notes, and then (ii) any Deferred
Interest with respect to the Class D Notes;

 

(J)            if either
Class C/D Coverage Test is not met on the related Determination Date,
payment on the Rated Notes (other than the Class E Notes and Class F
Notes) in accordance with the Note Payment Sequence, in each case until each
such test is satisfied as of such Determination Date or such Notes are paid in
full;

 

(K)          (i) accrued
and unpaid interest on the Class E Notes, and then (ii) any Deferred
Interest with respect to the Class E Notes;

 

(L)           if the Class E
Overcollateralization Test is not met on the related Determination Date,
payment on the Rated Notes (other than the Class F Notes) in accordance
with the Note Payment Sequence, until such test is satisfied as of such Determination
Date or such Notes are paid in full;

 

(M)         (i) accrued
and unpaid interest on the Class F Notes, and then (ii) any Deferred
Interest with respect to the Class F Notes;

 

176

 

(N)          if either
Rating Agency has failed to confirm its original rating on any Class of
Rated Notes in connection with the Effective Date, an amount (as determined by
the Collateral Manager in its sole discretion) of Interest Proceeds remaining
after payments of interest (and payments of principal in connection with
failure of any Coverage Tests) in respect of the Rated Notes shall be applied
to either or both of the following:  (i) such
Interest Proceeds may be designated as Principal Proceeds and applied in
accordance with the Priority of Principal Payments to invest in Eligible
Investments or Collateral Debt Securities, or (ii) to payments in
accordance with the Note Payment Sequence until confirmation of the original
ratings on each Class of Rated Notes is received from each Rating Agency
or such Notes are paid in full;

 

(O)          an amount
equal to the sum of the Terminated Loss Short Recapture Amounts (if any) with
respect to such Payment Date (allocated pro
rata based upon the amounts due) for deposit into the Collection
Account as Principal Proceeds;

 

(P)           beginning
on the second Payment Date, an amount for deposit into the Collection Account
as Principal Proceeds, until the aggregate amount so deposited on such Payment
Date and all prior Payment Dates is equal to the amount of Unused Proceeds (if
any) that were designated by the Collateral Manager as Interest Proceeds in
respect of the first Payment Date;

 

(Q)          (i) any
accrued and unpaid Administrative Expenses to the extent not paid pursuant to
clause (A) above as a result of the Administrative Expense Limit in
accordance with the Administrative Expense Payment Sequence, and then to
deposit into the Expense Reserve Account an amount sufficient to cause the
balance in such account (after giving effect to deposits made pursuant to clause
(A) above), to equal the Expense Reserve Account Amount, and then (ii) any
Revolving Note Increased Costs and Revolving Note Tax Gross-Up Amounts,
(allocated pro rata based upon
the amounts due); provided, that
the aggregate amount of any Revolving Note Increased Costs and Revolving Note
Tax Gross-Up Amounts paid with Interest Proceeds and Principal Proceeds on such
Payment Date shall not exceed an amount (as set forth in the Term Sheet) (such
amount, the Revolving Note Gross-Up Limit);

 

(R)           (i) the
Subordinated Collateral Management Fee for such Payment Date, minus the amount
of any Current Deferred Management Fee with respect to such Subordinated
Collateral Management Fee for such Payment Date, and then (ii) any
Subordinated Collateral Management Fee due on an earlier Payment Date that was
not paid because funds were not available in accordance with the Priority of
Payments;

 

(S)           all amounts due to a Hedge Counterparty or a
Short Position counterparty with respect to termination (or partial
termination) of any Hedge Agreement or any Short Position where the Issuer is
not the sole affected or defaulting party, (pro
rata based upon the amounts due);

 

(T)           any Cumulative Deferred Management Fee that
the Collateral Manager has elected to have paid;

 

177

 

(U)          any portion of any remaining excess Interest
Proceeds as Holders of two-thirds or more of the aggregate principal amount of
the Subordinated Notes may direct the Trustee in writing (on or before the
Determination Date with respect to such Payment Date), for deposit into the
Collection Account as Principal Proceeds; and

 

(V)           all remaining Interest Proceeds to the Holders of
Subordinated Notes.

 

(ii)           On each Payment Date, Principal Proceeds
will be applied as follows to the payment of:

 

(A)          the amounts
referred to in (i) clauses (A) through and including the clause
pursuant to which payments are made in connection with any failure to meet the
Senior Coverage Tests, (ii) the clause in which payments are made in connection
with any failure to meet the Class C/D Coverage Tests and (iii) the
clause in which payments are made in connection with any failure to meet the Class E
Overcollateralization Test, of the Priority of Interest Payments above, in the
priority stated therein but only to the extent not paid in full thereunder;

 

(B)           during the Reinvestment Period, at the option
of the Collateral Manager, (i) for deposit into the Collection Account as
Principal Proceeds to invest in Eligible Investments or Collateral Debt
Securities, (ii) if any Rating Agency has failed to confirm its original
ratings on any Class of Rated Notes in connection with the Effective Date,
amounts in accordance with the Note Payment Sequence until each such rating is
reinstated or such Notes are paid in full, (iii) repayments of any
Revolving Notes and/or (iv) after the Non-Call Period, to make payments in
accordance with the Note Payment Sequence;

 

(C)           after the Reinvestment Period, at the option
of the Collateral Manager, to the extent of Principal Proceeds with respect to
Credit Improved Securities, Credit Risk Securities and Prepaid Collateral Debt
Securities, an amount for deposit into the Collection Account as Principal
Proceeds to invest in Eligible Investments or Collateral Debt Securities;

 

(D)          after the Reinvestment Period, amounts in
accordance with the Note Payment Sequence until each Class of Rated Notes
has been repaid in full;

 

(E)           (i) Administrative Expenses (in
accordance with the Administrative Expense Sequence) and (ii) any Revolving
Note Increased Costs and Revolving Note Tax Gross-Up Amounts, in each case only
to the extent not paid in full under the Priority of Interest Payments
(allocated pro rata based upon
the amounts due);

 

(F)           all amounts due to a Hedge Counterparty or a Short
Position counterparty with respect to termination (or partial termination) of
any Hedge Agreement or any Short Position where the Issuer is not the sole
affected or defaulting party (pro rata

 

178

 

based
upon the amounts due), but only to the extent not paid in full under the
Priority of Interest Payments;

 

(G)           (i) the Subordinated Collateral
Management Fee for such Payment Date, minus the amount of any Current Deferred
Management Fee with respect to such Subordinated Collateral Management Fee for
such Payment Date, and then (ii) any Subordinated Collateral Management
Fee due on an earlier Payment Date that was not paid because funds were not
available in accordance with the Priority of Payments, and then (iii) any
Cumulative Deferred Management Fee, to the extent not waived by the Collateral
Manager, in each case only to the extent not paid in accordance with the Priority of Interest Payments on such
Payment Date; and

 

(H)          all remaining amounts to the
Holders of the Subordinated Notes.

 

The Collateral Manager shall
instruct the Trustee to sell all Collateral not maturing on or before Stated
Maturity, such that on the Stated Maturity, the Trustee shall pay the net
proceeds from the liquidation of the Collateral and all available Cash in
accordance with the Priority of Payments; provided,
however, that at the direction of the Holders of at least two-thirds
of the Aggregate Outstanding Amount of the Subordinated Notes, the Collateral
Manager shall instruct the Trustee to sell only that portion of the Collateral
(as determined by the Collateral Manager) as shall be necessary to generate
sufficient proceeds to pay all Outstanding Rated Notes in full in cash in
accordance with the Priority of Payments and to pay all other obligations of
the Issuer senior in priority to the Subordinated Notes, and any remaining
Collateral shall be distributed to the Holders of the Subordinated Notes pro
rata.

 

(b)           Not later than 12:00 p.m., New York
time, on or before the Business Day preceding each Payment Date, the Issuer
shall remit or cause to be remitted to the Trustee for deposit in the Payment
Account an amount of Cash sufficient to pay the amounts described in the
Priority of Payments or the Special Priority of Payments, as applicable,
 required to be paid on such Payment Date.

 

(c)           If on any Payment Date the amount
available in the Payment Account from amounts received in the related Due
Period is insufficient to make the full amount of the disbursements required by
the statements furnished by the Issuer pursuant to Section 10.5(b), the
Trustee shall make the disbursements called for in the order and according to
the priority set forth under the Priority of Payments or Special Priority of
Payments, as applicable, subject to Section 13.1, to the extent funds are
available therefor.  Principal Proceeds
shall not be paid on any Class of Notes in accordance with the Priority of
Payments if, after giving effect to such payment, any Overcollateralization
Test with respect to a more senior Class of Notes would be caused to fail.

 

(d)           In connection with the application of
funds to pay Administrative Expenses of the Issuer or the Co-Issuer, as the
case may be, in accordance with the Priority of Payments or Special Priority of
Payments, the Trustee shall remit such funds as directed, to the extent
available, to the appropriate creditor no later than each Payment Date.

 

179

 

(e)           In the event that any Hedge Counterparty
defaults in the payment of its obligations to the Issuer under the relevant
Hedge Agreement on any Payment Date, the Trustee shall make a demand on such
Hedge Counterparty, or any guarantor, if applicable, demanding payment by 12:30 p.m.,
New York time, on such date.  The Trustee
shall give notice to the Holders of Securities upon the continuing failure by
such Hedge Counterparty to perform its obligations during the two Business Days
following a demand made by the Trustee on such Counterparty, and shall take
such action with respect to such continuing failure directed to be taken by the
Securityholders pursuant to Article 5.

 

(f)            The principal amount of any Class of
Rated Notes to be redeemed on any Payment Date for which an Interest Coverage
Test is not satisfied as of the related Determination Date will be the amount
that, if it had been paid in reduction of the principal amount of such Class of
Rated Notes on the immediately preceding Payment Date, would have caused such
Interest Coverage Test to be satisfied for the current Determination Date.

 

The principal amount of any Class of Rated Notes
to be redeemed on any Payment Date for which an Overcollateralization Test is
not satisfied as of the related Determination Date will be the amount that, if
it had been applied to make payments on each class of Rated Notes (including
Deferred Interest, if any) in accordance with the Note Payment Sequence on such
Payment Date, would have caused such Overcollateralization Test to be satisfied
for the current Determination Date.  In
determining the amount of any principal payments required to satisfy any
Overcollateralization Test, (1) during the Reinvestment Period, (a) for
purposes of each clause in Section 11.1(a)(i), the Aggregate Outstanding
Amount of Notes for such purposes shall take into account any Interest Proceeds
applied or to be applied in payment of the principal amount of such Notes
pursuant to all prior clauses in Section 11.1(a)(i) and then (b) for
purposes of each clause in Section 11.1(a)(ii), the Aggregate Outstanding
Amount of Notes for such purposes shall take into account first the amounts in
the preceding clause (a) and second any Principal Proceeds applied or to
be applied in payment of the principal amount of such Notes pursuant to all
prior clauses in Section 11.1(a)(ii) and (2) after the
Reinvestment Period, (a) any Eligible Principal Investments not designated
for reinvestment by the Collateral Manager pursuant to Section 11.1(a)(ii)(C) shall
be excluded from Principal Collateral Value for such purposes and (b)(i) all
Eligible Principal Investments not designated for reinvestment by the
Collateral Manager pursuant to Section 11.1(a)(ii)(C) shall be deemed
to have been applied in accordance with Section 11.1(a)(ii), and then (ii) for
purposes of each clause in Section 11.1(a)(i), the Aggregate Outstanding
Amount of Notes for such purposes shall take into account first the amounts in
the preceding clause (b)(i) and second any Interest Proceeds applied or to
be applied in payment of the principal amount of such Notes pursuant to all
prior clauses in Section 11.1(a)(i), and then (iii) for purposes of
each clause in Section 11.1(a)(ii), the Aggregate Outstanding Amount of
Notes for such purposes shall take into account first the amounts in the
preceding clause (b)(i), second the amounts in the preceding clause (b)(ii) and
third any Principal Proceeds (other than Principal Proceeds included in the
preceding clause (b)(i)) applied or to be applied in payment of the principal
amount of such Notes pursuant to all prior clauses in Section 11.1(a)(ii).

 

In addition to the foregoing, on each Payment Date, (a) the
aggregate amount of Interest Proceeds to be applied in accordance with the
Priority of Payments to make payments on each Class of Rated Notes to
satisfy any Coverage Test as of the related Determination Date shall be

 

180

 

determined after giving effect to any Interest Proceeds already
allocated to pay principal of the Notes pursuant to an earlier clause in the
Priority of Interest Payments on such Payment Date; and (b) the aggregate
amount of Principal Proceeds to be applied in accordance with the Priority of
Payments to make payments on each Class of Rated Notes to satisfy any
Coverage Test as of the related Determination Date shall be determined after
giving effect to (i) Interest Proceeds allocated to pay principal of the
Rated Notes in accordance with the Priority of Interest Payments on such
Payment Date and (ii) Principal Proceeds already allocated to pay
principal of the Rated Notes pursuant to an earlier clause in the Priority of
Principal Payments on such Payment Date.

 

ARTICLE 12

 

SALE OF COLLATERAL

 

DEBT OBLIGATIONS;
SUBSTITUTION 

 

Section 12.1.          Sale
of Collateral Debt Securities and Reinvestment.

 

Subject to the satisfaction of the conditions
specified in Section 12.5, the Collateral Manager by Issuer Order may
direct the Trustee to sell, and the Trustee will sell in the manner directed by
the Collateral Manager, any Collateral Debt Security, Defaulted Security or
Equity Security if such sale meets the requirements of any one of paragraphs (a) through
(h) of this Section 12.1.

 

(a)           Credit Risk Securities. 
At any time, the Collateral Manager may direct the Trustee to sell a
Credit Risk Security without restriction.

 

(b)           Credit Improved Securities. 
The Collateral Manager may direct the Trustee to sell a Credit Improved
Security on behalf of the Issuer if:

 

(i)            the Collateral Manager reasonably
believes that it will be able to enter into binding commitments to reinvest all
or a substantial portion of the Sale Proceeds from such sale, in compliance
with the Investment Criteria, in one or more additional Collateral Debt
Securities no later than 20 Business Days following such sale or apply such
amounts to repayments on any Revolving Notes during the Draw Period; or

 

(ii)           after the Reinvestment Period only, if
the Sale Proceeds from such sale are at least equal to the Principal Balance of
such Credit Improved Security.

 

(c)           Defaulted Securities. 
At any time, the Collateral Manager may direct the Trustee to sell a
Defaulted Security without restriction; provided,
however, that the Collateral Manager shall use its commercially
reasonable efforts to effect the sale of any Defaulted Security within three
years after it became a Defaulted Security.

 

(d)           Equity Securities. 
At any time, the Collateral Manager may direct the Trustee to sell an
Equity Security without restriction; provided,
however, that the Collateral Manager will use commercially
reasonable efforts to sell any Collateral Debt Security that constitutes Margin
Stock not later than 45 days after the later of (a) the date of the Issuer’s
acquisition thereof or (b) the date such Equity Security or Pledged
Security became Margin Stock.

 

181

 

(e)           Optional Redemption. 
After the Issuer has notified the Trustee of an Optional Redemption of
the Notes in accordance with Section 9.2, the Collateral Manager will
direct the Trustee to sell, as necessary, all or any portion of the Collateral
Debt Securities, if (i) the requirements of Article 9 (including the
certification requirements of Section 9.3(c)) are satisfied and (ii) the
Independent certified public accountants appointed by the Issuer pursuant to Section 10.7
have confirmed the calculations contained in the certificate furnished by the
Collateral Manager pursuant to Section 9.3(c).

 

(f)            Discretionary Sales. The Collateral Manager may direct the
Trustee to sell any Collateral Debt Security that is not a Defaulted Security,
an Equity Security, a Credit Risk Security or a Credit Improved Security at any
time during the Reinvestment Period (any such sales, “Discretionary Sales”),
if:

 

(i)            after giving effect to such sale, the
Aggregate Principal Balance of all Collateral Debt Securities sold after the
Effective Date pursuant to this Section 12.1(f)(i) during any period
of 12 calendar months ending with such sale is not greater than a certain
percentage (as set forth in the Term Sheet) of the Principal Collateral Value
(such percentage, the Discretionary Sales Percentage) (calculated
assuming such Principal Collateral Value equals the Effective Date Target Par
at all times prior to the Effective Date);

 

(ii)           the Collateral Manager reasonably
believes that it will be able to reinvest or enter into binding commitments to
reinvest all or a substantial portion of the Sale Proceeds from such sale, in
compliance with the Investment Criteria, in one or more additional Collateral
Debt Securities within 20 Business Days following such sale or apply such
amounts to repayments on any Revolving Notes during the Draw Period; and

 

(iii)          the Restricted Trading Condition does not
apply.

 

(g)           Mandatory Sales. 
Notwithstanding the provisions of this Section 12.1, the Collateral
Manager will no later than the Determination Date prior to the Payment Date
coinciding with the Stated Maturity, on behalf of the Issuer, instruct the
Trustee pursuant to an Issuer Order to, and the Trustee will, sell for
settlement in immediately available funds no later than two Business Days
before the Stated Maturity any Collateral Debt Securities scheduled to mature
after the Stated Maturity of the Notes; provided,
however, that at the direction of the Holders of at least two-thirds of the
Aggregate Outstanding Amount of the Subordinated Notes and pursuant to the last
paragraph of Section 11(a)(ii), the Collateral Manager shall instruct the
Trustee to sell only that portion of the Collateral Debt Securities (as
determined by the Collateral Manager) as shall be necessary to generate sufficient
proceeds to pay all Outstanding Rated Notes in full in cash in accordance with
the Priority of Payments and to pay all other obligations of the Issuer senior
in priority to the Subordinated Notes.

 

(h)           Withholding Taxes. 
If a Collateral Debt Security becomes subject to withholding tax and the
terms of such Collateral Debt Security do not provide for a gross-up that would
cause the amount to be received by the Issuer to be not less than the amount
the Issuer would have received in the absence of such withholding tax, the
Collateral Manager may instruct the Trustee to sell such Collateral Debt
Security at any time.

 

182

 

Section 12.2.          Purchase
of Additional Collateral Debt Securities and Eligible Investments.

 

(a)           Purchase of Additional Collateral Debt
Securities During Reinvestment Period; Investment Criteria. 
The Collateral Manager on behalf of the Issuer may direct the Trustee to
invest Principal Proceeds (including Interest Proceeds designated as Principal
Proceeds pursuant to the Priority of Interest Payments, and at the discretion
of the Collateral Manager, Interest Proceeds with respect to the purchase of
accrued interest) and the funds available from Draws on any Commitment Notes in
additional Collateral Debt Securities if the conditions specified in this Section 12.2
and Section 12.5 are met.

 

No Collateral Debt Security may be purchased after the
Effective Date unless each of the following conditions (the “Investment
Criteria“) are satisfied as of the date the Collateral Manager commits on
behalf of the Issuer to make such purchase, in each case, after giving effect
to such purchase and all other sales or purchases previously or simultaneously
committed to:

 

(i)            such obligation is a Collateral Debt
Security;

 

(ii)           each Coverage Test will be satisfied, or
if not satisfied, such Coverage Test will be maintained or improved; provided, however,
that Principal Proceeds received in respect of any Defaulted Securities, Equity
Securities or Principal Proceeds constituting scheduled distributions, may not
be so reinvested after the Effective Date unless each Coverage Test is
satisfied immediately before and immediately following any purchase (or
commitment to purchase) using such Principal Proceeds;

 

(iii)          so long as any Rated Notes are rated by
S&P, except in connection with the reinvestment of Principal Proceeds of
any Defaulted Security or Credit Risk Security, the S&P CDO Monitor Test
must be maintained or improved after giving effect to such purchase (or
commitment to purchase);

 

(iv)          either (A) each requirement of the
Collateral Quality Test (other than the S&P CDO Monitor Test) and Portfolio
Profile Test will be satisfied or (B) if any such requirement was not
satisfied immediately prior to such reinvestment, such requirement will be
maintained or improved;

 

(v)           in the case of reinvestment during the
Reinvestment Period of Principal Proceeds received with respect to a
discretionary sale of a Collateral Debt Security (other than a Defaulted
Security, an Equity Security or a Credit Risk Security) or a sale of a Credit
Improved Security, either (A) the Aggregate Principal Balance of all
Collateral Debt Securities purchased with such Principal Proceeds will at least
equal the Aggregate Principal Balance of the Collateral Debt Security sold, or (B) the
Class C/D Overcollateralization Ratio is greater than or equal to the
Effective Date Target Par Ratio, in either case after such reinvestment;

 

(vi)          in the case of reinvestment during the
Reinvestment Period of Principal Proceeds received with respect to a sale of a
Defaulted Security, an Equity Security or a Credit Risk Security, either (A) the
Aggregate Principal Balance of all Collateral Debt Securities purchased with
such Principal Proceeds will at least equal 100% of such Principal Proceeds or

 

183

 

(B) the Class C/D Overcollateralization Ratio is greater than
or equal to the Effective Date Target Par Ratio, in either case after such
reinvestment;

 

(vii)         in the case of reinvestment after the
Reinvestment Period of Principal Proceeds received in connection with a Prepaid
Collateral Debt Security or sale of a Credit Improved Security or Credit Risk
Security, (A) the Collateral Manager elects to invest such amounts in
additional Collateral Debt Securities, (B) the Restricted Trading
Condition does not apply, (C) the Moody’s Weighted Average Rating Factor
Test is satisfied after giving effect to such reinvestment, (D) either (x)
the Aggregate Principal Balance of all Collateral Debt Securities purchased
with such Principal Proceeds will at least equal the Aggregate Principal
Balance of the Collateral Debt Security sold or prepaid or (y) the Class C/D
Overcollateralization Ratio is greater than the Effective Date Target Par Ratio
after such reinvestment, (E) each of the Coverage Tests will be satisfied
after giving effect to such sale (if applicable) and reinvestment, (F) if
the aggregate principal balance of all CCC Obligations as of such date is
greater than 5% of the Principal Collateral Value, then the Moody’s Rating of
any Collateral Debt Security purchased with such Principal Proceeds must be
greater than “B3” and (G) each Collateral Debt Security purchased with
such Principal Proceeds must have an S&P Rating no lower and a maturity no
longer than the Collateral Debt Security that generated such Principal
Proceeds; and

 

(viii)        no Event of Default has occurred and is
continuing and has not been waived.

 

For purposes of calculating compliance with the
Investment Criteria, (i) each proposed investment will be evaluated after
giving effect to all sales and reinvestments (A) previously settled and (B) not
yet settled but reasonably expected to settle within 20 Business Days following
the date of calculation, as certified by the Collateral Manager to the Trustee
based on outstanding Issuer orders, trade confirmations or executed assignments
and (ii) temporary investment of Principal Proceeds received in connection
with Credit Improved Securities, Prepaid Collateral Debt Securities and Sale
Proceeds invested in Eligible Investments will be disregarded.

 

(b)           Purchase of Defaulted Securities in
Exchange Transactions.  Notwithstanding Section 12.2(a),
a Defaulted Security (a “Purchased Defaulted Security”) may be purchased
with Sale Proceeds of another Defaulted Security (an “Exchanged Defaulted
Security”) if:

 

(i)            when compared to the Exchanged Defaulted
Security, the Purchased Defaulted Security (A) is issued by a different
obligor and (B) but for the fact that such debt obligation is a Defaulted
Security, such Purchased Defaulted Security would otherwise qualify as a
Collateral Debt Security;

 

(ii)           the Collateral Manager has certified to
the Trustee that:

 

(A)          at the time of the purchase, (i) the Collateral
Manager believes the Purchased Defaulted Security has equal or relative credit
risk and (ii) each of the S&P rating and Moody’s rating, if any, of
the Purchased Defaulted Security is at least as high as the comparable rating,
if any, of the Exchanged Defaulted Security;

 

184

 

(B)           both prior to and after giving effect to such
purchase, the Portfolio Profile Test will be satisfied or, if the Portfolio
Profile Test was not satisfied prior to such exchange, the Portfolio Profile
Test will be maintained or improved;

 

(C)           the Exchanged Defaulted Security was not originally
purchased as a Purchased Defaulted Security; and

 

(D)          the Restricted Trading Condition does not apply;

 

(iii)          the period during which the Issuer held
the Exchanged Defaulted Security will be included for all purposes when
determining the period during which the Issuer holds the Purchased
Defaulted Security for purposes of any period described above in Section 12.1;
and

 

(iv)          such purchase of the Purchased Defaulted
Security will not, when taken together with all other Purchased Defaulted
Securities then held, cause the aggregate Principal Balance of all Purchased
Defaulted Securities then held by Issuer to exceed a certain percentage (as set
forth in the Term Sheet) of the Principal Collateral Value (such percentage,
the Maximum Purchased Defaulted Percentage.

 

For the avoidance of doubt, Exchange Transactions may
occur by separate purchase and sale transactions.

 

(c)           Certification by Collateral Manager. 
Each Collateral Debt Security purchased after the Closing Date will be
made pursuant to an Issuer Order, which Issuer Order will be deemed a
certification by the Collateral Manager that such purchase complies with this Section 12.2
and Section 12.5.

 

Section 12.3.          Securities
Lending.

 

(a)           Unless an Event of Default has occurred
and is continuing, in order to permit the lending of Collateral Debt Securities
(other than a Synthetic Security that is not a “security” within the meaning of
Section 1236(c) of the Code), the Collateral Manager, on behalf of
the Issuer, may, in its discretion and from time to time, enter into a
Securities Lending Agreement with a Securities Lending Counterparty, provided,
that:

 

(i)            Rating Agency Confirmation is obtained;
and

 

(ii)           no more than 20% of the principal balance
of Collateral Debt Securities may be subject to Securities Lending Agreements
and no such Securities Lending Agreements may have a term of greater than 90
days; provided that the duration
of any Securities Lending Agreement shall not extend beyond the Stated Maturity
of the Notes;

 

(iii)          each Securities Lending Agreement will
be, as determined by the Collateral Manager in its reasonable business judgment
in good faith, on market terms (except as required below) and:

 

185

 

(A)          require the Securities Lending Counterparty to pledge
as Collateral and deliver to the Issuer collateral in the form of Cash or
direct Registered debt obligations of the United States with a maturity not
greater than five years to secure its obligation to return the Collateral Debt
Securities (“Securities Lending Collateral”) and to maintain such
collateral at all times with the Trustee in an amount equal to at least 102% of
the current market value (determined daily by the related Securities Lending
Counterparty and monitored by the Collateral Manager) of the loaned Collateral
Debt Securities;

 

(B)           provide that any Securities Lending Collateral in the
form of Cash shall be invested by the Trustee in Eligible Investments (subject
to the terms of the Securities Lending Agreement) and that the Issuer will be
entitled to a portion of interest earned on any such Eligible Investments; and
if securities are delivered to the Trustee as Securities Lending Collateral,
the Issuer will be paid a loan fee for lending the loaned Collateral Debt
Securities to the Securities Lending Counterparty;

 

(C)           require that the Securities Lending Counterparty
return to the Issuer debt obligations which are identical (in terms of issue
and class) to the loaned Collateral Debt Security, unless the Issuer and the
Trustee shall have received an opinion of tax counsel of nationally recognized
standing in the United States experienced in such matters to the effect that
the absence of such requirement in such Securities Lending Agreement will not
cause the Issuer to be engaged, or deemed to be engaged, in a trade or business
in the United States for United States federal income tax purposes or otherwise
to be subject to United States federal income tax on a net basis;

 

(D)          require that the Securities Lending Counterparty pay
to the Issuer such amounts as are equal to all interest and other payments to
which the owner of the loaned Collateral Debt Security is entitled for the
period during which the Collateral Debt Security is loaned and that no such
payments are subject to withholding tax of any jurisdiction, unless the Issuer
is entitled to a full gross-up (on an after-tax basis) with respect to any such
withholding tax;

 

(E)           satisfy any other requirements of Section 1058 of
the Code and the Treasury regulations promulgated thereunder, as certified by
the Collateral Manager, unless the Issuer and the Trustee shall have received
an opinion of tax counsel of nationally recognized standing in the United States
experienced in such matters to the effect that the absence of such requirement
in such Securities Lending Agreement will not cause the Issuer to be engaged,
or deemed to be engaged, in a trade or business in the United States for United
States federal income tax purposes or otherwise to be subject to United States
federal income tax on a net basis;

 

(F)           be governed by the laws of the state of New York; and

 

(G)           permit the Issuer to assign its rights thereunder to
the Trustee pursuant to this Indenture;

 

186

 

(iv)          each Securities Lending Agreement shall
allow the Issuer to terminate if:

 

(A)          the credit ratings of the Securities Lending
Counterparty are withdrawn or downgraded below ratings specified in the Securities
Lending Agreement;

 

(B)           an Optional Redemption occurs;

 

(C)           the Securities Lending Counterparty is the subject of
an insolvency or similar proceeding;

 

(D)          the Securities Lending Counterparty defaults in the
performance of any of its obligations under the related Securities Lending
Agreement; or

 

(E)           the Issuer gives prior written notice to the
Securities Lending Counterparty; and

 

(v)           the Issuer (or the
Collateral Manager acting on behalf of the Issuer) complies with
Sections 7.17(j) and 10.6(e).

 

(b)           Upon entering into any Securities Lending
Agreement, the Collateral Manager shall provide a certificate to the Trustee:

 

(i)            notifying the Trustee of the details and
identifying the Collateral Debt Securities that are subject to such agreement;

 

(ii)           certifying to the Trustee that all
applicable conditions of this Indenture have been satisfied and that, in its
reasonable business judgment, it believes that such Securities Lending
Agreement will generate additional net income for the Issuer; and

 

(iii)          directing, as applicable, the release of
any Collateral Debt Security to be delivered pursuant to such Securities
Lending Agreement.

 

(c)           Whenever a loan of a Collateral Debt
Security is made by the Issuer to a Securities Lending Counterparty under a Securities
Lending Agreement pursuant to this Section 12.3, the lien of the Trustee
in such Collateral Debt Security Granted by the Issuer shall, immediately prior
to such loan, be released (with no further action required on the part of the
Issuer or the Trustee).

 

(d)           The Trustee shall be authorized to enter
into or acknowledge any Securities Lending Agreement (and any account control
agreement, collateral agreement or any similar agreement) at the instruction of
the Collateral Manager on behalf of the Issuer and to perform in accordance
therewith, and to make delivery and accept delivery and return (directly or
through a custodian or intermediary) of any collateral pursuant thereto, or
pursuant to such instruction as shall be provided by the Collateral Manager in
connection therewith and to take any actions and exercise any rights and
remedies under any such Securities Lending Agreement (and any account control
agreement, collateral agreement or any similar agreement) as the Collateral
Manager may instruct; provided, however,
that the Trustee shall not be under any obligation to enter into or acknowledge
any Securities Lending Agreement (or any account control agreement, collateral

 

187

 

agreement or any similar agreement), or to deliver or receive any
collateral pursuant thereto, without specific written instruction of the
Collateral Manager; and provided, further,
that the Trustee shall not be obligated to enter into any Securities Lending
Agreement (or any account control agreement, collateral agreement or any
similar agreement) that would in its judgment, subject it to any liability,
whether financial or otherwise, or cause it to incur or subject it to risk of
any expense, cost or disbursement for which it is not, in its judgment,
adequately indemnified, or that would impose upon it any duties, obligations or
responsibilities that are unacceptable to it. 
The Collateral Manager shall provide written instructions to the Trustee
with respect to the administration of any such Securities Lending Agreement
(and any account control agreement, collateral agreement or any similar
agreement) including, without limitation, with respect to any default and the
exercise of rights and remedies thereunder, as the Trustee may reasonably
require.  Any instruction by the Issuer
or Collateral Manager to the Trustee with respect to any Securities Lending
Agreement (and any account control agreement, collateral agreement or any
similar agreement), the lending or return of Collateral Debt Securities
thereunder, the posting of collateral thereunder or other matters concerning
the administration thereof or exercise of rights or remedies thereunder, shall
contain such information as the Trustee reasonably may require to enable it to
perform and carry out the terms thereof. 
In connection with any such instruction by the Collateral Manager, the
Trustee shall be entitled to receive and rely upon an Officer’s certificate of
the Collateral Manager to the effect that such Securities Lending Agreement,
any related agreement, and the Securities Lending Counterparty thereunder, is
each in compliance with the requirements of this Indenture.  The execution or acknowledgement of any
Securities Lending Agreement (and any account control agreement, collateral
agreement or any similar agreement) by the Trustee shall not cause, or be
deemed to imply, any responsibility of evaluation on the part of the Trustee
for the sufficiency, validity or adequacy of the terms thereof.  Nothing herein shall be construed to cause
the Trustee to have any fiduciary duties to any Securities Lending
Counterparty.

 

So long as any Collateral Debt Security is on loan
pursuant to a Securities Lending Agreement, (i) the Trustee shall have no
liability for any failure or inability on its part to receive any information
or take any action in respect of such Collateral Debt Security by reason of its
being on loan (including without limitation, any failure to take action in
respect of a notice of redemption, consent solicitation, exchange or tender
offer or similar corporate action) and (ii) any such loaned Collateral
Debt Security shall not be disqualified for return to the Trustee as a Pledged
Security by reason of any change in circumstance or status during the time
while on loan (including any change which would cause such Collateral Debt
Security to be ineligible for purchase by the Issuer under the terms hereof if
applied to a proposed purchase thereof in the open market at the time of such
return from loan).

 

(e)           Upon termination of a Securities Lending
Agreement and upon receipt of a written certification of the Collateral Manager
that such transfer is in accordance with the terms of the relevant Securities
Lending Agreement, the Trustee shall transfer any Securities Lending Collateral
received with respect to such Securities Lending Agreement, either (i) to
the Securities Lending Counterparty or (ii) to the Collection Account for
application as Interest Proceeds or Principal Proceeds, as applicable.

 

188

 

(f)            If a Securities Lending Counterparty no
longer meets the required ratings, then the Issuer, within ten Business Days
thereof, will take one of the following actions:

 

(i)            terminate each Securities Lending
Agreement with such Securities Lending Counterparty;

 

(ii)           obtain a guarantee of the Securities
Lending Counterparty’s obligations under each applicable Securities Lending
Agreement from a Person meeting the required ratings;

 

(iii)          reduce the percentage of the Collateral
Debt Securities lent to the affected Securities Lending Counterparty so that
each such Securities Lending Agreement, together with all other Securities
Lending Agreements, is in compliance with the requirements relating to the
credit ratings of Securities Lending Counterparties;

 

(iv)          take such other steps as each Rating
Agency that has reduced its rating of such Securities Lending Counterparty may
require to cause such Securities Lending Counterparty’s obligations under each
Securities Lending Agreement to be treated by such Rating Agency as if such
obligations were owed by a counterparty having a rating at least equivalent to
the rating that was assigned by such Rating Agency to the affected Securities
Lending Counterparty immediately prior to its rating being reduced; or

 

(v)           take such other action for which Rating
Agency Confirmation is obtained.

 

(g)           Unless an Event of Default has occurred
and is continuing, upon an “event of default” (as such term is defined under
the applicable Securities Lending Agreement) by a Securities Lending
Counterparty, the Collateral Manager, on behalf of the Issuer, shall promptly
exercise the Issuer’s remedies under such Securities Lending Agreement,
including directing the Trustee to liquidate, or cause the liquidation of, the
related Securities Lending Collateral in accordance with written instructions
from the Collateral Manager.  If an Event
of Default has occurred and is continuing and an “event of default” (as such
term is defined under the applicable Securities Lending Agreement) by a
Securities Lending Counterparty occurs, the Trustee shall pursue the remedies
set forth in Article 5.  Proceeds of
any liquidation pursuant to this subsection shall be deposited in the
Collection Account for application as Interest Proceeds or Principal Proceeds,
as applicable.

 

(h)           If an Event of Default has occurred and
is continuing, the Issuer shall not extend the term of any Securities Lending
Agreement or renew any such Agreement.

 

Section 12.4.                             Synthetic Securities.

 

(a)           As part of the purchase of a Synthetic
Security, the Issuer, or the Collateral Manager on behalf of the Issuer, may be
required to deposit Synthetic Security Collateral with a custodian or other
third party (which may be the Trustee, acting as collateral agent) and grant to
the related Synthetic Security Counterparty a security interest in such
Synthetic Security Collateral, and the Synthetic Security Counterparty may be
required to post collateral for the benefit of the Issuer in accordance with
the terms of such Synthetic Security. 
The Issuer may acquire, transfer or assign Synthetic Security
Collateral, and the Trustee shall release funds in

 

189

 

connection therewith, notwithstanding that such Synthetic Security
Collateral may not be Collateral Debt Securities or Eligible Investments; provided, that Synthetic Security
Collateral may not include Margin Stock and the ownership of Synthetic Security
Collateral will not cause the Issuer to be subject to income tax on a net
income basis in any jurisdiction, nor will any payments received with respect
to any Synthetic Security Collateral be subject to withholding tax of any
jurisdiction, unless the Issuer is entitled to a full gross-up (on an after-tax
basis) with respect to any such withholding tax.  Such released funds shall, for purposes of
this Indenture, be considered part of the purchase price of the related
Synthetic Security.

 

(b)           In the event the Trustee acts as
collateral agent with respect to Synthetic Security Collateral, the Trustee
shall deposit such Synthetic Security Collateral in one or more segregated
trust accounts, which shall be held in trust in the name of the Trustee, as
collateral agent, for the benefit of the related Synthetic Security
Counterparty, and shall apply the funds on deposit in such account(s), as
instructed by the Collateral Manager pursuant to the terms of the related
Synthetic Security.  The Issuer shall
grant to the Trustee a second priority security interest in any Synthetic
Security Collateral, and shall cause the Synthetic Security Counterparty and
the custodian or other third party (including, if applicable, the Trustee as
collateral agent) holding the Synthetic Security Collateral to be notified of
and acknowledge such second priority security interest.

 

(c)           Any payments in respect of the Synthetic
Security Collateral not retained by the Synthetic Security Counterparty are to
be paid to the Trustee.  Interest (or the
economic equivalent) received by the Trustee on the Synthetic Security Collateral
prior to the release of the Synthetic Security Collateral shall be Interest
Proceeds; principal payments (or their economic equivalent) received by the
Trustee on the Synthetic Security Collateral prior to the release of the
Synthetic Security Collateral shall either be Principal Proceeds or, if
required under the terms of the related Synthetic Security, invested in
Eligible Investments or any other Synthetic Security Collateral securities
acceptable to the Issuer and the Synthetic Security Counterparty and maintained
as Synthetic Security Collateral.

 

(d)           Upon the release of the Synthetic
Security Counterparty’s lien on any Synthetic Security Collateral held in
relation to a Synthetic Security through the termination or sale of such
Synthetic Security or otherwise, the Collateral Manager on behalf of the Issuer
shall cause such Synthetic Security Collateral to be Delivered to the
Intermediary for the benefit of the Trustee (or shall take or cause the taking
of any and all other actions necessary to create in favor of the Trustee a
valid, perfected, first-priority security interest in such Synthetic Security
Collateral under applicable law and regulations (including without limitation
Articles 8 and 9 of the UCC) in effect at the time of such release).  Synthetic Security Collateral Delivered to
the Intermediary may be retained by the Trustee or sold by the Collateral
Manager without regard to the requirements of Sections 12.1 and 12.2 at the
sole discretion of the Collateral Manager to the extent it consists of
Collateral Debt Securities.

 

(e)           With respect to any Synthetic Security
with an unfunded amount that does not by its terms require Synthetic Security
Collateral, additional funds from Principal Proceeds will be deposited at the
time of purchase, and at all times funds will be maintained, in the Synthetic
Security Reserve Account such that the amount of funds on deposit in the
account will be equal

 

190

 

to the unfunded amount of all such outstanding Synthetic
Securities.  All payments received on
such Synthetic Security will be treated as Interest Proceeds or Principal
Proceeds, as the case may be, and all interest received on any investments of
funds on deposit in the account will be treated as Interest Proceeds.  Upon the sale of any Synthetic Security,
maturity or termination of the Synthetic Security or termination of the future
payment obligation, any funds in the Synthetic Security Reserve Account in
excess of the unfunded amount on all remaining Synthetic Securities will be
transferred to the Collection Account and treated as Sale Proceeds.

 

Section 12.5.          Conditions
Applicable to all Transactions Under Article 12.

 

(a)           Any transaction effected under this Article 12
or under Section 10.6 in connection with the acquisition of additional
Collateral Debt Securities will be conducted on an arm’s-length basis, and, if
effected with a Person Affiliated with the Collateral Manager, the Issuer or
the Trustee, will be effected on terms as favorable to the Issuer as would be
the case if such Person were not so Affiliated; provided, however, that (i) after the Closing Date, the
Collateral Manager will not purchase any Collateral Debt Security for inclusion
in the Collateral directly from any account or portfolio for which the
Collateral Manager serves as investment advisor or sell any Collateral Debt
Security directly to any account or portfolio for which the Collateral Manager
serves as investment advisor except upon compliance with the requirements of Section 5
of the Collateral Management Agreement; and (ii) the Trustee will have no
responsibility to oversee compliance with this clause by the other parties.

 

(b)           Upon any acquisition of a Pledged
Security pursuant to this Article 12, all of the Issuer’s right, title and
interest to such Pledged Security will be Granted to the Trustee pursuant to
this Indenture, and such Pledged Security will be delivered to the
Intermediary.  The Trustee will also
receive, not later than the related settlement date with respect to each
Collateral Debt Security, (i) an Authorized Officer’s certificate of the
Collateral Manager certifying compliance with the provisions of Section 12.2
based on calculations included in such certificate (to the extent applicable)
and (ii) an Officer’s certificate of the Issuer certifying that the
representations and warranties contained in Section 3.5 are true and
correct as of such date.

 

(c)           Notwithstanding anything contained in
this Article 12 to the contrary, so long as an Event of Default has
occurred and is continuing, the Issuer will not have the right to effect any
sale or purchase of any Collateral Debt Security except with the consent of the
Majority of the Notes of the Controlling Class; provided, however, that, unless and to the extent such consent
is specifically revoked in writing by a Majority of the Notes of the
Controlling Class, the Controlling Class shall be deemed to have consented
to any such sale or purchase proposed by the Issuer following the occurrence
and during the continuances of an Event of Default.

 

(d)           Notwithstanding anything to the contrary
herein, the Issuer will not purchase or acquire (whether as part of a “unit”
with a Collateral Debt Security, in exchange for a Collateral Debt Security or
otherwise) (i) any asset the ownership of which would cause the Issuer to
be subject to income tax on a net income basis in any jurisdiction or (ii) any
asset the gain from the disposition of which would be subject to U.S. federal
income or withholding tax under Section 897 or Section 1445,
respectively, of the Code and the Treasury regulations promulgated thereunder.

 

191

 

Section 12.6.          Short
Positions.

 

(a)           The Issuer shall not acquire any Short
Position unless (i) the Annualized Short Premium (after giving effect to
the proposed acquisition) would be less than or equal total Excess Interest
minus a certain percentage (as set forth in the Term Sheet) of Excess Interest
(such percentage, the Short Premium Excess Interest Haircut) as of the earlier
of the date of such acquisition or the entry into an irrevocable commitment to
make such acquisition, (ii) the Coverage Tests, the S&P CDO Monitor
Test and the Moody’s Weighted Average Rating Factor Test are satisfied and (iii) the
Issuer is only required to make payments under such Short Positions on Payment
Dates.

 

(b)           The Issuer shall not acquire any Short
Position until after the Effective Date.

 

(c)           If the Issuer (or the Collateral Manager
on behalf of the Issuer) concludes that amounts available on the next Payment
Date will be insufficient to pay interest on the Senior Notes in full, the
Issuer shall sell, assign, terminate or enter into offsetting positions with
respect to Short Positions if such transaction would result in a payment being
made to the Issuer, until (i) the amount received in connection therewith,
together with other amounts available on the next Payment Date, will be
sufficient to pay interest on the Senior Notes in full or (ii) all such
Short Positions have been sold, assigned, terminated or offset.

 

ARTICLE 13

 

NOTEHOLDERS’
RELATIONS

 

Section 13.1.          Subordination.

 

(a)           Anything in this Indenture or the Notes
to the contrary notwithstanding, the Issuer and the Holders of the Class B
Notes, the Mezzanine Notes and the Subordinated Notes agree for the benefit of
the Holders of the Class A Notes that the Class B Notes, the
Mezzanine Notes, the Subordinated Notes and the Issuer’s rights in and to the
Collateral (the “Subordinate Interests”) shall be subordinate and junior
to the Class A Notes to the extent and in the manner set forth in this
Indenture including, without limitation, as set forth in the Priority of
Payments and Special Priority of Payments and hereinafter provided.  If any Event of Default has occurred and has
not been cured or waived and acceleration occurs and is not rescinded in
accordance with Article 5, including, without limitation, as a result of
an Event of Default specified in Section 5.1(g) or (h), the Class A
Notes shall be paid in full in Cash or, to the extent a Majority of the Class A
Notes, as applicable, consent, other than in Cash, before any further payment
or distribution is made on account of the Subordinate Interests.  The Holders of the Class B Notes, the
Mezzanine Notes, the Subordinated Notes and the holders of equity in the Issuer
and Co-Issuer agree, for the benefit of the Holders of the Class A Notes,
not to cause the filing of a petition in bankruptcy against the Issuer or the
Co-Issuer for failure to pay to them amounts due under the Class B Notes,
the Mezzanine Notes or the Subordinated Notes or hereunder until the payment in
full of the Class A Notes and not before one year and one day (or if
longer, the applicable preference period then in effect) have elapsed since
such payment.

 

192

 

(b)           Anything in this Indenture or the Notes
to the contrary notwithstanding, the Issuer and the Holders of the Mezzanine
Notes and the Subordinated Notes agree for the benefit of the Holders of the Class B
Notes that the Mezzanine Notes and the Subordinated Notes and the Issuer’s
rights in and to the Collateral (also, “Subordinate Interests”) shall be
subordinate and junior to the Class B Notes to the extent and in the
manner set forth in this Indenture including, without limitation, as set forth
in the Priority of Payments and Special Priority of Payments and hereinafter
provided.  If any Event of Default has
occurred and has not been cured or waived and acceleration occurs and is not
rescinded in accordance with Article 5, including, without limitation, as
a result of an Event of Default specified in Section 5.1(g) or (h),
the Class B Notes shall be paid in full in Cash or, to the extent a
Majority of the Class B Notes consent, other than in Cash, before any
further payment or distribution is made on account of the Subordinate
Interests.  The Holders of the Mezzanine
Notes and the Subordinated Notes and the holders of equity in the Issuer and Co-Issuer
agree, for the benefit of the Holders of the Class B Notes, not to cause
the filing of a petition in bankruptcy against the Issuer or the Co-Issuer for
failure to pay to them amounts due under the Mezzanine Notes or the
Subordinated Notes or hereunder until the payment in full of the Class B
Notes and not before one year and one day (or if longer, the applicable
preference period then in effect) have elapsed since such payment.

 

(c)           Anything in this Indenture or the Notes
to the contrary notwithstanding, the Issuer and the Holders of the Class D
Notes, the Class E Notes, the Class F Notes and the Subordinated
Notes agree for the benefit of the Holders of the Class C Notes that the Class D
Notes, the Class E Notes, the Class F Notes, the Subordinated Notes
and the Issuer’s rights in and to the Collateral (also, “Subordinate
Interests”) shall be subordinate and junior to the Class C Notes to
the extent and in the manner set forth in this Indenture, including, without
limitation, as set forth in the Priority of Payments and Special Priority of
Payments and hereinafter provided.  If
any Event of Default has occurred and has not been cured or waived and
acceleration occurs and is not rescinded in accordance with Article 5,
including, without limitation, as a result of an Event of Default specified in Section 5.1(g) or
(h), the Class C Notes shall be paid in full in Cash or, to the extent a
Majority of the Class C Notes consent, other than in Cash, before any
further payment or distribution is made on account of the Subordinate
Interests.  The Holders of the Class D
Notes, the Class E Notes, the Class F Notes and the Subordinated
Notes and the holders of equity in the Issuer and the Co-Issuer agree, for the
benefit of the Holders of the Class C Notes, not to cause the filing of a
petition in bankruptcy against the Issuer or the Co-Issuer for failure to pay
to them amounts due under the Class D Notes, the Class E Notes, the Class F
Notes or the Subordinated Notes or hereunder until the payment in full of the Class C
Notes and not before one year and one day (or if longer, the applicable
preference period then in effect) have elapsed since such payment.

 

(d)           Anything in this Indenture or the Notes
to the contrary notwithstanding, the Issuer and the Holders of the Class E
Notes, the Class F Notes and the Subordinated Notes agree for the benefit
of the Holders of the Class D Notes that the Class E Notes, the Class F
Notes and the Subordinated Notes and the Issuer’s rights in and to the
Collateral (also, “Subordinate Interests”) shall be subordinate and
junior to the Class D Notes to the extent and in the manner set forth in
this Indenture, including, without limitation, as set forth in the Priority of
Payments and Special Priority of Payments and hereinafter provided.  If any Event of Default has occurred and has
not been cured or waived and acceleration occurs and is not rescinded in
accordance with Article 5,

 

193

 

including, without
limitation, as a result of an Event of Default specified in Section 5.1(g) or
(h), the Class D Notes shall be paid in full in Cash or, to the extent a
Majority of the Class D Notes consent, other than in Cash, before any
further payment or distribution is made on account of the Class E Notes,
the Class F Notes or the Subordinate Interests.  The Holders of the Class E Notes, the Class F
Notes and the Subordinated Notes and the holders of equity in the Issuer and
the Co-Issuer agree, for the benefit of the Holders of the Class D Notes,
not to cause the filing of a petition in bankruptcy against the Issuer or the
Co-Issuer for failure to pay to them amounts due under the Class E Notes,
the Class F Notes or the Subordinated Notes or hereunder until the payment
in full of the Class D Notes and not before one year and one day (or if
longer, the applicable preference period then in effect) have elapsed since
such payment.

 

(e)           Anything in this Indenture or the Notes
to the contrary notwithstanding, the Issuer and the Holders of the Class F
Notes and the Subordinated Notes agree for the benefit of the Holders of the Class E
Notes that the Class F Notes and the Subordinated Notes and the Issuer’s
rights in and to the Collateral (also, “Subordinate Interests”) shall be
subordinate and junior to the Class E Notes to the extent and in the
manner set forth in this Indenture, including, without limitation, as set forth
in the Priority of Payments and Special Priority of Payments and hereinafter
provided.  If any Event of Default has
occurred and has not been cured or waived and acceleration occurs and has not
been rescinded in accordance with Article 5, including, without
limitation, as a result of an Event of Default specified in Section 5.1(g) or
(h), the Class E Notes shall be paid in full in Cash or, to the extent a
Majority of the Class E Notes consent, other than in Cash, before any
further payment or distribution is made on account of the Class F Notes or
the Subordinate Interests.  The Holders
of the Class F Notes and the Subordinated Notes and the holders of equity
in the Issuer and the Co-Issuer agree, for the benefit of the Holders of the Class E
Notes, not to cause the filing of a petition in bankruptcy against the Issuer
or the Co-Issuer for failure to pay to them amounts due under the Class F
Notes or the Subordinated Notes or hereunder until the payment in full of the Class E
Notes and not before one year and one day (or if longer, the applicable
preference period then in effect) have elapsed since such payment.

 

(f)            Anything in this Indenture or the Notes
to the contrary notwithstanding, the Issuer and the Holders of the Subordinated
Notes agree for the benefit of the Holders of the Class F Notes that the
Subordinated Notes and the Issuer’s rights in and to the Collateral (also, “Subordinate
Interests”) shall be subordinate and junior to the Class F Notes to
the extent and in the manner set forth in this Indenture, including, without
limitation, as set forth in the Priority of Payments and Special Priority of
Payments and hereinafter provided.  If
any Event of Default has occurred and has not been cured or waived and
acceleration occurs and has not been rescinded in accordance with Article 5,
including, without limitation, as a result of an Event of Default specified in Section 5.1(g) or
(h), the Class F Notes shall be paid in full in Cash or, to the extent a
Majority of the Class F Notes consent, other than in Cash, before any
further payment or distribution is made on account of the Subordinate Interests.  The Holders of the Subordinated Notes and the
holders of equity in the Issuer and the Co-Issuer agree, for the benefit of the
Holders of the Class F Notes, not to cause the filing of a petition in
bankruptcy against the Issuer or the Co-Issuer for failure to pay to them
amounts due under the Subordinated Notes or hereunder until the payment in full
of the Class F Notes and not before one year and one day (or if longer,
the applicable preference period then in effect) have elapsed since such payment.

 

194

 

(g)           In the event that notwithstanding the
provisions of this Indenture, any Holder of any Subordinate Interest shall have
received any payment or distribution in respect of such Subordinate Interest
contrary to the provisions of this Indenture, then, unless and until the Class A
Notes, the Class B Notes, the Class C Notes, the Class D Notes,
the Class E Notes, the Class F Notes or the Subordinated Notes, as
the case may be, shall have been paid in full in Cash or, to the extent a
Majority of the Class A Notes, the Class B Notes, the Class C
Notes, the Class D Notes, the Class E Notes, or the Class F
Notes or the Subordinated Notes, as the case may be, consent, other than in
Cash in accordance with this Indenture, such payment or distribution shall be
received and held in trust for the benefit of, and shall forthwith be paid over
and delivered to, the Trustee, which shall pay and deliver the same to the
Holders of Class A Notes, Class B Notes, Class C Notes, the Class D Notes,
the Class E Notes, the Class F Notes or the Subordinated Notes, as
the case may be, in accordance with this Indenture; provided, however, that, if any such payment or distribution
is made other than in Cash, it shall be held by the Trustee as part of the
Collateral and subject in all respects to the provisions of this Indenture,
including, without limitation, this Section 13.1.

 

(h)           Each Holder of Subordinate Interests
agrees with all Holders of Class A Notes, Class B Notes, Class C
Notes, Class D Notes, Class E Notes, Class F Notes or
Subordinated Notes, as the case may be, that such Holder of Subordinate
Interests shall not demand, accept, or receive any payment or distribution in
respect of such Subordinate Interests in violation of the provisions of this
Indenture including, without limitation, this Section 13.1; provided, however, that after the Class A
Notes, the Class B Notes, the Class C Note, the Class D Notes,
the Class E Notes, the Class F Notes or the Subordinated Notes as the
case may be, have been paid in full, the Holders of Subordinate Interests shall
be fully subrogated to the rights of the Holders of the Class A Notes, the
Class B Notes, the Class C Notes, the Class D Notes, the Class E
Notes, the Class F Notes or the Subordinated Notes, as the case may
be.  Nothing in this Section 13.1
shall affect the obligation of the Issuer to pay Holders of Subordinate
Interests.

 

Section 13.2.          Standard of Conduct.

 

In exercising any of its or their voting rights,
rights to direct and consent or any other rights as a Securityholder under this
Indenture, subject to the terms and conditions of the Indenture, including,
without limitation, Section 5.9, a Securityholder or Securityholders shall
not have any obligation or duty to any Person or to consider or take into
account the interests of any Person and shall not be liable to any Person for
any action taken by it or them or at its or their direction or any failure by
it or them to act or to direct that an action be taken, without regard to
whether such action or inaction benefits or adversely affects any
Securityholder, the Issuer, or any other Person, except for any liability to
which such Securityholder may be subject to the extent such liability results
from such Securityholder’s taking or directing an action, or failing to take or
direct an action, in bad faith or in violation of the express terms of this
Indenture.

 

Section 13.3.          Right to List of Holders.

 

Any Securityholder shall have the right, upon five
Business Days’ prior notice to the Trustee to obtain a complete list of
Securityholders.

 

195

 

ARTICLE 14

 

MISCELLANEOUS

 

Section 14.1.          Form of
Documents Delivered to Trustee.

 

In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.

 

Any certificate or opinion of an Authorized Officer of
the Issuer or the Co-Issuer or the Collateral Manager may be based, insofar as
it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such Authorized Officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which its certificate or
opinion is based are erroneous.  Any such
certificate of an Authorized Officer of the Issuer, the Co-Issuer or the Collateral
Manager or Opinion of Counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, the Issuer,
the Co-Issuer, the Collateral Manager or any other Person, stating that the
information with respect to such factual matters is in the possession of the
Issuer, the Co-Issuer, the Collateral Manager or such other Person, unless such
Authorized Officer of the Issuer or the Co-Issuer or such counsel knows that
the certificate or opinion or representations with respect to such matters are
erroneous.  Any Opinion of Counsel may
also be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an Authorized Officer of the Issuer or the
Co-Issuer, stating that the information with respect to such matters is in the
possession of the Issuer or the Co-Issuer, unless such counsel knows that the
certificate or opinion or representations with respect to such matters are
erroneous.

 

Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.

 

Whenever in this Indenture it is provided that the
absence of the occurrence and continuation of a Default or Event of Default is
a condition precedent to the taking of any action by the Trustee at the request
or direction of the Issuer or the Co-Issuer, then notwithstanding that the
satisfaction of such condition is a condition precedent to the Co-Issuers’
rights to make such request or direction, the Trustee shall be protected in
acting in accordance with such request or direction if it does not have
knowledge of the occurrence and continuation of such Default or Event of
Default as provided in Section 6.1(d).

 

Section 14.2.          Acts of Securityholders.

 

(a)           Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture
to be given or taken by Securityholders may be embodied in

 

196

 

and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by an
agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee, and, where it is hereby expressly
required, to the Issuer.  Such instrument
or instruments (and the action or actions embodied therein and evidenced
thereby) are herein sometimes referred to as the “Act” of the Securityholders
signing such instrument or instruments. 
Proof of execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture and conclusive
in favor of the Trustee and the Co-Issuers, if made in the manner provided in
this Section 14.2.

 

(b)           The fact and date of the execution by any
Person of any such instrument or writing may be proved in any manner that the
Trustee deems sufficient.

 

(c)           The principal amount and registered
numbers of Securities held by any Person, and the date of its
holding the same, shall be proved by the Security Register.

 

(d)           Any request, demand, authorization,
direction, notice, consent, waiver or other action by the Holder of any
Securities shall bind the Holder (and any transferee thereof) of such Security
and of every Security issued upon the registration thereof or in exchange
therefor or in lieu thereof, in respect of anything done, omitted or suffered
to be done by the Trustee or the Co-Issuers in reliance thereon, whether or not
notation of such action is made upon such Security.

 

Section 14.3.                             Notices, etc., to Trustee, the Co-Issuers, the Collateral
Manager, the Managers, Moody’s and S&P.

 

Except as otherwise expressly provided herein, any
request, demand, authorization, direction, notice, consent, waiver,
confirmation or Act of Securityholders or other documents provided or permitted
by this Indenture to be made upon, given or furnished to, or filed with any of
the parties indicated below shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to and mailed, by certified mail,
return receipt requested, hand delivered, sent by overnight courier service
guaranteeing next day delivery or by telecopy in legible form at the following
address (or at any other address provided in writing by the relevant party):

 

(a)           the Trustee at the Trustee’s Corporate Trust
Office, telecopy number (713) 216-2101, Attention:  Institutional Trust Services – KKR
Financial CLO 2005-1, Ltd.

 

(b)           the Issuer c/o Maples Finance Limited, P.O. Box
1093GT, Queensgate House, 113 South Church Street, George Town, Grand Cayman,
Cayman Islands, Attention:  The
Directors, telecopy no. (345) 949-8080, with a copy to Maples and Calder
addressed to it at P.O. Box 309GT, Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands, telecopy number (345) 949-8080,
Attention:  Mark Rawlins;

 

(c)           the Co-Issuer at 850 Library Avenue, Newark,
Delaware, 19711, Attention:  The
Directors;

 

197

 

(d)           the Collateral Manager addressed to it at
Four Embarcadero Center, Suite 2050, San Francisco, CA  94111,
telephone number (415) 315-3620, telecopy number (415) 391-3077, Attention:  Chief Operating Officer;

 

(e)           the Managers at the Managers Addresses set
forth in the Supplement;

 

(f)            Moody’s at Moody’s Investors Service, 99
Church Street, New York, New York 10007, telecopy number (212) 553-0355
(with confirmation of receipt thereof), Attention:  CBO/CLO Monitoring or by email to
cdomonitoring@moodys.com;

 

(g)           S&P at Standard & Poor’s, 55
Water Street, 41st Floor, New York, New York 10041, telecopy number (212) 438-2664
(with confirmation of receipt thereof), Attention:  Asset-Backed CBO/CLO Surveillance or by
e-mail to cdo_surveillance@sandp.com;

 

(h)           each Hedge Counterparty at the address
specified in the relevant Hedge Agreement;

 

(i)            to the Paying Agent in Ireland, at the
address set forth on the back cover of the Offering Memorandum;

 

(j)            the Delayed Draw Note Agent (if any Delayed
Draw Notes have been issued), at the address set forth in the Note Purchase
Agreement relating to any Delayed Draw Notes; or

 

(k)           the Revolving Note Agent (if any Revolving
Notes have been issued), at the address set forth in the Note Purchase
Agreement relating to any Revolving Notes.

 

Section 14.4.                             Notices to Holders;
Waiver.

 

Except as otherwise expressly provided herein, where
this Indenture provides for notice to Holders of any event,

 

(a)           such notice shall be sufficiently given
to Holders of Securities if in writing and mailed, first class postage prepaid,
to each Holder of Securities affected by such event, at the address of such
Holder as it appears in the Security Register, not earlier than the earliest
date and not later than the latest date, prescribed for the giving of such
notice; and

 

(b)           such notice shall be in the English language.

 

Such notices will be deemed to have been given on the
date of such mailing.

 

The Trustee will deliver to the Holders of the
Securities, any information or notice requested in accordance with this
Indenture to be so delivered by at least 25% of the Aggregate Outstanding
Amount of any Class of Securities.

 

The Trustee shall deliver or cause to be delivered to
each Hedge Counterparty copies of all notices and reports delivered or caused
to be delivered by the Issuer or the Trustee (including

 

198

 

those to be delivered by the Collateral
Manager on behalf of the Issuer) to any Holder pursuant to the terms hereof by
the same means and simultaneously with the delivery thereof to such Holder.

 

So long as any Securities are listed on the Irish
Stock Exchange (or other stock exchange) and the rules of such exchange so
require, all notices to Holders will be provided to the Paying Agent in Ireland
and any other relevant paying agent and, to the extent required by such
exchange, published in accordance with the rules of such exchange (in the
case of the Irish Stock Exchange, in the Daily Official List).

 

Neither the failure to mail any notice, nor any defect
in any notice so mailed, to any particular Holder of a Security shall affect
the sufficiency of such notice with respect to other Holders of
Securities.  In case by reason of the
suspension of regular mail service or by reason of any other cause it shall be
impracticable to give such notice by mail, then such notification to Holders of
Securities as shall be made with the approval of the Trustee shall constitute a
sufficient notification to such Holders for every purpose hereunder.

 

Where this Indenture provides for notice in any
manner, such notice may be waived in writing by any Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice.  Waivers of
notice by Holders shall be filed with the Trustee but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.

 

The Trustee shall deliver or cause to be delivered to
each applicable Holder of Securities any notices that the Collateral Manager is
required to deliver to such Holders pursuant to the Collateral Management
Agreement, provided that the Collateral Manager delivers such notices to the
Trustee along with a request that such notices be forwarded to such Holders.

 

Any additional notices required to be sent pursuant to
this Section 14.4 are set forth in the Supplement.

 

Section 14.5.          Effect of Headings and Table of Contents.

 

The Article and Section headings herein and
the Table of Contents are for convenience only and shall not affect the
construction hereof.

 

Section 14.6.          Successors and Assigns.

 

All covenants and agreements in this Indenture by the
Co-Issuers shall bind their respective successors and assigns, whether so
expressed or not.

 

Section 14.7.          Separability.

 

In case any provision in this Indenture or in the
Notes shall be invalid, illegal or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

 

199

 

Section 14.8.          Benefits of Indenture.

 

Nothing in this Indenture or in the Securities,
expressed or implied, shall give to any Person, other than the parties hereto
and their successors hereunder, the Securityholders, the Collateral Manager and
the Hedge Counterparties (which shall be express third party beneficiaries of
this Indenture) any benefit or any legal or equitable right, remedy or claim
under this Indenture.

 

Section 14.9.                             Governing
Law.

 

THIS INDENTURE AND EACH SECURITY SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

 

Section 14.10.                       Submission
to Jurisdiction.

 

The Co-Issuers hereby irrevocably submit to the
non-exclusive jurisdiction of any New York State or federal court sitting in
the Borough of Manhattan in The City of New York in any action or proceeding
arising out of or relating to the Securities or this Indenture, and the Co-Issuers
hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such New York State or federal
court.  The Co-Issuers hereby irrevocably
waive, to the fullest extent that they may legally do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding.  The Co-Issuers irrevocably consent to the
service of any and all process in any action or proceeding by the mailing or
delivery of copies of such process to it at the office of the Co-Issuers’ agent
set forth in Section 7.2.  The
Co-Issuers agree that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

 

Section 14.11.                       Counterparts.

 

This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
instrument.

 

Section 14.12.                       Pass-Through
CP Conduit Non-Petition; Limited Recourse.  

 

(a)           Notwithstanding any provisions contained
in this Indenture to the contrary each party hereto covenants and agrees that
any Pass-Through CP Conduit shall not, and shall not be obligated to, pay any
amount pursuant to this Indenture unless the Pass-Through CP Conduit has
received funds which may be used to make such payment and which funds are not
required to repay its commercial paper notes when due and after giving effect
to such payment, either (x) the Pass-Through CP Conduit could issue commercial
paper notes to refinance all of the Pass-Through CP Conduit’s outstanding
commercial paper notes (assuming such outstanding commercial paper notes
matured at such time) in accordance with the program documents governing the
Pass-Through CP Conduit’s commercial paper program or (y) all of the commercial
paper notes are paid in full. Any amount that the Pass-Through CP Conduit does
not pay pursuant to the operation of this Section 14.12(a) shall not
constitute a claim (as defined in

 

200

 

§101 of the
Bankruptcy Code) against or an obligation of the Pass-Through CP Conduit for
any such insufficiency. This Section 14.12 shall survive the termination
of this Indenture.

 

(b)           Each of the parties hereto hereby
covenants and agrees that, prior to the date which is one year and one day (or,
if longer, the then applicable preference period) after the payment in full of
all outstanding commercial paper notes and other indebtedness for borrowed
money of any Pass-Through CP Conduit in respect of any Revolving Note, such
Person shall not institute against, or join any other Person in instituting
against, such Pass-Through CP Conduit, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar
proceedings. This provision shall survive the termination of this Indenture.

 

Section 14.13.        Liability of
Co-Issuers.

 

Notwithstanding
any other terms of this Indenture, the Securities or any other agreement
entered into between, inter alia, the Co-Issuers or otherwise, neither Co-Issuer
shall have any liability whatsoever to the other Co-Issuer under this
Indenture, the Securities, any such agreement or otherwise and, without
prejudice to the generality of the foregoing, neither Co-Issuer shall be
entitled to take any steps to enforce, or bring any action or proceeding, in
respect of this Indenture, the Securities, any such agreement or otherwise
against the other Co-Issuer.  In
particular, neither Co-Issuer shall be entitled to petition or take any other
steps for the winding up or bankruptcy of the other Co-Issuer or shall have any
claim in respect of any assets of the other Co-Issuer.

 

Section 14.14.        Acts of Issuer.

 

Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
performed by the Issuer shall be effective if given or performed by the Issuer
or by the Collateral Manager on the Issuer’s behalf.

 

Section 14.15.        Waiver of Jury Trial.

 

The Trustee and each of the Co-Issuers each hereby
knowingly, voluntarily and intentionally waives (to the extent permitted by
applicable law) any rights it may have to a trial by jury in respect of any
litigation based hereon, or arising out of, under, or in connection with, this
Indenture, the Securities or any other related documents, or any course of
conduct, course of dealing, statements (whether verbal or written), or actions
of the Trustee or either of the Co-Issuers. 
This provision is a material inducement for the Trustee and the
Co-Issuers to enter into this Indenture.

 

Section 14.16.        Escheat.

 

In the absence of a written request from the
Co-Issuers to return unclaimed funds to the Co-Issuers, the Trustee may from
time to time following the two year anniversary of the final Payment Date with
respect to the Securities deliver all unclaimed funds to or as directed by
applicable escheat authorities, as determined by the Trustee in its sole
discretion, in accordance with the customary practices and procedures of the
Trustee; provided, however, that
prior to delivering such funds to the authorities, the Trustee shall notify the
Issuer and the Issuer shall

 

201

 

have the right to act in accordance with Section 7.3.  Any unclaimed funds held by the Trustee
pursuant to this Section 14.16 shall be held uninvested and without any
liability for interest.

 

ARTICLE 15

 

ASSIGNMENT OF
COLLATERAL MANAGEMENT AGREEMENT

 

Section 15.1.          Assignment of Collateral Management Agreement.

 

(a)           The Issuer, in furtherance of the
covenants of this Indenture and as security for the Issuer’s payment
obligations hereunder and the performance and observance of the provisions
hereof, hereby assigns, transfers, conveys and sets over to the Trustee, for
the benefit of the Secured Parties all of the Issuer’s right, title and
interest in, to and under the Collateral Management Agreement, including,
without limitation, (i) the right to give all notices, consents and releases
thereunder, (ii) the right to give all notices of termination and to take
any legal action upon the breach of an obligation of the Collateral Manager
thereunder, including the commencement, conduct and consummation of proceedings
at law or in equity, (iii) the right to receive all notices, accountings,
consents, releases and statements thereunder and (iv) the right to do any
and all other things whatsoever that the Issuer is or may be entitled to do
thereunder; provided, however,
that the Issuer may exercise any of its rights under the Collateral Management
Agreement without notice to or the consent of the Trustee (except as otherwise
expressly required by this Indenture), so long as an Event of Default has not
occurred and is not continuing.

 

(b)           Upon the retirement of the Notes and the
release of the Collateral from the lien of this Indenture, this assignment and
all rights herein assigned to the Trustee shall cease and terminate and all the
estate, right, title and interest of the Trustee in, to and under the
Collateral Management Agreement shall revert to the Issuer and no further
instrument or act shall be necessary to evidence such termination and
reversion.

 

202

 

IN WITNESS WHEREOF, we have set our hands as of the
30th day of March 2005.

 

	
   

  	
  Executed as a
  deed by:

  
	
   

  	
  KKR FINANCIAL
  CLO 2005-1, LTD.

  
	
   

  	
  as Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ HUGH
  THOMPSON

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Witnessed by:

  	
   

  	
   

  	
  /s/ CARLOS
  FARJALLAH

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KKR FINANCIAL
  CLO 2005-1 CORP.

  
	
   

  	
  as Co-Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ DONALD J.
  PUGLISI

  	
   

  
	
   

  	
   

  	
  Name: Donald J.
  Puglisi

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE
  BANK, NATIONAL

  ASSOCIATION

  
	
   

  	
  as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ ELAINE MAH

  	
   

  
	
   

  	
   

  	
  Name: Elaine Mah

  
	
   

  	
   

  	
  Title: Vice
  President

  
						

 

 

SCHEDULE A

 

Schedule of Collateral Debt Securities

 

A-1

 

SCHEDULE B–1

 

S&P Industry Classifications

 

	
  Industry
  Code

  	
   

  	
  Description

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  0

  	
   

  	
  Zero Default
  Risk

  	
   

  
	
  1

  	
   

  	
  Aerospace &
  Defense

  	
   

  
	
  2

  	
   

  	
  Air transport

  	
   

  
	
  3

  	
   

  	
  Automotive

  	
   

  
	
  4

  	
   

  	
  Beverage &
  Tobacco

  	
   

  
	
  5

  	
   

  	
  Radio &
  Television

  	
   

  
	
  6

  	
   

  	
  Brokers, Dealers &
  Investment houses

  	
   

  
	
  7

  	
   

  	
  Building &
  Development

  	
   

  
	
  8

  	
   

  	
  Business
  equipment & services

  	
   

  
	
  9

  	
   

  	
  Cable &
  satellite television

  	
   

  
	
  10

  	
   

  	
  Chemicals &
  plastics

  	
   

  
	
  11

  	
   

  	
  Clothing/textiles

  	
   

  
	
  12

  	
   

  	
  Conglomerates

  	
   

  
	
  13

  	
   

  	
  Containers &
  glass products

  	
   

  
	
  14

  	
   

  	
  Cosmetics/toiletries

  	
   

  
	
  15

  	
   

  	
  Drugs

  	
   

  
	
  16

  	
   

  	
  Ecological
  services & equipment

  	
   

  
	
  17

  	
   

  	
  Electronics/electrical

  	
   

  
	
  18

  	
   

  	
  Equipment
  leasing

  	
   

  
	
  19

  	
   

  	
  Farming/agriculture

  	
   

  
	
  20

  	
   

  	
  Financial
  intermediaries

  	
   

  
	
  21

  	
   

  	
  Food/drug
  retailers

  	
   

  
	
  22

  	
   

  	
  Food products

  	
   

  
	
  23

  	
   

  	
  Food service

  	
   

  
	
  24

  	
   

  	
  Forest products

  	
   

  
	
  25

  	
   

  	
  Health care

  	
   

  
	
  26

  	
   

  	
  Home furnishings

  	
   

  
	
  27

  	
   

  	
  Lodging &
  casinos

  	
   

  
	
  28

  	
   

  	
  Industrial
  equipment

  	
   

  
	
  29

  	
   

  	
  Insurance

  	
   

  
	
  30

  	
   

  	
  Leisure
  goods/activities/movies

  	
   

  
	
  31

  	
   

  	
  Nonferrous
  metals/minerals

  	
   

  
	
  32

  	
   

  	
  Oil &
  gas

  	
   

  
	
  33

  	
   

  	
  Publishing

  	
   

  
	
  34

  	
   

  	
  Rail industries

  	
   

  
	
  35

  	
   

  	
  Retailers
  (except food & drug)

  	
   

  
	
  36

  	
   

  	
  Steel

  	
   

  
	
  37

  	
   

  	
  Surface
  transport

  	
   

  
	
  38

  	
   

  	
  Telecommunications/cellular

  	
   

  
	
  39

  	
   

  	
  Utilities

  	
   

  
	
  49

  	
   

  	
  Project Finance

  	
   

  
	
  50

  	
   

  	
  CDO

  	
   

  
	
  51

  	
   

  	
  ABS Consumer

  	
   

  
	
  52

  	
   

  	
  ABS Commercial

  	
   

  
	
  53

  	
   

  	
  CMBS Diversified
  (Conduit and CTL)

  	
   

  
	
  54

  	
   

  	
  CMBS (Large
  Loan, Single Borrower, and Single Property)

  	
   

  
	
  55

  	
   

  	
  REITs and REOCs

  	
   

  
	
  56

  	
   

  	
  RMBS A

  	
   

  
	
  57

  	
   

  	
  RMBS B&C,
  HELs, HELOCs, and Tax Lien

  	
   

  
	
  58

  	
   

  	
  Manufactured
  Housing

  	
   

  
	
  59

  	
   

  	
  U.S. Agency
  (Explicitly Guaranteed)

  	
   

  
	
  60

  	
   

  	
  Monoline/FER
  Guaranteed

  	
   

  
	
  61

  	
   

  	
  Non-FER Company
  Guaranteed

  	
   

  
	
  62

  	
   

  	
  FFELP Student
  Loans (Over 70% FFELP)

  	
   

  

 

B-1-1

 

SCHEDULE B–2

 

Moody’s Industry Classifications

 

	
  1.

  	
   

  	
  Aerospace and
  Defense

  
	
  2.

  	
   

  	
  Automobile

  
	
  3.

  	
   

  	
  Banking

  
	
  4.

  	
   

  	
  Beverage, Food
  and Tobacco

  
	
  5.

  	
   

  	
  Buildings and
  Real Estate

  
	
  6.

  	
   

  	
  Chemicals,
  Plastics and Rubber

  
	
  7.

  	
   

  	
  Containers,
  Packaging and Glass

  
	
  8.

  	
   

  	
  Personal and
  Non-Durable Consumer Products (Manufacturing Only)

  
	
  9.

  	
   

  	
  Diversified/Conglomerate
  Manufacturing

  
	
  10.

  	
   

  	
  Diversified/Conglomerate
  Service

  
	
  11.

  	
   

  	
  Diversified
  Natural Resources, Precious Metals and Minerals

  
	
  12.

  	
   

  	
  Ecological

  
	
  13.

  	
   

  	
  Electronics

  
	
  14.

  	
   

  	
  Finance
  (including structured products)

  
	
  15.

  	
   

  	
  Farming and
  Agriculture

  
	
  16.

  	
   

  	
  Grocery

  
	
  17.

  	
   

  	
  Healthcare,
  Education and Childcare

  
	
  18.

  	
   

  	
  Home and Office
  Furnishings, Housewares and Durable Consumer Products

  
	
  19.

  	
   

  	
  Hotels, Motels,
  Inns and Gaming

  
	
  20.

  	
   

  	
  Insurance

  
	
  21.

  	
   

  	
  Leisure,
  Amusement, Motion Pictures, Entertainment

  
	
  22.

  	
   

  	
  Machinery
  (Non-Agriculture, Non-Construction and Non-Electronic)

  
	
  23.

  	
   

  	
  Mining, Steel,
  Iron and Nonprecious Metals

  
	
  24.

  	
   

  	
  Oil and Gas

  
	
  25.

  	
   

  	
  Personal, Food
  and Miscellaneous Services

  
	
  26.

  	
   

  	
  Printing,
  Publishing and Broadcasting

  
	
  27.

  	
   

  	
  Cargo Transport

  
	
  28.

  	
   

  	
  Retail Stores

  
	
  29.

  	
   

  	
  Telecommunications

  
	
  30.

  	
   

  	
  Textiles and
  Leather

  
	
  31.

  	
   

  	
  Personal
  Transportation

  
	
  32.

  	
   

  	
  Utilities

  
	
  33.

  	
   

  	
  Broadcasting and
  Entertainment

  

 

B-2-1

 

SCHEDULE C

 

Calculation of LIBOR

 

With respect to the Floating Rate Notes, the London
interbank offered rate (“LIBOR”) shall be determined by the Calculation
Agent in accordance with the following provisions (in each case rounded to the
nearest 0.00001%):

 

(1)           On the second LIBOR Business Day (as
defined below) prior to the commencement of an Accrual Period or prior to a
Draw (each such day, a “LIBOR Determination Date”), LIBOR for any given
Note shall equal the rate, as obtained by the Calculation Agent from Bloomberg
Financial Markets Commodities News, for Eurodollar deposits of the Index
Maturity that appears on Dow Jones Telerate Page 3750 (as defined in the
International Swaps and Derivatives Association, Inc. 1991 Interest Rate
and Currency Exchange Definitions), or such other page as may replace such
Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination
Date; provided that, with respect
to the first Interest Accrual Period and any Draw on a date other than a
Payment Date, LIBOR will be interpolated from LIBOR for the number of months in
the applicable Interest Accrual Period rounded up to the nearest whole month
and LIBOR for the number of months in the applicable Interest Accrual Period
rounded down to the nearest whole month; provided
that if the applicable Interest Accrual Period is less than one month, LIBOR
will be interpolated from LIBOR for one month and LIBOR for one week.

 

(2)           If, on any LIBOR Determination Date, such
rate does not appear on Dow Jones Telerate Page 3750 or such other page as
may replace such Page 3750, the Calculation Agent shall determine the
arithmetic mean of the offered quotations of the Reference Banks (as defined
below) to leading banks in the London interbank market for Eurodollar deposits
of the Index Maturity in an amount determined by the Calculation Agent by
reference to requests for quotations as of approximately 11:00 a.m.
(London time) on the LIBOR Determination Date made by the Calculation Agent to
the Reference Banks.  If, on any LIBOR
Determination Date, at least two of the Reference Banks provide such
quotations, LIBOR shall equal such arithmetic mean of such quotations.  If, on any LIBOR Determination Date, only one
or none of the Reference Banks provide such quotations, LIBOR shall be deemed
to be the arithmetic mean of the offered quotations that leading banks in the
City of New York selected by the Calculation Agent (after consultation with the
Collateral Manager) are quoting on the relevant LIBOR Determination Date for
Eurodollar deposits of the Index Maturity in an amount determined by the
Calculation Agent by reference to the principal London offices of leading banks
in the London interbank market; provided,
however, that if the Calculation Agent is required but is unable to
determine a rate in accordance with at least one of the procedures provided
above, LIBOR shall be LIBOR as determined on the previous LIBOR Determination
Date.

 

(3)           As used herein:  “Reference Banks” means four major
banks in the London interbank market selected by the Calculation Agent; and “LIBOR
Business Day” means a day on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency deposits) in
London.

 

C-1

 

With respect to any Collateral Debt Security, LIBOR
shall be the London interbank offered rate determined in accordance with the
related Underlying Instrument.

 

C-2

 

SCHEDULE D

Diversity Score Table

 

The Diversity Score for the Collateral Debt Securities is calculated by
summing each of the Industry Diversity Scores, which are calculated as follows:

 

(i)            An
“Obligor Par Amount” is calculated for each obligor represented in the
Collateral Debt Securities by summing the Principal Balance of all Collateral
Debt Securities in the Collateral issued by that obligor.

 

(ii)           An
“Average Par Amount” is calculated by summing the Obligor Par Amounts
and dividing by the number of obligors represented.

 

(iii)          An
“Equivalent Unit Score” is calculated for each obligor by taking the
lesser of (A) one and (B) the Obligor Par Amount for each obligor
divided by the Average Par Amount.

 

(iv)          An
“Aggregate Industry Equivalent Unit Score” is then calculated for each
of the Moody’s Industry Classification groups by summing the Equivalent Unit
Scores for each obligor in the industry.

 

(v)           An
“Industry Diversity Score” is then established by reference to the
Diversity Score Table shown below for the related Aggregate Industry Equivalent
Unit Score; provided that if any
Aggregate Industry Equivalent Unit Score falls between any two such scores then
the applicable Industry Diversity Score will be the lower of the two Industry
Diversity Scores in the Diversity Score Table.

 

D-1

 

	
  Aggregate

  Industry

  Unit Score

  	
   

  	
  Diversity

  Score

  	
   

  
	
  0.0000

  	
   

  	
  0.0000

  	
   

  
	
  0.0500

  	
   

  	
  0.1000

  	
   

  
	
  0.1500

  	
   

  	
  0.2000

  	
   

  
	
  0.2500

  	
   

  	
  0.3000

  	
   

  
	
  0.3500

  	
   

  	
  0.4000

  	
   

  
	
  0.4500

  	
   

  	
  0.5000

  	
   

  
	
  0.5500

  	
   

  	
  0.6000

  	
   

  
	
  0.6500

  	
   

  	
  0.7000

  	
   

  
	
  0.7500

  	
   

  	
  0.8000

  	
   

  
	
  0.8500

  	
   

  	
  0.9000

  	
   

  
	
  0.9500

  	
   

  	
  1.0000

  	
   

  
	
  1.0500

  	
   

  	
  1.0500

  	
   

  
	
  1.1500

  	
   

  	
  1.1000

  	
   

  
	
  1.2500

  	
   

  	
  1.1500

  	
   

  
	
  1.3500

  	
   

  	
  1.2000

  	
   

  
	
  1.4500

  	
   

  	
  1.2500

  	
   

  
	
  1.5500

  	
   

  	
  1.3000

  	
   

  
	
  1.6500

  	
   

  	
  1.3500

  	
   

  
	
  1.7500

  	
   

  	
  1.4000

  	
   

  
	
  1.8500

  	
   

  	
  1.4500

  	
   

  
	
  1.9500

  	
   

  	
  1.5000

  	
   

  
	
  2.0500

  	
   

  	
  1.5500

  	
   

  
	
  2.1500

  	
   

  	
  1.6000

  	
   

  
	
  2.2500

  	
   

  	
  1.6500

  	
   

  
	
  2.3500

  	
   

  	
  1.7000

  	
   

  
	
  2.4500

  	
   

  	
  1.7500

  	
   

  
	
  2.5500

  	
   

  	
  1.8000

  	
   

  
	
  2.6500

  	
   

  	
  1.8500

  	
   

  
	
  2.7500

  	
   

  	
  1.9000

  	
   

  
	
  2.8500

  	
   

  	
  1.9500

  	
   

  
	
  2.9500

  	
   

  	
  2.0000

  	
   

  
	
  3.0500

  	
   

  	
  2.0333

  	
   

  
	
  3.1500

  	
   

  	
  2.0667

  	
   

  
	
  3.2500

  	
   

  	
  2.1000

  	
   

  
	
  3.3500

  	
   

  	
  2.1333

  	
   

  
	
  3.4500

  	
   

  	
  2.1667

  	
   

  
	
  3.5500

  	
   

  	
  2.2000

  	
   

  
	
  3.6500

  	
   

  	
  2.2333

  	
   

  
	
  3.7500

  	
   

  	
  2.2667

  	
   

  
	
  3.8500

  	
   

  	
  2.3000

  	
   

  
	
  3.9500

  	
   

  	
  2.3333

  	
   

  
	
  4.0500

  	
   

  	
  2.3667

  	
   

  
	
  4.1500

  	
   

  	
  2.4000

  	
   

  
	
  4.2500

  	
   

  	
  2.4333

  	
   

  
	
  4.3500

  	
   

  	
  2.4667

  	
   

  
	
  4.4500

  	
   

  	
  2.5000

  	
   

  
	
  4.5500

  	
   

  	
  2.5333

  	
   

  
	
  4.6500

  	
   

  	
  2.5667

  	
   

  
	
  4.7500

  	
   

  	
  2.6000

  	
   

  
	
  4.8500

  	
   

  	
  2.6333

  	
   

  
	
  4.9500

  	
   

  	
  2.6667

  	
   

  
	
  5.0500

  	
   

  	
  2.7000

  	
   

  
	
  5.1500

  	
   

  	
  2.7333

  	
   

  
	
  5.2500

  	
   

  	
  2.7667

  	
   

  
	
  5.3500

  	
   

  	
  2.8000

  	
   

  
	
  5.4500

  	
   

  	
  2.8333

  	
   

  
	
  5.5500

  	
   

  	
  2.8667

  	
   

  
	
  5.6500

  	
   

  	
  2.9000

  	
   

  
	
  5.7500

  	
   

  	
  2.9333

  	
   

  
	
  5.8500

  	
   

  	
  2.9667

  	
   

  
	
  5.9500

  	
   

  	
  3.0000

  	
   

  
	
  6.0500

  	
   

  	
  3.0250

  	
   

  
	
  6.1500

  	
   

  	
  3.0500

  	
   

  
	
  6.2500

  	
   

  	
  3.0750

  	
   

  
	
  6.3500

  	
   

  	
  3.1000

  	
   

  
	
  6.4500

  	
   

  	
  3.1250

  	
   

  
	
  6.5500

  	
   

  	
  3.1500

  	
   

  
	
  6.6500

  	
   

  	
  3.1750

  	
   

  
	
  6.7500

  	
   

  	
  3.2000

  	
   

  
	
  6.8500

  	
   

  	
  3.2250

  	
   

  
	
  6.9500

  	
   

  	
  3.2500

  	
   

  
	
  7.0500

  	
   

  	
  3.2750

  	
   

  
	
  7.1500

  	
   

  	
  3.3000

  	
   

  
	
  7.2500

  	
   

  	
  3.3250

  	
   

  
	
  7.3500

  	
   

  	
  3.3500

  	
   

  
	
  7.4500

  	
   

  	
  3.3750

  	
   

  
	
  7.5500

  	
   

  	
  3.4000

  	
   

  
	
  7.6500

  	
   

  	
  3.4250

  	
   

  
	
  7.7500

  	
   

  	
  3.4500

  	
   

  
	
  7.8500

  	
   

  	
  3.4750

  	
   

  
	
  7.9500

  	
   

  	
  3.5000

  	
   

  
	
  8.0500

  	
   

  	
  3.5250

  	
   

  
	
  8.1500

  	
   

  	
  3.5500

  	
   

  
	
  8.2500

  	
   

  	
  3.5750

  	
   

  
	
  8.3500

  	
   

  	
  3.6000

  	
   

  
	
  8.4500

  	
   

  	
  3.6250

  	
   

  
	
  8.5500

  	
   

  	
  3.6500

  	
   

  
	
  8.6500

  	
   

  	
  3.6750

  	
   

  
	
  8.7500

  	
   

  	
  3.7000

  	
   

  
	
  8.8500

  	
   

  	
  3.7250

  	
   

  
	
  8.9500

  	
   

  	
  3.7500

  	
   

  
	
  9.0500

  	
   

  	
  3.7750

  	
   

  
	
  9.1500

  	
   

  	
  3.8000

  	
   

  
	
  9.2500

  	
   

  	
  3.8250

  	
   

  
	
  9.3500

  	
   

  	
  3.8500

  	
   

  
	
  9.4500

  	
   

  	
  3.8750

  	
   

  
	
  9.5500

  	
   

  	
  3.9000

  	
   

  
	
  9.6500

  	
   

  	
  3.9250

  	
   

  
	
  9.7500

  	
   

  	
  3.9500

  	
   

  
	
  9.8500

  	
   

  	
  3.9750

  	
   

  
	
  9.9500

  	
   

  	
  4.0000

  	
   

  
	
  10.0500

  	
   

  	
  4.0100

  	
   

  
	
  10.1500

  	
   

  	
  4.0200

  	
   

  
	
  10.2500

  	
   

  	
  4.0300

  	
   

  
	
  10.3500

  	
   

  	
  4.0400

  	
   

  
	
  10.4500

  	
   

  	
  4.0500

  	
   

  
	
  10.5500

  	
   

  	
  4.0600

  	
   

  
	
  10.6500

  	
   

  	
  4.0700

  	
   

  
	
  10.7500

  	
   

  	
  4.0800

  	
   

  
	
  10.8500

  	
   

  	
  4.0900

  	
   

  
	
  10.9500

  	
   

  	
  4.1000

  	
   

  
	
  11.0500

  	
   

  	
  4.1100

  	
   

  
	
  11.1500

  	
   

  	
  4.1200

  	
   

  
	
  11.2500

  	
   

  	
  4.1300

  	
   

  
	
  11.3500

  	
   

  	
  4.1400

  	
   

  
	
  11.4500

  	
   

  	
  4.1500

  	
   

  
	
  11.5500

  	
   

  	
  4.1600

  	
   

  
	
  11.6500

  	
   

  	
  4.1700

  	
   

  
	
  11.7500

  	
   

  	
  4.1800

  	
   

  
	
  11.8500

  	
   

  	
  4.1900

  	
   

  
	
  11.9500

  	
   

  	
  4.2000

  	
   

  
	
  12.0500

  	
   

  	
  4.2100

  	
   

  
	
  12.1500

  	
   

  	
  4.2200

  	
   

  
	
  12.2500

  	
   

  	
  4.2300

  	
   

  
	
  12.3500

  	
   

  	
  4.2400

  	
   

  
	
  12.4500

  	
   

  	
  4.2500

  	
   

  
	
  12.5500

  	
   

  	
  4.2600

  	
   

  
	
  12.6500

  	
   

  	
  4.2700

  	
   

  
	
  12.7500

  	
   

  	
  4.2800

  	
   

  
	
  12.8500

  	
   

  	
  4.2900

  	
   

  
	
  12.9500

  	
   

  	
  4.3000

  	
   

  
	
  13.0500

  	
   

  	
  4.3100

  	
   

  
	
  13.1500

  	
   

  	
  4.3200

  	
   

  
	
  13.2500

  	
   

  	
  4.3300

  	
   

  
	
  13.3500

  	
   

  	
  4.3400

  	
   

  
	
  13.4500

  	
   

  	
  4.3500

  	
   

  
	
  13.5500

  	
   

  	
  4.3600

  	
   

  
	
  13.6500

  	
   

  	
  4.3700

  	
   

  
	
  13.7500

  	
   

  	
  4.3800

  	
   

  
	
  13.8500

  	
   

  	
  4.3900

  	
   

  
	
  13.9500

  	
   

  	
  4.4000

  	
   

  
	
  14.0500

  	
   

  	
  4.4100

  	
   

  
	
  14.1500

  	
   

  	
  4.4200

  	
   

  
	
  14.2500

  	
   

  	
  4.4300

  	
   

  
	
  14.3500

  	
   

  	
  4.4400

  	
   

  
	
  14.4500

  	
   

  	
  4.4500

  	
   

  
	
  14.5500

  	
   

  	
  4.4600

  	
   

  
	
  14.6500

  	
   

  	
  4.4700

  	
   

  
	
  14.7500

  	
   

  	
  4.4800

  	
   

  
	
  14.8500

  	
   

  	
  4.4900

  	
   

  
	
  14.9500

  	
   

  	
  4.5000

  	
   

  
	
  15.0500

  	
   

  	
  4.5100

  	
   

  
	
  15.1500

  	
   

  	
  4.5200

  	
   

  
	
  15.2500

  	
   

  	
  4.5300

  	
   

  
	
  15.3500

  	
   

  	
  4.5400

  	
   

  
	
  15.4500

  	
   

  	
  4.5500

  	
   

  
	
  15.5500

  	
   

  	
  4.5600

  	
   

  
	
  15.6500

  	
   

  	
  4.5700

  	
   

  
	
  15.7500

  	
   

  	
  4.5800

  	
   

  
	
  15.8500

  	
   

  	
  4.5900

  	
   

  
	
  15.9500

  	
   

  	
  4.6000

  	
   

  
	
  16.0500

  	
   

  	
  4.6100

  	
   

  
	
  16.1500

  	
   

  	
  4.6200

  	
   

  
	
  16.2500

  	
   

  	
  4.6300

  	
   

  
	
  16.3500

  	
   

  	
  4.6400

  	
   

  
	
  16.4500

  	
   

  	
  4.6500

  	
   

  
	
  16.5500

  	
   

  	
  4.6600

  	
   

  
	
  16.6500

  	
   

  	
  4.6700

  	
   

  
	
  16.7500

  	
   

  	
  4.6800

  	
   

  
	
  16.8500

  	
   

  	
  4.6900

  	
   

  
	
  16.9500

  	
   

  	
  4.7000

  	
   

  
	
  17.0500

  	
   

  	
  4.7100

  	
   

  
	
  17.1500

  	
   

  	
  4.7200

  	
   

  
	
  17.2500

  	
   

  	
  4.7300

  	
   

  
	
  17.3500

  	
   

  	
  4.7400

  	
   

  
	
  17.4500

  	
   

  	
  4.7500

  	
   

  
	
  17.5500

  	
   

  	
  4.7600

  	
   

  
	
  17.6500

  	
   

  	
  4.7700

  	
   

  
	
  17.7500

  	
   

  	
  4.7800

  	
   

  
	
  17.8500

  	
   

  	
  4.7900

  	
   

  
	
  17.9500

  	
   

  	
  4.8000

  	
   

  
	
  18.0500

  	
   

  	
  4.8100

  	
   

  
	
  18.1500

  	
   

  	
  4.8200

  	
   

  
	
  18.2500

  	
   

  	
  4.8300

  	
   

  
	
  18.3500

  	
   

  	
  4.8400

  	
   

  
	
  18.4500

  	
   

  	
  4.8500

  	
   

  
	
  18.5500

  	
   

  	
  4.8600

  	
   

  
	
  18.6500

  	
   

  	
  4.8700

  	
   

  
	
  18.7500

  	
   

  	
  4.8800

  	
   

  
	
  18.8500

  	
   

  	
  4.8900

  	
   

  
	
  18.9500

  	
   

  	
  4.9000

  	
   

  
	
  19.0500

  	
   

  	
  4.9100

  	
   

  
	
  19.1500

  	
   

  	
  4.9200

  	
   

  
	
  19.2500

  	
   

  	
  4.9300

  	
   

  
	
  19.3500

  	
   

  	
  4.9400

  	
   

  
	
  19.4500

  	
   

  	
  4.9500

  	
   

  
	
  19.5500

  	
   

  	
  4.9600

  	
   

  
	
  19.6500

  	
   

  	
  4.9700

  	
   

  
	
  19.7500

  	
   

  	
  4.9800

  	
   

  
	
  19.8500

  	
   

  	
  4.9900

  	
   

  
	
  19.9500

  	
   

  	
  5.0000

  	
   

  

 

D-2

 

SCHEDULE E

 

MOODY’S DEFAULT PROBABILITY RATING

 

(i)            With respect to a Collateral Debt
Security that is a Senior Secured Loan or Participation Interest in a Senior
Secured Loan, if the obligor of such Collateral Debt Security has a senior
implied rating by Moody’s, then such senior implied rating.

 

(ii)           With respect to a Collateral Debt
Security that is a Senior Secured Loan or Participation Interest in a Senior
Secured Loan, if not determined pursuant to clause (i) above, if such
Collateral Debt Security (A) is publicly rated by Moody’s, such public
rating, or (B) is not publicly rated by Moody’s but for which a rating or
rating estimate has been assigned by Moody’s upon the request of the Issuer or
the Collateral Manager, such rating or the senior implied rating estimate, as
applicable.

 

(iii)          With respect to a Collateral Debt
Security other than a Synthetic Security or a Structured Finance Security, if
not determined pursuant to clause (i) or (ii) above, (A) if the
obligor of such Collateral Debt Security has one or more senior unsecured
obligations publicly rated by Moody’s, then the Moody’s public rating on any
such obligation as selected by the Collateral Manager or, if no such rating is
available, (B) if such Collateral Debt Security is publicly rated by Moody’s,
such public rating or, if no such rating is available, (C) if a rating or
rating estimate has been assigned to such Collateral Debt Security by Moody’s
upon the request of the Issuer or the Collateral Manager, such rating or, in
the case of a rating estimate, the applicable rating estimate for such
obligation.

 

(iv)          With respect to a Collateral Debt
Security other than a Synthetic Security or a Structured Finance Security, if
not determined pursuant to clause (i), (ii) or (iii) above, the Moody’s
Derived Rating.

 

(v)           With respect to a Synthetic Security or a
Structured Finance Security, as determined as set forth in the definition
thereof.

 

(vi)          With respect to a REIT Preferred Security, the Moody’s
public or private rating of such security.

 

For purposes of calculating a Moody’s Default
Probability Rating, each applicable rating on credit watch by Moody’s with
positive or negative implication at the time of calculation will be treated as
having been upgraded or downgraded by one rating subcategory, as the case may
be.

 

MOODY’S RATING

 

(i)            With respect to a Collateral Debt
Security (including a Synthetic Security or a Structured Finance Security) that
(A) is publicly rated by Moody’s, such public rating, or (B) is not
publicly rated by Moody’s but for which a rating or rating estimate has been
assigned by Moody’s upon the request of the Issuer or the Collateral Manager,
such rating or, in the case of a rating estimate,  the applicable rating estimate for
such obligation.

 

E-1

 

(ii)           With respect to a Collateral Debt
Security that is a Senior Secured Loan or Participation Interest in a Senior
Secured Loan, if not determined pursuant to clause (i) above, if the
obligor of such Collateral Debt Security has a senior implied rating by Moody’s,
then such senior implied rating.

 

(iii)          With respect to a Collateral Debt
Security other than a Synthetic Security or a Structured Finance Security, if
not determined pursuant to clause (i) or (ii) above, if the obligor
of such Collateral Debt Security has one or more senior unsecured obligations
publicly rated by Moody’s, then the Moody’s public rating on any such
obligation as selected by the Collateral Manager.

 

(iv)          With respect to a Collateral Debt
Security other than a Synthetic Security or a Structured Finance Security, if
not determined pursuant to clause (i), (ii) or (iii) above, the Moody’s
Derived Rating.

 

(v)           With respect to a Synthetic Security or a
Structured Finance Security, as determined as set forth in the definition
thereof.

 

(vi)          With respect to a REIT Preferred Security, the Moody’s
public or private rating of such security.

 

For purposes of calculating a Moody’s Rating, each applicable rating on credit watch by Moody’s
with positive or negative implication at the time of calculation will be
treated as having been upgraded or downgraded by one rating subcategory, as the
case may be.

 

MOODY’S DERIVED RATING

 

With respect to a Collateral Debt Security whose Moody’s
Rating or Moody’s Default Probability Rating cannot otherwise be determined
pursuant to the definitions thereof, such Moody’s Rating or Moody’s Default
Probability Rating shall be determined as set forth below.

 

(i)            If the obligor of such Collateral Debt
Security has a long-term issuer rating by Moody’s, then such long-term issuer
rating.

 

(ii)           If not determined pursuant to clause (i) above,
if another obligation of the obligor is rated by Moody’s, then by adjusting the
rating of the related Moody’s rated obligations of the related obligor by the
number of rating sub-categories according to the table below:

 

E-2

 

	
  Obligation Category
  of

  Rated Obligation

  	
   

  	
  Rating of

  Rated Obligation

  	
   

  	
  Number of Subcategories

  Relative to Rated

  Obligation Rating

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Senior secured
  obligation

  	
   

  	
  greater than or
  equal to B2

  	
   

  	
  -1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Senior secured
  obligation

  	
   

  	
  less than B2

  	
   

  	
  -2

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subordinated
  obligation

  	
   

  	
  greater than or
  equal to B3

  	
   

  	
  +1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subordinated
  obligation

  	
   

  	
  less than B3

  	
   

  	
  0

  	
   

  

 

(iii)          If not determined pursuant to clause (i) or
(ii) above, if the obligor of such Collateral Debt Security has a senior
implied rating by Moody’s, then one subcategory below such senior implied
rating.

 

(iv)          If not determined pursuant to clause (i), (ii) or (iii) above,
then by using any one of the methods provided below:

 

(A)          (1)

 

	
  Type of Collateral

  Debt Security

  	
   

  	
  S&P Rating

  	
   

  	
  Collateral Debt Security

  Rated by S&P

  	
   

  	
  Number of Subcategories

  Relative to Moody’s

  Equivalent of S&P Rating

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Not Structured Finance Security

  	
   

  	
  >BBB-

  	
   

  	
  Not a Loan or Participation Interest in Loan

  	
   

  	
  -1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Not Structured Finance Security

  	
   

  	
  <BB+

  	
   

  	
  Not a Loan or Participation Interest in Loan

  	
   

  	
  -2

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Not Structured Finance Security

  	
   

  	
   

  	
   

  	
  Loan or Participation Interest in Loan

  	
   

  	
  -2

  	
   

  

 

(2)           if such Collateral Debt Security is not
rated by S&P but another security or obligation of the obligor is rated by
S&P (a “parallel security”), then the rating of such parallel security will
at the election of the Collateral Manager be determined in accordance with the
table set forth in subclause (A)(1) above, and the Moody’s Rating or Moody’s
Default Probability Rating of such Collateral Debt Security will be determined
in accordance with the methodology set forth in clause (i) above (for such
purposes treating the parallel security as if it were rated by Moody’s at the
rating determined pursuant to this subclause (A)(2)); or

 

(3)           if such Collateral Debt Security is a DIP
Collateral Debt Security, no Moody’s Rating or Moody’s Default Probability
Rating may be determined based on a rating by S&P or any other rating
agency;

 

(B)           if such Collateral Debt Security is not
rated by Moody’s or S&P and no other security or obligation of the issuer
of such Collateral Debt Security is rated by Moody’s or S&P, and if Moody’s
has been requested by the Issuer or the Collateral Manager to

 

E-3

 

assign a rating or rating estimate with respect to
such Collateral Debt Security but such rating or rating estimate has not been
received, pending receipt of such estimate, (1) ”B3” if the Collateral
Manager certifies to the Trustee that the Collateral Manager believes that such
estimate will be at least “B3” and if the Aggregate Principal Balance of
Collateral Debt Securities determined pursuant to this clause (B) does not
exceed 5% of the Aggregate Principal Balance of all Collateral Debt Securities
or (2) otherwise, “Caa1”;

 

(C)           if the obligor of such Collateral Debt
Security is a U.S. obligor and if such Collateral Debt Security is a senior
secured obligation of the obligor and (1) neither the obligor nor any of
its Affiliates is subject to reorganization or bankruptcy proceedings, (2) no
debt securities or obligations of the obligor are in default, (3) neither
the obligor nor any of its Affiliates have defaulted on any debt during the
past two years, (4) the obligor has been in existence for the past five
years, (5) the obligor is current on any cumulative dividends, (6) the
fixed-charge ratio for the obligor exceeds 125% for each of the past two fiscal
years and for the most recent quarter, (7) the obligor had a net profit
before tax in the past fiscal year and the most recent quarter and (8) the
annual financial statements of the obligor are unqualified and certified by a
firm of Independent accountants of national reputation, and quarterly
statements are unaudited but signed by a corporate officer, “Caa1”;

 

(D)          if the obligor of such Collateral Debt
Security is a U.S. obligor and if such Collateral Debt Security is a senior
secured or senior unsecured obligation of the obligor and (1) neither the
obligor nor any of its Affiliates is subject to reorganization or bankruptcy
proceedings and (2) no debt security or obligation of the obligor has been
in default during the past two years, “Caa3”;

 

(E)           if a debt security or obligation of the
obligor has been in default during the past two years, “Ca”; or

 

(F)           with respect to any DIP Collateral Debt
Security, one subcategory below the facility rating (whether public or private)
of such DIP Collateral Debt Security rated by Moody’s.

 

For purposes of calculating a Moody’s Derived Rating, each applicable
rating on credit watch by Moody’s with positive or negative implication at the
time of calculation will be treated as having been upgraded or downgraded by
one rating subcategory, as the case may be.

 

E-4

 

SCHEDULE F

 

S&P RATING

 

With respect to any Collateral Debt Security:

 

(i)            (a) If the Collateral Debt Security
is a DIP Collateral Debt Security, then (A) if such Collateral Debt
Security has a S&P credit rating (1) equal to or greater than “BBB-,”
then the S&P Rating shall be such credit rating lowered by one rating
subcategory, (2) equal to or less than “BB+,” and equal to or greater than
“CCC+,” then the S&P Rating shall be such credit rating lowered by two
rating subcategories, (3) equal to “CCC,” then the S&P Rating shall be
“CCC-” or (4) equal to or less than “CCC-,” then the S&P Rating shall
be “D” or (B) the S&P Rating shall be the written credit estimate
assigned thereto by S&P upon application therefor by the Issuer or the
Collateral Manager, on behalf of the Issuer, in conjunction with the
acquisition thereof, or (b) if the Collateral Debt Security is a Current
Pay Obligation, then the S&P Rating shall be the higher of (i) the
rating assigned to such Collateral Debt Security by S&P or (ii) ”CCC-.”

 

(ii)           If the Collateral Debt Security is a
Synthetic Security, then (A) if such Collateral Debt Security has a
S&P credit rating, the S&P Rating shall be such credit rating; or (B) if
such Collateral Debt Security does not have a S&P credit rating, the
S&P Rating shall be the written credit estimate assigned thereto by S&P
upon application therefor by the Issuer or the Collateral Manager, on behalf of
the Issuer, in conjunction with the acquisition thereof.

 

(iii)          (A) If there is a publicly issued
S&P long-term issuer credit rating of the obligor, or the guarantor that
unconditionally and irrevocably guarantees in writing the timely payment of
principal and interest on a Collateral Debt Security, then the S&P Rating
will be such rating; or (B) if there is no publicly issued S&P
long-term issuer credit rating of the obligor, or such guarantor, as the case
may be, but there is a publicly issued S&P long-term rating of another debt
obligation of such obligor, or guarantor, then the S&P Rating will be
determined by adjusting the rating of the related rated obligation of the
related obligor, or guarantor, as the case may be, by the number of rating
subcategories according to the table below. 
If more than one such publicly issued S&P long-term rating is
available, the S&P Rating shall be the lowest such rating determined as
described in this subclause (iii) unless S&P consents to the use of a
higher S&P Rating.

 

F-1

 

	
  Obligation

  Category of

  Rated

  Obligations

  	
   

  	
  Rating of

  Rated Obligation

  	
   

  	
  Number of

  Subcategories

  Relative to Rated

  Obligation Rating

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Senior Unsecured

  	
   

  	
   

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Senior Secured

  	
   

  	
   

  	
   

  	
  -1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subordinated

  	
   

  	
  less than BB+

  	
   

  	
  +1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Subordinated

  	
   

  	
  greater than or equal to BB+

  	
   

  	
  +2

  	
   

  

 

(iv)          If the Collateral Debt Security is a REIT Preferred
Security, the S&P public or private rating of such security.

 

(v)           If the S&P Rating is not otherwise
determinable in accordance with the foregoing clauses (i) through (iii),
then the S&P Rating may be determined, at the discretion of the Issuer or
the Collateral Manager, on behalf of the Issuer, on the basis of one of the
following:

 

(A)          The S&P Rating shall be the written
credit estimate assigned thereto by S&P upon application therefore; provided that if the Collateral Manager
determines in good faith that S&P would issue a written credit estimate
equal to or greater than “B-”, then pending the assignment of such written
credit estimate, the S&P Rating shall be deemed to be “CCC-”; or

 

(B)           For any Collateral Debt Security other
than a S&P Non-Notching Security, if the Collateral Debt Security has a
Moody’s rating and such rating (1) is a public Moody’s credit rating or
derived from a public Moody’s credit rating (so long as such Moody’s credit
rating is not derived from any S&P credit rating); (2) is continuously
monitored by Moody’s; (3) contains no qualifiers; and (4) is equal to
or greater than “Caa1,” then the S&P Rating shall be reduced below the
equivalent Moody’s rating subcategory by (x) one subcategory if such Moody’s
rating is higher than “BB+” and (y) two subcategories if such Moody’s rating is
less than or equal to “BB+”; provided,
however, that the Principal Collateral Value of Collateral Debt
Securities so rated shall not exceed 10% of the Principal Collateral Value of
all Collateral Debt Securities.

 

(vi)          If the Collateral Debt Security has not
been assigned a S&P Rating pursuant to the
foregoing clauses (i) through (v), the S&P Rating shall be deemed to
be “D,” and the Collateral Manager shall so notify S&P in writing.

 

Notwithstanding anything to the contrary in any of the
foregoing:

 

(1)           If the S&P credit rating of any
Collateral Debt Security or obligor or guarantor, as the case may be, under
clauses (i) through (iv) is on S&P’s Credit Watch list with a “positive”
or “negative” designation, then such rating will be raised or lowered by one
rating subcategory, respectively;

 

F-2

 

(2)           If such obligor or guarantor, as the case
may be, is not Domiciled in the United States, then any reference to the
S&P issuer credit rating shall mean the S&P foreign currency issuer
credit rating;

 

(3)           Any S&P credit rating that contains a
qualifier, including “p,” “pi,” “t,” “r” or “q,” shall not be a valid S&P
credit rating for use in determining the S&P Rating unless Rating Agency
Confirmation has been obtained from S&P for such use; and

 

(4)           Any reference to S&P credit rating in
this definition shall mean the public S&P credit rating and shall not
include any private or confidential S&P credit rating unless (1) the
obligor and any other relevant party has provided written consent to S&P
for the use of such rating; and (2) such rating is subject to continuous
monitoring by S&P.

 

F-3

 

APPENDIX
A

 

SUPPLEMENT

 

1.             Section 1.1.  Definitions.

 

“Administrative Expense Limit”:  $170,000 per annum plus 0.0425% of the
Principal Collateral Value (prior to giving effect to any payment on the
Securities on such Payment Date).

 

“Class A Notes”:  The Class A-1 Notes and the Class A-2
Notes.

 

“Class A-1
Notes”:  The Class A-1
Senior Secured Floating Rate Notes, Due 2017, issued by the Co-Issuers,
authenticated by the Trustee or any Authenticating Agent and designated as a Class A-1
Senior Secured Floating Rate Note pursuant to the Indenture.

 

“Class A-2
Notes”:  The Class A-2
Senior Secured Delayed Draw Floating Rate Notes, Due 2017, issued by the
Co-Issuers, authenticated by the Trustee or any Authenticating Agent and
designated as a Class A-2 Senior Secured Delayed Draw Floating Rate
Note pursuant to the Indenture.

 

“Class B Notes”:  The Class B Senior Secured Floating Rate
Notes, Due 2017, issued by the Co-Issuers, authenticated by the Trustee or any
Authenticating Agent and designated as a Class B Senior Secured Floating
Rate Note pursuant to the Indenture.

 

“Class C Notes”:  The Class C Deferrable Mezzanine Secured
Floating Rate Notes, Due 2017, issued by the Co-Issuers, authenticated by the
Trustee or any Authenticating Agent and designated as a Class C Deferrable
Mezzanine Floating Rate Note pursuant to the Indenture.

 

“Class D Notes”:  The Class D Deferrable Mezzanine
Floating Rate Notes, Due 2017, issued by the Co-Issuers, authenticated by the
Trustee or any Authenticating Agent and designated as a Class D Deferrable
Mezzanine Floating Rate Note pursuant to the Indenture.

 

“Class E Notes”:  The Class E Deferrable Mezzanine
Floating Rate Notes, Due 2017, issued by the Co-Issuers, authenticated by the
Trustee or any Authenticating Agent and designated as a Class E Deferrable
Mezzanine Floating Rate Note pursuant to the Indenture.

 

“Class F Notes”:  The Class F Deferrable Mezzanine
Floating Rate Notes, Due 2017, issued by the Co-Issuers, authenticated by the
Trustee or any Authenticating Agent and designated as a Class F Deferrable
Mezzanine Floating Rate Note pursuant to the Indenture.

 

“Delayed Draw Notes”:  The Class A-2 Notes.

 

“Interim
Target”:  The criteria set
forth in the table below, as the same may be modified with Rating Agency
approval (which modification shall not constitute a supplemental indenture
requiring any of the procedures of Article 8 hereunder), for the
applicable Interim Target Date.

 

A-A-1

 

	
   

  	
   

  	
  First Interim

  Target Date

  	
   

  	
  Second Interim

  Target Date

  	
   

  
	
  Weighted Average Spread

  	
   

  	
  2.25

  	
  %

  	
  2.25

  	
  %

  
	
  Weighted Average Moody’s Rating Factor

  	
   

  	
  2250

  	
   

  	
  2250

  	
   

  
	
  Diversity Score

  	
   

  	
  30

  	
   

  	
  35

  	
   

  
	
  Par amount of Collateral Debt Securities

  	
   

  	
  $

  	
  800,000,000

  	
   

  	
  $

  	
  900,000,000

  	
   

  
								

 

“Interim
Target Dates”:  60 days after
the Closing Date and 120 days after the Closing Date, as applicable.

 

“Manager Addresses”:  Morgan Stanley & Co. International
Limited at its principal office at 25 Cabot Square, Canary Wharf, London E14
4QA England, Attention:  Managing
Director, Fixed Income Structured Credit Products Transactions, or Morgan
Stanley & Co. Incorporated, 1585 Broadway, New York, New York  10036, Attention:  Managing Director, CDO Group.

 

“Maximum Returnable Excess Equity”:  $1,000,000.

 

“Mezzanine Notes”:  The Class C Notes, the Class D
Notes, the Class E Notes and the Class F Notes.

 

“Monthly Report Date”:  The 16th  day of each calendar
month, commencing in November 2005; provided,
however, that if such date shall fall on a day that is not a
Business Day, the Monthly Report Date shall be the immediately preceding
Business Day.

 

“Moody’s Weighted Average
Rating Factor Adjustment”:  As of any
Measurement Date, the amount equal to:

 

(a)           (i) the
amount (not less than zero) equal to (A) the Moody’s Weighted Average
Recovery Rate as of such Measurement Date (subject to a maximum percentage of
48.00%) minus (B) 44.00%, multiplied by (ii) 8,000; plus

 

(b)           (i) the amount (not less than zero) equal to (A) the
Moody’s Weighted Average Spread Adjustment as of such Measurement Date (subject
to a maximum of 2.40%) minus (B) 2.25%,
multiplied by (ii) 50,000.

 

“Moody’s Weighted Average Rating Factor Ceiling”:  2860.

 

“Moody’s Weighted Average Rating Factor Matrix”:  The table below:

 

	
  Option

  	
   

  	
  Diversity Score

  	
   

  	
  Applicable

  Moody’s

  Rating Factor

  	
   

  
	
  1

  	
   

  	
  Diversity Score
  is less than 45

  	
   

  	
  2400

  	
   

  
	
  2

  	
   

  	
  Diversity Score
  is equal to or greater than 45 but less than 50

  	
   

  	
  2500

  	
   

  
	
  3

  	
   

  	
  Diversity Score
  is equal to or greater than 50 but less than 55

  	
   

  	
  2575

  	
   

  
	
  4

  	
   

  	
  Diversity Score
  is greater than or equal to 55

  	
   

  	
  2625

  	
   

  

 

A-A-2

 

“Offering Memorandum”:  The Base Offering Memorandum, dated March 24,
2005 and the Supplement thereto, dated March 24, 2005.

 

“Rated Notes”:  The Senior Notes and the Mezzanine Notes.

 

“Reinvestment Yield Percentage”:  N/A.

 

“Revolving Note Rating
Criteria”:  N/A.

 

“REIT Preferred Securities Recovery Rate”:  N/A

 

“S&P Recovery Rate”:  With respect to a Collateral Debt Security,
the “S&P Recovery Rate” set forth in the following table opposite the
appropriate priority category for such Collateral Debt Security.

 

	
  Priority Category

  	
   

  	
  S&P Recovery Rate(1)

  	
   

  
	
  Senior Secured Loans(2)

  	
   

  	
  56.50

  	
  %

  
	
  Senior unsecured loans and Second Lien Loans

  	
   

  	
  41.25

  	
  %

  
	
  Subordinated loans

  	
   

  	
  23.45

  	
  %

  
	
  Senior secured bonds

  	
   

  	
  49.75

  	
  %

  
	
  Senior unsecured bonds

  	
   

  	
  37.35

  	
  %

  
	
  Subordinated bonds

  	
   

  	
  23.45

  	
  %

  
	
  DIP Collateral Debt Securities

  	
   

  	
  56.50

  	
  %

  
	
  REIT Preferred Securities

  	
   

  	
  10.00

  	
  %

  
	
  Synthetic Securities and Structured Finance
  Securities

  	
   

  	
   

  	
  (3)

  
	
  Non-U.S./Non-Canadian Obligors

  	
   

  	
   

  	
  (3)

  
	
  Structured Finance Securities

  	
   

  	
   

  	
  (4)

  

 

(1)           Or,
at the option of the Collateral Manager, such higher rates as provided by
S&P.

(2)                                  If
a Loan satisfies the definition of Second Lien Loan, such Loan shall not be
treated as a Senior Secured Loan for purposes of the S&P Recovery Rate.

(3)           As
determined by S&P on a case-by-case basis or as published by S&P.

(4)                                  Per
the table below, unless a higher recovery rate has been assigned by S&P on
a case-by-case basis.

 

A-A-3

 

Structured Finance Securities
Recovery Rates

 

	
  Priority Category

  	
   

  	
  S&P Recovery Rate

  	
   

  
	
  AAA Senior-most Tranche

  	
   

  	
  80.0

  	
  %

  
	
  AA-, AA, AA+ Senior-most Tranche

  	
   

  	
  70.0

  	
  %

  
	
  A-, A, A+ Senior-most Tranche

  	
   

  	
  60.0

  	
  %

  
	
  BBB+, BBB or BBB- Senior-most Tranche

  	
   

  	
  50.0

  	
  %

  
	
  Below BBB- Senior-most Tranche

  	
   

  	
   

  	
  (1)

  
	
  AA-, AA, AA+ Not Senior-most Tranche

  	
   

  	
  55.0

  	
  %

  
	
  A-, A, A+ Not Senior-most Tranche

  	
   

  	
  40.0

  	
  %

  
	
  BBB+, BBB, BBB- Not Senior-most Tranche

  	
   

  	
  30.0

  	
  %

  
	
  BB+, BB or BB- Not Senior-most Tranche

  	
   

  	
  10.0

  	
  %

  
	
  B+, B or B- Not Senior-most Tranche

  	
   

  	
  2.5

  	
  %

  
	
  Below B- Not Senior Most Tranche

  	
   

  	
  0

  	
  %

  

 

(1)           As
determined by S&P on a case-by-case basis.

 

“Securities”: 
The Notes.

 

“Senior Notes”: 
The Class A Notes and the Class B Notes.

 

“Subordinated Notes”:  The Subordinated Notes, Due 2017, issued by
the Issuer, authenticated by the Trustee or any Note Authenticating Agent and
designated as a Subordinated Note pursuant to the Indenture.

 

2.             Section 7.18.  Hedge Agreement
Provisions.  Section 7.18(a) is
hereby deleted in its entirety and replaced with the following:

 

The Issuer may enter into one or more Hedge Agreements
provided that (i) the consent of each Hedge Counterparty (other than
counterparties to Hedge Agreements that are concurrently being terminated or
assigned) is received, (ii) Rating Agency Confirmation has been received
with respect to such Hedge Agreement or the form utilized for such Hedge
Agreement and (iii) so long as any Class A Notes remain Outstanding,
if such Hedge Agreement constitutes an interest rate swap, cap, floor or collar
or otherwise hedges interest rate risk, the consent of a Majority of the
Controlling Class is received.  The
Issuer shall not amend or terminate a Hedge Agreement unless Rating Agency
Confirmation has been received.

 

3.             Section 8.1.  Supplemental Indentures Without
Consent of Securityholders.  The
following new paragraph is added to the end of Section 8.1:

 

Notwithstanding the foregoing, for so long as any Class A
Notes are Outstanding, no supplemental indenture shall be adopted with respect
to subclauses (i), (l) and (q) above unless the consent of a Majority of the Class A
Notes has been received; provided that
a Majority of the Class A Notes shall be deemed to have given such consent
if they do not respond in writing within 10 days of delivery of notice of such
proposed supplemental indenture.

 

A-A-4

 

4.             Section 14.4.  Notices to Holders; Waiver.  The following new paragraph is added to the
end of Section 14.4:

 

The Trustee shall deliver or cause to be delivered to
Financial Security Assurance Inc., 350 Park Avenue, New York, New York  10022, Attn: Insured Portfolio Management
Department, Re: Credit Protection Trust CPT-182; Policy No. 51632-N,
telecopy number (212) 339-3518, copies of all notices and reports (i) delivered
or caused to be delivered by the Trustee to the Holders to any Holder of Class A
Notes pursuant to the terms hereof and (ii) delivered to the Trustee by
the Collateral Manager or the Issuer with a request that they be delivered to
the Holders to any Holder of Class A Notes, by the same means and
simultaneously with the delivery thereof to such Holder.

 

A-A-5

 

APPENDIX
B

 

TERM SHEET

 

	
  Issuer:

  	
   

  	
  KKR Financial CLO 2005-1, Ltd., a Cayman Islands exempted
  company

  
	
   

  	
   

  	
   

  
	
  Co-Issuer:

  	
   

  	
  KKR Financial CLO 2005-1 Corp., a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  Collateral Manager:

  	
   

  	
  KKR Financial Advisors II, LLC, a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
  Trustee, Security Registrar and Delayed
  Draw Note Agent:

  	
   

  	
  JPMorgan Chase Bank, National Association

  
	
   

  	
   

  	
   

  
	
  Managers, Lead Placement Agents and Sole
  Bookrunners:

  	
   

  	
  Morgan Stanley & Co. Incorporated
  and Morgan Stanley & Co. International Limited

  
	
   

  	
   

  	
   

  
	
  Co-Placement Agent:

  	
   

  	
  J.P. Morgan Securities Inc. (together with
  the Lead Placement Agents, the “Placement Agents”)

  
	
   

  	
   

  	
   

  
	
  Closing Date:

  	
   

  	
  March 30, 2005

  

 

	
  Securities Offered:

  	
   

  	
  Principal Amount

  	
   

  	
  Interest Rate(3)

  	
   

  	
  Moody’s

  Rating

  	
   

  	
  S&P

  Rating

  	
   

  
	
  Class A-1 Notes

  	
   

  	
  $

  	
  615,000,000

  	
  (1)

  	
  LIBOR + 0.27

  	
  %

  	
  Aaa

  	
   

  	
  AAA

  	
   

  
	
  Class A-2 Notes

  	
   

  	
  $

  	
  100,000,000

  	
  (2)

  	
  LIBOR + 0.27

  	
  %(3)

  	
  Aaa

  	
   

  	
  AAA

  	
   

  
	
  Class B Notes

  	
   

  	
  $

  	
  58,000,000

  	
   

  	
  LIBOR + 0.45

  	
  %

  	
  Aa2

  	
   

  	
  AA

  	
   

  
	
  Class C Notes

  	
   

  	
  $

  	
  64,000,000

  	
   

  	
  LIBOR + 0.80

  	
  %

  	
  A2

  	
   

  	
  A

  	
   

  
	
  Class D Notes

  	
   

  	
  $

  	
  64,000,000

  	
   

  	
  LIBOR + 2.05

  	
  %

  	
  Baa3

  	
   

  	
  BBB-

  	
   

  
	
  Class E Notes

  	
   

  	
  $

  	
  15,000,000

  	
   

  	
  LIBOR + 5.50

  	
  %

  	
  Ba2

  	
   

  	
  BB-

  	
   

  
	
  Class F Notes

  	
   

  	
  $

  	
  5,000,000

  	
   

  	
  LIBOR + 8.50

  	
  %

  	
  B2

  	
   

  	
  B-

  	
   

  
	
  Subordinated Notes

  	
   

  	
  $

  	
  85,500,000

  	
   

  	
   

  	
  (5)

  	
  N/A

  	
   

  	
  N/A

  	
   

  

 

(1)                                  To the extent
the drawn portion of any Commitment Notes are converted into Class A-1
Notes in accordance with the terms of the Indenture, the total outstanding
principal amount of the Class A-1 Notes may be increased by an
amount up to but not exceeding the initial principal amount of the Commitment
Notes, and the principal amount of the Commitment Notes will be reduced
accordingly.

(2)                                  In the case of
the Class A-2 Notes, the Commitment.

(3)                                  For the
definition of LIBOR, see “Glossary of Certain Defined Terms” in the Base
Offering Memorandum.

(4)                                  Interest on the Class A-2
Notes will accrue on the Drawn Amount. 
The Commitment Fee on the Class A-2 Notes will equal a per annum
rate (set forth below) on any undrawn amount and will be paid on each Payment
Date on which a Commitment Fee is due.

(5)                                  The Subordinated
Notes will not receive a stated rate of interest, but instead will receive on
each Payment Date the Interest Proceeds, if any,  remaining after all other obligations
of the Co-Issuers payable from Interest Proceeds have been paid in accordance
with the Priority of Payments.

 

B-B-1

 

	
  Stated Maturity:

  	
   

  	
  April 26, 2017

  
	
   

  	
   

  	
   

  
	
  Payment Date:

  	
   

  	
  The 26th day of January, April, July and October of each year (or, if such
  day is not a Business Day, then the next succeeding Business Day), commencing
  on October 26, 2005

  
	
   

  	
   

  	
   

  
	
  Closing Date Invested Par Percentage:

  	
   

  	
  65%

  
	
   

  	
   

  	
   

  
	
  Effective Date Target Par:

  	
   

  	
  $1,000,000,000

  
	
   

  	
   

  	
   

  
	
  Outside Effective Date:

  	
   

  	
  180 days after the Closing Date

  
	
   

  	
   

  	
   

  
	
  Non-Call Period:

  	
   

  	
  The period beginning on the Closing Date and ending immediately prior
  to the Payment Date in April 2008

  
	
   

  	
   

  	
   

  
	
  Reinvestment Period:

  	
   

  	
  The period from and including the Closing Date to and including the
  last day of the Due Period relating to the Payment Date in April 2011

  
	
   

  	
   

  	
   

  
	
  Delayed Draw Notes:

  	
   

  	
  Commitment: $100,000,000

  
	
   

  	
   

  	
  Commitment Fee: 0.135%

  
	
   

  	
   

  	
  Maximum Number of Draws: 4, on or about April 29,
  2005, May 31, 2005, June 30, 2005 and a final Draw, if required, on
  the Draw Period End Date

  
	
   

  	
   

  	
   

  
	
  Draw Period End Date:

  	
   

  	
  September 30, 2005

  
	
   

  	
   

  	
   

  
	
  Expense Reserve Account Amount:

  	
   

  	
  $150,000

  
	
   

  	
   

  	
   

  
	
  Closing Expenses Reserve Account Amount:

  	
   

  	
  $0

  
	
   

  	
   

  	
   

  
	
  Senior Collateral Management Fee
  Percentage:

  	
   

  	
  0.15%

  
	
   

  	
   

  	
   

  
	
  Intermediate Collateral Management Fee Percentage:

  	
   

  	
  0% for so long as KKR Financial
  Advisors II, LLC or an Affiliate is Collateral Manager, and 0.0% at all times
  thereafter

  
	
   

  	
   

  	
   

  
	
  Subordinated Collateral Management Fee Percentage:

  	
   

  	
  0% for so long as KKR Financial
  Advisors II, LLC or an Affiliate is Collateral Manager, and 0.35% at all
  times thereafter

  
	
   

  	
   

  	
   

  
	
  Minimum Spread:

  	
   

  	
  2.25%

  
	
   

  	
   

  	
   

  
	
  Coverage Tests:

  	
   

  	
  Senior Interest Coverage Ratio Minimum:
  100% prior to the second Determination Date and 115% thereafter

  
	
   

  	
   

  	
  Senior Overcollateralization Ratio Minimum:
  119.4%

  
	
   

  	
   

  	
  Class C/D Interest Coverage Ratio
  Minimum: 110%

  

 

B-B-2

 

	
   

  	
   

  	
  Class C/D Overcollateralization Ratio
  Minimum: 106%

  
	
   

  	
   

  	
  Class E Overcollateralization Ratio
  Minimum: 106.2%

  
	
   

  	
   

  	
  Senior Interest Coverage Test Start Date:
  First Determination Date

  
	
   

  	
   

  	
  Senior Overcollateralization Test Start
  Date: First Determination Date

  
	
   

  	
   

  	
  Class C/D Interest Coverage Test Start
  Date: Second Determination Date

  
	
   

  	
   

  	
  Class C/D Overcollateralization Test
  Start Date: First Determination Date

  
	
   

  	
   

  	
  Class E Overcollateralization Test
  Start Date: First Determination Date

  
	
   

  	
   

  	
   

  
	
  Collateral Debt Security:

  	
   

  	
  Extended Maturity Obligations Percentage:
  2%

  
	
   

  	
   

  	
   

  
	
  Portfolio Profile Test:

  	
  (1)

  	
   

  	
  Minimum Senior Secured Loan Percentage: 90%

  
	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
  Maximum Convert Percentage:
  5%

  
	
   

  	
   

  	
  Convert Right Price Percentage:
  2%

  
	
   

  	
   

  	
   

  
	
  (3)

  	
   

  	
  Maximum Zero Coupon Percentage:
  5%

  
	
   

  	
   

  	
  Maximum PIK Percentage: 5%

  
	
   

  	
   

  	
   

  
	
  (4)

  	
   

  	
  Maximum Short-Term Obligations Percentage: 5%

  
	
   

  	
   

  	
   

  
	
  (5)

  	
   

  	
  Maximum Revolver Percentage:
  10%

  
	
   

  	
   

  	
   

  
	
  (6)

  	
   

  	
  Maximum Bond and Second Lien Loan Percentage: 10%

  
	
   

  	
   

  	
   

  
	
  (7)

  	
   

  	
  Maximum CCC Purchase Percentage: 5%

  
	
   

  	
   

  	
  Maximum CCC Replacement Percentage: 5%

  
	
   

  	
   

  	
   

  
	
  (8)

  	
   

  	
  Maximum Equity Exposure Percentage: 5%

  
	
   

  	
   

  	
  Warrants Price Percentage: 2%

  
	
   

  	
   

  	
  Maximum Warrants Exceptions Percentage: 3%

  
	
   

  	
   

  	
  Maximum Warrants Price Percentage: 5%

  
	
   

  	
   

  	
   

  
	
  (9)

  	
   

  	
  Maximum Offers Percentage: 0%

  
	
   

  	
   

  	
   

  
	
  (10)

  	
   

  	
  Maximum Single Obligor Percentage: 2%

  
	
   

  	
   

  	
  Single Obligor Exception: 5

  
	
   

  	
   

  	
  Single Obligor Exception Percentage: 3%, with excess over 2% limited
  to Senior Secured Loans

  
	
   

  	
   

  	
  Maximum Structured Finance Single Obligor Percentage: 1.5%

  
	
   

  	
   

  	
  Maximum Single Obligor High Yield Percentage: 1%

  
	
   

  	
   

  	
  Moody’s High Yield Minimum Rating: “B3”

  
	
   

  	
   

  	
  S&P High Yield Minimum Rating: “B—”

  
	
   

  	
   

  	
   

  
	
  (11)

  	
   

  	
  Maximum S&P Single Industry Percentage: 9%

  
	
   

  	
   

  	
  Maximum S&P Industry Exceptions: 2 (excluding
  telecommunications/cellular)

  
				

 

B-B-3

 

	
   

  	
   

  	
  Maximum S&P Industry Exceptions Percentage: 12%

  
	
   

  	
   

  	
  Maximum Moody’s Single Industry Percentage: 12%

  
	
   

  	
   

  	
  Maximum Moody’s Industry Exceptions: 2 (excluding
  telecommunications/cellular)

  
	
   

  	
   

  	
  Maximum Moody’s Industry Exceptions Percentage: 15%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (12)

  	
   

  	
  Maximum Country Exposure Percentages:

  
	
   

  	
   

  	
  20%

  	
   

  	
  Eligible Countries
  other than the United States;

  
	
   

  	
   

  	
  10%

  	
   

  	
  Eligible Countries
  other than the United States and Canada;

  
	
   

  	
   

  	
  10%

  	
   

  	
  Eligible Countries
  other than the United States, Canada and Group I European Countries;

  
	
   

  	
   

  	
  10%

  	
   

  	
  any single Group I
  European Country;

  
	
   

  	
   

  	
  5%

  	
   

  	
  any single Group II
  European Country, Group III European Country or other Eligible Country (other
  than the United States and Canada);

  
	
   

  	
   

  	
  3%

  	
   

  	
  any single Group IV
  European Country;

  
	
   

  	
   

  	
  5%

  	
   

  	
  Antilles, Bermuda, the
  Cayman Islands and the British Virgin Islands (without regard to Structured
  Finance Securities);

  
	
   

  	
   

  	
  15%

  	
   

  	
  Canada; and

  
	
   

  	
   

  	
  5%

  	
   

  	
  all Eligible Countries other than the
  United States, Canada and European Countries, taken together.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Maximum Non-Senior
  Secured Eligible Country Percentage:
  5%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (13)

  	
   

  	
  Maximum S&P Foreign Obligor Risk Percentage: 20%

  
	
   

  	
   

  	
  Maximum S&P Bi-Variant Risk Percentage: 20%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (14)

  	
   

  	
  Maximum Small Obligor Percentage: 5%

  
	
   

  	
   

  	
  Small Obligor Threshold: $75,000,000

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (15)

  	
   

  	
  Maximum Fixed Rate Percentage:
  5%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (16)

  	
   

  	
  Maximum Non-Quarterly Pay Percentage: 5%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (17)

  	
   

  	
  Maximum DIP and Current Pay Percentage: 5%

  
	
   

  	
   

  	
  Maximum Single Obligor DIP and Current Pay Percentage: 2%

  
	
   

  	
   

  	
  Maximum Purchased Current Pay Percentage: 2.5%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (18)

  	
   

  	
  Maximum PIK and Partial PIK Percentage: 5%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (19)

  	
   

  	
  Maximum Structured Finance and REIT Preferred Percentage: 5%

  
	
   

  	
   

  	
  Moody’s Structured Finance Minimum Rating: “B1”

  
	
   

  	
   

  	
  S&P Structured Finance Minimum Rating: “B+”

  
	
   

  	
   

  	
   

  
	
  (20)

  	
   

  	
  Maximum REIT Preferred Percentage: 0%

  
	
   

  	
   

  	
   

  
	
  Discretionary Sales:

  	
   

  	
  Discretionary Sales Percentage: 25%

  
							

 

B-B-4

 

	
  Purchased Defaulted Security:

  	
   

  	
  Maximum Purchased Defaulted Percentage: 2.5%

  
	
   

  	
   

  	
   

  
	
  Short Positions:

  	
   

  	
  Short Premium Excess Interest Haircut: 0%

  
	
   

  	
   

  	
   

  
	
  Aggregate Excess Funded Spread:

  	
   

  	
  Excess Funded Spread Threshold: 0.15%

  
	
   

  	
   

  	
   

  
	
  Discount Obligation:

  	
   

  	
  Discount Loan Minimum Price: 80%

  
	
   

  	
   

  	
  Discount Bond Minimum Price: 75%

  
	
   

  	
   

  	
  Discount Below B3 Loan Minimum Price: 85%

  
	
   

  	
   

  	
  Discount Below B3 Bond Minimum Price: 80%

  
	
   

  	
   

  	
   

  
	
  Funding Rate:

  	
   

  	
  CP Conduit Spread: N/A

  
	
   

  	
   

  	
   

  
	
  Interest Reserve Amount:

  	
   

  	
  Interest Reserve Threshold: 10%

  
	
   

  	
   

  	
   

  
	
  Lowest CCC Obligations:

  	
   

  	
  Lowest CCC Threshold: 5%

  
	
   

  	
   

  	
   

  
	
  Moody’s Diversity Test:

  	
   

  	
  Moody’s Minimum Diversity Score: 40

  
	
   

  	
   

  	
   

  
	
  Moody’s Minimum Weighted Average Recovery
  Rate Test:

  	
   

  	
  Moody’s Minimum Recovery Rate: 44%

  
	
   

  	
   

  	
   

  
	
  Moody’s Recovery Rate:

  	
   

  	
  REIT Preferred Securities Recovery Rate:
  N/A

  
	
   

  	
   

  	
   

  
	
  Principal Balance:

  	
   

  	
  REIT Market Value Percentage: N/A

  
	
   

  	
   

  	
  Discount Loan Reset Percentage: 90%

  
	
   

  	
   

  	
  Discount Bond Reset Percentage: 85%

  
	
   

  	
   

  	
  REIT Unpaid Interest Percentage: N/A

  
	
   

  	
   

  	
   

  
	
  S&P Minimum Weighted
  Average Recovery Rate Test:

  	
   

  	
  S&P Minimum Recovery Rate: 53%

  
	
   

  	
   

  	
   

  
	
  Terminated Loss Short Position:

  	
   

  	
  Terminated Loss Short Position Threshold: N/A

  
	
   

  	
   

  	
   

  
	
  Weighted Average Life Test:

  	
   

  	
  Weighted Average Life Maximum: 9

  
	
   

  	
   

  	
   

  
	
  Hedge Agreement Requirements:

  	
   

  	
  Rating Agency Confirmation

  

 

B-B-5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}]]