HillMark Funding Ltd. JPMorgan - Irish Stock Exchange

HillMark Funding Ltd.
HillMark Funding Corp.
U.S.$368,000,000 Class A-1 Senior Secured Floating Rate Notes due 2021
U.S.$24,500,000 Class A-2 Senior Secured Floating Rate Notes due 2021
U.S.$28,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2021
U.S.$25,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2021
U.S.$15,250,000 Class D Secured Deferrable Floating Rate Notes due 2021
U.S.$39,250,000 Subordinated Notes due 2021
The Offered Securities will be issued on or about November 16, 2006 (the "Closing Date") pursuant to an Indenture, dated as of November 16, 2006
(the "Indenture"), among HillMark Funding Ltd. (the "Issuer"), HillMark Funding Corp. (the "Co-Issuer" and, together with the Issuer, the
"Co-Issuers") and The Bank of New York Trust Company, National Association, as Trustee (the "Trustee"). HillMark Capital Management, L.P.
("HillMark") will serve as portfolio manager (the "Portfolio Manager") for the Issuer's portfolio.
For a discussion of certain factors regarding the Issuer and the Offered Securities that, among other things, should be considered by
prospective purchasers of the Offered Securities, see "Risk Factors."
It is a condition of the issuance of the Offered Securities that (i) the Class A-1 Notes be rated "Aaa" by Moody's Investors Service, Inc. ("Moody's")
and "AAA" by Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. ("S&P" and, together with Moody's, the "Rating
Agencies"), (ii) the Class A-2 Notes be rated at least "Aa2" by Moody's and at least "AA" by S&P, (iii) the Class B Notes be rated at least "A2" by
Moody's and at least "A" by S&P, (iv) the Class C Notes be rated at least "Baa3" by Moody's and at least "BBB-" by S&P, and (v) the Class D Notes
be rated at least "Ba2" by Moody's and at least "BB" by S&P, in each case as more fully described under "Ratings of the Secured Notes." A credit
rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning Rating
Agency.
Application has been made to the Irish Financial Services Regulatory Authority ("IFSRA"), as competent authority under Directive 2003/71/EC (the
"Prospectus Directive"), for the Offering Circular to be approved. Application has been made to the Irish Stock Exchange for the Offered Securities to
be admitted to the Official List and trading on its regulated market. Such approval relates only to the Offered Securities which are to be admitted to
trading on the regulated market of the Irish Stock Exchange or other regulated markets for the purposes of Directive 93/22/EEC or which are to be
offered to the public in any Member State of the European Economic Area. However, there can be no assurance that the Irish Stock Exchange will in
fact accept the listing of such Offered Securities or that the listing, if granted, will be maintained.
This Offering Circular constitutes a Prospectus for the purposes of the Prospectus Directive. References throughout this document to the “Offering
Circular” shall be taken to read “Prospectus” for this purpose.
THE OFFERED SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") AND NEITHER THE ISSUER NOR THE CO-ISSUER WILL BE REGISTERED UNDER
THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT"). THE
OFFERED SECURITIES WILL BE OFFERED AND SOLD TO NON-U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT ("REGULATION S")) OUTSIDE THE UNITED STATES IN RELIANCE ON REGULATION S. THE OFFERED
SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT TO PERSONS THAT ARE (I) (X) QUALIFIED INSTITUTIONAL BUYERS ("QUALIFIED INSTITUTIONAL
BUYERS") (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) IN RELIANCE ON THE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS PROVIDED BY RULE 144A OR, (Y) SOLELY IN THE CASE OF OFFERED SECURITIES ISSUED
AS CERTIFICATED NOTES OR CERTIFICATED SUBORDINATED NOTES, INSTITUTIONAL ACCREDITED INVESTORS (AS DEFINED
IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (ANY SUCH INVESTOR, AN "IAI") IN
TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR, (Z) SOLELY IN THE CASE OF THE
SUBORDINATED NOTES, ACCREDITED INVESTORS ("ACCREDITED INVESTORS") (AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT) IN TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT WHO ARE ALSO
KNOWLEDGEABLE EMPLOYEES AND (II) (A) QUALIFIED PURCHASERS ("QUALIFIED PURCHASERS") (FOR THE PURPOSES OF
SECTION 3(c)(7) OF THE INVESTMENT COMPANY ACT) OR (B) SOLELY IN THE CASE OF THE SUBORDINATED NOTES,
KNOWLEDGEABLE EMPLOYEES ("KNOWLEDGEABLE EMPLOYEES") (AS DEFINED IN RULE 3c-5 UNDER THE INVESTMENT
COMPANY ACT) WITH RESPECT TO THE ISSUER OR AN ENTITY OWNED EXCLUSIVELY BY QUALIFIED PURCHASERS AND/OR
KNOWLEDGEABLE EMPLOYEES, AND IN ACCORDANCE WITH ANY OTHER APPLICABLE LAW.
The Secured Notes are being offered by J.P. Morgan Securities Inc. ("JPMorgan") as initial purchaser (in such capacity, the "Initial Purchaser"),
when, as and if such Notes are received and accepted by the Initial Purchaser and subject to prior sale, withdrawal, cancellation or modification of the
offer without notice, to the right of the Initial Purchaser to reject orders in whole or in part and to certain other conditions. A portion of the
Subordinated Notes are being offered by the Issuer through JPMorgan as placement agent (in such capacity, the "Placement Agent") to purchasers in
privately negotiated transactions. The remaining Subordinated Notes will be offered and sold by the Issuer directly to the Portfolio Manager,
"knowledgeable employees" of the Portfolio Manager and/or its affiliates and JPMorgan is not acting as a placement agent or initial purchaser with
respect to the offering of such portion of the Subordinated Notes.
JPMorgan
December 15, 2006

Certain pledged assets of the Issuer are the sole source of payments on the Notes. The Subordinated
Notes are not secured by the assets of the Issuer. The Notes do not represent an interest in or obligations
of, and are not insured or guaranteed by, the Portfolio Manager, the Trustee, the Collateral Administrator,
any paying agent, JPMorgan, any Hedge Counterparty or any of their respective affiliates.
No person has been authorized to make or provide any representation or information regarding the
Co-Issuers or the Offered Securities other than as contained in this Offering Circular. Any such
representation or information should not be relied upon as having been authorized by the Co-Issuers,
JPMorgan or the Portfolio Manager. The delivery of this Offering Circular at any time does not imply
that the information contained in it is correct as of any time subsequent to the date of this Offering
Circular. Unless otherwise indicated, all information in this Offering Circular is given as of the date of
this Offering Circular.
This Offering Circular has been prepared by the Co-Issuers solely for use in connection with the offering
and listing of the Offered Securities. Unless otherwise provided herein, the Co-Issuers have taken
reasonable care to ensure that facts stated in this Offering Circular are true and accurate in all material
respects and that there have not been omitted material facts the omission of which would make
misleading in any material respect any statements of fact or opinion herein. The Co-Issuers accept
responsibility accordingly.
The Portfolio Manager accepts responsibility for the information appearing in the sections entitled "Risk
Factors—Relating to Certain Conflicts of Interest—The Issuer Will be Subject to Various Conflicts of
Interest Involving the Portfolio Manager" and "The Portfolio Manager" and having taken all reasonable
care to ensure that such is the case, the information is, to the best of their knowledge, in accordance with
the facts and does not omit anything likely to affect its import. JPMorgan and the Co-Issuers do not
assume any responsibility for the accuracy, completeness, or applicability of such information, except that
the Co-Issuers assume responsibility for accurately reproducing such information in this Offering
Circular.
None of JPMorgan, the Trustee, the Collateral Administrator or (except with respect to the sections
entitled "Risk Factors—Relating to Certain Conflicts of Interest—The Issuer Will be Subject to Various
Conflicts of Interest Involving the Portfolio Manager" and "The Portfolio Manager") the Portfolio
Manager has independently verified or make any representation or warranty, express or implied, as to the
accuracy or completeness of the information in this Offering Circular. Each person receiving this Offering
Circular acknowledges that such person has not relied on JPMorgan, the Trustee, the Collateral
Administrator or (except with respect to the sections entitled "Risk Factors—Relating to Certain Conflicts
of Interest—The Issuer Will be Subject to Various Conflicts of Interest Involving the Portfolio Manager"
and "The Portfolio Manager") the Portfolio Manager or any person affiliated therewith, in connection
with its investigation of the accuracy of such information or its investment decision. Nothing contained in
this Offering Circular is, or shall be relied upon as, a promise or representation as to the past or the future
by JPMorgan, the Trustee, the Collateral Administrator or the Portfolio Manager. Each person
contemplating making an investment in the Offered Securities must make its own investigation and
analysis of the creditworthiness of the Co-Issuers and its own determination of the suitability of any such
investment, with particular reference to its own investment objectives and experience, and any other
factors that may be relevant to it in connection with such investment.
THE OFFERED SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION OR OTHER REGULATORY AUTHORITY, AND NONE OF THE FOREGOING
AUTHORITIES HAS CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF
ii

THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Offering Circular contains summaries of certain documents. The summaries do not purport to be
complete and are qualified in their entirety by reference to such documents. Each person receiving this
Offering Circular acknowledges that such person has been afforded an opportunity to request from the
Issuer and to review, and has received, all additional information considered by such person to be
necessary to verify the accuracy and completeness of the information herein. Requests and inquiries
regarding this Offering Circular or such documents should be directed to the Issuer, in care of J.P.
Morgan Securities Inc., 270 Park Avenue, 8th Floor, New York, New York, 10017, Attention: Structured
Credit Products. Such requests may also be made to the Irish Paying Agent and Listing Agent at the
address set forth on the final page of this Offering Circular.
The Offered Securities are a new issue of securities. There can be no assurance that a secondary market
for any of the Offered Securities will develop, or if a secondary market does develop, that it will provide
the holders of such Offered Securities with liquidity of investment or that it will continue. Accordingly,
investors should be prepared to bear the risks of holding the Offered Securities until final payment is
made thereon.
THE CONTENTS OF THIS OFFERING CIRCULAR ARE NOT TO BE CONSTRUED AS LEGAL,
BUSINESS OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN
ATTORNEY, BUSINESS ADVISOR AND TAX ADVISOR AS TO LEGAL, BUSINESS AND TAX
ADVICE.
This Offering Circular does not constitute an offer of, or an invitation by or on behalf of, the Co-Issuers
(in respect of the Secured Notes (other than the Class D Notes)) or the Issuer (in respect of the Class D
Notes or the Subordinated Notes), or JPMorgan to subscribe to or purchase any of the Offered Securities
in any jurisdiction in which it is unlawful to make such an offer or invitation. The distribution of this
Offering Circular and the offering of the Offered Securities in certain jurisdictions may be restricted by
law. Persons into whose possession this Offering Circular comes are required by the Co-Issuers and
JPMorgan to inform themselves about and to observe any such restrictions. For a description of certain
further restrictions on offers and sales of Offered Securities and distribution of this Offering Circular, see
"Description of the Offered Securities," "Plan of Distribution" and "Transfer Restrictions."
Neither the Issuer nor the Co-Issuer has been registered under the Investment Company Act. Each
purchaser of Secured Notes that are represented by an interest in a Rule 144A Global Security will be
deemed to represent and agree, and each purchaser of Secured Notes that is a U.S. person and that
purchases such Secured Notes as Certificated Notes will represent and agree, that the purchaser is
acquiring such Notes in a principal amount of not less than U.S.$500,000 for its own account and that the
purchaser is a Qualified Purchaser. Each purchaser of Subordinated Notes that is a U.S. person will be
required to represent and agree that the purchaser is acquiring such Subordinated Notes in a principal
amount of not less than $100,000 for its own account and that the purchaser is (i) a Qualified Purchaser,
(ii) a Knowledgeable Employee or (iii) an entity owned exclusively by Qualified Purchasers and/or
Knowledgeable Employees. See "Transfer Restrictions."
Prospective purchasers are hereby notified that a seller of the Offered Securities may be relying on an
exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(2)
of, or Rule 144A under, the Securities Act.
iii

In this Offering Circular references to "U.S. Dollars", "$" and "U.S.$" are dollars or other equivalent
units 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.
NO ACTION WAS TAKEN OR IS BEING CONTEMPLATED BY THE CO-ISSUERS THAT
WOULD PERMIT A PUBLIC OFFERING OF THE OFFERED SECURITIES OR POSSESSION
OR DISTRIBUTION OF THIS OFFERING CIRCULAR OR ANY AMENDMENT THEREOF,
OR SUPPLEMENT THERETO OR ANY OTHER OFFERING MATERIAL RELATING TO
THE OFFERED SECURITIES IN ANY JURISDICTION (OTHER THAN IRELAND) WHERE,
OR IN ANY OTHER CIRCUMSTANCES IN WHICH, ACTION FOR THOSE PURPOSES IS
REQUIRED. NOTHING CONTAINED HEREIN SHALL CONSTITUTE AN OFFER TO SELL
OR A SOLICITATION OF AN OFFER TO PURCHASE ANY OFFERED SECURITIES IN ANY
JURISDICTION WHERE IT IS UNLAWFUL TO DO SO ABSENT THE TAKING OF SUCH
ACTION OR THE AVAILABILITY OF AN EXEMPTION THEREFROM.
IMPORTANT NOTICE REGARDING THE SECURITIES
THE SECURITIES REFERRED TO IN THIS OFFERING CIRCULAR, AND THE ASSETS
BACKING THEM, ARE SUBJECT TO MODIFICATION OR REVISION AND ARE OFFERED ON A
"WHEN, AS AND IF ISSUED" BASIS. AN INVESTOR UNDERSTANDS THAT, WHEN SUCH
INVESTOR IS CONSIDERING THE PURCHASE OF THE SECURITIES, A BINDING CONTRACT
OF SALE WILL NOT EXIST PRIOR TO THE TIME THAT THE RELEVANT CLASS HAS BEEN
PRICED AND THE INITIAL PURCHASER OR PLACEMENT AGENT, AS APPLICABLE, HAS
CONFIRMED THE ALLOCATION OF SUCH SECURITIES TO BE MADE TO SUCH INVESTOR;
PRIOR TO THAT TIME ANY "INDICATIONS OF INTEREST" EXPRESSED BY SUCH INVESTOR,
AND ANY "SOFT CIRCLES" GENERATED BY THE INITIAL PURCHASER OR THE
PLACEMENT AGENT, AS APPLICABLE, WILL NOT CREATE BINDING CONTRACTUAL
OBLIGATIONS FOR SUCH INVESTOR OR THE INITIAL PURCHASER OR THE PLACEMENT
AGENT, AS APPLICABLE, AND MAY BE WITHDRAWN AT ANY TIME.
AN INVESTOR MAY COMMIT TO PURCHASE ONE OR MORE CLASSES OF SECURITIES
THAT HAVE CHARACTERISTICS THAT MAY CHANGE, AND SUCH INVESTOR IS ADVISED
THAT ALL OR A PORTION OF THE SECURITIES MAY NOT BE ISSUED WITH THE
CHARACTERISTICS DESCRIBED IN THIS OFFERING CIRCULAR. THE INITIAL
PURCHASER'S OR PLACEMENT AGENT'S OBLIGATION TO SELL OR PLACE SUCH
SECURITIES TO SUCH INVESTOR IS CONDITIONED ON THE SECURITIES HAVING THE
CHARACTERISTICS DESCRIBED IN THIS OFFERING CIRCULAR. IF THE INITIAL
PURCHASER OR THE PLACEMENT AGENT, AS APPLICABLE, DETERMINES THAT
CONDITION IS NOT SATISFIED IN ANY MATERIAL RESPECT, AN INVESTOR WILL BE
NOTIFIED, AND NONE OF THE ISSUER, THE CO-ISSUER, THE INITIAL PURCHASER AND
THE PLACEMENT AGENT WILL HAVE ANY OBLIGATION TO AN INVESTOR TO DELIVER
ANY PORTION OF THE SECURITIES WHICH SUCH INVESTOR COMMITTED TO PURCHASE,
AND THERE WILL BE NO LIABILITY AMONG THE ISSUER, THE CO-ISSUER, THEIR
AFFILIATES, THE INITIAL PURCHASER, THE PLACEMENT AGENT AND SUCH INVESTOR AS
A CONSEQUENCE OF THE NON-DELIVERY.
THE INFORMATION CONTAINED HEREIN SUPERSEDES ANY PREVIOUS SUCH
INFORMATION DELIVERED TO AN INVESTOR AND MAY BE SUPERSEDED BY
INFORMATION DELIVERED TO AN INVESTOR PRIOR TO THE TIME OF CONTRACT OF
SALE.
iv

NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION
FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW
HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE
FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED
IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY
OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A
TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO
MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER,
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF
THIS PARAGRAPH.
NOTICE TO FLORIDA RESIDENTS
THE OFFERED SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER
SECTION 517.061 OF THE FLORIDA SECURITIES ACT AND HAVE NOT BEEN REGISTERED
UNDER SAID ACT IN THE STATE OF FLORIDA. ALL FLORIDA RESIDENTS WHO ARE NOT
INSTITUTIONAL INVESTORS DESCRIBED IN SECTION 517.061(7) OF THE FLORIDA
SECURITIES ACT HAVE THE RIGHT TO VOID THEIR PURCHASE OF THE OFFERED
SECURITIES, WITHOUT PENALTY, WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF
CONSIDERATION.
NOTICE TO GEORGIA RESIDENTS
THE OFFERED SECURITIES WILL BE ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13)
OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH
ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.
NOTICE TO RESIDENTS OF AUSTRALIA
NO PROSPECTUS OR OTHER DISCLOSURE DOCUMENT IN RELATION TO THE OFFERED
SECURITIES HAS BEEN LODGED WITH THE AUSTRALIAN SECURITIES AND INVESTMENTS
COMMISSION OR THE AUSTRALIAN STOCK EXCHANGE LIMITED. EACH OF THE INITIAL
PURCHASER AND THE PLACEMENT AGENT WILL REPRESENT AND AGREE THAT IT:
(A) HAS NOT OFFERED OR INVITED APPLICATIONS, AND WILL NOT
OFFER OR INVITE APPLICATIONS, FOR THE ISSUE, SALE OR PURCHASE OF THE
OFFERED SECURITIES IN AUSTRALIA (INCLUDING AN OFFER OR INVITATION
WHICH IS RECEIVED BY A PERSON IN AUSTRALIA); AND
(B) HAS NOT DISTRIBUTED OR PUBLISHED, AND WILL NOT DISTRIBUTE
OR PUBLISH, THIS OFFERING CIRCULAR OR ANY OTHER OFFERING MATERIAL OR
ADVERTISEMENT RELATING TO THE OFFERED SECURITIES IN AUSTRALIA,
v

UNLESS (I) THE MINIMUM AGGREGATE CONSIDERATION PAYABLE BY EACH OFFEREE IS
AT LEAST AU$500,000 (DISREGARDING MONEYS LENT BY THE OFFEROR OR ITS
ASSOCIATES) OR THE OFFER OR INVITATION OTHERWISE DOES NOT REQUIRE
DISCLOSURE TO INVESTORS IN ACCORDANCE WITH PART 6D.2 OF THE CORPORATIONS
LAW, AND (II) SUCH ACTION COMPLIES WITH ALL APPLICABLE LAWS AND
REGULATIONS.
NOTICE TO RESIDENTS OF AUSTRIA
THE OFFERED SECURITIES MAY ONLY BE OFFERED IN THE REPUBLIC OF AUSTRIA IN
COMPLIANCE WITH THE PROVISIONS OF THE AUSTRIAN CAPITAL MARKET ACT AND
OTHER LAWS APPLICABLE IN THE REPUBLIC OF AUSTRIA GOVERNING THE OFFER AND
SALE OF THE OFFERED SECURITIES IN THE REPUBLIC OF AUSTRIA. THE OFFERED
SECURITIES ARE NOT REGISTERED OR OTHERWISE AUTHORISED FOR PUBLIC OFFER
EITHER UNDER THE CAPITAL MARKET ACT OR THE INVESTMENT FUND ACT. THE
RECIPIENTS OF THIS OFFERING CIRCULAR AND OTHER SELLING MATERIAL IN RESPECT
TO THE OFFERED SECURITIES HAVE BEEN INDIVIDUALLY SELECTED AND IDENTIFIED
BEFORE THE OFFER BEING MADE AND ARE TARGETED EXCLUSIVELY ON THE BASIS OF
A PRIVATE PLACEMENT. ACCORDINGLY, THE OFFERED SECURITIES MAY NOT BE, AND
ARE NOT BEING, OFFERED OR ADVERTISED PUBLICLY OR OFFERED SIMILARLY UNDER
EITHER THE CAPITAL MARKET ACT OR THE INVESTMENT FUND ACT. THIS OFFER MAY
NOT BE MADE TO ANY OTHER PERSONS THAN THE RECIPIENTS TO WHOM THIS
DOCUMENT IS PERSONALLY ADDRESSED.
NOTICE TO RESIDENTS OF BAHRAIN
PURCHASE OF THE OFFERED SECURITIES IS BY INVITATION ONLY AND NO OFFER WILL
BE MADE IN BAHRAIN TO THE PUBLIC TO PURCHASE THE SAME. THIS OFFERING
CIRCULAR IS INTENDED TO BE READ ONLY BY THE ADDRESSEE.
NOTICE TO RESIDENTS OF BELGIUM
THE OFFER HAS NOT BEEN NOTIFIED TO THE BELGIAN BANKING, FINANCE AND
INSURANCE COMMISSION (COMMISSION BANCAIRE, FINANCIÈRE ET DES ASSURANCES)
BY THE OFFEROR PURSUANT TO ARTICLE 18 OF THE BELGIAN LAW OF 22 APRIL 2003 ON
THE PUBLIC OFFERING OF SECURITIES (THE "LAW ON PUBLIC OFFERINGS") NOR BY THE
COMPETENT AUTHORITY OF THE HOME MEMBER STATE OF THE ISSUER PURSUANT TO
ARTICLE 18.1 OF THE PROSPECTUS DIRECTIVE. ACCORDINGLY THE OFFER MAY NOT BE
ADVERTISED, THE OFFERED SECURITIES MAY NOT BE OFFERED OR SOLD, AND THIS
OFFERING CIRCULAR NOR ANY OTHER INFORMATION CIRCULAR, BROCHURE OR
SIMILAR DOCUMENT MAY NOT BE DISTRIBUTED, DIRECTLY OR INDIRECTLY, TO ANY
PERSON IN BELGIUM OTHER THAN (I) ELIGIBLE QUALIFIED INVESTORS REFERRED TO IN
ARTICLE 3.2(A) OF THE PROSPECTUS DIRECTIVE OR (II) INVESTORS WISHING TO
ACQUIRE OFFERED SECURITIES FOR A TOTAL CONSIDERATION OF AT LEAST EUR 50,000
(OR ITS EQUIVALENT IN FOREIGN CURRENCIES) PER TRANSACTION, AS SPECIFIED IN
ARTICLE 3.2(C) OF THE PROSPECTUS DIRECTIVE.
vi

NOTICE TO RESIDENTS IN THE PROVINCES OF QUEBEC, ONTARIO AND
BRITISH COLUMBIA IN CANADA
THIS OFFERING CIRCULAR IS NOT, AND UNDER NO CIRCUMSTANCES IS TO BE
CONSTRUED AS, AN ADVERTISEMENT OR PUBLIC OFFERING OF THE SECURITIES
DESCRIBED HEREIN. NO SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA
HAS IN ANY WAY PASSED JUDGEMENT ON THE MERITS OF THE SECURITIES DESCRIBED
HEREIN AND ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE. NO
INVITATION MAY BE MADE TO THE PUBLIC IN THE PROVINCES OF QUEBEC, ONTARIO
AND BRITISH COLUMBIA IN CANADA TO SUBSCRIBE FOR THE OFFERED SECURITIES. NO
PRELIMINARY OR FINAL OFFERING CIRCULAR IS BEING FILED WITH THE SECURITIES
COMMISSIONS OF THE SAID PROVINCES IN CANADA WITH RESPECT TO THE OFFERING
OF THE OFFERED SECURITIES, WHICH IS BEING MADE SOLELY PURSUANT TO
EXEMPTIONS FROM PROSPECTUS REQUIREMENTS UNDER SECURITIES LEGISLATION OF
SAID PROVINCES IN CANADA. THE ISSUER DOES NOT INTEND TO FILE A PROSPECTUS OR
OTHERWISE BECOME A 'REPORTING ISSUER' PURSUANT TO APPLICABLE CANADIAN
SECURITIES LEGISLATION AND ACCORDINGLY IT IS NOT INTENDED THAT THE OFFERED
SECURITIES WILL EVER BECOME FREELY TRADABLE IN THE PROVINCES OF QUEBEC,
ONTARIO AND BRITISH COLUMBIA. PURCHASERS OF OFFERED SECURITIES WILL BE
PERMITTED TO RESELL SUCH OFFERED SECURITIES ONLY PURSUANT TO AVAILABLE
EXEMPTIONS FROM THE PROSPECTUS REQUIREMENTS OF THE SECURITIES LAW OF THE
SAID PROVINCES IN CANADA.
NOTICE TO RESIDENTS IN THE PROVINCE OF QUEBEC IN CANADA
THE OFFERING AND SALE OF THE OFFERED SECURITIES MUST BE TO EITHER
"SOPHISTICATED PURCHASERS" WITHIN THE MEANING OF SECTIONS 43, 44 AND 45 OF
THE SECURITIES ACT (QUEBEC) OR PURCHASERS PURCHASING AS PRINCIPAL FOR THEIR
OWN ACCOUNT THE OFFERED SECURITIES OF THE ISSUER HAVING A TOTAL COST OF
SUBSCRIPTION OR PURCHASE IN EACH CASE OF AT LEAST CAD 150,000.
NOTICE TO RESIDENTS IN THE PROVINCE OF ONTARIO, CANADA
THIS OFFERING OF OFFERED SECURITIES IS BEING MADE PURSUANT TO EXEMPTIONS
FROM THE PROSPECTUS REQUIREMENTS OF THE SECURITIES LAWS OF THE PROVINCE
OF ONTARIO. PURCHASERS RESIDENT IN THE PROVINCE OF ONTARIO MUST BE PERSONS
WHO ARE EXEMPT PURCHASERS UNDER SECTION 72(1) OF THE SECURITIES ACT
(ONTARIO) OR WHO ACQUIRE THE SECURITIES OFFERED HEREBY AS PRINCIPAL AT AN
AGGREGATE ACQUISITION COST TO THE PURCHASER OF NOT LESS THAN CAD 150,000. IF
THIS OFFERING CIRCULAR, TOGETHER WITH ANY AMENDMENT THERETO, CONTAINS AN
UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS TO STATE A MATERIAL FACT
THAT IS REQUIRED TO BE STATED OR IS NECESSARY IN ORDER TO MAKE ANY
STATEMENT HEREIN NOT FALSE OR MISLEADING IN THE LIGHT OF THE
CIRCUMSTANCES IN WHICH IT WAS MADE (A "MISREPRESENTATION") AND IT WAS A
MISREPRESENTATION, ON THE DATE OF INVESTMENT, AN INVESTOR TO WHOM THIS
OFFERING CIRCULAR WAS DELIVERED AND WHO PURCHASES THE SECURITIES OFFERED
HEREUNDER SHALL HAVE, SUBJECT AS HEREINAFTER IN THIS PARAGRAPH PROVIDED,
WHILE STILL THE OWNER OF ANY OF THE SECURITIES OFFERED HEREUNDER, A RIGHT
OF ACTION, EXERCISABLE ON WRITTEN NOTICE GIVEN NOT MORE THAN 180 DAYS
SUBSEQUENT TO THE DATE OF INITIAL INVESTMENT, EITHER FOR DAMAGES OR
ALTERNATIVELY FOR RESCISSION AGAINST THE ISSUER PROVIDED, THAT:
vii

(A)
(B)
(C)
(D)
THE ISSUER WILL NOT BE HELD LIABLE UNDER THIS PARAGRAPH IF THE
INVESTOR PURCHASED THE OFFERED SECURITIES WITH KNOWLEDGE OF
THE MISREPRESENTATION;
IN AN ACTION FOR DAMAGES, THE ISSUER WILL NOT BE LIABLE FOR ALL
OR ANY PORTION OF SUCH DAMAGES THAT IT PROVES DO NOT
REPRESENT THE DEPRECIATION IN VALUE OF THE SECURITIES OFFERED
HEREBY AS A RESULT OF THE MISREPRESENTATION RELIED UPON;
IN NO CASE WILL THE AMOUNT RECOVERABLE UNDER THIS PARAGRAPH
EXCEED THE PRICE AT WHICH THE OFFERED SECURITIES WERE SOLD TO
AN INVESTOR; AND
THE RIGHTS DESCRIBED ABOVE ARE IN ADDITION TO AND WITHOUT
DEROGATION FROM ANY OTHER RIGHT OR REMEDY AVAILABLE AT LAW
TO THE INVESTOR.
THE FOREGOING SUMMARY IS SUBJECT TO THE EXPRESS PROVISIONS OF THE
SECURITIES ACT (ONTARIO) AND THE REGULATIONS THEREUNDER AND REFERENCE IS
MADE THERETO FOR THE COMPLETE TEXT OF SUCH PROVISIONS. THE ISSUER IS
LOCATED OUTSIDE CANADA AND, ACCORDINGLY, IT MAY NOT BE POSSIBLE FOR
PURCHASERS TO EFFECT SERVICE OF PROCESS WITHIN CANADA UPON THE ISSUER. IN
ADDITION, ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE ISSUER WILL BE
LOCATED OUTSIDE CANADA AND, AS A RESULT, IT MAY NOT BE POSSIBLE TO SATISFY A
JUDGEMENT OBTAINED AGAINST THE ISSUER IN ONTARIO. MOREOVER, IT MAY NOT BE
POSSIBLE FOR PURCHASERS TO ENFORCE A JUDGEMENT OBTAINED IN CANADIAN
COURTS AGAINST THE ISSUER IN THE JURISDICTION OF THE ISSUER.
NOTICE TO RESIDENTS OF CAYMAN ISLANDS
NO INVITATION MAY BE MADE TO THE PUBLIC IN THE CAYMAN ISLANDS TO SUBSCRIBE
FOR THE OFFERED SECURITIES UNLESS AT THE TIME OF INVITATION THE ISSUER IS
LISTED ON THE CAYMAN ISLANDS STOCK EXCHANGE. THE ISSUER DOES NOT INTEND
TO BE SO LISTED.
NOTICE TO RESIDENTS OF FRANCE
EACH OF JPMORGAN AND THE CO-ISSUERS HAS REPRESENTED AND AGREED THAT, IN
CONNECTION WITH THEIR INITIAL DISTRIBUTION, IT HAS NOT OFFERED OR SOLD AND
WILL NOT OFFER OR SELL, DIRECTLY OR INDIRECTLY, ANY OFFERED SECURITIES BY
WAY OF A PUBLIC OFFERING IN FRANCE (AN APPEL PUBLIC À L'ÉPARGNE, AS DEFINED
IN ARTICLES L.411-1 AND L.411-2 OF THE CODE, AND SUBJECT TO AMENDMENTS TO
THESE ARTICLES FOLLOWING THE IMPLEMENTATION IN FRANCE OF THE PROSPECTUS
DIRECTIVE).
THIS DOCUMENT IS FURNISHED TO YOU SOLELY FOR YOUR INFORMATION AND MAY
NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON. IT IS STRICTLY
CONFIDENTIAL AND IS SOLELY DESTINED FOR PERSONS OR INSTITUTIONS TO WHICH IT
WAS INITIALLY SUPPLIED. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR AN
INVITATION TO SUBSCRIBE FOR OR TO PURCHASE ANY SECURITIES AND NEITHER THIS
viii

DOCUMENT NOR ANYTHING CONTAINED HEREIN SHALL FORM THE BASIS OF ANY
CONTRACT OR COMMITMENT WHATSOEVER.
THIS DOCUMENT MAY NOT BE DISTRIBUTED TO THE PUBLIC IN FRANCE OR USED IN
CONNECTION WITH ANY OFFER FOR SUBSCRIPTION OR SALE OF SECURITIES IN FRANCE
OTHER THAN IN ACCORDANCE WITH ARTICLE L-411-2 OF THE CODE MONÉTAIRE ET
FINANCIER AND DÉCRET NO. 98-880 DATED 1ST OCTOBER 1998. THIS DOCUMENT HAS
NOT BEEN SUBMITTED TO THE "AUTORITÉ DES MARCHÉS FINANCIERS" FOR APPROVAL
AND DOES NOT CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF SECURITIES.
NOTICE TO RESIDENTS OF GERMANY
PLEASE NOTE THAT THE OFFERED SECURITIES MAY BE RE-QUALIFIED AS A FUND
INVESTMENT. THE OFFERED SECURITIES WHICH ARE THE OBJECT OF THIS DOCUMENT
ARE NOT REGISTERED FOR PUBLIC DISTRIBUTION WITH THE FEDERAL FINANCIAL
SUPERVISORY AUTHORITY (BUNDESANSTALT FÜR FINANZDIENSTLEISTUNGSAUFSICHT
– "BAFIN") ACCORDING TO THE GERMAN INVESTMENT ACT. CONSEQUENTLY, THE
INTERESTS IN THE OFFERED SECURITIES MUST BE EXCLUSIVELY DISTRIBUTED TO
CLIENTS WITH WHOM AN INVESTMENT RELATIONSHIP PRE-EXISTS. IN PARTICULAR,
THE OFFERED SECURITIES MAY NOT BE DISTRIBUTED WITHIN GERMANY BY WAY OF A
PUBLIC OFFER, PUBLIC ADVERTISEMENT OR IN ANY SIMILAR MANNER AND THIS
OFFERING CIRCULAR AND ANY OTHER DOCUMENT RELATING TO THE INTERESTS IN
THE OFFERED SECURITIES, AS WELL AS INFORMATION OR STATEMENTS CONTAINED
THEREIN, MAY NOT BE SUPPLIED TO THE PUBLIC IN GERMANY OR USED IN
CONNECTION WITH ANY OFFER FOR SUBSCRIPTION OF INTERESTS IN THE OFFERED
SECURITIES TO THE PUBLIC IN GERMANY OR ANY OTHER MEANS OF PUBLIC
MARKETING. NO VIEW ON TAXATION IS EXPRESSED. PROSPECTIVE INVESTORS IN
GERMANY ARE URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE TAX
CONSEQUENCES THAT MAY ARISE FROM AN INVESTMENT IN THE OFFERED SECURITIES.
NOTICE TO RESIDENTS OF GREECE
ALL INFORMATION REGARDING THE OFFERING DESCRIBED HEREIN, INCLUDING THIS
OFFERING CIRCULAR, IS CONFIDENTIAL AND NOT FOR PUBLIC USE, AS IT HAS NOT BEEN
AUTHORISED FOR DISTRIBUTION TO THE PUBLIC. AS REGARDS GREEK PARTICIPANTS,
JPMORGAN HAS AGREED THAT THIS OFFERING CIRCULAR AND ALL RELATED
MATERIAL ARE DIRECTED SOLELY AT PERSONS WHO QUALIFY AS INSTITUTIONAL
INVESTORS, IN THE SENSE OF DECISION 6/306/22.6.2004 OF THE GREEK CAPITAL MARKET
COMMISSION NAMELY, MUTUAL FUNDS, PORTFOLIO INVESTMENT COMPANIES,
COMPANIES FOR THE PROVISION OF INVESTMENT SERVICES, CREDIT INSTITUTIONS,
INSURANCE COMPANIES AND SOCIAL SECURITY FUNDS. OFFSHORE COMPANIES ARE
EXCLUDED IN ANY WAY.
NOTICE TO RESIDENTS OF HONG KONG
THE OFFERED SECURITIES MAY NOT BE OFFERED OR SOLD IN HONG KONG BY MEANS
OF THIS DOCUMENT (IN PROOF OR FINAL FORM) OR ANY OTHER DOCUMENT OTHER
THAN TO PERSONS WHOSE ORDINARY BUSINESS IT IS TO BUY OR SELL SHARES OR
DEBENTURES, WHETHER AS PRINCIPAL OR AGENT, OR IN CIRCUMSTANCES WHICH DO
NOT CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THE COMPANIES
ORDINANCE (CAP. 32 OF THE LAWS OF HONG KONG). EXCEPT AS PERMITTED BY LAW,
ix

THERE MAY NOT IN OR FROM HONG KONG BE DISTRIBUTED OR ISSUED OR CAUSED TO
BE DISTRIBUTED OR ISSUED ANY INVITATION OR DOCUMENT RELATING TO THE
OFFERED SECURITIES, THIS DOCUMENT OR ANY OTHER OFFERING MATERIAL RELATING
TO THE OFFERED SECURITIES IN ANY CASE OTHER THAN TO PERSONS OUTSIDE HONG
KONG OR TO PERSONS IN HONG KONG WHOSE BUSINESS INVOLVES THE ACQUISITION,
DISPOSAL OR HOLDING OF OFFERED SECURITIES, WHETHER AS PRINCIPAL OR AS
AGENT.
NOTICE TO RESIDENTS OF ITALY
JPMORGAN HAS REPRESENTED AND AGREED THAT IT HAS NOT OFFERED ANY OFFERED
SECURITIES NOR DISTRIBUTED, IN THE CONTEXT OF AN OFFER, ANY COPIES OF THE
OFFERING CIRCULAR OR ANY OTHER DOCUMENT RELATING TO THE OFFERED
SECURITIES IN THE REPUBLIC OF ITALY ("ITALY"), AND WILL NOT OFFER ANY OFFERED
SECURITIES NOR DISTRIBUTE, IN THE CONTEXT OF AN OFFER, ANY COPIES OF THE
OFFERING CIRCULAR OR ANY OTHER DOCUMENT RELATING TO THE OFFERED
SECURITIES IN ITALY.
NOTICE TO RESIDENTS OF JAPAN
THE OFFERED SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES AND EXCHANGE LAW OF JAPAN (THE "SECURITIES AND EXCHANGE
LAW"). ANY PERSON RESIDENT IN JAPAN, INCLUDING ANY CORPORATION OR OTHER
ENTITY ORGANIZED UNDER THE LAWS OF JAPAN, AND, WITH RESPECT TO ANY ENTITY
ORGANIZED UNDER THE LAWS OF A JURISDICTION OTHER THAN JAPAN, ITS BRANCHES
OR OFFICES LOCATED IN JAPAN, MAY ONLY PURCHASE OFFERED SECURITIES IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES AND EXCHANGE LAW AVAILABLE THEREUNDER AND IN COMPLIANCE
WITH THE OTHER RELEVANT LAWS AND REGULATIONS OF JAPAN.
NOTICE TO RESIDENTS OF JERSEY
NO PERSON MAY CIRCULATE IN THE ISLAND OF JERSEY THIS OFFERING CIRCULAR OR
ANY OTHER OFFER FOR SALE OF ANY OF THE OFFERED SECURITIES UNLESS SUCH
OFFER DOES NOT, FOR THE PURPOSES OF ARTICLE 6 OF THE CONTROL OF BORROWING
(JERSEY) ORDER 1958, AS AMENDED, CONSTITUTE AN OFFER TO THE PUBLIC.
NOTICE TO RESIDENTS OF LATVIA
THE OFFERED SECURITIES MAY BE OFFERED AND SOLD IN LATVIA IN ACCORDANCE
WITH THE LAW ON SECURITIES OF 23 AUGUST 1995, PROVIDED, THAT THE OFFER OR
SALE OF THE OFFERED SECURITIES CANNOT BE CONSTRUED AS CONDUCTING
INTERMEDIARY ACTIVITIES IN LATVIA, AND PROVIDED, THAT THE OFFERED
SECURITIES ARE NOT PUT IN PUBLIC CIRCULATION.
NOTICE TO RESIDENTS OF LUXEMBOURG
THE OFFERED SECURITIES MAY NOT BE OFFERED TO THE PUBLIC IN LUXEMBOURG,
UNLESS THE APPLICABLE LEGAL AND REGULATORY REQUIREMENTS, IN PARTICULAR
THE RULES SET FORTH IN THE DECEMBER 28, 1990 GRAND DUCAL REGULATION (ON THE
REQUIREMENTS FOR THE DRAWING-UP, SCRUTINY AND DISTRIBUTION OF THE
x

PROSPECTUS TO BE PUBLISHED WHERE TRANSFERABLE SECURITIES ARE OFFERED TO
THE PUBLIC OR OF LISTING PARTICULARS TO BE PUBLISHED FOR THE ADMISSION OF
TRANSFERABLE SECURITIES TO OFFICIAL STOCK EXCHANGE LISTING), AS AMENDED,
HAVE BEEN COMPLIED WITH.
NOTICE TO RESIDENTS OF NORWAY
THE OFFERING OF THE OFFERED SECURITIES WILL NOT BE A PUBLIC OFFER IN NORWAY
AND THIS OFFERING CIRCULAR IS INTENDED TO BE READ BY THE ADDRESSEE ONLY.
NOTICE TO RESIDENTS OF PANAMA
THE OFFERED SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE
NATIONAL SECURITIES COMMISSION OF THE REPUBLIC OF PANAMA UNDER DECREE
LAW N°1 OF JULY 8, 1999 (THE "PANAMANIAN SECURITIES ACT") AND MAY NOT BE
PUBLICLY OFFERED OR SOLD WITHIN PANAMA, EXCEPT IN CERTAIN LIMITED
TRANSACTIONS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
PANAMANIAN SECURITIES ACT. THESE SECURITIES DO NOT BENEFIT FROM THE TAX
INCENTIVES PROVIDED BY THE PANAMANIAN SECURITIES ACT AND ARE NOT SUBJECT
TO REGULATION OR SUPERVISION BY THE NATIONAL SECURITIES COMMISSION OF THE
REPUBLIC OF PANAMA.
NOTICE TO RESIDENTS OF POLAND
NO PERMIT HAS BEEN OBTAINED FROM THE POLISH SECURITIES AND EXCHANGE
COMMISSION IN RELATION TO THE ISSUE OF THE OFFERED SECURITIES. ACCORDINGLY,
THE OFFERED SECURITIES MAY NOT BE OFFERED IN THE REPUBLIC OF POLAND
("POLAND") IN THE COURSE OF PUBLIC TRADING, DEFINED IN THE POLISH ACT ON
PUBLIC TRADING IN SECURITIES DATED 21ST AUGUST 1997(AS AMENDED) AS OFFERING
TO SELL OR PURCHASE OR SALES AND PURCHASES OF SECURITIES ISSUED IN A SERIES
THROUGH USE OF MASS MEDIA OR OTHER MEANS IF THE OFFER IS DIRECTED AT MORE
THAN 300 PEOPLE OR TO AN UNNAMED ADDRESSEE ("PUBLIC TRADING"). NO SUCH
PERMIT HAS BEEN OBTAINED AND OFFERED SECURITIES HAVE NOT BEEN OFFERED,
SOLD OR DELIVERED AND WILL NOT BE OFFERED, SOLD OR DELIVERED IN POLAND IN
THE COURSE OF PUBLIC TRADING AS PART OF THEIR INITIAL DISTRIBUTION OR
OTHERWISE TO RESIDENTS OF POLAND. THE ACQUISITION AND HOLDING OF THE
OFFERED SECURITIES BY RESIDENTS OF POLAND MAY BE SUBJECT TO RESTRICTIONS
IMPOSED BY POLISH LAW (INCLUDING FOREIGN EXCHANGE REGULATIONS) AND THAT
THE OFFER AND SALE OF THE OFFERED SECURITIES TO POLISH RESIDENTS OR WITHIN
POLAND IN SECONDARY TRADING MAY ALSO BE SUBJECT TO RESTRICTIONS.
NOTICE TO RESIDENTS OF PORTUGAL
THE OFFERED SECURITIES HAVE NOT BEEN OFFERED, ADVERTISED, SOLD OR
DELIVERED AND WILL NOT BE DIRECTLY OR INDIRECTLY OFFERED, ADVERTISED, SOLD,
RE-SOLD, RE-OFFERED OR DELIVERED IN CIRCUMSTANCES WHICH COULD QUALIFY AS
A PUBLIC OFFER PURSUANT TO THE CÓDIGO DOS VALORES MOBILIÁRIOS OR IN
CIRCUMSTANCES WHICH COULD QUALIFY THE ISSUE OF THE OFFERED SECURITIES AS
AN ISSUE IN THE PORTUGUESE MARKET. THE OFFERED SECURITIES HAVE NOT BEEN
DIRECTLY OR INDIRECTLY DISTRIBUTED AND THIS OFFERING CIRCULAR, ANY OTHER
DOCUMENT, CIRCULAR, ADVERTISEMENT OR ANY OFFERING MATERIAL WILL NOT BE
xi

DIRECTLY OR INDIRECTLY DISTRIBUTED EXCEPT IN ACCORDANCE WITH ALL
APPLICABLE LAWS AND REGULATIONS.
NOTICE TO RESIDENTS OF SINGAPORE
THIS OFFERING CIRCULAR HAS NOT BEEN REGISTERED AS A PROSPECTUS WITH THE
MONETARY AUTHORITY OF SINGAPORE UNDER THE SECURITIES AND FUTURES ACT
2001 (ACT 42 OF 2001) OF SINGAPORE (THE "SECURITIES AND FUTURES ACT").
ACCORDINGLY, THE OFFERED SECURITIES MAY NOT BE OFFERED OR SOLD OR MADE
THE SUBJECT OF AN INVITATION FOR SUBSCRIPTION OR PURCHASE NOR MAY THIS
OFFERING CIRCULAR OR ANY OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH
THE OFFER OR SALE, OR INVITATION FOR SUBSCRIPTION OR PURCHASE OF SUCH
SECURITIES BE CIRCULATED OR DISTRIBUTED, WHETHER DIRECTLY OR INDIRECTLY, TO
THE PUBLIC OR ANY MEMBER OF THE PUBLIC IN SINGAPORE OTHER THAN (1) TO AN
INSTITUTIONAL INVESTOR OR OTHER PERSON FALLING WITHIN SECTION 274 OF THE
SECURITIES AND FUTURES ACT, (2) TO A SOPHISTICATED INVESTOR (AS DEFINED IN
SECTION 275 OF THE SECURITIES AND FUTURES ACT) AND IN ACCORDANCE WITH THE
CONDITIONS SPECIFIED IN SECTION 275 OF THE SECURITIES AND FUTURES ACT OR (3)
OTHERWISE THAN PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF,
ANY OTHER APPLICABLE PROVISION OF THE SECURITIES AND FUTURES ACT.
NOTICE TO RESIDENTS OF SLOVENIA
THIS OFFERING OF THE OFFERED SECURITIES HAS NOT BEEN REGISTERED WITH OR
NOTIFIED TO THE SECURITIES MARKET AGENCY OF THE REPUBLIC OF SLOVENIA. THE
OFFERED SECURITIES WILL NOT AND MAY NOT BE ISSUED, OFFERED, SOLD OR
ADVERTISED IN THE REPUBLIC OF SLOVENIA EXCEPT IN A MANNER CONSISTENT WITH
ANY REGISTRATION, NOTIFICATION OR APPROVAL UNDER SECURITIES MARKET ACT
(OFFICIAL GAZETTE OF THE REPUBLIC OF SLOVENIA NO. 56/1999, AS AMENDED),
INVESTMENT FUNDS AND MANAGEMENT COMPANIES ACT (OFFICIAL GAZETTE OF THE
REPUBLIC OF SLOVENIA NO. 110/2002, AS AMENDED), AND THE FOREIGN EXCHANGE
TRANSACTIONS ACT (OFFICIAL GAZETTE OF THE REPUBLIC OF SLOVENIA NO. 23/1999, AS
AMENDED). ACCORDINGLY, THE OFFERED SECURITIES MAY NOT BE ISSUED, OFFERED,
SOLD, ADVERTISED, TRANSFERRED OR DELIVERED TO THE PUBLIC NOR OFFERED NON-
PUBLICLY WITHIN THE MEANING OF THE SECURITIES MARKET ACT IN THE REPUBLIC OF
SLOVENIA. SLOVENE RESIDENTS MAY ACQUIRE THE OFFERED SECURITIES ABROAD
ONLY IN ACCORDANCE WITH THE PROVISIONS OF THE APPLICABLE SLOVENIAN
LEGISLATION.
NOTICE TO RESIDENTS OF SOUTH AFRICA
THE OFFERED SECURITIES HAVE NOT AND WILL NOT BE OFFERED FOR SALE OR
SUBSCRIPTION, DIRECTLY OR INDIRECTLY, WITHIN THE REPUBLIC OF SOUTH AFRICA
OR TO ANY PERSON OR CORPORATE OR OTHER ENTITY RESIDENT IN THE REPUBLIC OF
SOUTH AFRICA EXCEPT (I) IN ACCORDANCE WITH THE EXCHANGE CONTROL
REGULATIONS OF THE REPUBLIC OF SOUTH AFRICA AND (II) TO ANY ENTITY RESIDENT
OR WITHIN THE REPUBLIC OF SOUTH AFRICA IN ACCORDANCE WITH THE COMPANIES
ACT, 1973 AND THE REGULATIONS TO THE BANKS ACT, 1990.
xii

NOTICE TO RESIDENTS OF SWEDEN
THIS OFFERING CIRCULAR IS FOR THE RECIPIENT ONLY AND MAY NOT IN ANY WAY BE
FORWARDED TO ANY OTHER PERSON OR TO THE PUBLIC IN SWEDEN. IT HAS NOT AND
WILL NOT BE REGISTERED WITH THE SWEDISH FINANCIAL SUPERVISORY AUTHORITY
PURSUANT TO THE SWEDISH FINANCIAL INSTRUMENTS TRADING ACT (1991:980, AS
AMENDED). ACCORDINGLY, THIS OFFERING CIRCULAR MAY NOT BE MADE AVAILABLE,
NOR MAY THE COLLATERALISED DEBT OBLIGATIONS OTHERWISE BE MARKETED AND
OFFERED IN SWEDEN, OTHER THAN IN CIRCUMSTANCES WHICH ARE DEEMED NOT TO
BE AN OFFER TO THE PUBLIC IN SWEDEN UNDER THE FINANCIAL INSTRUMENTS
TRADING ACT.
NOTICE TO RESIDENTS OF THE UNITED KINGDOM
JPMORGAN HAS REPRESENTED, WARRANTED AND AGREED THAT:
(A) IT HAS ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL
ONLY COMMUNICATE OR CAUSE TO BE COMMUNICATED AN INVITATION OR
INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF
SECTION 21 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (THE "FSMA"))
RECEIVED BY IT IN CONNECTION WITH THE ISSUE OR SALE OF THE OFFERED
SECURITIES IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT
APPLY TO THE ISSUER; AND
(B) IT HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF
THE FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE OFFERED
SECURITIES IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.
AVAILABLE INFORMATION
To permit compliance with Rule 144A in connection with the sale of the Offered Securities, the Issuer
(and, solely in the case of the Secured Notes (other than the Class D Notes), the Co-Issuers) under the
Indenture referred to under "Description of the Offered Securities" will be required to furnish upon
request of a holder of an Offered Security to such holder and a prospective purchaser designated by such
holder the information required to be delivered under Rule 144A(d)(4) under the Securities Act if at the
time of the request the Co-Issuers are not reporting companies under Section 13 or Section 15(d) of the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), or exempt from
reporting pursuant to Rule 12g3-2(b) under the Exchange Act. Such information may be obtained directly
from the Issuer or through the paying agent in Ireland at the address set forth on the final page of this
Offering Circular.
INFORMATION AS TO SALE OR PLACEMENT WITHIN THE UNITED STATES
This Offering Circular is highly confidential and has been prepared by the Co-Issuers solely for use in
connection with this offering. This Offering Circular is personal to each offeree to whom it has been
delivered by the Co-Issuers, JPMorgan or any affiliates thereof and does not constitute an offer to any
other person or to the public generally to subscribe for or otherwise acquire the Offered Securities.
Distribution of this Offering Circular to any persons other than the offeree and those persons, if any,
retained to advise such offeree with respect thereto is unauthorized and any disclosure of any of its
contents, without the prior written consent of the Issuer, is prohibited except as otherwise authorized
under "Income Tax Considerations—Tax Return Disclosure and Investor List Requirements." Each
xiii

prospective purchaser in the United States, by accepting delivery of this Offering Circular, agrees to the
foregoing and to make no copies of this Offering Circular or any documents related hereto and, if the
offeree does not purchase Offered Securities or the offering is terminated, to return this Offering Circular
and all documents attached hereto to: J.P. Morgan Securities Inc., 270 Park Avenue, 8th Floor, New
York, New York 10017, Attention: Structured Credit Products.
NOTWITHSTANDING THE CONFIDENTIAL NATURE OF THIS OFFERING CIRCULAR, EACH
PROSPECTIVE INVESTOR (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT
OF SUCH PROSPECTIVE INVESTOR) MAY DISCLOSE TO ANY AND ALL PERSONS,
WITHOUT LIMITATIONS OF ANY KIND, THE TAX TREATMENT AND TAX STRUCTURE OF
THE TRANSACTION AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR
OTHER TAX ANALYSES) THAT ARE PROVIDED TO THE PROSPECTIVE INVESTOR
RELATING TO SUCH TAX TREATMENT AND TAX STRUCTURE. ANY SUCH DISCLOSURE
OF THE TAX TREATMENT, TAX STRUCTURE AND OTHER TAX-RELATED MATERIALS
SHALL NOT BE MADE FOR THE PURPOSE OF OFFERING TO SELL THE SECURITIES
OFFERED HEREBY OR SOLICITING AN OFFER TO PURCHASE ANY SUCH SECURITIES. FOR
PURPOSES OF THIS PARAGRAPH, THE TERMS "TAX TREATMENT" AND "TAX STRUCTURE"
HAVE THE MEANING GIVEN TO SUCH TERMS UNDER UNITED STATES TREASURY
REGULATION SECTION 1.6011-4(c) AND APPLICABLE U.S. STATE AND LOCAL LAW. IN
GENERAL, THE TAX TREATMENT OF A TRANSACTION IS THE PURPORTED OR CLAIMED
U.S. TAX TREATMENT OF THE TRANSACTION, AND THE TAX STRUCTURE OF A
TRANSACTION IS ANY FACT THAT MAY BE RELEVANT TO UNDERSTANDING THE
PURPORTED OR CLAIMED U.S. TAX TREATMENT OF THE TRANSACTION.
xiv

TABLE OF CONTENTS
Page
SUMMARY OF TERMS ............................................................................................................................. 1
RISK FACTORS ........................................................................................................................................ 30
DESCRIPTION OF THE OFFERED SECURITIES ................................................................................. 51
The Indenture and the Secured Notes.............................................................................................. 51
Status and Security .......................................................................................................................... 51
Interest ............................................................................................................................................. 52
Principal........................................................................................................................................... 54
Optional Redemption....................................................................................................................... 54
Mandatory Redemption ................................................................................................................... 57
Special Redemption......................................................................................................................... 57
Cancellation..................................................................................................................................... 57
Entitlement to Payments.................................................................................................................. 58
Priority of Payments ........................................................................................................................ 58
The Indenture................................................................................................................................... 59
Form, Denomination and Registration of the Offered Securities .................................................... 67
The Subordinated Notes .................................................................................................................. 70
RATINGS OF THE SECURED NOTES ................................................................................................... 71
The Secured Notes........................................................................................................................... 71
SECURITY FOR THE SECURED NOTES .............................................................................................. 72
Collateral Obligations...................................................................................................................... 72
The Concentration Limitations........................................................................................................ 73
The Collateral Quality Test ............................................................................................................. 73
Collateral Assumptions ................................................................................................................... 80
The Coverage Tests and the Reinvestment Overcollateralization Test ........................................... 83
Sales of Collateral Obligations; Additional Collateral Obligations and Investment Criteria.......... 83
The Collection and Payment Accounts ........................................................................................... 86
The Ramp-Up Account.................................................................................................................... 87
The Custodial Account .................................................................................................................... 87
The Revolver Funding Account ...................................................................................................... 88
The Synthetic Security Counterparty Accounts .............................................................................. 88
The Synthetic Security Issuer Accounts..........................................................................................89
The Expense Reserve Account........................................................................................................ 90
The Interest Reserve Account.......................................................................................................... 90
The Securities Lending Account ..................................................................................................... 91
Hedge Agreements .......................................................................................................................... 91
Securities Lending........................................................................................................................... 93
USE OF PROCEEDS ................................................................................................................................. 95
General ............................................................................................................................................ 95
xv

Ramp-Up Period.............................................................................................................................. 96
THE PORTFOLIO MANAGER................................................................................................................. 97
General ............................................................................................................................................ 97
Key Personnel.................................................................................................................................. 97
THE PORTFOLIO MANAGEMENT AGREEMENT .............................................................................. 98
THE CO-ISSUERS................................................................................................................................... 104
General .......................................................................................................................................... 104
Capitalization of the Issuer............................................................................................................ 106
Business of the Co-Issuers............................................................................................................. 106
Directors ........................................................................................................................................ 107
INCOME TAX CONSIDERATIONS ...................................................................................................... 107
Introduction ................................................................................................................................... 107
U.S. Federal Income Tax Consequences to the Issuer................................................................... 108
U.S. Classification and U.S. Tax Treatment of the Senior Notes.................................................. 109
Alternative Characterization of the Senior Notes.......................................................................... 111
Non-U.S. Holders of the Senior Notes .......................................................................................... 111
Treatment of U.S. Holders of the Subordinated Notes.................................................................. 111
Taxation of Non-U.S. Holders of Subordinated Notes.................................................................. 116
Transfer and Other Reporting Requirements................................................................................. 116
Tax-Exempt Investors ................................................................................................................... 116
Circular 230................................................................................................................................... 117
Cayman Islands Taxation .............................................................................................................. 117
ERISA AND LEGAL INVESTMENT CONSIDERATIONS ................................................................. 118
The Secured Notes (other than the Class D Notes) ....................................................................... 120
The Class D Notes and the Subordinated Notes............................................................................ 120
Further Considerations .................................................................................................................. 122
Legal Investment Considerations .................................................................................................. 122
PLAN OF DISTRIBUTION ..................................................................................................................... 123
TRANSFER RESTRICTIONS................................................................................................................. 125
Global Securities and Regulation S Global Subordinated Notes................................................... 125
Certificated Notes.......................................................................................................................... 127
Certificated Subordinated Notes.................................................................................................... 127
Additional Restrictions.................................................................................................................. 127
Legends.......................................................................................................................................... 128
Non-Permitted Holder/Non-Permitted ERISA Holder.................................................................. 136
Cayman Islands Placement Provisions.......................................................................................... 137
LISTING AND GENERAL INFORMATION......................................................................................... 138
LEGAL MATTERS.................................................................................................................................. 140
xvi

GLOSSARY OF DEFINED TERMS....................................................................................................... 141
INDEX OF DEFINED TERMS..................................................................................................................I-1
ANNEX A-1 – Form of Purchaser Representation Letter For Subordinated Notes ..............................A-1-1
ANNEX A-2 – Form of Subordinated Note ERISA and Affected Bank Certificate.............................A-2-1
ANNEX A-3 – Form of Purchaser Representation Letter For Certificated Notes.................................A-3-1
ANNEX A-4 – Form of Class D Note ERISA and Affected Bank Certificate......................................A-4-1
ANNEX B – Moody's Rating Definitions.............................................................................................. B-1
ANNEX C – S&P Rating Definition ..................................................................................................... C-1
xvii

SUMMARY OF TERMS
The following summary does not purport to be complete and is qualified in its entirety by
reference to the detailed information appearing elsewhere in this Offering Circular and related
documents referred to herein. An index of defined terms appears at the back of this Offering Circular.
Principal Terms of the Offered Securities
Class A-1
Designation 1 Notes
Type
Senior
Secured
Floating Rate
Class A-2
Notes Class B Notes Class C Notes Class D Notes
Senior Senior
Senior
Secured
Secured Secured
Secured
Deferrable
Deferrable Deferrable
Floating Rate
Floating Rate
Floating Rate Floating Rate
Subordinated
Notes
Issuer(s) Co-Issuers Co-Issuers Co-Issuers Co-Issuers Issuer Issuer
Initial Principal
Amount / Face
Amount (U.S.$)
Expected
Moody's Initial
Rating
Expected S&P
Initial Rating
Interest Rate
$368,000,000 $24,500,000 $28,000,000 $25,000,000 $15,250,000 $39,250,000
"Aaa" "Aa2" "A2" "Baa3" "Ba2" N/A
"AAA" "AA" "A" "BBB-" "BB" N/A
LIBOR 2 +
0.25%
LIBOR 2 +
0.40%
LIBOR 2 +
0.70%
LIBOR 2 +
1.70%
LIBOR 2
+3.60%
Stated Maturity May, 2021 May, 2021 May, 2021 May, 2021 May, 2021 May, 2021
Minimum
Denominations
(U.S.$) (Integral
Multiples)
Ranking of the
Securities:
Priority
Class(es)
$500,000
($1,000)
$500,000
($1,000)
$500,000
($1,000)
$500,000
($1,000)
$500,000
($1,000)
None 3 A-1, A-1, A-2 A-1, A-2, B A-1, A-2, B, C
N/A
$100,000
($1,000)
A-1, A-2, B,
C, D
Junior Class(es)
A-2, B, C, D,
Subordinated
Notes
B, C, D,
Subordinated
Notes
C, D,
Subordinated
Notes
D,
Subordinated
Notes
Subordinated
Notes 3
None
Deferred
Interest Notes
No No Yes Yes Yes N/A
1 Each Class of Notes is referred to in this Offering Circular using the respective term set forth under
the heading "Designation" in the table above. The Class A-1 Notes and the Class A-2 Notes are
collectively referred to herein as the "Class A Notes." The Subordinated Notes described above are
referred to herein as the "Subordinated Notes." The Class A Notes, the Class B Notes, the Class C
Notes and the Class D Notes are collectively referred to herein as the "Secured Notes" and are
referred to herein collectively with the Subordinated Notes as the "Offered Securities" or the
"Notes."
2 LIBOR is as calculated as set forth under "Description of the Offered Securities—Interest."
3 During the Reinvestment Period, the principal of the Class D Notes may be paid from Interest
Proceeds only in the event of a Class D Coverage Test failure. A Class D Coverage Test failure
triggers payment of principal of the Class D Notes (but not any other Notes) in accordance with the
Priority of Payments. After the Reinvestment Period, a Class D Coverage Test failure triggers
payments in accordance with the Note Payment Sequence.
1

Issuer:
Co-Issuer:
Portfolio Manager:
Trustee:
Initial Purchaser and Placement Agent:
Eligible Purchasers:
Payments on the Notes:
Payment Dates.......................................
Stated Note Interest ...............................
HillMark Funding Ltd., a Cayman Islands exempted
company incorporated with limited liability.
HillMark Funding Corp., a Delaware corporation.
HillMark Capital Management, L.P.
The Bank of New York Trust Company, National
Association.
J.P. Morgan Securities Inc.
The Offered Securities are being offered hereby (i) to non-
U.S. persons in offshore transactions in reliance on
Regulation S ("Regulation S") under the Securities Act of
1933, as amended (the "Securities Act") and (ii) in the
United States to persons that are either (A) Qualified
Purchasers (as defined in Section 2(a)(51) of the Investment
Company Act of 1940, as amended (the "Investment
Company Act")) ("Qualified Purchasers") or (B) (in the
case of the Subordinated Notes only) Knowledgeable
Employees (as defined in Rule 3c-5 under the Investment
Company Act) ("Knowledgeable Employees") with
respect to the Issuer or entities owned exclusively by
Knowledgeable Employees or Qualified Purchasers that in
the case of (A) and (B) are either (1) qualified institutional
buyers ("Qualified Institutional Buyers") within the
meaning of Rule 144A under the Securities Act ("Rule
144A"), (2) Accredited Investors (in the case of the
Subordinated Notes only) meeting the requirements of Rule
501(a) under the Securities Act who are also
Knowledgeable Employees or (3) institutional accredited
investors (each an "IAI") (solely in the case of Offered
Securities that are issued in the form of Certificated Notes
or Certificated Subordinated Notes) meeting the
requirements of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act. See "Description of the Offered
Securities—Form, Denomination and Registration of the
Offered Securities" and "Transfer Restrictions."
The 21 st day of May, August, November and February of
each year (or, if such day is not a Business Day, then the
next succeeding Business Day) commencing in May 2007
(each, a "Payment Date").
Interest on the Secured Notes is payable quarterly in arrears
on each Payment Date in accordance with the priority of
payments described herein.
2

Deferral of Interest................................
Distributions on Subordinated
Notes...................................................
Optional Redemption:
Non-Call Period ....................................
Redemption After Non-Call Period .......
So long as any more senior Class of Secured Notes is
outstanding, to the extent interest is not paid on the Class B
Notes, the Class C Notes or the Class D Notes on any
Payment Date, such amounts will be deferred and added to
the principal balance of the applicable Class of Secured
Notes and will bear interest at the Interest Rate applicable
to such Secured Notes, and the failure to pay such amounts
prior to the maturity of the Notes will not be an Event of
Default under the Indenture. See "Description of the
Offered Securities—Interest."
The Subordinated Notes will not bear a stated rate of
interest but will be entitled to receive distributions on each
Payment Date if and to the extent funds are available for
such purpose. Such payments will be made on the
Subordinated Notes only pursuant to the priority of
payments. See "—Priority of Payments" below and
"Description of the Offered Securities—The Subordinated
Notes—Distributions on the Subordinated Notes."
During the period from the Closing Date to but excluding
the Payment Date in November 2009 (such period, the
"Non-Call Period") the Secured Notes and the
Subordinated Notes are not subject to optional redemption
except upon the occurrence of a Withholding Tax Event.
See "Description of the Offered Securities—Optional
Redemption."
The Secured Notes may be redeemed in whole, but not in
part, upon the occurrence of a Withholding Tax Event or,
following the Non-Call Period, (i) in whole, but not in part,
on any Payment Date, from Sale Proceeds and other funds
in the Payment Account and the Collection Account on
such Payment Date or from Refinancing Proceeds, subject
to the restrictions described herein or (ii) in part on any
Payment Date so long as (a) the Class of Secured Notes to
be redeemed is the entire Class of such Secured Notes and
(b) the Redemption Price thereof shall be paid solely from
Refinancing Proceeds, in either case, at the direction of the
holders of at least a majority of the aggregate outstanding
principal amount of the Subordinated Notes (an "Optional
Redemption"). See "Description of the Offered
Securities—Optional Redemption." In the event of a
redemption of the Secured Notes from Sale Proceeds, the
Portfolio Manager will direct the sale of Assets in order to
make payments as described under "Description of the
Offered Securities—Optional Redemption." "Sale
Proceeds" are all proceeds (excluding accrued interest, if
any) received with respect to Assets as a result of sales of
3

such Assets in accordance with the restrictions described in
"Security for the Secured Notes—Sales of Collateral
Obligations; Additional Collateral Obligations and
Investment Criteria," less any reasonable expenses incurred
by the Portfolio Manager or the Trustee in connection with
the sale (other than Administrative Expenses).
The Subordinated Notes may be redeemed, in whole but not
in part, on any Payment Date on or after the Optional
Redemption or repayment of the Secured Notes, at the
direction of the holders of a majority of the Subordinated
Notes.
There are certain other restrictions on the ability of the Co-
Issuers to effect an Optional Redemption. See "Description
of the Offered Securities—Optional Redemption."
Redemption Prices.................................
The redemption price of each Class of Secured Notes (the
"Redemption Price" for such Secured Notes) will be (a)
100% of the outstanding principal amount of the Secured
Notes to be redeemed plus (b) accrued and unpaid interest
thereon (including interest on any accrued and unpaid
Deferred Interest with respect to such Secured Notes) to the
day of redemption.
The "Redemption Price" for each Subordinated Note will
be its proportional share (based on the outstanding principal
amount of such Notes) of the amount of the proceeds of the
Assets remaining after giving effect to the Optional
Redemption of the Secured Notes and payment in full of
(and/or creation of a reserve for) all expenses of the Co-
Issuers.
Special Redemption:
Redemption during the Reinvestment
Period ....................................................
During the Reinvestment Period, the Secured Notes will be
subject to redemption in part by the Co-Issuers or the
Issuer, as applicable, on any Payment Date occurring
during such period if the Portfolio Manager at its discretion
notifies the Trustee that it has been unable, for a period of
at least 20 consecutive Business Days, to identify additional
Collateral Obligations that are deemed appropriate by the
Portfolio Manager in its sole discretion and which would
meet the criteria for reinvestment described under "Security
for the Secured Notes—Sales of Collateral Obligations;
Additional Collateral Obligations and Investment Criteria"
in sufficient amounts to permit the investment or
reinvestment of all or a portion of the funds then in the
Collection Account that are to be invested in additional
4

Collateral Obligations. See "Description of the Offered
Securities—Special Redemption."
Redemption after the Ramp-Up Period .
After the Ramp-Up Period, the Secured Notes will be
subject to redemption in part by the Co-Issuers or the
Issuer, as applicable, on any Payment Date occurring after
such period if the Portfolio Manager notifies the Trustee
that a redemption is required in order to obtain from each
Rating Agency its written confirmation of its initial ratings
of the Secured Notes. See "Description of the Offered
Securities—Special Redemption."
There are certain other conditions required to be complied
with by the Co-Issuers or the Issuer, as applicable, to effect
a Special Redemption. See "Description of the Offered
Securities—Special Redemption."
Special Redemption Amount..................
The amount payable in connection with a Special
Redemption in respect of each Class of Secured Notes
subject to such Special Redemption (the "Special
Redemption Amount") will be equal to the amount in the
Collection Account representing Principal Proceeds which
(1) the Portfolio Manager has determined cannot be
reinvested in additional Collateral Obligations or (2) must
be applied to redeem the Notes in order to obtain
confirmation from each of the Rating Agencies of the initial
ratings of the Secured Notes, as the case may be. See "—
Priority of Payments" below and "Description of the
Offered Securities—Special Redemption."
Priority of Payments:
Application of Interest Proceeds ...........
On each Payment Date, Interest Proceeds on deposit in the
Collection Account, to the extent received on or before the
related Determination Date (or if such Determination Date
is not a Business Day, the next succeeding Business Day)
and that are transferred into the Payment Account, and, in
the case of any Hedge Agreements, payments received on
or before such Payment Date, will be applied in the
following order of priority:
(A) (1) first, to the payment of the Financed Amount
Periodic Payment Amount to the holder of the Financed
Amount Note and (2) second, at the option of the Portfolio
Manager, to prepay all or a portion of the Financed Amount
Balance; provided that such amounts paid on any Payment
Date pursuant to this clause (A) may not exceed the
Financed Amount Threshold for such Payment Date;
(B) (1) first, to the payment of taxes and governmental
fees owing by the Issuer or the Co-Issuer, if any and
5

(2) second, to the payment of the accrued and unpaid
Administrative Expenses up to the Administrative Expense
Cap;
(C) (1) first, to the payment of the Base Management
Fee to the Portfolio Manager except to the extent the
Portfolio Manager elects to treat such Base Management
Fee as Deferred Base Management Fee and (2) second, to
the payment of any unpaid Base Management Fee (plus
accrued and unpaid interest thereon) that the Portfolio
Manager elected to treat as Deferred Base Management Fee
with respect to prior Payment Dates which the Portfolio
Manager elects to be paid on such Payment Date);
(D) to the payment of any amounts due to any Hedge
Counterparty under any Hedge Agreement other than
amounts due as a result of the termination (or partial
termination) of such Hedge Agreement;
(E) to the payment of accrued and unpaid interest
(including any defaulted interest) on the Class A-1 Notes;
(F) to the payment of accrued and unpaid interest
(including any defaulted interest) on the Class A-2 Notes;
(G) (1) first, to the deposit into the Interest Collection
Subaccount of the Collection Account an amount equal to
the Liquidity Reserve Amount and (2) second, to the
payment of any amounts due to any Hedge Counterparty or
under any Hedge Agreement pursuant to an early
termination (or partial termination) of any Hedge
Agreement as a result of a Priority Hedge Termination
Event;
(H) if either of the Class A Coverage Tests is not
satisfied on the related Determination Date, to make
payments in accordance with the Note Payment Sequence
to the extent necessary to cause both Class A Coverage
Tests to be satisfied;
(I) to the payment of accrued and unpaid interest on
the Class B Notes;
(J) if either of the Class B Coverage Tests is not
satisfied on the related Determination Date, to make
payments in accordance with the Note Payment Sequence
to the extent necessary to cause both Class B Coverage
Tests to be met as of the related Determination Date on a
pro forma basis after giving effect to any payments made
through this clause (J);
6

(K) to the payment of any Deferred Interest on the
Class B Notes;
(L) to the payment of accrued and unpaid interest on
the Class C Notes;
(M) if either of the Class C Coverage Tests is not
satisfied on the related Determination Date, to make
payments in accordance with the Note Payment Sequence
to the extent necessary to cause both Class C Coverage
Tests to be met as of the related Determination Date on a
pro forma basis after giving effect to any payments made
through this clause (M);
(N) to the payment of any Deferred Interest on the
Class C Notes;
(O) to the payment of accrued and unpaid interest on
the Class D Notes;
(P) if the Class D Coverage Test is not satisfied on the
related Determination Date, (i) during the Reinvestment
Period, to the payment of principal on the Class D Notes, or
(ii) after the Reinvestment Period, to make payments in
accordance with the Note Payment Sequence to the extent
necessary to cause the Class D Coverage Test to be met as
of the related Determination Date on a pro forma basis after
giving effect to any payments made through this clause (P);
(Q) to the payment of any Deferred Interest on the
Class D Notes;
(R) to deposit in the Collection Account as Principal
Proceeds amounts representing Principal Proceeds
previously used to pay amounts referred to in clauses (E),
(F), (I), (K), (L), (N), (O) and (Q) above and not previously
restored to the Collection Account;
(S) during the Reinvestment Period, if the
Reinvestment Overcollateralization Test is not satisfied on
the related Determination Date, for deposit to the Collection
Account as Principal Proceeds the lesser of (i) 60% of the
remaining Interest Proceeds after application of Interest
Proceeds pursuant to (A) through (R) above and (ii) the
amount necessary to cause the Reinvestment
Overcollateralization Test to be satisfied as of such
Determination Date, after application of Principal Proceeds
as described under "—Application of Principal Proceeds"
below on the current Payment Date;
7

(T) (1) first, to the payment of the accrued and unpaid
Subordinated Management Fee to the Portfolio Manager,
except to the extent the Portfolio Manager elects to treat
such Subordinated Management Fee as Deferred
Subordinated Management Fee and (2) second, to the
payment of any unpaid Subordinated Management Fee
(plus accrued and unpaid interest thereon) that the Portfolio
Manager elected to treat as Deferred Subordinated
Management Fee with respect to prior Payment Dates
which the Portfolio Manager elects to be paid on such
Payment Date;
(U) to the payment (in the priority stated therein) of
(1) first, any Administrative Expenses not paid pursuant to
clause (B)(2) above due to the limitation contained therein
and (2) second, any amounts due to any Hedge
Counterparty under any Hedge Agreement pursuant to an
early termination (or partial termination) of any Hedge
Agreement not otherwise paid pursuant to clause (G)(2)
above;
(V) to pay the holders of the Subordinated Notes until
the Subordinated Notes have realized a Subordinated Notes
Internal Rate of Return of 12.0%; provided, that if, with
respect to the Payment Date following the end of the Ramp-
Up Period occurring prior to the date on which Moody’s
confirms satisfaction of the Moody’s Rating Condition
under the Indenture as described under "Use of Proceeds—
Ramp-Up Period", the Overcollateralization Ratio Tests,
the Target Initial Par Condition or the Collateral Quality
Tests are not satisfied as of the related Determination Date,
amounts available for distribution pursuant to this clause
(V) shall instead be used for application as Principal
Proceeds pursuant to "—Application of Principal Proceeds"
below on such Payment Date in an amount sufficient to
obtain Moody’s written confirmation of the Moody’s
Rating Condition; and
(W) any remaining Interest Proceeds shall be paid as
follows: (i) 20% of such remaining Interest Proceeds to the
Portfolio Manager as the Incentive Management Fee and
(ii) 80% of such remaining Interest Proceeds to the holders
of the Subordinated Notes.
Application of Principal Proceeds ........
On each Payment Date, Principal Proceeds on deposit in the
Collection Account that are received on or before the
related Determination Date, and that are transferred to the
Payment Account, shall be applied, except for any Principal
Proceeds that will be used to settle binding commitments
(entered into prior to the Determination Date) for the
8

purchase of Collateral Obligations, in the following order of
priority:
(A) to pay the amounts referred to in clauses (A)
through (G) of "—Application of Interest Proceeds" above
(and in the same manner and order of priority stated
therein), but only to the extent not paid in full thereunder;
(B) to pay the amounts referred to in clause (H) of "—
Application of Interest Proceeds" above but only to the
extent not paid in full thereunder and to the extent
necessary to cause the Coverage Tests with respect to the
Class A Notes to be met as of the related Determination
Date on a pro forma basis after giving effect to any
payments made through this clause (B);
(C) to pay the amounts referred to in clause (J) of "—
Application of Interest Proceeds" above but only to the
extent not paid in full thereunder and to the extent
necessary to cause the Coverage Tests with respect to the
Class B Notes to be met as of the related Determination
Date on a pro forma basis after giving effect to any
payments made through this clause (C);
(D) to pay the amounts referred to in clause (M) of "—
Application of Interest Proceeds" above but only to the
extent not paid in full thereunder and to the extent
necessary to cause the Coverage Tests with respect to the
Class C Notes to be met as of the related Determination
Date on a pro forma basis after giving effect to any
payments made through this clause (D);
(E) to pay the amounts referred to in clauses (I) and (K)
of "—Application of Interest Proceeds" above (and in the
same manner and order of priority stated therein) to the
extent not paid in full thereunder, only to the extent that all
of the Coverage Tests (other than the Class D Coverage
Test) would be met on a pro forma basis after giving effect
to any payments made through this clause (E);
(F) to pay the amounts referred to in clauses (L) and
(N) of "—Application of Interest Proceeds" above (and in
the same manner and order of priority stated therein) to the
extent not paid in full thereunder, only to the extent that all
of the Coverage Tests (other than the Class D Coverage
Test) would be met on a pro forma basis after giving effect
to any payments made through this clause (F);
(G) to pay the amounts referred to in clauses (O) and
(Q) of "—Application of Interest Proceeds" above (and in
the same manner and order of priority stated therein) to the
9

extent not paid in full thereunder, only to the extent that all
of the Coverage Tests (other than the Class D Coverage
Test) would be met on a pro forma basis after giving effect
to any payments made through this clause (G);
(H) (1) if such Payment Date is a Redemption Date, to
make payments in accordance with the Note Payment
Sequence, and (2) on any other Payment Date, to make
payments in accordance with the Note Payment Sequence
in the amount of the Special Redemption Amount, if any;
or if, on the related Determination Date, the Pro Rata
Special Redemption Conditions are satisfied, first, to the
payment of the Aggregate Outstanding Amounts of each
Class of the Secured Notes on a pro rata basis according to
the respective Aggregate Outstanding Amounts thereof,
until the Aggregate Outstanding Amount of the Class A-1
Notes is reduced to U.S.$220,800,000, and second, in
accordance with the Note Payment Sequence thereafter;
(I) (1) during the Reinvestment Period, at the
discretion of the Portfolio Manager, to the Collection
Account as Principal Proceeds to invest in Eligible
Investments and/or to the purchase of additional Collateral
Obligations and (2) after the Reinvestment Period, to invest
Principal Proceeds received with respect to a Prepaid
Collateral Obligation, a Credit Improved Obligation or a
Credit Risk Obligation, in accordance with the
requirements described under "Security for the Secured
Notes—Sales of Collateral Obligations; Additional
Collateral Obligations and Investment Criteria";
(J) after the Reinvestment Period, to make payments in
accordance with the Note Payment Sequence;
(K) after the Reinvestment Period, to pay the amounts
referred to in clauses (T), (U) and (V) of "—Application of
Interest Proceeds" above (and in the same manner and order
of priority stated therein), but only to the extent not paid in
full thereunder; and
(L) after the Reinvestment Period, any remaining
Principal Proceeds shall be paid as follows: (i) 20% of such
remaining Principal Proceeds to the Portfolio Manager as
the Incentive Management Fee and (ii) 80% of such
remaining Principal Proceeds to the holders of the
Subordinated Notes.
Note Payment Sequence ........................
The "Note Payment Sequence" shall be the application, in
accordance with the priority of payments described above,
of Interest Proceeds or Principal Proceeds, as applicable, in
the following order:
10

(i) to the payment of principal on the Class A-1 Notes
until such amount has been paid in full;
(ii) to the payment of principal of the Class A-2 Notes
until such amount has been paid in full;
(iii) to the payment of principal of the Class B Notes
until the Class B Notes have been paid in full;
(iv) to the payment of accrued and unpaid interest and
any Deferred Interest on the Class B Notes until such
amount has been paid in full;
(v) to the payment of principal of the Class C Notes
until such amount has been paid in full;
(vi) to the payment of accrued and unpaid interest and
any Deferred Interest on the Class C Notes until such
amounts have been paid in full;
(vii) to the payment of principal of the Class D Notes
until such amount has been paid in full; and
(viii) to the payment of accrued and unpaid interest and
any Deferred Interest on the Class D Notes until such
amounts have been paid in full.
Management Fees:
The Management Fee consists of, on each Payment Date:
(i) a Base Management Fee in the amount of 0.15%
per annum of the Fee Basis Amount;
(ii) a Subordinated Management Fee in the amount of
0.35% per annum of the Fee Basis Amount;
(iii) an Incentive Management Fee in an amount equal
to: (1) 20% of the remaining Interest Proceeds, if any,
available after making the distributions on such Payment
Date pursuant to clause (W) of the Priority of Payments as
described in "—Priority of Payments—Application of
Interest Proceeds" above and (2) 20% of the remaining
Principal Proceeds, if any, available for payment in respect
of the Incentive Management Fee pursuant to clause (L) of
the Priority of Payments as described in "—Priority of
Payments—Application of Interest Proceeds" above;
in each case as calculated and subject to the limitations
described under "The Portfolio Management Agreement"
and is payable as described above under "—Priority of
Payments."
11

Security for the Secured Notes:
General..................................................
The Secured Notes will be secured by the Assets, which
include the various accounts pledged under the Indenture.
In purchasing and selling Collateral Obligations, the Issuer
will generally be required to meet certain requirements
imposed by the Concentration Limitations described under
"—Concentration Limitations" and "Security for the
Secured Notes—The Concentration Limitations," the
Collateral Quality Test described under the "—Collateral
Quality Test" and "Security for the Secured Notes—The
Collateral Quality Test," the Coverage Tests described
under "—The Coverage Tests and the Reinvestment
Overcollateralization Test" and "Security for the Secured
Notes—The Coverage Tests and the Reinvestment
Overcollateralization Test" and various other criteria
described under "Security for the Secured Notes—Sales of
Collateral Obligations; Additional Collateral Obligations
and Investment Criteria." Substantially all of the Collateral
Obligations will be rated below investment grade and
accordingly will have greater credit and liquidity risk than
investment grade corporate obligations. See "Risk
Factors—Relating to Collateral Obligations—Below
Investment-Grade Assets Involve Particular Risks." The
initial portfolio of Collateral Obligations will be purchased
through the application of the net proceeds of the sale of the
Offered Securities. See "Security for the Secured Notes—
Collateral Obligations." During the Ramp-Up Period,
pending investment in such Collateral Obligations, a
portion of such net proceeds will be invested in Eligible
Investments.
The Issuer will be permitted to lend Collateral Obligations
pursuant to one or more Securities Lending Agreements
and in such cases the Secured Notes will be secured by the
Issuer's rights under the related Securities Lending
Agreement and not by the Collateral Obligations loaned
pursuant to such Securities Lending Agreement. See "Risk
Factors—Relating to the Collateral Obligations—The Issuer
Has the Right to Engage in Securities Lending, which
Involves Counterparty Risks and Other Risks."
Collateral Obligations...........................
An obligation meeting the standards set forth below,
whether pledged to the Trustee on the Closing Date, during
the Ramp-Up Period or thereafter, will constitute a
"Collateral Obligation."
An obligation will be eligible for purchase by the Issuer and
will be eligible to be pledged by the Issuer to the Trustee as
a Collateral Obligation if it is a debt obligation (including,
but not limited to, high-yield debt securities and interests in
12

ank loans acquired by way of a purchase or assignment),
Participation Interest, Synthetic Security or Structured
Finance Obligation that as of the date of acquisition by the
Issuer (or the date the Issuer commits to acquire):
(i) is U.S. Dollar denominated and is not
convertible by the issuer thereof into any other
currency;
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
is not a Defaulted Obligation or a Credit Risk
Obligation;
is not a lease or a financed lease;
if a Deferrable Security, is not currently
deferring payment of any accrued and unpaid
interest which would have otherwise been due
and continues to remain unpaid; provided if such
Deferrable Security is a Partial Deferrable
Security, a default has not occurred and is
continuing with respect to the portion of the
interest due thereon to be paid in cash on each
payment date with respect thereto;
provides for a fixed amount of principal payable
on scheduled payment dates and/or at maturity
(or a fixed notional amount in the case of a
Synthetic Security) and does not by its terms
provide for earlier amortization or prepayment at
a price of less than par;
does not constitute Margin Stock;
has payments that do not subject the Issuer to
withholding tax unless the related obligor is
required to make "gross-up" payments that cover
the full amount of any such withholding tax on
an after tax basis (for the avoidance of doubt,
this clause shall not apply to commitment fees,
letter of credit fees which the Issuer is permitted
to receive or fees that by their nature are
commitment fees);
has a Moody's Rating and an S&P Rating;
is not a debt obligation whose repayment is
subject to substantial non-credit related risk as
determined by the Portfolio Manager;
(x) is not acquired for the purpose of
accommodating a request from a Securities
Lending Counterparty to borrow such Collateral
Obligation;
13

(xi) except for Delayed Drawdown Collateral
Obligations and Revolving Collateral
Obligations, is not an obligation pursuant to
which any future advances or payments, other
than Excepted Advances, to the borrower or the
obligor thereof may be required to be made by
the Issuer;
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
does not have an "r", "p", "pi", "q" or "t"
subscript assigned by S&P;
is not a Related Obligation;
will not require the Issuer, the Co-Issuer or the
pool of Assets to be registered as an investment
company under the Investment Company Act;
is not a debt obligation (other than a Zero-
Coupon Security) that pays scheduled interest
less frequently than semi-annually;
matures before the Stated Maturity of the Notes;
is pledgible to the Trustee; and
(xviii) is not subject to a tender offer, voluntary
redemption, exchange offer, conversion or other
similar action.
Hedge Agreements.................................
Portfolio Management:
Use of Proceeds:
The Issuer does not expect to enter into any Hedge
Agreements on the Closing Date. However, subject to
certain restrictions, the Issuer is permitted to enter into one
or more interest rate Hedge Agreements after the Closing
Date, with any one or more institutions entering into or
guaranteeing a Hedge Agreement with the Issuer that
satisfies the Required Hedge Counterparty Rating (each, a
"Hedge Counterparty"). See "Security for the Secured
Notes—Hedge Agreements."
Management of the Assets will be conducted by the
Portfolio Manager pursuant to a portfolio management
agreement to be entered into between the Issuer and the
Portfolio Manager (the "Portfolio Management
Agreement"). Under the Portfolio Management
Agreement, and subject to the limitations of the Indenture,
the Portfolio Manager will manage the selection,
acquisition, reinvestment and disposition of the Assets,
including exercising rights and remedies associated with the
Assets, disposing of the Assets and certain related
functions.
The net cash proceeds of the offering of the Offered
Securities will be applied by the Issuer to repay warehouse
14

financing provided by affiliate(s) of the Initial Purchaser
and to purchase additional Collateral Obligations on and
after the Closing Date, all of which will be pledged under
the Indenture by the Issuer to the Trustee. The warehouse
financing enabled the Issuer to purchase the Collateral
Obligations prior to the Closing Date. See "Use of
Proceeds."
Purchase of Collateral Obligations;
Ramp-Up Period:
The Issuer will use commercially reasonable efforts to have
purchased or to have entered into binding agreements to
purchase, by the earlier of (a) 140 days after the Closing
Date and (b) the date selected by the Portfolio Manager and
upon which the Target Initial Par Condition has been
satisfied (the period from the Closing Date to such date
being the "Ramp-Up Period").
The Issuer will be subject to an Interim Target during the
Ramp-Up Period, as described under "Use of Proceeds—
Ramp-Up Period."
If, following the end of the Ramp-Up Period, (x) the
additional Collateral Obligations, together with the
Collateral Obligations purchased on or before the Closing
Date and still held as Collateral Obligations and amounts on
deposit in the Principal Collection Subaccount and the
Ramp-Up Account, fail to satisfy the Collateral Quality
Test, the Coverage Tests or the Target Initial Par Condition
as of the end of the Ramp-Up Period (a "Ramp-Up
Failure"), then (A) the Portfolio Manager shall request
Moody's to confirm, within 30 days following the end of
the Ramp-Up Period, that Moody's will not reduce or
withdraw its ratings assigned to the Secured Notes on the
Closing Date and (B) if, by the 30th day following the end
of the Ramp-Up Period, Moody's has not provided the
confirmation described in the preceding clause (x)(A), the
Portfolio Manager will, if the Ramp-Up Failure is still
continuing, instruct the Trustee to transfer amounts from
the Interest Collection Subaccount to the Principal
Collection Subaccount (and with such funds the Issuer will
purchase additional Collateral Obligations) in an amount
sufficient to obtain from Moody's written confirmation of
its ratings assigned to the Secured Notes on the Closing
Date or to cause the Collateral Obligations to satisfy the
Collateral Quality Test, the Coverage Tests and the Target
Initial Par Condition (provided that the amount of such
transfer would not result in deferral of interest with respect
to any Class of Secured Notes) or (y) S&P provides the
Issuer written notice, within 30 days following the end of
the Ramp-Up Period, that it has or will imminently reduce
or withdraw its ratings assigned to the Secured Notes on the
Closing Date, then the Portfolio Manager will instruct the
15

Trustee to transfer amounts from the Interest Collection
Subaccount to the Principal Collection Subaccount (and
with such funds the Issuer will purchase additional
Collateral Obligations) in an amount sufficient to obtain
from S&P written confirmation of its ratings assigned to the
Secured Notes on the Closing Date (provided that the
amount of such transfer would not result in deferral of
interest with respect to any Class of Secured Notes) (it
being understood that, if the events specified in both of
clauses (x) and (y) occur, the Issuer will be required to
satisfy the requirements of both clause (x) and clause (y));
provided that, in lieu of clause (x) or (y), the Issuer may
take such other action, including but not limited to, a
Special Redemption and/or transferring amounts from the
Interest Collection Subaccount to the Principal Collection
Subaccount as Principal Proceeds (for use in a Special
Redemption), sufficient to obtain from each Rating Agency
written confirmation of its ratings assigned to the Secured
Notes on the Closing Date. It is expected, but there can be
no assurance, that the Overcollateralization Ratio Test
applicable to each Class of Notes and the Reinvestment
Overcollateralization Test described herein will be satisfied
on the Closing Date. Additionally, it is expected, but there
can be no assurance, that the Concentration Limitations and
the Collateral Quality Test described herein will be satisfied
not later than the end of the Ramp-Up Period and the
Interest Coverage Test applicable to each Class of Notes
described herein will be satisfied not later than the
Determination Date immediately preceding the second
Payment Date.
Reinvestment Period..............................
The "Reinvestment Period" will be the period from and
including the Closing Date to and including the earliest of
(i) the Payment Date in November 2013, (ii) the date on
which the maturity of any Class of Secured Notes is
accelerated due to an Event of Default as described under
"Description of the Offered Securities—The Indenture" or
(iii) the date on which the Portfolio Manager reasonably
determines and notifies the Issuer, the Rating Agencies and
the Trustee that it can no longer reinvest in additional
Collateral Obligations in accordance with the Indenture or
the Portfolio Management Agreement; provided, that in the
case of the foregoing clause (iii), the Portfolio Manager
may, upon ten (10) Business Days prior written notice to
the Issuers, the Rating Agencies and the Trustee, restart the
Reinvestment Period which in no event shall extend beyond
the date specified in clause (i) hereof. See "Security for the
Secured Notes—Sales of Collateral Obligations; Additional
Collateral Obligations and Investment Criteria."
16

Collateral Quality Test:
The "Collateral Quality Test" will be satisfied if, as of any
date of determination at, or subsequent to, the end of the
Ramp-Up Period, in the aggregate, the Collateral
Obligations owned (or in relation to a proposed purchase of
a Collateral Obligation, proposed to be owned) by the
Issuer satisfy each of the tests set forth below (see "Security
for the Secured Notes—The Collateral Quality Test"):
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
the Minimum Fixed Coupon Test;
the Minimum Floating Spread Test;
the Maximum Moody's Rating Factor Test;
the Moody's Diversity Test;
the S&P CDO Monitor Test;
the Minimum Weighted Average Moody's Recovery
Rate Test;
the Minimum Weighted Average S&P Recovery
Rate Test; and
(viii) the Weighted Average Life Test.
The "Minimum Fixed Coupon Test" will be satisfied on
any date of determination if the Weighted Average Fixed
Coupon equals or exceeds the Minimum Fixed Coupon.
The "Minimum Floating Spread Test" will be satisfied on
any date of determination if the Weighted Average Floating
Spread equals or exceeds the Minimum Floating Spread.
"Minimum Fixed Coupon" as of any date of determination
means 8.0%.
"Minimum Floating Spread" means the number set forth
in the column entitled "Minimum Weighted Average
Spread" in the Minimum Diversity/Maximum
Rating/Minimum Spread Matrix set forth below based upon
the applicable "row/column combination" chosen by the
Portfolio Manager (or the interpolating between two
adjacent rows and/or two adjacent columns, as applicable)
in accordance with the Indenture.
The "Maximum Moody's Rating Factor Test" will be
satisfied on any date of determination if the Weighted
Average Moody's Rating Factor (determined as described
herein) of the Collateral Obligations is less than or equal to
17

the sum of (i) the number set forth in the column entitled
"Maximum Weighted Average Moody's Rating Factor" in
the Minimum Diversity/Maximum Rating/Minimum
Spread Matrix set forth below based upon the applicable
"row/column combination" chosen by the Portfolio
Manager (or the interpolating between two adjacent rows
and/or two adjacent columns, as applicable) in accordance
with the Indenture plus (ii) the Rating Factor Adjustment.
The Maximum Weighted Average Moody's Rating Factor
(including any Rating Factor Adjustment) shall not exceed
2850.
"Rating Factor Adjustment" means, as of any date of
determination, the greater of:
(a) zero; and
(b) the product of (i) the product of the Weighted Average
Moody's Recovery Rate as of such date of determination
and 100 minus 44.5 and (ii) 55.
The "Moody's Diversity Test" will be satisfied on any date
of determination if the Diversity Score (rounded to the
nearest whole number) equals or exceeds the number set
forth in the column entitled "Minimum Diversity Score" in
the Minimum Diversity/Maximum Rating/Minimum
Spread Matrix set forth below based upon the applicable
"row/column combination" chosen by the Portfolio
Manager (or the interpolating between two adjacent rows
and/or two adjacent columns, as applicable) in accordance
with the Indenture.
The "Minimum Diversity/Maximum Rating/Minimum
Spread Matrix" means the following chart used to
determine which of the "row/column combinations" are
applicable for purposes of determining compliance with the
Moody's Diversity Test, the Maximum Moody's Rating
Factor Test and the Minimum Floating Spread Test:
Minimum Diversity Score
Minimum Weighted Average Spread 50 55 60 65 70
2.000% 2100 2130 2145 2160 2180
2.125% 2210 2245 2270 2285 2310
2.250% 2295 2350 2375 2395 2415
2.375% 2340 2395 2445 2485 2520
2.500% 2385 2445 2495 2545 2580
2.625% 2435 2495 2545 2595 2635
2.750% 2485 2545 2595 2645 2675
Maximum Weighted Average Moody's Rating Factor
18

The "S&P CDO Monitor Test" will be satisfied on any
date of determination following receipt by the Issuer of the
applicable S&P CDO Monitor if, after giving effect to the
sale of a Collateral Obligation or the purchase of an
additional Collateral Obligation, each Class Default
Differential of the Proposed Portfolio is positive. The S&P
CDO Monitor Test will be considered to be improved if
each Class Default Differential of the Proposed Portfolio is
greater than the corresponding Class Default Differential of
the Current Portfolio.
The "Minimum Weighted Average Moody's Recovery
Rate Test" will be satisfied on any date of determination if
the Weighted Average Moody's Recovery Rate equals or
exceeds 44.5%.
The "Minimum Weighted Average S&P Recovery Rate
Test" will be satisfied on any date of determination if the
Weighted Average S&P Recovery Rate equals or exceeds
53.1%.
The "Weighted Average Life Test" will be satisfied on
any date of determination if the Weighted Average Life of
all Collateral Obligations as of such date is less than or
equal to the number of years set forth in the table below:
As of any Determination Date
occurring during the period below
On the Closing Date to and including
the Payment Date in May 2007:
Thereafter to and including the
Payment Date in August 2007:
Thereafter to and including the
Payment Date in November 2007:
Thereafter to and including the
Payment Date in February 2008:
Thereafter to and including the
Payment Date in May 2008:
Thereafter to and including the
Payment Date in August 2008:
Weighted
Average Life
10.00
9.50
9.25
9.0
8.75
8.50
19

Thereafter to and including the
Payment Date in November 2008:
Thereafter to and including the
Payment Date in February 2009:
Thereafter to and including the
Payment Date in May 2009:
Thereafter to and including the
Payment Date in August 2009:
Thereafter to and including the
Payment Date in November 2009:
Thereafter to and including the
Payment Date in February 2010:
Thereafter to and including the
Payment Date in May 2010:
Thereafter to and including the
Payment Date in August 2010:
Thereafter to and including the
Payment Date in November 2010:
Thereafter to and including the
Payment Date in February 2011:
Thereafter to and including the
Payment Date in May 2011:
Thereafter to and including the
Payment Date in August 2011:
Thereafter to and including the
Payment Date in November 2011:
Thereafter to and including the
Payment Date in February 2012:
Thereafter to and including the
Payment Date in May 2012:
Thereafter to and including the
Payment Date in August 2012:
Thereafter to and including the
Payment Date in November 2012:
8.25
8.00
7.75
7.5
7.25
7.00
6.75
6.50
6.25
6.00
5.75
5.50
5.25
5.00
4.75
4.50
4.25
20

Thereafter to and including the
Payment Date in February 2013:
Thereafter to and including the
Payment Date in May 2013:
Thereafter to and including the
Payment Date in August 2013:
Thereafter to and including the
Payment Date in November 2013:
4.00
3.75
3.50
3.25
Thereafter: 3.00
Concentration Limitations:
The "Concentration Limitations" will be satisfied if, as of
any date of determination at or subsequent to the end of the
Ramp-Up Period, in the aggregate, the Collateral
Obligations owned (or in relation to a proposed purchase of
a Collateral Obligation, proposed to be owned) by the
Issuer comply with all of the requirements set forth below
(or, if not in compliance, the relevant requirements must be
maintained or improved):
Non-Emerging Market Obligors (i) all of the Collateral Obligations must be issued by
Non-Emerging Market Obligors;
Domicile of obligor (ii) no more than the percentage listed below of the
Collateral Principal Amount may be issued by obligors
Domiciled in the country or countries set forth opposite
such percentage:
% Limit Country or Countries
20.0% All countries (in the aggregate) other
than the United States;
10.0% Any individual Group I Country;
7.5% All Group II Countries in the
aggregate;
5.0% Any individual Group II Country;
5.0% All Group III Countries in the
aggregate;
5.0% Greece, Italy and Portugal in the
aggregate; and
3.0% Any individual country other than the
United States, the United Kingdom,
Canada, the Netherlands, any Group II
Country or any Group III Country;
21

Delayed Drawdown/
Revolving Collateral Obligations
(iii) unfunded commitments under Delayed Drawdown
Collateral Obligations and unfunded and funded
commitments under Revolving Collateral Obligations may
not be more than 10% of the Collateral Principal Amount;
Moody's Counterparty Criteria (iv) the Moody's Counterparty Criteria are met;
Senior Secured First Lien Loans (v) not less than 90.0% of the Collateral Principal
Amount may consist of Senior Secured Loans that, in each
case, are secured by a first priority perfected security
interest in collateral;
Second Lien Loans (vi) not more than 10.0% of the Collateral Principal
Amount may consist of Second Lien Loans;
Senior Unsecured
Loans
(vii) not more than 10.0% of the Collateral Principal
Amount may consist of Senior Unsecured Loans;
Senior Secured Notes (viii) not more than 10.0% of the Collateral Principal
Amount may consist of Senior Secured Notes;
Floating rate Collateral
Obligations
Synthetic Securities and
Participation Interests
(ix) not more than 10.0% of the Collateral Principal
Amount may consist of fixed rate Collateral Obligations;
(x) not more than 20.0% of the Collateral Principal
Amount may consist of Synthetic Securities and
Participation Interests; provided, that not more than 10.0%
of the Collateral Principal Amount may consist of Synthetic
Securities.
Debt Securities (xi) not more than 10.0% of the Collateral Principal
Amount may consist of Collateral Obligations that are Debt
Securities in a form other than bank loans or Participation
Interests or Synthetic Securities the Reference Obligation of
which is a bank loan or Participation Interest;
Deferrable Securities (xii) not more than 3.0% of the Collateral Principal
Amount may consist of Deferrable Securities;
Discount Obligations
(xiii) not more than 5.0% of the Collateral Principal
Amount may consist of Discount Obligations;
DIP Collateral Obligations (xiv) not more than 7.5% of the Collateral Principal
Amount may consist of DIP Collateral Obligations and not
more than 2.0% of the Collateral Principal Amount may
consist of DIP Collateral Obligations issued by a single
obligor;
S&P Industry Classifications (xv) not more than 8% of the Collateral Principal
Amount may consist of Collateral Obligations issued by
22

obligors in the same S&P industry classification; provided
that the aggregate Principal Balance of Collateral
Obligations that fall within the largest three such S&P
industry classifications may exceed 8%, but not more than
10%; provided, further that the aggregate Principal Balance
of Collateral Obligations that fall within the largest such
S&P industry classification may exceed 10%, but not more
than 12%;
Single obligor (xvi) not more than 1.5% of the Collateral Principal
Amount may consist of obligations issued by a single
obligor, except that (x) obligations issued by up to seven
obligors may each constitute up to 2.5% of the Collateral
Principal Amount and (y) obligations issued by a single
obligor in respect of a Structured Finance Obligation may
constitute no more than 1.0% of the Collateral Principal
Amount;
Rating of "Caa1"/"CCC+" and
below
Third Party Credit Exposure
S&P Rating derived from a
Moody's Rating
Moody's Rating derived from an
S&P Rating
Interest less frequently than
quarterly
Zero-Coupon Securities
Loan facility
(xvii) not more than 7.5% of the Collateral Principal
Amount may consist of, without duplication, Collateral
Obligations with a Moody's Rating of "Caa1" or below or
an S&P Rating of "CCC+" or below;
(xviii) the Third Party Credit Exposure may not exceed
20.0% of the Collateral Principal Amount and the Third
Party Credit Exposure Limits may not be exceeded;
(xix) not more than 10.0% of the Collateral Principal
Amount may have an S&P Rating derived from a Moody's
Rating as set forth in clause (iii)(a) of the definition of the
term "S&P Rating";
(xx) not more than 10.0% of the Collateral Principal
Amount may consist of Collateral Obligations with a
Moody's Rating derived from an S&P Rating as provided in
clauses (iv)(A)(1) or (2) of the definition of the term
"Moody's Derived Rating";
(xxi) not more than 10.0% of the Collateral Principal
Amount may consist of Collateral Obligations that pay
interest less frequently than quarterly (but at least semiannually),
Zero-Coupon Securities, PIK Securities and
Step-Up Coupon Securities;
(xxii) not more than 5.0% of the Collateral Principal
Amount may consist of Zero-Coupon Securities;
(xxiii) not more than 10.0% of the Collateral Principal
Amount may consist of loans issued under a loan facility
with an aggregate maximum initial principal amount of less
than U.S.$100 million; provided, that no Collateral
23

Obligations may consist of loans issued under a loan
facility with an aggregate maximum initial principal
amount (including all tranches thereof, whether or not
drawn in full) of less than U.S.$25 million;
Structured Finance Obligations
Step-Up Coupon Securities
Structured Finance Obligations,
Debts Securities, Second Lien
Loans, Senior Secured Notes and
Senior Unsecured Loans
Loans Purchased with Attached
Warrants
(xxiv) not more than 3.0% of the Collateral Principal
Amount may consist of Structured Finance Obligations;
(xxv) not more than 5.0% of the Collateral Principal
Amount may consist of Step-Up Coupon Securities;
(xxvi) not more than 10.0% of the Collateral Principal
Amount may consist of Structured Finance Obligations,
Debts Securities, Second Lien Loans, Senior Secured Notes
and Senior Unsecured Loans; and
(xxvii) not more than 5.0% of the Collateral Principal
Amount may consist of loans purchased with attached
warrants where more than 2.0% of the purchase price of
such loan and warrant together is attributable to the
warrant.
"Group I Country" means The Netherlands and the United
Kingdom (or such other countries as may be notified by
Moody's to the Portfolio Manager from time to time).
"Group II Country" means Germany, Ireland, Sweden and
Switzerland (or such other countries as may be notified by
Moody's to the Portfolio Manager from time to time).
"Group III Country" means Austria, Belgium, Denmark,
Finland, France, Iceland, Liechtenstein, Luxembourg,
Norway and Spain (or such other countries as may be
notified by Moody's to the Portfolio Manager from time to
time).
"Collateral Principal Amount" means, as of any date of
determination, the sum of (a) the aggregate principal
balance of the Collateral Obligations (other than Defaulted
Obligations), and (b) without duplication, the amounts on
deposit in the Collection Account and the Ramp-Up
Account (including Eligible Investments therein)
representing Principal Proceeds and, from and after a
default under a Securities Lending Agreement, the amounts
on deposit in the related Securities Lending Account
(including Eligible Investments therein).
Coverage Tests and the Reinvestment
Overcollateralization Test:
The Coverage Tests will be used primarily to determine
whether principal and interest may be paid on the Secured
Notes and distributions may be made on the Subordinated
Notes or whether funds which would otherwise be used to
24

pay interest on the Secured Notes other than the Class A
Notes and to make distributions on the Subordinated Notes
must instead be used to pay principal on one or more
Classes of Secured Notes according to the priorities
referred to in "Summary of Terms—Priority of Payments."
The "Coverage Tests" will consist of the
Overcollateralization Ratio Test and the Interest Coverage
Test applied respectively to the Class A Notes (together, the
"Class A Coverage Tests"), the Class B Notes (together,
the "Class B Coverage Tests"), the Class C Notes
(together, the "Class C Coverage Tests") and with respect
to the Class D Notes, only the Overcollateralization Ratio
Test (the "Class D Coverage Test"). Measurement of the
degree of compliance with the Overcollateralization Ratio
Tests will be required as of the Closing Date and each
Measurement Date thereafter. Measurement of the degree
of compliance with the Interest Coverage Tests will be
required as of each Measurement Date beginning on the
Determination Date immediately preceding the second
Payment Date. In addition, the Reinvestment
Overcollateralization Test, which is not a Coverage Test,
will apply as described herein.
The "Overcollateralization Ratio Test" and "Interest
Coverage Test" applicable to the indicated Class or Classes
of Secured Notes will be satisfied as of any date of
determination at or subsequent to the Determination Date
occurring immediately prior to the second Payment Date
(or, in the case of the Overcollateralization Ratio Tests, at
or subsequent to the Closing Date) if the applicable
Overcollateralization Ratio or Interest Coverage Ratio, as
the case may be, is at least equal to the applicable ratio
indicated below or such Class or Classes of Secured Notes
is no longer outstanding. If the Coverage Tests are not
satisfied on any Determination Date occurring subsequent
to the Ramp-Up Period (or, in the case of the
Overcollateralization Ratio Tests, subsequent to the Closing
Date), the Issuer will be required to apply available
amounts in the Payment Account on the related Payment
Date to make payments in accordance with the Note
Payment Sequence to the extent necessary to achieve
compliance with such Coverage Tests.
25

Required Overcollateralization
Class
Ratio
A 111.2%
B 106.4%
C 103.2%
D 101.3%
Required Interest Coverage
Class
Ratio
A 120.0%
B 115.0%
C 110.0%
The "Overcollateralization Ratio" is, with respect to any
specified Class or Classes of Secured Notes as of the
Closing Date or any Measurement Date thereafter, the
percentage derived from:
(a)
by
(b)
the Adjusted Collateral Principal Amount; divided
the aggregate outstanding principal amounts of the
Secured Notes of such Class or Classes, each
priority class of Secured Notes and each pari passu
Class of Secured Notes.
The "Interest Coverage Ratio" for any designated Class or
Classes of Secured Notes, as of any date of determination
at, or subsequent to, the Determination Date occurring
immediately prior to the second Payment Date is the
percentage derived from:
26

The Collateral
Interest Amount as
of such date of
determination
Amounts payable
(or expected as of
the date of
determination to be
payable) on the
following Payment
Date as set forth in
clause (D) under
"Summary of
Terms—Priority of
Payments—
Application of
Interest Proceeds"
minus
divided by
plus
Amounts payable
(or expected as of
the date of
determination to be
payable) on the
following Payment
Date as set forth in
clauses (B) and (C)
and, with respect to
the Interest
Coverage Ratio for
the Class B Notes
and the Class C
Notes, as set forth in
clause (G)(1) under
"Summary of
Terms—Priority of
Payments—
Application of
Interest Proceeds"
Interest due and
payable on the
Secured Notes of
such Class or
Classes and each
Class of Secured
Notes that rank
senior to or pari
passu with such
Class or Classes
(excluding Deferred
Interest but
including any
interest on Deferred
Interest with respect
to any such Class or
Classes) on such
Payment Date
The "Reinvestment Overcollateralization Test" is a test
that will be satisfied as of any Measurement Date during
the Reinvestment Period on which Class D Notes remain
outstanding, if the Overcollateralization Ratio with respect
to the Class D Notes as of such Measurement Date is at
least equal to 102.3% (provided that, for purposes of this
definition, the Aggregate Principal Balance of Discount
Obligations shall equal the principal balance thereof, and
the Excess CCC/Caa Adjustment Amount shall be deemed
to be zero for, the Adjusted Collateral Principal Amount
when calculating the Overcollateralization Ratio):
27

Other Information:
Minimum Denominations ......................
Listing, Trading and Form of Notes......
The Notes will be issued in minimum denominations
("Minimum Denominations") of $500,000 and integral
multiples of $1,000 in excess thereof (except that
Subordinated Notes will be issued in Minimum
Denominations of $100,000 and integral multiples of
$1,000 in excess thereof).
Application has been made to the Irish Financial Services
Regulatory Authority, as competent authority under
Directive 2003/71/EC, for this Offering Circular to be
approved. Such approval relates only to the Offered
Securities which are to be admitted to trading on the
regulated market of the Irish Stock Exchange or other
regulated markets for the purposes of Directive 93/22/EEC
or which are to be offered to the public in any Member
State of the European Economic Area. Application has
been made to the Irish Stock Exchange for the Offered
Securities to be admitted to the Daily Official List, and
traded on its regulated market but there can be no assurance
that such listing will be granted or, if granted, that it will be
maintained. See "Listing and General Information." There
is currently no market for any Class of Offered Securities
and there can be no assurance that such a market will
develop. See "Risk Factors—Relating to the Offered
Securities—The Offered Securities Will Have Limited
Liquidity; The Offered Securities Are Subject to
Substantial Transfer Restrictions." The Secured Notes sold
to persons who are Qualified Purchasers in reliance on Rule
144A under the Securities Act will be represented by global
notes in fully registered form without interest coupons to be
deposited with a custodian for and registered in the name of
a nominee of The Depository Trust Company ("DTC").
The Secured Notes sold to persons who are Qualified
Purchasers and IAIs in reliance on an exemption from the
Securities Act will be issued in definitive, fully registered
form without interest coupons. The Secured Notes and at
the option of the Issuer, certain Subordinated Notes, sold to
non-U.S. persons in offshore transactions in reliance on
Regulation S under the Securities Act will be represented
by global notes or certificates, as applicable, in fully
registered form without interest coupons to be deposited
with a custodian for and registered in the name of a
nominee of DTC for the accounts of Euroclear or
Clearstream. All other Subordinated Notes will be issued
in definitive, fully registered form without interest coupons.
28

Governing Law......................................
Tax Matters............................................
ERISA ....................................................
Additional Issuance ...............................
The Offered Securities and the Indenture will be governed
by, and construed in accordance with, the laws of the State
of New York.
See "Income Tax Considerations."
See "ERISA and Legal Investment Considerations."
At any time during the Reinvestment Period, the Co-Issuers
may issue and sell additional Notes of any one or more
Classes and/or additional notes of one or more new classes
and use the net proceeds to purchase additional Collateral
Obligations or for other purposes permitted under the
Indenture if the conditions for such additional issuance
described under "Description of the Offered Securities—
The Indenture—Additional Issuance" are met.
29

RISK FACTORS
An investment in the Offered Securities involves certain risks. Prospective investors should
carefully consider the following factors, in addition to the matters set forth elsewhere in this Offering
Circular, prior to investing in the Offered Securities.
Relating to the Offered Securities
The Offered Securities Will Have Limited Liquidity; The Offered Securities Are Subject to
Substantial Transfer Restrictions
Currently, no market exists for the Notes. Neither the Initial Purchaser nor the Placement Agent
is under any obligation to make a market for the Notes. There can be no assurance that any secondary
market for any of the Notes will develop, or if a secondary market does develop, that it will provide the
holders of the Notes with liquidity of investment or will continue for the life of the Notes. Consequently,
a purchaser of Notes must be prepared to hold the Notes until their Stated Maturity. In addition, the
Notes are subject to certain transfer restrictions and can only be transferred to certain transferees as
described herein under "Transfer Restrictions." As described herein, the Issuer may, in the future, impose
additional restrictions to comply with changes in applicable law. Such restrictions on the transfer of the
Notes may further limit their liquidity. The Notes will not be registered under the Securities Act or any
state securities laws, and the Co-Issuers have no plans, and are under no obligation, to register the Notes
under the Securities Act.
Neither the Initial Purchaser nor the Placement Agent Will Have Ongoing Responsibility for the
Assets or the Actions of the Portfolio Manager or the Issuer
The Initial Purchaser and Placement Agent will have no obligation to monitor the performance of
the Assets or the actions of the Portfolio Manager or the Issuer and will have no authority to advise the
Portfolio Manager or the Issuer or to direct their actions, which will be solely the responsibility of the
Portfolio Manager and/or the Issuer, as the case may be. If either or both of the Initial Purchaser or the
Placement Agent acts as Hedge Counterparty, Synthetic Security Counterparty or Securities Lending
Counterparty or owns Notes, it will have no responsibility to consider the interests of any holders of
Notes in actions it takes in such capacities. While the Initial Purchaser or the Placement Agent may own
Offered Securities at any time, they have no obligation to make any investment in any Offered Securities
and may sell at any time any Offered Securities they do purchase.
The Notes Are Limited Recourse Obligations; Investors Must Rely on Available Collections from
the Collateral Obligations and Will Have No Other Source for Payment
The Class A Notes, the Class B Notes and the Class C Notes are limited recourse obligations of
the Co-Issuers and the Class D Notes, the Subordinated Notes are limited recourse obligations of the
Issuer; therefore, the Notes are payable solely from the Collateral Obligations and all other Assets
pledged by the Issuer pursuant to the Indenture. None of the Trustee, the Collateral Administrator, the
Portfolio Manager, the Initial Purchaser, the Placement Agent, the Administrator or any of their
respective affiliates or the Co-Issuers' affiliates or any other person or entity will be obligated to make
payments on the Notes. Consequently, holders of the Notes must rely solely on distributions on the
Assets for payments on the Notes. If distributions on such Assets are insufficient to make payments on
the Notes, no other assets (in particular, no assets of the Portfolio Manager, the holders of the Notes, the
Initial Purchaser, the Placement Agent, the Trustee, or any affiliates of any of the foregoing) will be
available for payment of the deficiency and all obligations of the Co-Issuers and any claims against the
Co-Issuers in respect of the Notes will be extinguished and will not revive.
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The Subordinated Notes are Unsecured Obligations of the Issuer
The Subordinated Notes will not be secured by any of the Assets, and will not generally be
entitled to exercise remedies under the Indenture and, while the Secured Notes are outstanding, the
Trustee will have no obligation to act on behalf of the holders of Subordinated Notes. Distributions to
holders of the Subordinated Notes will be made solely from distributions on the Assets after all other
payments have been made pursuant to the priority of payments described herein. There can be no
assurance that the distributions on the Assets will be sufficient to make distributions to holders of the
Subordinated Notes after making payments that rank senior to payments on the Subordinated Notes. The
Issuer's ability to make distributions to the holders of the Subordinated Notes will be limited by the terms
of the Indenture. If distributions on the Assets are insufficient to make distributions on the Subordinated
Notes, no other assets will be available for any such distributions. See "Description of the Offered
Securities—The Subordinated Notes."
The Subordination of the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C
Notes, the Class D Notes and the Subordinated Notes Will Affect Their Right to Payment
The Class A-1 Notes are subordinated to certain amounts payable by the Issuer to other parties as
set forth in the priority of payments (including taxes, amounts owing to the holder of the Financed
Amount Note, Administrative Expenses, Base Management Fees and certain payments under the Hedge
Agreements); the Class A-2 Notes are subordinated on each Payment Date to the Class A-1 Notes; the
Class B Notes are subordinated on each Payment Date to the Class A Notes; the Class C Notes are
subordinated on each Payment Date to the Class B Notes; the Class D Notes are subordinated on each
Payment Date to the Class C Notes; and the Subordinated Notes are subordinated on each Payment Date
to the Class D Notes and certain fees and expenses (including, but not limited to, the diversion of Interest
Proceeds to purchase additional Collateral Obligations if the Reinvestment Overcollateralization Test is
not satisfied, unpaid Administrative Expenses and certain Management Fees), in each case to the extent
described herein and except as otherwise provided in "Summary of Terms—Priority of Payments". No
payments of interest or distributions from Interest Proceeds will be made on any such Class of Offered
Securities on any Payment Date until interest on the Notes of each Class to which it is subordinated has
been paid, and no payments of principal (other than Deferred Interest with respect to the Class B Notes,
the Class C Notes or the Class D Notes, as applicable and payments of principal on the Class D Notes
during the Reinvestment Period pursuant to clause (P) of "Summary of Terms—Priority of Payments—
Application of Interest Proceeds," in each case, to the extent set forth in the priority of payments) or
distributions from Principal Proceeds will be made on any such Class of Offered Securities on any
Payment Date until principal on the Notes of each Class to which it is subordinated has been paid in full.
Therefore, to the extent that any losses are suffered by any of the holders of any Offered Securities, such
losses will be borne in the first instance by holders of the Subordinated Notes, then by the holders of the
Class D Notes, then by the holders of the Class C Notes, then by the holders of the Class B Notes, then by
the holders of the Class A-2 Notes and last by the holders of the Class A-1 Notes. Furthermore, payments
on the Class B Notes, the Class C Notes and the Class D Notes are subject to diversion to pay more senior
Classes of Notes pursuant to the priority of payments if certain Coverage Tests are not met, as described
herein, and failure to make such payments will not be a default under the Indenture. In addition, if an
Event of Default occurs, the holders of the Controlling Class of Notes (which will be the most senior
Class or Classes then outstanding) will be entitled to determine the remedies to be exercised under the
Indenture. See "Description of the Offered Securities—The Indenture—Events of Default." Remedies
pursued by the Controlling Class could be adverse to the interests of the holders of the Offered Securities
that are subordinated to the Notes held by the Controlling Class, and the Controlling Class will have no
obligation to consider any possible adverse effect on such other interests. Furthermore, the Collateral
Obligations may be sold and liquidated only if, among other things, (i) the Trustee determines that the
anticipated proceeds of a sale or liquidation of the Assets (after deducting the reasonable expenses of such
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sale or liquidation) would be sufficient to discharge in full the amounts then due (or, in the case of
interest, accrued) and unpaid on the Secured Notes for principal and interest (including Deferred Interest)
and all amounts payable prior to payment of principal on such Secured Notes (including amounts due and
owing as Administrative Expenses and amounts payable to any Hedge Counterparty upon liquidation of
the Assets and all amounts owing under the Financed Amount Note), and a majority of the aggregate
outstanding principal amount of the Controlling Class agrees with such determination; (ii) the holders of
at least a majority of the aggregate outstanding principal amount of the Class A-1 Notes and at least
66⅔% of the aggregate outstanding principal amount of each of the Class A-2 Notes, the Class B Notes,
the Class C Notes and the Class D Notes (for which purpose, Classes that rank pari passu will constitute a
single Class) direct, subject to the provisions of the Indenture, such sale and liquidation or (iii) with
respect to an Event of Default pursuant to clause (f) of the definition thereof, the holders at least a
majority of the aggregate outstanding principal amount of the Class A-1 Notes and at least 66 2/3% of the
aggregate outstanding principal amount of the Class A-2 Notes, the Class B Notes, the Class C Notes and
the Class D Notes (voting together as a single class) direct, subject to the provisions of the Indenture,
such sale and liquidation.
The Subordinated Notes are Highly Leveraged, which Increases Risks to Investors in Those
Classes
The Subordinated Notes represent a highly leveraged investment in the Assets. Therefore, the
market value of the Subordinated Notes would be anticipated to be significantly affected by, among other
things, changes in the market value of the Assets, changes in the distributions on the Assets, defaults and
recoveries on the Assets, capital gains and losses on the Assets, prepayments on Assets and the
availability, prices and interest rates of Assets and other risks associated with the Assets as described in
"—Relating to the Collateral Obligations" below. Accordingly, the Subordinated Notes may not be paid
in full and may be subject to up to 100% loss. Furthermore, the leveraged nature of each subordinated
class of Offered Securities may magnify the adverse impact on each such class of changes in the market
value of the Assets, changes in the distributions on the Assets, defaults and recoveries on the Assets,
capital gains and losses on the Assets, prepayments on Assets and availability, prices and interest rates of
Assets.
The Assets May Be Insufficient to Redeem the Offered Securities in an Event of Default
It is anticipated that the proceeds received by the Issuer on the Closing Date from the issuance of
the Offered Securities, net of certain fees and expenses, will be less than the aggregate amount of Notes.
Consequently, it is anticipated that on the Closing Date the Assets would be insufficient to redeem the
Secured Notes and Subordinated Notes in the event of an Event of Default under the Indenture.
The Indenture May Require Mandatory Redemption of the Secured Notes for Failure to Satisfy
Coverage Tests
If the Coverage Tests with respect to any Class or Classes of Secured Notes are not met, Interest
Proceeds that otherwise would have been paid or distributed to the holders of the Offered Securities of
each Class (other than Class A Notes) that is subordinated to such Class or Classes and (during the
Reinvestment Period) Principal Proceeds that would otherwise have been reinvested in Collateral
Obligations will instead be used to redeem the Secured Notes of the most senior Class or Classes then
outstanding to the extent necessary to satisfy the applicable Coverage Tests (except that (i) upon a Class
D Coverage Test failure during the Reinvestment Period, Interest Proceeds will be used to pay principal
of the Class D Notes (but not any other Notes) in accordance with the Priority of Payments and (ii) no
Principal Proceeds will be used to pay principal of the Notes upon a Class D Coverage Test failure), as
described under "Summary of Terms—Priority of Payments." This could result in an elimination,
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deferral or reduction in the payments of Interest Proceeds to the holders of the Class B Notes, the Class C
Notes, the Class D Notes and/or the Subordinated Notes, as the case may be. In addition, this could also
result in an increase in the average weighted interest rate payable by the Issuer on the Secured Notes,
which would adversely affect the Issuer.
The Indenture May Require Mandatory Redemption of the Secured Notes Upon Rating
Confirmation Failure
After the Ramp-Up Period, a redemption of the Secured Notes may result from a failure to obtain
from each Rating Agency its written confirmation of its initial ratings of the Secured Notes. See
"Description of the Offered Securities—Special Redemption." In the event of an early redemption, the
holders of the Secured Notes will be repaid prior to the respective Stated Maturity dates of such Secured
Notes. Interest Proceeds or Principal Proceeds diverted for this purpose would not be available to make
distributions in respect of the Subordinated Notes. In addition, a mandatory redemption of Secured Notes
could require the Portfolio Manager to liquidate positions more rapidly than would otherwise be
desirable, which could adversely affect the realized value of the Collateral Obligations sold.
The Notes Are Subject to Optional Redemption
The holders of at least a majority of the aggregate outstanding principal amount of the
Subordinated Notes may cause the Secured Notes to be redeemed and the holders of at least a majority of
the aggregate outstanding principal amount of the Subordinated Notes may cause the Subordinated Notes
to be redeemed upon the occurrence of a Withholding Tax Event or on any Payment Date at any time
after the expiration of the Non-Call Period, as described under "Description of the Offered Securities—
Optional Redemption" and "Description of the Offered Securities—The Subordinated Notes—Optional
Redemption." In the event of an early redemption, the holders of the Secured Notes and the Subordinated
Notes will be repaid prior to the respective Stated Maturity dates of such Notes. There can be no
assurance that, upon any such redemption, the Sale Proceeds realized and other available funds would
permit any distribution on the Subordinated Notes after all required payments are made to the holders of
the Secured Notes. In addition, an optional redemption of Notes could require the Portfolio Manager to
liquidate positions more rapidly than would otherwise be desirable, which could adversely affect the
realized value of the Collateral Obligations sold.
Redemption by Refinancing
The Indenture provides that any Class of the Secured Notes may be redeemed in whole, but not in
part, on any Payment Date after the Non-Call Period from Refinancing Proceeds subject to the
satisfaction of certain requirements. See "Description of the Offered Securities—Optional Redemption."
Accordingly, a more junior Class of Notes may be redeemed in whole from Refinancing Proceeds even if
a more senior Class of Notes remains outstanding. Holders of Secured Notes that are refinanced (or
otherwise optionally redeemed) may not be able to reinvest the proceeds of such redeemed Notes in assets
with comparable interest rates or maturity. An optional redemption from Refinancing Proceeds may also
result in a shorter investment than a holder of Secured Notes may have anticipated. In addition, the terms
of additional obligations issued pursuant to a Refinancing may differ from the terms of the Secured Notes
that are redeemed.
The Secured Notes Are Subject to Special Redemption at the Option of the Portfolio Manager
The Secured Notes will be subject to redemption in part by the Co-Issuers or the Issuer, as
applicable, on any Payment Date during the Reinvestment Period if the Portfolio Manager at its discretion
notifies the Trustee that it has been unable, for a period of at least 20 consecutive Business Days, to
33

identify additional Collateral Obligations that are deemed appropriate by the Portfolio Manager in its sole
discretion and which would meet the criteria for reinvestment described under "Security for the Secured
Notes—Sales of Collateral Obligations; Additional Collateral Obligations and Investment Criteria" in
sufficient amounts to permit the investment or reinvestment of all or a portion of the funds then in the
Collection Account that are to be invested in additional Collateral Obligations. On the Special
Redemption Date, in accordance with the Indenture, the Special Redemption Amount will be applied as
described under "Summary of Terms—Priority of Payments—Application of Principal Proceeds" to pay
the principal of the Secured Notes. The application of funds in that manner could result in an elimination,
deferral, or reduction of amounts available to make payments on Classes of the Notes subordinate in
priority to the Class or Classes of Secured Notes being amortized. See "Summary of Terms—Priority of
Payments—Application of Principal Proceeds" and "Description of the Offered Securities—Special
Redemption."
The Reinvestment Period May Terminate Earlier Than Expected
Although the Reinvestment Period is expected to terminate on the Payment Date occurring in
November 2013, the Reinvestment Period may terminate prior to such date if (i) the maturity of any Class
of Secured Notes is accelerated due to an Event of Default as described under "Description of the Offered
Securities—The Indenture" or (ii) the Portfolio Manager notifies the Issuer, the Rating Agencies and the
Trustee that it can no longer make investments in additional Collateral Obligations in accordance with the
Indenture or the Portfolio Management Agreement. Such early termination of the Reinvestment Period
may shorten the expected lives of the Notes.
Distributions on Subordinated Notes May Be Diverted by a Majority of Subordinated Notes
Not less than ten (10) days prior to any Payment Date, at the direction of a majority of the aggregate
outstanding principal amount of the Subordinated Notes but without any amendment to the Indenture, any
confirmation from either Rating Agency or the consent of any holder of Secured Notes, all or a specified
portion of amounts that would otherwise be distributed on such Payment Date to the holders of the
Subordinated Notes will instead be retained by the Trustee in the Collection Account as Principal Proceeds and
will be available for reinvestment in additional Collateral Obligations. The holders of Subordinated Notes who
do not form a part of a majority of the aggregate outstanding principal amount of the Subordinated Notes will
have no right to prevent a majority of the aggregate outstanding principal amount of the Subordinated Notes
from giving any such direction. No assurance can be given that any such action taken by a majority of the
aggregate outstanding principal amount of the Subordinated Notes will not adversely affect the holders of
Subordinated Notes who do not form a part of the majority of the aggregate outstanding principal amount of
the Subordinated Notes.
The Offered Securities May Be Affected by Interest Rate Risks, Including Mismatches Between the
Notes and the Collateral Obligations, and the Termination of the Hedge Agreement
The aggregate outstanding principal balance of Secured Notes may be different than the
aggregate principal balance of the floating rate Collateral Obligations. In addition, any payments of
principal of or interest on Collateral Obligations received during a Collection Period occurring during the
Reinvestment Period and not reinvested in Collateral Obligations during such Collection Period will be
reinvested in Eligible Investments maturing not later than the Business Day immediately preceding the
next Payment Date. There is no requirement that such Eligible Investments bear interest at a floating rate,
and the interest rates available for such Eligible Investments are inherently uncertain. As a result of such
mismatches, changes in the level of LIBOR or any other applicable floating rate index could adversely
affect the ability of the Co-Issuers or the Issuer, as applicable, to make payments on the Notes. To the
extent described herein, the Issuer may enter into Hedge Agreements to reduce the effect of any such
interest rate mismatch. However, there can be no assurance that the Issuer will enter into such Hedge
34

Agreements or that, if entered into, such Hedge Agreements will significantly reduce the effect of such
interest rate mismatch. The Subordinated Notes will be subordinated to the payment of interest on the
Secured Notes. There can be no assurance that the Collateral Obligations and the Eligible Investments
will in all circumstances generate sufficient Interest Proceeds to make timely payments of interest on the
Secured Notes and to make distributions to the holders of the Subordinated Notes, nor that the Hedge
Agreements will ensure any particular return on such Offered Securities.
A Hedge Counterparty may terminate the applicable Hedge Agreements if any withholding tax is
imposed on payments thereunder by such Hedge Counterparty, and any amounts that would be required to
be paid by the Issuer to enter into replacement Hedge Agreements will reduce amounts available for
payments to holders of Notes. A Hedge Counterparty may also terminate the applicable Hedge
Agreements upon the occurrence of certain events of default or termination events thereunder with respect
to the Issuer (including, but not limited to, bankruptcy, a change in law making the performance of the
obligations under such Hedge Agreement unlawful, or the determination to sell or liquidate the Assets
upon the occurrence of an Event of Default under the Indenture), and in the case of such early termination
of any Hedge Agreement, the Issuer may be required to make a payment to the related Hedge
Counterparty. Any amounts that would be required to be paid by the Issuer to enter into replacement
Hedge Agreements will reduce amounts available for payments to holders of Notes. In either case, there
can be no assurance that the remaining payments on the Assets would be sufficient to make payments of
interest and principal on the Secured Notes and distributions with respect to the Subordinated Notes.
Additional Issuance of Notes
Pursuant to the terms of the Indenture, additional Notes may be issued as described under
"Description of the Offered Securities—Indenture—Additional Issuance." There are certain conditions
relating to an additional issuance, including that (i) any such issuance be approved by the holders of at
least a majority of the aggregate outstanding principal amount of the Subordinated Notes, (ii) the issuance
does not exceed 100% of the respective original outstanding amount of the Subordinated Notes or the
applicable Class or Classes of Secured Notes, (iii) the terms of the Notes issued must be identical to the
respective terms of previously issued Notes of the applicable Class (except that the interest rate and price
of the additional Notes do not have to be identical to the initial Notes of that Class), (iv) in the case of
additional notes that are Secured Notes, the Global Rating Agency Condition shall have been satisfied, (v)
the net proceeds of any additional Notes are used to purchase additional Collateral Obligations, (vi) an
opinion of tax counsel is delivered to the Trustee, (vii) the ratio of (A) the aggregate outstanding principal
amount of each Class as to which additional Notes are issued, after giving effect to the issuance of such
additional Notes, plus the aggregate outstanding principal amount of all Classes senior to such Class, over
(B) the aggregate outstanding principal amount of all Classes of Notes subordinate to such Class, is not
greater than such ratio immediately prior to the issuance of such additional Notes, unless otherwise
consented to by (a) if the Class A-1 Notes are the Controlling Class, the holders of at least a majority of
the aggregate outstanding principal amount of the Controlling Class or (b) if the Class A-2 Notes, the
Class B Notes, the Class C Notes or the Class D Notes are the Controlling Class, the holders of at least 66
2/3% of the aggregate outstanding principal amount of the Controlling Class, (vii) the principal amount of
additional Notes that are Class A-1 Notes does not exceed 70% of the original outstanding amount of the
Class A-1 Notes unless otherwise consented to by a majority of the aggregate outstanding principal
amount of the Class A-1 Notes and (viii) the issuance of any additional Notes shall comply with any
applicable listing rules. The ability of the Issuer to issue and sell additional Notes may be limited by the
market or other conditions.
35

Modification of the Indenture
Pursuant to the terms of the Indenture, the Trustee and the Co-Issuers may, from time to time,
execute one or more supplemental indentures that add to, change, modify or eliminate provisions of the
Indenture or modify the rights of the holders of the Notes. Approval for entering into such supplemental
indentures does not in each instance require the consent of all of the holders of the outstanding Notes.
Accordingly, supplemental indentures that result in material and adverse changes to the interests of
Noteholders may be approved without the consent of all of Noteholders adversely affected. See
"Description of the Offered Securities—Modification of Indenture."
The Weighted Average Lives of the Notes May Vary
The Stated Maturity of the Notes is May, 2021. The average life of each Class of Notes is
expected to be shorter than the number of years until its respective Stated Maturity date. Each such
average life may vary due to various factors affecting the early retirement of Collateral Obligations, the
timing and amount of sales of such Collateral Obligations, the ability of the Portfolio Manager to invest
collections and proceeds in additional Collateral Obligations, and the occurrence of any Mandatory
Redemption, Optional Redemption, redemption of the Notes in connection with a Withholding Tax Event
or Special Redemption. Retirement of the Collateral Obligations prior to their respective final maturities
will depend, among other things, on the financial condition of the issuers of the underlying Collateral
Obligations and the respective characteristics of such Collateral Obligations, including the existence and
frequency of exercise of any optional redemption, mandatory redemption or sinking fund features, the
prevailing level of interest rates, the redemption prices, the actual default rates and the actual amount
collected on any Defaulted Obligations and the frequency of tender or exchange offers for such Collateral
Obligations. In particular, loans are generally prepayable at par, and a high proportion of loans could be
prepaid. The ability of the Issuer to reinvest proceeds in securities with comparable interest rates that
satisfy the reinvestment criteria specified herein may affect the timing and amount of payments received
by the holders of Notes and the yield to maturity of the Notes. See "Security for the Secured Notes—
Sales of Collateral Obligations; Additional Collateral Obligations and Investment Criteria."
Changes in Tax Law Could Result in the Imposition of Withholding Taxes with Respect to
Payments on the Offered Securities and Interest and Other Payments on the Collateral Obligations, and
the Issuer Will Not Gross-Up Payments to Holders of Offered Securities
Payments on the Collateral Obligations (other than commitment fees) are required not to be
subject to withholding tax when the Collateral Obligations are acquired by the Issuer unless the obligor
thereof is required to make "gross-up" payments that cover the full amount of such withholding tax on an
after-tax basis. In the case of debt obligations issued by U.S. obligors after July 18, 1984, interest
payments thereon are generally exempt under current United States tax law from the imposition of United
States federal income withholding tax. See "Income Tax Considerations—United States Federal Income
Taxation—Tax Treatment of the Issuer—United States Withholding Taxes."
With respect to Collateral Obligations that are not subject to withholding tax at the time of
acquisition by the Issuer, however, there can be no assurance that the payments on such Collateral
Obligations will not become subject to U.S. or other withholding tax as a result of a change in any
applicable law, treaty, rule or regulation or interpretation thereof or other causes, possibly with retroactive
effect. If any withholding tax is or becomes applicable to payments on the Collateral Obligations and
such tax is not fully offset by "gross-up" payments, such withholding tax will reduce the amounts
available to make payments on the Offered Securities. There can be no assurance that the remaining
payments on the Collateral Obligations would be sufficient to make payments on the Offered Securities.
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Withholding tax is not currently imposed by the Cayman Islands on payments of interest or
principal on the Secured Notes or distributions on the Subordinated Notes. There can be no assurance,
however, that the law will not change. In the event that any withholding tax is imposed on payments of
interest or principal on any of the Secured Notes or distributions on the Subordinated Notes, the holders
of the Offered Securities will not be entitled to receive grossed-up amounts to compensate for such
withholding tax.
Upon the occurrence of a Withholding Tax Event, the Secured Notes shall be redeemable at the
applicable Redemption Price, in whole, but not in part, by the Issuer at the written direction of the
Holders of at least a majority of the aggregate outstanding principal amount of the Subordinated Notes, as
described under "Description of the Offered Securities—Optional Redemption."
Each of the Issuer and the Co-Issuer is Recently Formed, Has No Significant Operating History,
Has No Assets Other Than the Assets and is Limited in its Permitted Activities
Each of the Issuer and the Co-Issuer is a recently incorporated or organized entity and has no
prior operating history or track record. Accordingly, neither the Issuer nor the Co-Issuer has a
performance history for a prospective investor to consider in making its decision to invest in the Offered
Securities.
The Offered Securities Are Not Guaranteed by the Co-Issuers, the Initial Purchaser, the
Placement Agent, the Portfolio Manager, any Hedge Counterparty or the Trustee
None of the Co-Issuers, the Initial Purchaser, the Placement Agent, the Portfolio Manager, any
Hedge Counterparty, the Collateral Administrator or the Trustee or any affiliate thereof makes 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) to investors of ownership of the Offered Securities and no purchaser may rely on
any such party for a determination of expected or projected success, profitability, return, performance
result, effect, consequence or benefit (including legal, regulatory, tax, financial, accounting or otherwise)
to such purchaser of ownership of the Offered Securities. Each purchaser of any Class of the Offered
Securities, by its acceptance thereof, will be deemed, and each purchaser of the Certificated Subordinated
Notes, by its acceptance thereof, will be required, to represent to the Issuer and the Initial Purchaser or the
Placement Agent, as applicable, among other things, that such purchaser has consulted with its own legal,
regulatory, tax, business, investment, financial, and accounting advisors regarding investment in the
Offered Securities as such purchaser has deemed necessary and that the investment by such purchaser is
within its powers and authority, is permissible under applicable laws governing such purchase, has been
duly authorized by it and complies with applicable securities laws and other laws.
Non-Compliance with Restrictions on Ownership of the Offered Securities and the United States
Investment Company Act of 1940 Could Adversely Affect the Issuer
Neither the Issuer nor the Co-Issuer has registered with the United States Securities and Exchange
Commission ("SEC") as an investment company pursuant to the Investment Company Act, in reliance on
an exception under Section 3(c)(7) of the Investment Company Act for investment companies (a) whose
outstanding securities are beneficially owned only by "qualified purchasers" and "knowledgeable
employees" and certain transferees thereof identified in Rules 3c-5 and 3c-6 under the Investment
Company Act and (b) which do not make a public offering of their securities in the United States.
If the SEC or a court of competent jurisdiction were to find that the Issuer or the Co-Issuer is
required, but in violation of the Investment Company Act had failed, to register as an investment
37

company, possible consequences include, but are not limited to, the following: (i) the SEC could apply to
a district court to enjoin the violation; (ii) investors in the Issuer and the Co-Issuer could sue the Issuer
and the Co-Issuer and recover any damages caused by the violation; and (iii) any contract to which the
Issuer and/or the Co-Issuer is party that is made in violation of the Investment Company Act or whose
performance involves such violation would be unenforceable by any party to the contract unless a court
were to find that under the circumstances enforcement would produce a more equitable result than nonenforcement
and would not be inconsistent with the purposes of the Investment Company Act. In
addition, such a finding would constitute an Event of Default under the Indenture. Should the Issuer or
the Co-Issuer be subjected to any or all of the foregoing, the Issuer and the Co-Issuer would be materially
and adversely affected.
Book-Entry Holders Are Not Considered Holders Under the Indenture
Holders of beneficial interests in any Offered Securities held in global form will not be
considered holders of such Offered Securities under the Indenture. After payment of any interest,
principal or other amount to DTC, neither the Issuer nor the Co-Issuer will have any responsibility or
liability for the payment of such amount by DTC or to any holder of a beneficial interest in a Note. DTC
or its nominee will be the sole holder for any Offered Securities held in global form, and therefore each
person owning a beneficial interest in an Offered Security held in global form must rely on the procedures
of DTC (and if such person is not a participant in DTC on the procedures of the participant through which
such person holds such interest) with respect to the exercise of any rights of a holder of a Note under the
Indenture.
Relating to the Portfolio Manager
The Portfolio Manager has a Very Limited Operating History
Although certain members of the Portfolio Manager's portfolio management team have
significant experience in the types of investment activities in which the Issuer proposes to engage,
HillMark was formed in March of 2006, and as such, has only a very limited operating history and does
not have an investment track record.
Performance History of the Portfolio Manager's Portfolio Management Team May Not Be
Indicative of Future Results
While certain members of the portfolio management team of the Portfolio Manager have
previously managed collateralized loan obligation transactions and other loan securitizations, the past
performance of such personnel of the Portfolio Manager in other portfolios, businesses or investment
vehicles should not be considered indicative of the results the Portfolio Manager may be able to achieve
with the Collateral Obligations. Similarly, any past performance over a particular period is not
necessarily indicative of the results that may be expected in future periods. Moreover, the nature of, and
risks associated with, the Issuer's investments may differ substantially from those investments and
strategies undertaken historically by the portfolio management team of the Portfolio Manager at their
previous employers. As a result, there can be no assurance that the Issuer's investments will perform as
well as any such past investments or that the Issuer will be able to avoid losses.
The Incentive Management Fee May Create Adverse Incentives for the Portfolio Manager
On each Payment Date, the Portfolio Manager may be paid the Incentive Management Fee to the
extent of funds available on such Payment Date as described in "Summary of Terms—Priority of
Payments", if the holders of the Subordinated Notes have realized a Subordinated Notes Internal Rate of
38

Return of 12.0% as of such Payment Date. The manner in which the Incentive Management Fee is
determined could create a further incentive for the Portfolio Manager to make more speculative
investments in the Collateral Obligations than the Issuer would otherwise make in order to increase the
likelihood that the holders of the Subordinated Notes will realize a Subordinated Notes Internal Rate of
Return of 12.0% for the Portfolio Manager to be entitled to be paid any Incentive Management Fee.
Dependence on the Portfolio Manager and its Key Personnel
The Issuer has no employees and is dependent on the employees of the Portfolio Manager and its
Affiliates to make decisions on the Issuer's behalf in accordance with the terms of the Indenture and the
Portfolio Management Agreement. Because the Issuer will have only limited rights under the Indenture
to dispose of or replace any Collateral Obligations, the Issuer's performance will depend significantly
upon the performance of the Collateral Obligations being acquired on the Closing Date. Meanwhile, as
the composition of the Collateral Obligations will change over time, the performance of the Collateral
Obligations will also depend to a significant degree on the skills of the Portfolio Manager in analyzing,
monitoring and overseeing the Issuer's portfolio of Collateral Obligations. As a result, the Issuer will be
highly dependent on the financial and managerial experience of the founding principals of the Portfolio
Manager and its individual employees to whom the task of overseeing the Assets has been assigned.
Certain employment arrangements between the Portfolio Manager and certain individuals performing
these functions may exist, but the Issuer is not, and will not be, a direct beneficiary of, or have any ability
to influence or enforce, any such arrangements. Any such arrangements may provide little, if any,
protection to the Portfolio Manager itself as to the continued employment and performance of its key
personnel and are in any event subject to change without the consent of the Issuer. Consequently, the loss
of one or more of the individuals employed by the Portfolio Manager, to manage the Issuer's investment
program could have a significant adverse effect on the performance of the Issuer or, in certain cases, on
the Issuer's ability to stay in business. In addition, the Portfolio Manager may add additional employees
to maintain and oversee the Collateral Obligations and perform the other obligations of the Portfolio
Manager at any time without notice to or consent of the Issuer. Any such additional employees may not
have the same level of experience as the person(s) they replace. Any such change to the persons
appointed by the Portfolio Manager to perform such obligations may have an adverse effect on the
performance of the Issuer. See "The Portfolio Manager."
The Investment Professionals of the Portfolio Manager Will Attend to Matters Unrelated to the
Investment Activities of the Issuer
The Portfolio Manager has informed the Issuer that the investment professionals associated with
the Portfolio Manager are actively involved in other investment activities not concerning the Issuer and
will not be able to devote all of their time to the Issuer's business and affairs. In addition, individuals not
currently associated with the Portfolio Manager may become associated with the Portfolio Manager and
the performance of the Collateral Obligations may also depend on the financial and managerial
experience of such individuals. See "The Portfolio Management Agreement" and "The Portfolio
Manager."
Relating to the Collateral Obligations
Below Investment-Grade Assets Involve Particular Risks
The Assets will consist primarily of non-investment grade loans or interests in non-investment
grade loans and high-yield debt securities, which are subject to liquidity, market value, credit, interest
rate, reinvestment and certain other risks. It is anticipated that the Assets generally will be subject to
39

greater risks than investment grade corporate obligations. These risks could be exacerbated to the extent
that the portfolio is concentrated in one or more particular types of Collateral Obligations.
Prices of the Assets may be volatile, and will generally fluctuate due to a variety of factors that
are inherently difficult to predict, including but not limited to changes in interest rates, prevailing credit
spreads, general economic conditions, financial market conditions, domestic and international economic
or political events, developments or trends in any particular industry, and the financial condition of the
obligors of the Assets. Additionally, loans and interests in loans have significant liquidity and market
value risks since they are not generally traded in organized exchange markets but are traded by banks and
other institutional investors engaged in loan syndications. Because loans are privately syndicated and
loan agreements are privately negotiated and customized, loans are not purchased or sold as easily as
publicly traded securities. In addition, historically the trading volume in the loan market has been small
relative to the high-yield debt securities market.
The market for high-yield debt securities, in particular, has experienced periods of volatility and
reduced liquidity. High-yield debt securities are generally unsecured, may be subordinated to other
obligations of the issuer and generally have greater credit, insolvency and liquidity risk than is typically
associated with investment grade obligations. Depending upon market conditions, there may be a very
limited market for high-yield debt securities. High-yield debt securities are often issued in connection
with leveraged acquisitions or recapitalizations in which the issuers incur a substantially higher amount of
indebtedness than the level at which they had previously operated. The lower rating of high-yield debt
securities reflects a greater possibility that adverse changes in the financial condition of the obligor or
general economic conditions (including, for example, a substantial period of rising interest rates or
declining earnings or disruptions in the financial markets) or both may impair the ability of the obligor to
make payments of principal and interest.
High-yield debt securities and leveraged loans have historically experienced greater default rates
than has been the case for investment grade securities. There can be no assurance as to the levels of
defaults and/or recoveries that may be experienced on the Collateral Obligations.
A non-investment grade loan or debt obligation or an interest in a non-investment grade loan is
generally considered speculative in nature and may become a Defaulted Obligation for a variety of
reasons. Upon any Collateral Obligation becoming a Defaulted Obligation, such Defaulted Obligation
may become subject to either substantial workout negotiations or restructuring, which may entail, among
other things, a substantial reduction in the interest rate, a substantial write-down of principal, and a
substantial change in the terms, conditions and covenants with respect to such Defaulted Obligation. In
addition, such negotiations or restructuring may be quite extensive and protracted over time, and therefore
may result in substantial uncertainty with respect to the ultimate recovery on such Defaulted Obligation.
The liquidity for Defaulted Obligations may be limited, and to the extent that Defaulted Obligations are
sold, it is highly unlikely that the proceeds from such sale will be equal to the amount of unpaid principal
and interest thereon. Furthermore, there can be no assurance that the ultimate recovery on any Defaulted
Obligation will be at least equal to either the minimum recovery rate assumed by either Rating Agency in
rating the Secured Notes or any recovery rate used in connection with any analysis of the Offered
Securities that may have been prepared by the Initial Purchaser or the Placement Agent for or at the
direction of holders of any Offered Securities.
Acquisition of Collateral Obligations Prior to Closing Date; There is Limited Disclosure About
the Collateral Obligations in this Offering Circular
The Issuer's purchase of Collateral Obligations prior to the Closing Date was financed through
the sale of participation interests therein to JPMCB pursuant to a warehousing agreement. Any gains or
40

losses realized by the Issuer in respect of Collateral Obligations that are sold or otherwise disposed of
prior to the Closing Date will be for the Issuer's account. Collateral Obligations owned by the Issuer on
the Closing Date were purchased in the open market, and the purchase price paid by the Issuer for such
Collateral Obligations is the prevailing price at the time such Collateral Obligations were purchased.
Because the purchase price of Collateral Obligations owned by the Issuer on the Closing Date is
determined prior to such date, the prevailing market price of such Collateral Obligations on the Closing
Date may be higher or lower than such purchase price. Accordingly, any unrealized losses or gains
experienced by the Issuer in respect of the Collateral Obligations acquired by the Issuer prior to, and
owned by the Issuer on, the Closing Date will be for the Issuer's account.
The Issuer and the Portfolio Manager will not be required to provide the holders of the Offered
Securities or the Trustee with financial or other information (which may include material non-public
information) it receives pursuant to the Collateral Obligations and related documents. The Portfolio
Manager also will not disclose to any of these parties the contents of any notice it receives pursuant to the
Collateral Obligations or related documents, or certain other information required to be reported under the
Portfolio Management Agreement and the Indenture.
The holders of the Offered Securities and the Trustee will not have any right to inspect any
records relating to the Collateral Obligations, and the Portfolio Manager will not be obligated to disclose
any further information or evidence regarding the existence or terms of, or the identity of any obligor on,
any Collateral Obligations, unless (i) specifically required by the Portfolio Management Agreement or (ii)
following its receipt of a written request from the Trustee, the Portfolio Manager in its sole discretion
determines that the disclosure of such further information or evidence regarding the existence or terms of,
or the identity of any obligor on, any Collateral Obligation to the Trustee would not be prohibited by
applicable law or the underlying instruments relating to such Collateral Obligation, in which case the
Portfolio Manager will disclose such further information or evidence to the Trustee; provided, the Trustee
will not disclose such further information or evidence to any third party. Furthermore, the Portfolio
Manager may demand that any persons requesting that information execute confidentiality agreements
before being provided with the information.
Lender Liability Considerations and Equitable Subordination Can Affect the Issuer's Rights with
Respect to Collateral Obligations
A number of judicial decisions have upheld judgments of borrowers against lending institutions
on the basis of various evolving legal theories, collectively termed "lender liability." Generally, lender
liability is founded on the premise that a lender has violated a duty (whether implied or contractual) of
good faith, commercial reasonableness and fair dealing, or a similar duty owed to the borrower or has
assumed an excessive degree of control over the borrower resulting in the creation of a fiduciary duty
owed to the borrower or its other creditors or shareholders. Because of the nature of the Assets, the Issuer
may be subject to allegations of lender liability.
In addition, under common law principles that in some cases form the basis for lender liability
claims, if a lender or bondholder (a) intentionally takes an action that results in the undercapitalization of
a borrower to the detriment of other creditors of such borrower, (b) engages in other inequitable conduct
to the detriment of such other creditors, (c) engages in fraud with respect to, or makes misrepresentations
to, such other creditors or (d) uses its influence as a stockholder to dominate or control a borrower to the
detriment of other creditors of such borrower, a court may elect to subordinate the claim of the offending
lender or bondholder to the claims of the disadvantaged creditor or creditors, a remedy called "equitable
subordination." Because of the nature of the Assets, the Assets may be subject to claims of equitable
subordination.
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Because affiliates of, or persons related to, the Portfolio Manager may hold equity or other
interests in obligors of Collateral Obligations, the Issuer could be exposed to claims for equitable
subordination or lender liability or both based on such equity or other holdings.
The preceding discussion is based upon principles of United States federal and state laws. Insofar
as Collateral Obligations that are obligations of non-United States obligors are concerned, the laws of
certain foreign jurisdictions may impose liability upon lenders or bondholders under factual
circumstances similar to those described above, with consequences that may or may not be analogous to
those described above under United States federal and state laws.
Loan Prepayments May Affect the Ability of the Issuer to Invest and Reinvest Available Funds in
Appropriate Assets
Loans are generally prepayable in whole or in part at any time at the option of the obligor thereof
at par plus accrued unpaid interest thereon. Prepayments on loans may be caused by a variety of factors
which are often difficult to predict. Consequently, there exists a risk that loans purchased at a price
greater than par may experience a capital loss as a result of such a prepayment. In addition, principal
proceeds received upon such a prepayment are subject to reinvestment risk during the Reinvestment
Period. Any inability of the Issuer to reinvest payments or other proceeds in Assets with comparable
interest rates that satisfy the Investment Criteria specified herein may adversely affect the timing and
amount of payments received by the holders of Offered Securities and the yield to maturity of the Notes
and the distributions on the Subordinated Notes. There is no assurance that the Issuer will be able to
reinvest proceeds in assets with comparable interest rates that satisfy the Investment Criteria or (if it is
able to make such reinvestments) as to the length of any delays before such investments are made.
The Issuer May Not Be Able to Acquire Collateral Obligations That Satisfy the Investment
Criteria
A portion of the initial Collateral Obligations is expected to be purchased after the Closing Date
as described herein. The ability of the Issuer to acquire an initial portfolio of Collateral Obligations that
satisfies the Investment Criteria at the projected prices, ratings, rates of interest and any other applicable
characteristics will be subject to market conditions and availability of such Collateral Obligations. Any
inability of the Issuer to acquire Collateral Obligations that satisfy the Investment Criteria specified herein
may adversely affect the timing and amount of payments received by the holders of Offered Securities
and the yield to maturity of the Secured Notes and the distributions on the Subordinated Notes. There is
no assurance that the Issuer will be able to acquire Collateral Obligations that satisfy the Investment
Criteria.
Investing in Loans Involves Particular Risks
The Issuer may acquire interests in loans either directly (by way of assignment from the selling
institution) or indirectly (by purchasing a Participation Interest from the selling institution or through the
acquisition of Synthetic Securities). As described in more detail below, holders of Participation Interests
and Synthetic Securities are subject to additional risks not applicable to a holder of a direct interest in a
loan.
Participations by the Issuer in a selling institution's portion of a loan typically result in a
contractual relationship only with such selling institution, not with the borrower. In the case of a
Participation Interest, the Issuer will generally have the right to receive payments of principal, interest and
any fees to which it is entitled only from the institution selling the participation and only upon receipt by
such selling institution of such payments from the borrower. By holding a Participation Interest in a loan,
42

the Issuer generally will have no right to enforce compliance by the borrower with the terms of the loan
agreement, nor any rights of set off against the borrower, and the Issuer may not directly benefit from the
collateral supporting the loan in which it has purchased the participation. As a result, the Issuer will
assume the credit risk of both the borrower and the institution selling the participation, which will remain
the legal owner of record of the applicable loan. In the event of the insolvency of the selling institution,
the Issuer, by owning a Participation Interest, may be treated as a general unsecured creditor of the selling
institution, and may not benefit from any set off between the selling institution and the borrower. In
addition, the Issuer may purchase a participation from a selling institution that does not itself retain any
portion of the applicable loan and, therefore, may have limited interest in monitoring the terms of the loan
agreement and the continuing creditworthiness of the borrower. When the Issuer holds a Participation
Interest in a loan it will not have the right to vote under the applicable loan agreement with respect to
every matter that arises thereunder, and it is expected that each selling institution will reserve the right to
administer the loan sold by it as it sees fit and to amend the documentation evidencing such loan in all
respects. Selling institutions voting in connection with such matters may have interests different from
those of the Issuer and may fail to consider the interests of the Issuer in connection with their votes.
Certain of the loans or Participation Interests may be governed by the law of a jurisdiction other
than a United States jurisdiction. The Issuer is unable to provide any information with respect to the risks
associated with purchasing a loan or a Participation Interest under an agreement governed by the laws of a
jurisdiction other than a United States jurisdiction, including characterization under such laws of such
Participation Interest or sub-Participation Interest in the event of the insolvency of the institution from
whom the Issuer purchases such Participation Interest or sub-Participation Interest or the insolvency of
the institution from whom the grantor of the sub-Participation Interest purchased its Participation Interest.
The purchaser of an assignment of an interest in a loan typically succeeds to all the rights and
obligations of the assigning selling institution and becomes a lender under the loan agreement with
respect to that loan. As a purchaser of an assignment, the Issuer generally will have the same voting
rights as other lenders under the applicable loan agreement, including the right to vote to waive
enforcement of breaches of covenants or to enforce compliance by the borrower with the terms of the loan
agreement, and the right to set off claims against the borrower and to have recourse to collateral
supporting the loan. Assignments are, however, arranged through private negotiations between assignees
and assignors, and in certain cases the rights and obligations acquired by the purchaser of an assignment
may differ from, and be more limited than, those held by the assigning selling institution.
Assignments and participations are sold strictly without recourse to the selling institutions, and
the selling institutions will generally make no representations or warranties about the underlying loan, the
borrowers, the documentation of the loans or any collateral securing the loans. In addition, the Issuer will
be bound by provisions of the underlying loan agreements, if any, that require the preservation of the
confidentiality of information provided by the borrower. Because of certain factors including
confidentiality provisions, the unique and customized nature of the loan agreement, and the private
syndication of the loan, loans are not purchased or sold as easily as are publicly traded securities.
Investing in Structured Finance Obligations Involves Particular Risks
A portion of the Collateral Obligations may consist of Structured Finance Obligations. Structured
Finance Obligations may present risks similar to those of the other types of Collateral Obligations in
which the Issuer may invest and, in fact, the risks may be of greater significance in the case of Structured
Finance Obligations. Moreover, investing in Structured Finance Obligations may entail a variety of
unique risks. Among other risks, Structured Finance Obligations may be subject to prepayment risk,
credit risk, liquidity risk, market risk, structural risk, legal risk and interest rate risk (which may be
exacerbated if the interest rate payable on a Structured Finance Obligation changes based on multiples of
43

changes in interest rates or inversely to changes in interest rates). In addition, certain Structured Finance
Obligations (particularly subordinated collateralized bond obligations) may provide that non-payment of
interest is not an event of default in certain circumstances and the holders of the securities will therefore
not have available to them any associated default remedies. During the period of non-payment, unpaid
interest will generally be capitalized and added to the outstanding principal balance of the related security.
Furthermore, the performance of a Structured Finance Obligation will be affected by a variety of factors,
including its priority in the capital structure of its issuer, the availability of any credit enhancement, the
level and timing of payments and recoveries on and the characteristics of the underlying receivables,
loans, or other assets that are being securitized, bankruptcy remoteness of those assets from the originator
or transferor, the adequacy of and ability to realize on any related collateral, and the skill of the manager
of the Structured Finance Obligation in managing securitized assets. The price of a Structured Finance
Obligation, if required to be sold, may be subject to certain market and liquidity risks for securities of its
type at the time of sale. In addition, Structured Finance Obligations may involve initial and ongoing
expenses above the costs associated with the related direct investments.
Investing in Synthetic Securities Involves Particular Risks
A portion of the Assets may consist of Synthetic Securities the Reference Obligations of which
may be leveraged loans, high-yield debt securities or similar securities. Investments in such types of
assets through the purchase of Synthetic Securities present risks in addition to those resulting from direct
purchases of such Collateral Obligations. With respect to each Synthetic Security, the Issuer will usually
have a contractual relationship only with the counterparty of such Synthetic Security, and not the
reference obligor on the Reference Obligation. The Issuer generally will have no right directly to enforce
compliance by the reference obligor with the terms of the Reference Obligation nor any rights of set-off
against the reference obligor, may be subject to set-off rights exercised by the reference obligor against
the counterparty or another person or entity, and generally will not have any voting or other contractual
rights of ownership with respect to the Reference Obligation. The Issuer will not directly benefit from
any collateral supporting the Reference Obligation and will not have the benefit of the remedies that
would normally be available to a holder of such Reference Obligation. In addition, in the event of the
insolvency of the counterparty, the Issuer will be treated as a general creditor of such counterparty, and
will not have any claim with respect to the Reference Obligation. Consequently, the Issuer will be subject
to the credit risk of the counterparty as well as that of the reference obligor. As a result, concentrations of
Synthetic Securities entered into with any one counterparty will subject the Offered Securities to an
additional degree of risk with respect to defaults by such counterparty as well as by the reference obligor.
Moody's or S&P may downgrade any Class of Secured Notes then rated by it if a counterparty to a
material portion of the Synthetic Securities held by the Issuer has been downgraded by Moody's or S&P,
respectively, below the then-current rating of such Secured Notes. Before any Synthetic Security (other
than a Form Approved Synthetic Security) may be included in the Assets, each Rating Agency must
confirm prior to the date of such purchase that such Synthetic Security may be included as a Collateral
Obligation without causing the reduction or withdrawal of its then-current rating, if any, of any Class of
Secured Notes.
Additionally, while the Issuer expects that the returns on a Synthetic Security will generally
reflect those of the related Reference Obligation, as a result of the terms of the Synthetic Security and the
assumption of the credit risk of the Synthetic Security Counterparty, a Synthetic Security may have a
different expected return, a different (and potentially greater) probability of default and expected loss
characteristics following a default, and a different expected recovery following default. Additionally,
when compared to the Reference Obligation, the terms of a Synthetic Security may provide for different
maturities, payment dates, interest rates, interest rate references, credit exposures, or other credit or noncredit
related characteristics. Upon maturity, default, acceleration or any other termination (including a
put or call) other than pursuant to a credit event (as defined therein) of the Synthetic Security, the terms of
44

the Synthetic Security may permit or require the issuer of such Synthetic Security to satisfy its obligations
under the Synthetic Security by delivering to the Issuer securities other than the Reference Obligation or
an amount different than the then current market value of the Reference Obligation.
One or more of the Initial Purchaser and Placement Agent and/or one or more of their affiliates
may act as a Synthetic Security Counterparty, which may create certain conflicts of interest. See "—
Relating to Certain Conflicts of Interest."
The Issuer Has the Right to Engage in Securities Lending, which Involves Counterparty Risks and
Other Risks
The Collateral Obligations may be loaned to banks, broker-dealers or other financial institutions
that have, or are guaranteed by entities that have, the required ratings set forth under "Security for the
Secured Notes—Securities Lending." Such loans will be required to be secured by cash or direct
registered debt obligations of the United States that have a maturity of five years or less, in an amount
equal to at least 102% of the market value of the loaned Collateral Obligations. However, in the event
that a borrower of loaned Collateral Obligations defaults in its obligation to return such loaned Collateral
Obligations, whether because of insolvency or otherwise, the Issuer could experience delays and costs in
gaining access to the collateral posted by the borrower (and in extreme circumstances could be restricted
from selling the collateral). Additionally, in such an event, the holders of the Notes could suffer a loss to
the extent the realized value of the cash or securities securing the obligation of the borrower to return the
loaned Collateral Obligation (less expenses) is less than the amount required to purchase such Collateral
Obligation in the open market. This shortfall could be due to, among other things, discrepancies between
the mark-to-market and actual transaction prices for the loaned Collateral Obligations arising from limited
liquidity or availability of the loaned Collateral Obligations, and in extreme circumstances, the loaned
Collateral Obligations being unavailable at any price. One or both of the Rating Agencies may
downgrade one or more Classes of the Secured Notes if a borrower of a Collateral Obligation, or, if
applicable, the entity guaranteeing the performance of such borrower, has been downgraded by such
Rating Agency such that the Issuer is no longer in compliance with the requirements relating to credit
ratings of Securities Lending Counterparties. Generally, the Issuer will have no right to directly enforce
compliance by the obligor of a loaned Collateral Obligation with the terms of such Collateral Obligation,
will not have any voting or other contractual rights of ownership with respect to such Collateral
Obligation and will not have the benefit of the remedies that would normally be available to a holder of
such Collateral Obligation. One or more of the Initial Purchaser and Placement Agent and/or one or more
of their affiliates may borrow Collateral Obligations, which may create certain conflicts of interest. See
"—Relating to Certain Conflicts of Interest."
Insolvency Considerations With Respect to Issuers of Collateral Obligations May Affect the
Issuer's Rights
Various laws enacted for the protection of creditors may apply to the Collateral Obligations. The
information in this and the following paragraph is applicable with respect to U.S. issuers. Insolvency
considerations will differ with respect to non-U.S. issuers. If a court in a lawsuit brought by an unpaid
creditor or representative of creditors of an issuer of a Collateral Obligation, such as a trustee in
bankruptcy, were to find that the issuer did not receive fair consideration or reasonably equivalent value
for incurring the indebtedness constituting such Collateral Obligation and, after giving effect to such
indebtedness, the issuer (i) was insolvent, (ii) was engaged in a business for which the remaining assets of
such issuer constituted unreasonably small capital or (iii) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they mature, such court could determine to invalidate,
in whole or in part, such indebtedness as a fraudulent conveyance, to subordinate such indebtedness to
existing or future creditors of the issuer or to recover amounts previously paid by the issuer in satisfaction
45

of such indebtedness. The measure of insolvency for purposes of the foregoing will vary. Generally, an
issuer would be considered insolvent at a particular time if the sum of its debts were then greater than all
of its property at a fair valuation or if the present fair salable value of its assets were then less than the
amount that would be required to pay its probable liabilities on its existing debts as they became absolute
and matured. There can be no assurance as to what standard a court would apply in order to determine
whether the issuer was "insolvent" after giving effect to the incurrence of the indebtedness constituting
the Collateral Obligations or that, regardless of the method of valuation, a court would not determine that
the issuer was "insolvent" upon giving effect to such incurrence. In addition, in the event of the
insolvency of an issuer of a Collateral Obligation, payments made on such Collateral Obligations could be
subject to avoidance as a "preference" if made within a certain period of time (which may be as long as
one year under Federal bankruptcy law or even longer under state laws) before insolvency.
In general, if payments on Collateral Obligations are avoidable, whether as fraudulent
conveyances or preferences, such payments can be recaptured either from the initial recipient (such as the
Issuer) or from subsequent transferees of such payments (such as the holders of the Offered Securities).
To the extent that any such payments are recaptured from the Issuer, the resulting loss will be borne by
the holders of the Offered Securities in inverse order of seniority as described above under "—Relating to
the Offered Securities—The Subordination of the Class A-1 Notes, the Class A-2 Notes, the Class B
Notes, the Class C Notes, the Class D Notes and the Subordinated Notes Will Affect Their Right to
Payment." However, a court in a bankruptcy or insolvency proceeding would be able to direct the
recapture of any such payment from a holder of Offered Securities only to the extent that such court has
jurisdiction over such holder or its assets. Moreover, it is likely that avoidable payments could not be
recaptured directly from a holder that has given value in exchange for its Offered Security, in good faith
and without knowledge that the payments were avoidable. Nevertheless, since there is no judicial
precedent relating to a structured transaction such as the Offered Securities, there can be no assurance that
a holder of Offered Securities will be able to avoid recapture on this or any other basis.
Relating to Certain Conflicts of Interest.
In General, the Transaction Will Involve Various Potential and Actual Conflicts of Interest
Various potential and actual conflicts of interest may arise from the overall investment activity of
the Portfolio Manager, its clients and its affiliates and the Initial Purchaser and the Placement Agent and
their affiliates. The following briefly summarizes some of these conflicts, but is not intended to be an
exhaustive list of all such conflicts.
The Issuer Will be Subject to Various Conflicts of Interest Involving the Portfolio Manager
The Issuer may be subject to various conflicts of interest involving the Portfolio Manager, its
personnel, its affiliates, or their personnel (collectively, "Portfolio Manager Affiliates"), and the Other
HM Accounts (as defined below).
The Portfolio Manager and its Affiliates may invest, for their own account or for accounts for
which they have investment discretion, in securities that would be appropriate investments for the Issuer.
Such investments may be the same as or different from those made on behalf of the Issuer in securities or
other assets that the Portfolio Manager has declined to invest in for its own account, the accounts of any
of its Affiliates or the account of any other of its clients. The Portfolio Manager and its Affiliates may
also have equity and other investments in, may be lenders to, and may have other ongoing relationships
with, the issuers of Collateral Obligations. In particular, the Portfolio Manager and its Affiliates may
make and/or hold an investment in an issuer's securities that may be pari passu, senior or junior in
ranking to an investment in such issuer's securities made and/or held by the Issuer or in which partners,
46

security holders, officers, directors, agents or employees of such entities serve on boards of directors or
otherwise have ongoing relationships. Each of such ownership and other relationship may result in
securities laws restrictions on transactions in such securities by the Issuer and otherwise create conflicts
of interest for the Issuer. In such instances, the Portfolio Manager and its Affiliates may in their
discretion make investment recommendations and decisions that may be the same as or different from
those made with respect to the Issuer's investments. In addition, Affiliates and clients of the Portfolio
Manager may invest in securities, sell credit protection under a credit default swap referencing securities
or issue financial guaranty insurance policies covering securities (or make loans) that are senior to, or
have interests different from or adverse to, the Collateral Obligations. The Portfolio Manager may at
certain times be simultaneously seeking to sell investments for the Issuer and any similar entity for which
the Portfolio Manager serves as manager in the future, or its clients or Affiliates.
The Portfolio Manager intends to use its reasonable efforts to allocate such investment
opportunities among the Issuer and its other accounts on a pro rata or other equitable basis to the extent
possible under the prevailing facts and circumstances and in accordance with applicable law.
Notwithstanding the foregoing, for these and other reasons, not all accounts managed or advised by the
Portfolio Manager will participate in the gains or losses experienced by other accounts with similar
investment objectives. The Portfolio Manager has not previously managed a collateralized debt
obligation vehicle (or other investment vehicle) similar to the Issuer but expects in the future to serve as
portfolio manager or sub-manager for other similar vehicles and other clients who invest in assets of a
nature similar to those of the Issuer. The terms of these arrangements, including the fees attributable
thereto, may differ significantly from those of the Issuer. In particular, certain investment vehicles and
accounts managed by the Portfolio Manager may provide for fees (including incentive fees) to the
Portfolio Manager that are higher than the Management Fee payable by the Issuer under the Portfolio
Management Agreement.
Affirmative obligations may exist or may arise in the future whereby Affiliates of the Portfolio
Manager are obligated to offer certain investments to funds or accounts that Affiliates manage or advise
before or without the Portfolio Manager offering those investments to the Issuer.
There is no limitation or restriction on the Portfolio Manager or any of its Affiliates with regard
to acting as collateral advisor (or similar role) to other parties or persons. This and other future activities
of the Portfolio Manager and/or its Affiliates may give rise to additional conflicts of interest.
Various potential and actual conflicts of interest may arise from the overall investment activity of
the Portfolio Manager and its Affiliates. No provision in the Portfolio Management Agreement prevents
the Portfolio Manager or any of its Affiliates from rendering services of any kind to the issuer of any
obligation included in the Assets and its affiliates, the Trustee, the securityholders or any other Person.
Without prejudice to the generality of the foregoing, the Portfolio Manager, its Affiliates and the
directors, officers, employees and agents of the Portfolio Manager and its Affiliates may, among other
things: (a) serve as directors, partners, officers, employees, agents, nominees or signatories for any issuer
of any obligation included in the Assets; (b) receive fees for services rendered to the issuer of any
obligation included in the Assets or any affiliate thereof; (c) be retained to provide services unrelated to
the Portfolio Management Agreement, to the Issuer or its Affiliates, and be paid therefor; (d) be a secured
or unsecured creditor of, or hold an equity interest in, any issuer of any obligation included in the Assets;
(e) sell any Collateral Obligation or Eligible Investment to, or purchase any Collateral Assets from, the
Issuer while acting in the capacity of principal or agent; (f) underwrite, act as a distributor of or make a
market in any Collateral Obligation or Eligible Investment; and (g) serve as a member of any "creditors
board" with respect to any obligation included in the Assets which has become or may become a
Defaulted Security.
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The Portfolio Manager and its Affiliates currently provide and, in the future, will continue to
provide advisory and other services to clients that include issuers of securities similar to or the same as
the Collateral Obligations and affiliates of such issuers. In the course of managing the Collateral
Obligations held by the Issuers, the Portfolio Manager may consider its relationships with other clients
(including companies the securities of which are pledged to secure the Secured Notes) and its Affiliates.
In providing services to other clients, the Portfolio Manager and its Affiliates may recommend activities
that would compete with or otherwise adversely affect the Issuer.
The Portfolio Manager and any of its Affiliates may engage in any other business and furnish
investment management and advisory services to others which may include serving as Portfolio Manager
for, investing in, lending to, or being affiliated with, other entities organized to issue collateralized debt
obligations secured by securities such as the Collateral Obligations and other trusts and pooled
investments vehicles that acquire interests in, provide financing to, or otherwise deal with securities
issued by, issuers that would be suitable investments for the Issuer. The Portfolio Manager will be free,
in its sole discretion, to make recommendations to others, or effect transactions on behalf of itself or for
others, that may be the same as or different from those effected on behalf of the Issuer, and the Portfolio
Manager may furnish investment management and advisory services to others that may have investment
policies similar to those followed by the Portfolio Manager with respect to the Issuer and that may own
securities of the same class, or which are the same type, as the Collateral Obligations.
The Portfolio Manager may also, at certain times, be seeking to effect sales of assets on behalf of
the Issuer and on behalf of other clients for whom the Portfolio Manager serves as Portfolio Manager or
for any other clients or Affiliates. The Portfolio Manager may aggregate sales of securities placed with
respect to the Assets with similar sales being made simultaneously for other clients or other accounts
managed by the Portfolio Manager or with accounts of the Affiliates of the Portfolio Manager, if, in the
Portfolio Manager's reasonable business judgment, such aggregation will result in an overall economic
benefit to the Assets, taking into consideration the advantageous selling price, brokerage commission and
other expenses. However, no provision of the Portfolio Management Agreement requires the Portfolio
Manager or its Affiliates to execute orders as part of concurrent authorizations or to aggregate sales.
Nevertheless, the Portfolio Manager may, in the allocation of business, take into consideration research
and other brokerage services furnished to the Portfolio Manager or its Affiliates by brokers and dealers.
Such services may be used by the Portfolio Manager in connection with the Portfolio Manager's other
advisory services or investment operations.
Unless the Portfolio Manager determines in its sole judgment that such sale is appropriate, the
Portfolio Manager may refrain from directing the sale pursuant to the Portfolio Management Agreement
of securities issued by (i) entities of which the Portfolio Manager, its Affiliates or any of its or their
officers, directors or employees are directors or officers, (ii) entities for which the Portfolio Manager or
its Affiliates act as financial adviser or underwriter or (iii) entities about which the Portfolio Manager or
any of its Affiliates have information that the Portfolio Manager deems confidential or non-public or
otherwise might prohibit it from trading such securities in accordance with applicable law.
Pursuant to the Portfolio Management Agreement, the Issuer is permitted (i) to purchase and sell
Collateral Obligations from and to the Portfolio Manager or any Affiliate of the Portfolio Manager as
principal and (ii) to purchase and sell Collateral Obligations from and to any account or portfolio for
which the Portfolio Manager or any of its Affiliates acts as investment adviser, subject to compliance with
the applicable provisions of the Investment Advisers Act of 1940, as amended. In the foregoing
situations, the Portfolio Manager and its Affiliates may have a potentially conflicting division of loyalties
regarding both parties in the transaction.
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Furthermore, because the Portfolio Manager may bid at each auction, this could discourage some
potential bidders from participating in the Auctions.
As of the Closing Date, the Portfolio Manager is expected to hold $500,000 of Subordinated
Notes. The Portfolio Manager, its Affiliates and client accounts for which the Portfolio Manager or its
Affiliates act as investment adviser may also at times own one or more Classes of Offered Securities and
additional Subordinated Notes. Neither the Portfolio Manager nor any of its Affiliates is required to hold
any Offered Securities; consequently, the interests of the Portfolio Manager and the Noteholders could be
viewed as being less aligned than if the Portfolio Manager or any of its Affiliates were required to hold a
minimum amount of Offered Securities. At any given time, the Portfolio Manager and its Affiliates will
not be entitled to vote the Offered Securities held by the Portfolio Manager, its Affiliates and accounts for
which the Portfolio Manager or any Affiliate thereof acts as investment adviser (and for which the
Portfolio Manager or such Affiliate has discretionary authority) during the time that the Portfolio
Manager is serving as the Portfolio Manager for the Issuer with respect to any termination of any of the
express rights or obligations of the Portfolio Manager under the Portfolio Management Agreement or the
Indenture (including the exercise of any rights to remove the Portfolio Manager or terminate the Portfolio
Management Agreement), or any amendment or other modification of the Indenture increasing the rights
or decreasing the obligations of the Portfolio Manager (it being understood that any such action would
require the consent of the Portfolio Manager itself). However, at any given time the Portfolio Manager
and its Affiliates will be entitled to vote Offered Securities held by them and by such accounts with
respect to all other matters, including the exercise of remedies after an Event of Default or the approval of
or objection to a replacement Portfolio Manager.
Other conflicts of interest involving the Portfolio Manager may arise from the compensation
payable to the Portfolio Manager. The existence of the Subordinated Management Fee and the Incentive
Management Fee may create an incentive for the Portfolio Manager to approve or cause the Issuer to
make investments in more speculative Collateral than it would otherwise make in the absence of such
performance-based compensation.
See "The Portfolio Manager" and "The Portfolio Management Agreement" for further
information on the role of the Portfolio Manager.
The Issuer Will Be Subject to Various Conflicts of Interest Involving the Initial Purchaser
Various potential and actual conflicts of interest may arise as a result of the investment banking,
commercial banking, asset management, financing and financial advisory services and products provided
by JPMorgan Chase & Co. and its Affiliates (including JPMorgan, JPMorgan Chase Bank, National
Association ("JPMCB") and their Affiliates (together, the "JPMorgan Companies")), to the Issuer, the
Trustee, the Portfolio Manager, the issuers of the Collateral Obligations and others, as well as in
connection with the investment, trading and brokerage activities of the JPMorgan Companies. The
following briefly summarizes some of these conflicts, but is not intended to be an exhaustive list of all
such conflicts.
JPMorgan will serve as Initial Purchaser for the Secured Notes and as a placement agent for a
portion of the Subordinated Notes and will be paid fees and commissions for such service by the Issuer
from the proceeds of the issuance of the Offered Securities. One or more of the JPMorgan Companies
may from time to time hold Offered Securities for investment, trading or other purposes. The Issuer's
purchase of Collateral Obligations prior to the Closing Date was financed by affiliate(s) of the Initial
Purchaser. A portion of the proceeds of the offering of the Offered Securities will be applied by the
Issuer to repay the warehouse financing provided by such affiliate(s). The Issuer may have purchased and
sold prior to the Closing Date, and may purchase or sell after the Closing Date, Collateral Obligations
49

from, to or through, and purchase Synthetic Securities and enter into Hedge Agreements or Securities
Lending Agreements with, one or more of the JPMorgan Companies. Certain Eligible Investments may
be issued, managed or underwritten by one or more of the JPMorgan Companies. One or more of the
JPMorgan Companies may provide investment banking, commercial banking, asset management,
financing and financial advisory services and products to the Portfolio Manager, its affiliates, and funds
managed by the Portfolio Manager and its affiliates, and purchase, hold and sell, both for their respective
accounts or for the account of their respective clients, on a principal or agency basis, loans, securities, and
other obligations and financial instruments of the Portfolio Manager, its affiliates, and funds managed by
the Portfolio Manager and its affiliates. As a result of such transactions or arrangements, one or more of
the JPMorgan Companies may have interests adverse to those of the Issuer and holders of the Notes.
One or more of the JPMorgan Companies may:
• have placed or underwritten, or acted as a financial arranger, structuring agent or advisor in
connection with the original issuance of, or may act as a broker or dealer with respect to,
certain of the Collateral Obligations;
• act as trustee, paying agent and in other capacities in connection with certain of the Collateral
Obligations or other classes of securities issued by an issuer of a Collateral Obligation or an
affiliate thereof;
• be a counterparty to issuers of certain of the Collateral Obligations under swap or other
derivative agreements;
• lend to certain of the issuers of Collateral Obligations or their respective affiliates or receive
guarantees from the issuers of those Collateral Obligations or their respective affiliates;
• provide other investment banking, asset management, commercial banking, financing or
financial advisory services to the issuers of Collateral Obligations or their respective
affiliates; or
• have an equity interest, which may be a substantial equity interest, in certain issuers of the
Collateral Obligations or their respective affiliates.
When acting as a trustee, paying agent or in other service capacities with respect to a Collateral
Obligation, the JPMorgan Companies will be entitled to fees and expenses senior in priority to payments
to such Collateral Obligation. When acting as a trustee for other classes of securities issued by the issuer
of a Collateral Obligation or an affiliate thereof, the JPMorgan Companies will owe fiduciary duties to the
holders of such other classes of securities, which classes of securities may have differing interests from
the holders of the class of securities of which the Collateral Obligation is a part, and may take actions that
are adverse to the holders (including the Issuer) of the class of securities of which the Collateral
Obligation is a part. As a counterparty under swaps and other derivative agreements, the JPMorgan
Companies might take actions adverse to the interests of the Issuer, including, but not limited to,
demanding collateralization of its exposure under such agreements (if provided for thereunder) or
terminating such swaps or agreements in accordance with the terms thereof. In making and administering
loans and other obligations, the JPMorgan Companies might take actions including, but not limited to,
restructuring a loan, foreclosing on or exercising other remedies with respect to a loan, requiring
additional collateral or other credit enhancement, charging significant fees and interest, placing the
obligor in bankruptcy or demanding payment on a loan guarantee or under other credit enhancement. The
Issuer's purchase, holding and sale of Collateral Obligations may enhance the profitability or value of
investments made by the JPMorgan Companies in the issuers thereof. As a result of all such transactions
or arrangements between the JPMorgan Companies and issuers of Collateral Obligations or their
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espective affiliates, JPMorgan Chase & Co. may have interests that are contrary to the interests of the
Issuer and the holders of the Notes.
As part of their regular business, the JPMorgan Companies may also provide investment banking,
commercial banking, asset management, financing and financial advisory services and products to, and
purchase, hold and sell, both for their respective accounts or for the account of their respective clients, on
a principal or agency basis, loans, securities, and other obligations and financial instruments and engage
in private equity investment activities. The JPMorgan Companies will not be restricted in their
performance of any such services or in the types of debt or equity investments, which they may make. In
conducting the foregoing activities, the JPMorgan Companies will be acting for their own account or the
account of their customers and will have no obligation to act in the interest of the Issuer.
The JPMorgan Companies may, by virtue of the relationships described above or otherwise, at the
date hereof or at any time hereafter, be in possession of information regarding certain of the issuers of
Collateral Obligations and their respective affiliates, that is or may be material in the context of the
Offered Securities and that is or may not be known to the general public. None of the JPMorgan
Companies has any obligation, and the offering of the Offered Securities will not create any obligation on
their part, to disclose to any purchaser of the Offered Securities any such relationship or information,
whether or not confidential.
The Indenture and the Secured Notes
DESCRIPTION OF THE OFFERED SECURITIES
All of the Offered Securities will be issued pursuant to the Indenture. However, only the Secured
Notes will be secured obligations of the Issuer. The following summary describes certain provisions of
the Secured Notes and the Indenture and, to a limited extent, the Subordinated Notes. The summary does
not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of
the Indenture. Additional information regarding the Subordinated Notes appears under "—The
Subordinated Notes."
Status and Security
The Secured Notes will be limited recourse obligations of the Co-Issuers (except that the Class D
Notes will be limited recourse obligations of the Issuer only), secured as described below, and will rank in
priority with respect to each other as described herein. Under the terms of the Indenture, the Issuer will
grant to the Trustee a security interest in the Assets to secure the Issuer's obligations under the Indenture
and the Secured Notes. See "Security for the Secured Notes."
Payments of interest and principal on the Secured Notes will be made from the proceeds of the
Assets, in accordance with the priorities described under "Summary of Terms—Priority of Payments"
herein. The aggregate amount that will be available from the Assets for payment on the Secured Notes
and of certain expenses of the Co-Issuers on any Payment Date will be (i) the sum of Interest Proceeds
and Principal Proceeds for the period (a "Collection Period") commencing immediately following the
prior Collection Period (or on the Closing Date, in the case of the Collection Period relating to the first
Payment Date) and ending on the 8 th Business Day prior to such Payment Date or, in the case of (x) the
final Collection Period preceding the latest Stated Maturity of any Class of Notes or (y) the final
Collection Period preceding an Optional Redemption, ending on the day preceding such Stated Maturity
or the Redemption Date, respectively, plus (ii) any payments received on or before such Payment Date on
any Hedge Agreement and borrowings on such Payment Date under the Financed Amount Note. To the
51

extent these amounts are insufficient to meet payments due in respect of the Secured Notes and expenses
following liquidation of the Assets, the Co-Issuers will have no obligation to pay such deficiency.
Interest
The Secured Notes will bear stated interest from the Closing Date and such interest will be
payable in arrears on each quarterly Payment Date on the aggregate outstanding principal amount thereof
on the first day of the related Interest Accrual Period (after giving effect to payments of principal thereof
on such date). The period from and including the Closing Date to but excluding the first Payment Date
and each succeeding period from and including each Payment Date to but excluding the following
Payment Date until the principal of the Secured Notes is paid or made available for payment, is an
"Interest Accrual Period." For purposes of determining any Interest Accrual Period, if any Payment
Date is not a Business Day, then the Interest Accrual Period ending on such Payment Date shall be
extended to but shall exclude the date on which payment is required to be made pursuant to an adjustment
for legal holidays pursuant to the Indenture and the succeeding Interest Accrual Period shall begin on and
include such date.
The per annum stated interest rate payable on the Secured Notes of each Class (the "Interest
Rate" for such Class) with respect to each Interest Accrual Period will be the rate indicated under
"Summary of Terms—Principal Terms of the Offered Securities." As used herein, "Class" means, in the
case of (x) the Secured Notes, all of the Secured Notes having the same Interest Rate, Stated Maturity and
designation and (y) the Subordinated Notes, all of the Subordinated Notes.
So long as any more senior Class of Secured Notes is outstanding, to the extent that funds are not
available on any Payment Date to pay the full amount of interest on the Class B Notes, the Class C Notes
or the Class D Notes or if such interest is not paid in order to satisfy the Coverage Tests, such amounts
("Deferred Interest") will not be due and payable on such Payment Date, but will be deferred and added
to the principal balance of such Classes and, thereafter, will bear interest at the Interest Rate for such
Classes until paid, and the failure to pay such Deferred Interest on such Payment Date will not be an
Event of Default under the Indenture; provided, however, that any such Deferred Interest must, in any
case, be paid no later than the earlier of the Redemption Date or Stated Maturity of the relevant Class of
the Secured Notes. See "—The Indenture—Events of Default." Interest may be deferred (i) on the Class
B Notes as long as any Class A Note is outstanding, (ii) on the Class C Notes as long as any Class A
Notes or Class B Notes are outstanding and (iii) on the Class D Notes as long as any Class A Notes, Class
B Notes or Class C Notes are outstanding.
If any interest due and payable in respect of any Class A Note (or, if there are no Class A Notes
outstanding, any Class B Note or, if there are no Class B Notes outstanding, any Class C Note, or, if there
are no Class C Notes outstanding, any Class D Note) is not punctually paid or duly provided for on the
applicable Payment Date or at the applicable Stated Maturity and such default continues for five Business
Days, an Event of Default will occur. To the extent lawful and enforceable, interest on such defaulted
interest will accrue at a per annum rate equal to the Interest Rate applicable to such Notes from time to
time in each case until paid.
Interest on the Secured Notes will be calculated on the basis of the actual number of days elapsed
in the applicable Interest Accrual Period divided by 360.
The Issuer shall initially appoint the Trustee as calculation agent (the "Calculation Agent") for
purposes of determining LIBOR for each Interest Accrual Period. The Calculation Agent will determine
LIBOR for each Interest Accrual Period on the second London Banking Day preceding the first day of
each Interest Accrual Period (each, an "Interest Determination Date").
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"LIBOR" with respect to the Notes, for any Interest Accrual Period will equal (a) the rate
appearing on the Telerate Screen for deposits with a term of three months; provided, that LIBOR for the
first Interest Accrual Period will be interpolated from the rates appearing on the Telerate Screen for
deposits with terms of 6 months and 7 months or (b) if such rate is unavailable at the time LIBOR is to be
determined, LIBOR shall be determined on the basis of the rates at which deposits in U.S. Dollars are
offered by four major banks in the London market selected by the Calculation Agent after consultation
with the Portfolio Manager (the "Reference Banks") at approximately 11:00 a.m., London time, on the
Interest Determination Date to prime banks in the London interbank market for a period approximately
equal to the Interest Accrual Period and an amount approximately equal to the amount of the aggregate
outstanding principal amount of the Secured Notes. The Calculation Agent will request the principal
London office of each Reference Bank to provide a quotation of its rate. If at least two such quotations
are provided, LIBOR shall be the arithmetic mean of such quotations (rounded upward to the next higher
1/100). If fewer than two quotations are provided as requested, LIBOR with respect to such Interest
Accrual Period will be the arithmetic mean of the rates quoted by three major banks in New York, New
York selected by the Calculation Agent after consultation with the Portfolio Manager at approximately
11:00 a.m., New York Time, on such Interest Determination Date for loans in U.S. Dollars to leading
European banks for a term approximately equal to such Interest Accrual Period and an amount
approximately equal to the aggregate outstanding principal amount of the Secured Notes. If the
Calculation Agent is required but is unable to determine a rate in accordance with at least one of the
procedures described above, LIBOR will be LIBOR as determined on the previous Interest Determination
Date. "LIBOR" when used with respect to a Collateral Obligation, means the "libor" rate determined in
accordance with the terms of such Collateral Obligation.
"London Banking Day" means a day on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency deposits) in London, England.
"Telerate Screen" means the rates for deposits in dollars which appear on Page 3750 of the Dow
Jones Telerate Service (or such other page that may replace that page on such service for the purpose of
displaying comparable rates) as reported by Bloomberg Financial Markets Commodities News as of
11:00 a.m., London time, on the Interest Determination Date.
As soon as possible after 11:00 a.m. London time on each Interest Determination Date, but in no
event later than 11:00 a.m. London time on the London Banking Day immediately following each Interest
Determination Date, the Calculation Agent will calculate the Interest Rate for each Class of Secured
Notes for the next Interest Accrual Period and the amount of interest payable in respect of each $100,000
outstanding principal amount of each Class of Secured Notes (the "Note Interest Amount" with respect
thereto) (in each case, rounded to the nearest cent, with half a cent being rounded upward) on the related
Payment Date to be given to the Co-Issuers, the Trustee, the Paying Agents (as defined herein), the holder
of the Financed Amount Note, Euroclear, Clearstream, the Portfolio Manager and, so long as any Secured
Notes are listed thereon, the Irish Stock Exchange. The Calculation Agent will also specify to the Co-
Issuers the quotations upon which the Interest Rate for each Class of Secured Notes are based, and in any
event the Calculation Agent shall notify the Co-Issuers before 5:00 p.m. (London time) on every Interest
Determination Date that either: (i) it has determined or is in the process of determining the Interest Rate
and Note Interest Amount for each Class of Secured Notes or (ii) it has not determined and is not in the
process of determining any such Interest Rate or Note Interest Amount, together with its reasons therefor.
The Issuer will agree that for so long as any Secured Notes remain outstanding there will at all
times be a Calculation Agent which shall not control, be controlled by or be under common control with
the Issuer or its affiliates or the Portfolio Manager or its affiliates. The Calculation Agent may be
removed by the Issuer or the Portfolio Manager, on behalf of the Issuer, at any time. If the Calculation
Agent is unable or unwilling to act as such or is removed by the Issuer or the Portfolio Manager, on
53

ehalf of the Issuer, or if the Calculation Agent fails to determine any of the information required to be
published in the Daily Official List of the Irish Stock Exchange, the Issuer or the Portfolio Manager, on
behalf of the Issuer, will be required to appoint promptly a replacement Calculation Agent which does not
control and is not controlled by or under common control with the Issuer, the Portfolio Manager or their
respective affiliates. In addition, for so long as any Offered Securities are listed on the Irish Stock
Exchange and the rules of such exchange so require, notice of the appointment of any replacement
Calculation Agent will be published in the Irish Stock Exchange's Daily Official List, as promptly as
practicable after such appointment.
Principal
The Secured Notes of each Class will mature at par on the Payment Date in May 2021 (the
"Stated Maturity" for each Class of Secured Notes), unless previously redeemed or repaid prior thereto
as described herein. During the Reinvestment Period, principal will not be payable on the Secured Notes
except with respect to Deferred Interest and in the limited circumstances described under "—Optional
Redemption," "—Mandatory Redemption," "—Special Redemption," and "Summary of Terms—Priority
of Payments—Application of Principal Proceeds." On each Payment Date after the Reinvestment Period,
Principal Proceeds will be payable on the Secured Notes in accordance with the priorities set forth under
"Summary of Terms—Priority of Payments—Application of Principal Proceeds."
At any time during which the Coverage Tests are not met, principal payments on the Secured
Notes will be made as described under "—Mandatory Redemption."
The average life of each class of Secured Notes is expected to be less than the number of years
until the Stated Maturity of such Secured Notes. See "Risk Factors—Relating to the Offered Securities—
The Weighted Average Lives of the Notes May Vary."
Any payment of principal on a Class of Secured Notes will be made by the Trustee on a pro rata
basis among the holders of such Class of Notes according to the respective unpaid principal amounts
thereof outstanding immediately prior to such payment.
Optional Redemption
General—Redemption of Notes. The Secured Notes shall be redeemable by the applicable Issuers
at the written direction of the holders of a majority of the aggregate outstanding principal amount of the
Subordinated Notes as follows: (i) based upon such written direction, the Secured Notes will be redeemed
in whole but not in part on any Payment Date after the end of the Non-Call Period (the "Optional
Redemption Date") from the proceeds of the liquidation of the Assets and/or from Refinancing Proceeds,
(ii) based upon such written direction, the Secured Notes will be redeemed in part on any Payment Date
after the end of the Non-Call Period as long as (x) the Class of Secured Notes to be redeemed represents
not less than the entire Class of such Secured Notes and (y) the Redemption Price thereof shall be paid
solely from Refinancing Proceeds and (iii) based upon such written direction, the Secured Notes will be
redeemed in whole but not in part, upon the occurrence of a Withholding Tax Event. In connection with
any such redemption, the Secured Notes shall be redeemed at the applicable Redemption Price at the
written direction of holders of at least a majority of the aggregate outstanding principal amount of the
Subordinated Notes, which direction must be given to the Issuer, the Trustee and the Portfolio Manager
not later than 90 days prior to the Payment Date on which such redemption is to be made. In such event,
the Portfolio Manager in its sole discretion on behalf of the Issuer will (unless a Refinancing shall occur)
direct the sale of all or part of the Assets in an amount sufficient that the proceeds of sale therefrom and
all other funds available for such purpose in the Collection Account and the Payment Account will be at
least sufficient to redeem all of the Secured Notes and to pay all administrative and other fees and
54

expenses payable under "Summary of Terms—Priority of Payments—Application of Interest Proceeds"
(including, without limitation, any amounts due to the Hedge Counterparties and all amounts owing under
the Financed Amount Note). If such proceeds of sale and all other funds available for such purpose in the
Collection Account and the Payment Account would not be sufficient to redeem all Secured Notes and to
pay such fees and expenses, the Secured Notes may not be redeemed. The Portfolio Manager, in its
discretion, may effect the sale of all or any of the Collateral Obligations or other Assets through the direct
sale of such Collateral Obligations or other Assets or by participation or other arrangement. In addition to
(or in lieu of) a sale of Collateral Obligations and/or Eligible Investments in the manner provided above,
any Class or Classes of Secured Notes may be redeemed from Refinancing Proceeds if a majority of the
Subordinated Notes direct the Trustee to direct the applicable Issuers to redeem any Class or Class of the
Secured Notes by obtaining an issuance of replacement securities or, in the case of a redemption of the
Secured Notes in whole but not in part, a loan, the terms of which issuance or loan will be negotiated by
the Portfolio Manager on behalf of the Issuer, from one or more financial institutions or purchasers (a
refinancing provided pursuant to such loan or issuance, a "Refinancing"); provided, that the terms of
such Refinancing and any financial institutions acting as lenders thereunder or purchasers thereof must be
acceptable to the Portfolio Manager and a majority of the Subordinated Notes and such Refinancing
otherwise satisfies the conditions described below. Prior to executing any Refinancing, the Issuer shall
satisfy the Global Rating Agency Condition in relation to such Refinancing.
In the case of a Refinancing upon a redemption of the Secured Notes in whole but not in part as
described in clause (i) of the above paragraph, the Issuer shall obtain a Refinancing only if (i) the cash
proceeds from the Refinancing (the "Refinancing Proceeds"), all Disposition Proceeds from the sale of
Collateral Obligations and Eligible Investments, any Refinancing Proceeds and all other available funds
in the Accounts will be at least sufficient to redeem simultaneously the Secured Notes, in whole but not in
part, and to pay the other amounts included in the aggregate Redemption Price and all accrued and unpaid
Administrative Expenses (regardless of the Administrative Expense Cap), including the reasonable costs,
charges and expenses incurred by the Trustee in connection with such Refinancing, (ii) the Disposition
Proceeds, Refinancing Proceeds and other available funds are used (to the extent necessary) to make such
redemption and (iii) the agreements relating to the Refinancing contain limited recourse and non-petition
provisions equivalent to those applicable to the Secured Notes being redeemed, as set forth in the
Indenture. In the case of a Refinancing upon a redemption of the Secured Notes in part by Class as
described in clause (ii) of the above paragraph, the Issuer shall obtain a Refinancing only if (i) the Global
Rating Agency Condition has been satisfied with respect to any remaining Secured Notes that were not
the subject of the Refinancing, (ii) the Refinancing Proceeds will be at least sufficient to pay the
aggregate Redemption Price of the Class or Classes of Secured Notes subject to Refinancing, (iii) the
aggregate principal amount of any securities providing the Refinancing is no greater than the aggregate
principal amount of the Secured Notes being redeemed with the proceeds of such securities plus an
amount equal to the reasonable fees, costs, charges and expenses incurred in connection with such
Refinancing, (iv) the stated maturity of each class of securities providing the Refinancing is no earlier
than the corresponding Stated Maturity of each Class of Secured Notes being refinanced, (v) the
Refinancing Proceeds are used (to the extent necessary) to make such redemption, (vi) the agreements
relating to the Refinancing contain limited recourse and non-petition provisions equivalent to those
applicable to the Secured Notes being redeemed, as set forth in the Indenture, (vii) the reasonable fees,
costs, charges and expenses incurred in connection with such Refinancing have been paid or will be
adequately provided for from the Refinancing Proceeds (except for expenses owed to Persons that agree
to be paid solely as Administrative Expenses) and (viii) the class of securities providing the Refinancing
shall not have any voting rights in addition to those of the Class of Secured Notes being refinanced.
Redemption Procedures. Notice of optional redemption will be given by first-class mail, postage
prepaid, mailed not later than ten Business Days prior to the applicable Optional Redemption Date to each
holder of Secured Notes at such holder's address in the register maintained by the registrar under the
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Indenture. In addition, for so long as any Offered Securities are listed on the Irish Stock Exchange and so
long as the rules of such exchange so require, notice of Optional Redemption to the holders of such
Offered Securities shall also be given by publication in the Daily Official List of the Irish Stock
Exchange. Secured Notes called for redemption must be surrendered at the office of any paying agent
(each, a "Paying Agent") appointed under the Indenture in order to receive the Redemption Price. The
initial Paying Agents for the Secured Notes will be the Trustee and, so long as any Offered Securities are
listed on the Irish Stock Exchange, RSM Robson Rhodes LLP (the "Irish Paying Agent and Listing
Agent").
The Co-Issuers will have the option to withdraw any such notice of redemption up to and
including the day on which the Portfolio Manager is required to deliver to the Trustee the sale agreement
or agreements or certifications as described in the following paragraph. Any withdrawal of such notice of
redemption will be made by written notice to the Trustee and the Portfolio Manager and will be made
only if the Portfolio Manager on behalf of the Issuer is unable to deliver the sale agreement or agreements
or certifications as described in the following paragraph in form satisfactory to the Trustee. If the Co-
Issuers so withdraw any notice of redemption or are otherwise unable to complete redemption of the
Secured Notes, the proceeds received from the sale of any Collateral Obligations and other Assets sold in
contemplation of such redemption may during the Reinvestment Period, at the Portfolio Manager's
discretion, be reinvested in accordance with the Investment Criteria described herein. In addition, the
holders of a majority of the aggregate outstanding principal amount of the Subordinated Notes shall have
the option to withdraw any such notice of redemption up to and including the day that is eleven (11)
Business Days prior to such Redemption Date.
No Secured Notes or Subordinated Notes may be optionally redeemed unless (i) at least ten
Business Days before the scheduled Optional Redemption Date the Portfolio Manager shall have
furnished to the Trustee evidence, in form satisfactory to the Trustee, that the Issuer (as may be directed
by the Portfolio Manager) has entered into a binding agreement or agreements with a financial or other
institution or 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) are rated (or whose obligations are
supported by a financial or other institution whose short-term unsecured debt obligations are rated) at
least "A-1+" by S&P and at least "P-1" by Moody's to purchase (directly or by participation or other
arrangement), not later than the Business Day immediately preceding the scheduled Optional Redemption
Date in immediately available funds, all or part of the Collateral Obligations and/or any Hedge
Agreements at a purchase price at least equal to an amount sufficient, together with the Eligible
Investments maturing (or putable to the issuer thereof at par) on or prior to the scheduled Optional
Redemption Date, Eligible Investments redeemed by the Issuer and any payments to be received in
respect of any Hedge Agreements, to pay all administrative and other fees and expenses payable in
accordance with the priority of payments and to redeem all of the Notes on the scheduled Optional
Redemption Date at the applicable Redemption Price, or (ii) prior to selling any Collateral Obligations
and/or Eligible Investments, the Portfolio Manager shall certify to the Trustee that, in its judgment, the
aggregate sum of (A) expected proceeds from Hedge Agreements and the sale of Eligible Investments,
and (B) for each Collateral Obligation, the product of its principal balance and its market value (expressed
as a percentage of its principal balance) and its Applicable Advance Rate, shall exceed the sum of (X) the
aggregate Redemption Prices of the outstanding Secured Notes and (Y) all administrative and other fees
and expenses payable pursuant to the priority of payments. Any certification delivered by the Portfolio
Manager pursuant to this paragraph shall evidence that the expected proceeds from the sale (directly or by
participation or other arrangement) of any Collateral Obligations, Eligible Investments and/or Hedge
Agreements shall exceed the sum of (x) the aggregate Redemption Prices of the outstanding Secured
Notes and (y) all administrative and other fees payable under the priority of payments.
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After it has delivered a notice of redemption as provided in the Indenture, the Issuer shall not
terminate any Hedge Agreement until such notice is no longer revocable (unless the termination of such
Hedge Agreement may be rescinded upon revocation).
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 Note selected for redemption shall not impair or affect the validity of the redemption
of any other Notes.
Mandatory Redemption
If a Coverage Test (as described under "Security for the Secured Notes—The Coverage Tests and
the Reinvestment Overcollateralization Test") is not met on any Determination Date on which such
Coverage Test is applicable, the Issuer will be required to apply available amounts in the Payment
Account on the related Payment Date to make payments in accordance with the Note Payment Sequence
(a "Mandatory Redemption") to the extent necessary to achieve compliance with such Coverage Tests
(except that (i) upon a Class D Coverage Test failure during the Reinvestment Period, Interest Proceeds
will be used to pay principal of the Class D Notes (but not any other Notes) in accordance with the
Priority of Payments and (ii) no Principal Proceeds will be used to pay principal of the Notes upon a Class
D Coverage Test failure), as described under "Summary of Terms—Priority of Payments."
Special Redemption
The Secured Notes will be subject to redemption in part by the Co-Issuers or the Issuer, as
applicable, on any Payment Date (i) during the Reinvestment Period if the Portfolio Manager at its
discretion notifies the Trustee that it has been unable, for a period of at least 20 consecutive Business
Days, to identify additional Collateral Obligations that are deemed appropriate by the Portfolio Manager
in its sole discretion and which would meet the criteria for reinvestment described under "Security for the
Secured Notes—Sales of Collateral Obligations; Additional Collateral Obligations and Investment
Criteria" in sufficient amounts to permit the investment or reinvestment of all or a portion of the funds
then in the Collection Account that are to be invested in additional Collateral Obligations or (ii) after the
Ramp-Up Period if the Portfolio Manager notifies the Trustee that a redemption is required in order to
obtain from each Rating Agency its written confirmation of its initial ratings of the Secured Notes (in
either case, a "Special Redemption"). On the first Payment Date following the Collection Period in
which such notice is given (a "Special Redemption Date"), the amount in the Collection Account
representing Principal Proceeds which (1) the Portfolio Manager has determined cannot be reinvested in
additional Collateral Obligations or (2) must be applied to redeem the Secured Notes in order to obtain
confirmation from each of the Rating Agencies of the initial ratings of the Secured Notes (such amount,
the "Special Redemption Amount"), as the case may be, will be applied as described under "Summary
of Terms—Priority of Payments—Application of Principal Proceeds." Notice of Special Redemption will
be given by the Trustee by first class mail, postage prepaid, mailed not less than three Business Days prior
to the applicable Special Redemption Date to each holder of Secured Notes affected thereby at such
holder's address in the register maintained by the applicable registrar under the Indenture. In addition, for
so long as any Offered Securities are listed on the Irish Stock Exchange and so long as the rules of such
exchange so require, notice of Special Redemption to the holders of such Offered Securities shall also be
given by publication in the Daily Official List of the Irish Stock Exchange.
Cancellation
All Notes that are redeemed or paid in full and surrendered for cancellation as described herein
will forthwith be canceled and may not be reissued or resold.
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Entitlement to Payments
Payments in respect of principal and interest on the Notes will be made to the person in whose
name the Note is registered fifteen days prior to the applicable Payment Date (the "Record Date").
Payments on Certificated Notes will be made in U.S. Dollars by wire transfer, as directed by the investor,
in immediately available funds to the investor; provided, that wiring instructions have been provided to
the Trustee and, if such payment is to be made by the Irish Paying Agent and Listing Agent, such Paying
Agent, on or before the related Record Date and provided, further, that if appropriate instructions for any
such wire transfer are not received by the Record Date, then such payment shall be made by check drawn
on a U.S. bank mailed to such holder of a Note at such holder's address specified in the applicable register
maintained by the Trustee. Final payments in respect of principal on the Notes will be made only against
surrender of the Notes at the office of any Paying Agent appointed under the Indenture.
Payments in respect of the principal and interest of any Global Securities or Regulation S Global
Subordinated Notes will be made to DTC or its nominee, as the registered owner thereof. Neither the Co-
Issuers, the Portfolio Manager, the Trustee nor any Paying Agent will have any responsibility or liability
for any aspect of the records relating to or payments made on account of beneficial ownership interests in
Global Securities or Regulation S Global Subordinated Notes or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests. The Co-Issuers expect that DTC or
its nominee, upon receipt of any payment of principal or interest in respect of a Global Security or
Regulation S Global Subordinated Note representing a Class of Notes, held by it or its nominee, will
immediately credit participants' accounts (through which, in the case of Regulation S Global Securities or
Regulation S Global Subordinated Notes, Euroclear and Clearstream hold their respective interests) with
payments in amounts proportionate to their respective beneficial interests in the stated original principal
amount of a Global Security or Regulation S Global Subordinated Note for a Class of Notes, as shown on
the records of DTC or its nominee. The Co-Issuers also expect that payments by participants to owners of
beneficial interests in a Global Security or Regulation S Global Subordinated Note held through the
participants 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 the customers. The
payments will be the responsibility of the participants.
Prescription. Except as otherwise required by applicable law, claims by holders of Notes in
respect of principal and interest must be made to the Trustee or any Paying Agent if made within two
years of such principal or interest becoming due and payable. Any funds deposited with the Trustee or
any Paying Agent in trust for the payment of principal or interest remaining unclaimed for two years after
such principal or interest has become due and payable shall be paid to the Issuer and, if applicable, the
Co-Issuer, pursuant to the Indenture; and the holder of a Note shall thereafter, as an unsecured general
creditor, look only to the Issuer and, if applicable, the Co-Issuer, for payment of such amounts and all
liability of the Trustee and any Paying Agent with respect to such trust funds shall thereupon cease.
Priority of Payments
On each Payment Date, Interest Proceeds will be applied in the order of priority described under
"Summary of Terms—Priority of Payments—Application of Interest Proceeds."
On each Payment Date, Principal Proceeds will be applied in the order of priority described under
"Summary of Terms—Priority of Payments—Application of Principal Proceeds."
For so long as any Class of Offered Securities is listed on the Irish Stock Exchange, the Trustee at
the direction of the Issuer will render an accounting in the form specified in the Indenture to the Irish
Stock Exchange prior to the related Payment Date which will contain the aggregate outstanding principal
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amount of the Offered Securities of each such Class at the beginning of the Interest Accrual Period and
such amount as a percentage of the original aggregate outstanding principal amount of the Secured Notes
of such Class, the amount of principal payments to be made on the Secured Notes of such Class on the
next Payment Date, the amount of any Deferred Interest on any such Class of Secured Notes, and the
aggregate outstanding principal amount of the Secured Notes of such Class after giving effect to the
principal payments, if any, on the next Payment Date and such amount as a percentage of the original
aggregate outstanding principal amount of the Secured Notes of such Class. In addition, for so long as
any Offered Securities are listed on the Irish Stock Exchange, such accounting in the form specified in the
Indenture will be obtainable free of charge upon request at the offices of the Irish Paying Agent and
Listing Agent.
The Indenture
The following summary describes certain provisions of the Indenture among the Co-Issuers and
the Trustee to be dated as of the Closing Date. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the provisions of the Indenture.
Events of Default. An "Event of Default" is defined in the Indenture as:
(a) a default in the payment, when due and payable, of (i) any interest on any Class A Note
or, if there are no Class A Notes outstanding, any Class B Note or, if there are no Class A Notes or Class
B Notes outstanding, any Class C Note or, if there are no Class A Notes, Class B Notes or Class C Notes
outstanding, any Class D Notes and the continuation of any such default for five Business Days (or, in the
case of a default in payment resulting solely from an administrative error or omission by the Trustee, the
Administrator, any Paying Agent or the Note Registrar or by any bank or third party institution involved
in respect of such payments or any combination of such parties, such default continues for a period of
seven Business Days after the Trustee has actual knowledge of such administrative error), or (ii) any
principal, interest, or Deferred Interest on, or any Redemption Price in respect of, any Secured Note at its
Stated Maturity or any Redemption Date (or, in the case of a default in payment resulting solely from an
administrative error or omission by the Trustee, the Administrator, any Paying Agent or the Note
Registrar or by any bank or third party institution involved in respect of such payments or any
combination of such parties, such default continues for a period of seven Business Days after the Trustee
has actual knowledge of such administrative error);
(b) the failure on any Payment Date to disburse amounts available in the Payment Account in
accordance with the priority of payments set forth in the Indenture and continuation of such failure for a
period of five Business Days (or, in the case of a default in payment resulting solely from an
administrative error or omission by the Trustee, the Administrator, any Paying Agent or the Note
Registrar or by any bank or third party institution involved in respect of such payments or any
combination of such parties, such default continues for a period of seven Business Days after the Trustee
has actual knowledge of such administrative error);
(c) either of the Co-Issuers or the Assets becomes an investment company required to be
registered under the Investment Company Act;
(d) except as otherwise provided in this definition of "Event of Default", a default in the
performance, or breach, of any other covenant or other agreement of the Issuer or the Co-Issuer in the
Indenture (it being understood, without limiting the generality of the foregoing, that any failure to meet
any Concentration Limitation, Collateral Quality Test or Coverage Test is not an Event of Default), or the
failure of any representation or warranty of the Issuer or the Co-Issuer made in the Indenture or in any
certificate or other writing delivered pursuant thereto or in connection therewith to be correct in all
59

material respects when the same shall have been made, which event is reasonably expected to have a
material adverse effect on any holders of the Notes and the continuation of such default, breach or failure
for a period of 45 days after notice to the Issuer or the Co-Issuer, as applicable, and the Portfolio Manager
by registered or certified mail or overnight courier, by the Trustee, the Issuer, the Co-Issuer or the
Portfolio Manager or to the Co-Issuers, the Portfolio Manager and the Trustee by a majority 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" under the Indenture;
(e)
Co-Issuers; or
certain events of bankruptcy, insolvency, receivership or reorganization of either of the
(f) on any Measurement Date, failure of the quotient of (i) the Collateral Principal Amount
plus the Market Value of all Defaulted Obligations (without giving effect to the proviso in subclause (iii)
of the definition of "Market Value") divided by (ii) the aggregate outstanding principal amount of the
Class A-1 Notes, to equal or exceed 100%.
If an Event of Default occurs and is continuing (other than an Event of Default referred to in
clause (e) above), the Trustee shall, upon the written direction of the holders of a majority in principal
amount of the Notes of the Controlling Class by notice to the applicable Co-Issuers and each Rating
Agency, declare the principal of and accrued interest on the Secured Notes to be immediately due and
payable. If an Event of Default described in clause (e) above occurs, such an acceleration will occur
automatically. The "Controlling Class" will be the Class A-1 Notes so long as any Class A-1 Notes are
outstanding; then the Class A-2 Notes so long as any Class A-2 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; and then the
Subordinated Notes.
If an Event of Default has occurred and is continuing, the Trustee will retain the Assets intact and
collect all payments in respect of the Assets unless either (i) the Trustee determines that the anticipated
proceeds of a sale or liquidation of the Assets (after deducting the reasonable expenses of such sale or
liquidation) would be sufficient to discharge in full the amounts then due (or, in the case of interest,
accrued) and unpaid on the Secured Notes for principal and interest (including Deferred Interest) all
Administrative Expenses and all amounts payable prior to payment of principal on such Secured Notes
(including amounts due and owing as Administrative Expenses and amounts payable to any Hedge
Counterparty upon liquidation of the Assets and all amounts owing under the Financed Amount Note),
and the Financed Amount Balance to the holder of the Financed Amount Note, and a majority of the
aggregate outstanding principal amount of the Controlling Class agrees with such determination; (ii) the
holders of at least (A) a majority of the aggregate outstanding principal amount of the Class A-1 Notes
and (B) 66⅔% of the aggregate outstanding principal amount of each of (1) the Class A-2 Notes, (2) the
Class B Notes, (3) the Class C Notes and (4) the Class D Notes, direct the sale and liquidation of the
Assets or (iii) with respect to an Event of Default pursuant to clause (f) above, the Holders of at least (A)
a majority of the aggregate outstanding principal amount of the Class A-1 Notes and (B) 66⅔% of the
aggregate outstanding principal amount of the Class A-2 Notes, the Class B Notes, the Class C Notes and
the Class D Notes (voting together as a single class), direct the sale and liquidation of the Assets.
The holders of a majority of the aggregate outstanding principal amount of the Controlling Class
will 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 proceeding 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 the Indenture, (b) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction, (c) the Trustee shall have been provided with
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indemnity reasonably satisfactory to it, and (d) notwithstanding the foregoing, any direction to the Trustee
to undertake a sale of Assets may be given only in accordance with the preceding paragraph and the
applicable provisions of the Indenture.
Subject to the provisions of the Indenture relating to the duties of the Trustee, the Trustee will be
under no obligation to exercise the rights or powers vested in it under the Indenture in respect of an Event
of Default, at the request or direction of the holders of any Notes unless such holders have provided to the
Trustee security or indemnity reasonably satisfactory to the Trustee. The holders of a majority in
aggregate outstanding principal amount of the Notes of the Controlling Class may, in certain cases, waive
any default with respect to such Notes, except a default (a) in the payment of the principal of any Secured
Note (which may be waived, in the case of a default in the payment of principal of any Secured Note,
with the consent of each holder of such Note), (b) in the payment of interest on the Notes of the
Controlling Class (which may be waived with the consent of the holders of 100% of the Controlling
Class) or (c) in respect of a provision of the Indenture that cannot be modified or amended without the
waiver or consent of the holder of each such outstanding Note adversely affected thereby (which may be
waived with the consent of each such holder).
No holder of a Note will have the right to institute any proceeding with respect to the Indenture
unless (i) such holder previously has given to the Trustee written notice of an Event of Default, (ii) the
holders of not less than 25% in aggregate outstanding principal amount of the Notes of the Controlling
Class have made a written request upon the Trustee to institute such proceedings in its own name as
Trustee and such holders have provided the Trustee indemnity reasonably satisfactory to the Trustee, (iii)
the Trustee, for 30 days after its receipt of such notice, request and provision of such indemnity to the
Trustee, has failed to institute any such proceeding and (iv) no direction inconsistent with such written
request has been given to the Trustee during such 30-day period by the holders of a majority of the
aggregate outstanding principal amount of the Controlling Class.
In determining whether the holders of the requisite aggregate outstanding principal amount have
given any request, demand, authorization, direction, notice, consent or waiver under the Indenture, (a)
Notes owned by the Issuer, the Co–Issuer, or (only in the case of a vote to remove or replace the Portfolio
Manager) the Portfolio Manager or any affiliate of the Portfolio Manager, or any other obligor upon the
Notes or any affiliate thereof shall be disregarded and deemed not to be outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that the Trustee knows to be so owned shall
be so disregarded and (b) Notes 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 Notes and that the pledgee is not the Issuer, the Co–Issuer, the Portfolio Manager or any
other obligor upon the Notes or any affiliate of the Issuer, the Co–Issuer, the Portfolio Manager or such
other obligor.
Notices. Notices to the holders of the Notes shall be given by first class mail, postage prepaid, to
registered holders of Notes at each such holder's address appearing in the register maintained by the
Trustee. In addition, for so long as the Offered Securities are listed on the Irish Stock Exchange and so
long as the rules of such exchange so require, notices to the holders of such Offered Securities shall also
be given by publication in the Daily Official List.
Modification of Indenture. With (i) the consent of the holders of not less than a majority in
aggregate outstanding principal amount of the Secured Notes of each Class materially and adversely
affected thereby and the consent of the holders of not less than a majority of the aggregate outstanding
principal amount of the Subordinated Notes (if the Subordinated Notes are materially and adversely
affected thereby) and (ii) the consent of the Portfolio Manager, the Trustee and the Co-Issuers may
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execute one or more supplemental indentures to add provisions to, or change in any manner or eliminate
any provisions of, the Indenture or modify in any manner the rights of the holders of the Notes of such
Class. The Trustee shall be entitled to conclusively rely on an opinion of counsel as to whether or not the
holders of Notes would be materially and adversely affected by such change. Such determination shall be
conclusive and binding on all present and future holders. However, the Issuer shall not enter into any
such supplemental indenture if any Hedge Counterparty would be materially and adversely affected by
such supplemental indenture and notifies the Issuer and the Trustee thereof without the prior written
consent of such Hedge Counterparty, and the Issuer shall not enter into any such supplemental indenture
if the holder of the Financed Amount Note would be materially and adversely affected by such
supplemental indenture and notifies the Issuer and the Trustee thereof without the prior written consent of
the holder of the Financed Amount Note.
Without the consent of the holders of each outstanding Note materially and adversely affected
thereby, however, no such supplemental indenture described above may:
(i) change the Stated Maturity of the principal of or the due date of any installment
of interest on any Secured Note, reduce the principal amount thereof or the rate of interest thereon
or the Redemption Price with respect to any Offered Security, or change the earliest date on
which Notes of any Class may be redeemed, change the provisions of the Indenture relating to the
application of proceeds of any Assets to the payment of principal of or interest on Secured Notes
or distributions on the Subordinated Notes or change any place where, or the coin or currency in
which, Notes or the principal thereof or interest thereon 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 principal amount of holders
of Notes 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 the Indenture or certain
defaults thereunder or their consequences provided for in the Indenture;
(iii)
Indenture;
impair or adversely affect the Assets except as otherwise permitted in the
(iv) except as otherwise permitted by the Indenture, permit the creation of any lien
ranking prior to or on a parity with the lien of the Indenture with respect to any part of the Assets
or terminate such lien on any property at any time subject thereto or deprive the holder of any
Secured Note of the security afforded by the lien of the Indenture;
(v) reduce the percentage of the aggregate outstanding principal amount of holders
of Secured Notes of each Class whose consent is required to request the Trustee to preserve the
Assets or rescind the Trustee's election to preserve the Assets or to sell or liquidate the Assets
pursuant to the Indenture;
(vi) modify any of the provisions of the Indenture with respect to supplemental
indentures, except to increase the percentage of outstanding Notes the consent of the holders of
which is required for any such action or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the holder of each Note outstanding and
affected thereby;
(vii) modify the definition of the term "outstanding" or the priority of payments set
forth in the Indenture; or
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(viii) modify any of the provisions of the Indenture in such a manner as to affect the
calculation of the amount of any payment of interest or principal on any Secured Note, or any
amount available for distribution to the Subordinated Notes or to affect the rights of the holders of
Secured Notes to the benefit of any provisions for the redemption of such Secured Notes
contained therein.
In addition, with the consent of the holders of a majority of the aggregate outstanding principal
amount of the Subordinated Notes delivered to the Trustee, the Co-Issuers and the Portfolio Manager, the
Trustee and the Co-Issuers may enter into one or more supplemental indentures to accommodate the
issuance of additional Notes.
The Co-Issuers and the Trustee may also enter into supplemental indentures, without obtaining
the consent of holders of the Offered Securities or the holder of the Financed Amount Note, but with the
consent of the Portfolio Manager, at any time and from time to time, subject to certain requirements
described in the Indenture:
(i) 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 in
the Indenture and in the Notes;
(ii) to add to the covenants of the Co-Issuers or the Trustee for the benefit of the
Secured Parties or to surrender any right or power conferred upon the Co-Issuers by the
Indenture;
(iii)
Trustee;
to convey, transfer, assign, mortgage or pledge any property to or with the
(iv) to evidence and provide for the acceptance of appointment under the Indenture
by a successor Trustee and to add to or change any of the provisions of the Indenture as shall be
necessary to facilitate the administration of the trusts under the Indenture by more than one
Trustee, pursuant to the requirements of the Indenture;
(v) to correct or amplify the description of any property at any time subject to the
lien of the Indenture, or to better assure, convey and confirm unto the Trustee any property
subject or required to be subjected to the lien of the 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 the Indenture any additional property;
(vi) to modify the restrictions on and procedures for resales and other transfers of
Notes to reflect any changes in applicable law or regulation (or the interpretation thereof) or to
enable the Co-Issuers to rely upon any exemption from registration under the Securities Act or
the Investment Company Act or to remove restrictions on resale and transfer to the extent not
required by the Indenture;
(vii) to make such changes as shall be necessary or advisable in order for the listed
Notes to be listed on an exchange, including the Irish Stock Exchange;
(viii) at any time within the Reinvestment Period, subject to the approval of the
majority of the Subordinated Notes, to make such changes as shall be necessary to permit the Co-
Issuers to issue additional notes of any one or more new classes;
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(ix) otherwise to correct any inconsistency or cure any ambiguity, omission or errors
in the Indenture or to conform the provisions of the Indenture to this Offering Circular;
(x)
Agreements;
to accommodate, modify or amend existing and/or replacement Hedge
(xi) to take any action advisable to prevent the Issuer from becoming subject to
withholding or other taxes (other than taxes with respect to the Issuer otherwise permitted under
the Indenture), fees or assessments or to prevent the Issuer from being treated as engaged in a
United States trade or business or otherwise being subject to United States federal, state or local
income tax on a net income basis;
(xii) 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 interest of holders of any Class of Notes;
(xiii) to evidence any waiver by any Rating Agency as to any requirement or condition,
as applicable, of such Rating Agency set forth herein;
(xiv) to modify the definitions of "Credit Improved Obligation", "Credit Risk
Obligation", "Defaulted Obligation" or "Equity Security", the restrictions on the sales of
Collateral Obligations or the Investment Criteria set forth under "Security for the Secured
Notes—Sales of Collateral Obligations; Additional Collateral Obligations and Investment
Criteria" (other than the calculation of the Concentration Limitations and the Collateral Quality
Test) in a manner not material and adverse to holders of any Class of the Notes as evidenced by
an opinion of counsel (which may be supported as to factual (including financial and capital
markets) matters by any relevant certificates and other documents necessary or advisable in the
judgment of counsel delivering such opinion of counsel) to the effect that such modification
would not be materially adverse to the holders of any Class of Notes;
(xv) except as otherwise provided in clause (xvi) below, to modify the calculation of
the "Collateral Quality Tests" or to amend or modify the definition of "Minimum
Diversity/Maximum Rating/Minimum Spread Matrix" or the definitions applicable thereto or any
of the defined terms used therein whether or not such modification is materially adverse to any
Holder of Notes, provided that the Global Rating Agency Condition is satisfied;
(xvi) with the consent of a majority of the Subordinated Notes, to amend or modify the
definition of "Maximum Moody's Rating Factor Test", "Minimum Diversity/Maximum
Rating/Minimum Spread Matrix", "Minimum Weighted Average Moody's Recovery Rate Test",
"Moody's Collateral Value," Moody's Counterparty Criteria", "Moody's Derived Rating",
"Moody's Industry Rating", "Moody's Recovery Rate", "Moody's Rating Condition" or "Moody's
Rating Factor" or any of the defined terms used therein, whether or not such modification is
materially adverse to any Holder of Notes, in order to conform with Moody's then current
established criteria;
(xvii) to amend, modify, enter into or accommodate the execution of any contract
relating to a Synthetic Security; or
(xviii) to amend or modify the Indenture in order to enter into or otherwise
accommodate the execution of any Securities Lending Agreement.
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The Portfolio Manager will not be bound to follow any amendment or supplement to this
Indenture unless the Portfolio Manager shall have consented thereto in writing.
At the cost of the Co-Issuers, for so long as any Notes shall remain outstanding, not later than 15
Business Days prior to the execution of any proposed supplemental indenture pursuant to clauses (xii) or
(xiv) of the second preceding paragraph, the Trustee shall deliver to the Portfolio Manager and the
holders of the Notes a copy of such supplemental indenture, and the holders of the Class A-1 Notes and
the holders of the Subordinated Notes shall have the right to consent (which consent shall not be
unreasonably withheld) to the determination that such supplemental indenture is not materially adverse to
the holders of the Class A-1 Notes or the holders of the Subordinated Notes, as applicable. If the holders
of a majority of the aggregate outstanding principal amount of the Class A-1 Notes or the Subordinated
Notes shall not object to any such determination within 10 Business Days of receipt of such supplemental
indenture, such Class A-1 holders or such Subordinated Note holders, as applicable, shall be deemed to
have consented to such supplemental indenture. At the cost of the Co-Issuers, for so long as any Class A-
1 Notes or the Subordinated Notes shall remain outstanding, not later than 15 Business Days prior to the
execution of any proposed supplemental indenture pursuant to clause (xv) of the second preceding
paragraph, the Trustee shall deliver to the holders of the Class A-1 Notes and the holders of the
Subordinated Notes a copy of such supplemental indenture, and the holders of the Class A-1 Notes and
the holders of the Subordinated Notes shall have the right to consent (which consent shall not be
unreasonably withheld) to such supplemental indenture, and if the holders of a majority of the aggregate
outstanding principal amount of the Class A-1 Notes or the Subordinated Notes shall not object to any
such supplemental indenture within 10 Business Days of receipt of such supplemental indenture, such
Class A-1 holders or such Subordinated Note holders, as applicable shall be deemed to have consented to
such supplemental indenture; provided, that any such supplemental indenture that modifies the "Minimum
Diversity/Maximum Rating/Minimum Spread Matrix" but does not reduce the Minimum Diversity Score
below "50", reduce the Minimum Weighted Average Spread below "2.00%" or raise the Maximum
Weighted Average Moody's Rating Factor above "2850" for purposes of such definition shall not require
the consent of the holders of the Class A-1 Notes or the holders of the Subordinated Notes. For so long as
any Offered Securities are listed on the Irish Stock Exchange and the rules of such exchange shall so
require, the Issuer will notify the Irish Stock Exchange of any material modification of the Indenture.
Except as described below, and as described in clause (vii) of the second preceding paragraph, no
supplemental indenture, or other modification or amendment of the Indenture not requiring consent of the
holders of the Offered Securities, may become effective unless each of the Rating Agencies has notified
in writing the Trustee and the Co-Issuers that such supplemental indenture, modification or amendment
will not result in a reduction or withdrawal of its then current rating of any Class of Secured Notes. The
Trustee will have no obligation to request such a determination from either Rating Agency and shall have
no liability for failure to request such a determination unless the Trustee is requested in writing to do so
by or on behalf of the Issuer or by a holder or beneficial owner of the Notes. The Trustee may rely upon
an opinion of counsel as to whether the interests of any holder of Notes would be materially adversely
affected by any supplemental indenture or other modification or amendment of the Indenture.
Not less than 10 days prior to any Payment Date, at the direction of the holders of not less than a
majority of the aggregate outstanding principal amount of the Subordinated Notes but without any
amendment to the Indenture, any confirmation from either Rating Agency or the consent of any holder of
Secured Notes, all or a specified portion of amounts that would otherwise be distributed on such Payment
Date to the holders of the Subordinated Notes will instead be retained by the Trustee in the Collection
Account as Principal Proceeds and will be available for reinvestment in additional Collateral Obligations.
Additional Issuance. The Indenture will provide that, at any time during the Reinvestment
Period, the Co-Issuers may issue and sell additional Notes of any one or more existing Classes and use the
proceeds to purchase additional Collateral Obligations or as otherwise permitted under the Indenture;
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provided, that the following conditions are met: (a) such issuance is approved by the holders of at least a
majority of the Subordinated Notes; (b) such issuance may not exceed 100% of the respective original
outstanding amount of the Subordinated Notes or the applicable Class or Classes of Secured Notes; (c)
the terms of the Notes issued must be identical to the respective terms of previously issued Notes of the
applicable Class (except that the interest due on additional Secured Notes will accrue from the issue date
of such additional Notes and the interest rate and price of such additional Notes do not have to be
identical to those of the initial Notes of that Class); (d) in the case of additional notes that are Secured
Notes, the Global Rating Agency Condition shall have been satisfied; (e) the proceeds of any additional
Notes (net of fees and expenses incurred in connection with such issuance) are used to purchase
additional Collateral Obligations or as otherwise permitted under the Indenture, (f) an opinion of tax
counsel of nationally recognized standing in the United States experienced in such matters shall be
delivered to the Trustee to the effect that (i) such additional issuance will not result in the Issuer becoming
subject to United States federal income taxation with respect to its net income and (ii) such issuance
would not cause the holders or beneficial owners of Notes previously issued to be deemed to have sold or
exchanged such Secured Notes under Section 1001 of the United States Internal Revenue Code of 1986,
as amended (the "Code"), (g) the ratio of (i) the aggregate outstanding principal amount of each Class as
to which additional Notes are issued, after giving effect to the issuance of such additional Notes, plus the
aggregate outstanding principal amount of all Classes senior to such Class, over (ii) the aggregate
outstanding principal amount of all Classes of Notes subordinate to such Class, is not greater than such
ratio immediately prior to the issuance of such additional Notes, unless otherwise consented to by (1) if
the Class A-1 Notes are the Controlling Class, the holders of a majority of the aggregate outstanding
principal amount of the Controlling Class or (2) if the Class A-2 Notes, the Class B Notes, the Class C
Notes, the Class D Notes or the Subordinated Notes are the Controlling Class, the holders of at least 66
2/3% of the aggregate outstanding principal amount of the Controlling Class, (vii) the principal amount of
additional Notes that are Class A-1 Notes shall not exceed 70% of the original outstanding amount of the
Class A-1 Notes unless otherwise consented to by a majority of the aggregate outstanding principal
amount of the Class A-1 Notes and (viii) the issuance of any additional Notes shall comply with any
applicable listing rules. Such additional Notes may be offered at prices that differ from the applicable
initial offering price. Any additional Notes of any Class will, to the extent reasonably practicable, be
offered first to holders of the Notes of such Class in such amounts as are necessary to preserve their pro
rata holdings of Notes of such Class.
Consolidation, Merger or Transfer of Assets. Except under the limited circumstances set forth in
the Indenture, neither the Issuer nor the Co-Issuer may consolidate with, merge into, or transfer or convey
all or substantially all of its assets to, any other corporation, partnership, trust or other person or entity.
Petitions for Bankruptcy. The Indenture will provide that the holders of the Notes may not seek
to commence a bankruptcy proceeding against or cause the Issuer or Co-Issuer to petition for bankruptcy
until the payment in full of the Notes and not before one year and a day, or if longer, the applicable
preference period then in effect, has elapsed since such payment.
Satisfaction and Discharge of the Indenture. The Indenture will be discharged with respect to the
Assets securing the Secured Notes upon (i) delivery to the Trustee for cancellation of all of the Notes, or,
with certain exceptions (including the obligation to pay principal and interest), upon deposit with the
Trustee of funds sufficient for the payment or redemption thereof and (ii) the payment by the Co-Issuers
of all other amounts due under the Indenture.
Trustee. The Bank of New York Trust Company, National Association, will be the Trustee under
the Indenture for the Notes. The payment of the fees and expenses of the Trustee relating to the Notes is
solely the obligation of the Co-Issuers and solely payable out of the Assets. The Trustee and/or its
affiliates may receive compensation in connection with the Trustee's investment of trust assets in certain
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Eligible Investments as provided in the Indenture. Eligible Investments may include investments for
which the Trustee or an affiliate of the Trustee provides services. The Co-Issuers, the Portfolio Manager
and their affiliates may maintain other banking relationships in the ordinary course of business with the
Trustee or its affiliates.
The Indenture contains provisions for the indemnification of the Trustee by the Issuer, payable
solely out of the Assets, for any loss, liability or expense incurred without negligence, willful misconduct
or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust.
The Trustee may resign at any time by providing 30 days' notice. The Trustee may be removed at any
time by the holders of a majority in aggregate outstanding principal amount of each Class of Secured
Notes (for which purpose, the Class A-1 Notes will constitute and vote together as a single Class, the
Class A-2 Notes will constitute and vote together as a single Class, the Class B Notes will constitute and
vote together as a single Class, the Class C Notes will constitute and vote together as a single Class and
the Class D Notes will constitute and vote together as a single Class) and the Portfolio Manager or, at any
time when an Event of Default shall have occurred and be continuing, by the holders of a majority in
aggregate outstanding principal amount of the Controlling Class and the Portfolio Manager as set forth in
the Indenture. No resignation or removal of the Trustee will become effective until the appointment of
the successor Trustee under 6.10 of the Indenture has become effective.
Form, Denomination and Registration of the Offered Securities
The Secured Notes will be sold only to (i) non-U.S. persons in offshore transactions in reliance on
Regulation S under the Securities Act and (ii) persons that are Qualified Purchasers and either (x)
Qualified Institutional Buyers or (y) IAIs. Each Secured Note sold to a person that, at the time of the
acquisition, purported acquisition or proposed acquisition of any such Secured Note is both a Qualified
Institutional Buyer and a Qualified Purchaser, will be issued in the form of one or more permanent global
notes in definitive, fully registered form without interest coupons (the "Rule 144A Global Securities").
The Secured Notes sold to a person that, at the time of the acquisition, purported acquisition or proposed
acquisition of any such Secured Note is a Qualified Purchaser and an IAI shall be issued in the form of
one or more definitive, fully registered notes without coupons (each, a "Certificated Note"). The
Secured Notes sold to non-U.S. persons in offshore transactions in reliance on Regulation S will be issued
in the form of one or more permanent global notes in definitive, fully registered form without interest
coupons (the "Regulation S Global Securities"). The Rule 144A Global Securities and the Regulation S
Global Securities are referred to herein collectively as the "Global Securities".
The Subordinated Notes are being initially offered, and may subsequently be transferred, only (a)
to persons in the United States that are either (A) Qualified Purchasers or (B) Knowledgeable Employees
with respect to the Issuer or entities owned exclusively by Knowledgeable Employees or Qualified
Purchasers that in the case of (A) and (B) are either (1) Qualified Institutional Buyers or (2) Accredited
Investors who are also Knowledgeable Employees and (b) to certain non-U.S. persons in offshore
transactions in reliance on Regulation S under the Securities Act.
All Subordinated Notes sold to U.S. purchasers and at the election of the Issuer, Subordinated
Notes sold to certain non-U.S. purchasers in offshore transactions in reliance on Regulation S, will be
evidenced by notes in definitive, fully registered form without interest coupons ("Certificated
Subordinated Notes"). At the option of the Issuer, certain Subordinated Notes sold to non-U.S. Persons
in offshore transactions in reliance on Regulation S will each be represented by one or more permanent
global notes in definitive, fully registered form without interest coupons (the "Regulation S Global
Subordinated Notes"). Each initial investor and each subsequent transferee of a Subordinated Note,
other than a subsequent transferee of a Regulation S Global Subordinated Note, will be required to
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provide a purchaser representation letter in which it will be required to certify, among other matters, as to
its status under the Securities Act, the Investment Company Act and ERISA.
As used above, "U.S. person" and "offshore transaction" shall have the meanings assigned to
such terms in Regulation S under the Securities Act.
The Global Securities and the Regulation S Global Subordinated Notes will be deposited with the
Trustee as custodian for, and registered in the name of, a nominee of DTC and, in the case of the
Regulation S Global Securities and the Regulation S Global Subordinated Notes, for the respective
accounts of Euroclear Bank S.A./N.V. ("Euroclear") and Clearstream Banking, société anonyme
("Clearstream").
A beneficial interest in a Regulation S Global Security may be transferred to a person who takes
delivery in the form of an interest in the corresponding Rule 144A Global Security or Certificated Note
only upon receipt by the Trustee of (i) a written certification from the transferor in the form required by
the Indenture to the effect that such transfer is being made to a person whom the transferor reasonably
believes is a Qualified Institutional Buyer in a transaction meeting the requirements of Rule 144A under
the Securities Act and in accordance with any applicable securities laws of any state of the United States
or any other jurisdiction (or, solely in the case of a transfer to a person who takes delivery in the form of a
Certificated Note, an IAI in a transaction exempt from registration under the Securities Act and in
accordance with any applicable securities laws of any state of the United States or any other jurisdiction)
and (ii) a written certification from the transferee in the form required by the Indenture to the effect,
among other things, that such transferee is either (x) a Qualified Institutional Buyer or (y) solely in the
case of a Certificated Note, an IAI, and (z) a Qualified Purchaser. Beneficial interests in a Rule 144A
Global Security or a Certificated Note may be transferred to a person who takes delivery in the form of an
interest in the corresponding Regulation S Global Security or Certificated Note only upon receipt by the
Trustee of (i) in the case of a transfer to a person who takes delivery in the form of an interest in the
corresponding Regulation S Global Security, a written certification from the transferor in the form
required by the Indenture to the effect that such transfer is being made in accordance with Regulation S
under the Securities Act and a written certification from the transferee in the form required by the
Indenture to the effect, among other things, that such transferee is a non-U.S. person purchasing such
Rule 144A Global Security or Certificated Note in an offshore transaction pursuant to Regulation S and
(ii) in the case of a transfer to a person who takes delivery in the form of an interest in a Certificated Note,
a written certification from the transferee in the form required by the Indenture to the effect, among other
things, that such transferee is an IAI and a Qualified Purchaser. Any beneficial interest in one of the
Global Securities that is transferred to a person who takes delivery in the form of an interest in another
Global Security will, upon transfer, cease to be an interest in such Global Security, and become an interest
in such other Global Security, and accordingly, will thereafter be subject to all transfer restrictions and
other procedures applicable to beneficial interests in such other Global Securities for as long as it remains
such an interest.
A beneficial interest in a Regulation S Global Subordinated Note may be transferred to a person
who takes delivery in the form of a Certificated Subordinated Note only upon receipt by the Issuer and the
Trustee of certificates substantially in the form of Annex A-1 and Annex A-2 attached hereto executed by
the transferee. A Certificated Subordinated Note may be transferred to a person who takes delivery in the
form of an interest in a Regulation S Global Subordinated Note only upon receipt by the Issuer and the
Trustee of (A) the transferor's Subordinated Note together with an interest transfer form in the form
prescribed by the Indenture executed by the transferor and (B) certificates substantially in the form of
Annex A-1 and Annex A-2 attached hereto executed by the transferee. A Certificated Subordinated Note
may be transferred to a person who takes delivery in the form of an interest in a Certificated Subordinated
Note only upon receipt by the Issuer and the Trustee of (A) the transferor's Subordinated Note together
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with an interest transfer form in the form prescribed by the Indenture executed by the transferor and (B)
certificates substantially in the form of Annex A-1 and Annex A-2 attached hereto executed by the
transferee. A beneficial interest in a Regulation S Global Subordinated Note may be transferred to a
person who takes delivery in the form of an interest in such Regulation S Global Subordinated Note
without the provision of any transferor or transferee certifications.
No service charge will be made for any registration of transfer or exchange of Notes but the
Trustee may require payment of a sum sufficient to cover any transfer, tax or other governmental charge
payable in connection therewith.
The registered owner of the relevant Global Security or Regulation S Global Subordinated Note
will be the only person entitled to receive payments in respect of the Offered Securities represented
thereby, and the Co-Issuers will be discharged by payment to, or to the order of, the registered owner of
such Global Security or Regulation S Global Subordinated Note in respect of each amount so paid. No
person other than the registered owner of the relevant Global Security or Regulation S Global
Subordinated Note will have any claim against the Co-Issuers in respect of any payment due on that
Global Security or Regulation S Global Subordinated Note. Account holders or participants in Euroclear
and Clearstream shall have no rights under the Indenture with respect to Global Securities or Regulation S
Global Subordinated Notes held on their behalf by the Trustee as custodian for DTC, and DTC may be
treated by the Co-Issuers, the Trustee and any agent of the Co-Issuers or the Trustee as the holder of
Global Securities or Regulation S Global Subordinated Notes for all purposes whatsoever.
Except in the limited circumstances described below, owners of beneficial interests in the Global
Securities will not be entitled to have Notes registered in their names, will not receive or be entitled to
receive definitive physical Notes and will not be considered "holders" of Notes under the Indenture or the
Notes. If DTC notifies the Co-Issuers that it is unwilling or unable to continue as depositary for Global
Securities of any Class or Classes or ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary or custodian is not appointed by the Co-Issuers within 90 days after receiving
such notice (a "Depository Event"), the Issuer will issue or cause to be issued, Notes of such Class or
Classes in the form of definitive physical certificates in exchange for the applicable Global Securities to
the beneficial owners of such Global Securities in the manner set forth in the Indenture. In addition, the
owner of a beneficial interest in a Global Security will be entitled to receive a definitive physical Note in
exchange for such interest if an Event of Default has occurred and is continuing. In the event that
definitive physical Notes are not so issued by the Issuer to such beneficial owners of interests in Global
Securities, the Issuer expressly acknowledges that such beneficial owners shall be entitled to pursue any
remedy that the holders of a Global Security would be entitled to pursue in accordance with the Indenture
(but only to the extent of such beneficial owner's interest in the Global Security) as if definitive physical
Notes had been issued. In the event that definitive physical Notes are issued in exchange for Global
Securities as described above, the applicable Global Security will be surrendered to the Trustee by DTC
and the Issuer or the Co-Issuers, as applicable, will execute and the Trustee will authenticate and deliver
an equal aggregate outstanding principal amount of definitive physical Notes.
Owners of beneficial interests in Regulation S Global Subordinated Notes will receive definitive
Subordinated Notes registered in their names in connection with a Depository Event, and may also
exchange such beneficial interests for Certificated Notes or Certificated Subordinated Notes in
accordance with the procedures described under "Transfer Restrictions."
For so long as any Offered Securities are listed on the Irish Stock Exchange and the rules of such
exchange shall so require, the Issuer or the Co-Issuers, as applicable, will have a paying agent and transfer
agent (which shall be the Irish Paying Agent and Listing Agent) for such Offered Securities in Ireland and
payments on and transfers or exchanges of interests in such Offered Securities may be effected through
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the Irish Paying Agent and Listing Agent; provided, that all transfers and exchanges must be effected in
accordance with the Indenture. In the event that the Irish Paying Agent and Listing Agent is replaced at
any time during such period, notice of the appointment of any replacement will be published in the Irish
Stock Exchange's Daily Official List.
In addition, for so long as any Offered Securities are listed on the Irish Stock Exchange and the
rules of such exchange shall so require, in the case of a transfer or exchange of definitive Notes a holder
thereof may effect such transfer or exchange by presenting such Notes at, and obtaining a new definitive
Note from, the office of the Irish Paying Agent and Listing Agent, in the case of a transfer of a part only
of a definitive Note, a new definitive Note, in respect of the outstanding balance of the principal amount
of the definitive Note, not transferred will be delivered at the office of the Irish Paying Agent and Listing
Agent, and in the case of a replacement of any lost, stolen, mutilated or destroyed definitive Notes, a
holder thereof may obtain a new definitive Note, from the Irish Paying Agent and Listing Agent;
provided, that all transfers, exchanges and replacements must be effected in accordance with the
Indenture.
Certificated Notes and interests in Global Securities and Regulation S Global Subordinated Notes
will be subject to certain restrictions on transfer set forth therein and in the Indenture and the Notes will
bear the restrictive legend set forth under "Transfer Restrictions."
The Notes will be issued in minimum denominations of $500,000 and integral multiples of
$1,000 in excess thereof; provided, that Subordinated Notes will be issued in minimum denominations of
$100,000 and integral multiples of $1,000 in excess thereof.
The Subordinated Notes
The Subordinated Notes will be issued pursuant to the Indenture, but will not be secured
obligations thereunder. The following summary, together with the preceding summary of certain
principal terms of the Indenture, describes certain provisions of the Subordinated Notes, but does not
purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the
Indenture.
Status and Ranking. The Subordinated Notes will be fully subordinated to the Secured Notes
and to the payment of all other amounts payable in accordance with the priority of payments. The
Subordinated Notes will not be secured by the Assets or any pledge of the Assets but, under the terms of
the Indenture, the Trustee will pay to the holders of the Subordinated Notes amounts available pursuant to
the priority of payments. To the extent that following realization of the Assets, these amounts are
insufficient to repay the principal amount of the Subordinated Notes or distributions thereon, no other
funds will be available to make such payments.
Distributions on the Subordinated Notes. The Stated Maturity of the Subordinated Notes will be
May, 2021. To the extent funds are available for such purpose under the Indenture as described above,
payments will be made to the holders of the Subordinated Notes on each Payment Date, commencing in
May 2007 and in connection with any redemption of the Subordinated Notes.
Payments on the Subordinated Notes will be made to the person in whose name the Subordinated
Note is registered on the applicable Record Date in the same manner as payments are made to the holders
of the Secured Notes as described under "—The Indenture and the Secured Notes—Entitlement to
Payments" and any unclaimed payments will be subject to the terms described under "—The Indenture
and the Secured Notes—Entitlement to Payments—Prescription."
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Mandatory Redemption. The Subordinated Notes will be fully redeemed on the Stated Maturity
indicated in "Summary of Terms—Principal Terms of the Offered Securities" unless previously
redeemed as described herein. The average life of the Subordinated Notes is expected to be less than the
number of years until their Stated Maturity. See "Risk Factors—Relating to the Offered Securities—The
Weighted Average Lives of the Notes May Vary."
Optional Redemption. The Subordinated Notes will be redeemed by the Issuer, in whole but not
in part, on any Payment Date on or after the date on which all of the Secured Notes have been redeemed
or repaid, from the proceeds of the Assets remaining after giving effect to redemption or repayment of the
Secured Notes and payment in full of all expenses of the Co-Issuers, at the direction of the holders of the
requisite percentage of the aggregate outstanding principal amount of the Subordinated Notes (which
direction may be given in connection with a direction to redeem the Secured Notes or at any time after the
Secured Notes have been redeemed or repaid in full). The Redemption Price payable to each holder of
the Subordinated Notes will be its proportionate share of the proceeds of the Assets remaining after the
payments described above.
Voting. Holders of the Subordinated Notes will have no voting rights except as set forth in the
Indenture, the Portfolio Management Agreement or the other transaction documents, as described herein.
The holders of the requisite percentage of the aggregate outstanding principal amount of the Subordinated
Notes will be able to direct a redemption of the Secured Notes and/or the Subordinated Notes pursuant to
the Indenture, and, at any time during the Reinvestment Period, to direct the issuance of additional Notes
of any Class and/or additional notes of one of more new classes, as described herein. See "—The
Indenture and the Secured Notes—The Indenture—Subordinated Notes—Optional Redemption" above.
Cancellation. All Subordinated Notes that are redeemed and surrendered for cancellation will
forthwith be canceled and may not be reissued or resold. The Issuer will not reissue or resell any such
Subordinated Notes.
The Secured Notes
RATINGS OF THE SECURED NOTES
It is a condition of the issuance of the Offered Securities that the Secured Notes of each Class
receive from each of Moody's and S&P (each, a "Rating Agency") the minimum rating indicated under
"Summary of Terms—Principal Terms of the Offered Securities." A security rating is not a
recommendation to buy, sell or hold securities and is subject to withdrawal at any time. There is no
assurance that a rating will remain for any given period of time or that a rating will not be lowered or
withdrawn entirely by the assigning Rating Agency if in its judgment circumstances in the future so
warrant.
The ratings of the Secured Notes address the likelihood of full and ultimate payment to holders of
the Secured Notes of all distributions of stated interest (or, in the case of the S&P ratings of the Class A-1
Notes and the Class A-2 Notes, timely payment of stated interest) and the ultimate payment in full of the
principal amount of each such Class not later than its respective Stated Maturity date. The ratings
assigned to the Secured Notes of each Class by each Rating Agency are based upon its assessment of the
probability that the Collateral Obligations will provide sufficient funds to pay the Secured Notes of such
Class (based upon the Interest Rate and principal balance or face amount, as applicable, of such Class),
based largely upon such Rating Agency's statistical analysis of historical default rates on debt securities
with various ratings, the terms of the Indenture, the asset and interest coverage required for the Secured
Notes (which is achieved through the subordination of the Subordinated Notes and certain Classes of
Secured Notes as described herein), and the Concentration Limitations and the Collateral Quality Test,
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each of which must be satisfied, maintained or improved in order to reinvest in additional Collateral
Obligations.
In addition to their respective quantitative tests, the ratings of each Rating Agency take into
account qualitative features of a transaction, including the legal structure and the risks associated with
such structure, such Rating Agency's view as to the quality of the participants in the transaction and other
factors that it deems relevant.
SECURITY FOR THE SECURED NOTES
The "Assets" will consist of, and the Issuer will grant to the Trustee a perfected security interest
for the benefit of the Secured Parties in:
(a) the Collateral Obligations that the Issuer causes to be delivered to the Trustee
(directly or through an intermediary or bailee) pursuant to the Indenture and all payments thereon
or with respect thereto, and all Collateral Obligations which are delivered to the Trustee in the
future pursuant to the terms of the Indenture and all payments thereon or with respect thereto;
(b) the Issuer's interest in (i) the Payment Account, (ii) the Collection Account,
(iii) the Ramp-Up Account, (iv) the Revolver Funding Account, (v) each Synthetic Security
Issuer Account (to the extent permitted under the related Synthetic Security), (vi) the Expense
Reserve Account, (vii) the Interest Reserve Account, (viii) the Custodial Account and (ix) each
Securities Lending Account (subject to any senior liens created by the related Securities Lending
Agreement), any Eligible Investments purchased with funds on deposit therein, and all income
from the investment of funds therein;
(c) the Issuer's rights under the Portfolio Management Agreement, the Hedge
Agreements (provided, that there is no such grant to the Trustee on behalf of any Hedge
Counterparty in respect of its related Hedge Agreement), the Collateral Administration
Agreement, the Securities Lending Agreements and any documentation related to a Synthetic
Security (to the extent permitted under the related Synthetic Security);
(d)
all cash or money delivered to the Trustee (or its bailee);
(e) all accounts, chattel paper, deposit accounts, financial assets, general intangibles,
instruments, investment property, letter-of-credit rights and other supporting obligations relating
to the foregoing;
(f) any other property otherwise delivered to the Trustee by or on behalf of the
Issuer (whether or not constituting Collateral Obligations or Eligible Investments); and
(g) all proceeds with respect to the foregoing; provided, that such grants shall not
include the $250 transaction fee paid to the Issuer in consideration of the issuance of the Notes,
the funds attributable to the issuance and allotment of the Issuer's ordinary shares or the bank
account in the Cayman Islands in which such funds are deposited (or any interest thereon).
Collateral Obligations
It is anticipated that the Issuer will have completed the purchase (or commitment to purchase) of
at least 80.0% (by principal amount) of the initial portfolio of Collateral Obligations on the Closing Date.
It is expected (but there can be no assurance) that the Concentration Limitations, the Collateral Quality
72

Test and the Overcollateralization Ratio Tests will be satisfied not later than the end of the Ramp-Up
Period.
The composition of the Collateral Obligations will change over time as a result of (i) the
acquisition of additional Collateral Obligations during the Ramp-Up Period, (ii) scheduled and
unscheduled principal payments on the Collateral Obligations, and (iii) sales of Assets and reinvestment
of Sale Proceeds and other Principal Proceeds during the Reinvestment Period, subject to the limitations
described under "—Sales of Collateral Obligations; Additional Collateral Obligations and Investment
Criteria" below.
The Concentration Limitations
By the end of the Ramp-Up Period, and in connection with any reinvestment in additional
Collateral Obligations, the Collateral Obligations in the aggregate are expected to comply with all of the
requirements of the Concentration Limitations set forth under "Summary of Terms—Concentration
Limitations" or, if not in compliance at the time of reinvestment, the relevant requirements must be
maintained or improved.
Measurement of the degree of compliance with the Concentration Limitations will be required on
(i) any day on which the Issuer purchases or sells, or enters into a commitment to purchase or sell, a
Collateral Obligation or a default of a Collateral Obligation occurs, (ii) any Determination Date, (iii) the
date as of which the information in any monthly report prepared under the Indenture is calculated, (iv)
with five Business Days prior notice, any Business Day requested by either Rating Agency and (v) the
last day of the Ramp-Up Period; provided that, in the case of (i) through (v), no "Measurement Date" can
occur prior to the last day of the Ramp-Up Period (each such date, a "Measurement Date"). See "—
Collateral Assumptions" below for a description of the assumptions applicable to the determination of
satisfaction of the Concentration Limitations.
The Collateral Quality Test
By the end of the Ramp-Up Period, and in connection with any reinvestment in additional
Collateral Obligations thereafter, the Collateral Obligations in the aggregate are expected to comply with
all of the requirements of the Collateral Quality Test set forth under "Summary of Terms—Collateral
Quality Test" or, if not in compliance at the time of reinvestment, the relevant requirements must be
maintained or improved. Measurement of the degree of compliance with the Collateral Quality Test will
be required on every Measurement Date after the end of the Ramp-up Period. See "—Collateral
Assumptions" below for a description of the assumptions applicable to the determination of satisfaction of
the Collateral Quality Test.
Minimum Fixed Coupon Test.
"Weighted Average Fixed Coupon" means, as of any Measurement Date, an amount equal to
the number, expressed as a percentage, obtained by dividing:
(a) in the case of each fixed rate Collateral Obligation (excluding any Deferring Security and
any Partial Deferrable Security to the extent of any non-cash interest), the stated interest coupon on such
Collateral Obligation times the principal balance of such Collateral Obligation (excluding the unfunded
portion of any Delayed Drawdown Collateral Obligation or Revolving Collateral Obligation); plus
(b) to the extent that the amount obtained in clause (a) is insufficient to satisfy the Minimum
Fixed Coupon Test, the Excess Weighted Average Floating Spread (if any); by
73

(c) an amount equal to the lesser of (i) the product of (A) the Target Initial Par Amount and
(B) a fraction, the numerator of which is equal to the aggregate principal balance of fixed rate Collateral
Obligations and the denominator of which is equal to the aggregate principal balance of all Collateral
Obligations as of such Measurement Date (in each case excluding (1) any Deferring Security or Partial
Deferrable Security to the extent of any non-cash interest and (2) the unfunded portion of any Delayed
Drawdown Collateral Obligation or Revolving Collateral Obligation that are fixed rate Collateral
Obligations) and (ii) the aggregate principal balance of the fixed rate Collateral Obligations (excluding (1)
any Deferring Security or Partial Deferrable Security to the extent of any non-cash interest and (2) the
unfunded portion of any Delayed Drawdown Collateral Obligation or Revolving Collateral Obligation
that are fixed rate Collateral Obligations).
"Excess Weighted Average Floating Spread" means, as of any Measurement Date, an amount
equal to the product obtained by multiplying (a) the excess, if any, of the Weighted Average Floating
Spread over the Minimum Floating Spread by (b) the principal balance of all floating rate Collateral
Obligations (excluding any Deferring Security or Partial Deferrable Security to the extent of any non-cash
interest).
"Aggregate Funded Spread" means, as of any Measurement Date, the sum of:
(a) in the case of each floating rate Collateral Obligation (excluding any Deferring Security
and any Partial Deferrable Security to the extent of any non-cash interest and the unfunded portion of any
Delayed Drawdown Collateral Obligation and Revolving Collateral Obligation) that bears interest at a
spread over a London interbank offered rate based index, (i) the stated interest rate spread on such
Collateral Obligation above such index times (ii) the principal balance of such Collateral Obligation
(excluding the unfunded portion of any Delayed Drawdown Collateral Obligation or Revolving Collateral
Obligation); and
(b) in the case of each floating rate Collateral Obligation (excluding any Deferring Security
and any Partial Deferrable Security to the extent of any non-cash interest and the unfunded portion of any
Delayed Drawdown Collateral Obligation and Revolving Collateral Obligation) 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 over LIBOR as of the immediately preceding Interest Determination Date
(which spread or excess may be expressed as a negative percentage) times (ii) the principal balance of
each such Collateral Obligation (excluding the unfunded portion of any Delayed Drawdown Collateral
Obligation or Revolving Collateral Obligation).
"Aggregate Excess Funded Spread" means, as of any Measurement Date, the amount obtained
by multiplying:
(a) the amount equal to LIBOR applicable to the Secured Notes during the Interest Accrual
Period in which such Measurement Date occurs; by
(b) the amount (not less than zero) equal to (i) the aggregate principal balance of the
Collateral Obligations (excluding any Deferring Security and any Partial Deferrable Security to the extent
of any non-cash interest) as of such Measurement Date minus (ii) the Target Initial Par Amount.
"Aggregate Unfunded Spread" means, as of any Measurement Date, the sum of the products
obtained by multiplying (i) for each Delayed Drawdown Collateral Obligation and Revolving Collateral
Obligation (other than Defaulted Obligations), the related commitment fee then in effect as of such date
and (ii) the undrawn commitments of each such Delayed Drawdown Collateral Obligation and Revolving
Collateral Obligation as of such date.
74

Minimum Floating Spread Test.
"Weighted Average Floating Spread" means, the number obtained by dividing:
(i) the amount equal to (A) the Aggregate Funded Spread, plus (B) the Aggregate
Unfunded Spread, plus (C) the Aggregate Excess Funded Spread, plus (D) to the extent that the
amounts in the foregoing clauses (A), (B) and (C) are insufficient to satisfy the Minimum
Floating Spread Test, the Excess Weighted Average Fixed Coupon (if any); by
(ii) an amount equal to the lesser of (i) the product of (A) the Target Initial Par Amount and
(B) a fraction, the numerator of which is equal to the aggregate principal balance of floating rate
Collateral Obligations and the denominator of which is equal to the aggregate principal balance of
all Collateral Obligations as of such Measurement Date and (ii) the Aggregate Principal Balance
of all floating rate Collateral Obligations, in each case, excluding any Deferring Security and any
Partial Deferrable Security to the extent of any non-cash interest.
"Excess Weighted Average Fixed Coupon" means, as of any Measurement Date, an amount
equal to the product obtained by multiplying (a) the excess, if any, of the Weighted Average Fixed
Coupon over the Minimum Fixed Coupon by (b) the aggregate principal balance of all fixed rate
Collateral Obligations.
Maximum Moody's Rating Factor Test.
The "Weighted Average Moody's Rating Factor" is the number (rounded up to the nearest
whole number) determined by:
The principal balance of each Collateral
Obligation (excluding Equity Securities)
X
The Moody's Rating Factor of such
Collateral Obligation (or in the case of
Collateral Obligations that are
Structured Finance Obligations, its
Adjusted Moody's Rating Factor) (as
described below)
Divided by
The outstanding principal balance of all such Collateral Obligations
The "Moody's Rating Factor" relating to any Collateral Obligation is the number set forth in the
table below opposite the Moody's Default Probability Rating (as described above) of such Collateral
Obligation.
Moody's Default
Probability Rating Moody's Rating Factor
Moody's Default
Probability Rating Moody's Rating Factor
Aaa 1 Ba1 940
Aa1 10 Ba2 1,350
Aa2 20 Ba3 1,766
Aa3 40 B1 2,220
A1 70 B2 2,720
A2 120 B3 3,490
A3 180 Caa1 4,770
Baa1 260 Caa2 6,500
75

Moody's Default
Probability Rating Moody's Rating Factor
Moody's Default
Probability Rating Moody's Rating Factor
Baa2 360 Caa3 8,070
Baa3 610 Ca or lower 10,000
For purposes of the Maximum Moody's Rating Factor Test, any Collateral Obligation issued or
guaranteed by the United States government or any agency or instrumentality thereof is assigned a
Moody's Rating Factor of 1.
"Adjusted Moody's Rating Factor" means for any Structured Finance Obligation, as of any
Measurement Date, the amount obtained by dividing:
(a) (1) the Moody's Rating Factor for such Structured Finance Obligation multiplied by (2)
0.55; by
(b)
(1) one minus (2) the Moody's Recovery Rate for such Structured Finance Obligation.
Moody's Diversity Test.
For purposes of the "Moody's Diversity Test", the Diversity Score (the "Diversity Score") is a
single number that indicates collateral concentration in terms of both issuer and industry concentration. A
higher Diversity Score reflects a more diverse portfolio in terms of issuer and industry concentration. The
Diversity Score is calculated as follows:
(i) An "Issuer Par Amount" is calculated for each issuer of a Collateral Obligation,
and is equal to the aggregate outstanding principal balance of all Collateral Obligations issued by that
issuer and all affiliates.
(ii) An "Average Par Amount" is calculated by summing the Issuer Par Amounts
for all issuers, and dividing by the number of issuers.
(iii) An "Equivalent Unit Score" is calculated for each issuer, and is equal to the
lesser of (x) one and (y) the Issuer Par Amount for such issuer 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 (as defined in the Indenture) and is equal to the sum of the
Equivalent Unit Scores for each issuer in such industry classification group.
(v) An "Industry Diversity Score" is then established for each Moody's industry
classification group by reference to the following table for the related Aggregate Industry Equivalent Unit
Score; provided, that if any Aggregate Industry Equivalent Unit Score falls between any two such scores,
the applicable Industry Diversity Score will be the lower of the two Industry Diversity Scores:
Aggregate Aggregate Aggregate Aggregate
Industry Industry Industry Industry Industry Industry Industry Industry
Equivalent Diversity Equivalent Diversity Equivalent Diversity Equivalent Diversity
Unit Score Score Unit Score Score Unit Score Score Unit Score Score
0.0000 0.0000 5.0500 2.7000 10.1500 4.0200 15.2500 4.5300
0.0500 0.1000 5.1500 2.7333 10.2500 4.0300 15.3500 4.5400
0.1500 0.2000 5.2500 2.7667 10.3500 4.0400 15.4500 4.5500
76

Aggregate Aggregate Aggregate Aggregate
Industry Industry Industry Industry Industry Industry Industry Industry
Equivalent Diversity Equivalent Diversity Equivalent Diversity Equivalent Diversity
Unit Score Score Unit Score Score Unit Score Score Unit Score Score
0.2500 0.3000 5.3500 2.8000 10.4500 4.0500 15.5500 4.5600
0.3500 0.4000 5.4500 2.8333 10.5500 4.0600 15.6500 4.5700
0.4500 0.5000 5.5500 2.8667 10.6500 4.0700 15.7500 4.5800
0.5500 0.6000 5.6500 2.9000 10.7500 4.0800 15.8500 4.5900
0.6500 0.7000 5.7500 2.9333 10.8500 4.0900 15.9500 4.6000
0.7500 0.8000 5.8500 2.9667 10.9500 4.1000 16.0500 4.6100
0.8500 0.9000 5.9500 3.0000 11.0500 4.1100 16.1500 4.6200
0.9500 1.0000 6.0500 3.0250 11.1500 4.1200 16.2500 4.6300
1.0500 1.0500 6.1500 3.0500 11.2500 4.1300 16.3500 4.6400
1.1500 1.1000 6.2500 3.0750 11.3500 4.1400 16.4500 4.6500
1.2500 1.1500 6.3500 3.1000 11.4500 4.1500 16.5500 4.6600
1.3500 1.2000 6.4500 3.1250 11.5500 4.1600 16.6500 4.6700
1.4500 1.2500 6.5500 3.1500 11.6500 4.1700 16.7500 4.6800
1.5500 1.3000 6.6500 3.1750 11.7500 4.1800 16.8500 4.6900
1.6500 1.3500 6.7500 3.2000 11.8500 4.1900 16.9500 4.7000
1.7500 1.4000 6.8500 3.2250 11.9500 4.2000 17.0500 4.7100
1.8500 1.4500 6.9500 3.2500 12.0500 4.2100 17.1500 4.7200
1.9500 1.5000 7.0500 3.2750 12.1500 4.2200 17.2500 4.7300
2.0500 1.5500 7.1500 3.3000 12.2500 4.2300 17.3500 4.7400
2.1500 1.6000 7.2500 3.3250 12.3500 4.2400 17.4500 4.7500
2.2500 1.6500 7.3500 3.3500 12.4500 4.2500 17.5500 4.7600
2.3500 1.7000 7.4500 3.3750 12.5500 4.2600 17.6500 4.7700
2.4500 1.7500 7.5500 3.4000 12.6500 4.2700 17.7500 4.7800
2.5500 1.8000 7.6500 3.4250 12.7500 4.2800 17.8500 4.7900
2.6500 1.8500 7.7500 3.4500 12.8500 4.2900 17.9500 4.8000
2.7500 1.9000 7.8500 3.4750 12.9500 4.3000 18.0500 4.8100
2.8500 1.9500 7.9500 3.5000 13.0500 4.3100 18.1500 4.8200
2.9500 2.0000 8.0500 3.5250 13.1500 4.3200 18.2500 4.8300
3.0500 2.0333 8.1500 3.5500 13.2500 4.3300 18.3500 4.8400
3.1500 2.0667 8.2500 3.5750 13.3500 4.3400 18.4500 4.8500
3.2500 2.1000 8.3500 3.6000 13.4500 4.3500 18.5500 4.8600
3.3500 2.1333 8.4500 3.6250 13.5500 4.3600 18.6500 4.8700
3.4500 2.1667 8.5500 3.6500 13.6500 4.3700 18.7500 4.8800
3.5500 2.2000 8.6500 3.6750 13.7500 4.3800 18.8500 4.8900
3.6500 2.2333 8.7500 3.7000 13.8500 4.3900 18.9500 4.9000
3.7500 2.2667 8.8500 3.7250 13.9500 4.4000 19.0500 4.9100
3.8500 2.3000 8.9500 3.7500 14.0500 4.4100 19.1500 4.9200
3.9500 2.3333 9.0500 3.7750 14.1500 4.4200 19.2500 4.9300
4.0500 2.3667 9.1500 3.8000 14.2500 4.4300 19.3500 4.9400
4.1500 2.4000 9.2500 3.8250 14.3500 4.4400 19.4500 4.9500
4.2500 2.4333 9.3500 3.8500 14.4500 4.4500 19.5500 4.9600
4.3500 2.4667 9.4500 3.8750 14.5500 4.4600 19.6500 4.9700
4.4500 2.5000 9.5500 3.9000 14.6500 4.4700 19.7500 4.9800
4.5500 2.5333 9.6500 3.9250 14.7500 4.4800 19.8500 4.9900
4.6500 2.5667 9.7500 3.9500 14.8500 4.4900 19.9500 5.0000
4.7500 2.6000 9.8500 3.9750 14.9500 4.5000
4.8500 2.6333 9.9500 4.0000 15.0500 4.5100
4.9500 2.6667 10.0500 4.0100 15.1500 4.5200
(vi) The Diversity Score is then calculated by summing each of the Industry Diversity
Scores for each Moody's industry classification group.
77

For purposes of calculating the Diversity Score, (i) affiliated issuers in the same industry are
deemed to be a single issuer, except as otherwise agreed to by Moody's and (ii) Structured Finance
Obligations that constitute collateralized loan obligations shall be excluded.
S&P CDO Monitor Test.
The S&P CDO Monitor Test will be satisfied on any date of determination if, after giving effect
to the sale of a Collateral Obligation or the purchase of an additional Collateral Obligation, each Class
Default Differential of the Proposed Portfolio is positive. The S&P CDO Monitor Test will be considered
to be improved if each Class Default Differential of the Proposed Portfolio is greater than the
corresponding Class Default Differential of the Current Portfolio.
Compliance with the S&P CDO Monitor Test will be measured by the Portfolio Manager on each
Measurement Date.
There can be no assurance that actual defaults of the Collateral Obligations will not exceed those
assumed in the application of the S&P CDO Monitor or that recovery rates with respect thereto will not
differ from those assumed in the S&P CDO Monitor. None of the Portfolio Manager, the Initial
Purchaser, the Placement Agent, the Co-Issuers, the Trustee or the Collateral Administrator makes any
representation as to the expected rate of defaults of the Collateral Obligations or the timing of defaults or
as to the expected recovery rate or the timing of recoveries.
Minimum Weighted Average Moody's Recovery Rate Test.
"Weighted Average Moody's Recovery Rate" means, as of any date of determination, the
number, expressed as a percentage, obtained by summing the product of the Moody's Recovery Rate on
such Measurement Date of each Collateral Obligation and the principal balance of such Collateral
Obligation, dividing such sum by the aggregate principal balance of all such Collateral Obligations and
rounding up to the first decimal place.
"Moody's Recovery Rate" means, with respect to any loan, Bond or Synthetic Security, as of
any date of determination, the recovery rate determined in accordance with the following, in the following
order of priority:
(a) if the loan, Bond (including, for the avoidance of doubt, a Structured Finance Obligation)
or Synthetic Security has been specifically assigned a recovery rate by Moody's (for example, in
connection with the assignment by Moody's of an estimated rating), such recovery rate;
(b) if the preceding clause does not apply to the Bond or loan, as the case may be, and the
loan is a Moody's Senior Secured Loan or a Moody's Non-Senior Secured Loan or a Bond (in each case
other than a Structured Finance Obligation or a DIP Collateral Obligation), the rate determined pursuant
to the table below based on the number of rating subcategories difference between the Bond's or loan's
Moody's Rating and its Moody's Default Probability Rating (for purposes of clarification, if the Moody's
Rating is higher than the Moody's Default Probability Rating, the rating subcategories difference will be
positive and if it is lower, negative):
78

Number of Moody's Ratings
Subcategories Difference
Between the Moody's Rating
and the Moody's Default
Probability Rating
Moody's
Non-Senior
Secured
Loans
Bonds*
Moody's Senior
Secured Loans
+2 or more 60.0% 45.0% 40.0%
+1 50.0% 42.5% 35.0%
0 45.0% 40.0% 30.0%
-1 40.0% 30.0% 15.0%
-2 30.0% 15.0% 10.0%
-3 or less 20.0% 10.0% 2.0%
* The recovery rate for a subordinated Bond will be 15% if its Moody's Rating has been determined with reference
to the definition of "Moody's Derived Rating."
(c) the loan is a DIP Collateral Obligation (other than a DIP Collateral Obligation which has
been specifically assigned a recovery rate by Moody's), 50%; or
(d) if the Bond is a Structured Finance Obligation (other than a Structured Finance
Obligation which has been specifically assigned a recovery rate by Moody's), the rate determined in
accordance with the Indenture.
Minimum Weighted Average S&P Recovery Rate Test.
"Weighted Average S&P Recovery Rate" means, as of any date of determination, the number,
expressed as a percentage, obtained by summing the products obtained by multiplying the outstanding
principal balance of each Collateral Obligation by its corresponding recovery rate as set forth in the table
below, dividing such sum by the aggregate principal balance of all Collateral Obligations, and rounding to
the nearest tenth of a percent. For purposes of the following table, (i) loans secured by a second priority
lien of collateral that would constitute Senior Secured Loans if such lien were of first priority comprising
up to 15% of the Collateral Principal Amount will receive the recovery rate assigned to Senior Unsecured
Loans and (ii) all other such loans will receive the recovery rate assigned to subordinated loans.
U.S./Canadian Obligors
Priority Category Recovery Rate 1
Senior Secured Loans 56.0%
Senior Unsecured Loans 40.0%
Subordinated Loans 22.8%
Senior Secured Bonds/Senior Secured Notes 49.0%
Senior Unsecured Bonds 36.4%
Subordinated Bonds 22.8%
DIP Collateral Obligations 56.0%
Synthetic Securities
Structured Finance Obligations
2
3
79

Non U.S./Non-Canadian Obligors
As determined by S&P on a case by case basis
1
2
3
Or, at the option of the Portfolio Manager, such higher rates as provided by S&P.
As determined by S&P on a case by case basis, except as otherwise provided in the Indenture or unless
published by S&P.
As determined in accordance with the Indenture.
Weighted Average Life Test.
The "Weighted Average Life" is, as of any date of determination with respect to all Collateral
Obligations other than Defaulted Securities, the number obtained by summing the products obtained by
multiplying:
The Average Life at such time of each
such Collateral Obligation
X
The outstanding Principal Balance of
such Collateral Obligation
and dividing such sum by:
The aggregate remaining principal balance at such time of all Collateral Obligations other
than Defaulted Securities
"Average Life" means, on any date of determination with respect to any Collateral Obligation,
the quotient obtained by dividing (i) the sum of the products of (a) the number of years (rounded to the
nearest one hundredth thereof) from such date of determination to the respective dates of each successive
scheduled distribution of principal of such Collateral Obligation and (b) the respective amounts of
principal of such scheduled distributions by (ii) the sum of all successive scheduled distributions of
principal on such Collateral Obligation.
Collateral Assumptions
Unless otherwise specified, the assumptions described below will be applied to the determination
of the Concentration Limitations, the Collateral Quality Test and the Coverage Tests.
For the purposes of calculating the Weighted Average Moody's Rating Factor, any Collateral
Obligation that is a Current Pay Obligation will be excluded in such calculation.
For purposes of calculating all Concentration Limitations, in both the numerator and the
denominator of any component of the Concentration Limitations, Defaulted Obligations will be treated as
having a principal balance equal to the lesser of (i) the S&P Collateral Value of such Defaulted
Obligation and (ii) the Moody's Collateral Value of such Defaulted Obligation. Except as otherwise
specified herein, Defaulted Obligations will not be included in the calculation of the Collateral Quality
Test.
For all purposes (including calculation of the Coverage Tests), the principal balance of a
Revolving Collateral Obligation or a Delayed Drawdown Collateral Obligation will include all unfunded
commitments that have not been irrevocably reduced or withdrawn.
80

For purposes of calculating the sale proceeds of a Collateral Obligation in sale transactions, sale
proceeds will include any Principal Financed Accrued Interest received in respect of such sale.
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
Obligations.
For each Collection Period and as of any date of determination, the scheduled payment of
principal and/or interest on any Asset (other than a Defaulted Obligation, which, except as otherwise
provided herein, shall be assumed to have scheduled distributions of zero) shall be the sum of (i) the total
amount of payments and collections to be received during such Collection Period in respect of such Asset
(including the proceeds of the sale of such Asset received and, in the case of sales which have not yet
settled, to be received during the Collection Period and not reinvested in additional Collateral Obligations
or Eligible Investments or retained in the Collection Account for subsequent reinvestment) that, if paid as
scheduled, will be available in the Collection Account at the end of the Collection Period and (ii) any
such amounts received by the Issuer in prior Collection Periods that were not disbursed on a previous
Payment Date.
Each scheduled payment of principal and/or interest receivable with respect to a Collateral
Obligation shall be assumed to be received on the applicable due date thereof, and each such scheduled
payment of principal and/or interest shall be assumed to be immediately deposited in the Collection
Account to earn interest at an 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 of the Indenture, to payments of principal of or interest on the
Notes or other amounts payable pursuant to the Indenture.
For all purposes under the Indenture, a Synthetic Security (i) will be treated as having the S&P
industry classification, Moody's industry classification and geographic location of the issuer of the
Reference Obligation; (ii) will be treated as being an obligation of the issuer of the Reference Obligation
for purposes of clause (xvi) of the definition of "Concentration Limitations"; (iii) (a) in the case of
Moody's and any Form Approved Synthetic Security, will be treated as having (x) a Moody's Rating
Factor equal to the sum of the Moody's Rating Factor of the related Reference Obligation and the
Moody's Rating Factor associated with the senior unsecured rating of the related Synthetic Security
Counterparty, unless otherwise determined by Moody's and (y) the Moody's Recovery Rate assigned to
the related Reference Obligation, unless otherwise determined by Moody's, (b) in the case of Moody's and
any other type of Synthetic Security, will be treated as having a Moody's Rating Factor and a Moody's
Recovery Rate as determined by Moody's and (c) in the case of S&P, will be treated as having an S&P
Recovery Rate equal to that of the related Reference Obligation unless otherwise determined by S&P and,
in the case of a Form Approved Synthetic Security, will be treated as having a S&P Rating equal to the
lower of the S&P Rating of the related Reference Obligation and the rating assigned by S&P to the
Synthetic Security Counterparty; (iv) will be treated as having the interest rate and other payment
characteristics, Stated Maturity and tax characteristics of such Synthetic Security (and, if the Synthetic
Security provides for (x) a fixed periodic amount payable to the Issuer under the terms thereof and (y)
collateralization by the Issuer under the terms thereof by deposit of collateral into a Synthetic Security
Counterparty Account and investment of such collateral in stated floating rate investments, such Synthetic
Security shall be deemed to have the interest rate and payment characteristics of a floating rate Collateral
Obligation based upon the aggregate of the amounts described in the preceding clauses (x) and (y)); (v)
will be treated as having a Moody's Rating and Moody's Default Probability Rating equal to the rating in
the "Moody's Default Probability Rating" column included in the definition of "Moody's Rating Factor"
opposite the Moody's Rating Factor of such Synthetic Security determined in accordance with clause
(iii)(b) above (for such purpose, such Moody's Rating Factor shall be rounded to the nearest whole
81

number included in the "Moody's Rating Factor" column); and (vi) will be treated as a bank loan for the
purposes of the definition of "Discount Obligation" if its Moody's Recovery Rate is greater than or equal
to 40%.
If a Collateral Obligation included in the Assets would be deemed a Current Pay Obligation but
for the applicable percentage limitation in the definition thereof, the Portfolio Manager may determine in
its sole discretion which such Current Pay Obligations will be deemed Defaulted Obligations. Each such
Defaulted Obligation will be treated as a Defaulted Obligation for all purposes until such time as the
aggregate principal balance of Current Pay Obligations would not exceed, on a pro forma basis including
such Defaulted Obligation, the applicable percentage of the Collateral Principal Amount.
References under "Summary of Terms—Priority of Payments" to calculations made on a "pro
forma basis" shall mean such calculations after giving effect to all payments, in accordance with the
priority of payments described herein, that precede (in priority of payment) or include the clause in which
such calculation is made.
Except as otherwise provided herein, Defaulted Obligations will not be included in the calculation
of the Collateral Quality Test.
For purposes of calculating the Collateral Quality Test, DIP Collateral Obligations will be treated
as having an S&P Recovery Rate equal to the S&P Recovery Rate for Senior Secured Loans.
For purposes of calculating compliance with the Investment Criteria, at the election of the
Portfolio Manager in its sole discretion, any proposed investment (whether a single Collateral Obligation
or a group of Collateral Obligations identified by the Portfolio Manager as such at the time when
compliance with the Investment Criteria is required to be calculated) may be evaluated after giving effect
to all sales and reinvestments proposed to be entered into within the five Business Days following the
date of determination of such compliance.
For purposes of calculating clauses (v) and (ix) of the Concentration Limitations, without
duplication, the amounts on deposit in the Collection Account and the Ramp-Up Account (including
Eligible Investments therein) representing Principal Proceeds and, from and after a default under a
Securities Lending Agreement, amounts on deposit in the related Securities Lending Account (including
Eligible Investments therein) shall each be deemed to be a floating rate Collateral Obligation that is a
Senior Secured Loan.
For purposes of determining the Moody's Recovery Rate, (i) a Senior Secured Note shall be
deemed to be a Moody's Senior Secured Loan if such Senior Secured Note, if it were a loan, would meet
the definition of Moody's Senior Secured Loan and (ii) a Senior Secured Note shall be deemed to be a
Moody's Non-Senior Secured Loan if such Senior Secured Note, if it were a loan, would meet the
definition of Moody's Non-Senior Secured Loan.
For all purposes of the Indenture, a Collateral Obligation lent pursuant to a Securities Lending
Agreement will be treated as a Collateral Obligation, including for purposes of determining the Fee Basis
Amount, compliance with the Concentration Limitations, the Collateral Quality Test and the Coverage
Tests and for purposes of the definitions of Interest Proceeds and Principal Proceeds, unless and until a
default occurs and is continuing under the applicable Securities Lending Agreement. Upon a default
under the related Securities Lending Agreement, such Collateral Obligation will cease to be treated as a
Collateral Obligation and in lieu thereof, amounts held in the applicable Securities Lending Account will
be treated as Eligible Investments (whether or not such amounts satisfy the definition of "Eligible
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Investment"), characterized as Principal Proceeds for all purposes unless and until such loaned Collateral
Obligation is delivered to the Issuer.
All monetary calculations under the Indenture will be in U.S. dollars.
The Coverage Tests and the Reinvestment Overcollateralization Test
See "—Collateral Assumptions" above for a description of the assumptions applicable to the
determination of satisfaction of the Coverage Tests.
Overcollateralization Ratio. See "Summary of Terms—Coverage Tests and the Reinvestment
Overcollateralization Test" for a description of the calculation of the Overcollateralization Ratio.
Measurement of the degree of compliance with the Overcollateralization Tests will be required as of the
Closing Date and each Measurement Date thereafter.
Interest Coverage Ratio. See "Summary of Terms—Coverage Tests and the Reinvestment
Overcollateralization Test" for a description of the calculation of the Interest Coverage Ratio.
Measurement of the degree of compliance with the Interest Coverage Tests will be required as of each
Measurement Date beginning on the Determination Date immediately preceding the second Payment
Date.
Reinvestment Overcollateralization Test. See "Summary of Terms—Coverage Tests and the
Reinvestment Overcollateralization Test" for a description of the Reinvestment Overcollateralization
Test. Measurement of the degree of compliance with the Reinvestment Overcollateralization Test will be
required as of each Measurement Date during the Reinvestment Period.
Sales of Collateral Obligations; Additional Collateral Obligations and Investment Criteria
Subject to the other requirements set forth in the Indenture and provided that no Event of Default
has occurred and is continuing (except for a sale pursuant to clauses (a), (c), (d) and (g) below), the
Portfolio Manager on behalf of the Issuer may in writing direct the Trustee to sell and the Trustee shall
sell in the manner directed by the Portfolio Manager any Collateral Obligation or Equity Security if, as
certified by the Portfolio Manager, such sale meets any one of the following requirements; provided,
however, if an Event of Default under clause (f) of the definition thereof has occurred and is continuing
for a period of three consecutive months without an acceleration of the Notes, then such Event of Default
shall not be deemed to be continuing for purposes of this provision; provided, further, that during the
period from the date that notice of resignation or removal of the Portfolio Manager has been delivered
pursuant to the Portfolio Management Agreement to, but excluding, the date that such resignation or
removal is effective pursuant to the Portfolio Management Agreement, the Portfolio Manager may not
direct the Trustee to sell any Credit Improved Obligations pursuant to clause (b) below or sell any
Collateral Obligation pursuant to clause (f) below, unless such direction to sell was made prior to such
delivery of notice of removal or resignation of the Portfolio Manager:
(a) The Portfolio Manager may direct the Trustee to sell any Credit Risk Obligation at any
time without restriction;
either:
(b)
The Portfolio Manager may direct the Trustee to sell any Credit Improved Obligation
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(i) at any time if (A) the Sale Proceeds from such sale are at least equal to the
Investment Criteria Adjusted Balance of such Credit Improved Obligation, or (B) the
Reinvestment Overcollateralization Test is satisfied; or
(ii) during the Reinvestment Period if the Portfolio Manager reasonably believes
prior to such sale that either (A) after such sale and subsequent reinvestment of the proceeds of
such sale, the Reinvestment Overcollateralization Test will be satisfied, or (B) it will be able to
enter into binding commitments to reinvest all or a portion of the proceeds of such sale, in
compliance with the Investment Criteria, in one or more additional Collateral Obligations with an
aggregate principal balance at least equal to the Investment Criteria Adjusted Balance of such
Credit Improved Obligation within twenty Business Days of such sale;
(c) The Portfolio Manager may direct the Trustee to sell any Defaulted Obligation at any
time during or after the Reinvestment Period without restriction;
(d) The Portfolio Manager may direct the Trustee to sell any Equity Security at any time
during or after the Reinvestment Period without restriction;
(e) After the Issuer has notified the Trustee of an optional redemption of the Notes and all
requirements set forth in the Indenture are met, the Portfolio Manager shall direct the Trustee to sell
(which sale may be through participation or other arrangement) all or a portion of the Collateral
Obligations;
(f) The Portfolio Manager may direct the Trustee to sell any Collateral Obligation at any
time other than a Restricted Trading Period if (i) after giving effect to such sale, the aggregate principal
balance of all Collateral Obligations sold as described in this paragraph during the same calendar year is
not greater than 20% of the Collateral Principal Amount as of the beginning of such calendar year (or, in
the case of the year 2006, $25,000,000); and (ii) either:
(A) during or after the Reinvestment Period, the Sale Proceeds from such sale are at
least equal to the Investment Criteria Adjusted Balance of such Collateral Obligation, or
(B) during the Reinvestment Period, the Portfolio Manager reasonably believes prior
to such sale that it will be able to enter into binding commitments to reinvest all or a portion of
the proceeds of such sale, in compliance with the Investment Criteria, in one or more additional
Collateral Obligations with an aggregate principal balance at least equal to the Investment
Criteria Adjusted Balance of such Collateral Obligation within twenty Business Days of such
sale; or
(g) If, at the time of sale of any Collateral Obligations, the Portfolio Manager is not required
to and has not identified substitute Collateral Obligations for purchase, Principal Proceeds may be
reinvested in Eligible Investments on a temporary basis, pending reinvestment in substitute Collateral
Obligations. Unless so designated by the Portfolio Manager, such Eligible Investments will not constitute
Collateral Obligations which must be applied in accordance with the Priority of Payments if such sale
occurred (i) within 30 Business Days prior to the Interest Determination Date for a Credit Risk Obligation
and (ii) within 90 days prior to the Interest Determination Date for a Defaulted Obligation.
(h) The Portfolio Manager shall use its commercially reasonable efforts to effect the sale of
any Collateral Obligation (other than Defaulted Obligations) that no longer meets the criteria described in
clause (viii) of the definition of "Collateral Obligation", within 18 months of the failure of such Collateral
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Obligation to meet any such criteria (unless the Moody's Rating Condition or S&P Rating Condition, as
the case may be, is satisfied).
Notwithstanding the other requirements set forth in the Indenture and described above, the Issuer shall
have the right to effect the sale of any pledged obligation or purchase of any Collateral Obligation (provided,
in the case of a purchase of a Collateral Obligation, such purchase must comply with the applicable tax
requirements set forth in the Indenture) (x) that has been consented to by holders of Notes evidencing at least
75% of the aggregate outstanding principal amount of each Class of Notes and (y) of which each Rating
Agency and the Trustee has been notified.
Investment Criteria. On any date during the Reinvestment Period (and after the Reinvestment
Period, subject to certain limitations described below, with respect to Principal Proceeds received from
Prepaid Collateral Obligations) and purchases made with Principal Proceeds received pursuant to clause
(S) of "Summary of Terms—Priority of Payments—Application of Interest Proceeds" on the last Payment
Date of the Reinvestment Period), pursuant to and subject to the other requirements of the Indenture the
Issuer may, but will not be required to, direct the Trustee to invest Principal Proceeds (together with
accrued interest received with respect to any Collateral Obligations). Such proceeds may be used to
purchase additional Collateral Obligations subject to the requirement that each of the following conditions
are satisfied as of the date the Issuer commits to make such purchase or on the date of such purchase, in
each case after giving effect to such purchase and all other sales or purchases previously or
simultaneously committed to; provided, that the conditions set forth in clauses (iv) and (v) below need
only be satisfied with respect to purchases of Collateral Obligations occurring after the end of the Ramp-
Up Period (the "Investment Criteria"):
(i)
such obligation is a Collateral Obligation;
(ii) such obligation is not convertible into or exchangeable for Equity Securities, or
attached with a warrant to purchase Equity Securities, unless (A) the value of such conversion
option, exchange option or warrant is not, in the reasonable commercial judgment of the Portfolio
Manager, a significant portion of the purchase price (it being understood that the value of such
conversion option, exchange option or warrant exceeding 2% of the purchase price will be
deemed to be a significant portion, unless such portion that exceeds 2% of the purchase price is
acquired using Interest Proceeds reasonably expected by the Portfolio Manager to remain after all
interest payments have been made on the Notes in accordance with the priority of payments on
the succeeding Payment Date) and (B) such obligation is convertible into or exchangeable for
Equity Securities only at the option of the Issuer, unless such exchange is an exchange of a unit
security;
(iii) (A) each Coverage Test will be satisfied, or if not satisfied, such Coverage Test
will be maintained or improved and (B) if each Coverage Test is not satisfied, the Principal
Proceeds received in respect of any Defaulted Obligation or the proceeds of any sale of a
Defaulted Obligation will not be reinvested in additional Collateral Obligations;
(iv) (A) in the case of an additional Collateral Obligation purchased with the proceeds
from the sale of a Credit Risk Obligation or a Defaulted Obligation, either (1) the aggregate
principal balance of all additional Collateral Obligations purchased with the proceeds from such
sale will at least equal the Sale Proceeds from such sale, (2) the aggregate principal balance of the
Collateral Obligations will be maintained or increased, or (3) the Reinvestment
Overcollateralization Test will be satisfied and (B) in the case of any other purchase of additional
Collateral Obligations, either (1) the aggregate principal balance of the Collateral Obligations will
be maintained or increased, or (2) the Reinvestment Overcollateralization Test will be satisfied;
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(v) either (A) each requirement or test, as the case may be, of the Concentration
Limitations and the Collateral Quality Test (except, in the case of an additional Collateral
Obligation purchased with the proceeds from the sale of a Credit Risk Obligation or a Defaulted
Obligation, the S&P CDO Monitor Test) will be satisfied or (B) if any such requirement or test
was not satisfied immediately prior to such reinvestment, such requirement or test will be
maintained or improved after giving effect to the reinvestment; provided, that the Minimum
Floating Spread Test need not be satisfied, maintained or improved in the case of a reinvestment
of Principal Proceeds received on a Collateral Obligation (a "Paid Down Collateral
Obligation") within 5 Business Days of the Issuer's receipt of such Principal Proceeds in another
Collateral Obligation that has (1) the same obligor as such Paid Down Collateral Obligation, (2)
the same or higher S&P Rating and Moody's Rating than such Paid Down Collateral Obligation,
(3) the same or an earlier maturity than such Paid Down Collateral Obligation, (4) the same or
higher level of priority and security than such Paid Down Collateral Obligation and (5) a lower
spread than the spread on such Paid Down Collateral Obligation, so long as Moody's shall have
upgraded its rating of the Paid Down Collateral Obligation within 60 days prior to receipt of such
Principal Proceeds.
Following the sale of any Credit Improved Obligation or any discretionary sale of a Collateral
Obligation, the Issuer shall use its reasonable efforts to purchase additional Collateral Obligations within
30 Business Days after such sale.
Investment After the Reinvestment Period. After the Reinvestment Period, the Portfolio Manager
may, but shall not be required to, invest Principal Proceeds within 20 days of the Issuer's receipt thereof
that were received with respect to: (1) a Prepaid Collateral Obligation or a Credit Improved Obligation
and (2) a Credit Risk Obligation; provided, that in the case of the foregoing clause (1), such Principal
Proceeds are invested in Collateral Obligations having a par value at least equal to the par value of the
applicable Prepaid Collateral Obligation or Credit Improved Obligation, and in the case of each of the
foregoing clauses (1) and (2), the Portfolio Manager may not reinvest such Principal Proceeds unless the
Portfolio Manager reasonably believes that, after giving effect to any such reinvestment (i) the Collateral
Quality Test (other than the S&P CDO Monitor Test) will be satisfied, (ii) the Coverage Tests will be
satisfied and (iii) the additional Collateral Obligations purchased will (w) have the same or higher S&P
Ratings, (x) have the same or earlier maturity, (y) not be acquired during a Restricted Trading Period and
(z) be acquired in compliance with clause (xvi) of the definition of "Concentration Limitations".
The Collection and Payment Accounts
All distributions on the Collateral Obligations and any proceeds received from the disposition of
any Collateral Obligations will be remitted to a single, segregated non-interest bearing trust account held
in the name of the Issuer (the "Collection Account") and subject to the lien of the Trustee for the benefit
of the Secured Parties, and will be available, together with reinvestment earnings thereon, for application
to the payment of the amounts set forth under "Summary of Terms—Priority of Payments" and for the
acquisition of additional Collateral Obligations under the circumstances and pursuant to the requirements
described herein and in the Indenture. Two segregated subaccounts will be established within the
Collection Account, one of which will be designated the "Interest Collection Subaccount" and one of
which will be designated the "Principal Collection Subaccount". All Interest Proceeds received by the
Trustee after the Closing Date (except for income earned on amounts deposited in certain subaccounts of
the Revolver Funding Account) will be deposited in the Interest Collection Subaccount. All other
amounts remitted to the Collection Account will be deposited in the Principal Collection Subaccount.
The Portfolio Manager on behalf of the Issuer may direct the Trustee to pay from amounts on
deposit in the Collection Account on any Business Day during any Interest Accrual Period (i) any amount
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equired to exercise a warrant or right to acquire securities held in the Assets in accordance with the
requirements of "Security for the Secured Notes—Sales of Collateral Obligations; Additional Collateral
Obligations and Investment Criteria" and (ii) from Interest Proceeds only, any Administrative Expenses;
provided, that the aggregate Administrative Expenses paid during any Collection Period shall not exceed
the Administrative Expense Cap for the related Payment Date. In addition, the Portfolio Manager on
behalf of the Issuer may direct the Trustee to pay from the Principal Collection Subaccount amounts
required to meet funding requirements with respect to Delayed Drawdown Collateral Obligations and
Revolving Collateral Obligations.
Amounts received in the Collection Account during a Collection Period will be invested in
Eligible Investments with stated maturities no later than the Business Day prior to the Payment Date next
succeeding the acquisition of such securities or instruments. All proceeds from the Eligible Investments
will be retained in the Collection Account unless used to purchase additional Collateral Obligations in
accordance with the Investment Criteria, or used as otherwise permitted under the Indenture. See "—
Sales of Collateral Obligations; Additional Collateral Obligations and Investment Criteria" and
"Summary of Terms—Priority of Payments."
On the Business Day preceding each Payment Date, the Trustee will deposit into a segregated
non-interest bearing trust account held in the name of the Issuer (the "Payment Account") and subject to
the lien of the Trustee for the benefit of the Secured Parties all funds in the Collection Account (other
than amounts that the Issuer is entitled to reinvest in accordance with the Investment Criteria described
herein, which may be retained in the Collection Account for subsequent reinvestment) required for
payments to holders of the Secured Notes and distributions on the Subordinated Notes and payments of
fees and expenses in accordance with the priorities described under "Summary of Terms—Priority of
Payments."
The Ramp-Up Account
The net proceeds of the issuance of the Offered Securities remaining after payment of fees and
expenses will be deposited on the Closing Date into a segregated non-interest bearing trust account held
in the name of the Issuer (the "Ramp-Up Account") and subject to the lien of the Trustee for the benefit
of the Secured Parties. Of the proceeds of the issuance of the Offered Securities which are not applied to
pay for the purchase of Collateral Obligations purchased by the Issuer on or before the Closing Date
(including, without limitation, repayment of any amounts borrowed by the Issuer in connection with the
purchase of Collateral Obligations prior to the Closing Date) approximately $88,200,000 representing
proceeds of the issuance of the Notes will be deposited in the Ramp-Up Account on the Closing Date. On
behalf of the Issuer, the Portfolio Manager will direct the Trustee to, from time to time during the Ramp-
Up Period, purchase additional Collateral Obligations and invest in Eligible Investments any amounts not
used to purchase such additional Collateral Obligations. On the first day after the end of the Ramp-Up
Period or upon the occurrence of an Event of Default (and excluding any proceeds that will be used to
settle binding commitments entered into prior to that date), the Trustee will deposit any remaining
amounts in the Ramp-Up Account into the Collection Account as Principal Proceeds. Any income earned
on amounts deposited in the Ramp-Up Account will be deposited in the Collection Account as Interest
Proceeds.
The Custodial Account
The Issuer will, on or prior to the Closing Date, establish a segregated non-interest bearing trust
account in the name of the Issuer and subject to the lien of the Trustee for the benefit of the Secured
Parties which will be designated as the "Custodial Account". The only permitted withdrawals from the
Custodial Account shall be in accordance with the provisions of the Indenture. The Co-Issuers shall not
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have any legal, equitable or beneficial interest in the Custodial Account other than in accordance with the
Indenture and the priority of payments.
The Revolver Funding Account
Upon the purchase of any Delayed Drawdown Collateral Obligation or Revolving Collateral
Obligation, funds in the amounts described below shall be withdrawn first from the Ramp-up Account
and then from the Collection Account and deposited in a single, segregated non-interest bearing trust
account established in the name of the Issuer (the "Revolver Funding Account") and subject to the lien
of the Trustee for the benefit of the Secured Parties. Upon initial purchase, funds deposited in the
Revolver Funding Account in respect of any Delayed Drawdown Collateral Obligation or Revolving
Collateral Obligation will be treated as part of the purchase price therefor. Amounts on deposit in the
Revolver Funding Account will be invested in overnight funds that are Eligible Investments and earnings
from all such investments will be deposited in the Interest Collection Subaccount as Interest Proceeds.
Upon the purchase of any Delayed Drawdown Collateral Obligation or Revolving Collateral
Obligation, funds will be deposited in the Revolver Funding Account such that the sum of the amount of
funds on deposit in such subaccount shall be equal to or greater than the sum of the unfunded funding
obligations under all such Delayed Drawdown Collateral Obligations and Revolving Collateral
Obligations then included in the Assets.
Any funds in the Revolver Funding Account (other than earnings from Eligible Investments
therein) will be available solely to cover any drawdowns on the Delayed Drawdown Collateral
Obligations and Revolving Collateral Obligations. Upon (a) the sale or maturity of a Delayed Drawdown
Collateral Obligation or Revolving Collateral Obligation or (b) the occurrence of an event of default with
respect to any such Delayed Drawdown Collateral Obligation or Revolving Collateral Obligation or any
other event or circumstance which results in the irrevocable reduction of the undrawn commitments under
such Delayed Drawdown Collateral Obligation or Revolving Collateral Obligation (the occurrence of
which the Portfolio Manager shall notify the Trustee) any excess of (A) the amounts on deposit in the
Revolver Funding Account over (B) the sum of the unfunded amounts of all Delayed Drawdown
Collateral Obligations and Revolving Collateral Obligations included in the Assets will be transferred by
the Trustee (at the written direction of the Portfolio Manager) as Principal Proceeds to the Principal
Collection Subaccount.
The Synthetic Security Counterparty Accounts
If and to the extent that any Synthetic Security requires the Issuer to secure its obligations to the
Synthetic Security Counterparty, the Portfolio Manager on behalf of the Issuer shall either (x) direct the
Trustee and the Trustee shall establish a segregated non-interest bearing trust account in respect of each
such Synthetic Security which shall be held in trust for the benefit of the related Synthetic Security
Counterparty and over which the Trustee as agent for the related Synthetic Security Counterparty or the
related Synthetic Security Counterparty shall have exclusive control and the sole right of withdrawal in
accordance with the applicable Synthetic Security and the Indenture or (y) cause the establishment of a
segregated non-interest bearing trust account in respect of any Synthetic Security at an organization or
entity (other than the Trustee) 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 rating of at least "Baa1" by Moody's and at least "BBB+" by S&P and having an
office within the United States (each such account, a "Synthetic Security Counterparty Account").
With respect to any such account set forth in clause (y), the related Synthetic Security Counterparty shall
have exclusive control over, and the sole right of withdrawal from, such account in accordance with the
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applicable Synthetic Security. However, the Issuer may, in lieu of establishing a Synthetic Security
Counterparty Account, provide cash or Synthetic Security Collateral to the Synthetic Security
Counterparty to be held and distributed in accordance with the applicable Synthetic Security. As directed
in writing by the Issuer, on any date during the Reinvestment Period, the Trustee will be required to
deposit into each Synthetic Security Counterparty Account or provide to the Synthetic Security
Counterparty all amounts or Synthetic Security Collateral which are required to secure the obligations of
the Issuer in accordance with the terms of the related Synthetic Security.
As directed by the Issuer in writing and in accordance with the applicable Synthetic Security,
amounts on deposit in a Synthetic Security Counterparty Account will be invested in Eligible Investments
or Synthetic Security Collateral. Income received on amounts or Synthetic Security Collateral on deposit
in each Synthetic Security Counterparty Account will be applied, as directed in writing by the Issuer, to
the payment of any periodic amounts owed by the Issuer to such Synthetic Security Counterparty on the
date any such amounts are due. After application of any such amounts, any income then contained in
such Synthetic Security Counterparty Account will (to the extent permitted by the applicable Synthetic
Security) be withdrawn from such account and deposited in the Collection Account as Interest Proceeds.
Upon the occurrence of any "credit event", "event of default" or "termination event" (each as
defined in the applicable Synthetic Security) under the related Synthetic Security, amounts contained in
the related Synthetic Security Counterparty Account shall, as directed in writing by the Portfolio
Manager, be withdrawn by the Trustee (or the related Synthetic Security Counterparty, as applicable) and
applied toward the payment of any amounts payable by the Issuer to the related Synthetic Security
Counterparty in accordance with the terms of such Synthetic Security. Any excess amounts held in a
Synthetic Security Counterparty Account after payment of all amounts owing from the Issuer to the
related Synthetic Security Counterparty in accordance with the terms of the related Synthetic Security will
be withdrawn from such Synthetic Security Counterparty Account and deposited in the Collection
Account as Principal Proceeds. In the event that the Issuer provides cash or Synthetic Security Collateral
directly to the Synthetic Security Counterparty, the related Synthetic Security shall provide that such cash
or Synthetic Security Collateral shall be applied to amounts owing to the Synthetic Security Counterparty
and that the remainder shall be returned to the Issuer. Upon receipt thereof, the Issuer shall place any
such amounts or Synthetic Security Collateral in the Collection Account for distribution as Principal
Proceeds.
Amounts contained in any Synthetic Security Counterparty Account or provided to a Synthetic
Security Counterparty shall not be considered to be an asset of the Issuer for purposes of any of the
Investment Criteria or the Coverage Tests, but the Synthetic Security which relates to such Synthetic
Security Counterparty Account shall be an asset of the Issuer for such purposes.
The Synthetic Security Issuer Accounts
If and to the extent that any Synthetic Security requires the Synthetic Security Counterparty to
secure its obligations to the Issuer with respect to such Synthetic Security, the Issuer will be required to
establish a segregated, non-interest bearing trust account (each such account, a "Synthetic Security
Issuer Account"). The Trustee (as directed in writing by the Portfolio Manager on behalf of the Issuer)
will be required to deposit into each Synthetic Security Issuer Account all amounts or Synthetic Security
Collateral which are required to secure the obligations of the Synthetic Security Counterparty in
accordance with the terms of the related Synthetic Security. Amounts or Synthetic Security Collateral in
any Synthetic Security Issuer Account will be released to the Issuer or the related Synthetic Security
Counterparty only in accordance with the Indenture, the applicable Synthetic Security and applicable law.
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As directed by the Issuer in writing and in accordance with the applicable Synthetic Security,
amounts on deposit in a Synthetic Security Issuer Account shall be invested in Eligible Investments or
Synthetic Security Collateral. Income received on amounts or Synthetic Security Collateral on deposit in
each Synthetic Security Issuer Account shall be applied, as directed by the Issuer, to the payment of any
periodic amounts owed by such Synthetic Security Counterparty to the Issuer on the date any such
amounts are due. After application of any such amounts, any income then contained in such Synthetic
Security Issuer Account shall be withdrawn from such account and paid to the related Synthetic Security
Counterparty in accordance with the applicable Synthetic Security as directed by the Issuer.
Upon the occurrence of any "credit event", "event of default", or "termination event" (each as
defined in the applicable Synthetic Security) under the related Synthetic Security, amounts contained in
the related Synthetic Security Issuer Account shall, as directed by the Issuer in writing, be withdrawn by
the Trustee and applied toward the payment of any amounts payable by the related Synthetic Security
Counterparty to the Issuer in accordance with the terms of such Synthetic Security. Any excess amounts
held in a Synthetic Security Issuer Account after payment of all amounts owing from the related Synthetic
Security Counterparty to the Issuer shall be withdrawn from such Synthetic Security Issuer Account and
paid to the related Synthetic Security Counterparty in accordance with the applicable Synthetic Security,
as directed by the Issuer.
The Expense Reserve Account
The Trustee will, prior to the Closing Date, establish a segregated non-interest bearing trust
account held in the name of the Issuer which will be designated as the "Expense Reserve Account" and
will be subject to the lien of the Trustee for the benefit of the Secured Parties. Approximately $2,275,000
will be deposited in the Expense Reserve Account as Interest Proceeds on the Closing Date for the
payment of certain expenses of the Issuer incurred in connection with the issuance of the Offered
Securities. On any Business Day from the Closing Date to and including the Determination Date relating
to the first Payment Date, the Trustee will apply funds from the Expense Reserve Account, as directed by
the Issuer, to pay expenses of the Co-Issuers incurred in connection with the establishment of the Co-
Issuers, the structuring and consummation of the Offering and the issuance of the Offered Securities or to
the Collection Account as Principal Proceeds. By the Determination Date relating to the first Payment
Date following the Closing Date, all funds in the Expense Reserve Account (after deducting any expenses
paid on such Determination Date) will be deposited in the Collection Account as Principal Proceeds and
the Expense Reserve Account will be closed. Any income earned on amounts deposited in the Expense
Reserve Account will be deposited in the Interest Collection Subaccount as Interest Proceeds as it is paid.
The Interest Reserve Account
The Trustee will, prior to the Closing Date, establish a segregated non-interest bearing trust
account held in the name of the Issuer which will be designated as the "Interest Reserve Account" and
will be subject to the lien of the Trustee for the benefit of the Secured Parties. Approximately $3,000,000
will be deposited in the Interest Reserve Account on the Closing Date. Funds deposited in the Interest
Reserve Account will be withdrawn and deposited into the Collection Account as Interest Proceeds to pay
amounts such that the amounts referred to in clauses (A) through (O) of "Summary of Terms—Priority of
Payments—Application of Interest Proceeds" will at least be paid in full on each Payment Date occurring
on or before the Payment Date in May 2007. By the Determination Date relating to the Payment Date
occurring in August 2007, all funds in the Interest Reserve Account (after deducting any amounts on
deposit therein required to be applied on such related Payment Date) will be deposited in the Collection
Account as Interest Proceeds and/or Principal Proceeds (in the respective amounts directed by the
Portfolio Manager on behalf of the Issuer in its discretion) and the Interest Reserve Account will be
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closed. Any income earned on amounts deposited in the Interest Reserve Account will be deposited in the
Interest Collection Subaccount as Interest Proceeds as it is paid.
The Securities Lending Account
At the time any Securities Lending Agreement is entered into, the Issuer will cause the
establishment of a segregated non-interest bearing trust or custodial account with a securities intermediary
in the name of the Securities Lending Counterparty, for the benefit of such Securities Lending
Counterparty, as pledgor, subject to the lien of the Trustee for the benefit of the Secured Parties (each, a
"Securities Lending Account"). Securities Lending Collateral pledged pursuant to a Securities Lending
Agreement shall be deposited into the related Securities Lending Account to secure the related Securities
Lending Counterparty's obligations under such Securities Lending Agreement. At all times, each
Securities Lending Account shall remain at an institution with a combined capital and surplus equal to or
in excess of $100,000,000 and having a long-term debt rating of at least "Baa2" by Moody's and a shortterm
debt rating of at least "A-1" by S&P. Upon any default by any Securities Lending Counterparty
under the related Securities Lending Agreement, the Issuer's remedies under such Securities Lending
Agreement, including liquidating the related Securities Lending Collateral, shall be exercised by the
Issuer or the Trustee, acting at the written direction of the Portfolio Manager. Proceeds of any such
liquidation shall be deposited in the Principal Collection Subaccount as Principal Proceeds. The Issuer
shall not have any right to cause the Trustee to withdraw money from any of the Securities Lending
Accounts other than in accordance with the Indenture, the applicable Securities Lending Agreement and
applicable law.
Hedge Agreements
The Issuer is permitted to enter into any interest rate swap, floor and/or cap agreements, including
without limitation one or more interest rate basis swap agreements (each, a "Hedge Agreement" and
collectively, the "Hedge Agreements"). Each Hedge Agreement will be documented as one or more
confirmations under a master swap agreement in the form published by the International Swaps and
Derivatives Association, Inc. Each Hedge Agreement will be governed by New York law (or, at the
option of the Issuer, English law).
The Issuer will not enter into any Hedge Agreement on the Closing Date. Any Hedge Agreement
entered into by the Issuer after the Closing Date will satisfy the Global Rating Agency Condition.
(a) Subject to rating conditions set forth in subclauses (b) and (c) below, if at any time a
Hedge Counterparty has:
(1) only a long-term debt rating by Moody's and such rating is below "Aa3" or is
"Aa3" and has been placed on credit watch for possible downgrade by Moody's; or
(2) both short-term and long-term debt ratings by Moody's; and either:
(A) the long-term debt rating by Moody's is below "A1" or such
rating is "A1" and has been placed on credit watch for possible downgrade by
Moody's; or
(B) the short-term debt rating by Moody's is below "P-1" or such
rating is "P-1" and has been placed on credit watch for possible downgrade by
Moody's; or
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(3) the short-term debt rating by S&P is below "A-1" or, if no short-term rating
exists, its long-term debt rating is less than "A+" (but such Hedge Counterparty has a short-term
debt rating by S&P of at least "A-3" and, if no short-term rating exists, a long-term debt rating by
S&P of at least "BBB-");
and the debt ratings of such Hedge Counterparty's guarantor, if applicable, fail to equal or exceed the
criteria in clauses (1), (2) and (3) above, then such Hedge Counterparty shall be required, at its sole
expense, to, within 30 days, either:
(1) post collateral to the Issuer to secure the Hedge Counterparty's obligations under
the Hedge Agreement, in an amount and of the type sufficient to cause the Global Rating Agency
Condition to be satisfied;
(2) obtain a guarantor whose short-term and long-term debt ratings equal or exceed
the above criteria in this subclause (a);
(3) replace itself at its own cost under the related or substantially equivalent Hedge
Agreement with a substitute Hedge Counterparty whose short-term and long-term debt ratings (or
those of the substitute Hedge Counterparty's guarantor) equal or exceed the above criteria in this
subclause (a)); or
(4) take such other actions as is necessary to satisfy the Global Rating Agency
Condition;
(b) Subject to the rating conditions set forth in subclause (c) below, if the Hedge
Counterparty has:
(1) only a long-term debt rating by Moody's and such rating is "A2" or below or has
been suspended or withdrawn; or
(2) both a short-term and long-term debt rating by Moody's; and either:
(A)
withdrawn; or
(B)
the long-term debt rating by Moody's is "A3" or below or is suspended or
the short-term debt rating by Moody's is "P-2" or below;
and the debt ratings of such Hedge Counterparty's guarantor fail to equal or exceed such ratings, then
such Hedge Counterparty shall be required, at its sole expense, to, within 30 days, either:
(1) post collateral to the Issuer to secure the Hedge Counterparty's obligations under
the Hedge Agreement, in an amount equal to the greatest of: (A) the next payment due under the
Hedge Agreement, (B) 1% of the notional amount of the Hedge Agreement, and (C) the mark-tomarket
value of the Hedge Agreement; and to continue to make commercially reasonable efforts
or, after 30 days, best efforts, to find either a guarantor pursuant to clause (2)(x) below or a
replacement Hedge Counterparty pursuant to clause (2)(y) below; provided, that the obligation to
post collateral shall continue until the completion of the requirements referenced in either of
clauses (2)(x) or (2)(y) below; or
(2) (x) obtain a guarantor whose short-term and long-term debt ratings equal or
exceed such ratings and the appointment of which will satisfy the S&P Rating Condition;
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(y) replace itself under the related or substantially equivalent Hedge
Agreement with a substitute Hedge Counterparty whose short-term and long-term debt
ratings (or those of its guarantor) equal or exceed the above criteria and the appointment
of which will satisfy the S&P Rating Condition; or
(z) take such other actions as is necessary to satisfy the Global Rating
Agency Condition.
(c) If the Hedge Counterparty has a short-term debt rating by S&P below "A-3" or, if no
short-term rating exists, a long-term debt rating by S&P below "BBB-" or that has been suspended or
withdrawn and the debt rating of such Hedge Counterparty's guarantor fails to equal or exceed the above
criteria, then such Hedge Counterparty shall be required, at its sole expense, to post collateral to the Issuer
to secure the Hedge Counterparty's obligations under the Hedge Agreement and, while posting such
collateral to the Issuer, such Hedge Counterparty will be required to transfer the Hedge Agreement, in
whole, but not in part, to a counterparty that satisfies (or whose guarantor (with such guarantor's
guarantee to comply with S&P's published criteria with respect to guarantees) satisfies) the debt ratings
set forth in clause (i) and (ii) of the definition of "Required Hedge Counterparty Rating" within 7 days of
the failure to equal or exceed the above criteria.
The Indenture requires that if at any time any Hedge Agreement becomes subject to early
termination due to the occurrence of an event of default or a termination event, the Issuer and the Trustee
shall notify each Rating Agency and take such actions (following the expiration of any applicable grace
period) to enforce the rights of the Issuer and the Trustee under such Hedge Agreement as may be
permitted by the terms of such Hedge Agreement and consistent with the terms hereof, and shall apply the
proceeds of any such actions (including, without limitation, the proceeds of the liquidation of any
collateral pledged by the Hedge Counterparty thereunder) to enter into a replacement Hedge Agreement
on such terms as satisfy the Global Rating Agency Condition (unless such early termination is due to an
additional termination event caused by an Optional Redemption). Any costs attributable to entering into a
replacement Hedge Agreement which exceed the sum of the proceeds of the liquidation of any such
Hedge Agreement shall be borne solely by the Hedge Counterparty; provided that such liquidation is not
the result of a Priority Hedge Termination Event.
The Trustee will agree to any reduction in the notional amount of any Hedge Agreement
proposed by the related Hedge Counterparty and agreed to by the Portfolio Manager, or any termination,
replacement and/or other modification of any such Hedge Agreement or any additional Hedge Agreement
proposed by the Portfolio Manager.
Securities Lending
Unless an Event of Default has occurred and is continuing, the Issuer (at the direction of the
Portfolio Manager) may from time to time lend Collateral Obligations (other than any Synthetic Security
that is not a "security" within the meaning of Section 1236(c) of the Code) to a Securities Lending
Counterparty pursuant to a Securities Lending Agreement; provided, that the requirements set forth in the
Indenture are satisfied. Such Securities Lending Counterparties may be affiliates of the Initial Purchaser
and Placement Agent and/or affiliates of the Portfolio Manager, notwithstanding conflicts of interest.
Each Securities Lending Agreement shall be entered into subject to receipt by the Trustee of
written certification from the Issuer or the Portfolio Manager on behalf of the Issuer that the following
conditions have been satisfied:
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(i) the duration of loans pursuant to the Securities Lending Agreement shall not exceed the
Stated Maturity of the Notes;
(ii) no more than 20% of the Collateral Principal Amount has been (or may be) loaned
pursuant to Securities Lending Agreements regardless of duration; and
(iii) no more than 10% of the Collateral Principal Amount has been (or may be) loaned
pursuant to Securities Lending Agreements, the duration of which exceeds two years.
Each Securities Lending Agreement shall be on market terms as determined by the Portfolio
Manager in good faith (except as required below) and shall:
(i) require that the Securities Lending Counterparty return to the Issuer debt obligations that
are identical (in terms of issue and class) to the loaned Collateral Obligations;
(ii) (A) require that the Securities Lending Counterparty pay to the Issuer such amounts as
are equivalent to all interest and other payments that the owner of the loaned Collateral Obligation is
entitled to for the period during which the Collateral Obligation is loaned, and (B) require that such
payments (other than any payments that are a substitute for commitment fees payable on the loaned
Collateral Obligation) not be subject to withholding tax imposed by any jurisdiction unless the Securities
Lending Counterparty is required under the Securities Lending Agreement to make "gross-up" payments
to the Issuer that cover the full amount of such withholding on an after-tax basis;
(iii) satisfy any other requirements of Section 1058 of the Code and Treasury Regulations
promulgated thereunder;
(iv) require that the Global Rating Agency Condition be satisfied as a condition of the
effectiveness of such Securities Lending Agreement (unless the Global Rating Agency Condition is
satisfied independently with respect to such Securities Lending Agreement);
(v)
(vi)
be governed by the laws of the State of New York; and
permit the Issuer to assign its rights thereunder to the Trustee pursuant to the Indenture;
provided, that clause (iii) above shall not apply if 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.
Each Securities Lending Agreement shall provide that (A) the Issuer may terminate such
Securities Lending Agreement if (i) the credit ratings of the Securities Lending Counterparty are
withdrawn or downgraded below the requirements relating to the credit ratings of such Securities Lending
Counterparty set forth in such Securities Lending Agreement, (ii) an Optional Redemption occurs, (iii) the
Securities Lending Counterparty is the subject of an insolvency or similar proceeding or (iv) the
Securities Lending Counterparty defaults in the performance of any of its obligations under the related
Securities Lending Agreement and/or (B) the Issuer may terminate such Securities Lending Agreement
upon prior written notice.
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Each Securities Lending Counterparty shall be required to post Securities Lending Collateral with
the Trustee or a Securities Intermediary to secure its obligation to return the loaned Collateral
Obligations. Such Securities Lending Collateral shall be maintained at all times with the Trustee or such
Securities Intermediary in an amount equal to at least 102% of the current market value (determined daily
in accordance with standard market practice and monitored by the Portfolio Manager) of the loaned
Collateral Obligations. The Issuer (at the direction of the Portfolio Manager) is expected to negotiate
with the related Securities Lending Counterparty a rate for the loan fee to be paid to the Issuer for lending
the loaned Collateral Obligations. For the avoidance of doubt, no loan fee paid to the Issuer for lending
the loaned Collateral Obligations shall be subject to the withholding tax requirement contained in clause
(ii)(B) above. If a Securities Lending Counterparty deposits cash as collateral in the related Securities
Lending Account, unless an Event of Default has occurred and is continuing, the Trustee (as directed by
the Issuer) may invest such cash collateral in Eligible Investments to the extent permitted by the
applicable Securities Lending Agreement and, if required by the terms of the applicable Securities
Lending Agreement, the Issuer may be responsible to the related Securities Lending Counterparty for any
related investment losses. Collateral deposited in a Securities Lending Account will not constitute
Collateral Obligations for purposes of the Indenture and will not be available to make payments on the
Notes unless the related Securities Lending Counterparty defaults on its obligations under the related
Securities Lending Agreement, including its obligation to return the loaned Collateral Obligations to the
Issuer.
If either of the Rating Agencies downgrades a Securities Lending Counterparty so that each
Securities Lending Agreement to which the Securities Lending Counterparty is a party is no longer in
compliance with the requirements relating to credit ratings of the Securities Lending Counterparties, then
the Issuer shall (at the direction of the Portfolio Manager), or in the case of clause (ii) below, the
Securities Lending Counterparty shall, within ten days thereof:
(i)
terminate any Securities Lending Agreement with such Securities Lending Counterparty;
(ii) obtain a guarantor that has the ratings required of a Securities Lending Counterparty to
guarantee the Securities Lending Counterparty's obligations under the applicable Securities Lending
Agreement;
(iii) reduce the percentage of the Collateral Obligations loaned to such downgraded Securities
Lending Counterparty so that the applicable Securities Lending Agreement are in compliance with the
requirements relating to the credit ratings of Securities Lending Counterparties; or
(iv) take such other steps as the Rating Agencies may require to cause such Securities
Lending Counterparty's obligations under the applicable Securities Lending Agreement to be treated by
the Rating Agencies as if such obligations were those of a counterparty having the ratings required of a
Securities Lending Counterparty.
General
USE OF PROCEEDS
The net proceeds from the issuance of the Offered Securities, after payment of applicable fees and
expenses in connection with the structuring and placement of the Offered Securities (including by making
a deposit to the Expense Reserve Account of funds to be used to pay expenses following the Closing
Date), are expected to be approximately $500,000,000.
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Prior to the Closing Date, affiliates of the Initial Purchaser provided a warehouse facility to the
Issuer to finance the acquisition of certain Collateral Obligations. Approximately $396,200,000 will be
used to repay warehouse financing (including interest and fees thereon) provided by an affiliate of the
Initial Purchaser which is still outstanding as of the Closing Date. See "Risk Factors—Relating to the
Collateral Obligations—Acquisition of Collateral Obligations Prior to Closing Date; There is Limited
Disclosure About the Collateral Obligations in this Offering Circular."
Approximately $88,200,000 will be deposited into the Ramp-Up Account on the Closing Date for
the purchase of additional Collateral Obligations during the Ramp-Up Period and for deposit into the
Collection Account as described herein upon completion of the Ramp-Up Period, approximately
$2,275,000 will be deposited into the Expense Reserve Account on the Closing Date for use as described
herein and approximately $3,000,000 will be deposited into the Interest Reserve Account on the Closing
Date for use as described herein.
Ramp-Up Period
The additional Collateral Obligations referred to in the preceding paragraph, together with the
Collateral Obligations purchased on or before the Closing Date, must satisfy, as of the end of the Ramp-
Up Period, the Concentration Limitations, the Collateral Quality Test and the Overcollateralization Ratio
Tests. If the expected Collateral Obligations are purchased by the end of the Ramp-Up Period, any excess
funds reserved for that purpose will be available for investment in additional Collateral Obligations
during the Reinvestment Period.
Provided that the Ramp-up Period has not ended, within fifteen (15) Business Days after ninety
(90) calendar days after the Closing Date (the "Interim Report Date"), the Issuer (or the Portfolio
Manager on its behalf) will obtain and deliver to the Trustee and each Rating Agency a report, determined
as of the Interim Report Date, calculating the tests included in the Interim Target. If, as of the Interim
Report Date, the Interim Target is not satisfied, the Portfolio Manager will submit a plan to each Rating
Agency as to how the Issuer will satisfy the Interim Target. "Interim Target" means target levels of the
Minimum Diversity Score, Minimum Floating Spread and Weighted Average Moody's Rating Factor set
forth in the Indenture established for the Interim Report Date.
If, following the end of the Ramp-Up Period, (i) the additional Collateral Obligations, together
with the Collateral Obligations purchased on or before the Closing Date and still held as Collateral
Obligations and amounts in the Issuer's accounts, fail to satisfy the Collateral Quality Test, the
Overcollateralization Tests or the Target Initial Par Amount as of the end of the Ramp-Up Period, then
(A) the Portfolio Manager will request Moody's to confirm, within 30 days following the end of the
Ramp-Up Period, that Moody's will not reduce or withdraw its initial ratings of the Secured Notes and (B)
if, by the 30th day following the end of the Ramp-Up Period, Moody's has not provided the confirmation
described in the preceding clause (A) of this paragraph, the Portfolio Manager will, if the Ramp-Up
Failure is still continuing, will instruct the Trustee to transfer amounts from the Interest Collection
Subaccount to the Principal Collection Subaccount (and with such funds the Issuer will purchase
additional Collateral Obligations) in an amount sufficient to obtain from Moody's written confirmation of
its initial rating of the Secured Notes or to cause the Collateral Obligations to satisfy the Collateral
Quality Test, the Coverage Tests and the Target Initial Par Amount (provided, that the amount of such
transfer would not result in deferral of interest with respect to any Class of Secured Notes) or (ii) S&P
provides the Issuer written notice, within 30 days following the end of the Ramp-Up Period, that it has or
will imminently reduce or withdraw its initial ratings of the Secured Notes, then the Portfolio Manager
will instruct the Trustee to transfer amounts from the Interest Collection Subaccount to the Principal
Collection Subaccount (and with such funds the Issuer will purchase additional Collateral Obligations) in
an amount sufficient to obtain from S&P written confirmation of its initial rating of the Secured Notes
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(provided, that the amount of such transfer would not result in deferral of interest with respect to any
Class of Secured Notes); provided that, in lieu of taking the actions described in clauses (i) or (ii) above,
the Portfolio Manager on behalf of the Issuer may take such other action, including but not limited to, a
Special Redemption and/or transferring amounts from the Interest Collection Subaccount to the Principal
Collection Subaccount as Principal Proceeds (for use in a Special Redemption), sufficient to obtain from
each Rating Agency written confirmation of its initial rating of the Secured Notes.
THE PORTFOLIO MANAGER
The Portfolio Manager accepts responsibility for the information contained in this section. To the best of
its knowledge the information is in accordance with the facts and does not omit anything likely to affect
the import of such information. The information appearing in this section has been prepared by the
Portfolio Manager, and has not been independently verified by the Co-Issuers, the Initial Purchaser or
the Trustee. Accordingly, notwithstanding anything to the contrary herein, none of the Co-Issuers, the
Initial Purchaser or the Trustee assumes any responsibility for the accuracy, completeness or
applicability of such information.
General
The Portfolio Manager, HillMark Capital Management, L.P., and its general partner, HillMark
Capital, L.L.C., were founded in March, 2006 as privately owned companies that focus on managing
collateralized debt obligations and other structured finance securitizations and funds providing
opportunities in the below investment grade space. The firm will offer a variety of risk-return profiles to
investors. The Portfolio Manager operates out of New York City currently with three limited partners,
one special advisor, nine employees and two interns. The three founding limited partners have been
involved in leverage/high yield finance, structured debt financings, and portfolio management for an
average of over 24 years.
The Portfolio Manager expects to offer a variety of credit-based investment products with a
philosophy centering on a credit intensive culture, risk adjusted returns and with active management.
Key Personnel
Set forth below is summary biographical information regarding background, principal
occupations and other affiliations of key personnel of the Portfolio Manager.
Hillel Weinberger. Mr. Weinberger is the Chairman of HillMark. Mr. Weinberger has over 20 years
experience in the high yield market, most recently at Loews Corporation. During his 18 year tenure at
Loews, Mr. Weinberger oversaw a portfolio of below investment grade credits that averaged
approximately $2 billion. During the past 10 years, $1 billion of Mr. Weinberger's assets under
management consisted of par bank debt. Mr. Weinberger has extensive experience in credit committees,
participating in over 100 committees during the past 20 years. Over the past 15 years, Mr. Weinberger has
been actively involved in the private equity market as well. Prior to joining Loews, Mr. Weinberger was a
Senior Portfolio Manager and Senior V.P. with Presidential Life. Before Presidential Life, he was a
Senior Finance Analyst for General Reassurance. Prior to General Re, Mr. Weinberger was an accountant
with Oppenheim Appel and Dixon. Mr. Weinberger currently serves on the Board of Advisors for Apax
Partners and Clarity Investments.
Mark L. Gold. Mr. Gold is the CEO and Chief Investment Officer of HillMark. Prior to HillMark, Mr.
Gold was a managing director of Trust Company of the West ("TCW") and a partner in the firm's
Leveraged Finance Group, whose investments included bank debt, subordinated financing, mezzanine
debt and distressed debt. He was responsible for building and managing the firm's Senior Loan and Bank
Debt Group. Mr. Gold has a long history in leveraged and structured finance and has been responsible for
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designing and/or managing numerous structures, including one of the first collateralized loan obligation
funds, several "rated equity" securitizations and the first pro rata loan fund. From 1989 to April 1993,
Mr. Gold was the portfolio manager responsible for organizing and managing Chancellor Senior Secured
Management’s (formerly Citicorp Investment Management) bank loan group. In this capacity, he was
responsible for the management of over $1.6 billion in bank loans and senior secured debt. Previously, he
was a portfolio manager at Chancellor, responsible for the management of portfolios that invested in high
yield bonds, private placements and mezzanine transactions. During his career in portfolio management,
Mr. Gold has been actively involved in all aspects of leveraged investing in a wide range of industries and
in the development of leveraged investing programs for a broad group of institutional investors. From
1979 to 1983, Mr. Gold was an investment banker in the Mergers and Acquisitions group of Morgan
Stanley and then Blyth Eastman Paine Webber. Prior thereto, he was with Hoffmann-LaRoche, initially
in pharmaceutical research and then in medical diagnostic product marketing. Mr. Gold received his
M.B.A. from New York University in 1981 and his B.A./M.A. from Queens College in 1974.
Kevin P. Cuskley. Mr. Cuskley is the Senior Portfolio Manager at HillMark. He has over twenty years
of Wall Street experience. He began his career as a sell-side equity analyst and moved to portfolio
management in 1992. Since 1992, he has been a Portfolio Manager in the high yield asset class.
Mr. Cuskley's primary expertise is high yield bonds but he has considerable experience with leveraged
bank loans, distressed securities, and equities. For the last nine years he managed high yield assets for the
Loews Corporation where his primary role was to invest in new issue and secondary opportunities in high
yield bonds. He was also a key player in the firm's analysis of private equity and mezzanine investments.
Mr. Cuskley holds an undergraduate degree from Princeton University and an M.B.A. from Cornell.
Jack Chen. Mr. Chen is the Chief Operating Officer of HillMark Capital. Before joining HillMark, he
was a Vice President/Senior Credit Officer on the Derivatives team at Moody's Investors Service.
Mr. Chen was responsible for rating a number of products, including cash flow and synthetic CDOs,
structured notes and credit derivative product companies. He authored a number of special reports and
rating methodologies while at Moody's. In addition to his rating responsibilities, Mr. Chen was also one
of the lead Moody's rating analysts working with internal technology staff on firm-wide technology
initiatives, including workflow design, application and user interface design, data integrity, document
retention and other matters. Before joining Moody's in 2001, Mr. Chen was a corporate associate at the
law firm of Sullivan & Cromwell, specializing in corporate finance, structured finance, capital markets,
and general corporate law. Prior to joining Sullivan & Cromwell in 1998, Mr. Chen was an associate at
the law firm of Willkie Farr & Gallagher. Mr. Chen received his A.B. with a major in East Asian Studies
from Columbia College, Columbia University in 1993 and a J.D., cum laude, from Fordham University
School of Law in 1996.
THE PORTFOLIO MANAGEMENT AGREEMENT
The Portfolio Management Agreement will set forth the advisory services to be provided by the
Portfolio Manager and the fees to be paid for such services. The following summary describes certain
provisions of the Portfolio Management Agreement. The summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Portfolio Management Agreement.
Certain administrative and advisory functions with respect to the Assets will be performed by the
Portfolio Manager under the Portfolio Management Agreement. Pursuant to the terms of the Portfolio
Management Agreement, the Portfolio Manager will monitor the Collateral Obligations and provide the
Issuer with certain information with respect to the composition and characteristics of the Collateral
Obligations, any disposition or tender of a Collateral Obligation, the reinvestment of the proceeds of any
such disposition in Eligible Investments and the retention of the proceeds of any such disposition or the
application thereof toward the purchase of an additional Collateral Obligation. In addition, pursuant to the
terms of the Collateral Administration Agreement, the Issuer will retain the Collateral Administrator to
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prepare certain reports with respect to the Collateral Obligations. The compensation paid to the Collateral
Administrator by the Issuer for such services will be in addition to the fees paid to the Portfolio Manager
and to the Collateral Administrator in its capacity as Trustee, and such amounts will be treated as an
expense of the Issuer under the Indenture and will be subject to the Priority of Payments.
The Portfolio Manager may, in its discretion, exercise any rights or remedies with respect to any
Collateral Obligation or Eligible Investment as provided in the related underlying instruments, including,
without limitation, any exercise of creditor rights or sitting on any creditors' committee, initiating or
participating in lawsuits against the issuer of any Collateral Obligation or Eligible Investment or against
any third party who has provided services to Issuer at Issuer's expense, or take any other action consistent
with the terms of the Portfolio Management Agreement and the Indenture.
As compensation for the performance of its obligations as Portfolio Manager, the Portfolio
Manager will be entitled to receive a fee, which will accrue quarterly in arrears on each Payment Date
(prorated for the related Interest Accrual Period), in an amount equal to the sum of (i) 0.15% per annum
(calculated on the basis of the actual number of days in a 360 day year) of the Fee Basis Amount at the
beginning of the Collection Period relating to such Payment Date (the "Base Management Fee"), (ii)
0.35% per annum (calculated on the basis of the actual number of days in a 360 day year) of the Fee Basis
Amount at the beginning of the Collection Period relating to such Payment Date (the "Subordinated
Management Fee") and (iii) an amount equal to (1) 20% of the remaining Interest Proceeds, if any,
available after making the distributions on such Payment Date pursuant to clause (W) of the Priority of
Payments and (2) 20% of the remaining Principal Proceeds, if any, available for payment in respect of the
Incentive Management Fee pursuant to clause (L) of the Priority of Payments, if applicable (the
"Incentive Management Fee" and, together with the Base Management Fee and the Subordinated
Management Fee, the "Management Fee"). The Base Management Fee, the Subordinated Management
Fee and the Incentive Management Fee are payable on each Payment Date only to the extent that
sufficient Interest Proceeds or Principal Proceeds are available, and, to the extent any such fee is not paid
on any Payment Date for any reason, it will be deferred, and, to the extent such fee is deferred voluntarily,
will accrue interest at LIBOR plus 0.50%, assuming an index maturity of three months from such
Payment Date, compounded quarterly.
The Portfolio Manager may in its sole discretion elect to defer payment of all or a portion of the
Base Management Fee or the Subordinated Management Fee on any Payment Date by providing written
notice to the Trustee of such election at least five Business Days prior to such Payment Date (such
amount of the Base Management Fee, together with any amounts of the Base Management Fee so
deferred on prior Payment Dates that remain unpaid, the "Deferred Base Management Fee"; and such
amount of the Subordinated Management Fee, together with any portion of the Subordinated Management
Fee so deferred on prior Payment Dates that remain unpaid, the "Deferred Subordinated Management
Fee"). The Portfolio Manager may elect to receive payment of all or any portion of the Deferred Base
Management Fee and/or the Deferred Subordinated Management Fee on any Payment Date to the extent
of funds available to pay such amounts as described in "Summary of Terms—Priority of Payments" by
providing notice to the Trustee of such election and the amount of such fees to be paid on or before three
Business Days preceding such Payment Date. For the avoidance of doubt, interest will accrue on
Deferred Base Management Fees and Deferred Subordinated Management Fees only if such deferral is
voluntary.
In the event of the removal of the Portfolio Manager, the removed Portfolio Manager will
continue to be entitled to receive any Management Fee accrued through the date of actual termination of
duties whenever such amount is payable pursuant to the Priority of Payments.
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The Portfolio Manager assumes no responsibility under the Portfolio Management Agreement
other than to render the services called for thereunder and under the terms of the Indenture expressly
applicable to it. The Portfolio Manager will not be responsible for any action of the Issuer, the Trustee,
the Co-Issuer, the Collateral Administrator or the Administrator in following or declining to follow any
advice, recommendation or direction of the Portfolio Manager. The Portfolio Manager will not be liable
to the Issuer, the Trustee or the holders of the Offered Securities for any loss incurred as a result of the
actions taken or recommended by the Portfolio Manager under the Portfolio Management Agreement or
the Indenture, except by reason of (i) acts constituting bad faith, fraud, willful misconduct, gross
negligence or reckless disregard in the performance of its duties under the Portfolio Management
Agreement or (ii) as a result of the information concerning the Portfolio Manager under the heading "The
Portfolio Manager" in the Offering Circular, containing any untrue statement of material fact or omitting
to state a material fact necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, as determined by a final adjudication of a court of
competent jurisdiction. In no event will the Portfolio Manager be liable for consequential, exemplary or
punitive damages.
The Indenture places significant restrictions on the Portfolio Manager's ability to buy and sell
securities representing collateral for the Notes, and the Portfolio Manager is required to comply with these
restrictions contained in the Indenture. During certain periods or in certain specified circumstances, the
Portfolio Manager may be unable to buy or sell securities or to take other actions which it might consider
in the best interests of the Issuer and the holders of the Notes, as a result of the restrictions set forth in the
Indenture or otherwise.
The Portfolio Manager and its affiliates and associates are in no way prohibited from, and intend
to, spend substantial business time in connection with other businesses or activities, including, but not
limited to, managing investments, advising or managing entities whose investment objectives are the
same as or overlap with those of the Issuer, participating in actual or potential investments of the Issuer,
providing consulting, merger and acquisition, structuring or financial advisory services, including with
respect to actual, contemplated or potential investments of the Issuer, or acting as a director, officer or
creditors' committee member of, adviser to, or participant in any corporation, partnership, trust or other
business entity. The Portfolio Manager and its affiliates and associates may, and expect to, receive fees or
other compensation from third parties for any of these activities, which fees will be for the benefit of their
own account and not the Issuer. These fees can relate to actual, contemplated or potential investments of
the Issuer and may be payable by entities in which the Issuer directly or indirectly, has invested or
contemplates investing. The Portfolio Manager and its affiliates may manage other funds and accounts
("Other HM Accounts") that invest in assets eligible for purchase by the Issuer. The investment policies,
fee arrangements and other circumstances of the Issuer may vary from those of Other HM Accounts. For
example, the Issuer may desire to retain an asset at the same time that one or more Other HM Accounts
desire to sell it. Similarly, Other HM Accounts which are in a liquidation phase may take priority as to
sales of investments in which the Issuer is also an investor. These procedures could in certain
circumstances affect adversely the price paid or received by the Issuer or the size of the position
purchased or sold by the Issuer. When the personnel of the Portfolio Manager who manage the
investments of the Issuer are considering purchases or sales for the Issuer and one or more of such Other
HM Accounts at the same time, the Portfolio Manager will attempt to allocate available investments or
opportunities for sales in a manner it believes to be both equitable and consistent with each entity's
investment objectives and in a manner consistent with the requirements of the Investment Advisers Act.
The Portfolio Manager and any of its affiliates each will be free, in its sole discretion, to make
recommendations to others, or effect transactions on behalf of itself or for others, which may be the same
as or different from those effected with respect to the Assets and will have no duty in making such
recommendations or effecting such transactions to act in a way favorable to the Issuer or to the holders of
the Notes.
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Although the Issuer intends to operate so that the Collateral Obligations are not "plan assets"
under ERISA, some of the Other HM Accounts hold or will hold "plan assets" subject to ERISA. For
those plan assets, the Portfolio Manager or certain affiliates of the Portfolio Manager are classified as
"fiduciaries" under ERISA. ERISA imposes certain general and specific responsibilities and restrictions
on fiduciaries with respect to plan assets. As a result, the Portfolio Manager may conclude that the Issuer
is restricted from entering into an otherwise favorable transaction if the investment would violate ERISA
with respect to the Other HM Accounts.
The Issuer may have the ability, under certain circumstances, to take certain actions that would
have an adverse effect on Other HM Accounts. In these circumstances, the Portfolio Manager and its
affiliates will act in a manner believed to be equitable, provided, that the Portfolio Manager and its
affiliates may be obligated to take certain actions in order to avoid a violation of ERISA with respect to
the Other HM Accounts.
Any sale or purchase by the Issuer of a Collateral Obligation will be conducted on an arm's length
basis and, if effected with the Portfolio Manager or a person affiliated with the Portfolio Manager or any
fund or account for which the Portfolio Manager or an affiliate of the Portfolio Manager acts as
investment adviser, will be effected in accordance with the requirements of the Portfolio Management
Agreement.
Subject to the foregoing restrictions, from time to time, the Portfolio Manager may take the
following actions on behalf of the Issuer: (i) buy or sell securities in which related persons have a
financial interest; (ii) effect transactions through related persons, including broker-dealers acting as
principal or as agent for non-clients; (iii) buy or sell securities to or from related persons who are brokerdealers;
(iv) buy or sell securities in which the Portfolio Manager, related parties or the Portfolio
Manager's other clients' accounts are at the same time effecting a sale or purchase; and (v) effect
transactions with brokers that have clearing relationships with related persons who are broker-dealers. In
any transaction with a related party, the related party may receive compensation.
Any assignment of the Portfolio Management Agreement, in whole or in part, by the Portfolio
Manager not expressly permitted pursuant to the terms of the Portfolio Management Agreement shall be
deemed null and void unless the Global Rating Agency Condition is satisfied with respect thereto;
provided that the Portfolio Manager may assign all (but not less than all) of its rights and delegate all its
obligations under the Portfolio Management Agreement to any of its Affiliates which (a) employs the
same Key Persons, (b) has an ability to professionally and competently perform the duties of the Portfolio
Manager and (c) is legally qualified and has the capacity to act as Portfolio Manager pursuant to the
Portfolio Management Agreement.
The Portfolio Manager may be removed for cause upon 30 days prior written notice by the Issuer,
at the direction of (a) at least 66 2/3% of the aggregate outstanding principal amount of the Notes, (b) (i)
if the Class A-1 Notes are the Controlling Class, the holders of at least a majority of the aggregate
outstanding principal amount of the Controlling Class or (ii) if the Class A-2 Notes, the Class B Notes,
the Class C Notes or the Class D Notes are the Controlling Class, the holders of at least 66 2/3% of the
aggregate outstanding principal amount of the Controlling Class or (c) the holders of at least a majority of
the aggregate outstanding principal amount of the Subordinated Notes. The Issuer will provide written
notice of any proposed removal of the Portfolio Manager to each of the Rating Agencies. In determining
whether the holders of the requisite percentage of Noteholders have given any such direction, notice or
consent, Notes owned by the Portfolio Manager or any affiliate thereof or held in accounts over which the
Portfolio Manager or any affiliate thereof has discretionary voting authority (including any employee of
the Portfolio Manager or any Affiliate of the Portfolio Manager) will be disregarded and deemed not to be
outstanding. For purposes of the Portfolio Management Agreement, "cause" will mean (i) willful
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violation by the Portfolio Manager of any provision of the Portfolio Management Agreement or the
Indenture applicable to the Portfolio Manager; (ii) violation by the Portfolio Manager of any material
provision of the Portfolio Management Agreement or the Indenture and failure to cure such violation
within 60 days after becoming aware of, or its receiving notice from the Trustee of, such violation, other
than as covered by the preceding clause (i) (it being understood, for the avoidance of doubt, that the
failure of any Coverage Test or Collateral Quality Test is not such a violation), unless the Portfolio
Manager has taken action that it believes will cure, and in fact does cure, such breach within 90 days after
it received notice of such breach; (iii) the failure of any representation or warranty made by the Portfolio
Manager in or pursuant to the Portfolio Management Agreement or the Indenture to be correct in any
material respect when made and such failure (x) has (or could reasonably be expected to have) a material
adverse effect on the holders of any Class of Notes and (y) if such failure can be cured, no correction is
made for a period of 45 days after the Portfolio Manager becomes aware of or received notice from the
Trustee of such violation; (iv) certain events of bankruptcy, insolvency, receivership or liquidation of the
Portfolio Manager (as set forth in the Portfolio Management Agreement); (v) the commitment of fraud or
a crime by the Portfolio Manager in connection with the performance of its obligations under the Portfolio
Management Agreement; (vi) the conviction of the Portfolio Manager or a senior officer thereof of a
felony criminal offense under the laws of the United States, or the laws of any other jurisdiction in which
the Portfolio Manager conducts business, directly and materially related to the Portfolio Manager's asset
management business; (vii) an Event of Default pursuant to clause (f) of the definition thereof shall have
occurred; and (viii) a Key Person Event shall occur. If the Portfolio Manager becomes aware that any of
the events specified in this paragraph have occurred, the Portfolio Manager will give prompt written
notice thereof to the Issuer and the Trustee.
No termination, removal or resignation of the Portfolio Manager shall be effective until the date
as of which (i) a successor portfolio manager that is an established institution that (x) has demonstrated an
ability to professionally and competently perform duties similar to those imposed upon the Portfolio
Manager hereunder and (y) is legally qualified and has the capacity to act as portfolio manager hereunder
as successor to the Portfolio Manager shall have been nominated by at least a majority of the aggregate
outstanding principal amount of the Subordinated Notes and shall have agreed in writing to assume all of
the Portfolio Manager's duties and obligations pursuant to the Portfolio Management Agreement and
(ii) the Global Rating Agency Condition shall have been satisfied with respect to the appointment of the
successor portfolio manager; provided, that prior to the appointment of a successor portfolio manager, 30
days prior written notice shall be given to the Holders of the Notes and (i) if the Class A-1 Notes are the
Controlling Class, the holders of at least a majority of the aggregate outstanding principal amount of the
Controlling Class or (ii) if the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes
or the Subordinated Notes are the Controlling Class, the holders of at least 66 2/3% of the aggregate
outstanding principal amount of the Controlling Class, shall not have rejected in writing such proposed
nominee successor prior to the expiration of such 30 day period. If no successor portfolio manager shall
have been appointed and so approved, or if an instrument of acceptance by a successor portfolio manager
shall not have been delivered to the Portfolio Manager, in any case within 60 days of the initial notice
relating to the removal, termination or resignation of the Portfolio Manager, any of the resigning or
removed Portfolio Manager, a majority of the aggregate outstanding principal amount of the Controlling
Class or a majority of the aggregate outstanding principal amount of the Subordinated Notes may petition
any court of competent jurisdiction for the appointment of a successor portfolio manager without the
approval of the Holders of the Notes or the Rating Agencies.
Following the date of occurrence of a Key Person Departure, a replacement for each of the
departed Key Persons may be proposed by the Portfolio Manager by notice furnished to the holders of
each of the Controlling Class and the Subordinated Notes and, within 20 Business Days after receipt of
such notice by the holders of each of the Controlling Class and the Subordinated Notes, the holders of not
less than (a) a majority of the aggregate outstanding principal amount of the Subordinated Notes may
reply to the Portfolio Manager with an approval (a "Subordinated Notes Majority Approval") or with a
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disapproval (a "Subordinated Notes Majority Non-Approval") and (b) a majority of the aggregate
outstanding principal amount of the Controlling Class may reply to the Portfolio Manager with an
approval (a "Controlling Class Majority Approval") or with a disapproval (a "Controlling Class
Majority Non-Approval"). Any non-response within such 20 Business Day period by a holder of a
Subordinated Note or a holder of the Controlling Class shall be treated as an approval by such holder with
respect to such proposed replacement person and shall constitute an approval for the purpose of
determining whether a Subordinated Notes Majority Approval and a Controlling Class Majority Approval
has occurred. If a Subordinated Notes Majority Approval and a Controlling Class Majority Approval
occurs or no Subordinated Notes Majority Non-Approval or no Controlling Class Majority Non-Approval
is received within such 20 Business Day period, then each such proposed replacement person shall as of
the next succeeding Business Day become a Key Person. If a Subordinated Notes Majority Non-
Approval or a Controlling Class Majority Non-Approval with respect to such proposed replacement
occurs, then the Portfolio Manager will have the right to propose one or more different replacement
persons in response. Different replacement persons may be proposed by the Portfolio Manager by notice
to the holders of the Subordinated Notes and the Controlling Class, within 20 Business Days after written
notice of any such different proposed replacement person has been furnished to the holders of the
Subordinated Notes and the Controlling Class, the holders of the Subordinated Notes and the Controlling
Class may again reply to the Portfolio Manager with an approval or with a disapproval. If no response by
a holder of a Subordinated Note or a holder of the Controlling Class is received by the Portfolio Manager
within such 20 Business Day period, such holder's non-response shall be treated as an approval with
respect to each such different proposed replacement person and shall constitute an approval for the
purpose of determining whether a Subordinated Notes Majority Approval and a Controlling Class
Majority Approval has occurred. The Portfolio Manager shall be obligated to notify the holders of the
Subordinated Notes and the Controlling Class in writing within ten Business Days following the
occurrence of a Key Person Departure. If a Key Person Departure occurs and no Key Person Departure
Cure occurs for a period of four months, then a Key Person Event shall have occurred.
If at any time one or more Key Persons cease to be employed by the Portfolio Manager on a
substantially full-time basis in a senior management position, where such cessation does not constitute a
Key Person Departure, the Portfolio Manager may in its discretion propose a replacement person for each
such departed Key Person by written notice to the holders of the Subordinated Notes and the Controlling
Class. If a Subordinated Notes Majority Approval and a Controlling Class Majority Approval occurs
with respect to such proposed replacement person, then such replacement person shall become a Key
Person as of the next succeeding Business Day after such approval. Any non-response by a holder of a
Subordinated Note or a holder of the Controlling Class within 20 Business Days after receipt of the notice
by such holder shall be treated as an approval with respect to each such different proposed replacement
person and shall constitute an approval for the purpose of determining whether a Subordinated Notes
Majority Approval and a Controlling Class Majority Approval has occurred. If a Subordinated Notes
Majority Non-Approval or a Controlling Class Majority Non-Approval occurs with respect to such
proposed replacement person, the Portfolio Manager may in its discretion propose a different replacement
person.
At any time that a Key Person Departure has not occurred (or at any time after a Key Person
Departure Cure has been effected), the Portfolio Manager may, in its sole discretion, propose additional
Key Persons; provided that the total numbers of Key Persons shall not at any time exceed three. The
Portfolio Manager shall propose such additional Key Persons by written notice to the holders of the
Subordinated Notes. If a Subordinated Notes Majority Approval and a Controlling Class Majority
Approval occurs with respect to each such proposed additional person, then such proposed additional
person shall become a Key Person as of the next succeeding Business Day after such approval. Any nonresponse
by a holder of a Subordinated Note or the Controlling Class within 20 Business Days after
receipt of the notice by such holder shall be treated as an approval by such holder with respect to such
proposed additional person and shall constitute an approval for the purpose of determining whether a
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Subordinated Notes Majority Approval or a Controlling Class Majority Approval has occurred. If a
Subordinated Note Majority Non-Approval occurs with respect to such additional person, the Portfolio
Manager may in its discretion propose a different additional Key Person.
The Portfolio Manager may resign upon 90 days' written notice to the Issuer and the Trustee and
the Rating Agencies.
In making determinations as to whether an investment satisfies the definition of Collateral
Obligations or complies with the investment criteria and for making other determinations relating to the
status or characteristics of an investment, the Portfolio Manager is entitled to rely upon such advice of
counsel or other advisors as the Portfolio Manager determines reasonably appropriate in its sole
discretion.
"Approved Replacement Person" means a replacement or additional Key Person appointed in
accordance with the procedures described in the Portfolio Management Agreement or pursuant to such
other procedures as may be agreed between the Portfolio Manager and the holders of a majority of the
aggregate outstanding principal amount of the Subordinated Notes.
"Key Person Departure" means (i) if Mark L. Gold and Hillel Weinberger are the only Key
Persons, each of Mark L. Gold and Hillel Weinberger ceases to be employed on a substantially full-time
basis in a senior management position by the Portfolio Manager (or by any of its successors or assigns
permitted pursuant to the Portfolio Management Agreement) and (ii) if there are three Key Persons, then
two such Key Persons cease to be employed on a substantially full-time basis in a senior management
position by the Portfolio Manager (or by any of its successors or assigns permitted pursuant to the
Portfolio Management Agreement).
"Key Person Departure Cure" means, in connection with a Key Person Departure, the
establishment of one or more additional Approved Replacement Persons that cause the total number of
Key Persons to be not less than one.
"Key Person Event" means, the occurrence of a Key Person Departure and the absence of a Key
Person Departure Cure for a period of four months.
"Key Persons" means Mark L. Gold and Hillel Weinberger (or if Mark L. Gold or Hillel
Weinberger have been replaced with one or more Approved Replacement Persons, such Approved
Replacement Person), and any additional Key Persons selected pursuant to the Portfolio Management
Agreement.
General
THE CO-ISSUERS
HillMark Funding Ltd. is an exempted company incorporated with limited liability under the laws
of the Cayman Islands as a special purpose vehicle for the purposes of issuing the Offered Securities,
acquiring the Collateral Obligations and engaging in certain related transactions. The Issuer was
incorporated on March 28, 2006 in the Cayman Islands with registered number MC-164993 and has an
indefinite existence. The Issuer's registered office is at the offices of Maples Finance Limited,
Queensgate House, South Church Street, PO Box 1093GT, George Town, Grand Cayman, Cayman
Islands, telephone no. (345) 945-7099. The directors of the Issuer are Richard Ellison and Phillip Hinds.
The principal outside function of the directors of the Issuer consists of serving as officers for Maples
Finance Limited, a licensed trust company incorporated in the Cayman Islands, and they may be
contacted at the offices of Maples Finance Limited. The directors of the Issuer serve as directors of and
provide services to other special purpose entities that issue collateralized obligations and perform other
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duties for the Administrator. The Issuer has no prior operating history. The Issuer does not publish any
financial statements.
Subject to the contracting restrictions imposed upon the Issuer by the Indenture, the directors of
the Issuer have the power to borrow on behalf of the Issuer to the extent that such powers are not required
to be exercised by the holders of the Subordinated Notes. A director of the Issuer is not required to own
any shares in the Issuer in order to qualify as a director.
A director of the Issuer (or his alternate director in his absence) is at liberty to vote in respect of
any contract or transaction in which he is interested; provided, that the nature of the interest of any
director or alternate director in any such contract or transaction is disclosed by him or the alternate
director appointed by him at or prior to its consideration and any vote on it.
The directors (and their alternates) are not currently entitled to any remuneration. Any director
may act by himself or his firm in a professional capacity for the Issuer and he or his firm is entitled to
remuneration for professional services as if he were not a director. A director is at liberty to vote in
respect of any matter relating to his remuneration; provided, that the nature of his interest is disclosed
prior to the matter being considered and voted upon by the board of directors.
As of the Closing Date, the authorized share capital of the Issuer will consist of 50,000 ordinary
voting shares of $1.00 par value per share (the "Issuer Ordinary Shares"). Two hundred fifty of the
Issuer Ordinary Shares are, or will be on the Closing Date, held by Maples Finance Limited (in such
capacity, the "Share Trustee"), under the terms of a declaration of trust in favor of charitable purposes.
The Issuer will not have any material assets other than the Collateral Obligations and certain other eligible
assets. The Collateral Obligations and such other eligible assets will be pledged to the Trustee as security
for the Issuer's obligations under the Secured Notes and the Indenture.
HillMark Funding Corp. is a Delaware corporation incorporated under the laws of the State of
Delaware as a special purpose vehicle for the sole purpose of co-issuing the Class A Notes, the Class B
Notes and the Class C Notes. The Co-Issuer was incorporated on September 12, 2006 in the State of
Delaware with registered number 4218623 and has an indefinite existence. The Co-Issuer's registered
office is at 850 Library Avenue, Newark, Delaware (Newcastle County), telephone no. (302) 738-6680.
The Co-Issuer has no substantial assets and will not pledge any assets to secure the Notes.
The sole director and officer of the Co-Issuer is Donald J. Puglisi. The principal outside function
of Donald J. Puglisi consists of being a finance professor emeritus at the University of Delaware and
serving as a corporate director for a variety of entities. Donald J. Puglisi may be contacted at the office of
the Co-Issuer. The Co-Issuer has no prior operating history. Unless otherwise required pursuant to the
Indenture, the Co-Issuer will not publish any financial statements.
The Co-Issuer's authorized common stock consists of 1,000 shares of common stock, $0.01 par
value (the "Co-Issuer Common Stock"). All of the Co-Issuer Common Stock is, or will be on the
Closing Date, held by the Share Trustee, under the terms of a declaration of trust in favor of charitable
purposes.
The Offered Securities are not obligations of the Trustee, the Portfolio Manager, the Initial
Purchaser, the Placement Agent or any of their respective affiliates, the Administrator, the Share Trustee
or any directors or officers of the Co-Issuers.
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Capitalization of the Issuer
The Issuer's initial proposed capitalization and indebtedness as of the Closing Date after giving
effect to the issuance of the Offered Securities and the Issuer Ordinary Shares (before deducting expenses
of the offering) is set forth below:
Amount
Class A-1 Notes .............................. $368,000,000
Class A-2 Notes .............................. $24,500,000
Class B Notes.................................. $28,000,000
Class C Notes.................................. $25,000,000
Class D Notes.................................. $15,250,000
Subordinated Notes......................... $39,250,000
Total Debt .......................... $500,000,000
Issuer Ordinary Shares.................... $250
Retained Earnings
Total Equity ....................... $250
Total Capitalization............ $500,000,250 1
1
Unaudited.
The Co-Issuer has no other liabilities other than the Class A Notes, the Class B Notes and the
Class C Notes.
Business of the Co-Issuers
The Issuer's Memorandum of Association describes the objects of the Issuer, which are
unrestricted and therefore include the business to be carried out by the Issuer in connection with the
Offered Securities. The Co-Issuer's certificate of incorporation describes the objects of the Co-Issuer,
which include the business to be carried out by the Co-Issuer in connection with the Notes. The Co-
Issuers have not issued securities, other than Issuer Ordinary Shares or Co-Issuer Common Stock, as
applicable, prior to the date of Offering Circular and have not listed any securities on any exchange. The
Co-Issuers will not undertake any business other than the issuance of the Class A Notes, Class B Notes,
and Class C Notes and, in the case of the Issuer, the issuance of the Class D Notes and Subordinated
Notes and the management of the Assets and other related transactions. Neither of the Co-Issuers will
have any subsidiaries. In general, subject to the credit quality and diversity of the Collateral Obligations
and general market conditions and the need (in the judgment of the Portfolio Manager) to satisfy the
Coverage Tests, the Concentration Limitations and the Collateral Quality Test or to obtain funds for the
redemption or payment of the Offered Securities, the Issuer will own the Assets and will receive
payments of interest and principal on the Collateral Obligations and Eligible Investments as the principal
source of its income. The ability to purchase additional Collateral Obligations and sell Collateral
Obligations prior to maturity is subject to significant restrictions under the Indenture. See "Security for
the Secured Notes—Sales of Collateral Obligations; Additional Collateral Obligations and Investment
Criteria."
Maples Finance Limited (the "Administrator"), a Cayman Islands licensed trust company, will
act as the administrator of the Issuer. The office of the Administrator will serve as the general business
office of the Issuer. Through this office and pursuant to the terms of an agreement between the
Administrator and the Issuer (the "Administration Agreement"), the Administrator will perform various
administrative functions on behalf of the Issuer, including communications with shareholders and the
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general public, and the provision of certain clerical, administrative and other services in the Cayman
Islands until termination of the Administration Agreement. In consideration of the foregoing, the
Administrator will receive various fees and other charges payable by the Issuer at rates agreed upon from
time to time plus expenses.
The activities of the Administrator under the Administration Agreement will be subject to the
overview of the Issuer's board of directors. The Administration Agreement may be terminated by either
the Issuer or the Administrator upon three months' written notice (or, upon the occurrence of certain
events, 14 days' written notice), in which case a replacement Administrator will be appointed. The
Administrator's principal office is Queensgate House, South Church Street, PO Box 1093GT, George
Town, Grand Cayman, Cayman Islands.
Directors
The Directors of the Issuer are Richard Ellison and Phillip Hinds. The Directors may be
contacted at the address of the Issuer.
Issuer.
The Director of the Co-Issuer is Donald Puglisi. He may be contacted at the address of the Co-
INCOME TAX CONSIDERATIONS
Introduction
The following is a summary of certain of the United States federal income tax and Cayman
Islands tax consequences of an investment in the Offered Securities by purchasers that acquire their
Offered Securities in the initial offering. The discussion and the opinions referenced below are based
upon laws, regulations, rulings, and decisions currently in effect, all of which are subject to change,
possibly with retroactive effect. Prospective investors should note that no rulings have been, or are
expected to be, sought from the United States Internal Revenue Service (the "IRS") with respect to any of
the United States federal income tax consequences discussed below, and no assurance can be given that
the IRS will not take contrary positions. Further, the following summary does not address all United
States federal income tax consequences applicable to any given investor, nor does it address the United
States federal income tax considerations (except, in some circumstances, in very general terms) applicable
to all categories of investors, some of which may be subject to special rules, such as Non-U.S. Holders (as
such term is defined below), banks, REITs, RICs, insurance companies, tax-exempt organizations, dealers
in securities or currencies, electing large partnerships, natural persons, cash method taxpayers, S
corporations, estates and trusts, investors that hold their Offered Securities as part of a hedge, straddle, or
an integrated or conversion transaction, or investors whose "functional currency" is not the U.S. dollar.
Furthermore, it does not address alternative minimum tax consequences, or the indirect effects on
investors of equity interests in either a U.S. Holder (as such term is defined below) or a Non-U.S. Holder.
In addition, this summary is generally limited to investors that will hold their Offered Securities as
"capital assets" within the meaning of Section 1221 of the Code. Investors should consult their own tax
advisors to determine the Cayman Islands, United States federal, state, local, and other tax consequences
of the purchase, ownership, and disposition of the Offered Securities.
As used herein, "U.S. Holder" or "Holder" means a beneficial holder of an Offered Security that
is an individual citizen or resident of the United States for United States federal income tax purposes, a
corporation or other entity taxable as a corporation created or organized in, or under the laws of, the
United States or any state thereof (including the District of Columbia), an estate, the income of which is
subject to United States federal income taxation regardless of its source, or a trust for which a court
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within the United States is able to exercise primary supervision over its administration and for which one
or more United States persons (as defined in the Code) have the authority to control all of its substantial
decisions or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a
domestic trust. If a partnership (or other pass-through entity) holds Offered Securities, the tax treatment
of a partner (or other equity holder) will generally depend upon the status of the partner (or other equity
holder) and upon the activities of the partnership (or other pass-through entity). Partners of partnerships
(or equity holders of other pass-thru entities) holding Offered Securities should consult their own tax
advisors.
"Non-U.S. Holder" means any holder (or beneficial holder) of an Offered Security that is not a
U.S. Holder.
U.S. Federal Income Tax Consequences to the Issuer
Upon the issuance of the Notes, McKee Nelson LLP, special U.S. tax counsel to the Issuer, will
deliver an opinion generally to the effect that, under current law, and assuming compliance with the
Indenture (and certain other documents), and based on certain factual representations made by the Issuer
and/or the Collateral Manager, and without regard to actions of the Issuer based on opinions of counsel
other than special U.S. tax counsel, although the matter is not free from doubt, the Issuer will not be
engaged in the conduct of a trade or business in the United States. Accordingly, the Issuer does not
expect to be subject to net income taxation in the United States. Prospective investors should be aware
that opinions of counsel are not binding on the IRS and there can be no absolute assurance that the IRS
will not seek to treat the Issuer as engaged in a U.S. trade or business. For example, the Treasury and the
IRS recently announced that they are considering taxpayer requests for specific guidance on, among other
things, whether a foreign person may be treated as engaged in a trade or business in the United State by
virtue of being the credit protection seller of credit default swaps. Thus, it is also possible that the IRS
could treat the Issuer as engaged in a trade or business in the United States by reason of the Issuer's
selling credit protection under a Synthetic Security if the Issuer were deemed to be guaranteeing
obligations from within the United States or insuring risks from within the United States.
Legislation recently proposed in the United States Senate would, for tax years beginning at least
two years after its enactment, tax a corporation as a United States corporation if the equity of that
corporation is regularly traded on an established securities market and the management and control of the
corporation occurs primarily within the United States. If this legislation caused the Issuer to be taxed as a
domestic corporation, the Issuer would be subject to United States net income tax. However, it is
unknown whether this proposal will be enacted in its current form and, whether if enacted, the Issuer
would be subject to its provisions. Upon enactment of this or similar legislation, the Issuer will be
permitted, with an opinion of counsel, to take such action as it deems advisable to prevent the Issuer from
being subject to such legislation. These actions could include removing the Subordinated Notes (and
possibly other classes of Notes) from listing on the Irish Stock Exchange.
If the IRS were to successfully characterize the Issuer as engaged in a United States trade or
business, among other consequences, the Issuer would be subject to net income taxation in the United
States on its income that was effectively connected with such business (as well as the branch profits tax).
The levying of such taxes could materially affect the Issuer's financial ability to make payments on the
Notes.
The Issuer intends to acquire the Collateral, the interest on which, and any gain from the sale or
disposition thereof, is expected not to be subject to United States federal withholding tax or withholding
tax imposed by other countries (unless subject to being "grossed up"). The Issuer will not, however,
make any independent investigation of the circumstances surrounding the issuance of the individual assets
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comprising the Collateral and, thus, there can be no absolute assurance that in every case, payments will
be received free of withholding tax. Prospective investors should be aware that there can be no absolute
assurance that the IRS will not seek to treat payments made to the Issuer from the synthetic obligation
counterparty as subject to withholding. For example, the Treasury and the IRS recently announced that
they are considering taxpayer requests for specific guidance on, among other things, whether amounts
paid in respect of credit default swaps by a U.S. protection buyer to a foreign protection seller constitute
income that is subject to withholding. Further, if the Issuer is a CFC (as such term is defined below), the
Issuer would incur United States withholding tax on interest received from a related U.S. person. In
addition, distributions on Equity Securities will likely, and distributions on Defaulted Obligations and
securities rated below investment grade could possibly, be subject to withholding. It is not expected,
however, that the Issuer will derive material amounts of any other items of income that will be subject to
United States or foreign withholding taxes.
Prospective investors should be aware that, under certain Treasury Regulations, the IRS may
disregard the participation of an intermediary in a "conduit" financing arrangement and the conclusions
reached in the immediately preceding paragraph assume that such Treasury Regulations do not apply.
Those Treasury Regulations could require withholding of U.S. federal income tax from payments to the
Issuer of interest on a Collateral Obligation if the Issuer's acquisition of the Collateral Obligations and the
issuance of the Notes are considered part of a "tax avoidance plan." Each holder and beneficial owner of
a Class D Note (other than a subsequent transferee of an interest in a Class D Note in the form of an
interest in a Global Security) or a Subordinated Note (other than a subsequent transferee of an interest in a
Subordinated Note in the form of an interest in a Regulation S Global Security) that is not a "United
States person" (as defined in Section 7701(a)(30) of the Code) will provide a written certification as to
whether it is an Affected Bank by delivery of a certificate in a form attached to the Indenture. Each
subsequent transferee of an interest in a Class D Note (in the form of an interest in a Global Security) or a
Subordinated Note (in the form of an interest in a Regulation S Global Security) will be deemed to
represent to the Issuer and to the Trustee that it is not an Affected Bank. No transfer of any Class D Note
or Subordinated Note to an Affected Bank will be effective, and the Trustee will not recognize any such
transfer, unless such transfer is specifically authorized by the Issuer in writing; provided, however, that
the Issuer shall authorize any such transfer if (x) such transfer would not cause more than 33⅓% of the
aggregate outstanding amount of the Class D Notes or the Subordinated Notes, as applicable, to be owned
by Affected Banks or (y) the transferor is an Affected Bank previously approved by the Issuer, as notified
to the Note Registrar. "Affected Bank" means a "bank" for purposes of Section 881 of the Code or an
entity affiliated with such a bank that neither (x) meets the definition of a U.S. Holder nor (y) is entitled to
the benefits of an income tax treaty with the United States under which withholding taxes on interest
payments made by obligors resident in the United States to such bank are reduced to 0%.
If withholding or deduction of any taxes from payments is required by law in any jurisdiction, the
Issuer will be under no obligation to make any additional payments to any holder in respect of such
withholding or deduction.
Notwithstanding any of the foregoing, any commitment fee, facility fee or similar fee that the
Issuer earns may be subject to a 30% withholding tax and any lending fees received under a securities
lending agreement may also be subject to withholding tax.
U.S. Classification and U.S. Tax Treatment of the Senior Notes
The Issuer has agreed and, by its acceptance of a Senior Note, each Noteholder will be deemed to
have agreed, to treat the Senior Notes as debt of the Issuer for United States federal income tax purposes,
except (x) as otherwise required by applicable law, (y) to the extent a Noteholder makes a protective QEF
election (described below), or (z) to the extent that the holder files certain Unites States tax information
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eturns required of only certain equity owners with respect to various reporting requirements under the
Code (as described below under "Transfer and Other Reporting Requirements"). Upon the issuance of the
Senior Notes, special U.S. tax counsel will deliver an opinion generally to the effect that, assuming
compliance with the Indenture (and certain other documents), and based on certain factual representations
made by the Issuer and/or the Collateral Manager, the Class A Notes, Class B Notes, and the Class C
Notes will, and the Class D Notes should, be characterized as debt of the Issuer for United States federal
income tax purposes. Prospective investors should be aware that opinions of counsel are not binding on
the IRS, and there can be no assurance that the IRS will not seek to characterize as something other than
indebtedness any particular Class or Classes of the Senior Notes. Further, recharacterization of a Class of
Notes, particularly the Class D Notes because of their place in the capital structure, may be more likely if
a single investor or a group of investors that holds all of the Subordinated Notes also holds all of the more
senior Class of Notes in the same proportion as the Subordinated Notes are held. In that case, the U.S.
federal income tax consequences to U.S. Holders of such Secured Notes would be substantially the same
as those set forth under "Tax Treatment of U.S Holders of Subordinated Notes" and there might be
adverse U.S. federal income tax consequences to a U.S. Holder of Secured Notes upon the sale,
redemption, retirement or other disposition of, or the receipt of certain types of distributions on, the
Secured Notes. Except as provided under "—Alternative Characterization of the Senior Notes" below,
the balance of this discussion assumes that the Senior Notes will be characterized as debt of the Issuer for
United States federal income tax purposes.
For United States federal income tax purposes, the Issuer of the Senior Notes, and not the Co-
Issuer, will be treated as the issuer of the Senior Notes.
Subject to the following paragraph, U.S. Holders of the Senior Notes will include payments of
stated interest received on the Notes in income in accordance with their normal method of tax accounting
as ordinary interest income.
While not absolutely certain, it appears that the Class B Notes, Class C Notes, and the Class D
Notes will be issued with original issue discount ("OID" and each of the Class B Notes, the Class C
Notes, and the Class D Notes is sometimes referred to herein as an "OID Note") because interest
payments on such Notes ("OID interest payments") may not be considered to be unconditionally
payable (a requisite for interest to not constitute OID) since they may be deferred in certain events. A
U.S. Holder of an OID Note will be required to include OID in gross income as it accrues under a
constant yield method, based on the original yield to maturity of the Note. Thus, the U.S. Holder of an
OID Note will be required to include original issue discount in income as it accrues, prior to the receipt of
the cash attributable to such income. U.S. Holders, however, would be entitled to claim a loss upon
maturity or other disposition of an OID Note with respect to interest amounts accrued and included in
gross income for which cash is not received. Such a loss generally would be a capital loss.
Although there can be no assurance, the Senior Notes should not be "contingent payment debt
instruments" ("CPDIs") within the meaning of Treasury Regulation Section 1.1275-4. If the Class D
Notes (or any other Class of the Notes) were considered to be CPDIs, among other consequences, any
gain on the sale of such Notes that might otherwise be a capital gain would be ordinary income.
Prospective investors should consult their own tax advisors regarding the possible characterization of the
Senior Notes as CPDIs.
The Senior Notes may be debt instruments described in Section 1272(a)(6) of the Code (debt
instruments that may be accelerated by reason of the prepayment of other debt obligations securing such
debt instruments). Special tax rules principally relating to the accrual of OID, market discount, and bond
premium apply to debt instruments described in Section 1272(a)(6). Further, those debt instruments may
not be part of an integrated transaction with a related hedge under Treasury Regulation Section 1.1275-6.
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Prospective investors should consult with their own tax advisors regarding the effects of Section
1272(a)(6).
In general, a U.S. Holder of a Senior Note will have a basis in such Note equal to the cost of such
Note increased by any OID and any market discount includible in income by such U.S. Holder and
reduced by any amortized premium and any principal payments and any OID interest payments. Upon a
sale, exchange or other disposition of a Senior Note, a U.S. Holder will generally recognize gain or loss
equal to the difference between the amount realized on the sale, exchange or other disposition (less any
accrued and unpaid interest, which would be taxable as such) and the U.S. Holder's tax basis in such
Note. Such gain or loss generally will be long term capital gain or loss if the U.S. Holder held the Senior
Note for more than one year at the time of disposition. In certain circumstances, U.S. Holders that are
individuals may be entitled to preferential treatment for net long term capital gains; however, the ability
of U.S. Holders to offset capital losses against ordinary income is limited.
Alternative Characterization of the Senior Notes
Notwithstanding special U.S. tax counsel's opinion, U.S. Holders should recognize that there is
some uncertainty regarding the appropriate classification of instruments such as the Senior Notes. It is
possible, for example, that the IRS may contend that a class of Senior Notes should be treated as equity
interests (or as part debt, part equity) in the Issuer. Such a recharacterization might result in material
adverse tax consequences to U.S. Holders. If U.S. Holders of a Class of the Senior Notes were treated as
owning equity interests in the Issuer, the U.S. federal income tax consequences to U.S. Holders of such
recharacterized Notes would be as described under "—Treatment of U.S. Holders of the Subordinated
Notes" and "Transfer and Other Reporting Requirements." In addition, in order to avoid one application
of the PFIC rules, each U.S. Holder of a Senior Note should consider making a qualified electing fund
election (the "QEF election") provided in Section 1295 of the Code on a "protective" basis (although
such protective election may not be respected by the IRS because current regulations do not specifically
authorize that particular election). See "—Treatment of U.S. Holders of the Subordinated Notes—Status
of the Issuer as a PFIC—QEF Election." Further, U.S. Holders of any Class of Senior Notes that may be
recharacterized as equity in the Issuer should consult with their own tax advisors with respect to whether,
if they owned equity in the Issuer, they would be required to file information returns in accordance with
sections 6038, 6038B, and 6046 of the Code (and, if so, whether they should file such returns on a
protective basis).
Non-U.S. Holders of the Senior Notes
Assuming that the Notes are either respected as debt or treated as equity in a non-United States
corporation, a Non-U.S. Holder of a Senior Note that has no connection with the United States and is not
related, directly or indirectly, with the Issuer or the holders of the Issuer's equity or the Subordinated
Notes will not be subject to U.S. withholding tax on interest payments. The Issuer does not currently
intend to require Non-U.S. Holders to make certain tax representations regarding the identity of the
beneficial owner of the Senior Notes in order to receive payments free of withholding, but Non-U.S.
Holders of Senior Notes may be required to provide such certification in order to receive payments free of
backup withholding.
Treatment of U.S. Holders of the Subordinated Notes
General
Prospective investors should not rely on this summary and should consult their own tax advisors
regarding alternative characterizations of the Subordinated Notes and the consequences of their acquiring,
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holding or disposing of the Subordinated Notes. For purposes of this section "—Treatment of U.S.
Holders of the Subordinated Notes," the term "U.S. Holder" refers to a U.S. Holder of a Subordinated
Note.
The Subordinated Notes will be characterized as equity (which would likely be considered voting
equity) of the Issuer for U.S. federal income tax purposes.
Distributions on the Subordinated Notes
Subject to the anti-deferral rules discussed below, any payment on the Subordinated Notes that is
distributed by the Issuer to a U.S. Holder that is subject to United States federal income tax will be
taxable to such U.S. Holder as a dividend to the extent of the current and accumulated earnings and
profits (determined under United States federal income tax principles) of the Issuer. Such payments will
not be eligible for the dividends received deduction allowable to corporations and likely will not be
eligible for the preferential income tax rate on qualified dividend income. Distributions in excess of
earnings and profits will be non-taxable to the extent of, and will be applied against and reduce, the U.S.
Holder's adjusted tax basis in the Subordinated Notes. Distributions in excess of earnings and profits and
basis will be taxable as gain from the sale or exchange of property, as described below.
Sale, Exchange or Other Disposition of the Subordinated Notes
In general, a U.S. Holder of the Subordinated Notes will recognize gain or loss upon the sale,
exchange or other disposition of the Subordinated Notes in an amount equal to the difference between the
amount realized and such U.S. Holder's adjusted tax basis in the Subordinated Notes. The character of
such gain or loss (as ordinary or capital) generally will depend on whether the U.S. Holder either has
made a QEF election or is subject to the CFC rules (as each is described below). Initially, the tax basis of
a U.S. Holder should equal the amount paid for the Subordinated Notes. Such basis will be (i) increased
by amounts taxable to such U.S. Holders by virtue of a QEF election or by virtue of the CFC rules, and
(ii) decreased by actual distributions from the Issuer that are deemed to consist of previously taxed
amounts or to represent the return of capital.
Anti-Deferral Rules
Prospective investors should be aware that certain of the procedural rules for "PFICs" and "QEF"
elections (as both of such terms are defined below) are complex and should consult their own tax advisors
regarding such rules.
The tax consequences discussed above are likely to be materially modified by the anti-deferral
rules discussed below. In general, each U.S. Holder's investment in the Issuer will be taxed as an
investment in a "passive foreign investment company" ("PFIC") or a controlled foreign corporation
("CFC"), depending (in part) upon the percentage of the Issuer's equity that is acquired and held by
certain U.S. Holders. If applicable, the rules pertaining to CFCs generally override those pertaining to
PFICs (although, in certain circumstances, more than one set of rules may be applicable simultaneously).
Prospective investors should be aware that in determining what percentage of the equity of the
Issuer is held by various categories of investors (for example, for purposes of the CFC and information
reporting rules described below), the Subordinated Notes will be treated as equity (and likely voting
equity) and the Collateral Manager's interest in certain portions of its fee and certain other classes of
Notes may be considered equity (and might be considered voting equity).
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Prospective investors should be aware that the Issuer's income that is allocated to holders (under
the QEF rules as well as under the CFC rules discussed below) will not necessarily bear any particular
relationship in any year to the amount of cash that is distributed on the Subordinated Notes and, in any
given year, may be substantially greater. Such an excess will arise, among other circumstances, when
distributions are deferred at the request of a majority of the aggregate outstanding amount of the
Subordinated Notes, Collateral is purchased at a discount, interest or other income on the Collateral
(which is included in gross income) is used to acquire other items of Collateral or to repay principal on
the Senior Notes (which does not give rise to a deduction), or any portion of the Senior Notes is not
ultimately paid upon maturity and the Issuer recognizes cancellation of indebtedness income without any
corresponding offsetting losses (due to tax character differences or otherwise). In addition, such an
excess could arise due to the amortization of the upfront payment (if any) on the Interest Rate Hedge
Agreements, since any such payment may have to be taken into income over the term of the applicable
hedge agreement in a manner that reflects the economic substance of the contract.
Status of the Issuer as a PFIC
The Issuer will be treated as a "PFIC" for U.S. federal income tax purposes. U.S. Holders in
PFICs, other than U.S. Holders that make a timely "qualified electing fund" or "QEF" election described
below, are subject to special rules for the taxation of "excess distributions" (which include both certain
distributions by a PFIC and any gain recognized on a disposition of PFIC stock). In general, Section
1291 of the Code provides that the amount of any "excess distribution" will be allocated to each day of
the U.S. Holder's holding period for its PFIC stock. The amount allocated to the current year will be
included in the U.S. Holder's gross income for the current year as ordinary income. With respect to
amounts allocated to prior years, the tax imposed for the current year will be increased by the "deferred
tax amount" (an amount calculated with respect to each prior year by multiplying the amount allocated to
such year by the highest rate of tax in effect for such year, together with an interest charge, as though the
amounts of tax were overdue).
An excess distribution is the amount by which distributions for a taxable year exceed 125% of the
average distribution in respect of the Subordinated Notes during the three preceding taxable years (or, if
shorter, the investor's holding period for the Subordinated Notes). As indicated above, any gain
recognized upon disposition (or deemed disposition) of the Subordinated Notes will be treated as an
excess distribution and taxed as described above (i.e., not be taxable as capital gain). For this purpose, a
U.S. Holder that uses a Subordinated Note as security for an obligation will be treated as having disposed
of the Subordinated Note.
Special rules apply to certain regulated investment companies that own interests in PFICs and any
such investor should consult with its own tax advisors regarding the consequences to it of acquiring
Subordinated Notes.
QEF Election
If a U.S. Holder (including certain U.S. Holders indirectly owning Subordinated Notes) makes
the qualified electing fund election (the "QEF election") provided in Section 1295 of the Code, the U.S.
Holder will be required to include its pro rata share (unreduced by any prior year losses) of the Issuer's
ordinary income and net capital gains (as ordinary income and long term capital gain, respectively) for
each taxable year and pay tax thereon even if such income and gain is not distributed to the U.S. Holder
by the Issuer. In addition, any losses of the Issuer (which may include losses (which may be substantial)
arising from credit event payments made by the Issuer under any Synthetic Security), will not be
deductible by such U.S. Holder. Rather, any tax benefit from such losses is effectively only available
when a U.S. Holder sells or disposes of its shares.
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A U.S. Holder that makes the QEF election may (in general) elect to defer the payment of tax on
undistributed income (until such income is distributed or the Subordinated Note is transferred); provided
that it agrees to pay interest on such deferred tax liability. For this purpose, a U.S. Holder that uses a
Subordinated Note as security for an obligation will be treated as having disposed of the Subordinated
Note. If the Issuer later distributes the income or gain on which the U.S. Holder has already paid taxes,
amounts so distributed to the U.S. Holder will not be further taxable to the U.S. Holder. A U.S. Holder's
tax basis in the Subordinated Notes will be increased by the amount included in such U.S. Holder's
income and decreased by the amount of nontaxable distributions. In general, a U.S. Holder making the
QEF Election will recognize, on the disposition of the Subordinated Notes, capital gain or loss equal to
the difference, if any, between the amount realized upon such disposition (including redemption or
retirement) and its adjusted tax basis in such Subordinated Notes. Such gain or loss generally will be long
term capital gain or loss if the U.S. Holder held the Subordinated Note for more than one year at the time
of disposition. In certain circumstances, U.S. Holders that are individuals may be entitled to preferential
treatment for net long term capital gains. However, the ability of U.S. Holders to offset capital losses
against ordinary income is limited.
If the Issuer holds equity of other PFICs (an "equity PFIC"), a U.S. Holder of Subordinated
Notes that wanted to avoid the application of the excess distribution rules (described above) with respect
to its indirect interest in such equity PFIC, would have to make a separate QEF election with respect to
such equity PFIC. In such case, the Issuer will provide, to the extent it receives it, the information needed
for U.S. Holders to make such a QEF election. U.S. holders should consult their own tax advisors with
respect to the tax consequences of such a situation.
In general, a QEF election should be made on or before the due date for filing a U.S. Holder's
federal income tax return for the first taxable year for which it held a Subordinated Note. The QEF
election is effective only if certain required information is made available by the Issuer to the IRS. The
Issuer will undertake to comply with the IRS information requirements necessary to be a QEF, which will
permit U.S. Holders to make the QEF election. Nonetheless, there can be no absolute assurance that such
information will always be available or presented.
Where a QEF election is not timely made by a U.S. Holder for the year in which it acquired its
Subordinated Notes, but is made for a later year, the excess distribution rules can be avoided by making
an election to recognize gain from a deemed sale of the Subordinated Notes at the time when the QEF
election becomes effective.
A U.S. Holder should consult its own tax advisors regarding whether it should make a QEF
election (and, if it failed to make an initial election, whether it should make an election in a subsequent
taxable year).
Status of the Issuer as a CFC
U.S. tax law also contains special provisions dealing with CFCs. A U.S. Holder (or any other
holder of an interest treated as voting equity in a foreign corporation that would meet the definition of
U.S. Holder but for the fact that such holder does not hold Subordinated Notes) that owns (directly or
indirectly) at least 10% of the voting stock of a foreign corporation, is considered a "U.S. Shareholder"
with respect to the foreign corporation. If U.S. Shareholders in the aggregate own (directly or indirectly)
more than 50% of the voting power or value of the stock of such corporation, the foreign corporation will
be classified as a CFC. Complex attribution rules apply for purposes of determining ownership of stock
in a foreign corporation such as the Issuer.
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If the Issuer is classified as a CFC, a U.S. Shareholder (and possibly any U.S. Holder that is a
direct or indirect holder of a grantor trust that is considered to be a U.S. Shareholder) that is a shareholder
of the Issuer as of the end of the Issuer's taxable year generally would be subject to current U.S. tax on the
income of the Issuer, regardless of cash distributions from the Issuer. Earnings subject to tax generally
will not be taxed again when they are distributed to the U.S. Holder. In addition, income that would
otherwise be characterized as capital gain and gain on the sale of the CFC's stock by a U.S. Shareholder
(during the period that the corporation is a CFC and thereafter for a five-year period) would be classified
in whole or in part as dividend income.
Certain income generated by a corporation conducting a banking, financing, insurance, or other
similar business would not be includible in a holder's income under the CFC rules. However, each U.S.
Holder of a Subordinated Note will agree not to take the position that the Issuer is engaged in such a
business. Accordingly, if the CFC rules apply, a U.S. Shareholder would generally be subject to tax on its
share of all of the Issuer's income.
Indirect Interests in PFICs and CFCs
If the Issuer owns a Collateral Debt Obligation or an Equity Security issued by a non-U.S.
corporation that is treated as equity for U.S. federal income tax purposes, U.S. Holders of Subordinated
Notes could be treated as owning an indirect equity interest in a PFIC or a CFC and could be subject to
certain adverse tax consequences.
In particular, if the Issuer owns equity interests in PFICs ("Lower-Tier PFICs"), a U.S. Holder
of Subordinated Notes would be treated as owning directly the U.S. Holder's proportionate amount (by
value) of the Issuer's equity interests in the Lower-Tier PFICs. A U.S. Holder's QEF election with respect
to the Issuer would not be effective with respect to such Lower-Tier PFICs. However, a U.S. Holder
would be able to make QEF elections with respect to such Lower-Tier PFICs if the Lower-Tier PFICs
provide certain information and documentation to the Issuer in accordance with applicable Treasury
Regulations. However, there can be no assurance that the Issuer would be able to obtain such information
and documentation from any Lower-Tier PFIC, and thus there can be no assurance that a U.S. Holder
would be able to make or maintain a QEF election with respect to any Lower-Tier PFIC. If a U.S. Holder
does not have a QEF election in effect with respect to a Lower-Tier PFIC, as a general matter, the U.S.
Holder would be subject to the adverse consequences described above under "—Investment in a Passive
Foreign Investment Company" with respect to any excess distributions made by such Lower-Tier PFIC to
the Issuer, any gain on the disposition by the Issuer of its equity interest in such Lower-Tier PFIC treated
as indirectly realized by such U.S. Holder, and any gain treated as indirectly realized by such U.S. Holder
on the disposition of its equity in the Issuer (which may arise even if the U.S. Holder realizes a loss on
such disposition). Such amount would not be reduced by expenses or losses of the Issuer, but any income
recognized may increase a U.S. Holder's tax basis in its Subordinated Notes. Moreover, if the U.S.
Holder has a QEF election in effect with respect to a Lower-Tier PFIC, the U.S. Holder would be required
to include in income the U.S. Holder's pro rata share of the Lower-Tier PFIC's ordinary earnings and net
capital gain as if the U.S. Holder's indirect equity interest in the Lower-Tier PFIC were directly owned,
and it appears that the U.S. Holder would not be permitted to use any losses or other expenses of the
Issuer to offset such ordinary earnings and/or net capital gains, but recognition of such income may
increase a U.S. Holder's tax basis in its Subordinated Notes.
Accordingly, if any of the Collateral Obligations or Equity Securities are treated as equity
interests in a PFIC, such U.S. Holders could experience significant amounts of phantom income with
respect to such interests. Other adverse tax consequences may arise for such U.S. Holders that are treated
as owning indirect interests in CFCs. U.S. Holders should consult their own tax advisors regarding the
tax issues associated with such investments in light of their own individual circumstances.
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Taxation of Non-U.S. Holders of Subordinated Notes
Payments on, and gain from the sale, exchange or redemption of, Subordinated Notes generally
should not be subject to United States federal income tax in the hands of a Non-U.S. Holder that has no
connection with the United States other than the holding of the Subordinated Notes.
Transfer and Other Reporting Requirements
In general, U.S. Holders who acquire any Subordinated Notes (or any Class of Notes that is
recharacterized as equity in the Issuer) for cash may be required to file a Form 926 with the IRS and to
supply certain additional information to the IRS if (i) such U.S. Holder owns (directly or indirectly)
immediately after the transfer, at least 10% by vote or value of the Issuer or (ii) the transfer when
aggregated with all related transfers under applicable regulations, exceeds U.S. $100,000. In the event a
U.S. Holder that is required to file such form, fails to file such form, the U.S. Holder could be subject to a
penalty of up to U.S. $100,000 (computed as 10% of the gross amount paid for the Subordinated Notes)
or more if the failure to file was due to intentional disregard of its obligation. Other important
information reporting requirements apply to persons that acquire 10% or more of a foreign corporation's
equity (here, the Subordinated Notes and any Class of Notes or portion of the Collateral Manager's fee
that is recharacterized as equity).
In addition, A U.S. Holder of Subordinated Notes that owns (actually or constructively) at least
10% by vote or value of the Issuer (and each officer or director of the Issuer that is a U.S. citizen or
resident) may be required to file an information return on IRS Form 5471. A U.S. Holder of
Subordinated Notes generally is required to provide additional information regarding the Issuer annually
on IRS Form 5471 if it owns (actually or constructively) more than 50% by vote or value of the Issuer.
U.S. Holders should consult their own tax advisors regarding whether they are required to file IRS Form
5471. In the event a U.S. Holder that is required to file such form, fails to file such form, the U.S. Holder
could be subject to a penalty of $10,000 for each such failure to file (in addition to other consequences).
Prospective investors of Subordinated Notes should consult with their own tax advisors regarding
whether they are required to file IRS Form 8886 in respect of this transaction. Such filing would
generally be required if such investors recognized a loss in excess of a specified threshold, and significant
penalties would be imposed on taxpayers that fail to properly file the form. Such filing would also
generally be required by a U.S. Holder Subordinated Notes if both the Issuer participates in certain types
of transactions that could be treated as "reportable transactions." (such as a transaction in which its loss
exceeds a specified threshold and (x) either such U.S. Holder owns 10% or more of the Subordinated
Notes and makes a QEF election with respect to the Issuer or (y) the Issuer is treated as a CFC and such
U.S. Holder is a "U.S. Shareholder" (as defined above) of the Issuer. If the Issuer does participate in a
reportable transaction, it will make reasonable efforts to make such information available.
Tax-Exempt Investors
Special considerations apply to pension plans and other investors ("Tax-Exempt Investors") that
are subject to tax only on their "unrelated business taxable income" ("UBTI"). A Tax-Exempt Investor's
income from an investment in the Issuer generally should not be treated as resulting in UBTI under
current law, so long as such investor's acquisition of the Notes is not debt-financed, and such investor
does not own more than 50% of the Issuer's equity (here, the Subordinated Notes and any Class of Notes
(if any) or portion of the Collateral Manager's fee that is recharacterized as equity).
Issuer.
Tax-Exempt Investors should consult their own tax advisors regarding an investment in the
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Circular 230
Under 31 C.F.R. part 10, the regulations governing practice before the Internal Revenue Service
(Circular 230), we and our tax advisors are (or may be) required to inform you that:
• Any advice contained herein, including any opinions of counsel referred to herein, is not intended
or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties
that may be imposed on the taxpayer;
• Any such advice is written to support the promotion or marketing of the Offered Securities and
the transactions described herein (or in such opinion or other advice); and
• Each taxpayer should seek advice based on the taxpayer's particular circumstances from an
independent tax advisor.
Cayman Islands Taxation
The following is a discussion of certain Cayman Islands tax consequences of an investment in the
Offered Securities. The discussion is a general summary of present law, which is subject to prospective
and retroactive change. It is not intended as tax advice, does not consider any investor's particular
circumstances, and does not consider tax consequences other than those arising under Cayman Islands
law.
Under existing Cayman Islands Laws:
(i) Payments of interest, principal and other amounts on the Secured Notes and
amounts in respect of the Subordinated Notes will not be subject to taxation in the Cayman
Islands and no withholding will be required on the payment of interest and principal and other
amounts on the Secured Notes or a distribution to any holder of the Subordinated Notes, nor will
gains derived from the disposal of the Offered Securities be subject to Cayman Islands income or
corporation tax. The Cayman Islands currently have no income, corporation or capital gains tax
and no estate duty, inheritance tax or gift tax;
(ii) no stamp duty is payable in respect of the issue or transfer of the Offered
Securities although duty may be payable if Offered Securities are executed in or brought into the
Cayman Islands; and
(iii) Certificates evidencing the Offered Securities, in registered form, to which title is
not transferable by delivery, should not attract Cayman Islands stamp duty. However, an
instrument transferring title to an Offered Security, if brought to or executed in the Cayman
Islands, would be subject to Cayman Islands stamp duty.
The Issuer has been incorporated with limited liability under the laws of the Cayman Islands as an
exempted company and, as such, obtained on April 18, 2006 an undertaking from the Governor in
Cabinet of the Cayman Islands in the following form:
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"The Tax Concessions Law
1999 Revision
Undertaking as to Tax Concessions
In accordance with the provision of Section 6 of The Tax Concession Law (1999 Revision), the
Governor in Cabinet undertakes with:
HillMark Funding Ltd., "the Company"
(a)
(b)
that no law which is hereafter enacted in the Islands imposing any tax to be
levied on profits, income, gains or appreciations shall apply to the Company or
its operations; and
in addition, that no tax to be levied on profits, income, gains or appreciations or
which is in the nature of estate duty or inheritance tax shall be payable:
(i)
(ii)
on or in respect of the shares, debentures or other obligations of the
Company; or
by way of the withholding in whole or part, of any relevant payment as
defined in Section 6(3) of the Tax Concessions Law (1999 Revision).
These concessions shall be for a period of twenty years from the 18th day of April, 2006.
GOVERNOR IN CABINET"
The Cayman Islands does not have an income tax treaty arrangement with the United States or
any other country; however, the Cayman Islands has entered into a tax disclosure agreement with the
United States.
ERISA AND LEGAL INVESTMENT CONSIDERATIONS
The advice below was not written and is not intended to be used and cannot be used by any taxpayer for
purposes of avoiding United States federal income tax penalties that may be imposed. The advice is
written to support the promotion or marketing of the transaction. Each taxpayer should seek advice
based on the taxpayer's particular circumstances from an independent tax advisor.
The foregoing disclaimer is provided to satisfy obligations under Circular 230 governing standards of
practice before the Internal Revenue Service.
The United States Employee Retirement Income Security Act of 1974, as amended ("ERISA")
imposes certain requirements on "employee benefit plans" (as defined in Section 3(3) of ERISA) which
are subject to Title I of ERISA, including entities such as collective investment funds and separate
accounts whose underlying assets include the assets of such plans (collectively, "ERISA Plans") and on
those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject
to ERISA's general fiduciary requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in accordance with the
documents governing the ERISA Plan. The prudence of a particular investment must be determined by
the responsible fiduciary of an ERISA Plan by taking into account the ERISA Plan's particular
circumstances and all of the facts and circumstances of the investment including, but not limited to, the
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matters discussed above under "Risk Factors" and the fact that in the future there may be no market in
which such fiduciary will be able to sell or otherwise dispose of the Offered Securities.
Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the
assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to
Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans, "Plans")
and certain persons (referred to as "parties in interest" or "disqualified persons") having certain
relationships to such Plans, unless a statutory or administrative exemption is applicable to the transaction.
A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise
taxes and other penalties and liabilities under ERISA and Section 4975 of the Code.
Governmental, church, non-U.S. and certain other plans, while not subject to the fiduciary
responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be
subject to state, local, federal or non-U.S. laws that are substantially similar to the foregoing provisions of
ERISA and the Code. Fiduciaries of any such plans should consult with their counsel before purchasing
any Offered Securities.
The U.S. Department of Labor has promulgated regulations 29 C.F.R. Section 2510.3-101 (the
"Plan Asset Regulations"), describing what constitutes the assets of a Plan with respect to the Plan's
investment in an entity for purposes of certain provisions of ERISA and Section 4975 of the Code,
including the fiduciary responsibility provisions of Title I of ERISA and Section 4975 of the Code.
Under the Plan Asset Regulations, if a Plan invests in an "equity interest" of an entity that is neither a
"publicly offered security" nor a security issued by an investment company registered under the
Investment Company Act, the Plan's assets include both the equity interest and an undivided interest in
each of the entity's underlying assets, unless it is established that the entity is an "operating company" or,
as further discussed below, that equity participation in the entity by "benefit plan investors" is not
"significant."
Prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of the Code
may arise if Offered Securities are acquired with the assets of a Plan with respect to which the Issuer, the
Initial Purchaser, the Trustee, the Portfolio Manager, any seller of Collateral Obligations to the Issuer or
any of their respective Affiliates, is a party in interest or a disqualified person. Certain exemptions from
the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may be
applicable, however, depending in part on the type of Plan fiduciary making the decision to acquire an
Offered Security and the circumstances under which such decision is made. Included among these
exemptions are Prohibited Transaction Class Exemption ("PTCE") 91-38 (relating to investments by
bank collective investment funds), PTCE 84-14 (relating to transactions effected by a "qualified
professional asset manager"), PTCE 90-1 (relating to investments by insurance company pooled separate
accounts), PTCE 95-60 (relating to investments by insurance company general accounts), and PTCE
96-23 (relating to transactions effected by in-house asset managers), ("Investor-Based Exemptions").
There is also a statutory exemption that may be available under Section 408(b)(17) of ERISA and Section
4975(d)(20) of the Code to a party in interest that is a service provider to a Plan investing in the Notes for
adequate consideration, provided such service provider is not (i) the fiduciary with respect to the Plan's
assets used to acquire the Notes or an affiliate of such fiduciary or (ii) an affiliate of the employer
sponsoring the Plan (the "Service Provider Exemption"). Adequate consideration means fair market as
determined in good faith by the Plan fiduciary pursuant to regulations to be promulgated by the U.S.
Department of Labor.
Any insurance company proposing to invest assets of its general account in Offered Securities
should consider the extent to which such investment would be subject to the requirements of Title I of
ERISA and Section 4975 of the Code in light of the U.S. Supreme Court's decision in John Hancock
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Mutual Life Insurance Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993), and the enactment of
Section 401(c) of ERISA on August 20, 1996. In particular, such an insurance company should consider
(i) the exemptive relief granted by the U.S. Department of Labor for transactions involving insurance
company general accounts in PTCE 95-60 and (ii) if such exemptive relief is not available, whether its
purchase of Offered Securities will be permissible under the final regulations issued under Section 401(c)
of ERISA. The final regulations provide guidance on which assets held by an insurance company
constitute "plan assets" for purposes of the fiduciary responsibility provisions of ERISA and Section 4975
of the Code. The regulations do not exempt the assets of insurance company general accounts from
treatment as "plan assets" to the extent they support certain participating annuities issued to Plans after
December 31, 1998.
The Secured Notes (other than the Class D Notes)
The Plan Asset Regulations define an "equity interest" as any interest in an entity other than an
instrument that is treated as indebtedness under applicable local law and which has no substantial equity
features. As noted above in "Income Tax Considerations", it is the opinion of tax counsel to the Issuer
that the Class A Notes, the Class B Notes and the Class C Notes will be treated as debt for U.S. income
tax purposes. Because of this, and the traditional debt features of the Secured Notes (other than the Class
D Notes), as well as the absence of conversion rights, warrants and other typical equity features, the
Secured Notes (other than the Class D Notes) should not be considered to be "equity interests" in the
Issuer. Nevertheless, without regard to whether the Secured Notes (other than the Class D Notes) are
considered equity interests, prohibited transactions within the meaning of Section 406 of ERISA or
Section 4975 of the Code may arise if such Notes are acquired with the assets of an ERISA Plan with
respect to which the Issuer, the Initial Purchaser or the Trustee or in certain circumstances, any of their
respective affiliates, is a party in interest or a disqualified person. The Investor-Based Exemptions and
the Service Provider Exemption may be available to cover such prohibited transactions.
By its purchase of any Secured Notes (other than the Class D Notes), each purchaser and
subsequent transferee thereof will be deemed to have represented and warranted (or, in the case of a
purchase of such Secured Notes in the form of Certificated Notes, will represent and warrant) either that
(a) it is neither a Plan nor any entity whose underlying assets include "plan assets" by reason of such
Plan's investment in the entity, nor a governmental, church, non-U.S. or other plan which is subject to any
federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA
or Section 4975 of the Code or (b) its purchase, holding and disposition of a Class A Note, Class B Note
or Class C Note will not constitute or result in a non-exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code (or, in the case of a governmental, church, non-U.S. or other plan, a
non-exempt violation under any substantially similar law).
The Class D Notes and the Subordinated Notes
Equity participation in an issuer of Offered Securities by "benefit plan investors" is "significant"
and will cause the assets of the Issuer to be deemed the assets of an investing Plan (in the absence of
another applicable Plan Asset Regulation exception) if 25% or more of the value of any class of equity
interest in the Issuer is held by "benefit plan investors." Recently, Section 3(42) of ERISA, as enacted
under the Pension Protection Act of 2006, effectively amended the definition of "benefit plan investors"
in the Plan Asset Regulations as it applies in determining whether equity interests in an Issuer are
"significant." Employee benefit plans that are not subject to Title I of ERISA and plans that are not
subject to Section 4975 of the Code, such as U.S. governmental and church plans or non-U.S. plans, are
no longer considered "benefit plan investors." Accordingly, only employee benefit plans subject to Title I
of ERISA or Section 4975 of the Code or an entity whose underlying assets include plan assets by reason
of such plan's investment in the entity are considered in determining whether investment by "benefit plan
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investors" represents 25% or more of any class of equity of the Issuer. Therefore, the term "benefit plan
investor" includes (a) an "employee benefit plan" (as defined in Section 3(3) of Title I of ERISA) that is
subject to the fiduciary responsibilities provisions of ERISA, (b) a "plan" as defined in Section 4975(e)(1)
of the Code that is subject to Section 4975 of the Code, (c) any entity whose underlying assets include
"plan assets" by reason of any such employee benefit plan's or plan's investment in the entity or (d) as
such term is otherwise defined in the regulations promulgated by the U.S. Department of Labor under
Section 3(42) of ERISA (collectively, "Benefit Plan Investors"). For purposes of making the 25%
determination, the value of any equity interests held by a person (other than a Benefit Plan Investor) who
has discretionary authority or control with respect to the assets of the Co-Issuers or any person who
provides investment advice for a fee (direct or indirect) with respect to such assets, or any affiliate of such
a person (a "Controlling Person"), is disregarded. Under the Plan Asset Regulation, an "affiliate" of a
person includes any person, directly or indirectly through one or more intermediaries, controlling,
controlled by or under common control with the person, and "control" with respect to a person other than
an individual, means the power to exercise a controlling influence over the management or policies of
such person. The Class D Notes and the Subordinated Notes will likely be considered equity investments
for the purposes of applying Title I of ERISA and Section 4975 of the Code. Accordingly: (i) by its
purchase of a Class D Note, each purchaser and subsequent transferee thereof will be deemed to have
represented and warranted (or, in the case of a purchase of such Class D Notes in the form of Certificated
Notes or such Class D Notes in the form of Global Securities purchased from the Initial Purchaser, will
represent and warrant) that such purchaser is not a Benefit Plan Investor and (ii) purchases of the
Subordinated Notes by Benefit Plan Investors from the Initial Purchaser and any subsequent purchaser
will be limited to less than 25% of the value of all outstanding Subordinated Notes by requiring each such
purchaser to make certain representations (or, in the case of a subsequent purchaser of Regulation S
Global Subordinated Notes not from the Issuer, deemed representations) and/or to agree to certain transfer
restrictions regarding their status as Benefit Plan Investors or Controlling Persons. Subordinated Notes (i)
held as principal by the Portfolio Manager, the Initial Purchaser, the Placement Agent, the Trustee, any of
their respective affiliates, employees of the Portfolio Manager, the Initial Purchaser, the Placement Agent,
the Trustee or any of their affiliates and any charitable foundation of any such employees (other than any
of such interests held as a Benefit Plan Investor) or (ii) held by persons that have represented that they are
Controlling Persons will be disregarded (to the extent that such a Controlling Person is not a Benefit Plan
Investor) and will not be treated as outstanding for purposes of determining compliance with such 25%
limitation.
In order to effect the above prohibition against the acquisition of Class D Notes by Benefit Plan
Investors and Controlling Persons, each purchaser of the Class D Notes in the initial offering will be
required to represent and warrant and each subsequent transferee of the Class D Notes will be deemed to
have represented and warranted (or, in the case of a purchase of such Class D Notes in the form of
Certificated Notes, will represent and warrant), in each case at the time of its purchase and throughout the
period that it holds such Class D Note or any interest therein, that (i) it is not a Benefit Plan Investor and
(ii) if it is a governmental, church, non-U.S. or other plan that is subject to any federal, state, local or non-
U.S. law that is substantially similar to the provisions of Title I of ERISA or Section 4975 of the Code, its
purchase, holding and disposition of Class D Notes will not constitute or result in a non-exempt violation
under any such substantially similar law.
With respect to the Certificated Subordinated Notes or any beneficial interest therein and with
respect to Regulation S Global Subordinated Notes purchased from the Issuer on the Closing Date, a
purchaser will be required to represent and warrant (1) whether or not the purchaser is a Benefit Plan
Investor, (2) whether or not the purchaser is a Controlling Person and (3) (a) if it is a Benefit Plan
Investor, its purchase, holding and disposition of Subordinated Notes will not constitute or result in a nonexempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code or (b) if it is a
governmental, church, non-U.S. or other plan which is subject to any federal, state, local or non-U.S. law
121

that is substantially similar to the provisions of Title I of ERISA or Section 4975 of the Code, its
purchase, holding and disposition of Subordinated Notes will not constitute or result in non-exempt
violation under any such substantially similar law. No Certificated Subordinated Notes (or Regulation S
Global Subordinated Notes purchased from the Issuer) may be acquired by Benefit Plan Investors or
Controlling Persons if it would cause the above 25% limitation to be exceeded, unless at all times no
Benefit Plan Investors holding any Subordinated Notes are Plans. Each subsequent purchaser or
transferee of Regulation S Global Subordinated Notes other than from the Issuer on the Closing Date will
be deemed to have represented and agreed that (1) such purchaser or transferee is not a Benefit Plan
Investor or Controlling Person and (2) if the purchaser is a governmental, church, non-U.S. or other plan
that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of
Title I of ERISA or Section 4975 of the Code, its purchase, holding and disposition of Subordinated
Notes will not constitute or result in a non-exempt violation under any such substantially similar law.
Further Considerations
There can be no assurance that, despite the transfer restrictions relating to purchases by Benefit
Plan Investors and Controlling Persons and the procedures to be employed by the Issuer to attempt to
limit ownership by Benefit Plan Investors of the Subordinated Notes and the Class D Notes to less than
25%, Benefit Plan Investors will not in actuality own 25% or more of the outstanding Subordinated Notes
and the Class D Notes.
If for any reason the assets of the Issuer are deemed to be "plan assets" of a Plan because one or
more Plans is an owner of Class D Notes or Subordinated Notes (or of Class A Notes, Class B Notes or
Class C Notes characterized as an "equity interest" in the Issuer), certain transactions that the Issuer might
enter into, or may have entered into, in the ordinary course of its business might constitute non-exempt
"prohibited transactions" under Section 406 of ERISA or Section 4975 of the Code and might have to be
rescinded at significant cost to the Issuer. The Portfolio Manager, as an ERISA fiduciary, may be
prevented from engaging in certain investments (as not being deemed consistent with the ERISA prudent
investment standards) or engaging in certain transactions or fee arrangements because they might be
deemed to cause non-exempt prohibited transactions. It also is not clear that Section 403(a) of ERISA,
which generally requires that all of the assets of an ERISA Plan be held in trust and limits delegation of
investment management responsibilities by fiduciaries of ERISA Plans, would be satisfied. In addition, it
is unclear whether Section 404(b) of ERISA, which generally provides that no fiduciary may maintain the
indicia of ownership of any assets of a plan outside the jurisdiction of the district courts of the United
States, would be satisfied or any of the exceptions to the requirement set forth in 29 C.F.R. Section
2550.404b-1 would be available.
Any fiduciary or other person who proposes to use assets of any Benefit Plan Investor to purchase
any Offered Securities should consult with its counsel regarding the applicability of the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code to such an
investment, and to confirm that such investment will not constitute or result in a non-exempt prohibited
transaction or any other violation of an applicable requirement of ERISA.
The sale of any Offered Security to a Benefit Plan Investor, or to a person using assets of any
Benefit Plan Investor to effect its purchase of any Offered Security, is in no respect a representation by
the Issuer, the Initial Purchaser or the Portfolio Manager that such an investment meets all relevant legal
requirements with respect to investments by Benefit Plan Investors generally or any particular Benefit
Plan Investor, or that such an investment is appropriate for Benefit Plan Investors generally or any
particular Benefit Plan Investor.
Legal Investment Considerations
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Investors whose investment activities are subject to regulation by federal, state or local law or
governmental authorities should review the applicable laws and/or rules, policies and guidelines adopted
from time to time by such authorities before purchasing any Subordinated Notes or any Class of Secured
Notes. No representation is made as to the proper characterization of the Offered Securities for legal
investment or other purposes or as to the ability of particular investors to purchase any Subordinated
Notes or any Class of Secured Notes under applicable law or other legal investment restrictions.
Accordingly, all investors whose investment activities are subject to such laws and/or regulations,
regulatory capital requirements or review by regulatory authorities should consult their own legal advisors
in determining whether and to what extent the Offered Securities constitute a legal investment or are
subject to investment, capital or other restrictions.
None of the Issuer, the Co-Issuer, the Portfolio Manager, the Initial Purchaser, the Trustee or the
Collateral Administrator make any representation as to the proper characterization of the Offered
Securities for legal investment or other purposes, as to the ability of particular investors to purchase the
Offered Securities for legal investment or other purposes or as to the ability of particular investors to
purchase the Offered Securities under applicable investment restrictions. All institutions the activities of
which are subject to legal investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult their own legal advisors in determining whether and to what extent
the Offered Securities are subject to investment, capital or other restrictions. Without limiting the
generality of the foregoing, none of the Issuer, the Co-Issuer, the Portfolio Manager, the Placement Agent
and the Initial Purchaser makes any representation as to the characterization of the Offered Securities as a
U.S.-domestic or foreign (non-U.S.) investment under any state insurance code or related regulations, and
they are not aware of any published precedent that addresses such characterization. Although they are not
making any such representation, the Co-Issuers understand that the New York State Insurance
Department, in response to a request for guidance, has been considering the characterization (as U.S.-
domestic or foreign (non-U.S.)) of certain collateralized debt obligation securities co-issued by a non-U.S.
issuer and a U.S. co-issuer. There can be no assurance as to the nature of any advice or other action that
may result from such consideration. The uncertainties described above (and any unfavorable future
determinations concerning legal investment or financial institution regulatory characteristics of the
Offered Securities) may affect the liquidity of the Offered Securities.
PLAN OF DISTRIBUTION
Subject to the terms and conditions contained in a purchase and placement agreement (the
"Purchase and Placement Agreement") to be entered into among the Co-Issuers and JPMorgan, as
Initial Purchaser and Placement Agent, the Co-Issuers will agree to sell, and JPMorgan will agree to
purchase, the Secured Notes. A portion of the Subordinated Notes will be placed in privately negotiated
transactions by JPMorgan pursuant to the Purchase and Placement Agreement. The Issuer will agree to
sell, and the Portfolio Manager, "knowledgeable employees" of the Portfolio Manager and/or its affiliates
will agree to purchase, a portion of the Subordinated Notes in a privately negotiated transaction.
JPMorgan is not acting as a placement agent or initial purchaser with respect to those Subordinated Notes
sold directly by the Issuer to the Portfolio Manager, "knowledgeable employees" of the Portfolio Manager
and/or its affiliates.
The Secured Notes will be offered by the Initial Purchaser from time to time for sale to investors
in negotiated transactions at varying prices to be determined in each case at the time of sale. A portion of
the Subordinated Notes as described above will be offered by the Placement Agent on behalf of the Issuer
from time to time in negotiated transactions at varying prices to be determined in each case at the time of
sale.
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The Purchase and Placement Agreement will provide that the obligations of the Initial Purchaser
to pay for and accept delivery of the Secured Notes thereunder are subject to certain conditions and the
Purchase and Placement Agreement provides that the obligation of the Placement Agent to act as
placement agent of the Issuer thereunder is subject to certain conditions.
In the Purchase and Placement Agreement, each of the Issuer and the Co-Issuer will agree to
indemnify the Initial Purchaser against certain liabilities under the Securities Act or to contribute to
payments the Initial Purchaser may be required to make in respect thereof. In addition, the Issuer will
agree to reimburse the Initial Purchaser for certain of its expenses incurred in connection with the closing
of the transactions contemplated hereby.
In the Purchase and Placement Agreement, the Issuer will agree to indemnify the Placement
Agent against certain liabilities under the Securities Act or to contribute to payments the Placement Agent
may be required to make in respect thereof. In addition, the Issuer will agree to reimburse the Placement
Agent for certain of its expenses incurred in connection with the closing of the transactions contemplated
hereby.
The offering of the Offered Securities has not been and will not be registered under the Securities
Act and may not be offered or sold in non-offshore transactions except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities Act.
No action has been taken or is being contemplated by the Issuer that would permit a public
offering of the Offered Securities or possession or distribution of this Offering Circular or any
amendment thereof, or supplement thereto or any other offering material relating to the Offered Securities
in any jurisdiction (other than Ireland) where, or in any other circumstances in which, action for those
purposes is required. No offers, sales or deliveries of any Offered Securities, or distribution of this
Offering Circular or any other offering material relating to the Offered Securities, may be made in or from
any jurisdiction except in circumstances that will result in compliance with any applicable laws and
regulations and will not impose any obligations on the Issuer, the Initial Purchaser or the Placement
Agent. Because of the restrictions contained in the front of this Offering Circular, purchasers are advised
to consult legal counsel prior to making any offer, resale, pledge or transfer of the Offered Securities.
In the Purchase and Placement Agreement, the Initial Purchaser will agree that it or one or more
of its Affiliates will sell the Secured Notes only to or with, and in the Purchase and Placement Agreement,
the Placement Agent will agree that it or one or more of their Affiliates will place the Subordinated Notes
only to or with, in each case, (a) purchasers it reasonably believes to be (i) (x) Qualified Institutional
Buyers or (y) with respect to Certificated Notes and Certificated Subordinated Notes only, IAIs, and (ii)
Qualified Purchasers and (b) non-U.S. persons in offshore transactions pursuant to Regulation S. In the
Purchase and Placement Agreement, each of the Initial Purchaser and the Placement Agent will also agree
that it will send to each other dealer to which it sells Offered Securities pursuant to Regulation S during
the distribution compliance period a confirmation or other notice setting forth the restrictions on offers
and sales of the Offered Securities in non-offshore transactions or to, or for the account or benefit of, U.S.
persons. Until 40 days after completion of the distribution by the Issuer, an offer or sale of Offered
Securities, in a non-offshore transaction by a dealer (whether or not participating in the offering) may
violate the registration requirements of the Securities Act if the offer or sale is made otherwise than
pursuant to Rule 144A or a transaction exempt from the registration requirements under the Securities
Act. Resales of the Offered Securities offered in reliance on Rule 144A or in a transaction exempt from
the registration requirements under the Securities Act, as the case may be, are restricted as described
under the "Transfer Restrictions." Beneficial interests in a Regulation S Global Security or Regulation S
Global Subordinated Note may not be held by a U.S. person at any time, and resales of the Offered
Securities offered in offshore transactions to non-U.S. persons in reliance on Regulation S may be
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effected only in accordance with the transfer restrictions described herein. As used in this paragraph, the
terms "United States" and "U.S." have the meanings given to them by Regulation S.
The Offered Securities are a new issue of securities for which there is currently no market.
Neither the Initial Purchaser nor the Placement Agent is under any obligation to make a market in any
Class of Offered Securities and any market making activity, if commenced, may be discontinued at any
time. There can be no assurance that a secondary market for any Class of Offered Securities will develop,
or if one does develop, that it will continue. Accordingly, no assurance can be given as to the liquidity of
or trading market for the Offered Securities.
In connection with the offering of the Offered Securities, the Initial Purchaser and Placement
Agent may, as permitted by applicable law, overallot or effect transactions that stabilize or maintain the
market price of the Offered Securities at a level which might not otherwise prevail in the open market.
The stabilizing, if commenced, may be discontinued at any time.
TRANSFER RESTRICTIONS
Because of the following restrictions, purchasers are advised to consult legal counsel prior to
making any offer, resale, pledge or transfer of the Offered Securities.
The Initial Purchaser and the Placement Agent will receive notice of any transfer of Offered
Securities.
The Offered Securities have not been registered under the Securities Act or any state securities or
"Blue Sky" laws or the securities laws of any other jurisdiction and, accordingly, may not be reoffered,
resold, pledged or otherwise transferred except in accordance with the restrictions described herein and
set forth in the Indenture.
Without limiting the foregoing, by holding an Offered Security, each holder will acknowledge
and agree, among other things, that such holder understands that neither of the Co-Issuers is registered as
an investment company under the Investment Company Act, and that the Co-Issuers are exempt from
registration as such by virtue of Section 3(c)(7) of the Investment Company Act. Section 3(c)(7) excepts
from the provisions of the Investment Company Act those issuers who privately place their securities
solely to persons who at the time of purchase are "qualified purchasers" or "knowledgeable employees."
In general terms, "qualified purchaser" is defined to mean, among other things, any natural person who
owns not less than $5,000,000 in investments; any person who in the aggregate owns and invests on a
discretionary basis, not less than $25,000,000 in investments; and trusts as to which both the settlor and
the decision-making trustee are qualified purchasers (but only if such trust was not formed for the specific
purpose of making such investment). In general terms, "knowledgeable employees" is defined to mean,
among other things, executive officers, directors and certain investment professionals and employees of
an issuer and its related investment manager.
Global Securities and Regulation S Global Subordinated Notes
Each initial purchaser and each transferee of Secured Notes or Subordinated Notes represented by
an interest in a Global Security or Regulation S Global Subordinated Note will be deemed to have
represented and agreed as follows (except as may be expressly agreed in writing between the Co-Issuers
and any initial purchasers):
(i) In connection with the purchase of such Offered Securities: (A) none of the Co-
Issuers, the Portfolio Manager, the Initial Purchaser, the Placement Agent, the Trustee or the
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Collateral Administrator or any of their respective affiliates is acting as a fiduciary or financial or
investment advisor for such beneficial owner; (B) such beneficial owner 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, the Portfolio Manager, the Trustee, the
Collateral Administrator, the Initial Purchaser or the Placement Agent or any of their respective
affiliates other than any statements in the final offering circular for such Offered Securities, and
such beneficial owner has read and understands such final offering circular; (C) such beneficial
owner has consulted with its own legal, regulatory, tax, business, investment, financial and
accounting advisors to the extent it has deemed necessary and has made its own investment
decisions (including decisions regarding the suitability of any transaction pursuant to the
Indenture) based upon its own judgment and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by the Co-Issuers, the Portfolio Manager, the
Trustee, the Collateral Administrator, the Initial Purchaser or the Placement Agent or any of their
respective affiliates; (D) such beneficial owner is either (1) (in the case of a beneficial owner of
an interest in a Rule 144A Global Security) both (a) a "qualified institutional buyer" (as defined
under Rule 144A under the Securities Act) that is not a broker-dealer which owns and invests on
a discretionary basis less than U.S.$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)(d) or (a)(1)(e) of Rule 144A
under the Securities Act or a trust fund referred to in paragraph (a)(1)(f) of Rule 144A under the
Securities Act that holds the assets of such a plan, if investment decisions with respect to the plan
are made by beneficiaries of the plan and (b) a "qualified purchaser" for purposes of Section
3(c)(7) of the Investment Company Act or (2) not a "U.S. person" as defined in Regulation S and
is acquiring the Offered Securities in an offshore transaction (as defined in Regulation S) in
reliance on the exemption from registration provided by Regulation S; (E) such beneficial owner
is acquiring its interest in such Offered Securities for its own account; (F) such beneficial owner
was not formed for the purpose of investing in such Offered Securities; (G) such beneficial owner
understands that the Issuer may receive a list of participants holding interests in the Offered
Securities from one or more book-entry depositories, (H) such beneficial owner will hold and
transfer at least the minimum denomination of such Offered Securities, (I) (in the case of the
Subordinated Notes) such beneficial owner is a sophisticated investor and is purchasing the
Offered Securities with a full understanding of all of the terms, conditions and risks thereof, and
is capable of and willing to assume those risks and (J) such beneficial owner will provide notice
of the relevant transfer restrictions to subsequent transferees.
(ii) (x) in the case of the Class A Notes, the Class B Notes and the Class C Notes, on
each day from the date on which such beneficial owner acquires its interest in such Offered
Securities through and including the date on which such beneficial owner disposes of its interest
in such Offered Securities either that (A) it is neither a Plan nor any entity whose underlying
assets include "plan assets" by reason of such Plan's investment in the entity, nor a governmental,
church, non-U.S. or other plan which is subject to any federal, state, local or non-U.S. law that is
substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code or
(B) its purchase, holding and disposition of an Offered Security will not constitute or result in a
non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or,
in the case of a governmental, church, non-U.S. or other plan, a non-exempt violation under any
substantially similar law) and (y) in the case of the Class D Notes on each day from the date on
which such beneficial owner acquires its interest in such Class of Offered Securities through and
including the date on which such beneficial owner disposes of its interest in such Class of the
Offered Securities, that (A) such beneficial owner is not a Benefit Plan Investor and (B) if the
purchaser or transferee is a governmental, church, non-U.S. or other plan that is subject to any
federal, state, local or non-U.S. law that is substantially similar to the provisions of Title I of
126

ERISA or Section 4975 of the Code, its purchase, holding and disposition of Class D Notes will
not constitute or result in a non-exempt violation under any such substantially similar law.
(iii) Such beneficial owner understands that such Offered Securities are being offered
only in a transaction not involving any public offering in the United States within the meaning of
the Securities Act, such Offered Securities have not been and will not be registered under the
Securities Act, and, if in the future such beneficial owner decides to offer, resell, pledge or
otherwise transfer such Offered Securities, such Offered Securities may be offered, resold,
pledged or otherwise transferred only in accordance with the provisions of the Indenture and the
legend on such Offered Securities. Such beneficial owner acknowledges that no representation
has been made as to the availability of any exemption under the Securities Act or any state
securities laws for resale of such Offered Securities. Such beneficial owner understands that
neither of the Co-Issuers has been registered under the Investment Company Act, and that the Co-
Issuers are exempt from registration as such by virtue of Section 3(c)(7) of the Investment
Company Act.
(iv) It is aware that, except as otherwise provided in the Indenture, any Offered
Securities being sold to it in reliance on Regulation S will be represented by one or more
Regulation S Global Securities or Regulation S Global Subordinated Notes, as applicable, and
that in each case beneficial interests therein may be held only through DTC for the respective
accounts of Euroclear or Clearstream.
(v) It will provide notice to each person to whom it proposes to transfer any interest
in the Offered Securities of the transfer restrictions and representations set forth in the Indenture.
In addition, each Person who purchases an interest in a Global Class D Note or a Regulation S
Global Subordinated Note from the Issuer on the Closing Date will be required to provide the Trustee
with a certificate in the form of Annex A-4 or Annex A-2, respectively, hereto.
Certificated Notes
No purchase or transfer of a Certificated Note (including a transfer of an interest in a Global
Security to a transferee acquiring a Certificated Note) will be recorded or otherwise recognized unless the
purchaser thereof has provided the Trustee with a certificate substantially in the form of Annex A-3 and,
in the case of a Certificated Note representing the Class D Notes, Annex A-4 hereto.
Certificated Subordinated Notes
No purchase or transfer of a Subordinated Note in certificated form (including a transfer of an
interest in a Regulation S Global Subordinated Note to a transferee acquiring a Subordinated Note in
certificated form) will be recorded or otherwise recognized unless the purchaser thereof has provided the
Trustee with certificates substantially in the form of Annex A-1 (which, in the case of initial purchasers of
the Subordinated Notes, will be delivered in the form of a subscription agreement containing substantially
the representations set forth in Annex A-1) and Annex A-2 hereto.
Additional Restrictions
No transfer of any Certificated Subordinated Note will be effective, and the Trustee will not
recognize any such transfer, if it may result in 25% or more of the value of the Subordinated Notes being
held by Benefit Plan Investors (the "25% Limitation"). For purposes of this determination, the value of
equity interests held by the Initial Purchaser, the Placement Agent, the Trustee, the Portfolio Manager and
127

certain of their affiliates (other than those interests held by a Benefit Plan Investor) or a person (other than
a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of Co-Issuers
or that provides investment advice for a fee (direct or indirect) with respect to such assets (or any affiliate
of such a person) is disregarded. No Benefit Plan Investors may acquire Class D Notes and no Benefit
Plan Investors or Controlling Person may acquire Regulation S Global Subordinated Notes (other than
Regulation S Global Subordinated Notes purchased from the Issuer on the Closing Date). See "ERISA
and Legal Investment Considerations."
Each purchaser or subsequent transferee of Certificated Subordinated Notes and each purchaser
of Regulation S Global Subordinated Notes purchased from the Issuer on the Closing Date will be
required to provide the Issuer and the Trustee written certification as to in the case of Subordinated Notes,
by the delivery of a certificate in the form of Annex A-2 hereto (or another form of certification
acceptable to the Issuer) as to whether it is an Affected Bank.
No transfer of any Class D Note or Subordinated Note to an Affected Bank will be effective, and
the Trustee will not recognize any such transfer, unless such transfer is specifically authorized by the
Issuer in writing; provided, however, that the Issuer shall authorize any such transfer if (x) such transfer
would not cause an Affected Bank, directly or in conjunction with its affiliates, to own more than 33⅓%
of the aggregate outstanding principal amount of the Class D Notes or the Subordinated Notes, or (y) the
transferor is an Affected Bank previously approved by the Issuer. Each purchaser of Class D Notes and
Regulation S Global Subordinated Notes from persons other than the Issuer that acquires, directly or in
conjunction with its affiliates, more than 33⅓% of the aggregate outstanding principal amount of the
Class D Notes or Subordinated Notes will be deemed to represent (or, in the case of a Certificated Note,
Certificated Subordinated Note, will represent) that such purchaser is not an Affected Bank.
Each purchaser of Class D Notes from the Initial Purchaser, and each subsequent transferee of
Class D Notes issued as Certificated Notes, will be required to provide the Initial Purchaser with written
certification in the form of Annex A-4 (i) as to whether it is an Affected Bank, (ii) that it is not a Benefit
Plan Investor and (iii) if the purchaser or transferee is a governmental, church, non-U.S. or other plan that
is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Title
I of ERISA or Section 4975 of the Code, its purchase, holding and disposition of Class D Notes will not
constitute or result in a non-exempt violation under any such substantially similar law.
To the extent required by the Issuer, as determined by the Issuer, the Issuer may impose
additional transfer restrictions on the Subordinated Notes to comply with the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 and
other similar laws or regulations, including, without limitation, requiring each transferee of a
Subordinated Note, as applicable, to make representations to the Issuer in connection with such
compliance.
Legends
The Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes and the Class D
Notes will bear a legend substantially to the following effect unless the Issuer determines otherwise in
compliance with applicable law:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES, AND MAY BE REOFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (A) TO A "QUALIFIED
128

PURCHASER" (AS DEFINED FOR PURPOSES OF SECTION 3(C)(7) OF
THE INVESTMENT COMPANY ACT) THAT IS EITHER (1) A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN RELIANCE ON THE EXEMPTION FROM
SECURITIES ACT REGISTRATION PROVIDED BY SUCH RULE THAT IS
NOT A BROKER-DEALER WHICH OWNS AND INVESTS ON A
DISCRETIONARY BASIS LESS THAN U.S.$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)(D) OR
(A)(1)(E) OF RULE 144A OR A TRUST FUND REFERRED TO IN
PARAGRAPH (A)(1)(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 OR (2) AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D OF THE SECURITIES ACT)
OR (B) TO A PERSON THAT IS NOT A "U.S. PERSON" (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR (B)
TO A PERSON THAT IS NOT A "U.S. PERSON" (AS DEFINED IN
REGULATION S UNDER THE SECURITIES ACT) AND IS ACQUIRING
THIS NOTE IN RELIANCE ON THE EXEMPTION FROM SECURITIES
ACT REGISTRATION PROVIDED BY SUCH REGULATION, AND IN
EACH CASE IN COMPLIANCE WITH THE CERTIFICATION AND OTHER
REQUIREMENTS SPECIFIED IN THE INDENTURE REFERRED TO
HEREIN AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES
LAW OF ANY APPLICABLE JURISDICTION. THE ISSUER HAS THE
RIGHT, UNDER THE INDENTURE, TO COMPEL ANY BENEFICIAL
OWNER OF AN INTEREST IN A GLOBAL NOTE (AS DEFINED IN THE
INDENTURE) THAT IS A U.S. PERSON AND IS NOT A QUALIFIED
PURCHASER AND A QUALIFIED INSTITUTIONAL BUYER TO SELL ITS
INTEREST IN THE NOTES, OR MAY SELL SUCH INTEREST ON BEHALF
OF SUCH OWNER.
[THE ACQUISITION OF THIS NOTE BY, OR ON BEHALF OF, OR WITH
THE ASSETS OF ANY "EMPLOYEE BENEFIT PLAN" SUBJECT TO TITLE
I OF THE UNITED STATES EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR ANY "PLAN"
SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), OR ANY ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF
SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S INVESTMENT IN THE
ENTITY, OR ANY GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER
PLAN SUBJECT TO FEDERAL, STATE, LOCAL OR NON-U.S. LAW
SUBSTANTIALLY SIMILAR TO THE FIDUCIARY RESPONSIBILITY
PROVISIONS OF ERISA OR SECTION 4975 OF THE CODE IS
PROHIBITED UNLESS SUCH PURCHASE, HOLDING AND SUBSEQUENT
DISPOSITION WOULD NOT RESULT IN ANY NON-EXEMPT
PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR
UNDER SECTION 4975 OF THE CODE (OR IN THE CASE OF A
GOVERNMENTAL, CHURCH OR NON-U.S. PLAN, A NON-EXEMPT
VIOLATION UNDER ANY SUBSTANTIALLY SIMILAR FEDERAL,
129

STATE, LOCAL OR NON-U.S. LAW). EACH BENEFICIAL OWNER OF
THIS NOTE WILL BE DEEMED TO HAVE MADE THE
REPRESENTATIONS AND AGREEMENTS SET FORTH IN SECTION 2.6
OF THE INDENTURE.] 1
[EACH PURCHASER IN THE INITIAL OFFERING WILL BE REQUIRED
TO REPRESENT AND WARRANT AND EACH SUBSEQUENT
TRANSFEREE OF THIS NOTE WILL BE DEEMED TO HAVE
REPRESENTED AND WARRANTED, AT THE TIME OF ITS PURCHASE
AND THROUGHOUT THE PERIOD THAT IT HOLDS SUCH NOTE OR
ANY INTEREST HEREIN, THAT (1) IT IS NOT AN "EMPLOYEE BENEFIT
PLAN" SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED ("ERISA"), A "PLAN" SUBJECT TO SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"),
ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS"
BY REASON OF SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S
INVESTMENT IN THE ENTITY OR A "BENEFIT PLAN INVESTOR" AS
SUCH TERM IS OTHERWISE DEFINED IN THE REGULATIONS
PROMULGATED BY THE U.S. DEPARTMENT OF LABOR UNDER
SECTION 3(42) OF ERISA (COLLECTIVELY, "BENEFIT PLAN
INVESTORS"), (2) IF IT IS A GOVERNMENTAL, CHURCH, NON-U.S. OR
OTHER PLAN THAT IS SUBJECT TO ANY FEDERAL, STATE, LOCAL OR
NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO THE
PROVISIONS OF TITLE I OF ERISA OR SECTION 4975 OF THE CODE,
ITS PURCHASE, HOLDING AND DISPOSITION OF THIS NOTE WILL
NOT CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION UNDER
ANY SUCH SUBSTANTIALLY SIMILAR LAW AND (3) IT WILL NOT
SELL OR OTHERWISE TRANSFER ANY SUCH NOTE OR INTEREST TO
ANY PERSON WHO CANNOT SATISFY THESE SAME FOREGOING
REPRESENTATIONS, WARRANTIES AND COVENANTS. EACH
BENEFICIAL OWNER OF THIS NOTE WILL BE DEEMED TO HAVE
MADE THE REPRESENTATIONS AND AGREEMENTS SET FORTH IN
SECTION 2.6 OF THE INDENTURE.] 2
[ANY TRANSFER, PLEDGE OR OTHER USE OF THIS NOTE FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN, UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"),
NEW YORK, NEW YORK, TO THE CO-ISSUERS OR THEIR AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR OF
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO.).
1 Applicable to Class A Notes, Class B Notes and Class C Notes.
2 Applicable to Class D Notes.
130

TRANSFERS OF THIS NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO HEREIN.] 3
PRINCIPAL OF THIS NOTE IS PAYABLE AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS NOTE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF. ANY PERSON ACQUIRING THIS NOTE MAY ASCERTAIN ITS
CURRENT PRINCIPAL AMOUNT BY INQUIRY OF THE TRUSTEE.
THE FAILURE TO PROVIDE THE ISSUER, THE TRUSTEE AND ANY
PAYING AGENT WITH THE APPLICABLE U.S. FEDERAL INCOME TAX
CERTIFICATIONS (GENERALLY, AN INTERNAL REVENUE SERVICE
FORM W-9 (OR SUCCESSOR APPLICABLE FORM) IN THE CASE OF A
PERSON THAT IS A "UNITED STATES PERSON" WITHIN THE
MEANING OF SECTION 7701(A)(30) OF THE INTERNAL REVENUE
CODE OF 1986 (THE "CODE") OR AN APPROPRIATE INTERNAL
REVENUE SERVICE FORM W-8 (OR SUCCESSOR APPLICABLE FORM)
IN THE CASE OF A PERSON THAT IS NOT A "UNITED STATES
PERSON" WITHIN THE MEANING OF SECTION 7701(A)(30) OF THE
CODE) MAY RESULT IN THE IMPOSITION OF U.S. FEDERAL BACK-UP
WITHHOLDING UPON PAYMENTS TO THE HOLDER IN RESPECT OF
THIS NOTE.
The Class B, Class C, and Class D Notes will bear a legend substantially to the following effect,
unless the Issuer determines otherwise in compliance with applicable law:
THIS NOTE HAS BEEN ISSUED WITH OID FOR UNITED STATES
FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE, AMOUNT OF OID, ISSUE
DATE AND YIELD TO MATURITY OF THIS NOTE MAY BE OBTAINED BY WRITING
TO THE ISSUER: C/O MAPLES FINANCE LIMITED, PO BOX 1093GT, QUEENSGATE
HOUSE, GEORGE TOWN, GRAND CAYMAN, CAYMAN ISLANDS.
The Subordinated Notes in the form of a Regulation S Global Subordinated Note will bear a
legend substantially to the following effect unless the Issuer determines otherwise in compliance with
applicable law:
THIS SUBORDINATED NOTE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES, AND MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) (1) TO A
"QUALIFIED PURCHASER", A "KNOWLEDGEABLE EMPLOYEE" WITH
RESPECT TO THE ISSUER OR A CORPORATION, PARTNERSHIP,
LIMITED LIABILITY COMPANY OR OTHER ENTITY (OTHER THAN A
3 Applicable to Secured Notes issued in the form of a Global Security.
131

TRUST) EACH SHAREHOLDER, PARTNER, MEMBER OR OTHER
EQUITY OWNER OF WHICH IS EITHER A KNOWLEDGEABLE
EMPLOYEE OR A QUALIFIED PURCHASER (IN EACH CASE, AS
DEFINED FOR PURPOSES OF SECTION 3(C)(7) OF THE INVESTMENT
COMPANY ACT) THAT IS (2) (X) A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
RELIANCE ON THE EXEMPTION FROM SECURITIES ACT
REGISTRATION PROVIDED BY SUCH RULE THAT IS NOT A BROKER-
DEALER WHICH OWNS AND INVESTS ON A DISCRETIONARY BASIS
LESS THAN U.S.$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)(D) OR (A)(1)(E) OF RULE 144A OR
A TRUST FUND REFERRED TO IN PARAGRAPH (A)(1)(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 OR (Y) AN "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT) WHO IS
ALSO A "KNOWLEDGEABLE EMPLOYEE" OR (B) TO A PERSON THAT
IS NOT A "U.S. PERSON" (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) AND IS ACQUIRING THIS SUBORDINATED NOTE IN
RELIANCE ON THE EXEMPTION FROM SECURITIES ACT
REGISTRATION PROVIDED BY SUCH REGULATION, AND IN EACH
CASE IN COMPLIANCE WITH THE CERTIFICATION AND OTHER
REQUIREMENTS SPECIFIED IN THE INDENTURE REFERRED TO
HEREIN AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES
LAW OF ANY APPLICABLE JURISDICTION.
EACH PURCHASER OF THIS NOTE ACQUIRING SUCH NOTE FROM
THE ISSUER WILL BE REQUIRED TO REPRESENT, WITH RESPECT TO
EACH DAY IT HOLDS SUCH NOTE OR ANY BENEFICIAL INTEREST
HEREIN, (1) WHETHER OR NOT IT IS (A) AN "EMPLOYEE BENEFIT
PLAN" SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS
OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED ("ERISA"), A "PLAN" SUBJECT TO SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR
ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS"
BY REASON OF SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S
INVESTMENT IN THE ENTITY OR A "BENEFIT PLAN INVESTOR" AS
SUCH TERM IS OTHERWISE DEFINED IN THE REGULATIONS
PROMULGATED BY THE U.S. DEPARTMENT OF LABOR UNDER
SECTION 3(42) OF ERISA (COLLECTIVELY, "BENEFIT PLAN
INVESTORS") OR (B) A PERSON (OTHER THAN A BENEFIT PLAN
INVESTOR) WHO HAS DISCRETIONARY AUTHORITY OR CONTROL
WITH RESPECT TO THE ASSETS OF THE ISSUER OR ANY PERSON
WHO PROVIDES INVESTMENT ADVICE FOR A FEE (DIRECT OR
INDIRECT) WITH RESPECT TO SUCH ASSETS, OR ANY AFFILIATE OF
SUCH A PERSON (A "CONTROLLING PERSON") AND (2) (A) IF IT IS A
BENEFIT PLAN INVESTOR, ITS PURCHASE, HOLDING AND
DISPOSITION OF SUBORDINATED NOTES WILL NOT CONSTITUTE OR
RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR (B) IF IT IS
132

A GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT
IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF TITLE I OF
ERISA OR SECTION 4975 OF THE CODE, ITS PURCHASE, HOLDING
AND DISPOSITION OF SUBORDINATED NOTES WILL NOT
CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION UNDER ANY
SUCH SUBSTANTIALLY SIMILAR LAW. EACH PURCHASER OF THIS
NOTE FROM PERSONS OTHER THAN THE INITIAL OFFERING WILL BE
DEEMED TO REPRESENT AND WARRANT THAT, FROM THE DATE ON
WHICH IT ACQUIRES ITS INTEREST IN SUCH NOTE THROUGH AND
INCLUDING THE DATE ON WHICH SUCH PURCHASER DISPOSES OF
ITS INTEREST IN SUCH NOTE, (I) IT IS NOT (A) A BENEFIT PLAN
INVESTOR OR (B) A CONTROLLING PERSON AND (II) IF IT IS A
GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN THAT IS
SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT
IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF TITLE I OF
ERISA OR SECTION 4975 OF THE CODE, ITS PURCHASE, HOLDING
AND DISPOSITION OF THIS NOTE WILL NOT CONSTITUTE OR RESULT
IN A NON-EXEMPT VIOLATION UNDER ANY SUCH SUBSTANTIALLY
SIMILAR LAW. NO TRANSFER OF ANY INTEREST IN THIS
SUBORDINATED NOTE WILL BE EFFECTIVE, AND THE TRUSTEE
WILL NOT RECOGNIZE ANY SUCH TRANSFER IF IT WOULD RESULT
IN 25% OR MORE OF THE VALUE OF THE SUBORDINATED NOTES
BEING HELD BY BENEFIT PLAN INVESTORS. ANY PURPORTED
TRANSFER OF THE SUBORDINATED NOTES IN VIOLATION OF THE
REQUIREMENTS SET FORTH IN THIS PARAGRAPH SHALL BE NULL
AND VOID AB INITIO. THE ISSUER HAS THE RIGHT, UNDER THE
INDENTURE, TO COMPEL ANY BENEFICIAL OWNER OF AN INTEREST
IN A SUBORDINATED NOTE THAT IS A U.S. PERSON AND IS NOT A
QUALIFIED PURCHASER, A KNOWLEDGEABLE EMPLOYEE WITH
RESPECT TO THE ISSUER 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 A KNOWLEDGEABLE
EMPLOYEE OR A QUALIFIED PURCHASER AND A QUALIFIED
INSTITUTIONAL BUYER OR AN ACCREDITED INVESTOR TO SELL ITS
INTEREST IN THE SUBORDINATED NOTES, OR MAY SELL SUCH
INTEREST ON BEHALF OF SUCH OWNER.
ANY TRANSFER, PLEDGE OR OTHER USE OF THIS SUBORDINATED
NOTE FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN, UNLESS THIS SUBORDINATED NOTE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY ("DTC"), NEW YORK, NEW YORK, TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT AND ANY SUBORDINATED NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR OF SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.).
133

TRANSFERS OF THIS SUBORDINATED NOTE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE REFERRED TO HEREIN.
DISTRIBUTIONS OF PRINCIPAL PROCEEDS AND INTEREST PROCEEDS
TO THE HOLDER OF THE SUBORDINATED NOTES REPRESENTED
HEREBY ARE SUBORDINATE TO THE PAYMENT ON EACH PAYMENT
DATE OF PRINCIPAL OF AND INTEREST ON THE SECURED NOTES OF
THE ISSUER AND THE PAYMENT OF CERTAIN OTHER AMOUNTS, TO
THE EXTENT AND AS DESCRIBED IN THE INDENTURE GOVERNING
SUCH SECURED NOTES.
THE FAILURE TO PROVIDE THE ISSUER, THE TRUSTEE AND ANY
PAYING AGENT WITH THE APPLICABLE U.S. FEDERAL INCOME TAX
CERTIFICATIONS (GENERALLY, AN INTERNAL REVENUE SERVICE
FORM W-9 (OR SUCCESSOR APPLICABLE FORM) IN THE CASE OF A
PERSON THAT IS A "UNITED STATES PERSON" WITHIN THE
MEANING OF SECTION 7701(A)(30) OF THE CODE OR AN
APPROPRIATE INTERNAL REVENUE SERVICE FORM W-8 (OR
SUCCESSOR APPLICABLE FORM) IN THE CASE OF A PERSON THAT IS
NOT A "UNITED STATES PERSON" WITHIN THE MEANING OF
SECTION 7701(A)(30) OF THE CODE) MAY RESULT IN THE IMPOSITION
OF U.S. FEDERAL BACK-UP WITHHOLDING UPON PAYMENTS TO THE
HOLDER IN RESPECT OF THIS SUBORDINATED NOTE.
The Subordinated Notes in the form of a Certificated Subordinated Note will bear a legend
substantially to the following effect unless the Issuer determines otherwise in compliance with applicable
law:
THIS SUBORDINATED NOTE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES, AND MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) (1) TO A
"QUALIFIED PURCHASER", A "KNOWLEDGEABLE EMPLOYEE" WITH
RESPECT TO THE ISSUER 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 A KNOWLEDGEABLE
EMPLOYEE OR A QUALIFIED PURCHASER (IN EACH CASE, AS
DEFINED FOR PURPOSES OF SECTION 3(C)(7) OF THE INVESTMENT
COMPANY ACT) THAT IS (2) (X) A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
RELIANCE ON THE EXEMPTION FROM SECURITIES ACT
REGISTRATION PROVIDED BY SUCH RULE THAT IS NOT A BROKER-
DEALER WHICH OWNS AND INVESTS ON A DISCRETIONARY BASIS
LESS THAN U.S.$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)(D) OR (A)(1)(E) OF RULE 144A OR
A TRUST FUND REFERRED TO IN PARAGRAPH (A)(1)(F) OF RULE 144A
THAT HOLDS THE ASSETS OF SUCH A PLAN, IF INVESTMENT
134

DECISIONS WITH RESPECT TO THE PLAN ARE MADE BY THE
BENEFICIARIES OF THE PLAN OR (Y) AN "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT) WHO IS
ALSO A "KNOWLEDGEABLE EMPLOYEE" OR (B) TO A PERSON THAT
IS NOT A "U.S. PERSON" (AS DEFINED IN REGULATION S UNDER THE
SECURITIES ACT) AND IS ACQUIRING THIS SUBORDINATED NOTE IN
RELIANCE ON THE EXEMPTION FROM SECURITIES ACT
REGISTRATION PROVIDED BY SUCH REGULATION, AND IN EACH
CASE IN COMPLIANCE WITH THE CERTIFICATION AND OTHER
REQUIREMENTS SPECIFIED IN THE INDENTURE REFERRED TO
HEREIN AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES
LAW OF ANY APPLICABLE JURISDICTION.
EACH PURCHASER OF THIS NOTE ACQUIRING SUCH NOTE FROM
THE ISSUER, AND EACH SUBSEQUENT TRANSFEREE ACQUIRING
SUCH NOTE FROM PERSONS OTHER THAN THE ISSUER IN THE FORM
OF A CERTIFICATED NOTE, WILL BE REQUIRED TO REPRESENT,
WITH RESPECT TO EACH DAY IT HOLDS SUCH NOTE OR ANY
BENEFICIAL INTEREST HEREIN, (1) WHETHER OR NOT IT IS (A) AN
"EMPLOYEE BENEFIT PLAN" SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), A "PLAN"
SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), OR ANY ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF
SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S INVESTMENT IN THE
ENTITY OR A "BENEFIT PLAN INVESTOR" AS SUCH TERM IS
OTHERWISE DEFINED IN THE REGULATIONS PROMULGATED BY THE
U.S. DEPARTMENT OF LABOR UNDER SECTION 3(42) OF ERISA
(COLLECTIVELY, "BENEFIT PLAN INVESTORS") OR (B) A PERSON
(OTHER THAN A BENEFIT PLAN INVESTOR) WHO HAS
DISCRETIONARY AUTHORITY OR CONTROL WITH RESPECT TO THE
ASSETS OF THE ISSUER OR ANY PERSON WHO PROVIDES
INVESTMENT ADVICE FOR A FEE (DIRECT OR INDIRECT) WITH
RESPECT TO SUCH ASSETS, OR ANY AFFILIATE OF SUCH A PERSON
(A "CONTROLLING PERSON") AND (2) (A) IF IT IS A BENEFIT PLAN
INVESTOR, ITS PURCHASE, HOLDING AND DISPOSITION OF
SUBORDINATED NOTES WILL NOT CONSTITUTE OR RESULT IN A
NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF
ERISA OR SECTION 4975 OF THE CODE OR (B) IF IT IS A
GOVERNMENTAL, CHURCH, NON-U.S. OR OTHER PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT
IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF TITLE I OF
ERISA OR SECTION 4975 OF THE CODE, ITS PURCHASE, HOLDING
AND DISPOSITION OF SUBORDINATED NOTES WILL NOT
CONSTITUTE OR RESULT IN A NON-EXEMPT VIOLATION UNDER ANY
SUCH SUBSTANTIALLY SIMILAR LAW. NO TRANSFER OF ANY
INTEREST IN THIS SUBORDINATED NOTE WILL BE EFFECTIVE, AND
THE TRUSTEE WILL NOT RECOGNIZE ANY SUCH TRANSFER IF IT
WOULD RESULT IN 25% OR MORE OF THE VALUE OF THE
SUBORDINATED NOTES BEING HELD BY BENEFIT PLAN INVESTORS.
135

EACH BENEFICIAL OWNER OF THIS SUBORDINATED NOTE WILL BE
REQUIRED TO MAKE THE REPRESENTATIONS AND AGREEMENTS
SET FORTH IN THE INDENTURE. THE ISSUER HAS THE RIGHT,
UNDER THE INDENTURE, TO COMPEL ANY BENEFICIAL OWNER OF
AN INTEREST IN A SUBORDINATED NOTE THAT IS A U.S. PERSON
AND IS NOT A QUALIFIED PURCHASER, A KNOWLEDGEABLE
EMPLOYEE WITH RESPECT TO THE ISSUER 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 A
KNOWLEDGEABLE EMPLOYEE OR A QUALIFIED PURCHASER AND A
QUALIFIED INSTITUTIONAL BUYER OR AN ACCREDITED INVESTOR
TO SELL ITS INTEREST IN THE SUBORDINATED NOTES, OR MAY
SELL SUCH INTEREST ON BEHALF OF SUCH OWNER.
DISTRIBUTIONS OF PRINCIPAL PROCEEDS AND INTEREST PROCEEDS
TO THE HOLDER OF THE SUBORDINATED NOTES REPRESENTED
HEREBY ARE SUBORDINATE TO THE PAYMENT ON EACH PAYMENT
DATE OF PRINCIPAL OF AND INTEREST ON THE SECURED NOTES OF
THE ISSUER AND THE PAYMENT OF CERTAIN OTHER AMOUNTS, TO
THE EXTENT AND AS DESCRIBED IN THE INDENTURE GOVERNING
SUCH SECURED NOTES.
THE FAILURE TO PROVIDE THE ISSUER, THE TRUSTEE AND ANY
PAYING AGENT WITH THE APPLICABLE U.S. FEDERAL INCOME TAX
CERTIFICATIONS (GENERALLY, AN INTERNAL REVENUE SERVICE
FORM W-9 (OR SUCCESSOR APPLICABLE FORM) IN THE CASE OF A
PERSON THAT IS A "UNITED STATES PERSON" WITHIN THE
MEANING OF SECTION 7701(A)(30) OF THE CODE OR AN
APPROPRIATE INTERNAL REVENUE SERVICE FORM W-8 (OR
SUCCESSOR APPLICABLE FORM) IN THE CASE OF A PERSON THAT IS
NOT A "UNITED STATES PERSON" WITHIN THE MEANING OF
SECTION 7701(A)(30) OF THE CODE) MAY RESULT IN THE IMPOSITION
OF U.S. FEDERAL BACK-UP WITHHOLDING UPON PAYMENTS TO THE
HOLDER IN RESPECT OF THIS SUBORDINATED NOTE.
Non-Permitted Holder/Non-Permitted ERISA Holder
If (x) any U.S. person that is not a Qualified Institutional Buyer and a Qualified Purchaser (in the
case of a Rule 144A Global Note) shall become the beneficial owner of an interest in any Secured Note,
(y) any U.S. person that is not a Qualified Purchaser, a Knowledgeable Employee 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 a Knowledgeable Employee or a Qualified Purchaser or
that does not have an exemption available under the Securities Act and the Investment Company Act shall
become the holder or beneficial owner of a Subordinated Note, or (z) any U.S. person that is not an IAI
and a Qualified Purchaser (in the case of a Certificated Note) shall become the beneficial owner of an
interest in a Certificated Note (any such person a "Non-Permitted Holder"), the Issuer shall, promptly
after discovery that such person is a Non-Permitted Holder by the Issuer (or upon notice to the Issuer
from the Trustee if it obtains actual knowledge or by the Co-Issuer if it makes the discovery (who, in each
case, agree to notify the Issuer of such discovery, if any)), send notice to such Non-Permitted Holder
demanding that such Non-Permitted Holder transfer its interest to a person that is not a Non-Permitted
136

Holder within 30 days of the date of such notice. If such Non-Permitted Holder fails to so transfer its
Notes the Issuer shall have the right, without further notice to the Non-Permitted Holder, to sell such
Notes or interest in such Offered 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 at the direction of the Issuer, the
Trustee through an investment bank selected by the Trustee from a list of investment banks provided by
the Issuer (the selection of which has been consented to by the Portfolio Manager 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 Notes and selling such Offered Securities to
the highest such bidder. However, the Issuer may select a purchaser by any other means determined by it
in its sole discretion. The holder of each Note, 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 Notes
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 shall be determined in the sole discretion of the
Issuer, and the Issuer shall not be liable to any person having an interest in the Offered Securities sold as a
result of any such sale or the exercise of such discretion.
If any person shall become the beneficial owner of an interest in a Class D Note or a
Subordinated Note who has made a Benefit Plan Investor or Controlling Person representation or deemed
representation that is subsequently shown to be false or misleading or whose beneficial ownership
otherwise causes a violation of the 25% Limitation (any such person a "Non-Permitted ERISA
Holder"), the Issuer shall, promptly after discovery that such person is a Non-Permitted ERISA Holder
by the Issuer (or upon notice to the Issuer from the Trustee if it obtains actual knowledge or the Co-Issuer
if it makes the discovery), send notice to such Non-Permitted ERISA Holder demanding that such Non-
Permitted ERISA Holder transfer its interest to a person that is not a Non-Permitted ERISA Holder within
14 days of the date of such notice. If such Non-Permitted ERISA Holder fails to so transfer its Class D
Notes or Subordinated Notes, as applicable, the Issuer shall have the right, without further notice to the
Non-Permitted ERISA Holder, to sell such Class D Notes or Subordinated Notes, as applicable, or
interest in such Class D Notes or Subordinated Notes, as applicable, to a purchaser selected by the Issuer
that is not a Non-Permitted ERISA Holder on such terms as the Issuer may choose. 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 Class D Notes or Subordinated Notes, as applicable, and selling
such Class D Notes or Subordinated Notes, as applicable, to the highest such bidder. However, the Issuer
may select a purchaser by any other means determined by it in its sole discretion. The holder of each
Class D Note or Subordinated Note, as applicable, the Non-Permitted ERISA Holder and each other
person in the chain of title from the holder to the Non-Permitted ERISA Holder, by its acceptance of an
interest in the Class D Notes or Subordinated Notes, as applicable, agrees to cooperate with the Issuer 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 ERISA Holder. The terms and
conditions of any sale under this subsection shall be determined in the sole discretion of the Issuer, and
the Issuer shall not be liable to any person having an interest in the Class D Notes or Subordinated Notes,
as applicable, sold as a result of any such sale or the exercise of such discretion.
Cayman Islands Placement Provisions
The Initial Purchaser and the Placement Agent have agreed that they have not made and will not
make any invitation to the public in the Cayman Islands to subscribe for the Offered Securities.
137

LISTING AND GENERAL INFORMATION
1. Application has been made to the Irish Financial Services Regulatory Authority, as
competent authority under Directive 2003/71/EC, for this Offering Circular to be approved. Such
approval relates only to the Offered Securities which are to be admitted to trading on the regulated market
of the Irish Stock Exchange or other regulated markets for the purposes of Directive 93/22/EEC or which
are to be offered to the public in any Member State of the European Economic Area. Application has
been made to the Irish Stock Exchange for the Offered Securities to be admitted to the Daily Official List,
and traded on its regulated market. There can be no assurance that such listings will be granted or, if
granted, will be maintained. The fees associated with the admission of the Offered Securities to trading
on the Irish Stock Exchange are estimated to be €25,000.
2. For the life of the prospectus, copies of the Memorandum of Association and Articles of
Association of the Issuer, the Certificate of Incorporation and By-laws of the Co-Issuer, the Indenture, the
Portfolio Management Agreement, the Collateral Administration Agreement and the Paying Agency
Agreement for Ireland will be available for inspection in electronic format and will be obtainable at the
principal office of the Issuer and the offices of RSM Robson Rhodes LLP in Dublin, Ireland, and copies
thereof may be obtained upon request.
3. Copies of the Memorandum and Articles of Association of the Issuer, the Certificate of
Incorporation and By-laws of the Co-Issuer, the Administration Agreement, the resolutions of the board
of directors of the Issuer authorizing the issuance of the Offered Securities, the resolutions of the board of
directors of the Co-Issuer authorizing the issuance of the Class A Notes, Class B Notes and the Class C
Notes, the Indenture, the Portfolio Management Agreement, and the Collateral Administration Agreement
will be available for inspection during the term of the Notes at the office of the Trustee.
4. Since incorporation, neither the Issuer nor the Co-Issuer has commenced trading,
established any accounts or declared any dividends, except for the transactions described herein. Neither
the Issuer nor the Co-Issuer has any loan capital (including term loans) outstanding or created but
unissued, or any outstanding mortgages, charges, or other borrowings or indebtedness in the nature of
borrowing, including bank overdrafts and liabilities under acceptance credits, hire purchase agreements,
guarantee or other contingent liabilities, other than the warehouse facility and the Notes described herein.
5. Neither of the Co-Issuers is, or has since incorporation been, involved in any litigation,
governmental or arbitration proceedings relating to claims in amounts which may have or have had a
material effect on the Co-Issuers in the context of the issue of the Notes, nor, so far as either Co-Issuer is
aware, is any such litigation or arbitration involving it pending or threatened.
6. The issuance by the Issuer of the Offered Securities is expected to be authorized by the
board of directors of the Issuer by resolutions to be passed prior to the Closing Date and the issuance by
the Co-Issuer of the Class A Notes, the Class B Notes and the Class C Notes is expected to be authorized
by the board of directors of the Co-Issuer by resolutions to be passed prior to the Closing Date.
7. The Issuer is not required by Cayman Islands law, and the Issuer does not intend, to
publish annual reports and accounts. The Co-Issuer is not required by Delaware State law, and the Co-
Issuer does not intend, to publish annual reports and accounts. The Indenture, however, requires the
Issuer to provide the Trustee with written confirmation, on an annual basis, that to the best of its
knowledge following review of the activities of the prior year, no Event of Default has occurred and in
continuing or, if one has, specifying the same.
138

8. The Notes sold in offshore transactions in reliance on Regulation S under the Securities
Act and represented by the Regulation S Global Securities or the Regulation S Global Subordinated
Notes, as applicable, have been accepted for clearance through Clearstream and Euroclear. The Notes
sold to persons that are Qualified Institutional Buyers and Qualified Purchasers in reliance on Rule 144A
under the Securities Act and represented by Rule 144A Global Securities have been accepted for
clearance through DTC. The CUSIP Numbers, Common Codes and International Securities Identification
Numbers (ISIN) for the Secured Notes represented by Regulation S Global Securities and Rule 144A
Global Securities and the Subordinated Notes represented by the Regulation S Global Subordinated Notes
are as indicated below, as applicable.
Rule 144A Global
Regulation S Global
CUSIP
ISIN
Common
Code CUSIP ISIN
Class A-1 Notes 43164QAA2 US43164QAA22 27502989 G4493LAA0 USG4493LAA01
Class A-2 Notes 43164QAB0 US43164QAB05 27503381 G4493LAB8 USG4493LAB83
Class B Notes 43164QAC8 US43164QAC87 27503390 G4493LAC6 USG4493LAC66
Class C Notes 43164QAD6 US43164QAD60 27503411 G4493LAD4 USG4493LAD40
Class D Notes 43164RAC6 US43164RAC60 27503420 G44935AA5 USG44935AA57
Subordinated Notes N/A N/A 27503438 G44935AB3 USG44935AB31
9. The Secured Notes in certificated form will also bear the following identification
numbers:
Certificated Notes
Certificated Notes:
CUSIP
ISIN
Class A-1 Notes 43164QAF1 US43164QAF19
Class A-2 Notes 43164QAG9 US43164QAG91
Class B Notes 43164QAH7 US43164QAH74
Class C Notes 43164QAJ3 US43164QAJ31
Class D Notes 43164RAD4 US43164RAD44
139

10. The Subordinated Notes in certificated form will also bear the following identification
numbers:
Rule 144A
Accredited Investor
CUSIP ISIN CUSIP ISIN
Subordinated Notes 43164RAA0 US43164RAA05 43164RAB8 US43164RAB87
LEGAL MATTERS
Certain legal matters with respect to the Notes will be passed upon for the Co-Issuers and the
Initial Purchaser and the Placement Agent by McKee Nelson LLP, New York, New York. Certain
matters with respect to Cayman Islands law will be passed upon for the Issuer by Maples and Calder,
Cayman Islands. Certain legal matters with respect to the Portfolio Manager will be passed upon by
Clifford Chance US LLP, New York, New York.
140

GLOSSARY OF DEFINED TERMS
"Adjusted Collateral Principal Amount" means as of any date of determination:
(a) the aggregate principal balance of the Collateral Obligations (other than
Defaulted Obligations, Deferring Securities and Discount Obligations); plus
(b) without duplication, the amounts on deposit in the Collection Account and the
Ramp-Up Account (including Eligible Investments therein) representing Principal Proceeds and,
from and after a default under a Securities Lending Agreement, the amounts on deposit in the
related Securities Lending Account (including Eligible Investments therein); plus
(c) the lesser of the (i) S&P Collateral Value of all Defaulted Obligations and all
Deferring Securities and (ii) Moody's Collateral Value of all Defaulted Obligations and all
Deferring Securities; plus
(d) the aggregate of the lesser, for each Discount Obligation, of (x) the purchase
price, excluding accrued interest, expressed as a dollar amount, for such Discount Obligation and
(y) the principal balance of such Discount Obligation; minus
(e)
the Excess CCC/Caa Adjustment Amount;
provided, that with respect to any Collateral Obligation that satisfies more than one of the definitions of
Defaulted Obligation, Deferring Security or Discount Obligation, such Collateral Obligation shall, for the
purposes of this definition, be treated as belonging to the category of Collateral Obligations which results
in the lowest Adjusted Collateral Principal Amount on any date of determination.
"Administrative Expense Cap" means, an amount equal on any Payment Date (when taken
together with any Administrative Expenses paid during the period since the preceding Payment Date or,
in the case of the first Payment Date, the Closing Date) to the sum of (a) 0.035% per annum (prorated for
the related Interest Accrual Period on the basis of a 360-day year consisting of twelve 30-day months) of
the Fee Basis Amount on the related Determination Date and (b) $220,000 per annum (prorated for the
related Interest Accrual Period on the basis of a 360-day year consisting of twelve 30-day months);
provided, however, that if the amount of Administrative Expenses paid under the Administrative Expense
Cap (including any excess applied in accordance with this proviso) on the three immediately preceding
Payment Dates or during the related Collection Periods is less than the stated Administrative Expense Cap
(without regard to any excess applied in accordance with this proviso) in the aggregate for such three
preceding Payment Dates, the excess may be applied to the Administrative Expense Cap with respect to
the then-current Payment Date; provided, further, that in respect of the first three Payment Dates from the
Closing Date, such excess amount shall be calculated based on the Payment Dates preceding such
Payment Date.
"Administrative Expenses" include fees, expenses (including indemnities) and other amounts
due or accrued with respect to any Payment Date and payable in the following order by the Issuer or the
Co-Issuer first, to the Trustee pursuant to the Indenture, second, to the Collateral Administrator pursuant
to the Collateral Administration Agreement, and then third, on a pro rata basis to:
(i) the independent accountants, agents (other than the Portfolio Manager) and
counsel of the Issuer for fees and expenses;
141

(ii) the Rating Agencies for fees and expenses (including surveillance fees) in
connection with any rating of the Secured Notes or in connection with the rating of (or provision
of credit estimates in respect of) any Collateral Obligations;
(iii) the Portfolio Manager under the Indenture and the Portfolio Management
Agreement, including without limitation reasonable expenses of the Portfolio Manager (including
fees for its accountants, agents and counsel) incurred in connection with the purchase or sale of
any Collateral Obligations, any other expenses incurred in connection with the Collateral
Obligations and amounts payable pursuant to the Portfolio Management Agreement but excluding
the Management Fee;
(iv)
the Administrator pursuant to the Administration Agreement;
(v) any person in respect of fees, costs or expenses incurred in connection with any
Securities Lending Agreement; and
(vi) any other person in respect of any other fees or expenses permitted under the
Indenture and the documents delivered pursuant to or in connection with the Indenture (including
the payment of facility rating fees and all legal and other fees and expenses incurred in
connection with the purchase or sale of any Collateral Obligations and any other expenses
incurred in connection with the Collateral Obligations) and the Offered Securities, including but
not limited to, amounts owed to the Co-Issuer pursuant to the Indenture and any amounts due in
respect of the listing of the Offered Securities on any stock exchange or trading system and any
costs associated with producing definitive Notes;
provided, that (x) amounts due in respect of actions taken on or before the Closing Date shall not be
payable as Administrative Expenses but shall be payable only from the Expense Reserve Account
pursuant to the Indenture and (y) for the avoidance of doubt, amounts that are expressly payable to any
person under the Priority of Payments in respect of an amount that is stated to be payable as an amount
other than as Administrative Expenses (including, without limitation, interest and principal in respect of
the Notes and amounts owing to Hedge Counterparties) shall not constitute Administrative Expenses.
"Affiliate" means, with respect to a person, (a) any other person who, directly or indirectly, is in
control of, or controlled by, or is under common control with, such person or (b) any other person who is
a director, officer or employee (i) of such person, (ii) of any subsidiary or parent company of such person
or (iii) of any person described in clause (a) of this sentence. For the purposes of this definition, control
of a person means the power, direct or indirect, (x) to vote more than 50% of the securities having
ordinary voting power for the election of directors of such person or (y) to direct or cause the direction of
the management and policies of such person whether by contract or otherwise. For purposes of this
definition, the management of an account by one person for the benefit of any other person shall not
constitute "control" of such other person and no entity shall be deemed an Affiliate of the Issuer or the
Co-Issuer solely because the Administrator or its Affiliates acts as administrator or share trustee for such
entity.
"Applicable Advance Rate" means, for each Collateral Obligation and for the applicable number
of Business Days between the certification date for a sale or participation as described in "Description of
the Offered Securities—Optional Redemption—Redemption Procedures" and the expected date of such
sale or participation, the percentage specified below:
142

Senior Secured Loans with a Market Value of:
same day 1-2 days 3-5 days 6-15 days
90% or more 100% 93% 92% 88%
below 90% 100% 80% 73% 60%
Other Collateral Obligations with a Moody's
Rating of at least "B3" and a Market Value of
90% or more
100% 89% 85% 75%
All other Collateral Obligations 100% 75% 65% 45%
"Bond" means a debt security (that is not a loan) that is issued by a corporation, limited liability
company, partnership or trust.
"Bond Yield Change" means the change in implied yield spread to an index based upon a
nationally recognized index as calculated by the Portfolio Manager in its reasonable commercial
judgment.
"Business Day" means any day other than (i) a Saturday or a Sunday or (ii) a day on which
commercial banks are authorized or required by applicable law, regulation or executive order to close in
New York, New York or in the city in which the principal corporate trust office of the Trustee is located
or, for any final payment of principal, in the relevant place of presentation.
"CCC/Caa Collateral Obligation" means a Collateral Obligation (other than a Defaulted
Obligation, a Discount Obligation or a Deferring Security) with an S&P Rating of "CCC+" or lower or a
Moody's Rating of "Caa1" or lower.
"CCC/Caa Excess" means the excess, if any, by which:
(i)
(ii)
the aggregate principal balance of all CCC/Caa Collateral Obligations exceeds
7.5% of the Collateral Principal Amount as of the current Determination Date;
provided, that in determining which of the CCC/Caa Collateral Obligations shall be included in the
CCC/Caa Excess, the CCC/Caa Collateral Obligations with the lowest Market Value shall be deemed to
constitute such CCC/Caa Excess.
"Class Break-even Default Rate" means, respect to each Class of Secured Notes, the maximum
percentage of defaults, at any time, that the Current Portfolio or the Proposed Portfolio, as applicable, can
sustain, as determined by S&P, through application of the applicable S&P CDO Monitor chosen by the
Portfolio Manager in accordance with the Indenture that is applicable to the portfolio of Collateral
Obligations, which, after giving effect to S&P's assumptions on recoveries, defaults and timing and to the
Priority of Payments, will result in sufficient funds remaining for the payment of such Class of Notes in
full. Not later than the end of the Ramp-Up Period, S&P will provide the Portfolio Manager with the
Class Break-even Default Rates for each S&P CDO Monitor based upon the Minimum
Diversity/Maximum Rating/Minimum Spread Matrix and the applicable Weighted Average S&P
Recovery Rate to be associated with such S&P CDO Monitor as selected by the Portfolio Manager.
143

"Class Default Differential" with respect to each Class of Secured Notes, at any time, the rate
calculated by subtracting the Class Scenario Default Rate for such Class of Notes at such time from the
Class Break-even Default Rate for such Class of Notes at such time.
"Class Scenario Default Rate" with respect to each Class of Secured Notes, at any time, an
estimate of the cumulative default rate for the Current Portfolio or the Proposed Portfolio, as applicable,
consistent with S&P's initial rating of such Class of Notes, determined by application by the Portfolio
Manager and the Collateral Administrator of the S&P CDO Monitor at such time.
"Collateral Administration Agreement" means an agreement dated as of the Closing Date
relating to the administration of the Assets among the Issuer, the Portfolio Manager and the Collateral
Administrator, as amended from time to time.
"Collateral Administrator" means The Bank of New York Trust Company, National
Association, in its capacity as such under the Collateral Administration Agreement, and any successor
thereto.
"Collateral Interest Amount" means, as of any date of determination, without duplication, the
aggregate amount of Interest Proceeds in the Interest Collection Subaccount that has been received or that
is expected to be received (other than Interest Proceeds expected to be received from Defaulted
Obligations and Deferring Securities, but including (x) Interest Proceeds actually received from Defaulted
Obligations (in accordance with the definition of "Interest Proceeds") and Deferring Securities and (y)
Interest Proceeds expected to be received of the type described in clause (i) of the definition of "Partial
Deferrable Security"), in each case during the Collection Period (and, if such Collection Period does not
end on a Business Day, the next succeeding Business Day) in which such date of determination occurs.
"Collateralized Synthetic Security" means a Synthetic Security (x) that requires the Synthetic
Security Counterparty to deposit into the Synthetic Security Issuer Account an amount equal to the
principal balance of such Synthetic Security or (y) (i) that is in the form of a credit default swap, (ii) with
respect to which the Issuer has caused an amount equal to the notional amount of such Synthetic Security
to be deposited into a Synthetic Security Counterparty Account and (iii) pursuant to which no scheduled
periodic payments are required to be made by the Issuer to the Synthetic Security Counterparty.
"Credit Improved Criteria" means, the criteria that will be met if:
(i) in the case of a loan, either (A) the Loan Pricing Change since the date of purchase by the
Issuer has been a percentage point increase of 0.50% or more or (B) the Market Value of such loan has
increased by at least 1.00% from the Market Value of such loan as of its date of acquisition, as
determined by the Portfolio Manager (provided that this subclause (i)(B) will be deemed satisfied if the
Market Value increases to 101% of par); and
(ii) in the case of a Bond, either (A) the Bond Yield Change since the date of purchase by the
Issuer has been a percentage point decrease of 0.50% or more and (B) the Market Value of such Bond has
changed since its date of acquisition by a percentage more positive than the percentage change in the
Merrill Lynch US High Yield Master II Constrained Index, Bloomberg ticker HUC0 (or such other index
as the Portfolio Manager selects and provides notice of to the Rating Agencies) plus 3.00%, over the same
period.
"Credit Improved Obligation" means any Collateral Obligation which, in the Portfolio
Manager's reasonable commercial judgment, has significantly improved in credit quality after it was
acquired by the Issuer, which improvement may (but need not) be evidenced by one of the following: (a)
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such Collateral Obligation satisfies the Credit Improved Criteria, (b) such Collateral Obligation has been
upgraded at least one rating sub-category by either Rating Agency or has been placed and remains on
credit watch with positive implication by either Rating Agency, (c) the issuer of such Collateral
Obligation has raised equity capital or other capital subordinated to the Collateral Obligation or (d) the
issuer of such Collateral Obligation has, in the Portfolio Manager's reasonable commercial judgment,
shown improved results or possesses less credit risk, in each case since such Collateral Obligation was
acquired by the Issuer; provided, however, that during a Restricted Trading Period, a Collateral
Obligation will qualify as a Credit Improved Obligation only if (i) it has been upgraded by any Rating
Agency at least one rating sub-category or has been placed and remains on a credit watch with positive
implication by Moody's or S&P since it was acquired by the Issuer, (ii) the Credit Improved Criteria are
satisfied with respect to such Collateral Obligation or (iii) the holders of a majority of the Controlling
Class vote to treat such Collateral Obligation as a Credit Improved Obligation.
"Credit Risk Criteria" means:
(i) in the case of a loan, either (A) the Loan Pricing Change since the date of purchase by the
Issuer has been a percentage point decrease of 0.50% or more or (B) the Market Value of such loan has
decreased by at least 1.00% from the Market Value of such loan as of its date of acquisition, as
determined by the Portfolio Manager; and
(ii) in the case of a Bond, either (A) the Bond Yield Change since the date of purchase by the
Issuer has been a percentage point increase of 0.50% or more and (B) the Market Value of such Bond has
changed since its date of acquisition by a percentage more negative than the percentage change in the
Merrill Lynch US High Yield Master II Constrained Index, Bloomberg ticker HUC0 (or such other index
as the Portfolio Manager selects and provides notice of to the Rating Agencies) plus 3.00%, over the same
period.
"Credit Risk Obligation" means any Collateral Obligation that, in the Portfolio Manager's
reasonable commercial judgment, has a significant risk of declining in credit quality or price unrelated to
general market conditions; provided, however, that during a Restricted Trading Period, a Collateral
Obligation will qualify as a Credit Risk Obligation for purposes of sales of Collateral Obligations only if,
in addition to the foregoing, (i) such Collateral Obligation has been downgraded by any Rating Agency at
least one rating sub-category or has been placed and remains on a credit watch with negative implication
by Moody's or S&P since it was acquired by the Issuer, (ii) the Credit Risk Criteria are satisfied with
respect to such Collateral Obligation or (iii) the holders of a majority of the Controlling Class vote to treat
such Collateral Obligation as a Credit Risk Obligation.
"Current Pay Obligation" means any Collateral Obligation that would otherwise be a Defaulted
Obligation as to which:
(i) all prior cash interest payments due were paid in cash and the Portfolio Manager
reasonably expects that the next interest payment due will be paid in cash;
(ii) (A) if the rating by Moody's of the Collateral Obligation is at least "Caa1" (and not on
credit watch with negative implications) or is "Caa2" (and on credit watch with positive implications), the
Market Value of the Collateral Obligation is at least equal to 80% of its principal balance or (B) if the
rating by Moody's of the Collateral Obligation is less than "Caa1" (or is "Caa1" and on credit watch with
negative implications), the Market Value of the Collateral Obligation is at least equal to 85% of its
principal balance; provided, however, if the rating by Moody's of the Collateral Obligation has been
withdrawn, the last rating by Moody's of the Collateral Obligation shall be used for purposes of this
clause (ii); and
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(iii) if the issuer of such Collateral Obligation is subject to a bankruptcy proceeding, a
bankruptcy court has authorized the payment of interest due and payable on such Collateral Obligation;
provided, that the aggregate principal balance of all Collateral Obligations which constitute "Current Pay
Obligations" may not exceed 5% of the Collateral Principal Amount.
"Current Portfolio" means, at any time, the portfolio of Collateral Obligations and Eligible
Investments, representing Principal Proceeds (determined in accordance with certain assumptions
included in the Indenture), then held by the Issuer.
"Debt Security" means any high yield debt security issued and purchased as a Collateral
Obligation in accordance herewith.
"Defaulted Obligation" means any Collateral Obligation included in the Assets as to which:
(a) a default as to the payment of principal and/or interest has occurred and is
continuing with respect to such debt obligation (without regard to any grace period applicable
thereto, or waiver thereof, after the passage (in the case of a default that in the Portfolio
Manager's judgment, as certified to the Trustee in writing, is not due to credit-related causes) of a
three Business Day grace period);
(b) a default as to the payment of principal and/or interest has occurred and is
continuing on another debt obligation of the same issuer which is senior or pari passu in right of
payment to such debt obligation (provided, that both debt obligations are full recourse
obligations);
(c) the issuer or others have instituted proceedings to have the issuer adjudicated as
bankrupt or insolvent or placed into receivership and such proceedings have not been stayed or
dismissed or such issuer has filed for protection under Chapter 11 of the United States
Bankruptcy Code;
(d) such Collateral Obligation has an S&P Rating of "D" or "SD" or, with respect to
a Structured Finance Obligation, has a Moody's Rating of "Ca" or below or an S&P Rating of
"CC" or below or at one point was rated by S&P or Moody's, but subsequently such rating was
withdrawn;
(e) such Collateral Obligation is pari passu in right of payment as to the payment of
principal and/or interest to another debt obligation of the same issuer which has an S&P Rating of
"D" or "SD" (provided, that both the Collateral Obligation and such other debt obligation are full
recourse obligations of the applicable issuer);
(f) such Collateral Obligation is a Synthetic Security referencing a Reference
Obligation that would, if such Reference Obligation were a Collateral Obligation, constitute a
"Defaulted Obligation" (other than under this clause (f)) or with respect to which the Synthetic
Security Counterparty has a S&P Rating of "D" or "SD" (a "Defaulted Synthetic Security");
(g) such Collateral Obligation is a Synthetic Security (other than a Defaulted
Synthetic Security) with respect to which the Synthetic Security Counterparty has defaulted in
any material respect in the performance of any of its payment obligations under the Synthetic
Security;
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(h) a default with respect to which the Portfolio Manager has received written notice
or has actual knowledge that a default has occurred under the underlying instruments and any
applicable grace period has expired and the holders of such Collateral Obligation have
accelerated the repayment of the Collateral Obligation (but only until such acceleration has been
rescinded) in the manner provided in the underlying instrument; or
(i) the Portfolio Manager has in its reasonable commercial judgment otherwise
declared such debt obligation to be a "Defaulted Obligation";
provided, that a Collateral Obligation shall not constitute a Defaulted Obligation pursuant to clauses (a)
through (e) above if: (x) in the case of clauses (a), (b), (c), (d) and (e), such Collateral Obligation is a
Current Pay Obligation or (y) in the case of clauses (b), (c) and (e), such Collateral Obligation is a DIP
Collateral Obligation.
"Deferrable Security" means a Collateral Obligation (including a Partial Deferrable Security)
which by its terms permits the deferral or capitalization of payment of accrued, unpaid interest.
"Deferring Security" means a Deferrable Security that is deferring the payment of interest due
thereon and has been so deferring the payment of interest due thereon (i) with respect to Collateral
Obligations that have a Moody's Rating of at least "Baa3", for the shorter of two consecutive accrual
periods or one year, and (ii) with respect to Collateral Obligations that have a Moody's Rating of "Ba1" or
below, for the shorter of one accrual period or six consecutive months, which deferred capitalized interest
has not, as of the date of determination, been paid in cash.
"Delayed Drawdown Collateral Obligation" means any Collateral Obligation that (a) requires
the Issuer to make one or more future advances to the borrower under the underlying instruments relating
thereto, (b) specifies a maximum amount that can be borrowed on one or more fixed borrowing dates, and
(c) does not permit the re-borrowing of any amount previously repaid by the borrower thereunder; but any
such Collateral Obligation will be a Delayed Drawdown Collateral Obligation only until all commitments
by the Issuer to make advances to the borrower expire or are terminated or reduced to zero.
"Determination Date" means the last day of each Collection Period.
"DIP Collateral Obligation" means a loan made to a debtor-in-possession pursuant to Section
364 of the U.S. Bankruptcy Code having the priority allowed by either Section 364(c) or 364(d) of the
U.S. Bankruptcy Code and secured by senior liens.
"Discount Obligation" means any Collateral Obligation that:
(i) in the case of a Collateral Obligation that is an interest in a bank loan or a
Participation Interest, is acquired by the Issuer for a purchase price of less than 85% of the principal
balance of such Collateral Obligation; provided, that such Collateral Obligation shall cease to be a
Discount Obligation at such time as the average Market Value of such Collateral Obligation, as
determined daily for any period of 30 consecutive days since the acquisition by the Issuer of such
Collateral Obligation, equals or exceeds 90% of the principal balance of such Collateral Obligation;
(ii) in the case of a Collateral Obligation that is a Structured Finance Obligation, is
acquired by the Issuer for a purchase price of less than 75% of the principal balance of such Collateral
Obligation; provided, that such Collateral Obligation shall cease to be a Discount Obligation at such time
as the average Market Value of such Collateral Obligation, as determined daily for any period of 60
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consecutive days since the acquisition by the Issuer of such Collateral Obligation, equals or exceeds 85%
of the principal balance of such Collateral Obligation; and
(iii) in the case of a Collateral Obligation that is not an interest in a bank loan or a
Participation Interest, is acquired by the Issuer for a purchase price of less than 80% of the principal
balance of such Collateral Obligation; provided, that such Collateral Obligation shall cease to be a
Discount Obligation at such time as the average Market Value of such Collateral Obligation, as
determined daily for any period of 30 consecutive days since the acquisition by the Issuer of such
Collateral Obligation, equals or exceeds 90% of the principal balance of such Collateral Obligation.
Discount Obligation shall not include a security that is a Zero-Coupon Security.
For the purpose of calculating the average Market Value above, the Market Value on any day that is not a
Business Day shall be deemed to the Market Value on the immediately preceding Business Day.
"Disposition Proceeds" means proceeds received with respect to sales of Collateral Obligations,
Eligible Investments and Equity Securities and the termination of any Hedge Agreement, in each case, net
of reasonable out-of-pocket expenses and disposition costs in connection with such sales.
"Distressed Exchange" means, in connection with any Collateral Obligation, a distressed
exchange or other debt restructuring has occurred, as reasonably determined by the Portfolio Manager,
pursuant to which the issuer or obligor of such Collateral Obligation has issued to the holders of such
Collateral Obligation a new security or package of securities or obligations that, in the sole judgment of
the Portfolio Manager, amounts to a diminished financial obligation or has the purpose of helping the
issuer of such Collateral Obligation avoid default; provided, that no Distressed Exchange shall be deemed
to have occurred if the securities or obligations received by the Issuer in connection with such exchange
or restructuring meet the definition of "Collateral Obligation".
"Domicile" or "Domiciled" means with respect to any issuer of, or obligor with respect to, a
Collateral Obligation, either (i) its country of organization or (ii) if it is organized in Bermuda, the
Cayman Islands, the Bahamas or the British Virgin Islands, the country in which the majority of its
operations are located or from which a substantial portion of its revenue is derived, in each case directly
or through subsidiaries.
"Eligible Investment Required Ratings" are 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 "AA+" from S&P.
"Eligible Investments" means any United States dollar investment that, at the time it is delivered
to the Trustee (directly or through an intermediary or bailee), is one or more of the following obligations
or securities:
(i) direct obligations of, and obligations the timely payment of principal and interest
on which is fully and expressly guaranteed by, the United States of 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;
(ii) demand and time deposits in, certificates of deposit of, trust accounts with,
bankers' acceptances issued by, or federal funds sold by any depository institution or trust
company incorporated under the laws of the United States of America (including The Bank of
New York Trust Company, National Association) or any state thereof and subject to supervision
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and examination by federal and/or state banking authorities, in each case payable within 183 days
of issuance, so long as the commercial paper and/or the debt obligations of such depository
institution or trust company (or, in the case of the principal depository 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;
(iii) unleveraged repurchase obligations with respect to (a) any security described in
clause (i) above or (b) any other security issued or guaranteed by an agency or instrumentality of
the United States of America, in either case entered into with a depository institution or trust
company (acting as principal) described in clause (ii) above or entered into with an entity (acting
as principal) with, or whose parent company has, the Eligible Investment Required Ratings;
(iv) securities bearing interest or sold at a discount issued by any entity formed under
the laws of the United States of America or any State thereof that have a credit rating of "Aa2"
from Moody's and "AA+" from S&P at the time of such investment or contractual commitment
providing for such investment;
(v) commercial paper or other short-term obligations with the Eligible Investment
Required Ratings and that either bear 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;
(vi) a Reinvestment Agreement issued by any bank (if treated as a deposit by such
bank), or a Reinvestment Agreement issued by any insurance company or other corporation or
entity, in each case with the Eligible Investment Required Ratings; and
(vii) money market funds domiciled outside of the United States which funds have, at
all times, credit ratings of "Aaa" and "MR1+" by Moody's and "AAAm" or "AAAm-G" by S&P,
respectively;
provided, however, that Eligible Investments purchased with funds in the Collection Account shall be
held until maturity except as otherwise specifically provided herein and shall include only such
obligations or securities, other than those referred to in clause (vii) above, as mature (or are putable at par
to the issuer thereof) 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; and provided, further, that none of the foregoing
obligations or securities shall constitute Eligible Investments if (a) such obligation or security has an "r",
"p", "pi", "q" or "t" subscript assigned by S&P, (b) all, or substantially all, of any Eligible Investment
subject to an offer and 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 foreign withholding tax unless the issuer of the security is required to make "gross-up"
payments for the full amount of such foreign withholding tax, (e) such obligation or security is secured by
real property, (f) such obligation or security is purchased at a price greater than 100% of the principal or
face amount thereof or (g) in the Portfolio Manager's judgment, such obligation or security is subject to
material non-credit related risks. Eligible Investments may include, without limitation, those investments
for which the Trustee or an Affiliate of the Trustee provides services.
"Emerging Market Security" means any security or obligation issued by a sovereign or nonsovereign
issuer domiciled in a country (excluding the Cayman Islands, Bermuda, the British Virgin
Islands, the Netherland Antilles, and the Channel Islands):
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(i)
that is in Latin America, Asia, Africa, Eastern Europe, or the Caribbean; or
(ii) the long-term foreign currency debt obligations of which are rated below "Aa2"
or is "Aa2" and on credit watch with negative implications by Moody's or the foreign currency
issuer credit rating of which is below "AA" by S&P.
"Equity Security" means any security or debt obligation which at the time of acquisition,
conversion or exchange does not satisfy the requirements of a Collateral Obligation and is not an Eligible
Investment.
"Excepted Advances" means customary advances made to protect or preserve rights against the
borrower of or obligor under a Collateral Obligation or to indemnify an agent or representative for lenders
pursuant to the underlying instrument.
"Excess CCC/Caa Adjustment Amount" means, as of any date of determination, an amount
equal to the excess, if any, of:
(a)
Excess; over
(b)
Excess.
the aggregate principal balance of all Collateral Obligations included in the CCC/Caa
the sum of the Market Values of all Collateral Obligations included in the CCC/Caa
"Fee Basis Amount" means, as of any date of determination, the sum of (a) the Collateral
Principal Amount and (b) the aggregate principal amount of all Defaulted Obligations.
"Financed Amount" means, at any time, the outstanding Financed Amount Balance at such time
(if any) together with interest accrued thereon (and on any unpaid interest) as provided in the Financed
Amount Note.
"Financed Amount Balance" means the principal amount outstanding from time-to-time under
the Financed Amount Note.
"Financed Amount Note" means the revolving promissory note issued by the Issuer after the
Closing Date to the holder identified therein (the "Financed Amount Noteholder") under which the
Financed Amount Noteholder will be obligated (subject to certain conditions) to advance funds to the
Issuer from time to time up to an aggregate outstanding principal amount not at any time exceeding 1% of
the principal amount of the Notes issued on the Closing Date plus the principal amount of Notes issued in
connection with any additional issuance described under "Description of the Offered Securities—The
Indenture—Additional Issuance" (the "Issuance Limit"); provided, that (i) no Financed Amount Note
shall be issued unless the Global Rating Agency Condition is satisfied and (ii) the Financed Amount
Balance may not be in excess of the Issuance Limit unless the Global Rating Agency Condition is
satisfied and the holders of a majority of the aggregate outstanding principal amount of each Class of
Notes consents in writing to such increase. Under the Financed Amount Note, the Portfolio Manager may
(if in its sole discretion it elects to do so) cause the Issuer to borrow under the Financed Amount Note on
any Payment Date during the Reinvestment Period, subject to compliance with the borrowing conditions
specified therein, provided that (a) the Portfolio Manager shall give notice of such borrowing in writing to
the Trustee and the holder of the Financed Amount Note no later than the Determination Date prior to
such Payment Date and (b) the amount borrowed on any Payment Date shall not exceed the remaining
amount available to be borrowed under the Financed Amount Note at such time. Subject to the terms and
conditions in the Indenture and in the Financed Amount Note, during the Reinvestment Period the Issuer
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may borrow, prepay and reborrow amounts under the Financed Amount Note. The Financed Amount
Note will evidence the Issuer's obligations to repay the Financed Amount.
Under the Financed Amount Note, interest will accrue on the Financed Amount Balance (and on
any accrued interest not paid on prior Payment Dates) during each Interest Accrual Period until the date
paid at a per annum rate set forth therein, calculated on the basis of the actual number of days elapsed in
the applicable Interest Accrual Period divided by 360. The interest accrued and payable on any Payment
Date is referred to herein as the "Financed Amount Interest Payment Amount" for such Payment Date.
"Financed Amount Periodic Payment Amount" means with respect to any Payment Date, the
sum of (a) the Financed Amount Interest Payment Amount for such Payment Date (together with the
Financed Amount Interest Payment Amounts for all prior Payment Dates to the extent not yet paid) and
(b) the Financed Amount Principal Payment Amount for such Payment Date. Amounts applied to the
Financed Amount under the Priority of Payments on any Payment Date (to the extent insufficient to pay
the Financed Amount Periodic Payment Amount for such Payment Date in full) will be applied first to
amounts referred to in clause (a) above and then to the Financed Amount Balance.
"Financed Amount Principal Payment Amount" means with respect to any Payment Date:
(a) during the Reinvestment Period, the amount (if any) specified by the Portfolio
Manager in its discretion for such Payment Date; provided that, if an Event of Default has
occurred and is continuing, the maturity of the Secured Notes has been accelerated in accordance
with the Indenture, or if such Payment Date is an optional Redemption Date, then the Financed
Amount Principal Payment Amount for such Payment Date shall be the entire Financed Amount
Balance as of such Payment Date; and
(b) after the Reinvestment Period, the entire Financed Amount Balance.
"Financed Amount Threshold" means with respect to any Payment Date, the greatest amount
that, if applied to the Financed Amount, will not result in (a) the non-payment of interest (including
Deferred Interest, if any) in respect of the Secured Notes on such Payment Date or (b) any Interest
Coverage Test to fail to be satisfied on a pro forma basis after giving effect to such payment (which
amount will be zero if any Interest Coverage Test will not be satisfied without giving effect to the
payment of any Financed Amount on such Payment Date). Notwithstanding the foregoing, if on any
Payment Date an Event of Default has occurred and is continuing, the maturity of the Secured Notes has
been accelerated in accordance with the Indenture, or such Payment Date is a Redemption Date for an
Optional Redemption, then the Financed Amount shall automatically be accelerated without the giving of
notice and become due and payable in its entirety and the Financed Amount Threshold shall be deemed to
be the entire Financed Amount. In addition, if the Financed Amount is not paid in full prior to the
Payment Date set forth therein, the Financed Amount Threshold on such Payment Date will be the
Financed Amount as of such Payment Date.
"Form Approved Synthetic Security" means a Synthetic Security (a) (i) the Reference
Obligation of which, on the date that the Issuer acquires or commits to acquire such Synthetic Security, if
it were a Collateral Obligation, could be purchased by the Issuer without any required action by the
Rating Agencies or with respect to which the Global Rating Agency Condition has been satisfied or
(ii) the Reference Obligation of which would satisfy clause (i) but for the currency in which it is payable
and such Synthetic Security is payable in U.S. Dollars and does not expose the Issuer to currency risk,
(b) the documentation of which conforms (but for the amount and timing of periodic payments, the name
of the Reference Obligation, the notional amount, the effective date, the termination date and other
similarly necessary changes) to a form previously approved by the Rating Agencies and (c) for which the
Issuer has provided S&P and Moody's notice of the purchase of such Synthetic Security and a copy of the
documentation therefor within five Business Days after such purchase, and each of S&P and Moody's (in
the case of Moody's, in writing signed by an authorized officer of Moody's) has responded within 10
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Business Days from the date of such notice, which response shall include the S&P Recovery Rate or the
Moody's Recovery Rate, as applicable, for such Synthetic Security; provided, however, that either
Moody's or S&P may, prior to the settlement or the purchase of such Synthetic Security, revoke its
consent to the documentation underlying a Form Approved Synthetic Security upon prior notice (and
such revocation shall be effective upon receipt of such notice by the Portfolio Manager and the Trustee).
"Global Rating Agency Condition" means, with respect to any action taken or to be taken by or
on behalf of the Issuer, satisfaction of both the Moody's Rating Condition and the S&P Rating Condition.
"Interest Proceeds" means, with respect to any Collection Period or Determination Date
includes, without duplication, the sum of:
(i) all payments of interest and other income received (other than any interest due on
any Partial Deferrable Security that has been deferred or capitalized prior to its acquisition) by the
Issuer during the related Collection Period on the Collateral Obligations and Eligible Investments,
including the accrued interest received in connection with a sale thereof during the related
Collection Period, less any such amount that represents Principal Financed Accrued Interest
(other than any Principal Financed Accrued Interest purchased prior to the last day of the Ramp-
Up Period that the Portfolio Manager elects to treat as Interest Proceeds); provided, however, that
any amounts received in respect of a Zero-Coupon Security will constitute Principal Proceeds;
(ii) all principal and interest payments received by the Issuer during the related
Collection Period on Eligible Investments purchased with Interest Proceeds;
(iii) all amendment and waiver fees, late payment fees and other fees received by the
Issuer during the related Collection Period, except for those in connection with (a) the
lengthening of the maturity of the related Collateral Obligation or (b) the reduction of the par of
the related Collateral Obligation;
(iv) commitment fees and other similar fees received by the Issuer during such
Collection Period in respect of Revolving Collateral Obligations and Delayed Drawdown
Collateral Obligations;
(v) any payment received with respect to (a) any Hedge Agreement other than an
upfront payment received upon entering into such Hedge Agreement or (b) a payment received as
a result of the termination of any Hedge Agreement to the extent not used by the Issuer to enter
into a new or replacement Hedge Agreement (for purposes of this subclause (v), any such
payment received or to be received on or before a Payment Date in respect of such Payment Date
will be deemed received in respect of the preceding Collection Period and included in the
calculation of Interest Proceeds received in such Collection Period);
(vi) any Liquidity Reserve Amount deposited in the Collection Account on the
preceding Payment Date;
(vii) all fees received by the Issuer during the related Collection Period pursuant to a
Securities Lending Agreement (net of related administration fees paid in connection with
securities lending) and all payments received by the Issuer during the related Collection Period
from a Securities Lending Counterparty that relate to a loaned Collateral Obligation, if such
payments would have constituted Interest Proceeds if made directly by the related obligor to the
Issuer;
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(viii) the amount borrowed by the Issuer (if any) under the Financed Amount Note on
the Payment Date immediately following such Determination Date; and
(ix) any amounts deposited in the Collection Account from the Expense Reserve
Account and, in the sole discretion of the Portfolio Manager, the Interest Reserve Account
pursuant to the Indenture in respect of the related Determination Date;
provided any amounts received in respect of any Defaulted Obligation will constitute Principal
Proceeds (and not Interest Proceeds) until the aggregate of all collections in respect of such
Defaulted Obligation since it became a Defaulted Obligation equals the outstanding principal
balance of such Collateral Obligation when it became a Defaulted Obligation; provided, further,
that amounts that would otherwise constitute Interest Proceeds may be designated as Principal
Proceeds pursuant to the last proviso under "Use of Proceeds—Ramp-Up Period".
"Investment Criteria Adjusted Balance" means, with respect to any Asset, the principal balance
of such Asset; provided, that for all purposes the Investment Criteria Adjusted Balance of any:
(i) Deferring Security shall be the lesser of (x) the S&P Collateral Value of such
Deferring Security and (y) the Moody's Collateral Value of such Deferring Security;
(ii)
Discount Obligation shall be the purchase price of such Discount Obligation; and
(iii) CCC/Caa Collateral Obligation shall be the Market Value of such CCC/Caa
Collateral Obligation if the Excess CCC/Caa Adjustment Amount is greater than 0.
"Junior Class" means, respect to a particular Class of Notes, each Class of Notes that is
subordinated to such Class, as indicated in "Summary of Terms—Principal Terms of the Offered
Securities."
"Liquidity Reserve Amount" with respect to both the Payment Date in May 2007 and the final
Payment Date, means $0 and, with respect to any Payment Date thereafter, means an amount equal to the
excess, if any, of:
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The sum of all payments of interest received during the related Collection Period (and, if such
Collection Period does not end on a Business Day, the next succeeding Business Day) on floating
rate Collateral Obligations and fixed rate Collateral Obligations (net of purchased accrued interest
acquired with Interest Proceeds) which pay interest less frequently than quarterly
0.25 X
The actual
number of days in
the related
Collection Period
360
X
minus
The Weighted Average Fixed
Coupon on fixed rate Collateral
Obligations which pay interest less
frequently than quarterly as of the
immediately preceding
Determination Date
plus
The sum of (I) LIBOR applicable
to the related Interest Accrual
Period beginning on the previous
Payment Date and (II) the
Weighted Average Floating
Spread on floating rate Collateral
Obligations which pay interest less
frequently than quarterly as of the
preceding Determination Date
X
X
The aggregate principal
balance of fixed rate
Collateral Obligations
which pay interest less
frequently than quarterly
as of the immediately
preceding Determination
Date
The aggregate principal
balance of floating rate
Collateral Obligations
which pay interest less
frequently than quarterly
as of the preceding
Determination Date;
provided, that for purposes of this definition, the numerators used in the calculation of the
Weighted Average Fixed Coupon and the Weighted Average Floating Spread shall not include the Excess
Weighted Average Floating Spread or the Excess Weighted Average Fixed coupon, respectively
"Loan Pricing Change" means, with respect to a loan, the change in price of such loan
(expressed as a percentage of par) relative to a nationally recognized index as calculated by the Portfolio
Manager in its reasonable commercial judgment.
"Margin Stock" means "Margin Stock" as defined under Regulation U issued by the Federal
Reserve Board, including any debt security which is by its terms convertible into "Margin Stock."
"Market Value" means, with respect to any loans or other assets, the amount (determined by the
Portfolio Manager) equal to the product of the principal amount thereof and the price determined in the
following manner:
(i) the average of the bid-side quotes determined by three independent broker-dealers active
in the trading of such asset; or if only two such bids can be obtained, the lower of the bid-side quotes of
such two bids; or
(ii) (x) in the case of a loan only, the bid-side quote determined by the Loan Pricing
Corporation, MarkIt, Mergent, Inc., IDC or any other nationally recognized loan pricing service selected
by the Portfolio Manager and approved by S&P and (y) in the case of a Bond, the bid-side quote
determined by FT Interactive Data or any other nationally recognized bond pricing service selected by the
Portfolio Manager and approved by S&P; or
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(iii) if such bid described in clause (i) or (ii) is not available, then the Market Value of an
asset will be the lesser of (x) the product of (1) the S&P Recovery Rate for such asset and (2) 1.25 and (y)
the price at which the Portfolio Manager reasonably believes such asset could be sold in the market within
30 days, as certified by the Portfolio Manager to the Trustee and determined by the Portfolio Manager
consistent with its reasonable and customary market practice; provided, however, that the Market Value
of any such asset may not be determined in accordance with this clause (iii) for more than 30 consecutive
days; or
(iv) if the Market Value of an asset is not determined in accordance with clause (i), (ii) or (iii)
above, then the Market Value shall be deemed to be zero until such determination is made in accordance
with clause (i) or (ii) above;
provided, that solely for purposes of the definitions of "Credit Improved Criteria" and "Credit Risk
Criteria," the term "Market Value" shall exclude the foregoing clause (iii).
"Moody's Collateral Value" means, of any date of determination, with respect to any Defaulted
Obligation or Deferring Security, the lesser of (i) the Moody's Recovery Amount of such Defaulted
Obligation or Deferring Security as of such date and (ii) the Market Value of such Defaulted Obligation
or Deferring Security as of such date.
"Moody's Counterparty Criteria" are, with respect to any Participation Interest or Synthetic
Security (other than any Collateralized Synthetic Security) proposed to be acquired by the Issuer, criteria
that will be met if immediately after giving effect to such acquisition, (x) the percentage of the Collateral
Principal Amount that consists in the aggregate of Participation Interests with Selling Institutions that
have the same or a lower Moody's credit rating and Synthetic Securities with Synthetic Security
Counterparties that have the same or a lower Moody's credit rating does not exceed the "Aggregate
Percentage Limit" set forth below for such Moody's credit rating and (y) the percentage of the Collateral
Principal Amount that consists in the aggregate of Participation Interests with any single Selling
Institution that has the Moody's credit rating set forth under "Individual Percentage Limit" below or a
lower credit rating and Synthetic Securities with any single Synthetic Security Counterparty that has the
Moody's credit rating set forth under "Individual Percentage Limit" below or a lower credit rating does
not exceed the "Individual Percentage Limit" set forth below for such Moody's credit rating:
Moody's credit rating of Selling Institution or Aggregate Percentage Individual Percentage
Synthetic Security Counterparty (at or below)
Limit
Limit
Aaa 20.0% 20.0%
Aa1 20.0% 20.0%
Aa2 20.0% 20.0%
Aa3 20.0% 15.0%
A1 and "P-1" 12.5% 10.0%
A2* and "P-1"
* and not on watch for possible downgrade.
7.5% 5.0%
"Moody's Non-Senior Secured Loan" means any assignment of or Participation Interest in or
other interest (including a Synthetic Security) in a loan that is not a Moody's Senior Secured Loan.
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"Moody's Rating Condition" means, with respect to any action taken or to be taken by or on
behalf of the Issuer, a condition that is satisfied if Moody's has confirmed in writing to the Issuer, the
Trustee and the Portfolio Manager that no immediate withdrawal or reduction with respect to its thencurrent
rating by Moody's of any Class of Secured Notes will occur as a result of such action; provided,
that the Moody's Rating Condition will be deemed to be satisfied if no Class of Secured Notes
outstanding is rated by Moody's.
"Moody's Recovery Amount" means, with respect to any Collateral Obligation which is a
Defaulted Obligation or a Deferring Security, the amount equal to:
(a)
(b)
the applicable Moody's Recovery Rate; multiplied by
the principal balance of such Defaulted Obligation or Deferring Security.
"Moody's Senior Secured Loan" means:
(a)
a loan that:
(i) is not (and cannot by its terms become) subordinate in right of payment
to any other debt obligation of the obligor of the loan;
(ii) is secured by a valid first priority perfected security interest or lien in, to
or on specified collateral securing the obligor's obligations under the loan; and
(iii) the value of the collateral securing the loan together with other attributes
of the obligor (including, without limitation, its general financial condition, ability to
generate cash flow available for debt service and other demands for that cash flow) is
adequate (in the commercially reasonable judgment of the Portfolio Manager) to repay
the loan in accordance with its terms and to repay all other loans of equal seniority
secured by a first lien or security interest in the same collateral); or
(b)
a loan that:
(i) is not (and cannot by its terms become) subordinate in right of payment
to any other debt obligation of the obligor of the loan, except that such loan can be
subordinate with respect to the liquidation of such obligor or the collateral for such loan;
(ii) with respect to such liquidation, is secured by a valid perfected security
interest or lien that is not a first priority in, to or on specified collateral securing the
obligor's obligations under the loan; and
(iii) the value of the collateral securing the loan together with other attributes
of the obligor (including, without limitation, its general financial condition, ability to
generate cash flow available for debt service and other demands for that cash flow) is
adequate (in the commercially reasonable judgment of the Portfolio Manager) to repay
the loan in accordance with its terms and to repay all other loans of equal or higher
seniority secured in the same collateral); and
(c) if the loan has a Moody's Rating determined pursuant to clause (i) of the
definition thereof, such Moody's Rating is not lower than the loan's Moody's corporate family
rating; and
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(d)
the loan is not:
(i)
a DIP Collateral Obligation; or
(ii) a loan for which the security interest or lien (or the validity or
effectiveness thereof) in substantially all of its collateral attaches, becomes effective, or
otherwise "springs" into existence after the origination thereof.
"Non-Emerging Market Obligor" means an obligor that (a) is not Domiciled in Malaysia,
Taiwan, Thailand or, Japan and (b) is Domiciled in (x) any country that has a country ceiling for foreign
currency bonds by Moody's of at least "Aa2" (which rating of "Aa2" is not on credit watch for possible
downgrade) or "Aa3" (which rating of "Aa3" is on credit watch for possible upgrade) and a foreign
currency issuer credit rating of at least "AA" by S&P or (y) Bermuda, the British Virgin Islands, the
Cayman Islands, the Channel Islands, the Bahamas or the Netherland Antilles.
"Partial Deferrable Security" means any Collateral Obligation with respect to which under the
related underlying instruments (i) a portion of the interest due thereon is required to be paid in cash on
each payment date therefor and is not permitted to be deferred or capitalized and (ii) the issuer thereof or
obligor thereon (or, in the case of a Synthetic Security, the related reference obligor) may defer or
capitalize the remaining portion of the interest due thereon.
"Participation Interest" means a participation interest in a loan that at the time of acquisition or
the Issuer's commitment to acquire the same is represented by a contractual obligation of a Selling
Institution that has at the time of such acquisition or the Issuer's commitment to acquire the same at least a
short-term rating of "A-1" (or a long-term rating of "A-") by S&P.
"PIK Security" means a debt security whose Underlying Instrument permits the deferral of the
payment of interest in Cash thereon, including, without limitation, by providing for the payment of
interest through the issuance of additional debt securities identical to such debt security or through
additions to the principal amount thereof for a specified period in the future or for the remainder of its life
or by capitalizing interest due on such debt security as principal.
"Prepaid Collateral Obligation" means a Collateral Obligation which has prepaid, whether by
tender, redemption prior to the stated maturity thereof, exchange or other prepayment (other than an
exchange in connection with a Distressed Exchange).
"Principal Financed Accrued Interest" means, with respect to (i) any Collateral Obligation
owned by the Issuer on the Closing Date, an amount equal to the unpaid interest on such Collateral
Obligation that accrued prior to the Closing Date that is owing to the Issuer and remains unpaid as of the
Closing Date and (ii) any Collateral Obligation purchased after the Closing Date, the amount of Principal
Proceeds, if any, applied towards the purchase of accrued interest on such Collateral Obligation.
"Principal Proceeds" means, with respect to any Collection Period or Determination Date
includes all amounts received by the Issuer during the related Collection Period that do not constitute
Interest Proceeds.
"Priority Category" means, with respect to any Collateral Obligation, the applicable category
listed in the table under the heading "Priority Category" in the definition of "Weighted Average S&P
Recovery Rate."
"Priority Class" means, respect to any specified Class of Notes, each Class of Notes that ranks
senior to such Class, as indicated in "Summary of Terms—Principal Terms of the Offered Securities."
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"Priority Hedge Termination Event" means the occurrence of (i) the Issuer's failure to make
required payments or deliveries pursuant to a Hedge Agreement, (ii) the occurrence of certain events of
bankruptcy, dissolution or insolvency with respect to the Issuer, (iii) the merger of the Issuer with or into
another entity where such surviving entity fails to assume all obligations of the Issuer, (iv) the liquidation
of the Assets due to an Event of Default under the Indenture (except as a result of an Event of Default that
occurred as a result of a "event of default" or a "termination event" (as defined in the applicable Hedge
Agreement) in which the applicable Hedge Counterparty was the "defaulting party" or the "sole affected
party"), (v) a change in law after the Closing Date which makes it unlawful for either the Issuer or a
Hedge Counterparty to perform its obligations under a Hedge Agreement or (vi) any termination of a
Hedge Agreement as a result of actions taken by the Trustee in response to a reduction in the Collateral
Principal Amount.
"Pro Rata Special Redemption Conditions": The conditions relating to Special Redemptions
that will be satisfied with respect to any Payment Date, if, on the related Determination Date, (A) the
Rating Agencies have not reduced or withdrawn the ratings assigned by them on the Closing Date to any
of the Notes, (B) the Moody's Diversity Test is satisfied, (C) clause (xvii) of the definition of
"Concentration Limitations" is satisfied, (D) the Overcollateralization Ratio with respect to the Class A
Notes is at least 123.67%, (E) the Overcollateralization Ratio with respect to the Class B Notes is at least
115.43%, (F) the Overcollateralization Ratio with respect to the Class C Notes is at least 108.95%, (G)
the Overcollateralization Ratio with respect to the Class D Notes is at least 105.35%, (H) the Moody's
Rating Condition is satisfied and (I) each of the Coverage Tests are satisfied.
"Proposed Portfolio" means the portfolio of Collateral Obligations and Eligible Investments
resulting from the proposed purchase, sale, maturity or other disposition of a Collateral Obligation or a
proposed reinvestment in an additional Collateral Obligation, as the case may be.
"Redemption Date" means any Optional Redemption Date.
"Reference Obligation" means a debt security or other obligation upon which a Synthetic
Security is based, which debt security or other obligation (a) is not itself either (x) a Synthetic Security or
(y) a structured finance security, asset-backed security or similar security, (b) in the reasonable
commercial judgment of the Portfolio Manager, satisfies (and, if owned by the Issuer, would satisfy) the
definition of "Collateral Obligation" (other than clauses (i) and (vii) of the definition of "Collateral
Obligation") and (c) could be acquired directly by the Issuer under the Investment Criteria (without giving
effect to clauses (i) and (vii) of the definition of "Collateral Obligation").
"Reinvestment Agreement" means 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 such agreement's Eligible Investment Required Rating.
"Related Obligation" means an obligation issued by the Portfolio Manager, any of its Affiliates
that are investment funds or any other Person that is an investment fund whose investments are primarily
managed by the Portfolio Manager or any such Affiliate.
"Required Hedge Counterparty Rating" means, in respect of a counterparty or entity
guaranteeing the obligations of such counterparty, (i) a long-term debt rating by Moody's of "Aa3" (which
rating of "Aa3" is not on credit watch for possible downgrade) or higher if the Hedge Counterparty or
guarantor has only a long-term debt rating; or a long-term debt rating by Moody's of "A1" (which rating
of "A1" is not on credit watch for possible downgrade) or higher and a short-term debt rating by Moody's
of "P-1" (which rating of "P-1" is not on credit watch for possible downgrade) if the Hedge Counterparty
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or guarantor has both long-term and short-term debt ratings and (ii) a short-term debt rating by S&P of
not less than "A-1" or, if no short-term rating exists, a long-term debt rating of not lower than "A+".
"Restricted Trading Period" means each day during which (a) the Moody's rating of any of the
Class A Notes is one or more sub-categories below its rating on the Closing Date, (b) the Moody's rating
of any of the Class B Notes or the Class C Notes is two or more sub-categories below their respective
rating on the Closing Date or (c) the Moody's rating of any Class A Notes, Class B Notes or Class C
Notes (in each case then outstanding) has been withdrawn and not reinstated; provided, that such period
will not be a Restricted Trading Period (so long as the Moody's rating of any of the Class A Notes, the
Class B Notes or the Class C Notes has not been further downgraded, withdrawn or put on watch) upon
the direction of the holders of at least a majority of the aggregate outstanding principal amount of (A) the
Class A-1 Notes, (B) the Class A-2 Notes, (C) the Class B Notes (voting together as a single class) and
(D) the Class C Notes.
"Revolving Collateral Obligation" means any Collateral Obligation (other than a Delayed
Drawdown Collateral Obligation) that is a loan (including, without limitation, revolving loans, 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 by its terms may
require one or more future advances to be made to the borrower by the Issuer; provided, that any such
Collateral Obligation will be a Revolving Collateral Obligation only until all commitments to make
advances to the borrower expire or are terminated or irrevocably reduced to zero.
"S&P CDO Monitor" means, each dynamic, analytical computer model developed by S&P 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 Obligations consistent with a specified benchmark rating level
based upon certain assumptions (including the applicable Weighted Average S&P Recovery Rate) and
S&P's proprietary corporate default studies, as may be amended by S&P from time to time upon notice to
the Issuer and the Trustee. Each S&P CDO Monitor shall be associated with a Weighted Average S&P
Recovery Rate and the S&P CDO Monitor that shall be applicable to the portfolio of Collateral
Obligations shall be selected by the Portfolio Manager in accordance with the Indenture. The Portfolio
Manager will identify the applicable model based on the matrix below (the "S&P CDO Monitor Test
Matrix") to be used for the purpose of determining compliance with the S&P CDO Monitor Test (the
"Applicable S&P CDO Monitor"); provided, that the Portfolio Manager may request additional S&P
CDO Monitors at any time. For the purpose of selecting the Applicable S&P CDO Monitor, the
applicable Weighted Average Spread with respect to the Collateral Obligations shall be as set forth
below:
Weighted Average S&P Recovery Rate
Minimum Weighted
Average Spread 53.1% 53.8% 54.5% 55.2%
2.000% 1 8 15 22
2.125% 2 9 16 23
2.250% 3 10 17 24
2.375% 4 11 18 25
2.500% 5 12 19 26
2.625% 6 13 20 27
2.750% 7 14 21 28
S&P CDO Monitor Scenario
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"S&P Collateral Value" means, with respect to any Defaulted Obligation or Deferring Security,
the lesser of (i) the S&P Recovery Amount of such Defaulted Obligation or Deferring Security as of the
relevant Measurement Date and (ii) the Market Value of such Defaulted Obligation or Deferring Security
as of the relevant Measurement Date.
"S&P Rating Condition" means, with respect to any action taken or to be taken by or on behalf
of the Issuer, a condition that is satisfied if S&P has confirmed in writing to the Issuer, the Trustee and
the Portfolio Manager that no immediate withdrawal or reduction with respect to its then-current rating by
S&P of any Class of Secured Notes will occur as a result of such action; provided, that the S&P Rating
Condition will be deemed to be satisfied if no Class of Secured Notes outstanding is rated by S&P.
"S&P Recovery Amount" means with respect to any Collateral Obligation which is a Defaulted
Obligation or a Deferring Security, the amount equal to:
(a)
(b)
the applicable S&P Recovery Rate; multiplied by
the principal balance of such Defaulted Obligation or Deferring Security;
provided, that the "S&P Recovery Amount" of any Synthetic Security which is a Defaulted Obligation or
a Deferring Security will be the amount determined by S&P.
"S&P Recovery Rate" means, with respect to a Collateral Obligation, the recovery rate assigned
thereto in accordance with the definition of "Weighted Average S&P Recovery Rate."
"Second Lien Loan" means any assignment of or Participation Interest in or other interest
(including a Synthetic Security) in a loan that (i) is not (and that by its terms is not permitted to become)
subordinate in right of payment to any other obligation of the obligor of the 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 perfected security interest or lien to or on specified collateral securing
the obligor's obligations under the loan, which security interest or lien is not subordinate to the security
interest or lien securing any other debt for borrowed money other than a Senior Secured Loan on such
specified collateral; provided, however, that with respect to clauses (i) and (ii) above, such right of
payment, security interest or lien may be subordinate to customary permitted liens, such as, but not
limited to, tax liens.
"Secured Parties" means collectively the holders of the Secured Notes, each Hedge Counterparty
and the Trustee.
"Securities Intermediary" is as defined in Section 8-102(a)(14) of the UCC.
"Securities Lending Agreement" means an agreement pursuant to which the Issuer agrees to
loan any Securities Lending Counterparty one or more Collateral Obligations and such Securities Lending
Counterparty agrees to post Securities Lending Collateral with the Trustee or a Securities Intermediary to
secure its obligation to return such Collateral Obligations to the Issuer.
"Securities Lending Collateral" means any cash or direct registered debt obligations of the
United States of America that have a maturity of five years or less and that are pledged by a Securities
Lending Counterparty as collateral pursuant to a Securities Lending Agreement.
"Securities Lending Counterparty" means any bank, insurance company, broker-dealer or other
financial institution that has (i) in the case of a loan with a term of 90 days or less, short-term senior
160

unsecured debt ratings or a guarantor with such ratings of "P-1" from Moody's and "A-1" from S&P, (ii)
in the case of a loan with a term of longer than 90 days but less than a year, (a) either (x) a long-term
senior unsecured debt rating of at least "A1" by Moody's or (y) both a long-term senior unsecured debt
rating of "A2" by Moody's and a short-term rating of "P-1" by Moody's and (b) either (x) a long-term
senior unsecured debt rating of at least "A+" by S&P or (y) both a long-term senior unsecured debt rating
of "A" by S&P and a short-term rating of "A-1" by S&P, and (iii) in the case of a loan for a one-year or
more (but less than two-year) term and a loan for a two-year term or more, a long-term senior unsecured
debt rating that, individually and together with all other Securities Lending Counterparties with the same
rating, is consistent with the percentage of the Collateral Principal Amount loaned to Securities Lending
Counterparties with such ratings as set forth in the table below:
Long-Term Senior Unsecured
Debt Rating of Securities
Lending Counterparty***
Individual Securities
Lending Counterparty
Percentage
Aggregate Securities
Lending Counterparty
Percentage
Moody's S&P 1 year 2 year 1 year 2 year
Aaa AAA 10.0% 10.0% 20.0% 10.0%
Aa1 AA+ 10.0% 10.0% 10.0% 10.0%
Aa2 AA 10.0% 10.0% 10.0% 10.0%
Aa3 AA- 10.0% **** 10.0% 7.5%
A1 A+ 5.0% **** 5.0% 5.0%
A2* A** 5.0% **** 5.0% 2.5%
* Applies only so long as Moody's short-term unsecured debt rating is "P-1".
** Applies only so long as the S&P short-term unsecured debt rating is "A-1".
*** For purposes of determining compliance with this credit rating requirement, if the actively-monitored
Moody's or S&P long-term senior unsecured debt rating of a Securities Lending Counterparty has been
put on a watch list for possible downgrade, such credit rating shall be one sub-category below its then
current Moody's or S&P rating or, if such credit rating has been put on a watch list for possible upgrade,
one sub-category above its then current Moody's or S&P rating; provided, that the Issuer may enter into a
Securities Lending Agreement with a Securities Lending Counterparty having, at such time, a long-term
senior unsecured debt rating below "A2" by Moody's and "A" by S&P, so long as each of the Moody's
Rating Condition and S&P Rating Condition has been satisfied.
**** Global Rating Agency Condition must be satisfied.
"Selling Institution" means the entity obligated to make payments to the Issuer under the terms
of a Participation Interest.
"Senior Secured Loan" means any assignment of or Participation Interest in or other interest
(including a Synthetic Security) in a loan that that (i) is secured by the pledge of collateral and which has
the most senior pre-petition priority (including pari passu with other obligations of the obligor) in any
bankruptcy, reorganization, arrangement, insolvency, moratorium or liquidation proceedings, (ii) is not
(and by its terms is not permitted to become) subordinate in right of payment to any other debt for
borrowed money incurred by the obligor of such loan and (iii) in the Portfolio Manager’s reasonable
business judgment, based upon a review of available documentation relating to such loan, is secured by a
valid first priority perfected security interest or lien on specified collateral securing the obligor’s
obligations under the loan, which security interest or lien is not subordinate to the security interest or lien
securing any other debt for borrowed money.
"Senior Secured Note" means any assignment of or Participation Interest in or other interest
(including a Synthetic Security) in a senior secured note issued pursuant to an indenture or equivalent
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document by a corporation, partnership, limited liability company, trust or other person that is secured by
either a first or second priority perfected security interest or lien in or on specified collateral securing the
issuer's obligations under such note.
"Senior Unsecured Loan" means any assignment of or Participation Interest in or other interest
(including a Synthetic Security) in a unsecured loan that is not subordinated to any other unsecured
indebtedness of the obligor.
"Step-Up Coupon Security": A security which by its terms provides that it does not pay interest
over a specified period of time ending prior to its maturity, but which does provide for the payment of
interest after the expiration of such specified period or a security which by its terms provides for the
payment of interest, but the rate at which such interest is paid increases after the expiration of a specified
period of time prior to its maturity; provided that a security shall be considered a "Step-Up Coupon
Security" whether or not it is purchased by the Issuer prior to the expiration of the specified period after
which it begins to pay interest or the interest rate is increased, as the case may be.
"Structured Finance Obligation" means any obligation:
(i) secured directly by, referenced to, or representing ownership of, a pool of
receivables or other assets of U.S. obligors, or obligors organized or incorporated in Group I
Countries, Group II Countries or Group III Countries, including collateralized debt obligations,
but excludes:
(A)
residential mortgage-backed securities;
(B) collateralized debt obligations a significant portion (i.e., 20% or more) of
which are backed by Emerging Market Securities;
(C)
securities;
(D)
(E)
(F)
collateralized debt obligations primarily backed by asset-backed
market value collateralized debt obligations;
securities backed by "future flow" receivables (i.e., 20% or more);
net interest margin securitizations;
(G) collateralized debt obligations primarily backed by other collateralized
debt obligations or primarily backed by synthetic securities or other "synthetic exposure"
to assets;
(H) collateralized debt obligations a significant portion (i.e., 30% or more) of
which are backed by bonds; and
(I) synthetic collateralized debt obligations secured by or referenced to one
or more portfolio credit default swaps;
(ii) that has an S&P Rating and a priority category recovery rate assigned in
accordance with the Indenture;
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(iii)
Indenture; and
that has a Moody's Rating and a recovery rate assigned in accordance with the
(iv) whose ownership or disposition (without regard to the Issuer's other activities) by
the Issuer will not cause the Issuer to be treated as engaged in a U.S. trade or business for United
States federal income tax purposes or otherwise subject the Issuer to net income taxes.
"Subordinated Notes Internal Rate of Return" means an annualized internal rate of return
(computed using the "XIRR" function in Microsoft® Excel 2002 or an equivalent function in another
software package), stated on a per annum basis, for the following cash flows, assuming all Subordinated
Notes were purchased on the Closing Date at par:
(i) each distribution of Interest Proceeds made to the holders of the Subordinated
Notes on any prior Payment Date and, to the extent necessary to reach the applicable
Subordinated Notes Internal Rate of Return, the current Payment Date; and
(ii) each distribution of Principal Proceeds made to the holders of the Subordinated
Notes on any prior Payment Date and, to the extent necessary to reach the applicable
Subordinated Notes Internal Rate of Return, the current Payment Date.
"Synthetic Security" means a security or swap transaction, other than a Participation Interest, (i)
that has payments associated with either payments of interest and/or principal on a Reference Obligation
or the credit performance of a Reference Obligation, (ii) with respect to which (unless such security is a
Form Approved Synthetic Security) the Global Rating Agency Condition has been satisfied, (iii) with
respect to which (unless such security is a Form Approved Synthetic Security) Moody's has assigned a
Moody's Recovery Rate and Moody's Rating Factor, (iv) that is not prohibited from inclusion as a
Collateral Obligation by any applicable law, (v) that for U.S. federal income tax purposes is either treated
as debt, as a notional principal contract or as an option, (vi) that is payable in U.S. Dollars and does not
expose the Issuer to currency risk and (vii) does not represent leveraged exposure to the related Reference
Obligation, provided, that in the event that such Synthetic Security is not a Form Approved Synthetic
Security and (a) Moody's has been provided with notice of a proposed Synthetic Security, (b) Moody's
has acknowledged in a written confirmation signed by an authorized officer of Moody's that Moody's has
received the information necessary for it to make a determination with respect to such proposed Synthetic
Security and (c) Moody's has not indicated within 10 Business Days of the confirmed receipt of the most
recently revised drafts of the documents (or copies of executed documents, if applicable) that the
inclusion of such proposed Synthetic Security will, at that time, cause it to downgrade, withdraw or
qualify any of its then-current ratings of any of the Secured Notes, Moody's will be deemed to have
confirmed in writing that the inclusion of such Synthetic Security will not, at that time, cause it to
downgrade, withdraw or qualify any of its then-current ratings of any of the Secured Notes if, but only if,
the Reference Obligation with respect to such Synthetic Security satisfies the definition of "Collateral
Obligation" (other than clauses (i) and (vii) of such definition), or would satisfy the definition of
"Collateral Obligation" (other than clauses (i) and (vii) of such definition), but for the rating, payment
frequency or currency of such Reference Obligation; provided, further, that (x) if a Synthetic Security
provides for physical settlement, delivery of any deliverable obligation thereunder to the Issuer and
transfer of such deliverable obligation by the Issuer to a third party will not require or cause the Issuer to
assume, and will not subject the Issuer to, any obligation or liability (other than immaterial, nonpayment
obligations and any assignment or transfer fee in respect of loans or, in the case of a deliverable
obligation that constitutes a Revolving Collateral Obligation or a Delayed Drawdown Collateral
Obligation, the obligation to make future advances pursuant to the terms thereof) and (y) each Synthetic
Security shall contain appropriate limited recourse and non-petition provisions (to the extent that the
163

Issuer has contractual payment or other obligations to the Synthetic Security Counterparty) substantially
equivalent to those contained in the Indenture.
"Synthetic Security Collateral" means, with respect to a Synthetic Security, any collateral
permitted by such Synthetic Security's related documentation.
"Synthetic Security Counterparty" means an entity (other than the Issuer) required to make
payments on a Synthetic Security (including any guarantor), which entity or guarantor has a long-term
senior unsecured debt rating (or a rating of its secured debt if such entity or guarantor is a trust and its
debt is secured by a Reference Obligation) of at least "A+" by S&P, or the short-term debt rating of such
entity or guarantor is at least "A-1" by S&P, in each such case, at the date of the Issuer's commitment to
purchase or execute of the related Synthetic Security documentation.
"Target Initial Par Amount" equals $485,385,000.
"Target Initial Par Condition" means a condition satisfied as of the end of the Ramp-Up Period
if the Issuer has purchased, or entered into binding commitments to purchase, Collateral Obligations,
including Collateral Obligations acquired by the Issuer on or prior to the Closing Date, that in the
aggregate equal or exceed the Target Initial Par Amount, without regard to prepayments, maturities,
redemptions or sales.
"Third Party Credit Exposure" as of any date of determination means the sum (without
duplication) of (a) the principal balance (or such lesser amount as may be determined by S&P) of any
Synthetic Security that is not a Collateralized Synthetic Security plus (b) the principal balance of all
Collateral Obligations issued by a non-sovereign or sovereign issuer located in a country whose foreign
currency issuer credit rating by S&P is below "AA" (other than the United States) plus (c) the principal
balance of each Collateral Obligation that consists of a Participation Interest plus (d) the principal balance
of each Collateral Obligation under a Securities Lending Agreement with a term of one year or longer;
provided, however, that such term shall not include the principal balance of any Synthetic Security or
Participation Interest if the counterparty or seller thereof, as applicable, has a short-term credit rating by
S&P of "A-1+".
"Third Party Credit Exposure Limits" means limits that shall be satisfied if the Third Party
Credit Exposure with counterparties having the ratings below from S&P do not exceed the percentage of
the Collateral Principal Amount specified below:
164

S&P's credit rating of
Selling Institution or
Synthetic Security
Counterparty or Securities
Lending Counterparty
under Securities Lending
Agreement with a Term of 1
Year or Longer
(at or below)
Aggregate
Percentage
Limit
Individual
Percentage
Limit
AAA 20% 20%
AA+ 10% 10%
AA 10% 10%
AA- 10% 10%
A+ 5% 5%
A 5% 5%
"Withholding Tax Event" means an event that occurs if either:
(i) (A) one or more Collateral Obligations that were not subject to withholding tax when the
Issuer committed to purchase them have become subject to withholding tax ("New Withholding
Tax Obligations") or the rate of withholding has increased on one or more Collateral Obligations
that were subject to withholding tax when the Issuer committed to purchase them ("Increased
Rate Withholding Tax Obligations") and (B) in any Collection Period, the aggregate of the
payments subject to withholding tax on New Withholding Tax Obligations and the increase in
payments subject to withholding tax on Increased Rate Withholding Tax Obligations, in each case
to the extent not "grossed-up" (on an after-tax basis) by the related obligor, represent 5% or more
of Interest Proceeds for the Collection Period; or
(ii) taxes, fees, assessments, or other similar charges are imposed on the Issuer or the Co-
Issuer in an aggregate amount in any twelve-month period in excess of U.S.$1,000,000, other
than any deduction or withholding for or on account of any tax with respect to any payment
owing in respect of any obligation that at the time of acquisition, conversion, or exchange does
not satisfy the requirements of a Collateral Obligation.
"Zero-Coupon Security" means any Collateral Obligation that at the time of purchase does not
by its terms provide for the payment of cash interest; provided, that a Zero-Coupon Security shall not
include a security that is a Step-Up Coupon Security.
165

INDEX OF DEFINED TERMS
Following is an index of defined terms used in this Offering Circular and the page number where
each definition appears.
$ ...................................................................................................................................................................iii
25% Limitation .........................................................................................................................................127
Accredited Investors ......................................................................................................................................i
Adjusted Collateral Principal Amount......................................................................................................140
Adjusted Moody's Rating Factor ................................................................................................................76
Administration Agreement........................................................................................................................106
Administrative Expense Cap.....................................................................................................................140
Administrative Expenses ..........................................................................................................................140
Administrator ............................................................................................................................................106
Affected Bank ...........................................................................................................................................109
Affiliate.....................................................................................................................................................141
Aggregate Excess Funded Spread...............................................................................................................74
Aggregate Funded Spread...........................................................................................................................74
Aggregate Industry Equivalent Unit Score .................................................................................................76
Aggregate Percentage Limit .....................................................................................................................154
Aggregate Unfunded Spread.......................................................................................................................74
Applicable Advance Rate .........................................................................................................................141
Applicable S&P CDO Monitor.................................................................................................................158
Approved Replacement Person.................................................................................................................104
Assets ..........................................................................................................................................................72
Average Life ...............................................................................................................................................80
Average Par Amount...................................................................................................................................76
Base Management Fee ................................................................................................................................99
Benefit Plan Investors...............................................................................................................................120
Bond..........................................................................................................................................................142
Bond Yield Change...................................................................................................................................142
Business Day.............................................................................................................................................142
Calculation Agent .......................................................................................................................................52
CCC/Caa Collateral Obligation ................................................................................................................142
CCC/Caa Excess .......................................................................................................................................142
Certificated Note.........................................................................................................................................67
Certificated Subordinated Notes .................................................................................................................67
CFC...........................................................................................................................................................112
Class............................................................................................................................................................52
Class A Coverage Tests ..............................................................................................................................24
Class A Notes................................................................................................................................................1
Class A-1 Notes ............................................................................................................................................1
Class A-2 Notes ............................................................................................................................................1
Class B Coverage Tests ..............................................................................................................................24
Class B Notes................................................................................................................................................1
Class Break-even Default Rate .................................................................................................................142
Class C Coverage Tests ..............................................................................................................................24
Class C Notes................................................................................................................................................1
Class D Coverage Test................................................................................................................................24
I-1

Class D Notes................................................................................................................................................1
Class Default Differential .........................................................................................................................143
Class Scenario Default Rate......................................................................................................................143
Clearstream .................................................................................................................................................68
Closing Date...................................................................................................................................................i
Code............................................................................................................................................................66
Co-Issuer........................................................................................................................................................i
Co-Issuer Common Stock .........................................................................................................................105
Co-Issuers ......................................................................................................................................................i
Collateral Administration Agreement.......................................................................................................143
Collateral Administrator ...........................................................................................................................143
Collateral Interest Amount........................................................................................................................143
Collateral Obligation...................................................................................................................................12
Collateral Principal Amount .......................................................................................................................24
Collateral Quality Test................................................................................................................................17
Collateralized Synthetic Security..............................................................................................................143
Collection Account .....................................................................................................................................86
Collection Period ........................................................................................................................................51
Concentration Limitations ..........................................................................................................................21
Controlling Class ........................................................................................................................................60
Controlling Class Majority Approval .......................................................................................................103
Controlling Class Majority Non-Approval ...............................................................................................103
Controlling Person ....................................................................................................................................120
Coverage Tests............................................................................................................................................24
CPDIs........................................................................................................................................................110
Credit Improved Criteria...........................................................................................................................143
Credit Improved Obligation......................................................................................................................143
Credit Risk Criteria...................................................................................................................................144
Credit Risk Obligation ..............................................................................................................................144
Current Pay Obligation .............................................................................................................................144
Current Portfolio .......................................................................................................................................145
Custodial Account.......................................................................................................................................87
Debt Security ............................................................................................................................................145
Defaulted Obligation.................................................................................................................................145
Defaulted Synthetic Security ....................................................................................................................145
Deferrable Security ...................................................................................................................................146
Deferred Base Management Fee.................................................................................................................99
Deferred Interest .........................................................................................................................................52
Deferred Subordinated Management Fee ...................................................................................................99
Deferring Security.....................................................................................................................................146
Delayed Drawdown Collateral Obligation................................................................................................146
Depository Event ........................................................................................................................................69
Determination Date...................................................................................................................................146
DIP Collateral Obligation .........................................................................................................................146
Discount Obligation..................................................................................................................................146
Disposition Proceeds.................................................................................................................................147
Distressed Exchange .................................................................................................................................147
Diversity Score............................................................................................................................................76
Domicile....................................................................................................................................................147
Domiciled..................................................................................................................................................147
DTC ............................................................................................................................................................28
I-2

Eligible Investment Required Ratings ......................................................................................................147
Eligible Investments..................................................................................................................................147
Emerging Market Security........................................................................................................................148
equitable subordination...............................................................................................................................41
equity PFIC ...............................................................................................................................................114
Equity Security..........................................................................................................................................149
Equivalent Unit Score.................................................................................................................................76
ERISA.......................................................................................................................................................118
ERISA Plans .............................................................................................................................................118
Euroclear.....................................................................................................................................................68
Event of Default..........................................................................................................................................59
Excepted Advances...................................................................................................................................149
Excess CCC/Caa Adjustment Amount .....................................................................................................149
Excess Weighted Average Fixed Coupon...................................................................................................75
Excess Weighted Average Floating Spread ................................................................................................74
Exchange Act.............................................................................................................................................xiii
Expense Reserve Account...........................................................................................................................90
Fee Basis Amount.....................................................................................................................................149
Financed Amount......................................................................................................................................149
Financed Amount Balance........................................................................................................................149
Financed Amount Interest Payment Amount............................................................................................150
Financed Amount Note.............................................................................................................................149
Financed Amount Noteholder...................................................................................................................149
Financed Amount Periodic Payment Amount ..........................................................................................150
Financed Amount Principal Payment Amount .........................................................................................150
Financed Amount Threshold.....................................................................................................................150
Form Approved Synthetic Security...........................................................................................................150
FSMA.........................................................................................................................................................xiii
Global Rating Agency Condition..............................................................................................................151
Global Securities.........................................................................................................................................67
Group I Country..........................................................................................................................................24
Group II Country.........................................................................................................................................24
Group III Country .......................................................................................................................................24
Hedge Agreement .......................................................................................................................................91
Hedge Agreements......................................................................................................................................91
Hedge Counterparty ....................................................................................................................................14
HillMark.........................................................................................................................................................i
Holder .......................................................................................................................................................107
IAI..............................................................................................................................................................i, 2
Incentive Management Fee .........................................................................................................................99
Increased Rate Withholding Tax Obligations...........................................................................................164
Indenture ........................................................................................................................................................i
Industry Diversity Score .............................................................................................................................76
Initial Purchaser .............................................................................................................................................i
Interest Accrual Period ...............................................................................................................................52
Interest Collection Subaccount ...................................................................................................................86
Interest Coverage Ratio...............................................................................................................................26
Interest Coverage Test ................................................................................................................................24
Interest Determination Date........................................................................................................................52
Interest Proceeds .......................................................................................................................................151
Interest Rate ................................................................................................................................................52
I-3

Interest Reserve Account ............................................................................................................................90
Interim Report Date ....................................................................................................................................96
Interim Target .............................................................................................................................................96
Investment Company Act ..........................................................................................................................i, 2
Investment Criteria......................................................................................................................................85
Investment Criteria Adjusted Balance ......................................................................................................152
Investor-Based Exemptions ......................................................................................................................119
Irish Paying Agent and Listing Agent.........................................................................................................56
IRS ............................................................................................................................................................107
Issuance Limit...........................................................................................................................................149
Issuer..............................................................................................................................................................i
Issuer Ordinary Shares..............................................................................................................................105
Issuer Par Amount.......................................................................................................................................76
Italy ...............................................................................................................................................................x
JPMCB........................................................................................................................................................49
JPMorgan .......................................................................................................................................................i
JPMorgan Companies .................................................................................................................................49
Junior Class...............................................................................................................................................152
Key Person Departure ...............................................................................................................................104
Key Person Departure Cure ......................................................................................................................104
Key Person Event......................................................................................................................................104
Key Persons ..............................................................................................................................................104
Knowledgeable Employees........................................................................................................................i, 2
lender liability .............................................................................................................................................41
LIBOR ........................................................................................................................................................53
Liquidity Reserve Amount........................................................................................................................152
Loan Pricing Change.................................................................................................................................153
London Banking Day..................................................................................................................................53
Lower-Tier PFICs .....................................................................................................................................115
Management Fee.........................................................................................................................................99
Mandatory Redemption ..............................................................................................................................57
Margin Stock.............................................................................................................................................153
Market Value ............................................................................................................................................153
Maximum Moody's Rating Factor Test ......................................................................................................17
Measurement Date ......................................................................................................................................73
Minimum Denominations ...........................................................................................................................28
Minimum Diversity/Maximum Rating/Minimum Spread Matrix ..............................................................18
Minimum Fixed Coupon.............................................................................................................................17
Minimum Fixed Coupon Test.....................................................................................................................17
Minimum Floating Spread ..........................................................................................................................17
Minimum Floating Spread Test ..................................................................................................................17
Minimum Weighted Average Moody's Recovery Rate Test ......................................................................19
Minimum Weighted Average S&P Recovery Rate Test.............................................................................19
Misrepresentation........................................................................................................................................vii
Moody's..........................................................................................................................................................i
Moody's Collateral Value .........................................................................................................................154
Moody's Counterparty Criteria .................................................................................................................154
Moody's Default Probability Rating .............................................................................................................1
Moody's Derived Rating ...............................................................................................................................1
Moody's Diversity Test...............................................................................................................................18
Moody's Non-Senior Secured Loan ..........................................................................................................154
I-4

Moody's Rating .............................................................................................................................................3
Moody's Rating Condition ........................................................................................................................155
Moody's Rating Factor................................................................................................................................75
Moody's Recovery Amount ......................................................................................................................155
Moody's Recovery Rate ..............................................................................................................................78
Moody's Senior Secured Loan ..................................................................................................................155
New Withholding Tax Obligations...........................................................................................................164
Non-Call Period ............................................................................................................................................3
Non-Emerging Market Obligor.................................................................................................................156
Non-Permitted ERISA Holder ..................................................................................................................137
Non-Permitted Holder...............................................................................................................................136
Non-U.S. Holder .......................................................................................................................................107
Note Interest Amount..................................................................................................................................53
Note Payment Sequence .............................................................................................................................10
Notes .............................................................................................................................................................1
Offered Securities .........................................................................................................................................1
offshore transaction.....................................................................................................................................68
OID ...........................................................................................................................................................110
OID interest payments ..............................................................................................................................110
OID Note...................................................................................................................................................110
Optional Redemption....................................................................................................................................3
Optional Redemption Date .........................................................................................................................54
Overcollateralization Ratio .........................................................................................................................26
Overcollateralization Ratio Test .................................................................................................................24
Paid Down Collateral Obligation................................................................................................................86
Panamanian Securities Act ..........................................................................................................................xi
Partial Deferrable Security........................................................................................................................156
Participation Interest .................................................................................................................................156
Paying Agent...............................................................................................................................................56
Payment Account........................................................................................................................................87
Payment Date................................................................................................................................................2
PFIC..........................................................................................................................................................112
PIK Secuirty..............................................................................................................................................156
Placement Agent ............................................................................................................................................i
Plan Asset Regulations .............................................................................................................................119
Plans..........................................................................................................................................................118
Poland ..........................................................................................................................................................xi
Portfolio Management Agreement..............................................................................................................14
Portfolio Manager ..........................................................................................................................................i
Portfolio Manager Affiliates .......................................................................................................................46
Prepaid Collateral Obligation....................................................................................................................156
Principal Collection Subaccount.................................................................................................................86
Principal Financed Accrued Interest .........................................................................................................156
Principal Proceeds.....................................................................................................................................156
Priority Category.......................................................................................................................................156
Priority Class.............................................................................................................................................156
Priority Hedge Termination Event............................................................................................................157
Pro Rata Special Redemption Conditions.................................................................................................157
Proposed Portfolio ....................................................................................................................................157
PTCE.........................................................................................................................................................119
public trading ...............................................................................................................................................xi
I-5

Purchase and Placement Agreement .........................................................................................................123
QEF election ..................................................................................................................................... 111, 113
Qualified Institutional Buyers....................................................................................................................i, 2
Qualified Purchasers ..................................................................................................................................i, 2
Ramp-Up Account ......................................................................................................................................87
Ramp-Up Failure ........................................................................................................................................15
Ramp-Up Period .........................................................................................................................................15
Rating Agencies.............................................................................................................................................i
Rating Agency ............................................................................................................................................71
Rating Factor Adjustment ...........................................................................................................................18
Record Date ................................................................................................................................................58
Redemption Date ......................................................................................................................................157
Redemption Price..........................................................................................................................................4
Reference Banks .........................................................................................................................................53
Reference Obligation ................................................................................................................................157
Refinancing.................................................................................................................................................55
Refinancing Proceeds..................................................................................................................................55
Regulation S...............................................................................................................................................i, 2
Regulation S Global Securities ...................................................................................................................67
Regulation S Global Subordinated Notes ...................................................................................................67
Reinvestment Agreement..........................................................................................................................157
Reinvestment Overcollateralization Test ....................................................................................................27
Reinvestment Period ...................................................................................................................................16
Related Obligation ....................................................................................................................................157
Required Hedge Counterparty Rating.......................................................................................................157
Restricted Trading Period .........................................................................................................................158
Revolver Funding Account .........................................................................................................................88
Revolving Collateral Obligation ...............................................................................................................158
Rule 144A ..................................................................................................................................................i, 2
Rule 144A Global Securities ......................................................................................................................67
S&P................................................................................................................................................................i
S&P CDO Monitor ...................................................................................................................................158
S&P CDO Monitor Test..............................................................................................................................19
S&P CDO Monitor Test Matrix................................................................................................................158
S&P Collateral Value................................................................................................................................159
S&P Rating ...................................................................................................................................................1
S&P Rating Condition ..............................................................................................................................159
S&P Recovery Amount.............................................................................................................................159
S&P Recovery Rate ..................................................................................................................................159
Sale Proceeds ................................................................................................................................................3
SEC .............................................................................................................................................................37
Second Lien Loan .....................................................................................................................................159
Secured Notes ...............................................................................................................................................1
Secured Parties..........................................................................................................................................159
Securities Act.............................................................................................................................................i, 2
Securities and Exchange Law .......................................................................................................................x
Securities and Futures Act ..........................................................................................................................xii
Securities Intermediary .............................................................................................................................159
Securities Lending Account........................................................................................................................91
Securities Lending Agreement..................................................................................................................159
Securities Lending Collateral....................................................................................................................159
I-6

Securities Lending Counterparty ..............................................................................................................159
Selling Institution......................................................................................................................................160
Senior Secured Loan.................................................................................................................................160
Senior Secured Note .................................................................................................................................160
Senior Unsecured Loan.............................................................................................................................161
Service Provider Exemption .....................................................................................................................119
Share Trustee ............................................................................................................................................105
Special Redemption ....................................................................................................................................57
Special Redemption Amount ..................................................................................................................5, 57
Special Redemption Date............................................................................................................................57
Stated Maturity............................................................................................................................................54
Step-Up Coupon Security .........................................................................................................................161
Structured Finance Obligation ..................................................................................................................161
Subordinated Management Fee...................................................................................................................99
Subordinated Notes.......................................................................................................................................1
Subordinated Notes Internal Rate of Return .............................................................................................162
Subordinated Notes Majority Approval....................................................................................................102
Subordinated Notes Majority Non-Approval............................................................................................103
Synthetic Security .....................................................................................................................................162
Synthetic Security Collateral ....................................................................................................................163
Synthetic Security Counterparty ...............................................................................................................163
Synthetic Security Counterparty Account...................................................................................................88
Synthetic Security Issuer Account ..............................................................................................................89
Target Initial Par Amount .........................................................................................................................163
Target Initial Par Condition ......................................................................................................................163
Tax-Exempt Investors...............................................................................................................................116
Telerate Screen............................................................................................................................................53
Third Party Credit Exposure .....................................................................................................................163
Third Party Credit Exposure Limits..........................................................................................................163
Trustee ...........................................................................................................................................................i
U.S. Dollars..................................................................................................................................................iii
U.S. Holder ...............................................................................................................................................107
U.S. person..................................................................................................................................................68
U.S.$ ............................................................................................................................................................iii
UBTI .........................................................................................................................................................116
Weighted Average Fixed Coupon...............................................................................................................73
Weighted Average Floating Spread ............................................................................................................75
Weighted Average Life...............................................................................................................................80
Weighted Average Life Test.......................................................................................................................19
Weighted Average Moody's Rating Factor.................................................................................................75
Weighted Average Moody's Recovery Rate ...............................................................................................78
Weighted Average S&P Recovery Rate .....................................................................................................79
Withholding Tax Event.............................................................................................................................164
Zero-Coupon Security...............................................................................................................................164
I-7

ANNEX A-1
FORM OF PURCHASER REPRESENTATION LETTER FOR SUBORDINATED NOTES
The Bank of New York Trust Company, National Association
Worldwide Securities Services
(Houston)—HillMark Funding Ltd.
601 Travis Street, 16 th Floor
Houston, Texas 77002
[DATE]
Re:
HillMark Funding Ltd. (the "Issuer"); Subordinated Notes
Reference is hereby made to the Indenture, dated as of [ ], 2006, among the Issuer,
HillMark Funding Corp., as Co-Issuer, and The Bank of New York Trust Company, National
Association, as Trustee (the "Indenture"). Capitalized terms not defined in this Certificate shall have
the meanings ascribed to them in the final offering circular of the Issuer or the Indenture.
This letter relates to $___________ aggregate outstanding principal amount of
Subordinated Notes (the "Subordinated Notes"), which are held in the form of [one or more certificated]
[a beneficial interest in a Regulation S Global] Subordinated Notes in the name of ______________ (the
"Transferor") to effect the transfer of the Subordinated Notes to ______________ (the "Transferee").
In connection with such request, and in respect of such Subordinated Notes, the
Transferee does hereby certify that the Subordinated Notes are being transferred (i) in accordance with
the transfer restrictions set forth in the Indenture and (ii) pursuant to an exemption from registration under
the United States Securities Act of 1933, as amended (the "Securities Act") and in accordance with any
applicable securities laws of any state of the United States or any other jurisdiction.
In addition, the Transferee hereby represents, warrants and covenants for the benefit of
the Issuer and its counsel that we are:
(a)
(PLEASE CHECK ONLY ONE)
_____ a "qualified institutional buyer" as defined in Rule 144A under the Securities Act, and are
acquiring the Subordinated Notes in reliance on the exemption from Securities Act registration
provided by Rule 144A thereunder;
_____ an institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act;
_____ an individual "accredited investor" as defined in Rule 501(a)(5), (6) or (8) under the Securities
Act who is also a "Knowledgeable Employee"; or
_____ a person that is not a "U.S. person" as defined in Regulation S under the Securities Act, and are
acquiring the Subordinated Notes in an offshore transaction (as defined in Regulation S) in
reliance on the exemption from Securities Act registration provided by Regulation S; and
A-1-1

(b) acquiring the Subordinated Notes for our own account (and not for the account of
any other Person) in a minimum denomination of $100,000 and in integral multiples of $1,000 in excess
thereof.
The Transferee further represents and warrants as follows:
1. It understands that the Subordinated Notes have not been and will not be registered under
the Securities Act, and, if in the future it decides to offer, resell, pledge or otherwise transfer the
Subordinated Notes, such Subordinated Notes may be offered, resold, pledged or otherwise transferred
only in accordance with the provisions of the Indenture and the legends on such Subordinated Notes,
including the requirement for written certifications. In particular, it understands that the Subordinated
Notes may be transferred only to a person that is either (a) a "qualified purchaser" (as defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act")), (b) a
"Knowledgeable Employee," as defined in Rule 3c-5 promulgated under the Investment Company Act, of
the Issuer, (c) 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 a Knowledgeable Employee or a
Qualified Purchaser; and in the case of (a), (b) and (c) above that is either (i) a "qualified institutional
buyer" as defined in Rule 144A under the Securities Act who purchases such Subordinated Notes in
reliance on the exemption from Securities Act registration provided by Rule 144A thereunder or (ii) an
"accredited investor" as defined in Rule 501(a)(1), (2), (3), (5), (6), (7) or (8) under the Securities Act
who, if an individual "accredited investor" is also a "Knowledgeable Employee" or (d) a person that is not
a "U.S. person" as defined in Regulation S under the Securities Act, and is acquiring the Subordinated
Notes in an offshore transaction (as defined in Regulation S thereunder) in reliance on the exemption
from registration provided by Regulation S thereunder. It acknowledges that no representation is made as
to the availability of any exemption under the Securities Act or any state securities laws for resale of the
Subordinated Notes.
2. In connection with its purchase of the Subordinated Notes: (i) none of the Co-Issuers, the
Initial Purchaser, the Placement Agent, the Portfolio Manager, the Trustee, the Collateral Administrator
or any of their respective affiliates is acting as a fiduciary or financial or investment adviser for it; (ii) it is
not relying (for purposes of making any investment decision or otherwise) upon any written or oral
advice, counsel or representations of the Co-Issuers, the Initial Purchaser, the Placement Agent, the
Portfolio Manager, the Trustee, the Collateral Administrator or any of their respective affiliates other than
any statements in the final offering circular for such Subordinated Notes; (iii) it has read and understands
the final offering circular for such Subordinated Notes (including, without limitation, the descriptions
therein of the structure of the transaction in which the Subordinated Notes are being issued and the risks
to purchasers of the Subordinated Notes); (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial and accounting advisers to the extent it has deemed necessary, and has
made its own investment decisions (including decisions regarding the suitability of any transaction
pursuant to the Indenture) 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, the Initial Purchaser, the
Placement Agent, the Portfolio Manager, the Trustee, the Collateral Administrator or any of their
respective affiliates; (v) it will hold and transfer at least the minimum denomination of such Subordinated
Notes; (vi) it was not formed for the purpose of investing in the Subordinated Notes; and (vii) it is a
sophisticated investor and is purchasing the Subordinated Notes with a full understanding of all of the
terms, conditions and risks thereof, and it is capable of assuming and willing to assume those risks.
3. (i) It is either (A) a "qualified purchaser" for purposes of Section 3(c)(7) of the
Investment Company Act, (B) a "Knowledgeable Employee" with respect to the Issuer for purposes of
Rule 3c-5 of the Investment Company Act, (C) 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
A-1-2

a Knowledgeable Employee or a Qualified Purchaser and in the case of (A), (B) and (C) above that is
either (x) a "qualified institutional buyer" as defined in Rule 144A under the Securities Act who
purchases such Subordinated Notes in reliance on the exemption from Securities Act registration provided
by Rule 144A thereunder or (y) an "accredited investor" as defined in Rule 501(a)(1), (2), (3), (5), (6), (7)
or (8) under the Securities Act who, if an individual "accredited investor," is also a "Knowledgeable
Employee" or (D) not a "U.S. person" as defined in Regulation S under the Securities Act and is acquiring
the Subordinated Notes in an offshore transaction (as defined in Regulation S thereunder) in reliance on
the exemption from registration provided by Regulation S thereunder; (ii) it is acquiring the Subordinated
Notes as principal solely for its own account for investment and not with a view to the resale, distribution
or other disposition thereof in violation of the Securities Act; (iii) it is not a (A) partnership, (B) common
trust fund, or (C) special trust, pension, profit sharing or other retirement trust fund or plan in which the
partners, beneficiaries or participants may designate the particular investments to be made; (iv) it agrees
that it shall not hold any Subordinated Notes for the benefit of any other person, that it shall at all times
be the sole beneficial owner thereof for purposes of the Investment Company Act and all other purposes
and that it shall not sell participation interests in the Subordinated Notes or enter into any other
arrangement pursuant to which any other person shall be entitled to a beneficial interest in the
distributions on the Subordinated Notes; (v) it is acquiring its interest in the Subordinated Notes for its
own account; and (vi) it will hold and transfer at least the minimum denomination of the Subordinated
Notes and provide notice of the relevant transfer restrictions to subsequent transferees.
4. It acknowledges and agrees that all of the assurances given by it in certifications required
by the Indenture as to its status under ERISA or as to its status as an Affected Bank are correct and are for
the benefit of the Issuer, the Trustee, the Initial Purchaser, the Placement Agent and the Portfolio
Manager. It agrees and acknowledges that none of Issuer or the Trustee will recognize any transfer of the
Subordinated Notes if such transfer may result in 25% or more of the value of the Subordinated Notes
being held by Benefit Plan Investors. It further agrees and acknowledges that no transfer of a Regulation
S Global Subordinated Note to a Benefit Plan Investor or a Controlling Person will be effective and the
Trustee will not recognize any such transfer. It further agrees and acknowledges that no transfer of a
Subordinated Note to an Affected Bank will be effective and the Trustee will not recognize any such
transfer, unless such transfer is specifically authorized by the Issuer in writing; provided, however, that
the Issuer shall authorize any such transfer if (x) such transfer would not cause an Affected Bank, directly
or in conjunction with its affiliates, to own more than 33⅓% of the Aggregate Outstanding Amount of the
Subordinated Notes or (y) the transferor is an Affected Bank previously approved by the Issuer.
5. It will treat its Subordinated Notes as equity of the Issuer for United States federal
income tax purposes.
6. It is ______ (check if applicable) a "United States person" within the meaning of Section
7701(a)(30) of the Code, and a properly completed and signed Internal Revenue Service Form W-9 (or
applicable successor form) is attached hereto; or ______ (check if applicable) not a "United States
person" within the meaning of Section 7701(a)(30) of the Code, and a properly completed and signed
applicable Internal Revenue Service Form W-8 (or applicable successor form) is attached hereto. It
understands and acknowledges that failure to provide the Issuer or the Trustee with the applicable United
States federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or successor
applicable form) in the case of a person that is a "United States person" within the meaning of Section
7701(a)(30) of the Code or an appropriate Internal Revenue Service Form W-8 (or successor applicable
form) in the case of a person that is not a "United States person" within the meaning of Section
7701(a)(30) of the Code) may result in United States federal back-up withholding from payments to it in
respect of the Subordinated Notes.
A-1-3

7. It agrees not to seek to commence in respect of the Issuer or the Co-Issuer, or cause the
Issuer or Co-Issuer to commence, a bankruptcy proceeding before a year and a day has elapsed since the
payment in full to the holders of the Notes issued pursuant to the Indenture or, if longer, the applicable
preference period then in effect.
8. To the extent required by the Issuer, as determined by the Issuer or the Portfolio Manager
on behalf of the Issuer, the Issuer may, upon notice to the Trustee, impose additional transfer restrictions
on the Subordinated Notes to comply with the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA Patriot Act") and
other similar laws or regulations, including, without limitation, requiring each transferee of a
Subordinated Note to make representations to the Issuer in connection with such compliance.
9. It understands that the Issuer, the Trustee, the Initial Purchaser, the Placement Agent and
their respective counsel will rely upon the accuracy and truth of the foregoing representations, and it
hereby consents to such reliance.
[The remainder of this page has been intentionally left blank.]
A-1-4

Name of Purchaser:
Dated:
By:
Name:
Title:
Outstanding principal amount of Subordinated Notes: $
Taxpayer identification number:
Address for notices:
Wire transfer information for payments:
Bank:
Address:
Bank ABA#:
Account #:
Telephone:
Facsimile:
FAO:
Attention:
Attention:
Denominations of certificates (if more than one):
Registered name:
cc:
HillMark Funding Ltd.
c/o Maples Finance Limited
Queensgate House, South Church Street
PO Box 1093GT
George Town
Grand Cayman
Cayman Islands
A-1-5

ANNEX A-2
FORM OF SUBORDINATED NOTE ERISA AND AFFECTED BANK CERTIFICATE
The purpose of this Benefit Plan Investor Certificate (this "Certificate") is, among other
things, to (i) endeavor to ensure that less than 25% of the value of the Subordinated Notes issued by
HillMark Funding Ltd. (the "Issuer") is held by an "employee benefit plan" subject to the fiduciary
responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), a "plan" subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), any entity whose underlying assets include "plan assets" by reason of such employee benefit
plan's or plan's investment in the entity or a "benefit plan investor" as such term is otherwise defined in
the regulations promulgated by the U.S. Department of Labor under Section 3(42) of ERISA
(collectively, "Benefit Plan Investors") so that the Issuer will not be subject to the U.S. federal pension
laws contained in ERISA and Section 4975 of the Code, (ii) endeavor to ensure that no Affected Bank,
directly or in conjunction with its affiliates, owns more than 33⅓% of the outstanding Subordinated
Notes, (iii) obtain from you certain representations and agreements and (iv) provide you with certain
related information with respect to your acquisition, holding or disposition of the Subordinated Notes. By
signing this Certificate, you agree to be bound by its terms.
Please be aware that the information contained in this Certificate is not intended to
constitute advice and the examples given below are not intended to be, and are not, comprehensive.
You should contact your own counsel if you have any questions in completing this Certificate.
Capitalized terms not defined in this Certificate shall have the meanings ascribed to them in the
final offering circular of the Issuer or the Indenture.
Please review the information in this Certificate and check the box(es) that are applicable to you.
If a box is not checked, you are agreeing that the applicable Section does not, and will not,
apply to you.
1. Employee Benefit Plans Subject to ERISA or the Code. We, or the entity on whose
behalf we are acting, are an "employee benefit plan" within the meaning of Section 3(3) of
ERISA that is subject to the fiduciary responsibility provisions of ERISA or a "plan" within the
meaning of Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code.
Examples: (i) tax qualified retirement plans such as pension, profit sharing and section 401(k)
plans, (ii) welfare benefit plans such as accident, life and medical plans, (iii) individual
retirement accounts or "IRAs" and "Keogh" plans and (iv) certain tax-qualified educational and
savings trusts.
2. Entity Holding Plan Assets by Reason of Plan Asset Regulations. We, or the entity
on whose behalf we are acting, are an entity or fund whose underlying assets include "plan
assets" of any Benefit Plan Investor by reason of a Benefit Plan Investor's investment in such
entity.
Examples: (i) a hedge fund or other private investment vehicle where 25% or more of the value
of any class of its equity is held by Benefit Plan Investors, (ii) an insurance company separate
account and (iii) a bank collective trust fund.
A-2-1

If you check Box 2, please indicate the maximum percentage of the entity or fund IN EXCESS OF 25%
that will constitute "plan assets" for purposes of Title I of ERISA or Section 4975 of the Code ______%.
An entity or fund that cannot provide the foregoing percentage hereby acknowledges that for purposes of
determining whether Benefit Plan Investors own less than 25% of the value of the Subordinated Notes
issued by the Issuer, 100% of the assets of the entity or fund will be treated as "plan assets."
Note: ERISA and the regulations promulgated thereunder are technical. Accordingly, if you have any
question regarding whether you may be an entity described in this Section 2, you should consult with
your counsel.
3. Insurance Company General Account. We, or the entity on whose behalf we are
acting, are an insurance company purchasing the Subordinated Notes with funds from our or their
general account (i.e., the insurance company's corporate investment portfolio), the assets of
which, in whole or in part, constitute "plan assets" for purposes of the Plan Asset Regulations.
If you check Box 3, please also check either Box A or Box B.
A. We are not able to determine an exact percentage of the general account that
constitutes "plan assets" but the maximum percentage of the general account that
constitutes (or will constitute) "plan assets" for purposes of the Plan Asset
Regulations is less than 25%.
B. The maximum percentage of the insurance company general account that will
constitute "plan assets" for purposes of conducting the 25% test under the Plan
Asset Regulations is: ____%. IF YOU CHECK THIS BOX B BUT DO NOT
INCLUDE ANY PERCENTAGE IN THE BLANK SPACE, YOU WILL BE
COUNTED AS IF YOU FILLED IN 100% IN THE BLANK SPACE.
4. None of Sections (1) Through (3) Above Apply. We, or the entity on whose behalf we
are acting, are a person that does not fall into any of the categories described in Sections (1)
through (3) above.
5. No Prohibited Transaction. If we checked any of the boxes in Sections (1) through (3) above,
we represent, warrant and agree that our acquisition, holding and disposition of the Subordinated Notes,
as applicable, do not and will not constitute or give rise to a non-exempt prohibited transaction under
Title I of ERISA or Section 4975 of the Code.
6. No Violation of Similar Law. If we are a governmental, church, non-U.S. or other plan subject
to any law substantially similar to Title I of ERISA or Section 4975 of the Code, we represent, warrant
and agree that our acquisition, holding and disposition of the Subordinated Notes, as applicable, do not
and will not constitute or give rise to a non-exempt violation of any such similar federal, state, local or
non-U.S. law.
A-2-2

7. Controlling Person. We are, or we are acting on behalf of any of: (i) the Trustee, (ii)
the Portfolio Manager, (iii) any person that has discretionary authority or control with respect to
the assets of the Issuer, (iv) any person who provides investment advice for a fee (direct or
indirect) with respect to such assets or (v) any "affiliate" of any of the above persons. "Affiliate"
shall have the meaning set forth in the Plan Asset Regulations. Any of the persons described in
the first sentence of this Section (7) is referred to in this Certificate as a "Controlling Person."
Note: We understand that, for purposes of determining whether Benefit Plan Investors hold less
than 25% of the value of the Subordinated Notes, the value of any Subordinated Notes held by
Controlling Persons (other than Benefit Plan Investors) are required to be disregarded.
Compelled Disposition. We acknowledge and agree that:
(i) if any representation that we made hereunder is subsequently shown to be false
or misleading or our beneficial ownership otherwise causes a violation of the 25% Limitation, the
Issuer shall, promptly after such discovery (or upon notice from the Trustee if the Trustee makes
the discovery (who, in each case, agree to notify the Issuer of such discovery, if any)), send
notice to us demanding that we transfer our interest to a person that is not a Non-Permitted
ERISA Holder within 30 days of the date of such notice;
(ii) if we fail to transfer our Subordinated Notes, the Issuer shall have the right,
without further notice to us, to sell our Subordinated Notes or our interest in the Subordinated
Notes, to a purchaser selected by the Issuer that is not a Non-Permitted ERISA Holder on such
terms as the Issuer may choose;
(iii) 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
Subordinated Notes and selling such securities to the highest such bidder. However, the Issuer
may select a purchaser by any other means determined by it in its sole discretion;
(iv) by our acceptance of an interest in the Subordinated Notes, we agree to cooperate
with the Issuer to affect such transfers;
(v) the proceeds of such sale, net of any commissions, expenses and taxes due in
connection with such sale shall be remitted to us; and
(vi) the terms and conditions of any sale under this subsection shall be determined in
the sole discretion of the Issuer, and the Issuer shall not be liable to us, as applicable, sold as a
result of any such sale or the exercise of such discretion.
Required Notification. We hereby agree that we (a) will inform the Trustee of any proposed
transfer by us of all or a specified portion of the Subordinated Notes owned by us to a transferee
who would be deemed to be a Benefit Plan Investor or a Controlling Person or of any proposed
change in our status under ERISA which would result in all or a portion of the Subordinated
Notes owned by us and not previously so characterized being deemed to be held by a Benefit
Plan Investor or a Controlling Person and (b) will not permit any such transfer or change of status
that would cause the 25% Limitation to be exceeded to become effective. We hereby agree and
acknowledge that after the Trustee effects any permitted transfer of Subordinated Notes owned
by us to a Benefit Plan Investor or a Controlling Person or receives notice of any such permitted
change of status, the Trustee shall include such Subordinated Notes in future calculations of the
A-2-3

25% Limitation made pursuant hereto unless subsequently notified that such Subordinated Notes
(or such portion), as applicable, would no longer be deemed to be held by Benefit Plan Investors
or Controlling Persons.
8. Affected Bank. We, or the entity on whose behalf we are acting, are a "bank" for
purposes of Section 881 of the Code or an entity affiliated with such a bank that is neither (x) a
U.S. Person (within the meaning of Section 7701(a)(30) of the Code) or (y) entitled to the
benefits of an income tax treaty with the United States under which withholding taxes on interest
payments made by obligors resident in the United States to such bank are reduced to 0%.
Note: We understand that, if we checked the box in Section 8, the Trustee will not register the transfer
of the Subordinated Notes to us unless such transfer is specifically authorized by the Issuer in writing;
provided, however, that the Issuer shall authorize any such transfer if (x) such transfer would not cause an
Affected Bank, directly or in conjunction with its affiliates, to own more than 33⅓% of the Aggregate
Outstanding Amount of such Subordinated Notes or (y) the transferor of the Subordinated Notes to us is
an Affected Bank previously approved by the Issuer.
9. Continuing Representation; Reliance. We acknowledge and agree that the representations
contained in this Certificate shall be deemed made on each day from the date we make such
representations through and including the date on which we dispose of our interests in the Subordinated
Notes. We understand and agree that the information supplied in this Certificate will be used and relied
upon by the Issuer to determine that (i) Benefit Plan Investors own or hold less than 25% of the value of
the Subordinated Notes upon any subsequent transfer of the Subordinated Notes in accordance with the
Indenture and (ii) no Affected Bank, directly or in conjunction with its affiliates, owns or holds more than
33⅓% of the Subordinated Notes at any time.
10. Further Acknowledgement. We acknowledge and agree that (i) all of the assurances contained
in this Certificate are for the benefit of the Issuer, the Trustee, the Initial Purchaser, the Placement Agent
and the Portfolio Manager as third-party beneficiaries hereof, (ii) copies of this Certificate and any
information contained herein may be provided to the Issuer, the Trustee, the Initial Purchaser, the
Placement Agent, the Portfolio Manager, affiliates of any of the foregoing parties and to each of the
foregoing parties' respective counsel for purposes of making the determinations described above and (iii)
any acquisition or transfer of the Subordinated Notes by us that is not in accordance with the provisions
of this Certificate shall be null and void from the beginning, and of no legal effect.
[The remainder of this page has been intentionally left blank.]
A-2-4

11. Future Transfer Requirements.
Transferee Letter and its Delivery. We acknowledge and agree that we may not transfer any
Subordinated Notes to any person unless the Trustee has received a certificate substantially in the form of
this Certificate. Any attempt to transfer in violation of this section will be null and void from the
beginning, and of no legal effect.
Note: Unless you are notified otherwise, the name and address of the Trustee is as
follows:
The Bank of New York Trust Company, National Association
Worldwide Securities Services
(Houston)—HillMark Funding Ltd.
601 Travis Street, 16 th Floor
Houston, Texas 77002
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Certificate.
________________________ [Insert Purchaser's Name]
By:
Name:
Title:
Dated:
This Certificate relates to $_________ of Subordinated Notes
A-2-5

ANNEX A-3
FORM OF PURCHASER REPRESENTATION LETTER FOR CERTIFICATED NOTES
The Bank of New York Trust Company, National Association
Worldwide Securities Services
(Houston)—HillMark Funding Ltd.
601 Travis Street, 16 th Floor
Houston, Texas 77002
[DATE]
Re:
HillMark Funding Ltd. (the "Issuer")[, HillMark Funding Corp. (the "Co-Issuer"
and together with the Issuer, the "Co-Issuers")]; Class [A-1][A-2][B][C][D]
Notes
Reference is hereby made to the Indenture, dated as of [ ], 2006, among the Issuer,
HillMark Funding Corp., as Co-Issuer, and The Bank of New York Trust Company, National
Association, as Trustee (the "Indenture"). Capitalized terms not defined in this Certificate shall have
the meanings ascribed to them in the final offering circular of the Issuer or the Indenture.
This letter relates to $___________ aggregate outstanding principal amount of Class [A-
1][A-2][B][C][D] Notes (the "Notes"), which are held in the form of [one or more certificated] [a
beneficial interest in a Regulation S Global] Notes in the name of ______________ (the "Transferor") to
effect the transfer of the Notes to ______________ (the "Transferee").
In connection with such request, and in respect of such Notes, the Transferee does hereby
certify that the Notes are being transferred (i) in accordance with the transfer restrictions set forth in the
Indenture and (ii) pursuant to an exemption from registration under the United States Securities Act of
1933, as amended (the "Securities Act") and in accordance with any applicable securities laws of any
state of the United States or any other jurisdiction.
In addition, the Transferee hereby represents, warrants and covenants for the benefit of
the Co-Issuers and their counsel that we are:
(a)
(PLEASE CHECK ONLY ONE)
_____ a "qualified institutional buyer" as defined in Rule 144A under the Securities Act, and are
acquiring the Notes in reliance on the exemption from Securities Act registration provided by
Rule 144A thereunder; or
_____ an institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act; and
(b) acquiring the Notes for our own account (and not for the account of any other
Person) in a minimum denomination of $500,000 and in integral multiples of $1,000 in excess thereof.
The Transferee further represents and warrants as follows:
1. It understands that the Notes have not been and will not be registered under the Securities
Act, and, if in the future it decides to offer, resell, pledge or otherwise transfer the Notes, such Notes may
A-3-1

e offered, resold, pledged or otherwise transferred only in accordance with the provisions of the
Indenture and the legends on such Notes, including the requirement for written certifications. In
particular, it understands that the Notes may be transferred only to a person that is either (a) a "qualified
purchaser" (as defined in the Investment Company Act of 1940, as amended (the "Investment Company
Act")) that is either (i) a "qualified institutional buyer" as defined in Rule 144A under the Securities Act
who purchases such Notes in reliance on the exemption from Securities Act registration provided by Rule
144A thereunder or (ii) solely in the case of Notes that are issued in the form of certificated Notes, an
institutional "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act or
(b) a person that is not a "U.S. person" as defined in Regulation S under the Securities Act, and is
acquiring the Notes in an offshore transaction (as defined in Regulation S thereunder) in reliance on the
exemption from registration provided by Regulation S thereunder. It acknowledges that no representation
is made as to the availability of any exemption under the Securities Act or any state securities laws for
resale of the Notes.
2. In connection with its purchase of the Notes: (i) none of the Co-Issuers, the Initial
Purchaser, the Placement Agent, the Portfolio Manager, the Trustee, the Collateral Administrator or any
of their respective affiliates is acting as a fiduciary or financial or investment adviser for it; (ii) it is not
relying (for purposes of making any investment decision or otherwise) upon any written or oral advice,
counsel or representations of the Co-Issuers, the Initial Purchaser, the Placement Agent, the Portfolio
Manager, the Trustee, the Collateral Administrator or any of their respective affiliates other than any
statements in the final offering circular for such Notes; (iii) it has read and understands the final offering
circular for such Notes (including, without limitation, the descriptions therein of the structure of the
transaction in which the Notes are being issued and the risks to purchasers of the Notes); (iv) it has
consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisers to
the extent it has deemed necessary, and has made its own investment decisions (including decisions
regarding the suitability of any transaction pursuant to the Indenture) 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, the Initial Purchaser, the Placement Agent, the Portfolio Manager, the Trustee, the Collateral
Administrator or any of their respective affiliates; (v) it will hold and transfer at least the minimum
denomination of such Notes; (vi) it was not formed for the purpose of investing in the Notes; and (vii) it
is a sophisticated investor and is purchasing the Notes with a full understanding of all of the terms,
conditions and risks thereof, and it is capable of assuming and willing to assume those risks.
3. (i) It is a "qualified purchaser" for purposes of Section 3(c)(7) of the Investment
Company Act that is either (x) a "qualified institutional buyer" as defined in Rule 144A under the
Securities Act who purchases such Notes in reliance on the exemption from Securities Act registration
provided by Rule 144A thereunder or (y) an institutional "accredited investor" as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act; (ii) it is acquiring the Notes as principal solely for its
own account for investment and not with a view to the resale, distribution or other disposition thereof in
violation of the Securities Act; (iii) it is not a (A) partnership, (B) common trust fund, or (C) special trust,
pension, profit sharing or other retirement trust fund or plan in which the partners, beneficiaries or
participants may designate the particular investments to be made; (iv) it agrees that it shall not hold any
Notes for the benefit of any other person, that it shall at all times be the sole beneficial owner thereof for
purposes of the Investment Company Act and all other purposes and that it shall not sell participation
interests in the Notes or enter into any other arrangement pursuant to which any other person shall be
entitled to a beneficial interest in the distributions on the Notes; (v) it is acquiring its interest in the Notes
for its own account; and (vi) it will hold and transfer at least the minimum denomination of the Notes and
provide notice of the relevant transfer restrictions to subsequent transferees.
4. In the case of the Class A Notes, the Class B Notes and the Class C Notes, it
acknowledges and agrees that on each day from the date on which it acquires its interest in such Notes
A-3-2

through and including the date on which it disposes of its interest in such Notes either that (A) it is neither
a Plan nor any entity whose underlying assets include "plan assets" by reason of such Plan's investment in
the entity, nor a governmental, church, non-U.S. or other plan which is subject to any federal, state, local
or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code or (B) its purchase, holding and disposition of a Note will not constitute or result in a nonexempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of
a governmental, church or other plan, a non-exempt violation under any substantially similar law).
5. In the case of the Class D Notes, it acknowledges and agrees that all of the assurances
given by it in certifications required by the Indenture as to its status under ERISA or as to its status as an
Affected Bank are correct and are for the benefit of the Issuer, the Trustee, the Initial Purchaser, the
Placement Agent and the Portfolio Manager. It agrees and acknowledges that none of Issuer or the
Trustee will recognize any transfer of the Notes, as applicable, if such transfer may result in Notes being
held by Benefit Plan Investors. It further agrees and acknowledges that no transfer of a Note, as
applicable, to an Affected Bank will be effective and the Trustee will not recognize any such transfer,
unless such transfer is specifically authorized by the Issuer in writing; provided, however, that the Issuer
shall authorize any such transfer if (x) such transfer would not cause an Affected Bank, directly or in
conjunction with its affiliates, to own more than 33-1/3% of the Aggregate Outstanding Amount of the
Class D Notes or (y) the transferor of the Notes, as applicable, to us is an Affected Bank previously
approved by the Issuer.
6. It is ______ (check if applicable) a "United States person" within the meaning of Section
7701(a)(30) of the Code, and a properly completed and signed Internal Revenue Service Form W-9 (or
applicable successor form) is attached hereto; or ______ (check if applicable) not a "United States
person" within the meaning of Section 7701(a)(30) of the Code, and a properly completed and signed
applicable Internal Revenue Service Form W-8 (or applicable successor form) is attached hereto. It
understands and acknowledges that failure to provide the Issuer or the Trustee with the applicable United
States federal income tax certifications (generally, an Internal Revenue Service Form W-9 (or successor
applicable form) in the case of a person that is a "United States person" within the meaning of Section
7701(a)(30) of the Code or an appropriate Internal Revenue Service Form W-8 (or successor applicable
form) in the case of a person that is not a "United States person" within the meaning of Section
7701(a)(30) of the Code) may result in United States federal back-up withholding from payments to it in
respect of the Notes.
7. It agrees not to seek to commence in respect of the Issuer or the Co-Issuer, or cause the
Issuer or Co-Issuer to commence, a bankruptcy proceeding before a year and a day has elapsed since the
payment in full to the holders of the Notes issued pursuant to the Indenture or, if longer, the applicable
preference period then in effect.
8. To the extent required by the Issuer, as determined by the Issuer or the Portfolio Manager
on behalf of the Issuer, the Issuer may, upon notice to the Trustee, impose additional transfer restrictions
on the Notes to comply with the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (the "USA Patriot Act") and other similar laws
or regulations, including, without limitation, requiring each transferee of a Note to make representations
to the Issuer in connection with such compliance.
9. It understands that the Issuer, the Trustee, the Initial Purchaser, the Placement Agent and
their respective counsel will rely upon the accuracy and truth of the foregoing representations, and it
hereby consents to such reliance.
[The remainder of this page has been intentionally left blank.]
A-3-3

Name of Purchaser:
Dated:
By:
Name:
Title:
Outstanding principal amount of Class [A-1][A-2][B][C][D] Notes: $
Taxpayer identification number:
Address for notices:
Wire transfer information for payments:
Bank:
Address:
Bank ABA#:
Account #:
Telephone:
Facsimile:
FAO:
Attention:
Attention:
Denominations of certificates (if more than one):
Registered name:
cc:
HillMark Funding Ltd.
c/o Maples Finance Limited
Queensgate House, South Church Street
PO Box 1093GT
George Town
Grand Cayman
Cayman Islands
[HillMark Funding Corp.
c/o Puglisi & Associates
850 Library Avenue, Ste. 204
Newark, Delaware 19711]
A-3-4

FORM OF CLASS D NOTE ERISA AND AFFECTED BANK CERTIFICATE
ANNEX A-4
The purpose of this certificate (this "Certificate") is, among other things, to (i) endeavor to
ensure that none of the value of the Class D Notes issued by HillMark Funding Ltd. (the "Issuer") is held
by an "employee benefit plan" subject to the fiduciary responsibility provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), a "plan" subject to Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"), any entity whose underlying assets include
"plan assets" by reason of such employee benefit plan's or plan's investment in the entity or a "benefit
plan investor" as such term is otherwise defined in the regulations promulgated by the U.S. Department of
Labor under Section 3(42) of ERISA (collectively, "Benefit Plan Investors") so that the Issuer will not be
subject to the U.S. federal pension laws contained in the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) obtain from you certain representations and agreements and (iii) provide you with certain
related information with respect to your acquisition, holding or disposition of the Class D Notes. By
signing this Certificate, you are agreeing to be bound by its terms.
Please be aware that the information contained in this Certificate is not intended to constitute
advice and the examples given below are not intended to be, and are not, comprehensive. You
should contact your own counsel if you have any questions in completing this Certificate.
Capitalized terms not defined in this Certificate shall have the meanings ascribed to them in the
final offering circular of the Issuer or the Indenture.
We, or the entity on whose behalf we are acting, acknowledge and agree as follows:
1. We are not acquiring the Class D Notes directly or indirectly, for, on behalf of or using the assets
of, a Benefit Plan Investor.
A Benefit Plan Investor includes:
(i) an "employee benefit plan" within the meaning of Section 3(3) of ERISA that is subject
to the fiduciary responsibility provisions of ERISA or a "plan" within the meaning of
Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code;
Examples: (i) tax qualified retirement plans such as pension, profit sharing and section
401(k) plans, (ii) welfare benefit plans such as accident, life and medical plans, (iii)
individual retirement accounts or "IRAs" and "Keogh" plans and (iv) certain tax-qualified
educational and savings trusts.
(ii)
an entity or fund whose underlying assets include "plan assets" of any Benefit Plan
Investor by reason of a Benefit Plan Investor's investment in such entity; or
Examples: (i) a hedge fund or other private investment vehicle where 25% or more of
the value of any class of its equity is held by Benefit Plan Investors, (ii) an insurance
company separate account and (iii) a bank collective trust fund.
(iii)
certain insurance company general accounts (i.e., such insurance company's corporate
investment portfolio).
ERISA AND THE REGULATIONS PROMULGATED THEREUNDER ARE TECHNICAL.
ACCORDINGLY, IF YOU HAVE ANY QUESTIONS ABOUT THE DEFINITION OF "BENEFIT
PLAN INVESTOR," YOU SHOULD CONSULT WITH YOUR COUNSEL.
A-4-1

2. No Violation of Similar Law. If we are a governmental, church, non-U.S. or other plan subject
to any law substantially similar to Title I of ERISA or Section 4975 of the Code, we represent, warrant
and agree that our acquisition, holding and disposition of the Class D Notes, as applicable, do not and will
not constitute or give rise to a non-exempt violation of any such similar federal, state, local or non-U.S.
law.
3. (i) The representations contained in this Certificate shall be deemed made on each day from the
date we make such representations through and including the date on which we dispose of our interests in
the Class D Notes and (ii) the information supplied in this Certificate will be used and relied upon by the
Issuer to determine that Benefit Plan Investors own or hold none of the value of the Class D Notes at any
time.
4. (i) All of the assurances contained in this Certificate are for the benefit of the Issuer, the Trustee,
the Initial Purchaser, the Placement Agent and the Portfolio Manager as third-party beneficiaries hereof,
(ii) copies of this Certificate and any information contained herein may be provided to the Issuer, the
Initial Purchaser, the Placement Agent, the Portfolio Manager, affiliates of any of the foregoing parties,
and to each of the foregoing parties' respective counsel and (iii) any transfer of the Class D Notes by us
that is not in accordance with the provisions of this Certificate shall be null and void from the beginning,
and of no legal effect.
5. We will transfer any Class D Notes only to a person that is not (and has appropriately represented
that it is not) a Benefit Plan Investor or a Controlling Person and any attempted transfer in violation of
this Section will be null and void from the beginning and of no legal effect.
6. We acknowledge and agree that we may not transfer any Class D Notes to any person acquiring
an interest in Class D Notes in the form of Certificated Notes unless the Trustee has received a certificate
substantially in the form of this Certificate. Any attempt to transfer in violation of this section will be
null and void from the beginning, and of no legal effect.
Note: Unless you are notified otherwise, the name and address of the Trustee is as follows:
The Bank of New York Trust Company, National Association
Worldwide Securities Services
(Houston)—HillMark Funding Ltd.
601 Travis Street, 16 th Floor
Houston, Texas 77002
7. Affected Bank. (Check the box below if applicable) We, or the entity on whose behalf we are
acting, are a "bank" for purposes of Section 881 of the Code or an entity affiliated with such a bank that is
neither (x) a U.S. Person (within the meaning of Section 7701(a)(30) of the Code) or (y) entitled to the
benefits of an income tax treaty with the United States under which withholding taxes on interest
payments made by obligors resident in the United States to such bank are reduced to 0%
Note: We understand that, if we checked the box in this Section 7, the Trustee will not register the
transfer of the Class D Notes to us unless such transfer is specifically authorized by the Issuer in writing;
provided, however, that the Issuer shall authorize any such transfer if (x) such transfer would not cause an
Affected Bank, directly or in conjunction with its affiliates, to own more than 33⅓% of the Aggregate
Outstanding Amount of the Class D Notes or (y) the transferor of the Class D Notes to us is an Affected
Bank previously approved by the Issuer.
[The remainder of this page has been intentionally left blank.]
A-4-2

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this
Transferee Certificate.
________________________ (insert Purchaser's Name)
By:
Name:
Title:
Dated:
This Certificate relates to $_________ of Class D Notes
A-4-3

ANNEX B
MOODY'S RATING DEFINITIONS
"Moody's Default Probability Rating" means, with respect to any Collateral Obligation, as of
any date of determination, the rating determined in accordance with the following methodology:
(i) With respect to a Collateral Obligation that is a Moody's Senior Secured Loan or
Participation Interest in a Moody's Senior Secured Loan, if the obligor of such Collateral
Obligation has a corporate family rating by Moody's, then such corporate family rating;
(ii) With respect to a Collateral Obligation that is a Moody's Senior Secured Loan or
Participation Interest in a Moody's Senior Secured Loan, if not determined pursuant to clause (i)
above, or a Structured Finance Obligation, if such Collateral Obligation (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 Portfolio
Manager, such rating or the corporate family rating estimate, as applicable;
(iii) With respect to a Collateral Obligation other than a Synthetic Security or a
Structured Finance Obligation, if not determined pursuant to clause (i) or (ii) above, (A) if the
obligor of such Collateral Obligation has one or more senior unsecured obligations publicly rated
by Moody's, then the Moody's public rating on any such obligation (or, if such Collateral
Obligation is a Moody's Senior Secured Loan, the Moody's rating that is one subcategory higher
than the Moody's public rating on any such senior unsecured obligation) as selected by the
Portfolio Manager or, if no such rating is available, (B) if such Collateral Obligation 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 Obligation by Moody's upon the request of the
Issuer, the Portfolio Manager or an affiliate of the Portfolio Manager, such rating or, in the case
of a rating estimate, the applicable rating estimate for such obligation or (D) if such Collateral
Obligation is a DIP Collateral Obligation, the Moody's Derived Rating set forth in clause (iv)(F)
in the definition thereof;
(iv) With respect to a Collateral Obligation other than a Synthetic Security or a
Structured Finance Obligation, if not determined pursuant to clause (i), (ii) or (iii) above, the
Moody's Derived Rating; and
(v) With respect to a Synthetic Security, as determined as set forth in "Security for
the Secured Notes—Collateral Assumptions."
For purposes of this definition, a Senior Secured Note shall be deemed to be a Moody's Senior Secured
Loan if such Senior Secured Note, if it were a loan, would meet the definition of Moody's Senior Secured
Loan. 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 Derived Rating" means, with respect to a Collateral Obligation (other than a
Structured Finance Obligation or a Synthetic 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:
B-1

(i) If the obligor of such Collateral Obligation 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:
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 Obligation has a corporate family rating by Moody's, then one subcategory below such
corporate family 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
Obligation
Not Structured
Finance Obligation
S&P Rating
>BBB-
Collateral Obligation
Rated by S&P
Not a Loan or Participation
Interest in Loan
Number of
Subcategories Relative
to Moody's Equivalent
of S&P Rating
-1
Not Structured
Finance Obligation

(B) if such Collateral Obligation is not rated by Moody's or S&P and no other security or
obligation of the issuer of such Collateral Obligation is rated by Moody's or S&P, and if Moody's has
been requested by the Issuer, Portfolio Manager or the issuer of such Collateral Obligation to assign a
rating or rating estimate with respect to such Collateral Obligation but such rating or rating estimate has
not been received, pending receipt of such estimate, (1) "B3" if the Portfolio Manager certifies to the
Trustee that the Portfolio Manager believes that such estimate will be at least "B3" and if the aggregate
principal balance of Collateral Obligations determined pursuant to this clause (B) does not exceed 5% of
the Collateral Principal Amount of all Collateral Obligations or (2) otherwise, "Caa1";
(C) if the obligor of such Collateral Obligation is a U.S. obligor and if such Collateral
Obligation 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 Obligation is a U.S. obligor and if such Collateral
Obligation 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)
years, "Ca"; or
if a debt security or obligation of the obligor has been in default during the past two
(F) with respect to any DIP Collateral Obligation, one subcategory below the facility rating
(whether public or private) of such DIP Collateral Obligation rated by Moody's.
For purposes of this definition, a Senior Secured Note shall be deemed to be a Moody's Senior Secured
Loan if such Senior Secured Note, if it were a loan, would meet the definition of Moody's Senior Secured
Loan. 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.
"Moody's Rating" means, with respect to any Collateral Obligation, as of any date of
determination, the rating determined in accordance with the following methodology:
(i) With respect to a Collateral Obligation (including a Structured Finance
Obligation) 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 Portfolio Manager, such rating or, in the case of a rating estimate, the
applicable rating estimate for such obligation;
(ii) With respect to a Collateral Obligation that is a Moody's Senior Secured Loan or
Participation Interest in a Moody's Senior Secured Loan, if not determined pursuant to clause (i)
above, if the obligor of such Collateral Obligation has a corporate family rating by Moody's, then
such corporate family rating;
B-3

(iii) With respect to a Collateral Obligation other than a Synthetic Security or a
Structured Finance Obligation, if not determined pursuant to clause (i) or (ii) above, if the obligor
of such Collateral Obligation has one or more senior unsecured obligations publicly rated by
Moody's, then the Moody's public rating on any such obligation (or, if such Collateral Obligation
is a Moody's Senior Secured Loan, the Moody's rating that is one subcategory higher than the
Moody's public rating on any such senior unsecured obligation) as selected by the Portfolio
Manager;
(iv) With respect to a Collateral Obligation (other than a Synthetic Security or a
Structured Finance Obligation), if not determined pursuant to clause (i), (ii) or (iii) above, the
Moody's Derived Rating; and
(v) With respect to a Synthetic Security, as determined as set forth in "Security for
the Secured Notes—Collateral Assumptions."
For purposes of this definition, a Senior Secured Note shall be deemed to be a Moody's Senior Secured
Loan if such Senior Secured Note, if it were a loan, would meet the definition of Moody's Senior Secured
Loan. 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.
B-4

ANNEX C
S&P RATING DEFINITION
"S&P Rating" means, with respect to any Collateral Obligation, as of any date of determination,
the rating determined in accordance with the following methodology:
(i) (a) if there is an issuer credit rating of the issuer of such Collateral Obligation by
S&P as published by S&P, or the guarantor which unconditionally and irrevocably guarantees
such Collateral Obligation then the S&P Rating shall be such rating (regardless of whether there
is a published rating by S&P on the Collateral Obligations of such issuer held by the Issuer) or (b)
if there is no issuer credit rating of the issuer by S&P but (i) if there is a senior unsecured rating
on any obligation or security of the issuer, the S&P Rating of such Collateral Obligation shall
equal such rating; (ii) if there is a senior secured rating on any obligation or security of the issuer,
then the S&P Rating of such Collateral Obligation shall be one sub-category below such rating;
and (iii) if there is a subordinated rating on any obligation or security of the issuer, then the S&P
Rating of such Collateral Obligation shall be one sub-category above such rating if such rating is
higher than "BB+", and shall be two sub-categories above such rating if such rating is "BB+" or
lower;
(ii) (a) with respect to any Collateral Obligation that is a Synthetic Security, the
S&P Rating shall be the rating assigned thereto by S&P in connection with the acquisition thereof
by the Issuer upon request of the Issuer or the Portfolio Manager (or, in the case of a Form
Approved Synthetic Security, shall be the lower of the S&P Rating of the related Reference
Obligation and the rating assigned by S&P to the Synthetic Security Counterparty); and
(b) with respect to any Collateral Obligation that is a DIP Collateral
Obligation, the S&P Rating thereof shall be the credit rating assigned to such issue by
S&P;
(iii) if there is not a rating by S&P on the issuer or on an obligation of the issuer, then
the S&P Rating may be determined pursuant to clauses (a) through (c) below:
(a) if an obligation of the issuer is not a DIP Collateral Obligation and is
publicly rated by Moody's, then the S&P Rating will be determined in accordance with
the methodologies for establishing the Moody's Rating set forth above except that the
S&P Rating of such obligation will be (1) one sub-category below the S&P equivalent of
the Moody's Rating if such Moody's Rating is "Baa3" or higher and (2) two subcategories
below the S&P equivalent of the Moody's Rating if such Moody's Rating is
"Ba1" or lower;
(b) the Issuer, the Portfolio Manager on behalf of the Issuer or the issuer of
such Collateral Obligation may apply to S&P for a credit estimate which shall be its S&P
Rating; provided, that for a period of up to thirty (30) days from the date of such
application pending receipt from S&P of such estimate, such Collateral Obligation shall
have an S&P Rating of "B-" if the Portfolio Manager provides written notice that such
estimate will be at least "B-"; provided, further, that for so long as any of the Secured
Notes remain Outstanding, prior to or immediately following the acquisition of any
Collateral Obligation not publicly rated by S&P and on or prior to each one-year
anniversary of the acquisition of any such Collateral Obligation, the Issuer shall submit to
C-1

S&P a request to perform a credit estimate on such Collateral Obligation, together with
all information reasonably required to perform such estimate; or
(c) with respect to a Collateral Obligation that is not a Defaulted Obligation,
the S&P Rating of such Collateral Obligation will at the election of the Issuer (at the
direction of the Portfolio Manager) be "CCC-"; or
(iv) with respect to a DIP Collateral Obligation that has no issue rating by S&P or a
Current Pay Obligation that is rated "D" or "SD" by S&P, the S&P Rating of such DIP Collateral
Obligation or Current Pay Obligation, as applicable, will be, at the election of the Issuer (at the
direction of the Portfolio Manager), "CCC-" or the S&P Rating determined pursuant to clause
(iii)(b) above;
provided, that for purposes of the determination of the S&P Rating, (x) if the applicable rating assigned
by S&P to an obligor or its obligations is on "credit watch positive" by S&P, such rating will be treated as
being one sub-category above such assigned rating and (y) if the applicable rating assigned by S&P to an
obligor or its obligations is on "credit watch negative" by S&P, such rating will be treated as being one
sub-category below such assigned rating.
C-2

PRINCIPAL OFFICE OF ISSUER
HillMark Funding Ltd.
c/o Maples Finance Limited
Queensgate House, South Church Street
PO Box 1093GT
George Town, Grand Cayman
Cayman Islands
PRINCIPAL OFFICE OF CO-ISSUER
HillMark Funding Corp.
c/o Puglisi & Associates
850 Library Avenue, Ste. 204
Newark, Delaware 19711
TRUSTEE
AND PAYING AGENT
The Bank of New York Trust Company, National Association
601 Travis Street, 16 th Floor
Houston, Texas 77002
PORTFOLIO MANAGER
HillMark Capital Management, L.P.
600 Madison Avenue
New York, NY 10022
IRISH PAYING AGENT AND LISTING AGENT
RSM Robson Rhodes LLP
RSM House
Herbert Street
Dublin 2, Ireland
LEGAL ADVISORS
To the Co-Issuers, the Initial Purchaser and the
Placement Agent
as to United States law
McKee Nelson LLP
One Battery Park Plaza
New York, New York 10004
To the Issuer as to
Cayman Islands law
Maples and Calder
Ugland House, South Church Street
PO Box 309GT
George Town, Grand Cayman
Cayman Islands
To the Portfolio Manager
as to United States law
To the Trustee and Collateral Administrator
as to United States law
Clifford Chance US LLP
Gardere Wynne Sewell LLP
31 West 52 nd Street 1000 Louisiana, Suite 3400
New York, New York 10019 Houston, Texas 77002