Octagon Investment Partners IX, Ltd. JPMorgan - Irish Stock Exchange

Offering Subject Memorandum
to Completion or Amendment, dated March [__], 2006
Octagon Investment Partners IX, Ltd.
Octagon Investment Partners IX, LLC
U.S.$300,000,000 Class A-1 Senior Secured Floating Rate Notes due 2020
U.S.$14,000,000 Class A-2 Senior Secured Floating Rate Notes due 2020
U.S.$20,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2020
U.S.$21,200,000 Class C Secured Deferrable Floating Rate Notes due 2020
44,800 Mandatorily Redeemable Preferred Shares
The Class A-1 Senior Secured Floating Rate Notes due 2020 (the "Class A-1 Notes"), the Class A-2 Senior Secured Floating Rate Notes due
2020 (the "Class A-2 Notes" and, together with the Class A-1 Notes, the "Class A Notes"), the Class B Senior Secured Deferrable Floating Rate
Notes due 2020 (the "Class B Notes") and the Class C Secured Deferrable Floating Rate Notes due 2020 (the "Class C Notes") will be issued by
Octagon Investment Partners IX, Ltd., a recently formed Cayman Islands exempted company with limited liability (the "Issuer"), and Octagon
Investment Partners IX, LLC, a recently formed Delaware limited liability company (the "Co-Issuer" and, together with the Issuer, the
"Co-Issuers"). The Issuer also will issue 44,800 Mandatorily Redeemable Preferred Shares (the "Preferred Shares"). The Class A Notes, the
Class B Notes and the Class C Notes collectively are referred to herein as the "Notes." The Notes and the Preferred Shares together are referred to
herein as the "Offered Securities."
The Notes will be issued and secured pursuant to an Indenture to be dated as of the Closing Date (as defined below) (the "Indenture") among
the Issuer, the Co-Issuer and U.S. Bank National Association, as trustee (the "Trustee"). The Collateral Debt Obligations (as defined herein, and
primarily consisting of bank loans, participations and corporate debt securities) will be managed by Octagon Credit Investors, LLC (the
"Collateral Manager").
It is a condition to 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 Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's" 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 Standard &
Poor's, (iii) the Class B Notes be rated at least "A2" by Moody's and at least "A" by Standard & Poor's, and (iv) the Class C Notes be rated at least
"Baa2" by Moody's and at least "BBB" by Standard & Poor's. The Preferred Shares will not be rated. 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, as competent authority under Directive 2003/71/EC, for this
Prospectus to be approved. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and traded on
its regulated market. Such approval or admission relates only to the Notes which are to be admitted to trading on the regulated market of 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 Financial Services Regulatory Authority or the Irish Stock
Exchange will in fact accept the listing of such Notes or that the listing, if granted, will be maintained. This Offering Memorandum, subject to it
being approved by the Irish Financial Services Regulatory Authority, constitutes a "Prospectus" for purposes of Directive 2003/71/EC.
(Continued on next page)
See "Risk Factors" for a description of some of the factors that should be considered in evaluating an investment in the Offered
Securities.
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) QUALIFIED INSTITUTIONAL BUYERS ("QUALIFIED INSTITUTIONAL
BUYERS") (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR, SOLELY IN THE CASE OF THE
PREFERRED SHARES, ACCREDITED INVESTORS ("ACCREDITED INVESTORS") (AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT) IN TRANSACTIONS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT 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 PREFERRED SHARES, KNOWLEDGEABLE EMPLOYEES ("KNOWLEDGEABLE
EMPLOYEES") (AS DEFINED IN RULE 3c-5 UNDER THE INVESTMENT COMPANY ACT) WITH RESPECT TO THE ISSUER OR A
COMPANY OWNED EXCLUSIVELY BY QUALIFIED PURCHASERS AND/OR KNOWLEDGEABLE EMPLOYEES, AND IN
ACCORDANCE WITH ANY OTHER APPLICABLE LAW.
The Offered Securities are being offered by J.P. Morgan Securities Inc. ("JPMorgan") as placement agent (in such capacity, the "Placement
Agent") on behalf of the Co-Issuers, subject to prior sale, when, as and if issued. The Placement Agent reserves the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that, on or about May 25, 2006 (the "Closing Date"), beneficial interests
in the Rule 144A Global Notes will be delivered in book-entry form through the facilities of The Depository Trust Company ("DTC"), beneficial
interests in the Regulation S Global Notes will be delivered in book-entry form through the facilities of Euroclear Bank, S.A./N.V., as operator of
the Euroclear System ("Euroclear") or Clearstream Banking, société anonyme ("Clearstream-Luxembourg") and certificates in respect of the
Preferred Shares will be delivered and the Preferred Shares will be issued in definitive, fully registered form and registered in the name of the
beneficial owner thereof, in each case against payment therefor in immediately available funds.
JPMorgan
August 14, 2006

(continued from previous page)
Interest on the Notes will accrue on the outstanding principal balance thereof from the Closing Date. Subject to
the Priority of Payments (as defined herein), interest will be payable quarterly in arrears on the 23rd day of each
January, April, July and October (or, if not a Business Day, on the immediately following Business Day) (each, a
"Distribution Date"), commencing in October 2006; provided that, if the Notes are no longer outstanding, a
Distribution Date will occur on any date designated as such by the Issuer or the Collateral Manager on behalf of the
Issuer not less than one Business Day prior to the date so designated. The principal of the Notes is required to be
paid on the Distribution Date occurring in April 2020 (the "Stated Maturity") unless redeemed or repaid prior
thereto. The Preferred Shares will not have a stated rate of dividends; rather, the holders of the Preferred Shares will,
subject to the provisions of the Fiscal Agency Agreement and Cayman Islands law, receive on each Distribution
Date, on a noncumulative basis, the amounts, if any, distributable to such holders in accordance with each of
clauses (19) and (21) of the allocation of payments described below under "Application of Funds—Priority of
Payments—Distributions of Interest Proceeds" and each of clauses (9) and (11) of the allocation of payments
described below under "Application of Funds—Priority of Payments—Distributions of Principal Proceeds,"
respectively. Payments on the Offered Securities will be made in U.S. dollars.
The Notes are subject to full or partial redemption or prepayment under the circumstances described herein
under "Description of the Offered Securities—Redemption" and "Application of Funds—Priority of Payments."
The Preferred Shares are subject to full redemption at the direction of the Majority of the Preferred Shares on any
Distribution Date following the payment in full of the Notes. See "Description of the Offered Securities—
Redemption."
The Offered Securities are subject to various risks related to the performance of the Collateral Debt Obligations
and the structure of the transaction. These risks, among others, should be considered in connection with any
purchase of the Notes. See "Risk Factors" herein for a discussion of some of the risks that should be considered in
evaluating an investment in the Notes. See also "Description of the Offered Securities" and "Security for the Notes"
herein.
The Notes sold within the United States or to "U.S. persons" as defined in Regulation S under the Securities
Act (each, a "U.S. Person") in reliance on Rule 144A under the Securities Act ("Rule 144A") or, in the case of the
initial offering, Section 4(2) of the Securities Act, initially will be issued in the form of one or more global notes in
fully registered form without coupons (each, a "Rule 144A Global Note") to be deposited with the Trustee as
custodian for, and registered in the name of a nominee of, DTC. The Notes sold in offshore transactions in reliance
on Regulation S under the Securities Act ("Regulation S") to persons that are not U.S. Persons initially will be
issued in the form of one or more global notes in fully registered form without coupons (each, a "Regulation S
Global Note") to be deposited with the Trustee as custodian for, and registered in the name of a nominee of, DTC,
for the respective accounts of Euroclear Bank S.A./N.V., 1 Boulevard du Roi Albert II, B - 1210 Brussels, as
operator of the Euroclear System ("Euroclear") and Clearstream Banking, société anonyme, L-2967 Luxembourg,
Luxembourg ("Clearstream-Luxembourg"). Beneficial interests in a Regulation S Global Note may be held only
through Euroclear or Clearstream-Luxembourg and may not be held by a U.S. Person at any time.
The Preferred Shares will be issued in the form of definitive physical certificates in fully registered form
without coupons, registered in the name of the legal and beneficial owner thereof (or a nominee acting on behalf of
such legal and beneficial owner).
Interests in a Regulation S Global Note may not be held at any time by a U.S. Person, and re-offers or resales of
such Notes or Preferred Shares offered outside the United States in reliance on Regulation S under the Securities Act
may be effected only in a transaction exempt from the registration requirements of the Securities Act and not
involving directly or indirectly the Issuer, the Co-Issuer or their agents, affiliates or intermediaries. In addition, until
the expiration of the applicable Distribution Compliance Period (as defined herein), a re-offer or resale of any Note
originally sold pursuant to Regulation S to, or for the account or benefit of, a U.S. Person by a dealer or person
receiving a concession, fee or remuneration in respect of the Notes may violate the registration requirements of the
Securities Act, unless such offer and sale is made in compliance with an exemption from such registration
requirements. Each purchaser of an interest in a Note or Preferred Share in the initial offering thereof and each
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subsequent transferee will be required to make or will be deemed to have made certain representations and
agreements. See "Certain ERISA Considerations" and "Transfer Restrictions."
Application has been made to list the Notes on the Irish Stock Exchange through Arthur Cox Listing Services
Limited ("ACLSL" and in such capacity, the "Irish Listing Agent").
Other than as expressly excepted herein, the Co-Issuers accept responsibility for the information contained in
this document. To the best of their knowledge and belief, the information contained in this document is in
accordance with the facts as of the date hereof and does not omit anything likely to affect the import of such
information.
The Collateral Manager accepts responsibility for the information with respect to the material relating to the
Collateral Manager set forth under “The Collateral Manager”. To the best of the knowledge and belief of the
Collateral Manager the information contained therein is in accordance with the facts as of the date hereof, and does
not omit anything likely to affect the import of such information.
THIS OFFERING MEMORANDUM ("OFFERING MEMORANDUM") DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, (I) ANY SECURITIES OTHER
THAN THE OFFERED SECURITIES OR (II) ANY SECURITIES IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFER OR SOLICITATION. THE
DISTRIBUTION OF THIS OFFERING MEMORANDUM AND THE OFFER OR SALE OF THE
OFFERED SECURITIES MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. PERSONS
INTO WHOSE POSSESSION THIS OFFERING MEMORANDUM OR ANY OF THE OFFERED
SECURITIES COME ARE REQUIRED BY THE CO-ISSUERS AND THE PLACEMENT AGENT TO
INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH RESTRICTIONS.
EACH PROSPECTIVE PURCHASER OF ANY OF THE OFFERED SECURITIES MUST COMPLY
WITH ALL APPLICABLE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION IN WHICH
IT PURCHASES, OFFERS OR SELLS SUCH OFFERED SECURITIES OR POSSESSES OR
DISTRIBUTES THIS OFFERING MEMORANDUM AND MUST OBTAIN ANY CONSENT, APPROVAL
OR PERMISSION REQUIRED BY IT FOR THE PURCHASE, OFFER OR SALE BY IT OF THE
OFFERED SECURITIES UNDER THE LAWS AND REGULATIONS IN FORCE IN ANY
JURISDICTION TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH PURCHASES, OFFERS
OR SALES, AND NONE OF THE CO-ISSUERS, THE PLACEMENT AGENT, THE COLLATERAL
MANAGER AND ANY OF THEIR RESPECTIVE AFFILIATES SHALL HAVE ANY RESPONSIBILITY
THEREFOR.
IRS CIRCULAR 230 NOTICE. THIS OFFERING MEMORANDUM WAS NOT INTENDED OR
WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSES OF AVOIDING U.S.
FEDERAL, STATE, OR LOCAL TAX PENALTIES. THIS OFFERING MEMORANDUM WAS
WRITTEN AND PROVIDED BY THE CO-ISSUERS IN CONNECTION WITH THE PROMOTION OR
MARKETING BY THE CO-ISSUERS AND/OR PLACEMENT AGENT OF THE OFFERED
SECURITIES. EACH HOLDER OF THE OFFERED SECURITIES SHOULD SEEK ADVICE BASED ON
ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
THE OFFERED SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED WITH,
RECOMMENDED BY OR APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR ANY OTHER SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAS
ANY SUCH COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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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 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 MEMORANDUM OR ANY OTHER OFFERING MATERIAL OR
ADVERTISEMENT RELATING TO THE OFFERED SECURITIES IN AUSTRALIA,
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
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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
MEMORANDUM 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 MEMORANDUM 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 MEMORANDUM 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.
NOTICE TO RESIDENTS IN THE PROVINCES OF QUEBEC, ONTARIO AND
BRITISH COLUMBIA IN CANADA
THIS OFFERING MEMORANDUM 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
MEMORANDUM 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
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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.
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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 MEMORANDUM, 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
MEMORANDUM 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:
(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.
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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 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 MEMORANDUM 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 MEMORANDUM, 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 MEMORANDUM 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,
-viii-

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, 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
MEMORANDUM 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 MEMORANDUM 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 MEMORANDUM 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
-ix-

FORTH IN THE DECEMBER 28, 1990 GRAND DUCAL REGULATION (ON THE REQUIREMENTS FOR
THE DRAWING-UP, SCRUTINY AND DISTRIBUTION OF THE 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 THE NETHERLANDS
THE OFFERED SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED OR DELIVERED,
HAVE NOT BEEN OFFERED, SOLD, TRANSFERRED AND DELIVERED AND WILL NOT BE OFFERED,
SOLD, TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY, ANYWHERE IN THE WORLD,
OTHER THAN TO PERSONS WHO TRADE OR INVEST IN SECURITIES IN THE CONDUCT OF THEIR
PROFESSION OR BUSINESS AND WHO QUALIFY AS PROFESSIONAL MARKET PARTIES ("PMPS") AS
DEFINED IN THE DUTCH BANKING ACT EXEMPTION REGULATION (VRIJSTELLINGSREGELING
WTK 1992).
NOTICE TO RESIDENTS OF NORWAY
THE OFFERING OF THE OFFERED SECURITIES WILL NOT BE A PUBLIC OFFER IN NORWAY AND
THIS OFFERING MEMORANDUM 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.
-x-

THE OFFERED SECURITIES HAVE NOT BEEN DIRECTLY OR INDIRECTLY DISTRIBUTED AND THIS
OFFERING MEMORANDUM, ANY OTHER DOCUMENT, CIRCULAR, ADVERTISEMENT OR ANY
OFFERING MATERIAL WILL NOT BE DIRECTLY OR INDIRECTLY DISTRIBUTED EXCEPT IN
ACCORDANCE WITH ALL APPLICABLE LAWS AND REGULATIONS.
NOTICE TO RESIDENTS OF SINGAPORE
THIS OFFERING MEMORANDUM HAS NOT BEEN REGISTERED AS A PROSPECTUS WITH THE
MONETARY AUTHORITY OF SINGAPORE (THE "MAS") 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 MEMORANDUM 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.
NOTICE TO RESIDENTS OF SWEDEN
THIS OFFERING MEMORANDUM 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 MEMORANDUM MAY NOT BE MADE AVAILABLE, NOR MAY THE
COLLATERALISED DEBT OBLIGATIONS OTHERWISE BE MARKETED AND OFFERED IN SWEDEN,
-xi-

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)
(B)
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
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.
THE NOTES REPRESENT ONLY LIMITED-RECOURSE DEBT OBLIGATIONS OF THE CO-ISSUERS
AND THE PREFERRED SHARES REPRESENT ONLY UNSECURED EQUITY INTERESTS IN THE ISSUER.
THE OFFERED SECURITIES DO NOT REPRESENT DEPOSITS OR OTHER INTERESTS IN OR
OBLIGATIONS OF, AND ARE NOT GUARANTEED BY OR SECURED BY THE ASSETS OF, THE
PLACEMENT AGENT, THE COLLATERAL MANAGER, THE TRUSTEE, THE PREFERRED SHARE
PAYING AGENT OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE OFFERED SECURITIES
NOR THE RELATED COLLATERAL IS INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR GOVERNMENTAL
PERSON.
THE OFFERED SECURITIES WILL BEAR RESTRICTIVE LEGENDS AND WILL BE SUBJECT TO
RESTRICTIONS ON TRANSFER AS DESCRIBED HEREIN, INCLUDING THE REQUIREMENT THAT
EACH INITIAL INVESTOR IN THE OFFERED SECURITIES IN GLOBAL FORM SHALL BE DEEMED TO
HAVE MADE, AND EACH INITIAL INVESTOR IN THE OFFERED SECURITIES IN CERTIFICATED FORM
WILL BE REQUIRED TO MAKE, CERTAIN REPRESENTATIONS AND AGREEMENTS AS DESCRIBED
HEREIN. ANY RESALE OR OTHER TRANSFER, OR ATTEMPTED RESALE OR OTHER TRANSFER, OF
ANY OF THE OFFERED SECURITIES THAT IS NOT MADE IN COMPLIANCE WITH THE APPLICABLE
TRANSFER RESTRICTIONS WILL BE NULL AND VOID AB INITIO. BECAUSE OF THE RESTRICTIONS
ON TRANSFER, AN INVESTOR SHOULD BE PREPARED TO BEAR THE RISK OF ITS INVESTMENT FOR
AN INDEFINITE PERIOD OF TIME OR UNTIL THE STATED MATURITY.
THE OFFERED SECURITIES AND THE RELATED DOCUMENTATION (INCLUDING, WITHOUT
LIMITATION, THE INDENTURE) MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME
WITHOUT THE CONSENT OF, BUT UPON NOTICE TO, THE HOLDERS OF OFFERED SECURITIES, TO,
AMONG OTHER THINGS, MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR RESALES AND
OTHER TRANSFERS OF THE OFFERED SECURITIES TO REFLECT ANY CHANGE IN APPLICABLE LAW
OR REGULATION (OR THE INTERPRETATION THEREOF) AND/OR TO ENABLE THE CO-ISSUERS TO
RELY UPON ANY EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OR THE 1940
ACT (AND TO REMOVE CERTAIN EXISTING RESTRICTIONS TO THE EXTENT NOT REQUIRED UNDER
SUCH EXEMPTION); PROVIDED THAT NO SUCH CHANGE WILL CAUSE THE RATING (IF ANY) OF
THE NOTES THEN OUTSTANDING TO BE REDUCED OR WITHDRAWN. THE BENEFICIAL OWNER OF
ANY OFFERED SECURITY SHALL BE DEEMED, BY ACCEPTANCE THEREOF, DIRECTLY OR
THROUGH A NOMINEE, TO HAVE AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT (EACH OF
WHICH SHALL BE CONCLUSIVE AND BINDING ON SUCH BENEFICIAL OWNER AND ALL FUTURE
-xii-

BENEFICIAL OWNERS OF SUCH OFFERED SECURITY AND ANY OFFERED SECURITY ISSUED IN
EXCHANGE OR SUBSTITUTION FOR SUCH OFFERED SECURITY WHETHER OR NOT ANY NOTATION
THEREOF IS MADE THEREON). SEE "THE INDENTURE—MODIFICATION OF INDENTURE" HEREIN.
THIS OFFERING MEMORANDUM HAS BEEN PREPARED BY THE CO-ISSUERS SOLELY FOR USE
IN CONNECTION WITH THE OFFERING OF THE OFFERED SECURITIES AND, EXCEPT AS OTHERWISE
PROVIDED IN THIS PARAGRAPH AND IN THE PENULTIMATE PARAGRAPH UNDER "DESCRIPTION
OF THE OFFERED SECURITIES—FORM, DENOMINATION, REGISTRATION AND TRANSFER OF THE
NOTES," THE CO-ISSUERS ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS
OFFERING MEMORANDUM. THE PLACEMENT AGENT, WITH RESPECT TO ONLY THE
INFORMATION APPEARING UNDER "PLAN OF DISTRIBUTION," AND THE COLLATERAL MANAGER,
WITH RESPECT TO ONLY THE INFORMATION APPEARING UNDER "THE COLLATERAL MANAGER,"
ACCEPT RESPONSIBILITY FOR THE INFORMATION CONTAINED IN THIS OFFERING MEMORANDUM.
TO THE BEST OF THE KNOWLEDGE AND BELIEF OF THE CO-ISSUERS (AND THE PLACEMENT
AGENT, WITH RESPECT TO ONLY THE INFORMATION APPEARING UNDER "PLAN OF
DISTRIBUTION," AND THE COLLATERAL MANAGER, WITH RESPECT TO ONLY THE INFORMATION
APPEARING UNDER "THE COLLATERAL MANAGER"), THE INFORMATION CONTAINED IN THIS
OFFERING MEMORANDUM AS OF THE DATE HEREOF IS IN ACCORDANCE WITH THE FACTS AND
DOES NOT OMIT ANYTHING LIKELY TO AFFECT THE IMPORT OF SUCH INFORMATION.
EXCEPT AS SET FORTH IN THIS OFFERING MEMORANDUM, NO PERSON IS AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
OFFERING MEMORANDUM; IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON. NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM AT ANY TIME
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, IMPLY THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF
THIS OFFERING MEMORANDUM.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS OFFERING
MEMORANDUM, ALL PERSONS MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT
LIMITATION OF ANY KIND, THE U.S. FEDERAL, STATE AND LOCAL TAX TREATMENT OF THE
OFFERED SECURITIES AND THE ISSUER, ANY FACT THAT MAY BE RELEVANT TO
UNDERSTANDING THE U.S. FEDERAL, STATE AND LOCAL TAX TREATMENT OF THE OFFERED
SECURITIES AND THE ISSUER, AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR
OTHER TAX ANALYSES) RELATING TO SUCH U.S. FEDERAL, STATE AND LOCAL TAX TREATMENT.
EACH PURCHASER AND EACH TRANSFEREE OF NOTES REPRESENTED BY AN INTEREST IN A
GLOBAL NOTE WILL BE DEEMED TO HAVE REPRESENTED AND AGREED, ON EACH DAY FROM
THE DATE ON WHICH SUCH BENEFICIAL OWNER ACQUIRES ITS INTEREST IN SUCH GLOBAL NOTE
THROUGH AND INCLUDING THE DATE ON WHICH SUCH BENEFICIAL OWNER DISPOSES OF ITS
INTEREST IN SUCH GLOBAL NOTE, EITHER THAT (A) IT IS NEITHER AN EMPLOYEE BENEFIT PLAN
SUBJECT TO TITLE I OF THE UNITED STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"), NOR A PLAN SUBJECT TO SECTION 4975 OF THE UNITED STATES
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), NOR AN ENTITY WHOSE
UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF SUCH EMPLOYEE BENEFIT PLAN'S
OR PLAN'S INVESTMENT IN THE ENTITY, NOR A GOVERNMENTAL, FOREIGN, CHURCH OR OTHER
PLAN WHICH IS SUBJECT TO ANY FEDERAL, STATE, LOCAL OR FOREIGN LAW THAT IS
SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE OR (B) ITS ACQUISITION, HOLDING AND DISPOSITION OF SUCH GLOBAL 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, FOREIGN,
CHURCH OR OTHER PLAN, ANY SUBSTANTIALLY SIMILAR LAW).
EACH PURCHASER AND EACH TRANSFEREE OF A PREFERRED SHARE (OR ANY INTEREST
THEREIN) WILL BE REQUIRED TO REPRESENT AND AGREE, ON EACH DAY FROM THE DATE ON
-xiii-

WHICH SUCH BENEFICIAL OWNER ACQUIRES SUCH PREFERRED SHARE (OR ANY INTEREST
THEREIN) THROUGH AND INCLUDING THE DATE ON WHICH SUCH BENEFICIAL OWNER DISPOSES
OF SUCH PREFERRED SHARE (OR ANY INTEREST THEREIN), EITHER THAT (A) IT IS NEITHER AN
EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE UNITED STATES EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), NOR A PLAN SUBJECT TO SECTION 4975
OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), NOR AN
ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF SUCH EMPLOYEE
BENEFIT PLAN'S OR PLAN'S INVESTMENT IN THE ENTITY, NOR A GOVERNMENTAL, FOREIGN,
CHURCH OR OTHER PLAN WHICH IS SUBJECT TO ANY FEDERAL, STATE, LOCAL OR FOREIGN LAW
THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE OR (B) ITS ACQUISITION, HOLDING AND DISPOSITION OF SUCH PREFERRED
SHARE (OR ANY INTEREST THEREIN) 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, FOREIGN, CHURCH OR OTHER PLAN, ANY SUBSTANTIALLY
SIMILAR LAW).
ANY PURCHASER OR TRANSFEREE OF ANY PREFERRED SHARE (OR ANY INTEREST THEREIN)
IS REQUIRED TO PROVIDE THE PREFERRED SHARE PAYING AGENT WRITTEN CERTIFICATION OF
ITS ERISA STATUS IN THE FORM SET FORTH IN THIS OFFERING MEMORANDUM OR THE FISCAL
AGENCY AGREEMENT. NO TRANSFER OF ANY PREFERRED SHARE (OR ANY INTEREST THEREIN)
WILL BE EFFECTIVE, AND THE PREFERRED SHARE PAYING AGENT WILL NOT RECOGNIZE ANY
SUCH TRANSFER, IF IT WOULD RESULT IN 25% OR MORE OF THE VALUE OF THE PREFERRED
SHARES OR ANY OTHER CLASS OF EQUITY INTEREST IN THE ISSUER BEING HELD BY BENEFIT
PLAN INVESTORS.
EACH INSURANCE COMPANY PURCHASING PREFERRED SHARES WITH THE ASSETS OF AN
INSURANCE COMPANY GENERAL ACCOUNT WILL BE REQUIRED TO REPRESENT AND WARRANT
THE MAXIMUM PERCENTAGE OF SUCH GENERAL ACCOUNT THAT REPRESENTS (AND WILL
REPRESENT AS LONG AS IT OWNS ANY INTEREST IN THE PREFERRED SHARES) OWNERSHIP BY
BENEFIT PLAN INVESTORS.
EACH PURCHASER ACKNOWLEDGES THAT NO TRANSFER OF A PREFERRED SHARE WILL BE
PERMITTED, AND NONE OF THE ISSUER, THE CO-ISSUER OR THE TRUSTEE WILL REGISTER ANY
SUCH TRANSFER, TO THE EXTENT THAT THE TRANSFER WOULD RESULT IN BENEFIT PLAN
INVESTORS OWNING 25% OR MORE OF THE OUTSTANDING PREFERRED SHARES IMMEDIATELY
AFTER SUCH TRANSFER. THE PURCHASER FURTHER ACKNOWLEDGES THAT THE FOREGOING
PROCEDURES ARE INTENDED TO ENABLE THE PREFERRED SHARES TO BE PURCHASED BY OR
TRANSFERRED TO BENEFIT PLAN INVESTORS AT ANY TIME, ALTHOUGH NO ASSURANCE CAN BE
GIVEN THAT THERE WILL NOT BE CIRCUMSTANCES IN WHICH TRANSFERS OF PREFERRED
SHARES WILL BE REQUIRED TO BE RESTRICTED IN ORDER TO COMPLY WITH THE
AFOREMENTIONED 25% LIMITATION.
NONE OF THE PLACEMENT AGENT, THE CO-ISSUERS, THE COLLATERAL MANAGER OR ANY
AFFILIATE THEREOF MAKES ANY REPRESENTATION TO ANY OFFEREE OR PURCHASER OF
OFFERED SECURITIES REGARDING THE LEGALITY OF INVESTMENT THEREIN BY SUCH OFFEREE
OR PURCHASER UNDER APPLICABLE LEGAL INVESTMENT OR SIMILAR LAWS OR REGULATIONS
OR THE PROPER CLASSIFICATION OF SUCH AN INVESTMENT THEREUNDER. THE CONTENTS OF
THIS OFFERING MEMORANDUM ARE NOT TO BE CONSTRUED AS LEGAL, FINANCIAL, BUSINESS
OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN ATTORNEY,
FINANCIAL ADVISOR, BUSINESS ADVISOR OR TAX ADVISOR AS TO LEGAL, FINANCIAL, BUSINESS
AND TAX ADVICE.
AVAILABLE INFORMATION
The Co-Issuers are not required by law to publish financial statements. However, to permit compliance with
Rule 144A in connection with the sale of (i) the Notes, the Co-Issuers under the Indenture or (ii) the Preferred
-xiv-

Shares, the Issuer under the Preferred Share Documents, will be required to furnish, upon request of a holder of a
Note or Preferred Share, as applicable, 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 or the Issuer, as applicable, are not reporting companies under Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or exempt from reporting pursuant to Rule
12g3-2(b) under the Exchange Act.
The Trustee will provide or cause to be provided, without charge to each investor upon request, a copy of the
Indenture. Requests to the Trustee should be directed in writing to its principal Corporate Trust Office located at
One Federal Street, Third Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Services/CDO Unit –
Octagon IX CLO. In addition, so long as any Notes are listed on the Irish Stock Exchange, certain information and
documents will be available at the office of the Irish Listing Agent.
CERTAIN DEFINITIONS AND RELATED MATTERS
Unless otherwise indicated, (i) references herein to "dollars," "USD," "U.S. dollars" and "$"will be to the lawful
currency of the United States; (ii) references herein to "EUR," "Euro" and "€" will be to the currency introduced on
1st January 1999 pursuant to the Treaty establishing the European Community as amended by the Treaty on
European Union; (iii) references herein to "Canadian Dollars" will be to the lawful currency of Canada;
(iv) references to "Sterling" will be to the lawful currency of the United Kingdom; (v) the term "Rating Agencies"
will, except as otherwise provided herein, mean Moody's and Standard & Poor's; (vi) references to a "Rating
Agency" will mean Moody's or Standard & Poor's; (vii) references to a Rating Agency in connection with a rating of
the Notes will be deemed to mean such Rating Agency with respect to the Notes rated by it; (viii) references to the
term "holder" will mean the person in whose name a security is registered; except where the context otherwise
requires, holder will include the beneficial owner of such security; and (ix) references to "U.S." and "United States"
will be to the United States of America, its territories and its possessions.
SUMMARIES AND INCORPORATION BY REFERENCE OF TRANSACTION DOCUMENTS
This Offering Memorandum summarizes certain provisions of the Offered Securities, the Indenture, the Fiscal
Agency Agreement, the Collateral Management Agreement, the Collateral Administration Agreement and other
transactions and documents. The summaries do not purport to be complete and (whether or not so stated herein) are
subject to, are qualified in their entirety by reference to, and incorporate by reference, the provisions of the actual
documents (including definitions of terms). Copies of the above documents are available on request from the
Trustee.
MARKET STABILIZATION
IN CONNECTION WITH THE ISSUE OF THE OFFERED SECURITIES, THE PLACEMENT AGENT OR
ANY PERSON ACTING ON ITS BEHALF MAY OVER-ALLOT OR EFFECT TRANSACTIONS WITH A
VIEW TO SUPPORTING THE MARKET PRICE OF THE OFFERED SECURITIES AT A LEVEL HIGHER
THAN THAT WHICH MIGHT OTHERWISE PREVAIL FOR A LIMITED PERIOD AFTER THE CLOSING
DATE. HOWEVER, THERE MAY BE NO OBLIGATION ON THE PLACEMENT AGENT OR ANY OF ITS
AGENTS TO DO THIS. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME
AND MUST BE BROUGHT TO AN END AFTER A LIMITED PERIOD. ALL SUCH TRANSACTIONS WILL
BE CARRIED OUT IN ACCORDANCE WITH ALL APPLICABLE LAWS AND REGULATIONS.
FORWARD-LOOKING STATEMENTS
This Offering Memorandum contains forward-looking statements, which can be identified by words like
"anticipate," "believe," "plan," "hope," "goal," "initiative," "expect," "future," "intend," "will," "could" and "should"
and similar expressions. Other information herein, including any estimated, targeted or assumed information, also
may deemed to be, or to contain, forward-looking statements. Prospective investors should not place undue reliance
on forward-looking statements. Actual results could differ materially from those referred in forward-looking
statements for many reasons, including the risks described in "Risk Factors." Forward-looking statements are
necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying any forward-
-xv-

looking statements will not materialize or will vary significantly from actual results. Variations of assumptions and
results may be material.
Without limiting the generality of the foregoing, the inclusion of forward-looking statements herein should not
be regarded as a representation by either the Issuer or the Co-Issuer, the Collateral Manager, the Placement Agent or
any of their respective affiliates or any other person of the results that will actually be achieved by the Co-Issuers or
the Offered Securities. None of the foregoing persons has any obligation to update or otherwise revise any forwardlooking
statements, including any revision to reflect changes in any circumstances arising after the date hereof
relating to any assumptions or otherwise.
-xvi-

TABLE OF CONTENTS
SUMMARY OF TERMS ..............................................................................................................................................2
RISK FACTORS ...........................................................................................................................................................2
THE CO-ISSUERS........................................................................................................................................................2
General ...................................................................................................................................................................2
Capitalization..........................................................................................................................................................2
Business..................................................................................................................................................................2
The Administrator ..................................................................................................................................................2
The LLC Manager ..................................................................................................................................................2
DESCRIPTION OF THE OFFERED SECURITIES ....................................................................................................2
Status and Security .................................................................................................................................................2
Interest....................................................................................................................................................................2
Principal .................................................................................................................................................................2
Redemption ............................................................................................................................................................2
Optional Redemption of Notes by Liquidation of Collateral ..........................................................................2
Optional Redemption of Notes Using Additional Notes or Secured Loans. ...................................................2
Special Redemption.........................................................................................................................................2
Coverage Test Failure Redemption.................................................................................................................2
Tax Redemption ..............................................................................................................................................2
Optional Redemption of the Preferred Shares.................................................................................................2
Redemption Procedures...................................................................................................................................2
Required Disposition..............................................................................................................................................2
Payments on the Offered Securities........................................................................................................................2
No Gross-Up...........................................................................................................................................................2
Form, Denomination, Registration and Transfer of the Offered Securities............................................................2
APPLICATION OF FUNDS.........................................................................................................................................2
Interest and Principal Proceeds...............................................................................................................................2
Priority of Payments...............................................................................................................................................2
Distributions of Interest Proceeds ...................................................................................................................2
Distributions of Principal Proceeds.................................................................................................................2
Liquidation of Collateral; Final Distribution..........................................................................................................2
USE OF PROCEEDS ....................................................................................................................................................2
RATINGS OF THE NOTES .........................................................................................................................................2
SECURITY FOR THE NOTES ....................................................................................................................................2
General ...................................................................................................................................................................2
Collateral ................................................................................................................................................................2
Collateral Debt Obligations....................................................................................................................................2
Portfolio Profile Test ..............................................................................................................................................2
Reinvestment Period...............................................................................................................................................2
The Coverage Tests, the Reinvestment Overcollateralization Test and Collateral Quality Tests ..........................2
The Class A Overcollateralization Test..................................................................................................................2
The Class A Interest Coverage Test .......................................................................................................................2
The Class B Overcollateralization Test ..................................................................................................................2
The Class B Interest Coverage Test .......................................................................................................................2
The Class C Overcollateralization Test ..................................................................................................................2
The Class C Interest Coverage Test .......................................................................................................................2
The Reinvestment Overcollateralization Test ........................................................................................................2
Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL ..........................................................2
The Weighted Average Rating Factor Test ............................................................................................................2
The Moody's Diversity Test ...................................................................................................................................2
The Weighted Average Life Test ...........................................................................................................................2
The Weighted Average Coupon Test .....................................................................................................................2
The Weighted Average Spread Test.......................................................................................................................2
The Weighted Average Recovery Rate Test ..........................................................................................................2
-xvii-

The Standard & Poor's CDO Monitor Test.............................................................................................................2
Sales, Substitute Securities and Reinvestment Criteria ..........................................................................................2
Mandatory Sales of Collateral Debt Obligations....................................................................................................2
Sales Relating to Redemptions...............................................................................................................................2
Sales of Non-USD Debt Obligations......................................................................................................................2
Investment in Eligible Investments and Non-USD Debt Obligations ....................................................................2
Accounts.................................................................................................................................................................2
Interest Collection Account.............................................................................................................................2
Principal Collection Account ..........................................................................................................................2
Custodial Account...........................................................................................................................................2
Payment Account ............................................................................................................................................2
Expense Account.............................................................................................................................................2
Swap Collateral Accounts ...............................................................................................................................2
Delayed Funding Obligation Account.............................................................................................................2
Interest Reserve Account.................................................................................................................................2
Securities Lending Account ............................................................................................................................2
Hedge Counterparty Collateral Account .........................................................................................................2
Swap Counterparty Collateral Account...........................................................................................................2
Proceeds Account............................................................................................................................................2
Currency Account ...........................................................................................................................................2
Hedge Agreements .................................................................................................................................................2
General ............................................................................................................................................................2
Currency Hedges.............................................................................................................................................2
Securities Lending..................................................................................................................................................2
A/B Exchanges.......................................................................................................................................................2
Margin Stock ..........................................................................................................................................................2
Certain Determinations in Respect of the Collateral ..............................................................................................2
THE INDENTURE........................................................................................................................................................2
Trustee....................................................................................................................................................................2
Events of Default....................................................................................................................................................2
Notices....................................................................................................................................................................2
Modification of Indenture.......................................................................................................................................2
Confirmation of Ratings; Ramp-Up Failure...........................................................................................................2
Consolidation, Merger or Transfer of Assets .........................................................................................................2
Petitions for Bankruptcy.........................................................................................................................................2
Satisfaction and Discharge of Indenture.................................................................................................................2
Intended Tax Treatment of the Notes .....................................................................................................................2
Governing Law.......................................................................................................................................................2
CERTAIN PARTICULARS OF THE PREFERRED SHARES ...................................................................................2
THE COLLATERAL MANAGER ...............................................................................................................................2
General ...................................................................................................................................................................2
Biographies of Certain Key Individuals .................................................................................................................2
THE COLLATERAL MANAGEMENT AGREEMENT .............................................................................................2
Compensation.........................................................................................................................................................2
Termination of the Collateral Management Agreement; Resignation or Removal of the Collateral
Manager; Assignment and Delegation ............................................................................................................2
Affiliate Transactions .............................................................................................................................................2
COLLATERAL ADMINISTRATION..........................................................................................................................2
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS..............................................................................2
General ...................................................................................................................................................................2
United States Federal Tax Treatment of the Issuer.................................................................................................2
United States Federal Tax Treatment of U.S. Holders ...........................................................................................2
Information Reporting and Backup Withholding ...................................................................................................2
Foreign, State and Local Taxes ..............................................................................................................................2
-xviii-

CAYMAN ISLANDS TAX CONSIDERATIONS.......................................................................................................2
CERTAIN ERISA CONSIDERATIONS......................................................................................................................2
General ...................................................................................................................................................................2
Plan Assets: the Class A Notes, the Class B Notes and the Class C Notes ............................................................2
Plan Assets: the Preferred Shares ...........................................................................................................................2
Prohibited Transaction Exemptions........................................................................................................................2
CERTAIN LEGAL INVESTMENT CONSIDERATIONS ..........................................................................................2
PLAN OF DISTRIBUTION..........................................................................................................................................2
TRANSFER RESTRICTIONS......................................................................................................................................2
Global Notes...........................................................................................................................................................2
Preferred Shares .....................................................................................................................................................2
Additional Restrictions...........................................................................................................................................2
Legends ..................................................................................................................................................................2
Non-Permitted Holder/Non-Permitted ERISA Holder ...........................................................................................2
Cayman Islands Placement Provisions ...................................................................................................................2
LISTING AND GENERAL INFORMATION..............................................................................................................2
Certain Additional Issues Relating to Listing of the Notes ....................................................................................2
CERTAIN LEGAL MATTERS ....................................................................................................................................2
GLOSSARY..................................................................................................................................................................2
INDEX OF DEFINED TERMS ....................................................................................................................................2
ANNEXES
ANNEX A – Form of Purchaser Representation Letter For Preferred Shares
ANNEX B – Form of Preferred Share ERISA and Affected Bank Certificate
EXHIBITS
Exhibit A – Moody's Diversity Score Table
Exhibit B – Industry Classification Groups
-xix-

SUMMARY OF TERMS
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed
information appearing elsewhere in this Offering Memorandum. An Index of Defined Terms identifying the location
of defined terms and a Glossary setting forth the definitions of terms used but not defined in the body of this Offering
Memorandum appear at the back of this Offering Memorandum.
Principal Terms of the Offered Securities
Designation 1 Class A-1 Notes Class A-2 Notes Class B Notes Class C Notes
Mandatorily
Redeemable
Preferred Shares
Type
Senior Secured
Floating Rate
Senior Secured
Floating Rate
Senior Secured
Deferrable Floating
Rate
Senior Secured
Deferrable Floating
Rate
N/A
Issuer(s) Co-Issuers Co-Issuers Co-Issuers Co-Issuers Issuer
Initial Principal
Amount (U.S.$) or
Original Issue
Price (U.S.$)
Expected Moody's
Initial Rating
Expected S&P
Initial Rating
U.S.$300,000,000 U.S.$14,000,000 U.S.$20,000,000 U.S.$21,200,000 U.S.$44,800,000
"Aaa" "Aa2" "A2" "Baa2" N/A
"AAA" "AA" "A" "BBB" N/A
Interest Rate LIBOR 2 + 0.24% LIBOR 2 + 0.37% LIBOR 2 + 0.65% LIBOR 2 + 1.58% N/A
Stated Maturity April 23, 2020 April 23, 2020 April 23, 2020 April 23, 2020 N/A
Minimum
Denominations
(U.S.$ or number
of shares) (Integral
Multiples)
U.S.$500,000
(U.S.$1,000)
U.S.$500,000
(U.S.$1,000)
U.S.$500,000
(U.S.$1,000)
U.S.$500,000
(U.S.$1,000)
250 (1)
Ranking of the Securities:
Priority Class(es) None A-1 A-1, A-2 A-1, A-2, B N/A
Junior Class(es) A-2, B, C B, C C None N/A
Deferred Interest
Notes
No No Yes Yes N/A
1 Each Class of Notes is referred to in this Offering Memorandum 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 Mandatorily Redeemable Preferred Shares described above are referred to
herein as the "Preferred Shares." The Class A Notes, the Class B Notes and the Class C Notes are collectively
referred to herein as the "Notes" and are referred to herein collectively with the Preferred Shares as the "Offered
Securities."
2 LIBOR is as calculated by reference to three-month LIBOR as set forth under "Description of the Offered
Securities—Interest"; provided that, for the period from the Closing Date to the end of the initial Interest
Accrual Period, LIBOR will be determined by interpolating linearly between (i) four-month LIBOR and
(ii) five-month LIBOR.

Issuer: ....................................................... Octagon Investment Partners IX, Ltd., an exempted company
incorporated under the laws of the Cayman Islands with limited
liability for the sole purpose of acquiring Collateral Debt Obligations,
issuing the Offered Securities and engaging in certain related
transactions. The Issuer will not have any substantial assets other than
the assets pledged under the Indenture. See "The Co-Issuers."
Co-Issuer: ................................................. Octagon Investment Partners IX, LLC, a Delaware limited liability
company established for the sole purpose of co-issuing the Notes and
engaging in certain related transactions. The Co-Issuer will not have
any assets other than nominal equity capital and will not pledge any
assets to secure the Notes. The Preferred Shares will not be issued by
the Co-Issuer. See "The Co-Issuers."
Closing Date:............................................ May 25, 2006.
Interest on the Notes: .............................. The Notes will accrue interest on the unpaid principal balance thereof
commencing on the Closing Date at the applicable Note Interest Rate.
Interest on the Notes will be due and payable in arrears on each
Distribution Date immediately following the related Interest Accrual
Period. Interest on any Note that is not paid when due shall accrue at
the Note Interest Rate for such Class until paid as provided in the
Indenture.
So long as any of the Class A Notes are outstanding, any interest
accrued on the Class B Notes that is not available to be paid as a result
of the operation of the Priority of Payments on any Distribution Date
will not be due and payable on such Distribution Date for any purpose
under the Indenture, but instead will be deferred (and nonpayment will
not be a Default), will bear interest at the Class B Note Interest Rate
and will be due and payable on the earlier of (i) the first Distribution
Date on which funds are available and permitted to be used for such
purpose in accordance with the Priority of Payments and (ii) the Stated
Maturity of the Class B Notes. The Aggregate Outstanding Amount of
the Class B Notes will include the Class B Deferred Interest.
"Class B Deferred Interest" means with respect to any Distribution
Date, as long as any Class A Notes are outstanding, the shortfall (if
any) in the payment of the accrued and unpaid interest on the Class B
Notes on such Distribution Date or any previous Distribution Date, in
each case to the extent not previously paid.
So long as any of the Class A Notes and the Class B Notes are
outstanding, any interest accrued on the Class C Notes that is not
available to be paid as a result of the operation of the Priority of
Payments on any Distribution Date will not be due and payable on such
Distribution Date for any purpose under the Indenture, but instead will
be deferred (and nonpayment will not be a Default), will bear interest at
the Class C Note Interest Rate and will be due and payable on the
earlier of (i) the first Distribution Date on which funds are available
and permitted to be used for such purpose in accordance with the
Priority of Payments and (ii) the Stated Maturity of the Class C Notes.
The Aggregate Outstanding Amount of the Class C Notes will include
the Class C Deferred Interest.
2

"Class C Deferred Interest" means with respect to any Distribution
Date, as long as any Class A Notes or Class B Notes are outstanding,
the shortfall (if any) in the payment of accrued and unpaid interest on
the Class C Notes with respect to such Distribution Date or any
previous Distribution Date, in each case to the extent not previously
paid.
"Class A-1 Note Interest Rate" means the per annum rate equal to
three-month LIBOR plus 0.24%; provided that, for the period from the
Closing Date to the end of the initial Interest Accrual Period, LIBOR
will be determined by interpolating linearly between (i) four-month
LIBOR and (ii) five-month LIBOR.
"Class A-2 Note Interest Rate" means the per annum rate equal to
three-month LIBOR plus 0.37%; provided that, for the period from the
Closing Date to the end of the initial Interest Accrual Period, LIBOR
will be determined by interpolating linearly between (i) four-month
LIBOR and (ii) five-month LIBOR.
The "Class B Note Interest Rate" means the per annum rate equal to
three-month LIBOR plus 0.65%; provided that, for the period from the
Closing Date to the end of the initial Interest Accrual Period, LIBOR
will be determined by interpolating linearly between (i) four-month
LIBOR and (ii) five-month LIBOR.
The "Class C Note Interest Rate" means the per annum rate equal to
three-month LIBOR plus 1.58%; provided that, for the period from the
Closing Date to the end of the initial Interest Accrual Period, LIBOR
will be determined by interpolating linearly between (i) four-month
LIBOR and (ii) five-month LIBOR.
Distributions on the Preferred Shares:.. The Preferred Shares will not have a stated rate of dividends; rather, the
holders of the Preferred Shares will, subject to the provisions of the
Fiscal Agency Agreement and Cayman Islands law, receive on each
Distribution Date, on a noncumulative basis, the amounts, if any,
distributable to such holders in accordance with clauses (19) and (21)
of the allocation of payments described below under "Application of
Funds—Priority of Payments—Distributions of Interest Proceeds" and
clauses (9) and (11) of the allocation of payments described below
under "Application of Funds—Priority of Payments—Distributions of
Principal Proceeds." See "Application of Funds—Priority of
Payments."
Minimum Denominations of the
Offered Securities: ............................... Each Class of Notes will be issuable in minimum denominations of
U.S.$500,000 and integral multiples of U.S.$1,000 in excess thereof.
The Preferred Shares will be issuable in minimum denominations of
250 shares, representing an aggregate original issue price of
U.S.$250,000.
Use of Proceeds:....................................... The proceeds received from the sale on the Closing Date of the Offered
Securities will be used by the Issuer (i) to fund, both on the Closing
Date and after the Closing Date pursuant to commitments entered into
by the Issuer on or prior to the Closing Date for settlement in
accordance with customary settlement terms, the purchase of
approximately U.S.$372,000,000 in aggregate principal amount of
Collateral Debt Obligations, (ii) to fund a U.S.$2,000,000 deposit in the
3

Interest Reserve Account (to be applied as described under "Security
for the Notes—Accounts—Interest Reserve Account") and (iii) to pay
certain closing fees and expenses of the Issuer and other transaction
parties.
The sum of all remaining proceeds (together with other funds available
therefor) will be deposited into the Principal Collection Account as
Principal Proceeds and thereafter will be used by the Issuer to fund the
purchases of additional Collateral Debt Obligations so that, on or
before the Effective Date, the Issuer will have a portfolio of Collateral
Debt Obligations in an aggregate principal amount of approximately
U.S.$386,000,000.
Security for the Notes:............................. Pursuant to the Indenture, the Secured Obligations will be secured by
the Collateral. In the event of any realization on the Collateral,
proceeds will be allocated to the Notes, the other Secured Obligations
and other amounts in accordance with the Priority of Payments. See
"Security for the Notes—General." "Secured Obligations" means,
collectively, all of the indebtedness, liabilities and obligations owed
from time to time by the Issuer to the Secured Parties whether for
principal, interest, fees, costs, expenses or otherwise.
Listing:...................................................... Application has been made to the Irish Financial Services Regulatory
Authority, as competent authority under Directive 2003/71/EC, for the
Offering Memorandum to be approved. Application has been made to
admit the Notes to the Official List of the Irish Stock Exchange and to
trading on the regulated market of the Irish Stock Exchange. There can
be no assurance that the admission will be granted or, if granted, that it
will be maintained. See "Listing and General Information."
Distribution Dates; Final
Distribution Date: ................................ The "Distribution Dates" will be the 23rd day of January, April, July
and October of each year; provided that (i) the first Distribution Date
will be the Distribution Date occurring in October 2006, (ii) the last
Distribution Date will be the Final Distribution Date, (iii) if the Notes
are no longer outstanding, a Distribution Date will occur on any date
designated as such by the Issuer or the Collateral Manager on behalf of
the Issuer not less than one Business Day prior to the date so designated
and (iv) if any such date is not a Business Day, the related Distribution
Date will be the immediately following Business Day.
The "Final Distribution Date" will be the earliest of (a) the Final
Maturity of the Notes; (b) the first Distribution Date following the
liquidation of all of the Collateral (whether due to an Event of Default
or otherwise); and (c) a Redemption Date on which all of the
outstanding Notes are redeemed.
Optional Redemption of the
Offered Securities: ............................... At the direction of the Majority of the Preferred Shares (subject to
satisfaction of certain conditions provided for in the Indenture), the
Notes may be redeemed by the Co-Issuers, in whole, and not in part, at
their respective Redemption Prices on any Distribution Date occurring
on or after April 23, 2010.
An Optional Redemption may be implemented using one of two
methods. First, a Majority of the Preferred Shares may direct that the
Notes be redeemed, in whole but not in part, using Sale Proceeds and
4

other funds in the Payment Account and the Collection Accounts on
such Payment Date. In such event, the Collateral Manager will direct
the sale of the Collateral in order to make payments as described under
"Description of the Offered Securities—Redemption—Optional
Redemption of Notes by Liquidation of Assets." Second, a Majority of
the Preferred Shares may direct that the Notes be redeemed, in whole
but not in part, using proceeds of a secured loan or an issuance of a
replacement class or classes of notes, to the extent and subject to the
restrictions described herein. See "Description of the Offered
Securities—Redemption—Optional Redemption of Notes using
Additional Notes or Secured Loans."
The Redemption Price for each Class of Notes is the sum of (i) the
Aggregate Outstanding Amount of such Class, plus (ii) accrued and
unpaid interest thereon.
No redemption of the Preferred Shares may be made from the
Collateral until the Notes and certain other amounts are paid in full as
provided in the Priority of Payments. On any Distribution Date on or
after the payment in full of the Notes and all administrative and other
fees and expenses payable under the Priority of Payments (including
the Base Collateral Management Fee and the Subordinated Collateral
Management Fee), the Preferred Shares, subject to Cayman Islands
law, may be permanently redeemed, in whole, but not in part, at the
direction of the Majority of the Preferred Shares and at their
Redemption Price, in accordance with the Priority of Payments and the
Fiscal Agency Agreement.
The Redemption Price for the Preferred Shares will be equal to the
amount of the proceeds of the Collateral remaining, if any, after giving
effect to the redemption of the Notes and the payment of, or
establishment of a reserve for, all prior amounts as described herein in
accordance with the Priority of Payments.
Reinvestment Period: .............................. The "Reinvestment Period" means the period commencing on the
Closing Date and ending on the first to occur of (a) the Distribution
Date occurring in April 2013, (b) the date of an Optional Redemption
of the Notes pursuant to the Indenture effected through a Redemption
by Liquidation and (c) the date of the acceleration of the Notes
pursuant to the Indenture following an occurrence of an Event of
Default. In the event the Reinvestment Period has been terminated due
to such acceleration of the Notes following the occurrence of an Event
of Default, the Reinvestment Period will be reinstated if (i) such
acceleration of the Notes has been rescinded and annulled in
accordance with the terms of the Indenture, (ii) the related Event of
Default has been cured or waived, (iii) no other events that would
terminate the Reinvestment Period have occurred and are continuing,
(iv) the Issuer shall have obtained the consents to such reinstatement of
the Collateral Manager and the Majority of the Controlling Class and
(v) the Issuer shall have obtained a Rating Confirmation with respect
thereto.
Hedge Agreements:.................................. Subject to certain restrictions, the Issuer will be authorized to enter into
Hedge Agreements from time to time in order to manage interest rate,
currency exchange and other risks in connection with the Issuer's
issuance of, and making of payments on, the Notes and ownership and
disposition of the Collateral Debt Obligations and with such Hedge
5

Counterparties as it may elect in its sole discretion, subject in all cases
to the receipt of a Rating Confirmation with respect thereto. See
"Security for the Notes—Hedge Agreements." Without limitation to
the foregoing, upon or promptly after the purchase of a Non-USD Debt
Obligation, the Issuer is expected to enter into one or more Currency
Hedges (or maintain one or more existing Currency Hedges in respect
of the related Permitted Currency covering such Non-USD Debt
Obligation as permitted in "Security for the Notes—Hedge
Agreements—Currency Hedges") with a Hedge Counterparty satisfying
the Required Hedge Counterparty Rating in a notional amount not to
exceed the collateral principal amount of the Non-USD Debt
Obligations being purchased.
Collateral Debt Obligations:................... A "Collateral Debt Obligation" will be any obligation that, at the time
the Issuer enters into the commitment to acquire such obligation:
(a) is a senior secured or a senior unsecured term or revolving
loan (including (i) a letter of credit reimbursement obligation and (ii) if
secured, a DIP Loan), including a Participation interest therein, a
corporate debt security (including an investment grade debt security, a
high-yield debt security and a mezzanine debt security), a Synthetic
Security, a Structured Finance Security or a certificate of beneficial
interest in an equipment trust that has the general characteristics of a
debt obligation and is treated as a debt obligation for U.S. federal
income tax purposes, which (except with respect to a Delayed Draw
Term Loan or a Revolving Credit Facility) is fully funded;
(b) is not a Defaulted Obligation or a Credit Risk Obligation;
(c) (i) has a Moody's Rating and a Standard & Poor's Rating (and
such Standard & Poor's Rating does not include the subscript "p," "pi,"
"q," "r" or "t" without Rating Confirmation from Standard & Poor's) or
(ii) is fully and unconditionally guaranteed as to the timely payment of
principal and interest by the U.S. government or any agency or
instrumentality thereof the obligations of which thereunder are backed
by the full faith and credit of the United States of America;
(d) has a Moody's Rating not below "Caa1" and a Standard &
Poor's Rating not below "CCC+";
(e) has a stated amortization schedule or maturity date or final
mandatory redemption date;
(f) is eligible under the instrument or agreement pursuant to
which it was issued or created to be purchased by the Issuer and
pledged to the Trustee;
(g) is an obligation of a borrower, issuer or obligor principally
located in (x) the United States, The Netherlands, the United Kingdom,
Germany, Ireland, Sweden, Switzerland, Austria, Belgium, Denmark,
Finland, France, Liechtenstein, Luxembourg, Norway, Spain, Greece,
Italy or Portugal, (y) a country that is referred to in the definition of
Permitted Non-U.S. Obligor or (z) any other country that has (i) a
Moody's foreign currency rating of at least "Aa2" and (ii) a Standard &
Poor's foreign issuer credit rating of at least "AA";
6

(h) is not subject to an Offer that is not (i) a Permitted Offer or
(ii) an exchange offer (including, without limitation, an A/B Exchange)
in which a security that is not registered under the Securities Act is
exchanged for a security that has substantially identical terms (except
for transfer restrictions) but is registered under the Securities Act or a
security that would otherwise qualify for purchase under the Portfolio
Profile Test, the Coverage Tests and the Collateral Quality Tests
described herein;
(i) if a debt obligation, is Registered;
(j) will not cause the Issuer, the Co-Issuer or the pool of
Collateral to be required to register as an investment company under
the 1940 Act;
(k) is not an interest-only security;
(l) either (i) is issued by an entity that is treated as a corporation
that is not a United States real property holding corporation as defined
in Section 897(c)(2) of the Code for U.S. federal income tax purposes,
(ii) is treated as indebtedness for U.S. federal income tax purposes, or
(iii) with respect to which the Issuer has received advice from Milbank,
Tweed, Hadley & McCloy LLP or an opinion of another nationally
recognized U.S. tax counsel experienced in such matters to the effect
that the acquisition, ownership or disposition of such security will not
cause the Issuer to be treated as engaged in a trade or business within
the United States for U.S. federal income tax purposes or otherwise
subject the Issuer to U.S. federal, state or local income or franchise tax
on a net income basis;
(m) except for Zero-Coupon Securities or Step-Up Coupon
Securities, provides for periodic payments of interest thereon in cash no
less frequently than semi-annually;
(n) if a Structured Finance Security, such Structured Finance
Security may not be a security whose repayment is subject to
substantial non-credit related risk as determined by the Collateral
Manager in its reasonable business judgment (provided that catastrophe
bonds, hurricane bonds, market value collateralized debt obligations
and "future-flow" securities will, for the avoidance of doubt, but
without limitation, be deemed to be securities whose payments is
subject to substantial non-credit related risk);
(o) is not a lease (other than a Finance Lease);
(p) is not (i) a Deferred Interest Asset or (ii) Margin Stock;
(q) does not mature or have a final mandatory redemption date
more than two years following the Stated Maturity of the Notes; and
(r) is (i) denominated in U.S. dollars or (ii) a Non-USD Debt
Obligation;
provided that (i) the entity selling a Collateral Debt Obligation that is a
Participation interest shall be (a) a financial institution organized under
the laws of the United States or any state thereof or (b) a financial
institution organized under the laws of a jurisdiction other than the
7

United States or any state thereof but located (or has a branch that is
located) in the United States, and (ii) the credit risk profile of any
Collateral Debt Obligation that is a certificate of beneficial interest in
an equipment trust that has the general characteristics of a debt
obligation and is treated as a debt obligation for U.S. federal income
tax purposes (A) shall be substantially similar to the credit risk profile
that would otherwise have existed had the instrument instead been a
debt obligation, (B) the obligor or the obligation in respect thereof shall
have an underlying Moody's rating and an underlying Standard &
Poor's rating, and (C) the obligor in respect thereof shall be principally
located in the United States; provided, further, that a Non-USD Debt
Obligation may not be purchased by the Issuer unless a Currency
Hedge with a notional amount equal to the outstanding principal
amount of such Non-USD Debt Obligation is entered into by the Issuer
at the direction of the Collateral Manager on or prior to the relevant
settlement date.
Notwithstanding the foregoing, the term Collateral Debt Obligation will
not include:
(i) any obligation that requires the Issuer to make additional or
future advances (other than in the case of a Delayed Draw Term Loan,
Revolving Credit Facility or Synthetic Security);
(ii) any Eligible Investments; and
(iii) any Hedge Agreements.
In addition, the term Collateral Debt Obligations shall include:
(i) any Swap Collateral as to which the lien of the related
Synthetic Security Counterparty has been released following the
termination of a Synthetic Security; provided that such Swap Collateral
satisfied the criteria for Collateral Debt Obligation at the time of the
commitment to purchase; and
(ii) a Deliverable Obligation that satisfies the criteria for inclusion
as a Collateral Debt Obligation delivered to the Issuer pursuant to a
Swap Agreement; provided that, in the event such Obligation does not
qualify as a Collateral Debt Obligation, it shall be accepted by the
Issuer and deemed to be an Equity Security.
In order to ensure that the Issuer is not treated as engaged in a U.S.
trade or business for U.S. federal income tax purposes, the Issuer and
the Collateral Manager will observe certain additional restrictions and
limitations on their activities and on the Collateral Debt Obligations
that may be purchased. Accordingly, although a particular prospective
investment may satisfy the definition of Collateral Debt Obligation, it
may be ineligible for purchase by the Issuer and the Collateral Manager
as a result of these limitations and restrictions.
Coverage Tests and Reinvestment
Overcollateralization Test: ................. The "Coverage Tests" will consist of the Interest Coverage Tests and
the Overcollateralization Tests. The "Interest Coverage Tests" will
consist of the Class A Interest Coverage Test, the Class B Interest
Coverage Test and the Class C Interest Coverage Test. The
"Overcollateralization Tests" will consist of the Class A
8

Overcollateralization Test, the Class B Overcollateralization Test and
the Class C Overcollateralization Test.
The "Overcollateralization Ratios" will consist of the Class A
Overcollateralization Ratio, the Class B Overcollateralization Ratio and
the Class C Overcollateralization Ratio. The "Interest Coverage
Ratios" will consist of the Class A Interest Coverage Ratio, the Class B
Interest Coverage Ratio and the Class C Interest Coverage Ratio.
The "Class A Coverage Tests" will consist of the Class A
Overcollateralization Test and the Class A Interest Coverage Test.
The "Class A Overcollateralization Ratio" is equal, as of any
Measurement Date, to the ratio (expressed as a percentage) obtained by
dividing: (1) the Principal Collateral Value (as of such Measurement
Date); by (2) the Aggregate Outstanding Amount of the Class A Notes
(as of such Measurement Date).
The "Class A Overcollateralization Test" is a test (i) that will be
deemed satisfied as of any Measurement Date before the Effective
Date; and (ii) that will be satisfied as of any Measurement Date on or
after the Effective Date if on such Measurement Date the Class A
Overcollateralization Ratio is equal to or greater than 111.8%.
The "Class A Interest Coverage Ratio" is equal, as of any Measurement
Date, to the ratio (expressed as a percentage) obtained by dividing:
(a) the sum (without duplication), with respect to the Due Period
in which such Measurement Date occurs, of the Interest Proceeds
received in cash or, in the Collateral Manager's judgment, scheduled to
be received between such Measurement Date and the end of the related
Due Period minus the amounts, if any, scheduled to be applied on the
Distribution Date relating to such Due Period in accordance with
clauses (1) through (5) of the allocation of payments described below
under "Application of Funds—Priority of Payments—Distributions of
Interest Proceeds"; by
(b) with respect to the next Distribution Date, the sum (without
duplication) of amounts payable in respect of interest on the Class A
Notes pursuant to clauses (6) and (7) of the allocation of payments
described below under "Application of Funds—Priority of Payments—
Distributions of Interest Proceeds."
For the purposes of calculating the Class A Interest Coverage Ratio, the
Class B Interest Coverage Ratio and the Class C Interest Coverage
Ratio,
(i) such calculation will not include any scheduled interest
payments as to which the Collateral Manager has actual knowledge that
such payment will not be made;
(ii) the expected interest income on the Collateral Debt
Obligations and floating rate Eligible Investments will be calculated
using the then current interest rates applicable thereto;
9

(iii) such calculation will not include interest scheduled to be
received in respect of Defaulted Obligations or Deferred Interest
Assets, unless actually received; and
(iv) for so long as a Hedge Counterparty payment default has
occurred and is continuing, such calculation will not include Hedge
Receipt Amounts scheduled to be paid to the Issuer by such defaulting
Hedge Counterparty.
The "Class A Interest Coverage Test" is a test (i) that will be deemed
satisfied as of any Measurement Date before the Effective Date; and
(ii) that will be satisfied as of any Measurement Date on or after the
Effective Date if on such Measurement Date the Class A Interest
Coverage Ratio is equal to or greater than 120.0%.
The "Class B Coverage Tests" will consist of the Class B
Overcollateralization Test and the Class B Interest Coverage Test.
The "Class B Overcollateralization Ratio" is equal, as of any
Measurement Date, to the ratio (expressed as a percentage) obtained by
dividing: (1) the Principal Collateral Value (as of such Measurement
Date); by (2) the Aggregate Outstanding Amount of the Class A Notes
and the Class B Notes (each, as of such Measurement Date).
The "Class B Overcollateralization Test" is a test (i) that will be
deemed satisfied as of any Measurement Date before the Effective
Date; and (ii) that will be satisfied as of any Measurement Date on or
after the Effective Date if on such Measurement Date the Class B
Overcollateralization Ratio is equal to or greater than 106.6%.
The "Class B Interest Coverage Ratio" is equal, as of any Measurement
Date, to the ratio (expressed as a percentage) obtained by dividing:
(a) the sum (without duplication), with respect to the Due Period
in which such Measurement Date occurs, of the Interest Proceeds
received in cash or, in the Collateral Manager's judgment, scheduled to
be received between such Measurement Date and the end of the related
Due Period minus the amounts, if any, scheduled to be applied on the
Distribution Date relating to such Due Period in accordance with
clauses (1) through (5) of the allocation of payments described below
under "Application of Funds—Priority of Payments—Distributions of
Interest Proceeds"; by
(b) with respect to the next Distribution Date, the sum (without
duplication) of amounts payable in respect of interest on the Class A
Notes and the Class B Notes pursuant to clauses (6), (7) and (10) (other
than Class B Deferred Interest) of the allocation of payments described
below under "Application of Funds—Priority of Payments—
Distributions of Interest Proceeds."
The "Class B Interest Coverage Test" is a test (i) that will be deemed
satisfied as of any Measurement Date before the Effective Date; and
(ii) that will be satisfied as of any Measurement Date on or after the
Effective Date if on such Measurement Date the Class B Interest
Coverage Ratio is equal to or greater than 115.0%.
10

The "Class C Coverage Tests" will consist of the Class C
Overcollateralization Test and the Class C Interest Coverage Test.
The "Class C Overcollateralization Ratio" is equal, as of any
Measurement Date, to the ratio (expressed as a percentage) obtained by
dividing: (1) the Principal Collateral Value (as of such Measurement
Date); by (2) the Aggregate Outstanding Amount of the Class A Notes,
the Class B Notes and the Class C Notes (each, as of such
Measurement Date).
The "Class C Overcollateralization Test" is a test (i) that will be
deemed satisfied as of any Measurement Date before the Effective
Date; and (ii) that will be satisfied as of any Measurement Date on or
after the Effective Date if on such Measurement Date the Class C
Overcollateralization Ratio is equal to or greater than 103.1%.
The "Class C Interest Coverage Ratio" is equal, as of any Measurement
Date, to the ratio (expressed as a percentage) obtained by dividing:
(a) the sum (without duplication), with respect to the Due Period
in which such Measurement Date occurs, of the Interest Proceeds
received in cash or, in the Collateral Manager's judgment, scheduled to
be received between such Measurement Date and the end of the related
Due Period minus the amounts, if any, scheduled to be applied on the
Distribution Date relating to such Due Period in accordance with
clauses (1) through (5) of the allocation of payments described below
under "Application of Funds—Priority of Payments—Distributions of
Interest Proceeds"; by
(b) with respect to the next Distribution Date, the sum (without
duplication) of amounts payable in respect of interest on the Class A
Notes, the Class B Notes and the Class C Notes pursuant to clauses (6),
(7), (10) (other than Class B Deferred Interest) and (12) (other than
Class C Deferred Interest) of the allocation of payments described
below under "Application of Funds—Priority of Payments—
Distributions of Interest Proceeds."
The "Class C Interest Coverage Test" is a test (i) that will be deemed
satisfied as of any Measurement Date before the Effective Date; and
(ii) that will be satisfied as of any Measurement Date on or after the
Effective Date if on such Measurement Date the Class C Interest
Coverage Ratio is equal to or greater than 110.0%.
The "Reinvestment Overcollateralization Ratio" is equal, as of any
Measurement Date, to the ratio (expressed as a percentage) obtained by
dividing: (1) the Principal Collateral Value (as of such Measurement
Date); by (2) the Aggregate Outstanding Amount of the Class A Notes,
the Class B Notes and the Class C Notes (each, as of such
Measurement Date).
The "Reinvestment Overcollateralization Test" is a test (i) that will be
deemed satisfied as of any Measurement Date before the Effective Date
or after the Reinvestment Period; and (ii) that will be satisfied as of any
Measurement Date on or after the Effective Date and during the
Reinvestment Period if on such Measurement Date the Reinvestment
Overcollateralization Ratio is equal to or greater than the Reinvestment
Overcollateralization Test Level for such Measurement Date.
11

The "Reinvestment Overcollateralization Test Level" is, initially,
107.7%, until the day following the Distribution Date in April 2007,
and on the day following such Distribution Date and on the day
following the Distribution Date in each April thereafter, the
Reinvestment Overcollateralization Test Level will be reduced by
0.50%.
Maintenance and Measurement
of Coverage Tests:................................ If a Coverage Test is not satisfied as of any Determination Date
preceding any Distribution Date occurring on or after the Effective
Date, certain funds from the Collection Accounts will be used to reduce
the Aggregate Outstanding Amount of the relevant Class or Classes, as
applicable, of Notes on such Distribution Date in accordance with
the Priority of Payments until such Coverage Test is satisfied.
Pursuant to the Indenture, the Coverage Tests will be deemed to be
satisfied as of any time prior to the Effective Date. See "—Coverage
Tests," "—Distributions of Interest Proceeds" and "—Distributions of
Principal Proceeds."
Measurement of the degree of compliance with the Coverage Tests will
be required on each Measurement Date on or after the Effective Date.
A "Measurement Date" is a day that is (1) the Effective Date, (2) the
last day of a Due Period (any such date, a "Determination Date"),
(3) any day a transaction is entered into by the Collateral Manager on
behalf of the Issuer for the purchase or sale of a Collateral Debt
Obligation, (4) the day as of which a Collateral Debt Obligation
becomes a Defaulted Obligation, and the Collateral Manager has
knowledge thereof, (5) the day as of which any monthly report is
determined pursuant to the Indenture and (6) with reasonable notice to
the Co-Issuers, the Collateral Manager and the Trustee, any other
Business Day that either Rating Agency reasonably requests; provided
that, if any such date would otherwise fall on a day that is not a
Business Day, the relevant Measurement Date will be the next
succeeding Business Day.
If the Reinvestment Overcollateralization Test is not satisfied as of any
Determination Date preceding any Distribution Date occurring on or
after the Effective Date and during the Reinvestment Period, a portion
of the Interest Proceeds that would otherwise be used to make
distributions to the Preferred Shares, to pay Collateral Management
Incentive Fees and to pay certain expenses will instead be deposited to
the Principal Collection Account as Principal Proceeds.
Collateral Quality Tests: ......................... The Collateral Quality Tests will be used as criteria for purchasing
Collateral Debt Obligations. The "Collateral Quality Tests" will
consist of the Weighted Average Rating Factor Test, the Moody's
Diversity Test, the Weighted Average Life Test, the Weighted Average
Coupon Test, the Weighted Average Spread Test, the Weighted
Average Recovery Rate Test and the Standard & Poor's CDO Monitor
Test. Compliance with the Collateral Quality Tests will be determined
as of each Measurement Date occurring on and after the Effective Date.
The "Weighted Average Rating Factor Test" is a test that will be
satisfied on any Measurement Date if the Moody's Average Rating of
the Collateral Debt Obligations (excluding Defaulted Obligations) on
such Measurement Date is less than or equal to (i) the maximum rating
factor corresponding to the applicable Minimum Diversity/Maximum
12

Rating/Minimum Spread/Maximum WAL Matrix and "row/column
combination" thereof elected by the Collateral Manager plus (ii) the
Recovery Rate Modifier.
The "Moody's Diversity Test" is a test that will be satisfied on
any Measurement Date if the Diversity Score equals or exceeds
the requirement corresponding to the applicable Minimum
Diversity/Maximum Rating/Minimum Spread/Maximum WAL Matrix
and "row/column combination" thereof elected by the Collateral
Manager.
The "Weighted Average Life Test" is a test that will be satisfied as of
any Measurement Date during the Reinvestment Period if the Weighted
Average Life of the Collateral Debt Obligations (excluding Defaulted
Obligations) is less than (a) the number of years corresponding
to the applicable Minimum Diversity/Maximum Rating/Minimum
Spread/Maximum WAL Matrix and "row/column combination" thereof
elected by the Collateral Manager, minus (b) the product of 25.0%
times the aggregate number of quarter-year periods that have elapsed
since the Effective Date.
The "Weighted Average Coupon Test" is a test that will be satisfied on
any Measurement Date, if the Weighted Average Coupon is greater
than or equal to 7.25%.
The "Weighted Average Spread Test" is a test that will be satisfied on
any Measurement Date if the Weighted Average Spread on such
Measurement Date is greater than or equal to the applicable Minimum
Diversity/Maximum Rating/Minimum Spread/Maximum WAL Matrix
and "row/column combination" thereof elected by the Collateral
Manager.
The "Weighted Average Recovery Rate Test" is a test that will be
satisfied if the Moody's Average Recovery Rate is 43.63% or greater
and the Standard & Poor's Average Recovery Rate is 54.0% or greater.
The "Standard & Poor's CDO Monitor Test" is a test that will be
satisfied on any Measurement Date if, after giving effect to any
purchase or sale of a Collateral Debt Obligation (or both), as the case
may be, (i) the Class A-1 Loss Differential, the Class A-2 Loss
Differential, the Class B Loss Differential or the Class C Loss
Differential, as the case may be, of the Proposed Portfolio is positive or
(ii) the Class A-1 Loss Differential, the Class A-2 Loss Differential, the
Class B Loss Differential or the Class C Loss Differential, as the case
may be, of the Proposed Portfolio is greater than or equal to the
Class A-1 Loss Differential, the Class A-2 Loss Differential, the
Class B Loss Differential or the Class C Loss Differential, as the case
may be, of the Current Portfolio. For the purpose of the Standard &
Poor's CDO Monitor Test, (i) a Synthetic Security will be included as a
Collateral Debt Obligation having the rating of the Synthetic Security
and the industry code of the Reference Obligation and (ii) multiple
Structured Finance Securities from collateralized debt obligation
transactions managed by the same asset manager or multiple Structured
Finance Securities issued by the same master trust will be considered to
be obligations of one issuer.
13

The foregoing descriptions are summary in nature. For a fuller
description of such tests, see "Security for the Notes—The Coverage
Tests and Collateral Quality Tests."
Portfolio Profile Test:.............................. The following requirements (subject to the paragraphs of this definition
following clause (ff) below) will apply to the acquisition of Collateral
Debt Obligations (the "Portfolio Profile Test"):
(a) Not less than 92.5% of the Principal Collateral Value will
consist of Floating Rate Collateral Debt Obligations;
(b) Not less than 87.5% of the Principal Collateral Value will
consist of First Lien Loans, Participation interests therein or Synthetic
Securities based on or referencing First Lien Loans;
(c) Not more than 7.5% of the Principal Collateral Value will
consist of Fixed Rate Collateral Debt Obligations;
(d) Not more than 5.0% of the Principal Collateral Value will
consist of senior unsecured loans;
(e) Not more than 5.0% of the Principal Collateral Value will
consist of Second Lien Loans;
(f) Not more than 7.5% of the Principal Collateral Value will
consist of high-yield debt securities;
(g) The aggregate of the Principal Balances of high-yield debt
securities with a Moody's Rating of "Ba3" or higher issued or
guaranteed by a single obligor will not be more than U.S.$2,000,000,
except that the aggregate of the Principal Balances of high-yield debt
securities with a Moody's Rating of "Ba3" or higher issued or
guaranteed by each of three obligors may each be up to
U.S.$4,000,000;
(h) The aggregate of the Principal Balances of high-yield debt
securities with a Moody's Rating of "B1" or lower issued or guaranteed
by a single obligor will not be more than U.S.$1,000,000;
(i) The aggregate of the Principal Balances of high-yield debt
securities with a right to payment that is senior subordinated or more
junior will not be more than U.S.$10,000,000;
(j) Not more than 5.0% of the Principal Collateral Value will
consist of Non-USD Debt Obligations;
(k) Collectively, not more than 12.5% of the Principal Collateral
Value will consist of (i) Second Lien Loans, (ii) senior unsecured loans
and (iii) high-yield debt securities;
(l) Not more than 5.0% of the Principal Collateral Value will
consist of DIP Loans;
(m) Not more than 10.0% of the Principal Collateral Value will
consist of Delayed Draw Term Loans or Revolving Credit Facilities;
(n) Not more than 5.0% of the Principal Collateral Value will
consist of PIK Securities;
14

(o) Not more than 5.0% of the Principal Collateral Value will
consist of Zero-Coupon Securities;
(p) Not more than 5.0% of the Principal Collateral Value will
consist of Step-Up Coupon Securities;
(q) Not more than 5.0% of the Principal Collateral Value will
consist of Collateral Debt Obligations that are the subject of Permitted
Offers;
(r) Not more than 7.5% of the Principal Collateral Value will
consist of Collateral Debt Obligations that pay interest less frequently
than quarterly;
(s) Collectively, not more than 12.5% of the Principal Collateral
Value will consist of (i) Zero-Coupon Securities, (ii) Step-Up Coupon
Securities, (iii) PIK Securities and (iv) Collateral Debt Obligations that
pay interest less frequently than quarterly;
(t) Collectively, not more than 15.0% of the Principal Collateral
Value will consist of (i) Synthetic Securities, (ii) Participations,
(iii) Non-USD Debt Obligations, (iv) Collateral Debt Obligations that
are subject to Securities Lending Agreements and (v) obligations of an
obligor (excluding with respect to Structured Finance Securities, any
obligor which is a Special Purpose Vehicle) organized under the laws
of a non-U.S. jurisdiction;
(u) Not more than 5.0% of the Principal Collateral Value will
consist of Collateral Debt Obligations that are Structured Finance
Securities;
(v) Not more than 2.5% of the Principal Collateral Value will
consist of CDO Securities;
(w) Not more than 20.0% of the Principal Collateral Value will
consist of Collateral Debt Obligations that are parts of issues with
Original Issuance Amounts of less than U.S.$100,000,000;
(x) Not more than 1.5% of the Principal Collateral Value will
consist of Collateral Debt Obligations (or Participations therein) of the
obligor of such Collateral Debt Obligation; provided that Collateral
Debt Obligations (and Participations therein) of the top five obligors
(by Principal Balance) may each represent up to 2.0% of the Principal
Collateral Value; and provided, further, that this requirement will not
apply to the acquisition of a Collateral Debt Obligation that is fully and
unconditionally guaranteed as to the timely payment of principal and
interest by the U.S. government or any agency or instrumentality
thereof the obligations of which thereunder are backed by the full faith
and credit of the United States of America;
(y) Not more than 8.0% in Principal Collateral Value may be
Collateral Debt Obligations that are issued by obligors that belong to
any single Standard & Poor's Industry Classification Group (an
"Industry Group"), except that (i) the largest Industry Group may
represent up to 12.0% of the Principal Collateral Value and (ii) the next
two largest Industry Groups may each represent up to 10.0% of the
Principal Collateral Value;
15

(z) Not more than the percentage of the Principal Collateral Value
listed in the first column below will consist of Collateral Debt
Obligations that have been issued by Permitted Non-U.S. Obligors
and/or by issuers principally located in the country or countries listed in
the corresponding row in the second column below:
% Limit Countries/Obligors
15.0% All of The Netherlands, the United
Kingdom, Germany, Ireland, Sweden,
Switzerland, Austria, Belgium, Denmark,
Finland, France, Liechtenstein,
Luxembourg, Norway, Spain, Greece, Italy,
Portugal and Permitted Non-U.S. Obligors
10.0% Any of The Netherlands or the United
Kingdom
15.0% All of The Netherlands and the United
Kingdom
5.0% Any of Germany, Ireland, Sweden,
Switzerland, Austria, Belgium, Denmark,
Finland, France, Liechtenstein,
Luxembourg, Norway, Spain or any
Permitted Non-U. S. Obligor (except
obligors principally located in Canada)
10.0% All of Germany, Ireland, Sweden,
Switzerland, Austria, Belgium, Denmark,
Finland, France, Liechtenstein,
Luxembourg, Norway, Spain and Permitted
Non-U.S. Obligors (except obligors
principally located in Canada)
3.0% Any of Greece, Italy or Portugal
5.0% All of Greece, Italy and Portugal
provided, however, clause (z) of this definition of Portfolio Profile Test
will not apply to the acquisition of a Collateral Debt Obligation issued
by a Special Purpose Vehicle; provided that, if such Collateral Debt
Obligation is issued by a Special Purpose Vehicle that holds or
references a single obligation, such clauses will apply (to the extent
relevant) and will be applied (both for purposes of such acquisition as
well as any other acquisition to which such clause applies) as if such
obligation were the relevant Collateral Debt Obligation);
(aa) Not more than 5.0% of the Principal Collateral Value will
consist of Collateral Debt Obligations with a Moody's Rating of "Caa1"
or below;
(bb) Not more than 5.0% of the Principal Collateral Value will
consist of Collateral Debt Obligations with a Standard & Poor's Rating
of "CCC+" or below;
(cc) Not more than 7.5% of the Principal Collateral Value will
consist of Collateral Debt Obligations that are Triple-C Collateral Debt
Obligations;
16

(dd) (i) Not more than 5.0% of the Principal Collateral Value will
consist of Collateral Debt Obligations that have attached equity features
and (ii) no Collateral Debt Obligation's equity feature will be a value
greater than 2.0% of the Principal Balance of such Collateral Debt
Obligation;
(ee) Not more than 5.0% of the Principal Collateral Value will
consist of Collateral Debt Obligations that provide for any payments
which are or will be subject to deduction or withholding for or on
account of any withholding or similar tax (other than commitment
fees); provided that this clause (ee) will not be applicable to the
acquisition of any such Collateral Debt Obligation with respect to
which the related issuer is required to make "gross up" payments that
ensure that the net amount actually received by the Issuer (free and
clear of taxes, whether assessed against such obligor or the Issuer) will
equal the full amount that the Issuer would have received had no such
deduction or withholding been required; and
(ff) Not more than 2.0% of the Principal Collateral Value will
consist of Collateral Debt Obligations that mature following the Stated
Maturity of the Notes (excluding any Collateral Debt Obligation that
matures subsequent to the Stated Maturity of the Notes that is subject to
an unexpired put option exercisable at the option of the holder of the
Collateral Debt Obligation at a price at least equal to par prior to the
Stated Maturity of the Notes).
For the purposes of clauses (a) and (b) above, the principal amount of
funds resulting from Principal Proceeds and Sale Proceeds on deposit
in the Principal Collection Account, including Eligible Investments
purchased with such funds, will be included as Floating Rate Collateral
Debt Obligations that are First Lien Loans.
Unless a Rating Confirmation from Standard & Poor's with respect
thereto has been obtained, for purposes of clause (x) of the Portfolio
Profile Test, any issuers or obligors affiliated with one another shall be
considered one issuer or obligor (other than issuers that are affiliated
solely by reason of common ownership by a Financial Sponsor).
Management of the
Collateral: ............................................. The Collateral Manager selected the Collateral Debt Obligations during
the warehousing period preceding the Closing Date for inclusion in the
Collateral and thereafter will select the Collateral Debt Obligations and
monitor the performance and credit quality of the Collateral Debt
Obligations on an ongoing basis. The portfolio of Collateral Debt
Obligations expected to be owned by the Issuer on the Closing Date
will include approximately U.S.$75,000,000 principal amount of
Collateral Debt Obligations consisting of loans that the Issuer
purchased from Octagon III in connection with the optional redemption
of the securities issued by Octagon III and a material amount of
Collateral Debt Obligations consisting of loans that the Issuer
purchased from JPMorgan Chase affiliates. The Collateral Manager
generally is permitted to direct the Trustee at any time to sell (i) any
Defaulted Obligation; (ii) any Credit Improved Obligation; (iii) any
Credit Risk Obligation; or (iv) any Equity Security.
In addition, the Collateral Manager may, during the Reinvestment
Period and subject to the determination by the Collateral Manager that
17

the proceeds of such sale may be reinvested in compliance with the
Reinvestment Criteria (as defined below), direct the Trustee to dispose
of one or more Collateral Debt Obligations (other than any Defaulted
Obligation, Credit Improved Obligation, Credit Risk Obligation or
Equity Security) in cases where the Collateral Manager chooses, in its
sole discretion, to sell a Collateral Debt Obligation; provided that,
subject to the other requirements described herein, such sales
(measured by the Aggregate Principal Balance of the Collateral Debt
Obligations sold) in any twelve-month period commencing the day
after the Effective Date and ending on the day before the applicable
anniversary thereof does not exceed 25% of the Principal Collateral
Value of the Collateral Debt Obligations at the beginning of such
period.
During the period commencing on the Effective Date and ending on the
last day of the Reinvestment Period, the Collateral Manager may cause
(and the Trustee shall release) Principal Proceeds to be reinvested in
new Collateral Debt Obligations (the "Substitute Collateral Debt
Obligations") if, immediately after giving effect to such reinvestment,
the following criteria (the "Reinvestment Criteria") are satisfied:
(a) the Substitute Collateral Debt Obligation satisfies the
definition of Collateral Debt Obligation;
(b) the Overcollateralization Tests are satisfied, or if immediately
prior to such acquisition an Overcollateralization Test was not satisfied,
the relevant Overcollateralization Ratio is maintained or improved after
giving effect to such acquisition;
(c) the Interest Coverage Tests are satisfied or, if immediately
prior to such acquisition an Interest Coverage Test was not satisfied,
the relevant Interest Coverage Ratio is maintained or improved after
giving effect to such acquisition;
(d) the Collateral Quality Tests are satisfied or if, immediately
prior to such acquisition, any Collateral Quality Test was not satisfied,
the extent of compliance with such Collateral Quality Test is
maintained or improved after giving effect to such acquisition;
provided that the Weighted Average Spread Test need not be satisfied,
or the extent of compliance with such test need not be maintained or
improved, in the case of a reinvestment of Principal Proceeds received
in connection with the refinancing of a Collateral Debt Obligation
within five Business Days of the Issuer's receipt of such Principal
Proceeds in a Substitute Collateral Debt Obligation issued by the issuer
(or its successor by merger, conversion or consolidation) of the
Collateral Debt Obligation so refinanced so long as (I) the Spread of
such Substitute Collateral Debt Obligation is lower than the Spread of
the Collateral Debt Obligation so refinanced, (II) the priority in right of
payment and in right of collateral of such Substitute Collateral Debt
Obligation is the same as or higher than the priority in right of payment
and in right of collateral of the Collateral Debt Obligation so
refinanced, (III) Moody’s shall have upgraded or put on watch for
possible upgrade the rating assigned by it to the Collateral Obligation
so refinanced within 60 days prior to receipt of such Principal
Proceeds, (IV) the Moody's Rating of such Substitute Collateral Debt
Obligation is not lower than the Moody's Rating of the Collateral Debt
Obligation so refinanced and (V) the Standard & Poor's Rating of such
18

Substitute Collateral Debt Obligation is not lower than the Standard &
Poor's Rating of the Collateral Debt Obligation so refinanced;
(e) except in connection with the reinvestment of Sale Proceeds in
respect of any Defaulted Obligation, Equity Security or Credit Risk
Obligation, if the Class A-1 Loss Differential, the Class A-2 Loss
Differential, the Class B Loss Differential or the Class C Loss
Differential is less than zero, the Standard & Poor's CDO Monitor Test
is satisfied;
(f) if such acquisition shall occur after the Effective Date, each
applicable requirement of the Portfolio Profile Test is satisfied or, if
immediately prior to such acquisition, any such requirement was not
satisfied, the extent of compliance with such requirement is maintained
or improved after giving effect to such acquisition; and
(g) the procedures set forth in the Indenture relating to the
perfection of the Trustee's security interest in the Substitute Collateral
Debt Obligation or Substitute Collateral Debt Obligations have been
complied with to the extent required to be complied with through the
date of such acquisition.
No investment will be made in Collateral Debt Obligations after the
termination of the Reinvestment Period, except that the Issuer may
reinvest (i) principal payments received on Collateral Debt Obligations
as a result of optional redemptions, prepayments or Offers
("Unscheduled Principal Payments") or (ii) Sale Proceeds of Credit
Risk Obligations and Credit Improved Obligations in Collateral Debt
Obligations (and may use Interest Proceeds to pay for the portion of the
purchase price of any Collateral Debt Obligation so purchased that is
allocable to accrued interest) subject to the satisfaction of the
Reinvestment Criteria and the following conditions (collectively, the
"Additional Reinvestment Conditions"):
(i) no Event of Default has occurred or is continuing;
(ii) the Aggregate Principal Balance of the Substitute Collateral
Debt Obligation or Substitute Collateral Debt Obligations is no greater
than, (A) in the case of Unscheduled Principal Payments, the Aggregate
Principal Balance of the Collateral Debt Obligation that was the source
of such Unscheduled Principal Payments (or, in the case of
Unscheduled Principal Payments that are partial prepayments, no
greater than the amount of such Unscheduled Principal Payments) or
(B) in the case of Sale Proceeds, the Aggregate Principal Balance of the
sold Collateral Debt Obligation (less any Currency Hedge Termination
Payment associated with any related Currency Hedge);
(iii) the stated maturity of the Substitute Collateral Debt Obligation
or Collateral Debt Obligations is no greater than, (A) in the case of
Unscheduled Principal Payments, the stated maturity of the Collateral
Debt Obligation that was the source of such Unscheduled Principal
Payments or (B) in the case of Sale Proceeds, the stated maturity of the
sold Collateral Debt Obligation;
(iv) not more than 7.5% of the Principal Collateral Value of the
Collateral Debt Obligations may consist of Triple-C Collateral Debt
Obligations;
19

(v) the Weighted Average Rating Factor Test shall be satisfied;
(vi) (A) in the case of any other purchase of Substitute Collateral
Debt Obligations (other than Collateral Debt Obligations purchased
with the Sale Proceeds from the sale of Non-USD Debt Obligations),
either (I) the Aggregate Principal Balance of the Collateral
Debt Obligations will be maintained or increased or (II) the
Overcollateralization Tests will be satisfied and (B) in the case of any
purchase of Substitute Collateral Debt Obligations purchased with
Sales Proceeds from the sale of Non-USD Debt Obligations not
covered under clause (ii) above, either (I) the Aggregate Principal
Balance of the Substitute Collateral Debt Obligations purchased with
the Sale Proceeds will at least equal the Aggregate Principal Balance of
the Non-USD Debt Obligations sold or (II) the Overcollateralization
Tests will be satisfied;
(vii) the Class A Notes and the Class B Notes shall be rated at least
as high by Moody's as the rating assigned to such Class of Notes on the
Closing Date and the Class C Notes shall be rated no lower than one
subcategory below the rating assigned by Moody's to the Class C Notes
on the Closing Date; and
(viii) if the Standard & Poor's CDO Monitor Test is not satisfied,
the Standard & Poor's Rating of the substitute Collateral Debt
Obligation or Collateral Debt Obligations is equal to or greater than,
(A) in the case of Unscheduled Principal Payments, the Standard &
Poor's Rating of the Collateral Debt Obligation that was the source of
such Unscheduled Principal Payments or (B) in the case of Sale
Proceeds, the Standard & Poor's Rating of the sold Collateral Debt
Obligation.
In all other cases, Unscheduled Principal Payments and Sale Proceeds
of Credit Risk Obligations and Credit Improved Obligations, along
with all other Principal Proceeds, must be applied after the
Reinvestment Period to pay the principal of the Notes in accordance
with the Priority of Payments.
Notwithstanding anything to the contrary set forth herein, compliance
with the Reinvestment Criteria will be measured by determining the
aggregate effect of all sales of Collateral Debt Obligations and
purchases of Substitute Collateral Debt Obligations on a given date (or,
at the election of the Collateral Manager, the aggregate effect of a
series of related sales of Collateral Debt Obligations and purchases of
Substitute Collateral Debt Obligations during a period (not to exceed
two Business Days) as specified by the Collateral Manager) on the
Issuer's level of compliance with the Reinvestment Criteria, rather than
considering the effect of each such purchase individually.
Placement Agent of the Offered
Securities:.............................................. J.P. Morgan Securities Inc. ("JPMorgan").
Trustee:..................................................... U.S. Bank National Association, and its successors in such capacity.
Preferred Share Paying Agent: .............. U.S. Bank National Association, and its successors in such capacity.
Collateral Manager: ................................ Certain advisory and administrative functions with respect to the
Collateral will be performed by Octagon Credit Investors, LLC
20

("Octagon" or the "Collateral Manager"), pursuant to a Collateral
Management Agreement to be dated as of the Closing Date by and
between the Issuer and the Collateral Manager (the "Collateral
Management Agreement").
Octagon is expected to purchase up to 2,240 Preferred Shares on the
Closing Date. Octagon is not required to retain any of such Preferred
Shares for any period of time.
Distributions of Interest Proceeds:......... On each Distribution Date, Interest Proceeds (other than Interest
Proceeds invested or intended to be invested by the Issuer at the
direction of the Collateral Manager in accrued interest in respect of
Substitute Collateral Debt Obligations), with respect to the related Due
Period will be distributed in the following order of priority:
(1) to the payment of taxes, filing fees and registration fees (if
any) owing by the Issuer or the Co-Issuer for the related Interest
Accrual Period as certified by the Issuer the or the Co-Issuer, as
applicable, to the Trustee;
(2) to the payment of the following amounts in the following
priority: (i) to the pro rata payment of accrued and unpaid
Administrative Expenses constituting fees and expenses (including in
respect of any indemnities) of the Trustee, the Preferred Share Paying
Agent, the Collateral Administrator and the Securities Intermediary;
and (ii) all other accrued and unpaid Administrative Expenses
(including in respect of any indemnities) (in the order set forth in the
definition of such term) including amounts payable by the Issuer to the
Collateral Manager under the Collateral Management Agreement or the
Indenture and expenses of the Trustee, the Preferred Share Paying
Agent, the Collateral Administrator and the Securities Intermediary not
paid pursuant to clause (i) of this clause (2); provided that such
payments pursuant to clauses (i) and (ii) above shall be in aggregate
limited to payments not to exceed on any Distribution Date the sum of
0.05% per annum (prorated for the related Interest Accrual Period) of
the Principal Collateral Value on the related Determination Date plus
U.S.$220,000 per annum (the limit imposed on clauses (i) and (ii) of
this clause (2), the "Administrative Expense Cap");
(3) on and after the second Distribution Date, for deposit into the
Expense Account, at the Collateral Manager's discretion, up to an
amount equal to an amount, if greater than zero, by which (i) the
Administrative Expense Cap on such Distribution Date exceeds (ii) the
aggregate payments pursuant to clauses (i) and (ii) of clause (2) above
on such Distribution Date;
(4) to the payment of all accrued and unpaid Hedge Payment
Amounts (in the case of any Currency Hedge, to the extent that there
are no funds available in the subaccount applicable to such Currency
Hedge within the Currency Account) (other than amounts due as a
result of the termination (or partial termination) of such Hedge
Agreement);
(5) first, to the payment of all accrued and unpaid Base Collateral
Management Fees; and second, to the payment of all accrued and
unpaid Base Collateral Management Fee Interest;
21

(6) to the payment of accrued and unpaid interest on the Class A-1
Notes;
(7) to the payment of accrued and unpaid interest on the Class A-2
Notes;
(8) to the pro rata payment of Hedge Payment Amounts that are
due as a result of the termination (or partial termination) of such Hedge
Agreement (in the case of any Currency Hedge, to the extent there are
no funds available in the subaccount applicable to such Currency
Hedge within the Currency Account on or prior to such Distribution
Date in connection with such termination) (other than Specified Hedge
Termination Payments, if any);
(9) in the event that any of the Class A Coverage Tests are 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 as of such
Determination Date on a pro forma basis after giving effect to any
payments made through this clause (9);
(10) to the payment of accrued and unpaid interest on the Class B
Notes and any Class B Deferred Interest;
(11) in the event that any of the Class B Coverage Tests are 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 satisfied as of such
Determination Date on a pro forma basis after giving effect to any
payments made through this clause (11);
(12) to the payment of accrued and unpaid interest on the Class C
Notes and any Class C Deferred Interest;
(13) in the event that any of the Class C Coverage Tests are 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 satisfied as of such
Determination Date on a pro forma basis after giving effect to any
payments made through this clause (13);
(14) first, to the payment of the Subordinated Collateral
Management Fee Interest; and second, to the payment of the
Subordinated Collateral Management Fees, including Subordinated
Collateral Management Fees not paid on any previous Distribution
Date;
(15) during the Reinvestment Period, in the event that the
Reinvestment Overcollateralization Test is not satisfied as of the related
Determination Date, for deposit into the Principal Collection Account
as Principal Proceeds, the lesser of (i) 75% of the remaining Interest
Proceeds and (ii) the amount necessary to cause the Reinvestment
Overcollateralization Test to be satisfied as of such Determination
Date;
(16) for deposit into the Principal Collection Account as Principal
Proceeds, at the Collateral Manager's discretion, up to an amount equal
22

to the aggregate amount of Principal Proceeds previously applied
pursuant to "—Distributions of Principal Proceeds" below to make
payments specified in clauses (1), (2), (4)-(8), (10) and (12) above less
the aggregate amount of Interest Proceeds previously applied pursuant
to this clause (16);
(17) to the payment of any amounts described in clause (2) above,
in the sequence stated therein and only to the extent not previously paid
thereunder whether due to the Administrative Expense Cap or
otherwise;
(18) to the payment of any Specified Hedge Termination Payments
(in the case of any Currency Hedge, to the extent there are no funds
available in the subaccount applicable to such Currency Hedge within
the Currency Account on or prior to such Distribution Date in
connection with such termination);
(19) to pay to the Preferred Share Paying Agent (for payment to
holders of the Preferred Shares pursuant to the Preferred Share
Documents to the extent legally permitted) until the Preferred Shares
have realized an Internal Rate of Return of 10%;
(20) to the payment of the Collateral Management Incentive Fees,
if any; and
(21) any remaining funds will be distributed to the Preferred Share
Paying Agent (for payment to holders of the Preferred Shares pursuant
to the Preferred Share Documents to the extent legally permitted).
Distributions of Principal Proceeds: ...... On each Distribution Date, Principal Proceeds (other than Principal
Proceeds reinvested or intended to be reinvested by the Collateral
Manager in Substitute Collateral Debt Obligations) will be distributed
in the following order of priority:
(1) first, to the payment of the amounts referred to in clauses (1),
(2) and (4) through (8) of "—Distributions of Interest Proceeds" above,
in the sequence stated therein and only to the extent not paid in full
thereunder, and second, to the payment of the amounts referred to in
clause (9) of "—Distributions of Interest Proceeds" above but only to
the extent not paid in full thereunder and to the extent necessary to
cause the Class A 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 (1);
(2) to the payment of the amounts referred to in clause (11) of
"—Distributions of Interest Proceeds" above but only to the extent not
paid in full thereunder and to the extent necessary to cause the 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 (2);
(3) to the payment of the amounts referred to in clause (13) of
"—Distributions of Interest Proceeds" above but only to the extent not
paid in full thereunder and to the extent necessary to cause the 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 (3);
23

(4) to the payment of the amounts referred to in clause (10) of
"—Distributions of Interest Proceeds" above but only to the extent not
paid in full thereunder and only to the extent that all of the Coverage
Tests would be satisfied on a pro forma basis after giving effect to any
payments made through this clause (4);
(5) to the payment of the amounts referred to in clause (12) of
"—Distributions of Interest Proceeds" above but only to the extent not
paid in full thereunder and only to the extent that all of the Coverage
Tests would be satisfied on a pro forma basis after giving effect to any
payments made through this clause (5);
(6) (i) if such Distribution Date is a Redemption Date, to make
payments in accordance with the Note Payment Sequence, and (ii) on
any other Distribution Date, to make payments in the amount of the
Special Redemption Amount, if any, at the election of the Collateral
Manager, either (x) in accordance with the Note Payment Sequence or
(y) if, on the related Determination Date, the Pro Rata Special
Redemption Conditions are satisfied, (A) first, to the payment of the
Aggregate Outstanding Amounts of each Class of the 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.$180,000,000, and (B) second, in accordance
with the Note Payment Sequence thereafter;
(7) (i) during the Reinvestment Period, all remaining funds will be
allocated to the Principal Collection Account for the acquisition of
Substitute Collateral Debt Obligations and (ii) after the Reinvestment
Period in the case of Unscheduled Principal Payments and Sale
Proceeds of Credit Risk Obligations and Credit Improved Obligations
received during the related Due Period, at the sole discretion of the
Collateral Manager and in accordance with the Reinvestment Criteria
and subject to the Additional Reinvestment Conditions, to the Principal
Collection Account for the acquisition of additional Collateral Debt
Obligations;
(8) after the Reinvestment Period, to make payments in
accordance with the Note Payment Sequence;
(9) to the payment of the amounts referred to in clauses (14) and
(17) through (19) of "—Distributions of Interest Proceeds" above, in
the sequence stated therein and only to the extent not paid in full
thereunder;
(10) to the payment of the Collateral Management Incentive Fees,
if any; and
(11) any remaining funds shall be distributed to the Preferred
Share Paying Agent (for payment to holders of the Preferred Shares
pursuant to the Preferred Share Documents to the extent legally
permitted).
Management Fee: .................................... The management fee consists of, on each Distribution Date:
(i) a Base Collateral Management Fee in an amount equal to the
Base Collateral Management Fee Rate per annum of the Principal
Collateral Value;
24

(ii) a Subordinated Collateral Management Fee in an amount
equal to the Subordinated Collateral Management Fee Rate per annum
of Principal Collateral Value; and
(ii) a Collateral Management Incentive Fee in an amount equal to:
(1) 20% of the remaining Interest Proceeds, if any, available after
making the distributions on such Distribution Date pursuant to
clause (19) of the priority of payments as described in "Application of
Funds—Priority of Payments—Distributions of Interest Proceeds" and
(2) 20% of the remaining Principal Proceeds, if any, available after
making the distributions on such Distribution Date pursuant to
clause (9) of the priority of payments as described in "Application of
Funds—Priority of Payments—Distributions of Principal Proceeds."
As used herein,
"Base Collateral Management Fee Rate" means initially, 0.125%,
except that such rate may be increased to up to 0.20% with the approval
of a Majority of the Controlling Class in connection with the
appointment of a replacement collateral manager that is not Octagon
Credit Investors LLC or an Affiliate thereof.
"Subordinated Collateral Management Fee Rate" means initially,
0.375%, except that (i) such rate may be reduced upon any increase of
the Base Collateral Management Fee Rate in connection with the
appointment of a replacement collateral manager that is not Octagon
Credit Investors LLC or an Affiliate thereof and (ii) in no event shall
the sum of the Subordinated Collateral Management Fee Rate plus the
Base Collateral Management Fee Rate exceed 0.50%.
Governing Law: ....................................... The Notes, the Indenture, the Fiscal Agency Agreement, the Collateral
Management Agreement and the Collateral Administration Agreement
to be entered into on the Closing Date by the Issuer and U.S. Bank
National Association, as collateral administrator (the "Collateral
Administration Agreement"), will be governed by, and construed in
accordance with, the laws of the State of New York. The Preferred
Shares will be governed by, and construed in accordance with, the laws
of the Cayman Islands.
Certain Tax Considerations: .................. See "Certain U.S. Federal Income Tax Considerations."
Certain ERISA Considerations:............. See "Certain ERISA Considerations."
Legal Investment: .................................... See "Certain Legal Investment Considerations."
25

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 Memorandum, prior to investing
in the Offered Securities.
There are Risks 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 Offered Securities. The Placement Agent is under no obligation to make a
market for the Offered Securities. There can be no assurance that any secondary market for any of the Offered
Securities will develop, or if a secondary market does develop, that it will provide the holders of the Offered
Securities with liquidity of investment or will continue for the life of the Offered Securities. Consequently, a
purchaser of Offered Securities must be prepared to hold the Offered Securities until their Stated Maturity or the
liquidation of the Issuer, as applicable. In addition, the Offered Securities 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 Offered Securities may further limit their liquidity. The Offered Securities 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 Offered Securities under the Securities Act. Application has been made to Irish
Financial Services Regulatory Authority, as competent authority under Directive 2003/71/EC, for the Prospectus to
be approved. Application has been made to admit the Notes to the Official List of the Irish Stock Exchange and
trading on its regulated market. There can be no assurance that any such admission will be granted or maintained.
The Placement Agent Will Have No Ongoing Responsibility for the Collateral or the Actions of the Collateral
Manager or the Issuer
The Placement Agent will have no obligation to monitor the performance of the Collateral or the actions of the
Collateral Manager or the Issuer and will have no authority to advise the Collateral Manager or the Issuer or to
direct their actions, which will be solely the responsibility of the Collateral Manager and/or the Issuer, as the case
may be. If the Placement Agent acts as Hedge Counterparty, Synthetic Security Counterparty or Securities Lending
Counterparty or owns Offered Securities, it will have no responsibility to consider the interests of any holders of
Offered Securities in actions it takes in such capacities. While 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 of the Co-Issuers and the Preferred Shares Are Equity Interests in
the Issuer; Investors Must Rely on Available Collections from the Collateral Debt 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 Preferred Shares are unsecured equity interests in the Issuer; therefore, the Offered Securities are payable
solely from the Collateral Debt Obligations and all other Collateral. None of the Trustee, the Preferred Share Paying
Agent, the Collateral Manager, 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 Offered Securities.
Consequently, holders of the Offered Securities must rely solely on distributions on the Collateral for payments on
the Offered Securities. If distributions on such Collateral are insufficient to make payments on the Offered
Securities, no other assets (in particular, no assets of the Collateral Manager, the holders of the Offered Securities,
the Placement Agent, the Trustee, the Preferred Share Paying Agent, the Administrator, or any affiliates of any of
the foregoing) will be available for payment of the deficiency and all obligations of the Co-Issuer or Issuer, as
applicable, and any claims against the Co-Issuer or Issuer, as applicable, in respect of the Offered Securities will be
extinguished and will not revive.
26

The Issuer May Not Be Able to Reinvest Available Funds in Appropriate Collateral
The amount of Collateral Debt Obligations purchased on the Closing Date, the amount and timing of the
purchase of additional Collateral Debt Obligations before the Effective Date, and the subsequent reinvestment of
Principal Proceeds, will affect the cash flows available to make payments on, and the return to the holders of, the
Offered Securities. Reduced liquidity and relatively lower volumes of trading in certain Collateral Debt Obligations,
in addition to restrictions on investment represented by the Reinvestment Criteria, could result in periods during
which the Issuer is not able to fully invest its available cash in Collateral Debt Obligations, and it is unlikely that the
Issuer's available cash will be fully invested in Collateral Debt Obligations at any time. The longer the period before
reinvestment of cash or cash-equivalents in Collateral Debt Obligations and the larger the amount of uninvested cash
or cash-equivalents, the greater the adverse impact may be on aggregate interest collected and distributed by the
Issuer, thereby resulting in lower yield than could have been obtained if the net proceeds associated with the offering
of the Offered Securities and all Principal Proceeds were immediately and fully reinvested. The associated
reinvestment risk on the Collateral Debt Obligations will be borne by the holders of the Offered Securities,
beginning with the most subordinated Class. Although the Collateral Manager may mitigate this risk to some degree
during the Reinvestment Period by declaring a Special Redemption, the Collateral Manager is not required to do so,
and any Special Redemption may result in a lower yield on the Issuer's assets than could have been obtained if the
net proceeds from the offering of the Offered Securities and all Principal Proceeds were immediately and fully
reinvested and no Special Redemption had taken place.
Generally, Principal Proceeds (together with Interest Proceeds, but only to the extent used to pay for accrued
interest on Collateral Debt Obligations, and Sale Proceeds received on the Collateral Debt Obligations) will be
reinvested during the Reinvestment Period in Substitute Collateral Debt Obligations or temporarily reinvested in the
Eligible Investments pending reinvestment in Substitute Collateral Debt Obligations in accordance with the Priority
of Payments. The earnings with respect to Substitute Collateral Debt Obligations will depend, among other factors,
on reinvestment rates available in the marketplace at the time and on the availability of investments acceptable to the
Collateral Manager that satisfy the criteria under "Security for the Secured Notes—Sales, Substitute Securities and
Reinvestment Criteria." The need to satisfy the criteria and identify acceptable investments may require the
purchase of Substitute Collateral Debt Obligations having lower yields than those initially acquired or require that
Principal Proceeds be held temporarily in cash or Eligible Investments, which will reduce the yield earned by the
Issuer. Further, issuers of Collateral Debt Obligations may be more likely to exercise any rights they may have to
redeem them when interest rates or spreads are declining. Any decrease in the yield on the Collateral Debt
Obligations will reduce the amounts available to make payments of principal and interest on the Offered Securities.
The Issuer expects that, as of the Closing Date, it will have purchased (or entered into commitments to
purchase) at least U.S.$372,000,000 in aggregate principal balance of the Collateral Debt Obligations to be included
in the anticipated portfolio as of the Effective Date.
The Preferred Shares are Unsecured Equity Interests in the Issuer
The Preferred Shares will be equity interests in the Issuer and will not be secured by the Collateral Debt
Obligations or other Collateral securing the Notes and certain other obligations. As such, the holders of Preferred
Shares will rank lower in priority to all creditors of the Issuer, whether secured or unsecured and known or
unknown, including, without limitation, the holders of the Notes and the Hedge Counterparties. As a result of the
foregoing, 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 Preferred Shares.
Any amounts paid by the Preferred Share Paying Agent as distributions on the Preferred Shares will be payable
out of distributable profits and/or share premium of the Issuer and may be paid by the Preferred Share Paying Agent
only if the Issuer is solvent on the applicable Distribution Date and immediately thereafter and such payments will
not be made until due and unpaid interest on the Notes and certain other amounts (including certain fees and
expenses) have been paid. On any Distribution Date, sufficient funds may not be available (including as a result of a
failure of any of the Coverage Tests or the Reinvestment Overcollateralization Test) to make payments to the
holders of the Preferred Shares in accordance with the Priority of Payments. In addition, such distributions will be
payable only to the extent that the Issuer will not be insolvent after such distributions are paid. Under Cayman
Islands law, a company is generally deemed to be solvent if it is able to pay its debts as they come due in the
ordinary course of business.
27

To the extent the requirements under Cayman Islands law described in the preceding paragraph are not met,
amounts otherwise payable to the holders of the Preferred Shares will be retained in the Preferred Shares
Distribution Account until, in the case of any payments by way of dividend, the next succeeding Distribution Date
or (in the case of any payment which would otherwise be payable on a redemption date of the Preferred Shares) the
next succeeding Business Day on which the Issuer notifies the Preferred Share Paying Agent that such requirements
are met and, in the case of any payments by way of redemption of the Preferred Shares, the next succeeding
Business Day on which the Issuer notifies the Preferred Share Paying Agent that such requirements are met.
Amounts on deposit in the Preferred Shares Distribution Account will not be available to pay amounts due to the
holders of the Notes, the Trustee, any Hedge Counterparty or any other creditor of the Issuer whose claim is limited
in recourse to the Collateral. However, amounts on deposit in the Preferred Shares Distribution Account may be
subject to the claims of creditors of the Issuer that have not contractually limited their recourse to the Collateral.
The Indenture and the Fiscal Agency Agreement will limit the Issuer's activities to the issuance and sale of the
Offered Securities, the acquisition and disposition of the Collateral Debt Obligations, the acquisition and disposition
of, and investment and reinvestment in, the Eligible Investments and the other activities related to the issuance and
the sale of the Offered Securities described under "Description of the Offered Securities." The Issuer does not
expect to have any significant full recourse liabilities that would be payable out of amounts on deposit in the
Preferred Shares Distribution Account.
The Subordination of the Class A-1 Notes, the Class A-2 Notes, the Class B Notes and the Class C 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, Administrative Expenses, Base Collateral Management Fees and certain
payments under the Hedge Agreements); the Class A-2 Notes are subordinated on each Distribution Date to the
Class A-1 Notes; the Class B Notes are subordinated on each Distribution Date to the Class A Notes; and the
Class C Notes are subordinated on each Distribution Date to the Class B Notes, in each case to the extent described
herein. Amounts distributable in respect of the Preferred Shares are subordinated to interest on, and any required
payments of principal of, the Notes, payments of fees and expenses and payments in respect of the claims of any
other creditor of the Issuer. No payments of interest or distributions from Interest Proceeds will be made on any
Class of Notes or the Preferred Shares on any Distribution 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 or the Class C Notes, as applicable, to the extent set forth in the Priority of Payments) or distributions from
Principal Proceeds will be made on any such Class of Notes or the Preferred Shares on any Distribution 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 Preferred Shares, 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 and the Class C 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 a
Majority 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 "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 Debt Obligations may be
sold and liquidated only if, among other things, (i) the Trustee determines that the anticipated proceeds of such sale
or liquidation (after deducting the reasonable expenses of such sale or liquidation) would be sufficient to discharge
in full the amounts then due and unpaid with respect to all the Notes and the holders of a Majority of the Controlling
Class agrees with such determination or (ii) the holders of at least 66-2/3% of the Aggregate Outstanding Amount of
each Class of the Notes, voting as a separate class, and each Hedge Counterparty direct, subject to the provisions of
the Indenture, such sale and liquidation.
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The Preferred Shares are Highly Leveraged, which Increases Risks to Investors in Preferred Shares; Other
Subordinated Classes are Also Leveraged
The Preferred Shares represent a highly leveraged investment in the Collateral. Therefore, the market value of
the Preferred Shares would be anticipated to be significantly affected by, among other things, changes in the market
value of the Collateral, changes in the distributions on the Collateral, defaults and recoveries on the Collateral,
capital gains and losses on the Collateral, prepayments on Collateral and the availability, prices, interest rates and
exchange rates of Collateral and other risks associated with the Collateral as described in "—Relating to the
Collateral Debt Obligations" below. Accordingly, the Preferred Shares 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 Collateral, changes in the distributions
on the Collateral, defaults and recoveries on the Collateral, capital gains and losses on the Collateral, prepayments
on Collateral and availability, prices, interest rates and exchange rates of Collateral.
Interest Will Be Deferred on the Class B Notes and the Class C Notes if There Are Insufficient Funds under the
Priority of Payments for Payment of Interest
So long as any more senior Class of Notes is outstanding, to the extent that funds are not available on any
Distribution Date to pay the full amount of interest on the Class B Notes or the Class C Notes or if such interest is
not paid in order to satisfy the Coverage Tests, such amounts will not be due and payable on such Distribution Date,
but will be deferred and added to the principal balance of the applicable Class or Classes and, thereafter, will bear
interest at the Note Interest Rate for such Class or Classes until paid. The failure to pay such Deferred Interest on
such Payment Date will not be an Event of Default under the Indenture. 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 or Classes of
the Notes.
The Indenture May Be Modified without the Consent of the Holders of the Offered Securities
The provisions of the Indenture may be modified subject to the satisfaction of various conditions precedent. In
certain cases, the consent of holders of Offered Securities is required for such modifications, but, in certain cases,
such consent is not required. One of such conditions is that the interests of any holders of the Notes or Preferred
Shares would not be materially adversely affected by such modification. However, in certain cases described herein
under "The Indenture––Modification of the Indenture," unless a Majority of any Class of Notes or a Majority of
Preferred Shares notifies the Trustee that its interests will be materially adversely affected by such supplemental
indenture, the interests of the holders of such Class of Notes or the holders of the Preferred Shares will be deemed
not to be materially affected thereby. Moreover, in the case of any supplemental indenture that (a) modifies the
Collateral Quality Tests, the definition of the term "Moody's Rating" or "Standard & Poor's Rating" or any of the
defined terms used in the Collateral Quality Tests or (b) facilitates the addition of additional collateral quality tests
required by the Rating Agencies to measure the characteristics of the pool of Collateral or adds or modifies defined
terms related thereto, the interests of the holders of the Notes of each Class will be deemed not to be materially
adversely affected by such proposed supplemental indenture if Rating Confirmation with respect to such Class of
Notes is received with respect to such supplemental indenture.
In addition, in many cases when consent of the holders of Notes is required to make modifications to the
Indenture, such modifications may be made with the consent of a Majority of the outstanding Notes voting together
as a single class, in which case any single Class of Notes that is adversely affected by such modification may not be
able to block such modifications. Initially, the Class A-1 Notes will constitute approximately 84.5% of the
Aggregate Outstanding Amount of the Notes issued on the Closing Date and will be able to control the vote relating
to such modifications. See "The Indenture––Modification of the Indenture."
The Collateral 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 Offered Securities.
Consequently, it is anticipated that on the Closing Date the Aggregate Principal Balance of the Collateral will be less
than the sum of the Aggregate Outstanding Amount of the Notes plus the aggregate original issue price of the
29

Preferred Shares. In the event of an Event of Default under the Indenture or liquidation of the Co-Issuers, Principal
Proceeds will likely be insufficient to pay off the Offered Securities in full.
The Indenture Requires Mandatory Redemption of the Notes for Failure to Satisfy Coverage Tests
If the Coverage Tests with respect to any Class or Classes of Notes are not met, Interest Proceeds that otherwise
would have been paid or distributed to the holders of the Notes 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 Debt Obligations will instead be used to redeem the Notes of the most senior
Class or Classes then outstanding to the extent necessary to satisfy the applicable Coverage Tests as described under
"Summary of Terms—Priority of Payments." This could result in an elimination, deferral or reduction in the
payments of Interest Proceeds to the holders of the Class B Notes and/or the Class C Notes of dividends to the
holders of the Preferred Shares, 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 Notes, which would adversely affect the Issuer.
Distributions to the Preferred Shares will be Reduced upon a Failure to Satisfy the Reinvestment
Overcollateralization Test
If the Reinvestment Overcollateralization Test is not satisfied as of any Determination Date preceding any
Distribution Date occurring on or after the Effective Date and during the Reinvestment Period, a portion of the
Interest Proceeds that would otherwise be used to make distributions to the Preferred Shares, to pay Collateral
Management Incentive Fees and to pay certain expenses will instead be deposited to the Principal Collection
Account as Principal Proceeds.
The Notes Are Subject to Optional Redemption
A Majority of the Preferred Shares may cause the Notes and, on or after the payment in full of the Notes and all
administrative and other fees and expenses payable under the Priority of Payments, the Preferred Shares to be
redeemed as described under "Description of the Offered Securities—Redemption—Optional and Special
Redemption" and "Description of the Offered Securities—Redemption—Optional Redemption of the Preferred
Shares" on any Distribution Date occurring on or after April 23, 2010.
In the event of an early redemption, the holders of the Notes and the Preferred Shares will be repaid prior to the
respective Stated Maturity, in the case of the Notes, or mandatory redemption date, in the case of the Preferred
Shares. In the case of an Optional Redemption effected through a Redemption by Liquidation, there can be no
assurance that, upon any such redemption, the Sale Proceeds realized and other available funds would permit any
distribution on the Preferred Shares after all required payments are made to the holders of the Notes. In addition, an
Optional Redemption of Notes and Preferred Shares could require the Collateral Manager to liquidate positions
more rapidly than would otherwise be the case, which could adversely affect the realized value of the Collateral
Debt Obligations sold.
In addition, in the case of an Optional Redemption effected through a Redemption by Refinancing, the holders
of the Preferred Shares may cause an Optional Redemption through a Redemption by Refinancing if interest rates on
investments similar to the Notes fall below current levels. If exercised, such redemption would result in the Notes
being redeemed at the Redemption Price at a time when they may be trading in the market at a premium and when
other investments bearing the same rate of interest relative to the level of risk assumed may be difficult or expensive
to acquire. In addition, if the holders of the Preferred Shares cause the Notes to be redeemed pursuant to a
Redemption by Refinancing in which additional notes are issued or borrowings under secured loans are made, the
Preferred Shares will be subordinate to payments on such additional notes or secured loans. The additional notes
issued, or secured loans obtained, as the case may be, in connection with a Redemption by Refinancing would have
such terms and priorities as are negotiated at the time and that are set forth in a supplemental indenture. The terms
and priorities of the Preferred Shares may be less favorable to the holders of the Preferred Shares than the Notes that
are being redeemed pursuant to the Redemption by Refinancing.
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The Notes Are Subject to Special Redemption at the Option of the Collateral Manager
The Notes will be subject to redemption in part by the Issuer (i) on any Distribution Date during the
Reinvestment Period if the Collateral Manager in its discretion notifies the Trustee that it has been unable, for a
period of at least 30 days, to identify Substitute Collateral Debt Obligations which would meet the criteria for
reinvestment described under "Security for the Notes—Substitute Securities and Reinvestment Criteria" in sufficient
amounts to permit the reinvestment of all or a portion of the funds then in the Principal Collection Account that are
to be invested in Substitute Collateral Debt Obligations or (ii) after the Effective Date, if the Collateral Manager
notifies the Trustee that a redemption is required as described under "The Indenture—Confirmation of Ratings;
Ramp-Up Failure" in order to obtain from each Rating Agency written confirmation that it will not downgrade or
withdraw its rating of the Notes assigned thereto on the Closing Date. On the first Distribution Date following the
Due Period in which notice of a Special Redemption is given, the funds in the Principal Collection Account
representing Principal Proceeds that cannot be reinvested in Substitute Collateral Debt Obligations will be available
to be applied in accordance with the Priority of Payments to redeem the Notes either (x) in accordance with the Note
Payment Sequence or (y) if, on the related Determination Date, the Pro Rata Special Redemption Conditions are
satisfied, (A) first, to the payment of the Aggregate Outstanding Amounts of each Class of the 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.$180,000,000, and (B) second, in accordance with the Note Payment
Sequence thereafter. The application of funds in that manner could result in an elimination, deferral, or reduction of
amounts available to make payments on the Notes following the applicable date of Special Redemption. If the
Collateral Manager does not effect a Special Redemption in such circumstances, amounts available for investment in
Substitute Collateral Debt Obligations would instead be invested in Eligible Investments that are likely to yield
substantially less than Collateral Debt Obligations, and accordingly, the Issuer's ability to make distributions to the
holders of the Offered Securities will be adversely affected. See "—The Offered Securities Are Limited Recourse
Obligations; Investors Must Rely on Available Collections from the Collateral Debt Obligations and Will Have No
Other Source for Payment," "Application of Funds—Priority of Payments—Distributions of Principal Proceeds" and
"Description of the Offered Securities—Redemption—Optional and Special Redemption."
The Reinvestment Period May Terminate Earlier Than Expected
Although the Reinvestment Period is expected to terminate on the Distribution Date occurring in April 2013,
the Reinvestment Period may terminate prior to such date if the Collateral Manager notifies the Issuer and the
Trustee that, in its judgment, investments in Substitute Collateral Debt Obligations in accordance with the Indenture
or the Collateral Management Agreement is no longer feasible or advisable and obtains Rating Confirmation thereto.
Such early termination of the Reinvestment Period may shorten the expected lives of the Notes.
The Offered Securities May Be Affected by Interest Rate Risks and Currency Exchange Risks, Including
Mismatches Between the Notes and the Collateral Debt Obligations
The aggregate principal balance of Notes may be different than the aggregate principal balance of the floating
rate Collateral Debt Obligations, and a portion of the portfolio of Collateral may consist of fixed rate Collateral Debt
Obligations. In addition, any payments of principal of or interest on Collateral Debt Obligations received during a
Due Period occurring during the Reinvestment Period and not reinvested in Collateral Debt Obligations during such
Due Period will be reinvested in Eligible Investments maturing not later than the Business Day immediately
preceding the next Distribution 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 Offered Securities. 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 Agreements or that, if
entered into, such Hedge Agreements will significantly reduce the effect of such interest rate mismatch. The
Preferred Shares will be subordinated to the payment of interest on the Notes. There can be no assurance that the
Collateral Debt Obligations and the Eligible Investments will in all circumstances generate sufficient Interest
Proceeds to make timely payments of interest on the Notes and to make distributions to the holders of the Preferred
Shares, nor that the Hedge Agreements will ensure any particular return on such Notes or Preferred Shares.
31

Investments of the Issuer in securities or other debt instruments (including Synthetic Securities) of non-U.S.
issuers may be denominated in currencies other than the U.S. Dollar, and the value of such investments in U.S.
Dollars will fluctuate based on exchange rates. The Issuer may be adversely affected by exchange control
regulations or changes in the exchange rate between foreign currencies and the U.S. Dollar. Changes in foreign
currency exchange rates may also affect the value of interest earned, and the level of gains and losses realized on the
sale of loans or other debt instruments. The rates of exchange between the U.S. Dollar and other currencies are
affected by many factors, including forces of supply and demand in the foreign exchange markets. These rates are
also affected by the international balance of payments and other economic and financial conditions, government
intervention, speculation and other factors. To the extent described herein, the Issuer is expected to enter into one or
more currency hedging transactions (or maintain one or more existing currency hedging transactions) in connection
with the purchase of Non-USD Debt Obligations to hedge a portion of the Issuer's exposures to foreign exchange
risks from such Non-USD Debt Obligations. However, there can be no assurance that such currency hedging
transactions will significantly reduce the effect of such foreign exchange risks with respect to Non-USD Debt
Obligations. In certain circumstances where there are insufficient funds in the applicable subaccount of the
Currency Account, amounts on deposit in the Collection Accounts otherwise available to make payments on the
Notes may be required to be used to pay certain currency hedging termination payments and other amounts owing to
Hedge Counterparties. To the extent that amounts on deposit in the Collection Accounts, which are amounts
denominated in U.S. Dollars, are required to be used to pay certain currency hedging termination payments and
other amounts owing to Hedge Counterparties, such amounts will be converted into the applicable Permitted
Currency or Permitted Currencies pursuant to a Permitted Currency Exchange at the Applicable Spot Market
Exchange Rate. See "Security for the Notes—Accounts" and "Security for the Notes—Hedge Agreements."
A Hedge Counterparty may terminate an applicable Hedge Agreement 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 a replacement Hedge Agreement will reduce amounts available for payments to holders of Offered
Securities. A Hedge Counterparty may also terminate an applicable Hedge Agreement 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 Collateral 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 Offered Securities. In
either case, there can be no assurance that the remaining payments on the Collateral would be sufficient to make
payments of interest and principal on the Notes and distributions with respect to the Preferred Shares.
The Weighted Average Lives of the Notes and the Investment Term of the Preferred Shares May Vary
The Stated Maturity of the Notes and the mandatory redemption date in respect of the Preferred Shares is April
23, 2020. The average life of each Class of Notes and the investment term of the Preferred Shares is expected to be
shorter than the number of years until its respective Stated Maturity date or mandatory redemption date, as
applicable. Each such average life or investment term may vary due to various factors affecting the early retirement
of Collateral Debt Obligations, the timing and amount of sales of such Collateral Debt Obligations, the ability of the
Collateral Manager to invest collections and proceeds in additional Collateral Debt Obligations, and the occurrence
of any mandatory redemption, Optional Redemption or Special Redemption. Retirement of the Collateral Debt
Obligations prior to their respective final maturities will depend, among other things, on the financial condition of
the issuers of the underlying Collateral Debt Obligations and the respective characteristics of such Collateral Debt
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 Debt 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 Offered Securities and the yield to maturity of the Offered Securities. See "Security for the Notes—
Substitute Securities and Reinvestment Criteria."
32

The Issuer May Be Engaged in a U.S. Trade or Business
The Issuer will adopt certain operating procedures intended to reduce the risk that the Issuer will be deemed to
have engaged in a trade or business in the United States. The Issuer will receive an opinion of Milbank, Tweed,
Hadley & McCloy LLP subject to customary assumptions and qualifications to the effect that, assuming the Issuer
and Collateral Manager comply with these procedures and other provisions of the transaction documents, the Issuer
will not be engaged in a trade or business in the United States. The Issuer will not obtain any ruling from the
Internal Revenue Service ("IRS") and such an opinion of counsel is not binding on the IRS or any court. If the
Issuer is not engaged in a United States trade or business, the Issuer will not be subject to United States Federal
income tax on its net income. If the Issuer were found to be engaged in a United States trade or business, it could be
subject to substantial United States Federal income taxes that would materially impair its ability to pay interest on
and principal of the Notes and make distributions with respect to the Preferred Shares. In addition, in that event
payments in respect of the Notes may be treated as U.S. source income and could be subject to withholding tax
unless foreign investors have provided appropriate certifications entitling them to an exemption.
Certain Income of the Issuer May Be Subject to Withholding Tax, and Changes In Tax Law May Adversely
Affect the Issuer
A portion of the Collateral Debt Obligations may be subject to withholding tax. The Collateral Quality and
Coverage Tests will be determined on the basis of the after-tax spread, coupon or amount of interest, as applicable.
However, there can be no assurance that, as a result of any change in any applicable law, treaty, rule or regulation or
interpretation thereof, payments on the Collateral Debt Obligations that were not subject to withholding tax when
purchased might not in the future become subject to U.S. or other withholding tax or that the amount or rate of
withholding tax to which a payment on a Collateral Obligation is subject might not increase. If the withholding tax
on payments on the Collateral Debt Obligations increases, or if withholding tax is imposed on payments on the
Collateral Debt Obligations, but is not compensated for by a "gross up" provision under the terms of such Collateral
Debt Obligations, such tax would reduce the amounts available to make payments on the Offered Securities. There
can be no assurance that remaining payments on the Collateral would be sufficient to make timely payments on the
Note and to pay distributions to the Preferred Share Paying Agent for payment to the holders of the Preferred Shares
pursuant to the Preferred Share Documents. Income from Equity Securities is likely to be subject to United States
withholding tax or withholding in other jurisdictions from which such income is sourced and the treatment under
current law of certain types of income the Issuer may receive (such as commitment fees, certain securities lending
fees and income on certain derivatives) may not be entirely clear. The extent to which other source country
withholding taxes may apply to the Issuer's income will depend on the actual composition of its assets.
Holders of Equity of the Issuer May Be Taxed on Phantom Income
The Issuer will be a passive foreign investment company and may also be a controlled foreign corporation. As
a result, United States holders of any class of Notes treated as equity for federal income tax purposes could be
required to recognize income for tax purposes in excess of cash actually distributable to them ("phantom income") in
a variety of circumstances and could be subject to certain other potentially adverse consequences described under
the heading "Certain U.S. Federal Income Tax Consequences—United States Federal Tax Treatment of U.S.
Holders—U.S. Holders of Preferred Shares." Each holder should review the disclosure under the heading "Certain
U.S. Federal Income Tax Consequences—United States Federal Tax Treatment of U.S. Holders—U.S. Holders of
Preferred Shares" and consult its own tax advisor before investing.
The Issuer is Highly Leveraged, which Increases Risks to Investors
The Issuer will be highly leveraged. Use of leverage is a speculative investment technique and involves certain
risks to investors in the Offered Securities. The leverage provided to the Issuer by the issuance of the Offered
Securities will result in interest expense and other costs incurred in connection with the borrowings that may not be
covered by the net interest income, dividends, and, if applicable in the context of a sale, appreciation of the
Collateral Debt Obligations. The use of leverage generally magnifies the Issuer's risk of loss, particularly for the
more subordinate Classes of Notes and the Preferred Shares. In certain circumstances, such as in connection with
the exercise of remedies following an Event of Default, holders of the Controlling Class may require the Issuer to
dispose of some or all of the Collateral Debt Obligations under unfavorable market conditions, thus causing the
Issuer to recognize a loss that might not otherwise have occurred. In certain circumstances, the holders of the
33

Controlling Class are entitled to direct the sales of Collateral Debt Obligations and may be expected to do so in their
own interest, rather than in the interests of the more subordinate Classes of Notes or the Preferred Shares.
Holders of Notes May Be Subject to Regulation U Reporting Requirements
Regulation U ("Regulation U") governs certain extensions of credit that are secured by margin stock ("Margin
Stock") as defined under Regulation U by persons other than securities broker-dealers (such persons, "Regulation U
Lenders") issued by the Board of Governors of the Federal Reserve System (the "FRB"). Under current
interpretations of Regulation U by the FRB and its staff, the purchase of a debt security such as the Notes in a
private placement may constitute an extension of credit. Among other things, Regulation U generally imposes
certain limits on the amount of credit that Regulation U Lenders may extend that is used to purchase or carry Margin
Stock ("Purpose Credit"). The provisions of the Indenture and the Collateral Management Agreement are intended
to ensure that the credit extended by purchasing the Notes is not Purpose Credit. Regulation U Lenders are not
subject to the Regulation U credit limits with respect to extensions of credit that are not Purpose Credit.
Regulation U also generally requires Regulation U Lenders (other than persons that are banks within the
meaning of Regulation U) who are not otherwise exempted from the registration requirements to register with the
FRB. Under an interpretation of Regulation U by the FRB staff, Qualified Institutional Buyers purchasing debt
securities in a transaction in compliance with Rule 144A are not required to register with the FRB where the
proceeds of the securities are not Purpose Credit. Non-U.S. Persons purchasing Notes in reliance on Regulation S
who do not have their principal place of business in a Federal Reserve District of the FRB also are not required to
register with the FRB. However, the initial placement of the Notes is not being made pursuant to Rule 144A and
purchasers of the Notes should consider whether they are required to register with the FRB. In addition, purchasers
of Notes subject to the registration requirements of Regulation U, as well as any purchasers of the Notes that are
banks within the meaning of Regulation U, also may be subject to certain additional requirements under Regulation
U. If the registration or other requirements of Regulation U are applicable to a purchaser of Notes, and such
purchaser does not comply with such requirements, such failure may affect the enforceability of such purchaser's
Notes. See "Security for the Notes—Margin Stock." Purchasers of the Notes should consult their own legal
advisors as to Regulation U and its application to them.
Each of the Issuer and the Co-Issuer is Recently Formed, Has No Significant Operating History, Has No Assets
Other Than the Collateral and is Limited in its Permitted Activities
Each of the Issuer and the Co-Issuer is a recently organized entity and has no prior operating history or track
record other than in connection with the purchase of Collateral Debt Obligations prior to the Closing Date.
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 Placement Agent, the Collateral Manager,
the Administrator, any Hedge Counterparty, the Trustee or the Preferred Share Paying Agent
None of the Co-Issuers, the Placement Agent, the Collateral Manager, the Administrator, any Hedge
Counterparty, the Trustee or the Preferred Share Paying Agent 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 Notes, by its acceptance thereof, will be deemed, and each purchaser of the
Preferred Shares, by its acceptance thereof, will be required, to represent to the Issuer and the Placement Agent
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.
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Non-Compliance with Restrictions on Ownership of the Offered Securities or with the United States Investment
Company Act 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 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 non-enforcement 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 Notes held in global form will not be considered holders of such Notes
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 Notes held in global form, and
therefore each person owning a beneficial interest in a Note 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.
Anti-Money Laundering Provisions
The Uniting and Strengthening America By Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (the "USA PATRIOT Act"), signed into law on and effective as of October 26, 2001,
imposes anti-money laundering obligations on different types of financial institutions, including banks, broker
dealers and investment companies. The USA PATRIOT Act requires the Secretary of the United States Department
of the Treasury (the "Treasury") to prescribe regulations to define the types of investment companies subject to the
USA PATRIOT Act and the related anti-money laundering obligations. It is not clear whether Treasury will require
entities such as the Issuer to enact anti-money laundering policies. It is possible that Treasury will promulgate
regulations requiring the Co-Issuers or the Collateral Manager or other service providers to the Co-Issuers, in
connection with the establishment of anti-money laundering procedures, to share information with governmental
authorities with respect to investors in the Offered Securities. Such legislation and/or regulations could require the
Co-Issuers to implement additional restrictions on the transfer of the Offered Securities. As may be required, the
Issuer reserves the right to request such information and take such actions as are necessary to enable it to comply
with the USA PATRIOT Act.
Investors Will Indirectly Bear Expenses of the Issuer
Through their investment in the Offered Securities, investors bear the cost of the Base Collateral Management
Fee, Subordinated Collateral Management Fee and Collateral Management Incentive Fee and other expenses
described in this Offering Memorandum. In the aggregate, these fees and expenses may be greater than if an
investor were directly to make investments identical to the Collateral Debt Obligations. Payment of any taxes and
filing and registration fees is required to be payable before any of the other amounts owed by the Co-Issuers. In
addition, Interest Proceeds and Principal Proceeds are required to be available for the payment of expenses in
accordance with the Priority of Payments. If funds are not sufficient to pay the expenses incurred by the Co-Issuers,
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the ability of the Co-Issuers to operate effectively may be impaired, and the Issuer, the Collateral Manager and the
Trustee may not be able to defend or prosecute legal proceedings brought against it or that it might otherwise bring
to protect the interests of the Co-Issuers.
The Issuer Has the Right to Require Holders of the Offered Securities to Sell Their Holdings in Certain
Circumstances
If the Issuer reasonably determines in good faith that a holder or beneficial owner of the Offered Securities does
not have the status that it purports to have and such holder or beneficial owner is not otherwise qualified to hold
such Offered Securities, the Issuer will have the right to require such holder or beneficial owner to dispose of such
holder's or beneficial owner's Notes, as applicable, to a person or entity that is qualified to hold such Notes
immediately upon receipt of a notice from the Issuer that such holder or beneficial owner is not so qualified.
Relating to the Collateral Manager
The Issuer Will Depend on the Managerial Expertise Available to the Collateral Manager and its Key
Personnel
The performance of the Collateral depends heavily on the financial and managerial expertise of the Collateral
Manager. As a result, the Issuer will be highly dependent on the financial and managerial experience of certain
investment professionals associated with the Collateral Manager. The loss of the services of one or more of these
investment professionals could have a material adverse effect on the performance of the Collateral. There can be no
assurance that the individuals currently constituting the senior management team of the Collateral Manager will
continue to be affiliated with the Collateral Manager or involved in the management and administration of the
collateral for the Issuer. Any employment arrangements between the Collateral Manager and its senior management
team are subject to change or termination without the consent of the Issuer or any holder of the Offered Securities.
Although the Collateral Manager will commit a commensurate amount of its resources to the management of the
Collateral, it manages other investment products and vehicles and is not required (and will not be able) to devote all
of its resources to the management of the Collateral. Moreover, the Collateral Management Agreement may be
terminated under certain circumstances. See "The Collateral Manager."
Performance History of the Collateral Manager May Not Be Indicative of Future Results
The past performance of the principals and affiliates of the Collateral Manager in other portfolios or investment
vehicles is not indicative of the results that the Collateral Manager may be able to achieve with the Collateral Debt
Obligations. Similarly, the past performance of the Collateral Manager over a particular period is not indicative of
the results that may be expected in future periods. Furthermore, the nature of, and risks associated with, the Issuer's
investments differs substantially from those investments and strategies undertaken historically by the principals and
affiliates of the Collateral Manager. There can be no assurance that the Issuer's investments will perform as well as
past investments of the Collateral Manager, that the Issuer will be able to avoid losses or that the Issuer will be able
to make investments similar to the past investments of the principals or any other person described herein. In
addition, such past investments may have been made utilizing a leveraged capital structure, an asset mix and fee
arrangements that are different from the anticipated capital structure, asset mix and fee arrangements of the Issuer.
Moreover, because the investment criteria that govern investments in the Issuer's portfolio do not govern the
Collateral Manager's investments and investment strategies generally, such investments conducted in accordance
with such criteria, and the results they yield, are not directly comparable with, and may differ substantially from,
other investments managed by the Collateral Manager and its principals. In addition, circumstances may exist in
which the Collateral Manager may not be able or permitted to take actions it desires.
The Incentive Management Fee May Create Different Incentives for the Collateral Manager
On each Distribution Date, the Collateral Manager may be paid the Collateral Management Incentive Fee to the
extent of funds available on such Distribution Date as described in "Summary of Terms—Priority of Payments," if
the holders of the Preferred Shares have realized an Internal Rate of Return of 10% as of such Distribution Date.
The manner in which the Collateral Management Incentive Fee is determined could create an incentive for the
Collateral Manager to make more speculative investments in the Collateral Debt Obligations than the Issuer would
otherwise make.
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The Investment Professionals of the Collateral Manager Will Attend to Matters Unrelated to the Investment
Activities of the Issuer
The investment professionals available to the Collateral Manager are actively involved in other investment
activities not concerning the Issuer and will not devote all of their time to the Issuer's business and affairs. In
addition, individuals not currently available to the Collateral Manager may become associated with the Collateral
Manager. As a result, the performance of the Issuer's portfolio may become dependent on the financial and
managerial experience of such individuals. See "The Collateral Management Agreement" and "The Collateral
Manager."
Relating to the Collateral Debt Obligations
Below Investment-Grade Assets Involve Particular Risks
The Collateral 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 Collateral generally will be subject to 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 Debt Obligations.
Prices of the items of Collateral 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 such items of
Collateral. 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 Debt 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 Debt 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
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Agency in rating the Notes or any recovery rate used in connection with any analysis of the Offered Securities that
may have been prepared by the Placement Agent for or at the direction of holders of any Offered Securities.
Many Collateral Debt Obligations Were Acquired Prior to Closing Date; There is Limited Disclosure About the
Collateral Debt Obligations in this Offering Memorandum
The Issuer's purchase of Collateral Debt Obligations prior to the Closing Date was financed by affiliate of the
Placement Agent. Collateral Debt Obligations owned by the Issuer on the Closing Date were purchased at terms
prevailing in the market at the time such Collateral Debt Obligations were purchased. Because the purchase price of
Collateral Debt Obligations owned by the Issuer on the Closing Date was determined prior to such date, the
prevailing market price of such Collateral Debt 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
Debt 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 Collateral Manager will not be required to provide the holders of the Offered Securities, the
Trustee or the Preferred Share Paying Agent with financial or other information (which may include material nonpublic
information) it receives pursuant to the Collateral Debt Obligations and related documents. The Collateral
Manager also will not be required to disclose to any of these parties the contents of any notice it receives pursuant to
the Collateral Debt Obligations or related documents. In particular, the Collateral Manager will not have any
obligation to keep any of these parties informed as to matters arising in relation to any Collateral Debt Obligations,
except with respect to: (i) the receipt or non-receipt, on an aggregate basis, of principal, interest, or other amounts of
collections or recoveries; (ii) the cancellation of any Collateral Debt Obligations; (iii) default amounts in respect of
the Collateral Debt Obligations; and (iv) certain other information required to be reported under the Collateral
Management Agreement and the Indenture.
The holders of the Offered Securities, the Trustee and the Preferred Share Paying Agent will not have any right
to inspect any records relating to the Collateral Debt Obligations, and the Collateral 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 Debt Obligations, unless (i) specifically required by the Collateral Management Agreement or
(ii) following its receipt of a written request from the Trustee or the Preferred Share Paying Agent, the Collateral
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 Debt Obligation to the Trustee or the Preferred
Share Paying Agent would not be prohibited by applicable law or the underlying instruments relating to such
Collateral Debt Obligation, in which case the Collateral Manager will disclose such further information or evidence
to the Trustee or the Preferred Share Paying Agent; provided that (a) neither the Trustee nor the Preferred Share
Paying Agent will disclose such further information or evidence to any third party except (i) to the extent disclosure
may be required by law or any governmental or regulatory authority and (ii) to the extent that (A) the Trustee, in its
sole judgment, may determine that such disclosure is consistent with its obligations under the Indenture and (B) the
Preferred Share Paying Agent, in its sole judgment, may determine that such disclosure is consistent with its
obligations under the Preferred Share Documents and (b) the Trustee and Preferred Share Paying Agent may
disclose on a confidential basis any such information to its agents, attorneys and auditors in connection with the
performance of its obligations under the Indenture or the Preferred Share Documents, as applicable. Furthermore,
the Collateral Manager may, with respect to any information that it elects to disclose, demand that persons receiving
such 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 Debt 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 Collateral, the Issuer may be subject to allegations of lender liability.
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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 Collateral, the
Collateral may be subject to claims of equitable subordination.
Because affiliates of, or persons related to, the Collateral Manager may hold equity or other interests in obligors
of Collateral Debt 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
Debt 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
Collateral
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 Collateral with comparable interest rates that satisfy the Reinvestment 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 Preferred Shares. There is no assurance that the Issuer will be
able to reinvest proceeds in Collateral with comparable interest rates that satisfy the Reinvestment 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 Debt Obligations That Satisfy the Reinvestment Criteria
A portion of the initial Collateral Debt 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 Debt Obligations that satisfies
the Reinvestment 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 Debt Obligations. Any inability of the Issuer
to acquire Collateral Debt Obligations that satisfy the Reinvestment 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 Preferred Shares. There is no assurance that the Issuer will be able to acquire
Collateral Debt Obligations that satisfy the Reinvestment 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 from the selling institution or through the acquisition of Synthetic
Securities). As described in more detail below, holders of Participations 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 ("Participations") typically result in a
contractual relationship only with such selling institution, not with the borrower. In the case of a Participation, 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 in a loan, 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
39

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, 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 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 Participations 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 under an agreement governed by the laws of a jurisdiction other than a United States
jurisdiction, including characterization under such laws of such Participation or sub-Participation in the event of the
insolvency of the institution from whom the Issuer purchases such Participation or sub-Participation or the
insolvency of the institution from whom the grantor of the sub-Participation purchased its Participation.
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 Securities Involves Particular Risks
A portion of the Collateral Debt Obligations may consist of Structured Finance Securities. Structured Finance
Securities may present risks similar to those of the other types of Collateral Debt Obligations in which the Issuer
may invest and, in fact, the risks may be of greater significance in the case of Structured Finance Securities.
Moreover, investing in Structured Finance Securities may entail a variety of unique risks. Among other risks,
Structured Finance Securities 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
Security changes based on multiples of changes in interest rates or inversely to changes in interest rates). In
addition, certain Structured Finance Securities (particularly subordinated collateralized debt 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 nonpayment,
unpaid interest will generally be deferred or capitalized and added to the outstanding principal balance of
the related security. Furthermore, the performance of a Structured Finance Security 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 Security in
managing securitized assets. The price of a Structured Finance Security, if required to be sold, may be subject to
40

certain market and liquidity risks for securities of its type at the time of sale. In addition, Structured Finance
Securities 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 Collateral 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
Debt 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 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 Notes. Before any Synthetic Security (other
than a Form Approved Synthetic Security) may be included in the Collateral, each Rating Agency must confirm
prior to the date of such purchase that such Synthetic Security may be included as a Collateral Debt Obligation
without causing the reduction or withdrawal of its then-current rating, if any, of any Class of 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, Distribution Dates, interest rates, interest rate references,
credit exposures, or other credit or non-credit 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 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 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 Debt 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 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 Debt Obligations. However, in the event that a borrower of loaned Collateral Debt Obligations
defaults on its obligation to return such loaned Collateral Debt 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 Offered Securities 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 Debt Obligation (less expenses) is less than the amount
required to purchase such Collateral Debt 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 Debt
Obligations arising from limited liquidity or availability of the loaned Collateral Debt Obligations, and in extreme
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circumstances, the loaned Collateral Debt Obligations being unavailable at any price. One or both of the Rating
Agencies may downgrade one or more Classes of the Notes if a borrower of a Collateral Debt 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 Debt Obligation with the terms of such Collateral Debt Obligation, will not have any voting or other
contractual rights of ownership with respect to such Collateral Debt Obligation and will not have the benefit of the
remedies that would normally be available to a holder of such Collateral Debt Obligation. One or more of the
Placement Agent and/or one or more of their affiliates may borrow Collateral Debt Obligations, which may create
certain conflicts of interest. See "—Relating to Certain Conflicts of Interest."
Insolvency Considerations With Respect to Issuers of Collateral Debt Obligations May Affect the Issuer's Rights
Various laws enacted for the protection of creditors may apply to the Collateral Debt Obligations. The
information in this and the following paragraph is applicable with respect to U.S. obligors and issuers. Insolvency
considerations will differ with respect to non-U.S. obligors and issuers. If a court in a lawsuit brought by an unpaid
creditor or representative of creditors of an issuer of a Collateral Debt 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 Debt 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 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 Debt 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 Debt Obligation, payments made on such Collateral Debt 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 Debt 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 and the Class C 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 activities of the
Collateral Manager, its clients and its affiliates and of the Placement Agent and its affiliates. The following briefly
summarizes some of these conflicts, but is not intended to be an exhaustive list of all such conflicts.
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The Issuer Will be Subject to Various Conflicts of Interest Involving the Collateral Manager and its Affiliates
Various potential and actual conflicts of interest may arise from the overall investment activities of the
Collateral Manager, its investment professionals and its affiliates. The following briefly summarizes some of these
conflicts but is not intended to be an exhaustive list of all possible conflicts.
There is no limitation or restriction on the Collateral Manager or any of its affiliates with regard to acting as
collateral manager to other parties or persons. Octagon currently manages, and expects in the future to continue to
manage, other funds and private accounts with similar or identical investment objectives and policies, including
investment funds that may be sponsored by Octagon or its affiliates. Certain of such funds and other accounts are
currently in warehousing or ramp-up periods and may continue to be during the time that the Issuer is in a ramp-up
period. In addition, because such funds and other accounts invest principally in loans which are generally subject to
early prepayment, such funds and other accounts may during the time that the Issuer is in a ramp-up period have
significant amounts of cash that Octagon will be seeking to invest in the same securities or other assets in which the
Issuer will invest. Additionally, the Collateral Manager's personnel and affiliates may make investments for their
own accounts and become affiliated with other entities in the securities industry. Such other entities, whether now
existing or created in the future, could compete with the Issuer for the purchase and sale of investment opportunities.
If purchases or sales of any securities or other assets for the Issuer or other funds or advisory clients for which the
Collateral Manager or its personnel and affiliates act as investment manager arise for consideration at or about the
same time, transactions in such securities or other assets will be made for the respective funds and advisory clients
in a manner that the personnel of the Collateral Manager deem appropriate, taking into account any fiduciary duties
and the contractual obligations to such other funds or advisory clients, given the investment objectives, liquidity,
diversification and other limitations of the Issuer and such other funds or advisory clients. To the extent that other
funds or advisory clients are in ramp-up periods (whether or not the Issuer is also in a ramp-up period), the
Collateral Manager may allocate securities or other assets to those funds or clients on a preferential basis, which
could be adverse to the Issuer. To the extent the transactions on behalf of more than one client of the Collateral
Manager or its affiliates during the same period may increase the demand for securities being purchased or the
supply of securities being sold, there may be an adverse effect on price. It is also possible that the investments made
by other funds or advisory clients for which the Collateral Manager acts may be pari passu, senior or junior in
ranking to an investment in such issuer's securities by the Issuer. In such instances, the Collateral Manager may take
positions, give advice and provide recommendations contrary to those which may be taken by, given or provided to
the Issuer.
Although the professional staff of the Collateral Manager will devote as much time to the Issuer as the
Collateral Manager deems appropriate to perform its duties in accordance with the Collateral Management
Agreement and in accordance with reasonable commercial standards, the staff may have conflicts in allocating its
time and services among the Issuer and the Collateral Manager's other accounts. The Indenture places significant
restrictions on the Collateral Manager's ability to buy and sell Collateral Debt Obligations. Accordingly, during
certain periods or in certain circumstances, the Collateral Manager may be unable as a result of such restrictions to
buy or sell securities or to take other actions that it might consider to be in the best interests of the Issuer and the
holders of the Offered Securities. In addition, because of the different seniorities and other characteristics of the
various Classes of Notes and Preferred Shares, decisions by the Collateral Manager with respect to the Issuer are
likely to affect such Classes and/or Preferred Shares differently (and may even affect one or more Classes or
Preferred Shares adversely while affecting one or more other Classes or Preferred Shares positively). Such conflicts
are inherent in a multiclass capital structure within a single entity managed by a single collateral manager.
One or more of Octagon, any of its personnel and any entity that owns or that is affiliated with Octagon may
own Offered Securities from time to time, and concurrently with the offering of the Offered Securities. Such
Offered Securities may be sold by such party or parties to related and unrelated parties at any time after the Closing
Date. On the Closing Date, Octagon is expected to purchase up to 2,240 Preferred Shares. Octagon is not required
to retain any or all of such Preferred Shares for any period of time. The interests of the holders of the Preferred
Shares may be different from and adverse to the interests of the holders of the Notes. Offered Securities held by the
Collateral Manager or its affiliates or in accounts with respect to which the Collateral Manager exercises
discretionary voting rights will have no voting rights with respect to any vote in connection with the removal of the
Collateral Manager and will be deemed not to be outstanding in connection with any such vote; provided that such
Offered Securities will have voting rights with respect to all other matters as to which the holders of the Offered
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Securities are entitled to vote, including, without limitation, any vote in connection with an Optional Redemption.
See "The Collateral Management Agreement."
Octagon is majority-owned by its employees and minority-owned by certain other investors, including affiliates
of JPMorgan Partners LLC ("JPMorgan Partners"), the global private equity investment affiliate and an indirect
subsidiary of JPMorgan Chase & Co. ("JPMorgan Chase"), which affiliates own approximately 30% of Octagon's
equity. Notwithstanding that the activities of the Collateral Manager on behalf of the Issuer are managed by its
managing members independently of and conducted separately from the commercial banking, investment banking
and other activities of JPMorgan Chase and its affiliates, certain conflicts of interest with respect to the Issuer may
arise due to the other activities in which JPMorgan Chase and its affiliates engage. As part of their regular business,
JPMorgan Chase and its affiliates hold, purchase, sell and trade both for their respective accounts and for the
accounts of their respective clients, on a principal or agency basis, loans, securities and other investments and
financial instruments of all types and provide various financial, investment advisory and other services. A
JPMorgan Chase affiliate may own loans or securities of, act as an underwriter, agent, placement agent or dealer or
for or provide other commercial banking, investment banking, investment advisory or other services to, issuers of
Collateral Debt Obligations and may take positions, give advice and provide recommendations contrary to those
which may be taken by, given or provided to the Issuer and may hold interests potentially adverse to those of the
Issuer. In conducting their activities, JPMorgan Chase and its affiliates will be acting for their own accounts or for
the account of other clients and would be expected not to take into account the interests of the Issuer and might take
actions, including, but not limited to, restructuring an item of Collateral Debt Obligations, foreclosing on an item of
Collateral Debt Obligations, requiring additional collateral from an issuer, charging significant fees and interest to
the issuer, placing the issuer in bankruptcy, or demanding payment on an item of Collateral Debt Obligations
guarantee, that may be contrary to the interests of the Issuer and could adversely affect the prices of the Collateral
Debt Obligations or the ability of the Issuer to dispose of Collateral Debt Obligations, and otherwise create conflicts
of interest for the Issuer, each of which could have an adverse impact on the Issuer's performance.
The Collateral Manager may effect a substantial portion of portfolio transactions by the Issuer, to the extent
consistent with applicable law (including, without limitation, the Advisers Act), with or through its affiliates or other
accounts advised by it or any of its affiliates. The portfolio of Collateral Debt Obligations expected to be owned by
the Issuer on the Closing Date will include approximately U.S.$75,000,000 principal amount of Collateral Debt
Obligations consisting of loans that the Issuer purchased from Octagon Investment Partners III, Ltd. ("Octagon III"),
an arbitrage cash flow CDO managed by Octagon in connection with the optional redemption of the securities issued
by Octagon III and a material amount of Collateral Debt Obligations consisting of loans that the Issuer purchased
from JPMorgan Chase affiliates. Except for the foregoing purchases from Octagon III and JPMorgan Chase
affiliates, acquisitions of Collateral Debt Obligations and Eligible Investments (including any associated Equity
Securities) from and dispositions of Collateral Debt Obligations and Eligible Investments (including any associated
Equity Securities) to the Collateral Manager or any of its affiliates or any account or portfolio for which the
Collateral Manager or any of its affiliates serve as investment advisor will be effected on terms described under
"The Collateral Management Agreement—Affiliate Transactions" or will require the prior approval of the Issuer,
acting for this purpose at the direction or with the approval of a Majority of the Preferred Shares (excluding
Preferred Shares owned by the Collateral Manager or any affiliate of the Collateral Manager).
The Issuer Will Be Subject to Various Conflicts of Interest Involving the Placement Agent
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 JP Morgan Chase &
Co. and its Affiliates (including JPMorgan, JPMorgan Chase Bank, National Association ("JPMCB") and their
Affiliates, (each, a "JPMorgan Company" and together the "JPMorgan Companies")), to the Issuer, the Collateral
Manager, the issuers of the Collateral Debt 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 Placement Agent for the Offered Securities 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 Debt Obligations that are loans prior to the Closing Date was financed through loans
borrowed from an affiliate of the Placement Agent. A portion of the proceeds of the offering of the Offered
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Securities will be paid to repay the financing provided by an affiliate of the Placement Agent to finance the Issuer's
purchase of such Collateral Debt Obligations prior to the Closing Date. The Issuer may have purchased and sold
prior to the Closing Date, and may purchase or sell after the Closing Date, Collateral Debt Obligations 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 Collateral Manager, its affiliates, and funds managed by the Collateral 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 Collateral Manager, its
affiliates, and funds managed by the Collateral 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 Offered Securities.
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
Debt Obligations;
• act as trustee, paying agent and in other capacities in connection with certain of the Collateral Debt
Obligations or other classes of securities issued by an issuer of a Collateral Debt Obligation or an
affiliate thereof;
• be a counterparty to issuers of certain of the Collateral Debt Obligations under swap or other derivative
agreements;
• lend to certain of the issuers of Collateral Debt Obligations or their respective affiliates or receive
guarantees from the issuers of those Collateral Debt Obligations or their respective affiliates;
• provide other investment banking, asset management, commercial banking, financing or financial
advisory services to the issuers of Collateral Debt Obligations or their respective affiliates; or
• have an equity interest, which may be a substantial equity interest, in certain issuers of the Collateral
Debt Obligations or their respective affiliates.
When acting as a trustee, paying agent or in other service capacities with respect to a Collateral Debt
Obligation, the JPMorgan Companies will be entitled to fees, expenses and certain other amounts then due and
payable senior in priority to payments to such Collateral Debt Obligation. When acting as a trustee for other classes
of securities issued by the issuer of a Collateral Debt 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 Debt 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 Debt 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 Debt 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 Debt
Obligations or their respective affiliates, JP Morgan Chase & Co. may have interests that are contrary to the interests
of the Issuer and the holders of the Offered Securities.
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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 Debt
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.
ERISA Considerations
If the ownership of Preferred Shares or any other class of equity interest in the Issuer by Benefit Plan Investors
were to equal or exceed 25% of the value of the class of equity (as determined under the Plan Asset Regulation
issued by the United States Department of Labor at 29 C.F.R. Section 2510.3-101 (the "Plan Asset Regulation")),
resulting in the assets of the Issuer being deemed to be "plan assets," certain transactions that the Issuer might enter
into, or may have entered into, in the ordinary course of business might constitute non-exempt prohibited
transactions under ERISA and/or Section 4975 of the Code and might have to be rescinded, at significant cost to the
Issuer. Additionally, the Issuer or one or more "parties in interest" (as defined in Section 3(14) of ERISA) or
"disqualified persons" (as defined in Section 4975(e)(2) of the Code) may be subject to other penalties or excise
taxes with respect to such transaction. The term "Benefit Plan Investor" is defined in the Plan Asset Regulation as
(a) any employee benefit plan (as defined in Section 3(3) of ERISA), whether or not it is subject to the provisions of
Title I of ERISA, including, without limitation, foreign, governmental or church plans, (b) any plan described in
Section 4975(e)(1) of the Code and (c) any entity whose underlying assets include plan assets by reason of an
employee benefit plan's or a plan's investment in the entity.
The Issuer intends, through the use of representations, to restrict ownership of the Preferred Shares so that no
assets of the Issuer will be deemed to be "plan assets" subject to ERISA or Section 4975 of the Code as such term is
defined in the Plan Asset Regulation. Although the Issuer intends to restrict the acquisition of Preferred Shares by
Benefit Plan Investors, there can be no assurance that ownership of Preferred Shares or any other class of equity
interest in the Issuer by Benefit Plan Investors will always remain below the 25% limitation established under the
Plan Asset Regulation.
See "Certain ERISA Considerations" herein for a more detailed discussion of certain ERISA and related
considerations with respect to an investment in the Offered Securities.
German Banking Act and German Investment Act
There is currently legal uncertainty in the Federal Republic of Germany as to whether collateralized debt
obligation transactions in relation to which there are German investors involve activities requiring a license under
the German Banking Act (Kreditwesengesetz—KWG) on the basis that they constitute "banking business." In
particular, the German regulator recently broadly interpreted banking business in the form of principal broking
business (Finanzkommissionsgeschäft) under the German Banking Act as including cases where a German or
foreign company invests in financial instruments for the economic interest of German investors. Should it be
determined that activities involved in collateralized debt obligation transactions in relation to which there are
German investors are subject to license requirements under the German Banking Act, the German regulator could, to
the extent it has authority to do so, impose sanctions on certain of the parties involved in such collateralized debt
obligation transactions, including seeking the immediate cessation of the relevant issuer's activities in Germany and
prompt liquidation of the transactions conducted by it with German investors.
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German Tax Treatment of German Investors
The German Investment Tax Act (Investmentsteuergesetz) ("Investment Tax Act") applies (i) to "shares"
(Investmentanteile) in investment funds held by German tax resident investors, (ii) to an investor holding shares in
an investment fund as business assets of a permanent establishment maintained in Germany or carried on through a
permanent representative in Germany, or as business assets of a fixed base in Germany or (iii) if an investor
physically presents shares in an investment fund at the office of a German credit institution or financial services
institution (over-the-counter transaction (Tafelgeschäft)) (collectively, "German Investors"). The Issuer believes
that the Investment Tax Act should not be applicable to Holders of the Offered Securities. If any German Investor
notifies the Issuer that it is subject to the Investment Tax Act, the Issuer will, if and only if the expense of its
compliance is immaterial, comply with the minimum statutory reporting and publication requirements (the
"Minimum Reporting Requirements") set forth in paragraph 1 of Section 5 of the Investment Tax Act for so-called
"semi-transparent funds" for so long as such German Investor holds any Offered Securities. There can be no
assurance that the expense of compliance by the Issuer with the Minimum Reporting Requirements would be
immaterial to the Issuer. Due to the fact that the Investment Tax Act has only recently been enacted and so far no
court decisions or tax circulars are available in this respect, there are a number of uncertainties regarding the
interpretation of the tax provisions contained in the Investment Tax Act (including Minimum Reporting
Requirements).
General
THE CO-ISSUERS
The Issuer is incorporated in the Cayman Islands under the Companies Law (2004 Revision) of the Cayman
Islands, and its registered office is at the offices of Maples Finance Limited, P.O. Box 1093GT, Queensgate House,
South Church Street, George Town, Grand Cayman, Cayman Islands. The Issuer was incorporated on May 12, 2005
with the registration number 148847 for an indefinite period and since incorporation has not had any commercial
operations other than those preparatory to the transactions contemplated herein and no financial statements have
been prepared. The authorized share capital of the Issuer is U.S.$45,050, divided into 250 ordinary shares with a par
value of U.S.$1.00 per share (the "Ordinary Shares"), all of which have been issued and are outstanding, and 44,800
Preferred Shares with a par value of U.S.$0.01 per share, all of which will be issued on the Closing Date. Except for
assets purchased in anticipation of the transactions contemplated herein, the Issuer has no prior operating experience
and will not have any substantial assets other than the Collateral. The directors of the Issuer are Phillip Hinds,
Carrie Bunton and Helen Allen, each of whom is an officer of the Administrator. The business address of the Issuer
and each of the directors of the Issuer is the address of the Administrator, which is Maples Finance Limited, P.O.
Box 1093GT, Queensgate House, South Church Street, George Town, Grand Cayman, Cayman Islands, telephone
number: 1-345-945-7099. The directors of the Issuer serve as directors of and provide services to other special
purpose entities, including entities that issue collateralized debt obligations and perform other duties for Maples
Finance Limited. Maples Secretaries Limited also serves as Secretary for the Issuer. The Issuer is not required by
Cayman Islands law, and the Issuer does not intend, to publish annual reports and accounts. The Indenture,
however, requires the Issuer to provide the Trustee with written notification if an Event of Default has occurred, in
accordance with the rules of the Irish Stock Exchange.
The Co-Issuer is a limited liability company formed on April 18, 2006 under the laws of the State of Delaware
pursuant to a certificate of formation and limited liability company agreement with registered number 4143523. The
registered office of the Co-Issuer is at the offices of Puglisi & Associates, 850 Library Avenue, Suite 204, Newark,
Delaware 19711, telephone number: 1-302-738-6680. The Co-Issuer has no prior operating experience and will not
have any material assets. The Issuer will be the sole member of the Co-Issuer.
All of the outstanding Ordinary Shares of the Issuer will be legally owned by Maples Finance Limited, a
Cayman Islands licensed trust company (the "Share Trustee") under the terms of an amended and restated
declaration of trust (the "Declaration of Trust") dated on or before the Closing Date under which the Share Trustee
holds the Ordinary Shares in trust until the Termination Date (as defined in the Declaration of Trust) and may
dispose or otherwise deal with the Ordinary Shares only with the approval of the Trustee for so long as there are
Notes outstanding. Prior to the Termination Date, the trust is an accumulation trust, but the Share Trustee has power
with the consent of the Trustee, to benefit the holders of the Notes or Qualified Charities (as defined in the
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Declaration of Trust). It is not anticipated that any distribution will be made while any Note is outstanding.
Following the Termination Date, the Share Trustee will wind up the trust and make a final distribution to charity.
The Share Trustee has no beneficial interest in, and derives no benefit (other than its fee for acting as Share Trustee)
from, its holding of the Ordinary Shares.
The Notes are limited-recourse debt obligations only of the Co-Issuers and the Preferred Shares are unsecured
equity interests in the Issuer and are not obligations of the Trustee, the Administrator, the Collateral Manager, the
Placement Agent, or any of their respective affiliates or any directors or officers thereof or any other person or entity
(other than the Co-Issuers) or the directors of the Co-Issuers.
Capitalization
The initial capitalization, including indebtedness, of the Issuer as of the Closing Date, after giving effect to the
issuance of the Offered Securities and the shares of the Issuer, is expected to be as follows:
Class A-1 Notes $ 300,000,000
Class A-2 Notes $ 14,000,000
Class B Notes $ 20,000,000
Class C Notes $ 21,200,000
Total Debt $ 355,200,000
Preferred Shares $ 44,800,000
Ordinary Shares (a) $ 250
Total Equity $ 44,800,250
Total Capitalization $ 400,000,250
(a) The proceeds of the issuance of the ordinary shares are not included in the Collateral.
As of the Closing Date and after giving effect to the issuance of the Issuer's Ordinary Shares and Preferred
Shares, the authorized share capital of the Issuer will be 250 Ordinary Shares with a par value of U.S.$1.00 per share
and 44,800 Preferred Shares with a par value of U.S.$0.01 per share, all of which have been issued and are
outstanding.
On or before the Closing Date, the Co-Issuer will have issued limited liability company membership interests in
the amount of U.S.$250 (the "Co-Issuer Equity"), which will not be pledged to secure the Notes, and the Co-Issuer
will have no other assets other than the Co-Issuer Equity and will have no debt other than as the co-issuer of the
Notes. The Co-Issuer will not receive any funds from the Issuer. The Co-Issuer will not co-issue the Preferred
Shares.
Because the Co-Issuer has no material assets, and is not permitted to acquire any additional assets, the holders
of the Notes will not be able to enforce the obligations under the Notes against any assets of the Co-Issuer. The
holders of the Notes must rely on the Collateral held by the Issuer and pledged to the Trustee for payment of such
Notes in accordance with the Priority of Payments.
The Co-Issuer will not have any claim against the Issuer in respect of any of the Collateral.
Other than financing and other arrangements entered into in connection with the acquisition of legal title to
certain Collateral Debt Obligations in anticipation of the closing of the transactions contemplated herein on the
Closing Date and the financing and collateral arrangements contemplated herein, neither the Issuer nor the Co-Issuer
has, as of the date of this Offering Memorandum, any outstanding loans, borrowings or other indebtedness in the
nature of borrowings or mortgages or other charges.
Business
The Co-Issuers have been formed as special-purpose vehicles for the issuance of the Notes and the Preferred
shares, as applicable, and related activities. The Co-Issuers will agree in the Indenture not to undertake any business
other than the issuance of the Notes and, in the case of the Issuer, the Preferred Shares, the ownership of the
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Collateral and other related transactions as permitted under the Indenture. Under the certificate of formation and
limited liability company agreement of the Co-Issuer, and under the provisions of the Indenture, the activities of the
Issuer and Co-Issuer are effectively limited to those described herein. Neither of the Co-Issuers will have any
employees or subsidiaries. In general, subject to the need to satisfy the Collateral Quality Tests and Coverage Tests
applicable to the Notes and the need for funds for the redemption or payment of the Offered Securities and, subject
to the judgment of the Collateral Manager, the credit quality of the Collateral Debt Obligations securing the Notes,
and general market conditions, it is expected that the Issuer will hold such Collateral Debt Obligations until maturity
or redemption and will receive payments of interest as the principal source of its income. The ability to purchase
Substitute Collateral Debt Obligations and sell Collateral Debt Obligations prior to maturity will be subject to
significant restrictions under the Indenture. See "Security for the Notes—Substitute Securities and Reinvestment
Criteria."
The Administrator
Maples Finance Limited will act as the administrator of the Issuer (the "Administrator"). The Administrator's
registered office is at P.O. Box 1093GT, Queensgate House, South Church Street, George Town, Grand Cayman,
Cayman Islands. The office of the Administrator will serve as the general business office and registered office of the
Issuer. Through this office and pursuant to the terms of an agreement, dated May 18, 2005 and as amended and
restated on or around the Closing Date, between the Administrator and the Issuer (the "Administration Agreement"),
the Administrator will perform in the Cayman Islands various administrative functions on behalf of the Issuer,
including communications with shareholders and the general public, and the provision of certain clerical,
administrative and other services until termination of the Administration Agreement. In consideration of the
foregoing, the Administrator will receive various fees 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 the Issuer or the Administrator
upon 14 days' written notice following the happening of certain events, and upon three months' written notice in the
absence of such events, and a replacement administrator or a liquidator, as applicable, will be appointed thereafter.
Upon the termination of the Administration Agreement, the Administrator will be required to take all necessary
steps to vest in the Issuer or any new administrator or liquidator, as the case may be, any assets previously held in
the name of or to the order of the Administrator on behalf of the Issuer.
The Issuer will initially have three directors, each of whom is an employee or officer of the Administrator. Set
forth below is information regarding the background and experience of certain persons who will be the Directors of
the Board of the Issuer.
Phillip Hinds, Senior Vice President
Prior to joining Maples Finance Limited in 1997, Phillip worked for Bank of Butterfield International (Cayman)
Ltd. in the Capital Markets Department where he handled a diverse portfolio of structured finance transactions for
Asian and European institutional clients. He had previously worked for Bank of America Trust and Banking
(Cayman) Ltd.
Helen Allen, Senior Vice President
Helen joined Maples Finance Limited in 1997. She previously worked for a year in the capital markets division
of Queensgate Bank & Trust Company Ltd., which then became Maples Finance Limited. Before that she had been
an Associate Director at Nomura International in London, where she had worked in various departments during a
seven year period, and where she gained a broad range of debt and equity capital markets experience, including
privatisations, public offerings and listings.
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Carrie Bunton, Vice President
Carrie joined Maples Finance Limited in 2001 from Royal Bank of Canada Trust Company (Cayman) Limited
where she worked in the Private Trust Department as an Assistant Trust Officer. Prior to that, she worked at Bank
of Butterfield International (Cayman) Limited as a Compliance Officer and Mutual Fund Administrator.
The LLC Manager
Puglisi & Associates will act as manager of the Co-Issuer (the "LLC Manager") and will perform management
and administrative functions on behalf of the Co-Issuer. In consideration of the foregoing, the LLC Manager will
receive a fee and reimbursement of expenses. The principal of the LLC Manager is Donald J. Puglisi, MBNA
America Professor of Business Emeritus at the University of Delaware. The address of the LLC Manager is 850
Library Avenue, Suite 204, Newark, Delaware 19711.
DESCRIPTION OF THE OFFERED SECURITIES
The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed
information appearing elsewhere in this Offering Memorandum. An Index of Defined Terms identifying the location
of defined terms and a Glossary setting forth the definitions of terms used but not defined in the body of this Offering
Memorandum appear at the back of this Offering Memorandum.
Status and Security
The Notes will be limited-recourse debt obligations of the Co-Issuers and the Preferred Shares will be
unsecured equity interests in the Issuer. Under the terms of the Indenture, the Issuer will grant to the Trustee (on
behalf of the Trustee, the holders of the Notes, each Hedge Counterparty (for so long as it is a party under its Hedge
Agreement or any amounts are owed to it under the Indenture) and the Collateral Manager (collectively, the
"Secured Parties"), subject to the prior lien of the Swap Counterparties with respect to the Swap Collateral, a first
priority security interest in all of its right, title and interest in and to the Collateral, each as their interests appear in
applicable Program Documents and in accordance with the Priority of Payments.
Payments of interest on and principal of the Notes or distributions or other payments to the Preferred Share
Paying Agent for payment to the holders of the Preferred Shares (if any) on any Distribution Date pursuant to
clauses (19) and (21) of the allocation of payments described below under "Application of Funds—Priority of
Payments—Distributions of Interest Proceeds" and clauses (9) and (11) of the allocation of payments described
below under "Application of Funds—Priority of Payments—Distributions of Principal Proceeds" will be made
solely from the proceeds of the Collateral, in accordance with the priorities described under "Application of Funds"
herein. If the amounts received in respect of the Collateral (net of certain expenses) are insufficient to meet
payments due in respect of the Offered Securities, the obligations of the Issuer and the Co-Issuer (solely with respect
to the Notes) to pay such deficiency will be extinguished.
Interest
Each Class of Notes will bear interest from their date of issue and, subject to the Priority of Payments, such
interest will be payable in arrears on each Distribution Date, commencing on the Distribution Date occurring in
October 2006, and at maturity. Interest on each Class of Notes will be computed on the basis of a 360-day year and
the actual number of days elapsed (including the first day but excluding the last day) occurring in the applicable
Interest Accrual Period.
"Interest Accrual Period" means (i) initially the period from (and including) the Closing Date to (but excluding)
October 23, 2006 and (ii) thereafter, each period from (and including) October 23 to (but excluding) the following
January 23; and from (and including) January 23 to (but excluding) the following April 23; and from (and including)
April 23 to (but excluding) the following July 23; and from (and including) July 23 to (but excluding) the following
October 23; and each successive period until the principal of the Notes is paid or made available for payment.
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Interest will cease to accrue on each Note or, in the case of a partial repayment of principal, on such part, from
the date of repayment or Stated Maturity unless payment of principal is improperly withheld or unless a default is
otherwise made with respect to such payments.
"LIBOR" for each Interest Accrual Period with respect to any Class of Notes will be determined by the Trustee
under the Indenture acting in the capacity of calculation agent (the "LIBOR Calculation Agent") in accordance with
the following provisions (with the result in each case being rounded to the nearest 0.00001%):
(1) On the second LIBOR Business Day prior to the commencement of an Interest Accrual Period (each
such day, a "LIBOR Determination Date"), LIBOR will equal the rate, as obtained by the LIBOR Calculation
Agent from Bloomberg Financial Markets Commodities News or any successor thereto, for U.S. dollar deposits
in Europe of the LIBOR Period that appears on Dow Jones Telerate Page 3750 (as defined in the International
Swaps and Derivatives Association, Inc. 1991 Definitions), or such other page as may replace such Page 3750
(for the purpose of displaying comparable rates), as of 11:00 a.m. (London time) on such LIBOR Determination
Date.
(2) If, on any LIBOR Determination Date, such rate does not appear on Dow Jones Telerate Page 3750 as
reported on Bloomberg Financial Market Commodities News or such other page as may replace such Page 3750
(for the purpose of displaying comparable rates), the LIBOR Calculation Agent will determine the arithmetic
mean of the offered quotations of the Reference Banks to leading banks in the London interbank market for
U.S. dollar deposits in Europe of the LIBOR Period in an amount determined by the LIBOR Calculation Agent
by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR
Determination Date made by the LIBOR Calculation Agent to the Reference Banks. If, on any LIBOR
Determination Date, at least two of the Reference Banks provide such quotations, LIBOR will equal the
arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference
Banks provides such quotations, LIBOR will be deemed to be the arithmetic mean of the offered quotations that
leading banks in the City of New York selected by the LIBOR Calculation Agent (after consultation with the
Collateral Manager) are quoting on the relevant LIBOR Determination Date for U.S. dollar deposits in Europe
of the LIBOR Period in an amount determined by the LIBOR Calculation Agent by reference to the principal
London offices of leading banks in the London interbank market; provided that, if the LIBOR Calculation
Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided
above, LIBOR will be LIBOR as determined on the previous LIBOR Determination Date.
"LIBOR Period" means: (i) the period specified in the Indenture when used in conjunction with LIBOR, as in
the phrase "three-month LIBOR"; or (ii) if no such period is specified, three months.
"Reference Banks" means four major banks in the London interbank market selected by the LIBOR Calculation
Agent. "LIBOR Business Day" means a day on which commercial banks are open for business (including dealings
in foreign exchange and foreign currency deposits) in London.
As soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date, but in no event later
than 11:00 a.m. (London time) on the Business Day immediately following each LIBOR Determination Date, the
LIBOR Calculation Agent will calculate the interest rate for the next Interest Accrual Period in respect of each Class
of Notes and the amount of interest for such Interest Accrual Period payable in respect of each U.S.$100,000
principal amount of Notes of such Class (the "Interest Amount") (rounded to the nearest cent, with half a cent being
rounded upward) for the related Distribution Date and will communicate such rates and amounts to the Co-Issuers,
the Trustee, any Paying Agents, DTC, Euroclear, Clearstream-Luxembourg, the Collateral Manager and, so long as
any Notes are listed on the Irish Stock Exchange, to that exchange.
The Trustee will act as the initial LIBOR Calculation Agent for each Class of Notes. The LIBOR Calculation
Agent may be removed by the Co-Issuers at any time. If the LIBOR Calculation Agent is unable or unwilling to act
as such or is removed by the Co-Issuers, the Co-Issuers will promptly appoint as a replacement LIBOR Calculation
Agent the London office of a leading bank that is engaged in transactions in Eurodollar deposits in the international
Eurodollar market and that does not control or is not controlled by or under common control with the Co-Issuers or
their affiliates. The LIBOR Calculation Agent may not resign its duties without a successor having been duly
appointed and, upon such appointment, the successor shall promptly inform each Hedge Counterparty of such
appointment. The LIBOR Calculation Agent's determination of the interest rate and Interest Amount applicable to
51

any Notes for any Interest Accrual Period will (in the absence of manifest error) be final and binding upon all
parties.
Principal
The Stated Maturity of the Notes is April 23, 2020. Unless redeemed or repaid prior thereto, the Notes will
mature and be payable on the Distribution Date occurring in April 2020.
No principal payments will be made on the Class A Notes during the Reinvestment Period, except (a) upon
certain Coverage Tests not being satisfied and (b) in connection with a Special Redemption, an Optional
Redemption or a Tax Redemption. See "Description of Notes—Redemption." Holders of the Class A Notes will
receive payments of principal of the Class A Notes in accordance with the Priority of Payments described herein.
No principal payments will be made on the Class B Notes during the Reinvestment Period, except (a) upon
certain Coverage Tests not being satisfied and (b) in connection with a Special Redemption, an Optional
Redemption or a Tax Redemption; provided, in each case, that the Class A Notes have been repaid in full. Holders
of the Class B Notes will receive payments of principal of the Class B Notes in accordance with the Priority of
Payments described herein.
No principal payments will be made on the Class C Notes during the Reinvestment Period, except (a) upon
certain Coverage Tests not being satisfied and (b) in connection with a Special Redemption, an Optional
Redemption or a Tax Redemption; provided, in each case, that the Class A Notes and the Class B Notes have been
repaid in full. Holders of the Class C Notes will receive payments of principal of the Class C Notes in accordance
with the Priority of Payments described herein.
After the Reinvestment Period, on each Distribution Date principal of each Class of Notes will be payable, in
order of seniority, from Principal Proceeds according to the Priority of Payments.
Failure to make any payments on the Preferred Shares on any Distribution Date will not constitute an Event of
Default.
Redemption
Optional Redemption of Notes by Liquidation of Collateral
On any Distribution Date occurring on or after April 23, 2010, at the written direction to the Trustee, the Issuer
and the Collateral Manager by a Majority of the Preferred Shares, the Notes may be redeemed by the Co-Issuers in
whole, and not in part, from the Available Redemption Amount (a "Redemption by Liquidation"); provided that:
(1) the Available Redemption Amount will be at least sufficient to redeem the Notes simultaneously in accordance
with the procedures set forth in the Indenture and summarized herein under "—Redemption Procedures" and
(2) funds from the Available Redemption Amount are used to make such a redemption. "Available Redemption
Amount" means the sum of, without duplication, (a) the amount of Sale Proceeds attributable to the Pledged
Investments liquidated plus (b) the amount of all other funds in the Custodial Account, the Interest Collection
Account, the Principal Collection Account, the Interest Reserve Account, the Payment Account, the Proceeds
Account, the Expense Account, the Delayed Funding Obligation Account plus (c) (i) the positive net amount to be
received or (ii) the negative net amount to be distributed, in each case if any, in respect of a termination of any
Hedge Agreement or Synthetic Security.
Optional Redemption of Notes Using Additional Notes or Secured Loans.
On any Distribution Date occurring on or after April 23, 2010, at the written direction to the Trustee, the Issuer
and the Collateral Manager by a Majority of the Preferred Shares, the Notes may be redeemed by the Co-Issuers in
whole, and not in part, at the applicable Redemption Price by issuing additional notes (that would replace the Notes
being redeemed) or incurring secured loans (a "Redemption by Refinancing" and collectively with a Redemption by
Liquidation, "Optional Redemptions"); provided that the Notes being redeemed must be redeemed simultaneously
with the issuance of the additional notes or the incurrence of secured loans. Upon receipt of such written direction,
the Co-Issuers will commence the structuring of the additional notes to be issued or the secured loans to be
52

orrowed in a manner that ensures that the amount received from such additional notes or secured loans is sufficient
to redeem all of the Notes being redeemed and to pay all administrative and other fees and expenses payable under
"Application of Funds—Priority of Payments—Distributions of Interest Proceeds" (including, without limitation,
any amounts due to the Hedge Counterparties). If the amount received from the sale of the additional notes or the
amount borrowed under the secured loans would not be sufficient to redeem the Notes being redeemed and to pay
such fees and expenses, the Notes may not be redeemed unless the Majority of the Preferred Shares instead elect to
effect a Redemption by Liquidation as described in "—Optional Redemption of Notes by Liquidation of Collateral."
None of the Co-Issuers, the Trustee or any other Person will be liable to the Holders of the Preferred Shares for the
failure to issue additional notes or to obtain secured loans.
Special Redemption
The Notes may be redeemed in part by the Issuer (i) at any time during the Reinvestment Period if the Collateral
Manager shall by Issuer Order notify the Trustee that it has been unable, for a period of at least 30 days, to identify
Substitute Collateral Debt Obligations that satisfy the Reinvestment Criteria in sufficient amounts to permit the
reinvestment of all or a portion of the funds then in the Principal Collection Account that are to be invested in
Substitute Collateral Debt Obligations or (ii) after the Effective Date, if the Collateral Manager notifies the Trustee
that a redemption is required as described under "The Indenture—Confirmation of Ratings; Ramp-Up Failure" in
order to obtain from each Rating Agency written confirmation that it will not downgrade or withdraw its rating of
the Notes assigned thereto on the Closing Date (such redemption, a "Special Redemption"). On the first Distribution
Date following the Due Period in which notice of a Special Redemption is given, the funds in the Principal
Collection Account representing Principal Proceeds that cannot be reinvested in Substitute Collateral Debt
Obligations (the "Special Redemption Amount") will be available to be applied in accordance with the Priority of
Payments.
Coverage Test Failure Redemption
If a Coverage Test is not met on any Determination Date occurring on or after the Effective Date, the Issuer will
be required to apply available amounts in the Payment Account on the related Distribution Date to make payments
in accordance with the Note Payment Sequence to the extent necessary to achieve compliance with such Coverage
Tests, as described under "—Priority of Payments."
Tax Redemption
In addition, upon the occurrence of a Tax Event, the Co-Issuers shall redeem the Notes (such redemption, a
"Tax Redemption") on any Distribution Date, in whole but not in part, at the direction of the holders of a Majority of
any Class of Notes that, as a result of the occurrence of a Tax Event, has not received 100% of the aggregate amount
of principal and interest payable to such Class on any Distribution Date (each such Class, an "Affected Class"). Any
such Tax Redemption may be effected only on a Distribution Date and only from the Available Redemption Amount
on such Distribution Date, at the applicable Redemption Price. No Tax Redemption may be effected, however,
unless (i) a Tax Event shall have occurred and (ii) the Available Redemption Amount is sufficient to redeem the
Notes simultaneously and to pay certain other amounts in accordance with the procedures set forth in the Indenture.
Notwithstanding the immediately preceding paragraph, in connection with any Tax Redemption, holders of at
least 66-2/3% of the aggregate outstanding principal amount of an Affected Class of Notes may elect to receive less
than 100% of the portion of the Available Redemption Amount that would otherwise be payable to holders of such
Affected Class (and the minimum funding requirements specified in the immediately preceding paragraph will be
reduced accordingly).
"Tax Event" means an event that occurs if either:
(i) (A) one or more Collateral Debt Obligations that were not subject to withholding tax at the time the Issuer
committed to purchase the same have become subject to withholding tax ("New Withholding Tax Obligations")
and/or the rate of withholding has increased on one or more Collateral Debt Obligations that were subject to
withholding tax at the time the Issuer committed to purchase the same ("Increased Rate Withholding Tax
Obligations") and (B) in any Due 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
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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 such Due 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 Equity Security or Collateral Debt
Obligation.
Optional Redemption of the Preferred Shares
On any Distribution Date on or after the payment in full of the Notes and all administrative and other fees and
expenses payable under the Priority of Payments (including the Base Collateral Management Fee and the
Subordinated Collateral Management Fee), the Preferred Shares may be permanently redeemed (in whole but not in
part) at their Redemption Price at the direction of the Majority of the Preferred Shares in accordance with the
Priority of Payments, subject to the procedures described in "—Redemption Procedures" below.
Redemption Procedures
Notice of a redemption will, pursuant to the Indenture, be transmitted electronically or by mail, postage prepaid,
sent not less than ten Business Days prior to the applicable date scheduled for redemption (a "Redemption Date"), to
(a) each holder of Notes to be redeemed at such holder's address in the register maintained by the Note Registrar,
(b) the Rating Agencies, (c) the Collateral Manager, (d) each Hedge Counterparty and (e) the Preferred Share Paying
Agent (for forwarding to the holders of the Preferred Shares). In addition, so long as any Notes are listed on the
Irish Stock Exchange, notice of redemption will be given by publication via the Company Announcement Office of
the Irish Stock Exchange or as otherwise required by the rules of the Irish Stock Exchange not less than ten Business
Days prior to the Redemption Date. The certificates in respect of the Notes to be redeemed in whole must be
surrendered at the office of any paying agent appointed for the Notes under the Indenture (each, a "Paying Agent")
in order to receive the redemption price unless the holder provides an undertaking to surrender such Note thereafter.
The Notes will not be redeemed unless (i) at least 7 Business Days prior to the scheduled Redemption Date and
prior to selling any Collateral Debt Obligations, the Collateral Manager shall certify to the Trustee and to each of the
Rating Agencies that the expected proceeds from such sale (calculated as provided in the next succeeding
paragraph) together with any other amounts available to be used for such Optional Redemption or Tax Redemption
will be delivered to the Trustee not later than the Business Day immediately preceding the scheduled Redemption
Date, in immediately available funds, and will equal or exceed 100% of all amounts required to pay the Redemption
Price with respect to all of the Notes then outstanding plus the amounts required to be paid pursuant to clauses (1)
through (5) of "Application of Funds—Priority of Payments—Distributions of Interest Proceeds" (without regard to
the limitations set forth therein) and (ii) if the Person to whom any Collateral Debt Obligations are to be sold is a
Person (a) whose long-term unsecured, unguaranteed and unsupported (other than such obligations whose rating is
based on the credit of a person other than such institution) debt obligations have a credit rating of at least "Aa3"
from Moody's and at least "AA-" from Standard & Poor's or (b) whose short-term unsecured debt obligations have a
credit rating of "P-1" from Moody's and "A-1+" from Standard & Poor's or (c) whose obligations under binding
agreements for the purchase of Collateral Debt Obligations are supported by a letter of credit, a loan or warehousing
agreement or any other agreement, in each case, issued by or with a financial institution (or a guarantor or
guarantors of the obligations thereof) satisfying either of the foregoing clauses (a) or (b), then the expected proceeds
will be deemed to be 100% of the expected proceeds of the sale of such Collateral Debt Obligations or if each
Person to whom any Collateral Debt Obligations are to be sold does not satisfy any of the foregoing clauses (a), (b)
or (c), then the expected proceeds from the sale of such Collateral Debt Obligations to such Person will be deemed
to be the percentage of the expected proceeds of such sale of the Collateral Debt Obligations set forth in the
applicable column of the table below based upon the period of time between the certification and the expected date
of sale.
For purposes of determining the expected proceeds from a sale for purposes of the immediately preceding
paragraph, the expected proceeds will be deemed to be (x) the Market Value of the Eligible Investments and, if
Collateral Debt Obligations are to be sold on the Business Day of the certification, the Market Value of the
Collateral Debt Obligations or (y) the percentage of the Market Value of the Collateral Debt Obligations set forth in
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the applicable column of the table below based upon the period of time between certification and the expected date
of sale:
Number of Business Days Between
Certification and Expected Sale
Collateral Type 1 to 2 3 to 5 6 to 15
Cash and Eligible Investments................................................................... 100% 100% 100%
Loans (other than loans with a Market Value of less than 90% of
the Principal Balance thereof)................................................................ 93% 92% 88%
Bonds rated "B3/B-" or higher (other than bonds with a Market
Value of less than 90% of the Principal Balance thereof)...................... 89% 85% 75%
Loans with a Market Value of less than 90% of the Principal
Balance thereof...................................................................................... 80% 73% 60%
Bonds rated "Caa1/CCC+" or lower and Bonds rated "B3/B-" or
higher with a Market Value of less than 90% of the Principal
Balance thereof...................................................................................... 75% 65% 45%
Any notice of Optional Redemption or Tax Redemption may be withdrawn by the Issuer up to the fourth
Business Day prior to the scheduled Redemption Date by written notice to the Trustee, the Collateral Manager, each
Hedge Counterparty and the Preferred Share Paying Agent (for forwarding to the holders of the Preferred Shares)
only if the Collateral Manager does not deliver evidence to the Trustee that the Issuer has entered into the sale
agreement or agreements or provided the certifications referred to above, as the case may be. At the cost of the
Issuer, notice of any such withdrawal will be given by the Trustee to each holder of Notes and Preferred Shares to be
delivered to such holder's address in the Note Register or the register maintained under the Preferred Share
Documents, as the case may be, if possible, by overnight courier guaranteeing next day delivery and otherwise by
first class mail, sent not later than the second Business Day prior to the scheduled Redemption Date. If a
counterparty to a forward agreement relating to the sale of a Collateral Debt Obligation fails to consummate the
purchase contemplated therein in whole or in part by the Business Day prior to the scheduled Redemption Date, and
as a result of such failure, there would not be sufficient funds available to the Issuer to consummate such scheduled
redemption in accordance with the Priority of Payments, any failure to consummate such scheduled redemption on
such Redemption Date under such circumstances will not constitute a Default or an Event of Default.
For so long as any Class of Notes is listed on the Irish Stock Exchange and the rules thereof so require, notice of
any such withdrawal will be published via the Company Announcement Office of the Irish Stock Exchange or as
otherwise required by the rules of the Irish Stock Exchange and, in the case of Notes in global form, as applicable,
delivery of the relevant notice will be made for communication by such Clearing Agency to the holders of interests
in the relevant Notes in global form.
The amount payable in connection with a redemption of any Note or Preferred Share (the "Redemption Price")
will be, when used with respect to (i) any Class of Notes to be redeemed pursuant to the Indenture, an amount equal
to 100% of the Aggregate Outstanding Amount of such Notes, together with accrued and unpaid interest thereon at
the applicable Note Interest Rate to the Redemption Date and (ii) any Preferred Shares to be redeemed, the amount
of the proceeds of the Collateral remaining, if any, after giving effect to the redemption of the Notes and the
payment of, or establishment of a reserve for, all prior amounts in accordance with the Priority of Payments.
All Notes and Preferred Shares that are redeemed or paid and surrendered for cancellation as described herein
will be canceled and may not be reissued or resold.
Required Disposition
Notwithstanding any other provision hereof, if the Issuer reasonably determines in good faith that a holder or
beneficial owner of the Offered Securities does not have the status that it purports to have and such holder or
beneficial owner is not otherwise qualified to hold such Offered Securities, the Issuer will have the right to require
such holder or beneficial owner to dispose of such holder's or beneficial owner's Offered Securities to a person or
entity that is qualified to hold such Offered Securities immediately upon receipt of a notice from the Issuer that such
holder or beneficial owner is not so qualified.
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Payments on the Offered Securities
Payments in respect of principal and/or interest and/or any other amount on any Note of any Class or Preferred
Share will be made to the person in whose name such Note or Preferred Share is registered in the note register or
share register, as applicable, on the related Record Date. "Record Date" means, with respect to any Distribution
Date, the 15 th day (whether or not a Business Day) prior to the applicable Distribution Date. Payments on Global
Notes will be made by wire transfer of immediately available funds to an account maintained by DTC or its
nominee, or if wire transfer cannot be effected, by a U.S. dollar check delivered to DTC or its nominee. The
Co-Issuers expect that DTC or its nominee, upon receipt of any payment of principal or interest in respect of Global
Notes held by DTC or its nominee, will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interest in such Global Notes as shown on the records of DTC or its
nominee. The Co-Issuers also expect that payments by DTC Participants to owners of beneficial interests in a
Global Note held through such DTC 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 such
customers. Such payments will be the responsibility of such DTC Participants. Payments in respect of principal
and/or interest and/or any other amount on Definitive Notes or Preferred Shares will be made by the Issuer and
payable by a U.S. dollar check payable to the holder thereof mailed to such holder or by wire transfer of
immediately available funds to a dollar denominated account maintained by the holder in accordance with wire
transfer instructions received by the Trustee on or before the Record Date. Final payments in respect of principal
and/or any other amount of the Notes or Preferred Shares will be made against surrender of the certificates in respect
of such Notes or Preferred Shares at the Corporate Trust Office of the Trustee or the Preferred Share Paying Agent,
as applicable, or at the office of any paying agent appointed under the Indenture or the Fiscal Agency Agreement, as
applicable, or without surrender if the holder of the certificates in respect of such Notes or Preferred Shares provides
the Trustee or the Preferred Share Paying Agent, as applicable, any paying agent and the Co-Issuers or the Issuer, as
applicable, with either the security or indemnity required by them, in the case of a holder other than a Qualified
Institutional Buyer, and an undertaking to surrender the certificates in respect of such Notes or Preferred Shares.
None of the Co-Issuers, the Trustee, the Preferred Share Paying Agent nor any paying agent will have any
responsibility or liability for any aspects of the records maintained by DTC, DTC's nominee, any of DTC
Participants, or for payments made thereby on account of beneficial interests in, a Global Note. Each of the persons
shown as a holder of a Global Note in the records of DTC, DTC's nominee, any of DTC Participants, Euroclear or
Clearstream-Luxembourg (an "Accountholder") must look solely to DTC, DTC's nominee, any of DTC Participants,
Euroclear or Clearstream-Luxembourg, as the case may be, for his share of each payment made by the Issuer to the
holder of the applicable Global Note, subject to and in accordance with the respective rules and procedures of DTC,
DTC's nominee, any of DTC Participants, Euroclear or Clearstream-Luxembourg, as the case may be.
Accountholders will have no claim directly against the Issuer or the Co-Issuer in respect of payments due on the
Notes for so long as such Notes remain represented by Global Notes in respect of each amount so paid.
If any payment in respect of a Note of any Class or Preferred Share is due on a day that is not a Business Day,
payment will be made on the next succeeding Business Day with the same force and effect as if made on the date for
payment; provided that in the event that the nominal Distribution Date shall not fall on a Business Day, the
Distribution Date will be deemed to be the next succeeding Business Day.
In the case of any Notes that are listed on the Irish Stock Exchange, the Irish Stock Exchange will be informed
of the principal amounts of such Notes outstanding following each Distribution Date and of any failure to receive
scheduled payments of principal of or interest on such Notes on a Distribution Date. In addition, with respect to
each Distribution Date, for so long as the Notes of any Class are listed on the Irish Stock Exchange and the rules of
such exchange so require, the Irish Stock Exchange will be informed of the interest rate for each such Class of
Notes, the amount of interest payable thereon and the exact date of such Distribution Date. For so long as the Notes
of any Class are listed on the Irish Stock Exchange and the rules of such exchange so require, the Co-Issuers will
have a paying agent and transfer agent for such securities in Ireland, and payments on and transfers or exchanges of
interests in such Notes (including partial interests therein) may be effected through such paying and transfer agent
(or any other paying and transfer agent); provided that all transfers and exchanges must be effected in accordance
with the Indenture. In addition, for so long as the Notes of any Class are listed on the Irish Stock Exchange and the
rules of such exchange so require, in the case of a transfer or exchange of a physical instrument representing such
security, a holder thereof may obtain a new physical instrument from the paying agent and transfer agent in Ireland
56

in accordance with the Indenture. The initial paying agent in Ireland in respect of the Notes will be Maples Finance
Dublin (in such capacity, the "Irish Paying Agent").
Payments to each holder of the Notes of each Class will be made ratably among the holders of the Notes of such
Class in proportion to the Aggregate Outstanding Amount of the Notes of such Class held by each such holder.
Payments to each holder of the Preferred Shares will be made ratably among the holders of the Preferred Shares in
proportion to the number of Preferred Shares held by each such holder.
No Gross-Up
All payments made by the Issuer in respect of the Notes will be made without any deduction or withholding for
or on account of any tax unless such deduction or withholding is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, then in effect. If the Issuer is so required to deduct or
withhold, then the amount so deducted or withheld will be deemed to have been paid to the holders or beneficial
owners of the Notes in respect of which such deduction or withholding was made and the Issuer will not be
obligated to pay any additional amounts to the holders or beneficial owners of the Notes as a result of any
withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental
charges.
Form, Denomination, Registration and Transfer of the Offered Securities
The 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 Qualified Institutional Buyers. Each Note sold
to a person that, at the time of the acquisition, purported acquisition or proposed acquisition of any such 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 Notes"). The 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
Notes"). The Rule 144A Global Notes and the Regulation S Global Notes are referred to herein collectively as the
"Global Notes."
The Preferred Shares 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
companies owned exclusively by Knowledgeable Employees and/or Qualified Purchasers that in the case of (A) and
(B) are either (1) Qualified Institutional Buyers or (2) Accredited Investors and (b) to certain non-U.S. persons in
offshore transactions in reliance on Regulation S under the Securities Act. Each initial investor and each subsequent
transferee of a Preferred Share (or any interest therein) will be required to 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.
The Preferred Shares will be issued in the form of definitive physical certificates in fully registered form
without coupons, registered in the name of the legal and beneficial owner thereof (or a nominee acting on behalf of
such legal and beneficial owner). Beneficial interests in Preferred Shares are subject to certain restrictions on
transfer and all of the Preferred Shares will bear a restrictive legend. See "Transfer Restrictions."
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 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 Notes, for the respective accounts of Euroclear Clearance
System plc. ("Euroclear") and Clearstream Banking, société anonyme ("Clearstream").
A beneficial interest in a Regulation S Global Note may be transferred to a person who takes delivery in the
form of an interest in the corresponding Rule 144A Global 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
57

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 a Qualified Institutional Buyer and
a Qualified Purchaser. Beneficial interests in a Rule 144A Global Note may be transferred to a person who takes
delivery in the form of an interest in the corresponding Regulation S Global 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 in accordance with Regulation S under the Securities Act 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 a non-U.S.
person purchasing such Rule 144A Securities in an offshore transaction pursuant to Regulation S. Any beneficial
interest in one of the Global Notes that is transferred to a person who takes delivery in the form of an interest in
another Global Note will, upon transfer, cease to be an interest in such Global Note and become an interest in such
other Global Note, and accordingly, will thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Notes for as long as it remains such an interest.
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 Note will be the only person entitled to receive payments in respect
of the Class of Notes represented thereby, and the Co-Issuers will be discharged by payment to, or to the order of,
the registered owner of such Global Note in respect of each amount so paid. No person other than the registered
owner of the relevant Global Note will have any claim against the Co-Issuers in respect of any payment due on that
Global Note. Account holders or participants in Euroclear and Clearstream shall have no rights under the Indenture
with respect to Global 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 Notes for all
purposes whatsoever.
Except in the limited circumstances described below, owners of beneficial interests in the Global Notes 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 (A) (i) DTC notifies the Co-
Issuers that it is unwilling or unable to continue as depositary for Global Notes of any Class or Classes or (ii) DTC
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 such event or (B) an Event of Default has occurred and is
continuing (each, 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 Notes to the beneficial owners of
such Global Notes in the manner set forth in the Indenture. In the event that definitive physical Notes are not so
issued by the Issuer to such beneficial owners of interests in Global Notes, the Issuer expressly acknowledges that
such beneficial owners shall be entitled to pursue any remedy that the holders of a Global Note would be entitled to
pursue in accordance with the Indenture (but only to the extent of such beneficial owner's interest in the Global
Note) as if definitive physical Notes had been issued. In the event that definitive physical Notes are issued in
exchange for Global Notes as described above, the applicable Global Note 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.
For so long as any Notes are listed on the Irish Stock Exchange and the rules of such exchange shall so require,
the Co-Issuers will have a paying agent and transfer agent (which shall be the Irish Paying Agent) for such Notes in
Ireland and payments on and transfers or exchanges of interests in such Notes may be effected through the Irish
Paying Agent; provided that all transfers and exchanges must be effected in accordance with the Indenture. In the
event that the Irish Paying Agent is replaced at any time during such period, notice of the appointment of any
replacement will be published via the Company Announcement Office of the Irish Stock Exchange.
In addition, for so long as any Notes 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 certificated Notes, a holder thereof may effect such transfer or
exchange by presenting such Notes at, and obtaining a new certificated Note from, the office of the Irish Paying
Agent, in the case of a transfer of a part only of a certificated Note a new certificated Note in respect of the
outstanding balance of the principal amount of the certificated Note not transferred will be delivered at the office of
the Irish Paying Agent, and in the case of a replacement of any lost, stolen, mutilated or destroyed certificated Notes,
58

a holder thereof may obtain a new certificated Note from the Irish Paying Agent; provided that all transfers,
exchanges and replacements must be effected in accordance with the Indenture.
Both certificated Notes and interests in Global 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 U.S.$500,000 and integral multiples of U.S.$1,000 in
excess thereof and the Preferred Shares will be issued in minimum denominations of 250 shares, representing an
aggregate original issue price of U.S.$250,000.
APPLICATION OF FUNDS
Collections received in any Due Period in respect of the Collateral Debt Obligations and Eligible Investments
securing the Notes will be divided into Interest Proceeds and Principal Proceeds as described below. The manner in
which Interest Proceeds and Principal Proceeds will be applied to make payments on the Notes and payments for the
expenses of the Co-Issuers, will be as described below.
Interest and Principal Proceeds
"Interest Proceeds" means, with respect to any Distribution Date, the sum (without duplication) of the
following, in each case to the extent received (or deemed received with respect to clause (e) herein or as to which
the Collateral Manager or the Trustee reasonably believes will be received) in cash in U.S. dollars by or on behalf of
the Issuer or the Trustee during the related Due Period:
(a) all payments of interest on Collateral Debt Obligations and Eligible Investments, including any
payments of accrued interest received on the sale of Collateral Debt Obligations or Eligible Investments (which
in the case of Zero-Coupon Securities and Step-Up Coupon Securities shall include the portion of Zero-Coupon
Securities or Step-Up Coupon Securities, as applicable, received upon sale or maturity that accreted from the
time of purchase thereof by the Issuer) and all payments of principal (including principal prepayments) on
Eligible Investments purchased with the proceeds of items (a) through (f) of this definition of Interest Proceeds;
provided that Interest Proceeds will not include (w) Sale Proceeds representing accrued interest that are applied
toward payment for accrued interest on the purchase of a Substitute Collateral Debt Obligation, (x) any amounts
withdrawn from the Interest Collection Account during such Due Period that are applied toward the purchase of
accrued interest in connection with the purchase by the Issuer of any Substitute Collateral Debt Obligation,
(y) interest received in respect of Collateral Debt Obligations (including interest received by the Issuer in
connection with a Sale of any such Collateral Debt Obligation), which interest was purchased with Principal
Proceeds and (z) interest received in respect of Collateral Debt Obligations owned by the Issuer on the Closing
Date (including interest received by the Issuer in connection with a Sale of any such Collateral Debt Obligation)
to the extent that such interest was accrued and unpaid as of the Closing Date;
(b) the portion of all amendment and waiver fees, late payment fees, commitment fees with respect to
Delayed Draw Term Loans and other fees and commissions (other than syndication, facility or other up front
fees) received in cash by the Issuer during the related Due Period in connection with the Collateral Debt
Obligations and Eligible Investments (excluding fees and commissions received in connection with a Defaulted
Obligation, up to the principal amount thereof) deemed to be "Interest Proceeds" by the Collateral Manager (in
its sole discretion);
(c) all securities lending fees (net of administration fees paid in connection with securities lending and
payments received from a securities lending counterparty that would have constituted Interest Proceeds had they
been made directly by the obligor of the loaned Collateral Debt Obligation);
(d) all fixed payments (but not any termination payment) made by any Synthetic Security Counterparty
under any Synthetic Security;
(e) all Hedge Receipt Amounts (including the portion thereof consisting of all Scheduled Periodic
Currency Hedge Receipts but excluding the portion thereof consisting of (i) termination or notional reduction
59

payments except the portion thereof that constitutes an accrued scheduled payment due in respect of such
Distribution Date, or (ii) Currency Hedge Principal Exchange Receipts) received by the Issuer pursuant to any
Hedge Agreement;
(f) an amount equal to the U.S. dollars received by the Issuer during the related Due Period in connection
with the conversion of the Permitted Currencies at the direction of the Collateral Manager, but only to the extent
that the amounts so converted would have been considered Interest Proceeds under items (a) or (b) above if they
had been denominated in U.S. dollars;
(g) all amounts deposited in the Interest Collection Account from the Currency Account pursuant to the
Indenture;
(h) on the initial Distribution Date, all or a portion of the amounts then on deposit in the Interest Reserve
Account designated by the Collateral Manager, in its sole discretion, as Interest Proceeds; and
(i) after the Effective Date, all or any portion of the amounts on deposit in the Proceeds Account from
time to time designated by the Collateral Manager, in its sole discretion, as Interest Proceeds; provided that any
such amount so designated will not, on a cumulative basis, exceed U.S.$2,000,000.
Notwithstanding the foregoing, Interest Proceeds will not include (i) interest received by or on behalf of the
Issuer in respect of any investments or funds on deposit in the Swap Counterparty Collateral Account, the Hedge
Collateral Account, the Securities Lending Account or the Currency Account, (ii) payments received by or on behalf
of the Issuer in respect of Non-USD Debt Obligations deposited in the Currency Account or (iii) the Excepted
Property or any proceeds therefrom.
"Principal Proceeds" means, with respect to any Distribution Date, the sum of (without duplication) the
following, in each case to the extent received (or to which the Collateral Manager or the Trustee reasonably believes
will be received) in cash in U.S. dollars by or on behalf of the Issuer or the Trustee during the related Due Period:
(a) all payments (including Unscheduled Principal Payments) and other payments received in respect of
Collateral Debt Obligations, Defaulted Obligations, Eligible Investments and Equity Securities that are not
Interest Proceeds;
(b) the portion of all amendment and waiver fees, late payment fees, commitment fees with respect to
Delayed Draw Term Loans and other fees and commissions received (other than syndication, facility or other
up front fees) in cash by the Issuer during the related Due Period in connection with the Collateral Debt
Obligations and Eligible Investments (excluding fees and commissions received in connection with a Defaulted
Obligation, up to the principal amount thereof) not deemed to be "Interest Proceeds" by the Collateral Manager
(in its sole discretion);
(c) all Sale Proceeds in respect of Collateral Debt Obligations, Defaulted Obligations, Eligible
Investments, Equity Workout Securities and Equity Securities that are not Interest Proceeds;
(d) all amounts on deposit in the Principal Collection Account and all Eligible Investments in the Principal
Collection Account but excluding interest on such Eligible Investments);
(e) amounts received from a Securities Lending Account or the Securities Lending Counterparty upon a
default of the Securities Lending Counterparty;
(f) amounts received from the Swap Counterparty Collateral Account or the Swap Counterparty upon (i) a
default of the Swap Counterparty or (ii) an early termination or notional reduction of a Swap Agreement;
(g) to the extent not designated as Interest Proceeds, amounts received from the Hedge Counterparty
Collateral Account or the Hedge Counterparty upon (i) a default of the Hedge Counterparty or (ii) an early
termination or notional reduction of a Hedge Agreement;
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(h) on the Final Distribution Date, all funds remaining on deposit in the Transaction Accounts (except the
Swap Counterparty Collateral Account, any Securities Lending Account and the Hedge Counterparty Collateral
Account unless held as a result of a Swap Counterparty default or a Hedge Counterparty default, as applicable);
(i) payments with respect to Equity Securities;
(j) on the initial Distribution Date, all or any portion of the amounts then on deposit in the Interest
Reserve Account designated by the Collateral Manager, in its sole discretion, as Principal Proceeds;
(k) after the Effective Date, all or any portion of the amounts on deposit in the Proceeds Account from
time to time designated by the Collateral Manager, in its sole discretion, as Principal Proceeds;
(l) without duplication, all Currency Hedge Principal Exchange Receipt received by the Issuer pursuant to
any Hedge Agreement;
(m) all amounts deposited in the Principal Collection Account from the Currency Account pursuant to the
Indenture; and
(n) all other amounts received by the Issuer during the related Due Period (except as expressly included in
the definition of Principal Proceeds pursuant to subparagraph (g) above) which are not included in the definition
of Interest Proceeds, including payments received from a securities lending counterparty that would have
constituted Principal Proceeds had they been made directly by the obligor of the loaned Collateral Debt
Obligation.
Notwithstanding the foregoing, Principal Proceeds will not include (i) principal received by or on behalf of the
Issuer in respect of any investments or funds on deposit in the Swap Counterparty Collateral Account, the Hedge
Collateral Account, the Securities Lending Account or the Currency Account, (ii) payments received by or on behalf
of the Issuer in respect of Non-USD Debt Obligations deposited in the Currency Account, (iii) Currency Hedge
Replacement Receipts and Currency Hedge Termination Receipts or (iv) the Excepted Property or any proceeds
therefrom.
Priority of Payments
On each Distribution Date, the Trustee will disburse amounts transferred from the Interest Collection Account
(and (x) solely with respect to the initial Distribution Date, the amount on deposit in the Interest Reserve Account
designated by the Collateral Manager as Interest Proceeds and (y) with respect to any Distribution Date occurring on
or after the Effective Date, the amount on deposit in the Proceeds Account designated by the Collateral Manager as
Interest Proceeds) or the Principal Collection Account (and (x) solely with respect to the initial Distribution Date,
the amount on deposit in the Interest Reserve Account designated by the Collateral Manager as Principal Proceeds
and (y) with respect to any Distribution Date occurring on or after the Effective Date, the amount on deposit in the
Proceeds Account designated by the Collateral Manager as Principal Proceeds), as applicable, to the Payment
Account as follows and for application by the Trustee in accordance with the following priorities of payments
(collectively, the "Priority of Payments"):
Distributions of Interest Proceeds
On each Distribution Date, Interest Proceeds (other than Interest Proceeds invested or intended to be invested
by the Issuer at the direction of the Collateral Manager in accrued interest in respect of Substitute Collateral Debt
Obligations), with respect to the related Due Period will be distributed in the following order of priority:
(1) to the payment of taxes, filing fees and registration fees (if any) owing by the Issuer or the Co-Issuer
for the related Interest Accrual Period as certified by the Issuer the or the Co-Issuer, as applicable, to the
Trustee;
(2) to the payment of the following amounts in the following priority: (i) to the pro rata payment of
accrued and unpaid Administrative Expenses constituting fees and expenses (including in respect of any
indemnities) of the Trustee, the Preferred Share Paying Agent, the Collateral Administrator and the Securities
61

Intermediary; and (ii) all other accrued and unpaid Administrative Expenses (including in respect of any
indemnities) (in the order set forth in the definition of such term) including amounts payable by the Issuer to the
Collateral Manager under the Collateral Management Agreement or the Indenture and expenses of the Trustee,
the Preferred Share Paying Agent, the Collateral Administrator and the Securities Intermediary not paid
pursuant to clause (i) of this clause (2); provided that such payments pursuant to clauses (i) and (ii) above shall
be in aggregate limited to payments not to exceed on any Distribution Date the sum of 0.05% per annum
(prorated for the related Interest Accrual Period) of the Principal Collateral Value on the related Determination
Date plus U.S.$220,000 per annum (the limit imposed on clauses (i) and (ii) of this clause (2), the
"Administrative Expense Cap");
(3) on and after the second Distribution Date, for deposit into the Expense Account, at the Collateral
Manager's discretion, up to an amount equal to an amount, if greater than zero, by which (i) the Administrative
Expense Cap on such Distribution Date exceeds (ii) the aggregate payments pursuant to clauses (i) and (ii) of
clause (2) above on such Distribution Date;
(4) to the payment of all accrued and unpaid Hedge Payment Amounts (in the case of any Currency
Hedge, to the extent that there are no funds available in the subaccount applicable to such Currency Hedge
within the Currency Account) (other than amounts due as a result of the termination (or partial termination) of
such Hedge Agreement);
(5) first, to the payment of all accrued and unpaid Base Collateral Management Fees; and second, to the
payment of all accrued and unpaid Base Collateral Management Fee Interest;
(6) to the payment of accrued and unpaid interest on the Class A-1 Notes;
(7) to the payment of accrued and unpaid interest on the Class A-2 Notes;
(8) to the pro rata payment of Hedge Payment Amounts that are due as a result of the termination (or
partial termination) of such Hedge Agreement (in the case of any Currency Hedge, to the extent there are no
funds available in the subaccount applicable to such Currency Hedge within the Currency Account on or prior
to such Distribution Date in connection with such termination) (other than Specified Hedge Termination
Payments, if any);
(9) in the event that any of the Class A Coverage Tests are 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 as of such Determination Date on a pro forma basis after giving effect to
any payments made through this clause (9);
(10) to the payment of accrued and unpaid interest on the Class B Notes and any Class B Deferred Interest;
(11) in the event that any of the Class B Coverage Tests are 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 satisfied as of such Determination Date on a pro forma basis after giving effect to
any payments made through this clause (11);
(12) to the payment of accrued and unpaid interest on the Class C Notes and any Class C Deferred Interest;
(13) in the event that any of the Class C Coverage Tests are 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 satisfied as of such Determination Date on a pro forma basis after giving effect to
any payments made through this clause (13);
(14) first, to the payment of the Subordinated Collateral Management Fee Interest; and second, to the
payment of the Subordinated Collateral Management Fees, including Subordinated Collateral Management Fees
not paid on any previous Distribution Date;
(15) during the Reinvestment Period, in the event that the Reinvestment Overcollateralization Test is not
satisfied as of the related Determination Date, for deposit into the Principal Collection Account as Principal
62

Proceeds, the lesser of (i) 75% of the remaining Interest Proceeds and (ii) the amount necessary to cause the
Reinvestment Overcollateralization Test to be satisfied as of such Determination Date;
(16) for deposit into the Principal Collection Account as Principal Proceeds, at the Collateral Manager's
discretion, up to an amount equal to the aggregate amount of Principal Proceeds previously applied pursuant to
"—Distributions of Principal Proceeds" below to make payments specified in clauses (1), (2), (4)-(8), (10) and
(12) above less the aggregate amount of Interest Proceeds previously applied pursuant to this clause (16);
(17) to the payment of any amounts described in clause (2) above, in the sequence stated therein and only
to the extent not previously paid thereunder whether due to the Administrative Expense Cap or otherwise;
(18) to the payment of any Specified Hedge Termination Payments (in the case of any Currency Hedge, to
the extent there are no funds available in the subaccount applicable to such Currency Hedge within the
Currency Account on or prior to such Distribution Date in connection with such termination);
(19) to pay to the Preferred Share Paying Agent (for payment to holders of the Preferred Shares pursuant to
the Preferred Share Documents to the extent legally permitted) until the Preferred Shares have realized an
Internal Rate of Return of 10%;
(20) to the payment of the Collateral Management Incentive Fees, if any; and
(21) any remaining funds shall be distributed to the Preferred Share Paying Agent (for payment to holders
of the Preferred Shares pursuant to the Preferred Share Documents to the extent legally permitted).
Distributions of Principal Proceeds
On each Distribution Date, Principal Proceeds (other than Principal Proceeds reinvested or intended to be
reinvested by the Collateral Manager in Substitute Collateral Debt Obligations) will be distributed in the following
order of priority:
(1) first, to the payment of the amounts referred to in clauses (1), (2) and (4) through (8) of "—
Distributions of Interest Proceeds" above, in the sequence stated therein and only to the extent not paid in full
thereunder, and second, to the payment of the amounts referred to in clause (9) of "—Distributions of Interest
Proceeds" above but only to the extent not paid in full thereunder and to the extent necessary to cause the
Class A 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 (1);
(2) to the payment of the amounts referred to in clause (11) of "—Distributions of Interest Proceeds"
above but only to the extent not paid in full thereunder and to the extent necessary to cause the 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 (2);
(3) to the payment of the amounts referred to in clause (13) of "—Distributions of Interest Proceeds"
above but only to the extent not paid in full thereunder and to the extent necessary to cause the 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 (3);
(4) to the payment of the amounts referred to in clause (10) of "—Distributions of Interest Proceeds"
above but only to the extent not paid in full thereunder and only to the extent that all of the Coverage Tests
would be satisfied on a pro forma basis after giving effect to any payments made through this clause (4);
(5) to the payment of the amounts referred to in clause (12) of "—Distributions of Interest Proceeds"
above but only to the extent not paid in full thereunder and only to the extent that all of the Coverage Tests
would be satisfied on a pro forma basis after giving effect to any payments made through this clause (5);
(6) (i) if such Distribution Date is a Redemption Date, to make payments in accordance with the Note
Payment Sequence, and (ii) on any other Distribution Date, to make payments in the amount of the Special
Redemption Amount, if any, at the election of the Collateral Manager, either (x) in accordance with the Note
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Payment Sequence or (y) if, on the related Determination Date, the Pro Rata Special Redemption Conditions are
satisfied, (A) first, to the payment of the Aggregate Outstanding Amounts of each Class of the 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.$180,000,000, and (B) second, in accordance with the Note
Payment Sequence thereafter;
(7) (i) during the Reinvestment Period, all remaining funds will be allocated to the Principal Collection
Account for the acquisition of Substitute Collateral Debt Obligations and (ii) after the Reinvestment Period in
the case of Unscheduled Principal Payments and Sale Proceeds of Credit Risk Obligations and Credit Improved
Obligations received during the related Due Period, at the sole discretion of the Collateral Manager and in
accordance with the Reinvestment Criteria and subject to the Additional Reinvestment Conditions, to the
Principal Collection Account for the acquisition of additional Collateral Debt Obligations;
(8) after the Reinvestment Period, to make payments in accordance with the Note Payment Sequence;
(9) to the payment of the amounts referred to in clauses (14) and (17) through (19) of "—Distributions of
Interest Proceeds" above, in the sequence stated therein and only to the extent not paid in full thereunder;
(10) to the payment of the Collateral Management Incentive Fees, if any; and
(11) any remaining funds shall be distributed to the Preferred Share Paying Agent (for payment to holders
of the Preferred Shares pursuant to the Preferred Share Documents to the extent legally permitted).
If, on any Distribution Date, the amount available in the Payment Account is insufficient to make the full
amount of the disbursements required pursuant to the Indenture, the Trustee will make the disbursements called for
in the order and according to the priority set forth above under "—Priority of Payments—Distributions of Interest
Proceeds" and "—Priority of Payments—Distributions of Principal Proceeds" to the extent funds are available
therefor.
Liquidation of Collateral; Final Distribution
On the Distribution Date in April 2020 (or, if earlier, prior to the Final Distribution Date), the Issuer will direct
the Trustee in writing to sell or liquidate all of the Collateral Debt Obligations in the manner specified by the Issuer,
and all net proceeds from such sales and liquidations and all available cash and all other amounts then credited to the
accounts will be distributed in the order of priorities set forth under "—Priority of Payments—Distributions of
Principal Proceeds" above, except that before payments are made in accordance with this paragraph, the Issuer will
be entitled to retain the amounts deposited in the Initial Capital Amount Account.
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 Account of funds to be used to pay expenses following the Closing Date), are expected to be approximately
U.S.$390,000,000 and will be used by the Issuer (i) to fund, both on the Closing Date and after the Closing Date
pursuant to commitments entered into by the Issuer on or prior to the Closing Date for settlement in accordance with
customary settlement terms, the purchase of approximately U.S.$372,000,000 in aggregate principal amount of
Collateral Debt Obligations (at least U.S.$350,000,000 of which are expected to be owned by the Issuer on the
Closing Date) and (ii) to fund a U.S.$2,000,000 deposit to the Interest Reserve Account (to be applied as described
under "Security for the Notes—Accounts—Interest Reserve Account").
The sum of all remaining proceeds (together with other funds available therefor) will be deposited into the
Principal Collection Account as Principal Proceeds and thereafter will be used by the Issuer to fund the purchases of
additional Collateral Debt Obligations so that on or before the Effective Date the Issuer will have a portfolio of
Collateral Debt Obligations in an aggregate principal amount of approximately U.S.$386,000,000.
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RATINGS OF THE NOTES
It is a condition to the issuance of the Notes that the Class A-1 Notes be rated "Aaa" by Moody's Investors
Service, Inc. ("Moody's") and "AAA" by Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's"), that the Class A-2 Notes be rated at least "Aa2" by Moody's and at least
"AA" by Standard & Poor's, that the Class B Notes be rated at least "A2" by Moody's and at least "A" by Standard
& Poor's and that the Class C Notes be rated at least "Baa2" by Moody's and at least "BBB" by Standard & Poor's.
The ratings assigned to each Class of Notes by Moody's address the ultimate payment of interest on and
principal of each such Class of Notes.
The ratings assigned to the Class A-1 Notes and Class A-2 Notes by Standard & Poor's address the timely
payment of interest on and the ultimate receipt of principal of such Notes. The ratings assigned to the Class B Notes
and Class C Notes by Standard & Poor's address the ultimate payment of interest on and principal of such Class of
Notes.
Security ratings are not a recommendation to buy, sell or hold any security. Ratings do not comment on the
adequacy of market price, the suitability of any security for a particular investor or the tax-exempt nature or
taxability of payments made in respect of any security. Ratings may be changed, withdrawn, suspended or placed
on rating alert due to changes in, additions to or the inadequacy of information.
No rating of the Preferred Shares will be sought or obtained in connection with the issuance thereof.
General
SECURITY FOR THE NOTES
The Collateral will secure the Notes and the other Secured Obligations and will include the Collateral Debt
Obligations and the other property pledged as Collateral under the Indenture.
Collateral
The "Collateral" securing the Secured Obligations will include (without limitation) all of the right, title and
interest of the Issuer in, to and under:
(1) the Collateral Debt Obligations that the Issuer causes to be delivered to the Trustee (directly or through
an intermediary or bailee) on the Closing Date, all payments thereon or with respect thereto, all Collateral Debt
Obligations, Equity Securities and Equity Workout Securities that are delivered to the Trustee (directly or
through an intermediary or bailee) after the Closing Date pursuant to the terms of the Indenture and all
payments thereon or with respect thereto and all contracts to purchase, commitment letters, confirmations and
due bills relating to Collateral Debt Obligations, Equity Securities and Equity Workout Securities;
(2) the Transaction Accounts (other than the Swap Collateral Accounts) and all Eligible Investments
purchased with funds on deposit in the Transaction Accounts (except for amounts standing to the credit of the
Swap Collateral Accounts) and other property deposited in or credited to the Transaction Accounts (other than
the Swap Collateral Accounts) and all income from the investment of funds therein;
(3) the Program Documents to which the Issuer is a party;
(4) all funds delivered to the Trustee (directly or through an intermediary or bailee);
(5) the Hedge Collateral;
(6) the Swap Collateral Accounts and the Swap Collateral, whether now owned or hereafter acquired or
arising; provided that the Swap Collateral Accounts and the Swap Collateral will be held in trust by the Trustee
or the related Swap Counterparty as collateral agent for the relevant Swap Counterparties, first, to secure the
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payment of all amounts due from the Issuer to such Swap Counterparties under all Swap Agreements in effect
from time to time and, second, for the benefit of the other Secured Parties; and
(7) all subaccounts, accessions, profits, income benefits, proceeds, substitutions and replacements, whether
voluntary or involuntary, of and to any of the property of the Issuer described in the preceding clauses (other
than amounts on deposit in the Initial Capital Amount Account).
For the avoidance of doubt, the Collateral will not include the Excepted Property or any proceeds therefrom.
Collateral Debt Obligations
A "Collateral Debt Obligation" will be any obligation that, at the time the Issuer enters into the commitment to
acquire such obligation:
(a) is a senior secured or a senior unsecured term or revolving loan (including (i) a letter of credit
reimbursement obligation and (ii) if secured, a DIP Loan), including a Participation interest therein, a corporate
debt security (including an investment grade debt security, a high-yield debt security and a mezzanine debt
security), a Synthetic Security, a Structured Finance Security or a certificate of beneficial interest in an
equipment trust that has the general characteristics of a debt obligation and is treated as a debt obligation for
United States federal income tax purposes, which (except with respect to a Delayed Draw Term Loan or a
Revolving Credit Facility) is fully funded;
(b) is not a Defaulted Obligation or a Credit Risk Obligation;
(c) (i) has a Moody's Rating and a Standard & Poor's Rating (and such Standard & Poor's Rating does not
include the subscript "p," "pi," "q," "r" or "t" without Rating Confirmation from Standard & Poor's) or (ii) is
fully and unconditionally guaranteed as to the timely payment of principal and interest by the U.S. government
or any agency or instrumentality thereof the obligations of which thereunder are backed by the full faith and
credit of the United States of America;
(d) has a Moody's Rating not below "Caa1" and a Standard & Poor's Rating not below "CCC+";
(e) has a stated amortization schedule or maturity date or mandatory redemption date;
(f) is eligible under the instrument or agreement pursuant to which it was issued or created to be
purchased by the Issuer and pledged to the Trustee;
(g) is an obligation of a borrower, issuer or obligor principally located in (x) the United States, The
Netherlands, the United Kingdom, Germany, Ireland, Sweden, Switzerland, Austria, Belgium, Denmark,
Finland, France, Liechtenstein, Luxembourg, Norway, Spain, Greece, Italy or Portugal, (y) a country that is
referred to in the definition of Permitted Non-U.S. Obligor or (z) any other country that has (i) a Moody's
foreign currency rating of at least "Aa2" and (ii) a Standard & Poor's foreign issuer credit rating of at least
"AA";
(h) is not subject to an Offer that is not (i) a Permitted Offer or (ii) an exchange offer (including, without
limitation, an A/B Exchange) in which a security that is not registered under the Securities Act is exchanged for
a security that has substantially identical terms (except for transfer restrictions) but is registered under the
Securities Act or a security that would otherwise qualify for purchase under the Portfolio Profile Test, the
Coverage Tests and the Collateral Quality Tests described herein;
(i) if a debt obligation, is Registered;
(j) will not cause the Issuer, the Co-Issuer or the pool of Collateral to be required to register as an
investment company under the 1940 Act;
(k) is not an interest-only security;
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(l) either (i) is issued by an entity that is treated as a corporation that is not a United States real property
holding corporation as defined in Section 897(c)(2) of the Code for U.S. federal income tax purposes, (ii) is
treated as indebtedness for U.S. federal income tax purposes, or (iii) with respect to which the Issuer has
received advice from Milbank, Tweed, Hadley & McCloy LLP or an opinion of another nationally recognized
U.S. tax counsel experienced in such matters to the effect that the acquisition, ownership or disposition of such
security will not cause the Issuer to be treated as engaged in a trade or business within the United States for U.S.
federal income tax purposes or otherwise subject the Issuer to U.S. federal, state or local income or franchise
tax on a net income basis;
(m) except for Zero-Coupon Securities or Step-Up Coupon Securities, provides for periodic payments of
interest thereon in cash no less frequently than semi-annually;
(n) if a Structured Finance Security, such Structured Finance Security may not be a security whose
repayment is subject to substantial non-credit related risk as determined by the Collateral Manager in its
reasonable business judgment (provided that catastrophe bonds, hurricane bonds, market value collateralized
debt obligations and "future-flow" securities will, for the avoidance of doubt, but without limitation, be deemed
to be securities whose payments is subject to substantial non-credit related risk);
(o) is not a lease (other than a Finance Lease);
(p) is not (i) a Deferred Interest Asset or (ii) Margin Stock;
(q) does not mature or have a final mandatory redemption date more than two years following the Stated
Maturity of the Notes; and
(r) is (i) denominated in U.S. dollars or (ii) a Non-USD Debt Obligation;
provided that (i) the entity selling a Collateral Debt Obligation that is a Participation interest will be (a) a financial
institution organized under the laws of the United States or any state thereof or (b) a financial institution organized
under the laws of a jurisdiction other than the United States or any state thereof but located (or has a branch that is
located) in the United States, and (ii) the credit risk profile of any Collateral Debt Obligation that is a certificate of
beneficial interest in an equipment trust that has the general characteristics of a debt obligation and is treated as a
debt obligation for U.S. federal income tax purposes (A) will be substantially similar to the credit risk profile that
would otherwise have existed had the instrument instead been a debt obligation, (B) the obligor or the obligation in
respect thereof will have an underlying Moody's rating and an underlying Standard & Poor's rating and (C) the
obligor in respect thereof will be principally located in the United States; provided, further, that a Non-USD Debt
Obligation may not be purchased by the Issuer unless a Currency Hedge with a notional amount equal to the
outstanding principal amount of such Non-USD Debt Obligation is entered into by the Issuer at the direction of the
Collateral Manager on or prior to the relevant settlement date.
Notwithstanding the foregoing, the term Collateral Debt Obligation will not include:
(i) any obligation that requires the Issuer to make additional or future advances (other than in the case of
a Delayed Draw Term Loan, a Revolving Credit Facility or a Synthetic Security);
(ii) any Eligible Investments; and
(iii) any Hedge Agreements.
In addition, the term Collateral Debt Obligations will include:
(i) any Swap Collateral as to which the lien of the related Synthetic Security Counterparty has been
released following the termination of a Synthetic Security; provided that such Swap Collateral satisfied the
criteria for Collateral Debt Obligation at the time of the commitment to purchase; and
(ii) a Deliverable Obligation that satisfies the criteria for inclusion as a Collateral Debt Obligation
delivered to the Issuer pursuant to a Swap Agreement; provided that, in the event such Obligation does not
qualify as a Collateral Debt Obligation, it shall be accepted by the Issuer and deemed to be an Equity Security.
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In order to ensure that the Issuer is not treated as engaged in a U.S. trade or business for U.S. federal income tax
purposes, the Issuer and the Collateral Manager will observe certain additional restrictions and limitations on their
activities and on the Collateral Debt Obligations that may be purchased. Accordingly, although a particular
prospective investment may satisfy the definition of Collateral Debt Obligation, it may be ineligible for purchase by
the Issuer and the Collateral Manager as a result of these limitations and restrictions.
Portfolio Profile Test
From and after the Effective Date, the following requirements (subject to the paragraphs of this definition
following clause (ff) below) will apply to the acquisition of Collateral Debt Obligations (the "Portfolio Profile
Test"):
(a) Not less than 92.5% of the Principal Collateral Value will consist of Floating Rate Collateral Debt
Obligations;
(b) Not less than 87.5% of the Principal Collateral Value will consist of First Lien Loans, Participation
interests therein or Synthetic Securities based on or referencing First Lien Loans;
(c) Not more than 7.5% of the Principal Collateral Value will consist of Fixed Rate Collateral Debt
Obligations;
(d) Not more than 5.0% of the Principal Collateral Value will consist of senior unsecured loans;
(e) Not more than 5.0% of the Principal Collateral Value will consist of Second Lien Loans;
(f) Not more than 7.5% of the Principal Collateral Value will consist of high-yield debt securities;
(g) The aggregate of the Principal Balances of high-yield debt securities with a Moody's Rating of "Ba3"
or higher issued or guaranteed by a single obligor will not be more than U.S.$2,000,000 except that aggregate of
the Principal Balances of high-yield debt securities with a Moody's Rating of "Ba3" or higher issued or
guaranteed by each of three obligors may each be up to U.S.$4,000,000;
(h) The aggregate of the Principal Balances of high-yield debt securities with a Moody's Rating of "B1" or
lower issued or guaranteed by a single obligor will not be more than U.S.$1,000,000;
(i) The aggregate of the Principal Balances of high-yield debt securities with a right to payment that is
senior subordinated or more junior will not be more than U.S.$10,000,000;
(j) Not more than 5.0% of the Principal Collateral Value will consist of Non-USD Debt Obligations;
(k) Collectively, not more than 12.5% of the Principal Collateral Value will consist of (i) Second Lien
Loans, (ii) senior unsecured loans and (iii) high-yield debt securities;
(l) Not more than 5.0% of the Principal Collateral Value will consist of DIP Loans;
(m) Not more than 10.0% of the Principal Collateral Value will consist of Delayed Draw Term Loans or
Revolving Credit Facilities;
(n) Not more than 5.0% of the Principal Collateral Value will consist of PIK Securities;
(o) Not more than 5.0% of the Principal Collateral Value will consist of Zero-Coupon Securities;
(p) Not more than 5.0% of the Principal Collateral Value will consist of Step-Up Coupon Securities;
(q) Not more than 5.0% of the Principal Collateral Value will consist of Collateral Debt Obligations that
are the subject of Permitted Offers;
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(r) Not more than 7.5% of the Principal Collateral Value will consist of Collateral Debt Obligations that
pay interest less frequently than quarterly;
(s) Collectively, not more than 12.5% of the Principal Collateral Value will consist of (i) Zero-Coupon
Securities, (ii) Step-Up Coupon Securities, (iii) PIK Securities and (iv) Collateral Debt Obligations that pay
interest less frequently than quarterly;
(t) Collectively, not more than 15.0% of the Principal Collateral Value will consist of (i) Synthetic
Securities, (ii) Participations, (iii) Non-USD Debt Obligations, (iv) Collateral Debt Obligations that are subject
to Securities Lending Agreements and (v) obligations of an obligor (excluding with respect to Structured
Finance Securities, any obligor which is a Special Purpose Vehicle) organized under the laws of a non-U.S.
jurisdiction;
(u) Not more than 5.0% of the Principal Collateral Value will consist of Collateral Debt Obligations that
are Structured Finance Securities;
(v) Not more than 2.5% of the Principal Collateral Value will consist of CDO Securities;
(w) Not more than 20.0% of the Principal Collateral Value will consist of Collateral Debt Obligations that
are parts of issues with Original Issuance Amounts of less than U.S.$100,000,000;
(x) Not more than 1.5% of the Principal Collateral Value will consist of Collateral Debt Obligations (or
Participations therein) of the obligor of such Collateral Debt Obligation; provided that Collateral Debt
Obligations (and Participations therein) of the top five obligors (by Principal Balance) may each represent up to
2.0% of the Principal Collateral Value; and provided, further, that this requirement will not apply to the
acquisition of a Collateral Debt Obligation that is fully and unconditionally guaranteed as to the timely payment
of principal and interest by the U.S. government or any agency or instrumentality thereof the obligations of
which thereunder are backed by the full faith and credit of the United States of America;
(y) Not more than 8.0% in Principal Collateral Value may be Collateral Debt Obligations that are issued
by obligors that belong to any single Standard & Poor's Industry Classification Group (each, an "Industry
Group"), except that (i) the largest Industry Group may represent up to 12.0% of the Principal Collateral Value
and (ii) the next two largest Industry Groups may each represent up to 10.0% of the Principal Collateral Value;
(z) Not more than the percentage of the Principal Collateral Value listed in the first column below will
consist of Collateral Debt Obligations that have been issued by Permitted Non-U.S. Obligors and/or by issuers
principally located in the country or countries listed in the corresponding row in the second column below:
% Limit Countries/Obligors
15.0% All of The Netherlands, the United Kingdom, Germany,
Ireland, Sweden, Switzerland, Austria, Belgium,
Denmark, Finland, France, Liechtenstein, Luxembourg,
Norway, Spain, Greece, Italy, Portugal and Permitted
Non-U.S. Obligors
10.0% Any of The Netherlands or the United Kingdom
15.0% All of The Netherlands and the United Kingdom
5.0% Any of Germany, Ireland, Sweden, Switzerland, Austria,
Belgium, Denmark, Finland, France, Liechtenstein,
Luxembourg, Norway, Spain or any Permitted Non-U. S.
Obligor (except obligors principally located in Canada)
10.0% All of Germany, Ireland, Sweden, Switzerland, Austria,
Belgium, Denmark, Finland, France, Liechtenstein,
Luxembourg, Norway, Spain and Permitted Non-U.S.
Obligors (except obligors principally located in Canada)
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3.0% Any of Greece, Italy or Portugal
5.0% All of Greece, Italy and Portugal
provided, however, clause (z) of this definition of Portfolio Profile Test will not apply to the acquisition of a
Collateral Debt Obligation issued by a Special Purpose Vehicle; provided that, if such Collateral Debt
Obligation is issued by a Special Purpose Vehicle that holds or references a single obligation, such clauses will
apply (to the extent relevant) and will be applied (both for purposes of such acquisition as well as any other
acquisition to which such clause applies) as if such obligation were the relevant Collateral Debt Obligation);
(aa) Not more than 5.0% of the Principal Collateral Value will consist of Collateral Debt Obligations with
a Moody's Rating of "Caa1" or below;
(bb) Not more than 5.0% of the Principal Collateral Value will consist of Collateral Debt Obligations with
a Standard & Poor's Rating of "CCC+" or below;
(cc) Not more than 7.5% of the Principal Collateral Value will consist of Collateral Debt Obligations that
are Triple-C Collateral Debt Obligations;
(dd) (i) Not more than 5.0% of the Principal Collateral Value will consist of Collateral Debt Obligations
that have attached equity features and (ii) no Collateral Debt Obligation's equity feature will be a value greater
than 2.0% of the Principal Balance of such Collateral Debt Obligation;
(ee) Not more than 5.0% of the Principal Collateral Value will consist of Collateral Debt Obligations that
provide for any payments which are or will be subject to deduction or withholding for or on account of any
withholding or similar tax (other than commitment fees); provided that this clause (ee) will not be applicable to
the acquisition of any such Collateral Debt Obligation with respect to which the related issuer is required to
make "gross up" payments that ensure that the net amount actually received by the Issuer (free and clear of
taxes, whether assessed against such obligor or the Issuer) will equal the full amount that the Issuer would have
received had no such deduction or withholding been required; and
(ff) Not more than 2.0% of the Principal Collateral Value will consist of Collateral Debt Obligations that
mature following the Stated Maturity of the Notes (excluding any Collateral Debt Obligation that matures
subsequent to the Stated Maturity of the Notes that is subject to an unexpired put option exercisable at the
option of the holder of the Collateral Debt Obligation at a price at least equal to par prior to the Stated Maturity
of the Notes).
For the purposes of clauses (a) and (b) above, the principal amount of funds resulting from Principal Proceeds
and Sale Proceeds on deposit in the Principal Collection Account, including Eligible Investments purchased with
such funds, will be included as Floating Rate Collateral Debt Obligations that are First Lien Loans.
Unless a Rating Confirmation from Standard & Poor's with respect thereto has been obtained, for purposes of
clause (x) of the Portfolio Profile Test, any issuers or obligors affiliated with one another will be considered one
issuer or obligor (other than issuers that are affiliated solely by reason of common ownership by a Financial
Sponsor).
"Principal Collateral Value" means, the sum of (i) the Aggregate Principal Balance of the Collateral Debt
Obligations plus accrued interest on the Collateral Debt Obligations to the extent that such accrued interest was
purchased with Principal Proceeds and (ii) amounts on deposit in the Principal Collection Account, including
Eligible Investments that represent Principal Proceeds (after giving effect to any prior distribution pursuant to the
Priority of Payments); provided that, for purposes of determining whether or not the Portfolio Profile Test is
satisfied in all cases under the Indenture, the Principal Collateral Value of a Defaulted Obligation will be deemed to
be zero and will not be included or considered in such determination.
"Delayed Draw Term Loan" means any bank loan that is fully committed on the initial funding date of such
bank loan and is required to be fully funded in one or more installments but which, once all such installments have
been made, has the characteristics of a term loan.
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"Revolving Credit Facility" means a senior secured or senior unsecured debt instrument which provides a
borrower with a line of credit against which one or more borrowings may be made to the stated principal amount of
such facility and which provides that such borrowed amount may be repaid and re-borrowed from time to time.
Synthetic Securities. A "Synthetic Security" is any U.S. dollar-denominated swap transaction, senior unsecured
debt security, structured bond investment or other investment purchased from, or entered into by the Issuer with a
Synthetic Security Counterparty which investment contains a probability of default, recovery upon default (equal to
a specific percentage of par not less than the applicable recovery rate therefor) and expected loss characteristics
closely correlated to those of the related Reference Obligation, but which may provide for a different maturity,
interest rate or other non-credit characteristics than such Reference Obligation; provided that, unless such Synthetic
Security is a Form-Approved Synthetic Security, prior to entering into such Synthetic Security, a Rating
Confirmation from Standard & Poor's shall be obtained; provided further that (a) such Synthetic Security will not
constitute an agreement, contract or transaction that is subject to the Commodity Exchange Act, as amended by the
Commodity Futures Modernization Act of 2000; (b) such Synthetic Security is positively referenced to the related
Reference Obligation on no more than a one-to-one basis; (c) at the time the Issuer acquires such Synthetic Security,
such Synthetic Security will have a rating and a priority category recovery rate assigned by each of Standard &
Poor's and Moody's; (d) the underlying instruments will provide appropriate and customary non-petition and limited
recourse provisions; (e) a Synthetic Security that is a senior secured obligation shall provide that any Deliverable
Obligation must be a senior secured obligation, which shall rank at least pari passu with the Reference Obligation;
(f) each Synthetic Security shall provide that a "credit event" thereunder shall be limited to either "bankruptcy" or
"failure to pay" or both; (g) the ownership of such Synthetic Security shall not cause the Issuer to be treated as
engaged in a trade or business in the United States for U.S. federal income tax purposes or otherwise subject the
Issuer to net income tax; (h) amounts receivable by the Issuer shall not be subject to withholding tax in respect of the
Synthetic Security or the Synthetic Security Counterparty or the Reference Obligor is required to make "gross-up"
payments that cover the full amount of any such withholding tax; and (i) each Synthetic Security that is a credit
default swap shall provide that upon the occurrence of a "credit event" thereunder, such Synthetic Security may be
settled only through a physical settlement of a Deliverable Obligation which satisfies the definition of Collateral
Debt Obligation at the time such Synthetic Security is entered into by the Issuer, and not in cash.
"Synthetic Security Counterparty" means an entity required to make payments to the Issuer on a Synthetic
Security to the extent that a Reference Obligor makes payments on a related Reference Obligation, which
counterparty, or the long-term senior unsecured debt of such counterparty (or its secured debt if such counterparty is
a trust and its debt is secured by a Reference Obligation), shall be rated such that the Synthetic/Participation
Sublimit will be satisfied.
Structured Finance Securities. A "Structured Finance Security" is any Collateral Debt Obligation that is
(a) secured directly by, or representing ownership of, and that entitles the holder thereof to receive payments that
depend primarily on the cashflow from, a pool of consumer receivables, auto loans, auto leases, equipment leases,
home or commercial mortgages, corporate debt or sovereign debt obligations, (b) a lease agreement or other
agreement entered into in connection with and evidencing a Finance Lease or (c) a CDO Security.
Loans—Participations and Assignments. The Issuer may purchase an interest in loans comprising Collateral
Debt Obligations either directly (by way of sale or assignment) or indirectly (by way of Participation), subject to
certain limitations set forth in the Indenture. Each institution from which such an interest in a loan is acquired is
referred to herein as a Selling Institution. Interests in loans acquired directly by way of sale or assignment are
referred to herein as "Assignments." Interests in loans acquired indirectly by way of participation are referred to
herein as "Participations."
The purchaser of an Assignment typically succeeds to all the rights and obligations of the assigning Selling
Institution and becomes a lender under the loan agreement with respect to the loan; however, its rights can be more
restricted than those of the assigning institution. The Issuer as an assignee generally will have the right to receive
directly from the borrower all payments of principal and interest to which it is entitled under the Assignment. As a
purchaser of an Assignment, the Issuer typically will have the same voting rights as other lenders under the
applicable loan agreement and will have the right to vote to waive enforcement of breaches of covenants. The Issuer
also will have the same rights as other lenders to enforce compliance by the borrower with the terms of the loan
agreement, to set off claims against the borrower and to have recourse to collateral supporting the loan. As a result,
the Issuer generally will not bear the credit risk of the assigning Selling Institution, and the insolvency of an
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assigning Selling Institution should have little effect on the ability of the Issuer to continue to receive payments of
principal or interest from the borrower. The Issuer will, however, assume the credit risk of the borrower.
A portion of the Principal Collateral Value may consist of Participations. See "Risk Factors—Nature of
Collateral; Default Risk—Bank Loans" for a discussion of factors to be considered in connection with the Issuer's
investment in Participations. At the time a Participation is acquired by the Issuer, the percentage of the Principal
Collateral Value that represents Participations purchased or entered into by the Issuer with a Selling Institution,
when combined with the Synthetic Securities purchased or entered into by the Issuer with such Selling Institution as
the Synthetic Security Counterparty will not exceed the individual percentage set forth in the table that is included in
the definition of Synthetic/Participation Sublimit for either the Moody's credit rating or the Standard & Poor's credit
rating of such Synthetic Security Counterparty (unless, with respect to the Standard & Poor's credit rating only, the
Issuer or the Trustee at the request of the Issuer notifies Standard & Poor's and requests that Standard & Poor's
modify the Standard & Poor's CDO Monitor accordingly), and the percentage of the Principal Collateral Value that
represents Participations purchased or entered into by the Issuer with the Selling Institutions (or their affiliates)
having the same credit rating, when combined with all Synthetic Securities purchased or entered into by the Issuer
with Synthetic Securities Counterparties having such rating will not exceed the aggregate percentage set forth in the
table that is included in the definition of Synthetic/Participation Sublimit for such credit rating.
Reinvestment Period
The "Reinvestment Period" will end on the first to occur of (a) the Distribution Date occurring in April 2013,
(b) the date of an Optional Redemption of the Notes pursuant to the Indenture and (c) the date of the acceleration of
the Notes pursuant to the Indenture following an occurrence of an Event of Default. In the event the Reinvestment
Period has been terminated due to such acceleration of the Notes following the occurrence of an Event of Default,
the Reinvestment Period will be reinstated if (i) such acceleration of the Notes has been rescinded and annulled in
accordance with the terms of the Indenture, (ii) the related Event of Default has been cured or waived, (iii) no other
events that would terminate the Reinvestment Period have occurred and are continuing, (iv) the Issuer shall have
obtained the consents to such reinstatement of the Collateral Manager and the Majority of the Controlling Class and
(v) the Issuer shall have obtained a Rating Confirmation with respect thereto.
The Coverage Tests, the Reinvestment Overcollateralization Test and Collateral Quality Tests
The Coverage Tests will be used primarily to determine whether interest may be paid on the Class B Notes or
the Class C Notes, whether any amounts are distributable to the holders of the Preferred Shares, whether the Class A
Notes, the Class B Notes or the Class C Notes will be required to be amortized on an accelerated basis and whether
the Collateral Manager may reinvest proceeds received upon the sale of Collateral Debt Obligations in new
Collateral Debt Obligations. Measurement of the degree of compliance with the Coverage Tests for the Notes will
be required on (a) the Effective Date and (b) after the Effective Date, on each Measurement Date and as part of the
Reinvestment Criteria. The "Coverage Tests" for the Notes will consist of the Overcollateralization Tests and the
Interest Coverage Tests. The "Overcollateralization Tests" will consist of the Class A Overcollateralization Test, the
Class B Overcollateralization Test and the Class C Overcollateralization Test, in each case as generally described
below. The "Interest Coverage Tests" will consist of the Class A Interest Coverage Test, the Class B Interest
Coverage Test and the Class C Interest Coverage Test, in each case as generally described below. The
"Overcollateralization Ratios" will consist of the Class A Overcollateralization Ratio, the Class B
Overcollateralization Ratio and the Class C Overcollateralization Ratio. The "Interest Coverage Ratios" will consist
of the Class A Interest Coverage Ratio, the Class B Interest Coverage Ratio and the Class C Interest Coverage Ratio.
The Reinvestment Overcollateralization Test will be used to determine whether a portion of the Interest
Proceeds that would otherwise be used to make distributions to the Preferred Shares on Distribution Dates occurring
on or after the Effective Date and during the Reinvestment Period will instead be deposited to the Principal
Collection Account as Principal Proceeds.
The Collateral Quality Tests will be used primarily as criteria for purchasing Collateral Debt Obligations. The
"Collateral Quality Tests" will consist of the Weighted Average Rating Factor Test, the Moody's Diversity Test, the
Weighted Average Life Test, the Weighted Average Coupon Test, the Weighted Average Spread Test, the Weighted
Average Recovery Rate Test and the Standard & Poor's CDO Monitor Test. Measurement of the degree of
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compliance with the Collateral Quality Tests will be required as of the Effective Date and thereafter as of each
Measurement Date and as part of the Reinvestment Criteria.
The Class A Overcollateralization Test
The "Class A Overcollateralization Ratio" is equal, as of any Measurement Date, to the ratio (expressed as a
percentage) obtained by dividing: (1) the Principal Collateral Value (as of such Measurement Date) by (2) the
Aggregate Outstanding Amount of the Class A Notes (as of such Measurement Date).
The "Class A Overcollateralization Test" is a test (i) that will be deemed satisfied as of any Measurement Date
before the Effective Date; and (ii) that will be satisfied as of any Measurement Date on or after the Effective Date if
on such Measurement Date the Class A Overcollateralization Ratio is equal to or greater than 111.8%.
The Class A Interest Coverage Test
The "Class A Interest Coverage Ratio" is, as of any Measurement Date, the ratio (expressed as a percentage)
obtained by dividing:
(a) the sum (without duplication), with respect to the Due Period in which such Measurement Date occurs,
of the Interest Proceeds received in cash or, in the Collateral Manager's judgment, scheduled to be received
between such Measurement Date and the end of the related Due Period minus the amounts, if any, scheduled to
be applied on the Distribution Date relating to such Due Period in accordance with clauses (1) through (5) of the
allocation of payments described above under "Application of Funds—Priority of Payments—Distributions of
Interest Proceeds"; by
(b) with respect to the next Distribution Date, the sum (without duplication) of amounts payable in respect
of interest on the Class A Notes pursuant to clauses (6) and (7) of the allocation of payments described above
under "Application of Funds—Priority of Payments—Distributions of Interest Proceeds."
For the purposes of calculating the Class A Interest Coverage Ratio, (i) such calculation will not include any
scheduled interest payments as to which the Collateral Manager has actual knowledge that such payment will not be
made, (ii) the expected interest income on the Collateral Debt Obligations and floating rate Eligible Investments will
be calculated using the then current interest rates applicable thereto, (iii) such calculation will not include interest
scheduled to be received in respect of Defaulted Obligations or Deferred Interest Assets, unless actually received,
and (iv) for so long as a Hedge Counterparty payment default has occurred and is continuing, such calculation will
not include Hedge Receipt Amounts scheduled to be paid to the Issuer by such defaulting Hedge Counterparty.
The "Class A Interest Coverage Test" is a test (i) that will be deemed satisfied as of any Measurement Date
before the Effective Date; and (ii) that will be satisfied as of any Measurement Date on or after the Effective Date if
on such Measurement Date the Class A Interest Coverage Ratio is equal to or greater than 120.0%.
The Class B Overcollateralization Test
The "Class B Overcollateralization Ratio" is equal, as of any Measurement Date, to the ratio (expressed as a
percentage) obtained by dividing: (1) the Principal Collateral Value (as of such Measurement Date); by (2) the
Aggregate Outstanding Amount of the Class A Notes and the Class B Notes (each, as of such Measurement Date).
The "Class B Overcollateralization Test" is a test (i) that will be deemed satisfied as of any Measurement Date
before the Effective Date; and (ii) that will be satisfied as of any Measurement Date on or after the Effective Date if
on such Measurement Date the Class B Overcollateralization Ratio is equal to or greater than 106.6%.
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The Class B Interest Coverage Test
The "Class B Interest Coverage Ratio" is equal, as of any Measurement Date, to the ratio (expressed as a
percentage) obtained by dividing:
(a) the sum (without duplication), with respect to the Due Period in which such Measurement Date occurs,
of the Interest Proceeds received in cash or, in the Collateral Manager's judgment, scheduled to be received
between such Measurement Date and the end of the related Due Period minus the amounts, if any, scheduled to
be applied on the Distribution Date relating to such Due Period in accordance with clauses (1) through (5) of the
allocation of payments described above under "Application of Funds—Priority of Payments—Distributions of
Interest Proceeds"; by
(b) with respect to the next Distribution Date, the sum (without duplication) of amounts payable in respect
of interest on the Class A Notes and the Class B Notes pursuant to clauses (6), (7) and (10) (other than Class B
Deferred Interest) of the allocation of payments described below under "Application of Funds—Priority of
Payments—Distributions of Interest Proceeds."
For the purposes of calculating the Class B Interest Coverage Ratio, (i) such calculation will not include any
scheduled interest payments as to which the Collateral Manager has actual knowledge that such payment will not be
made, (ii) the expected interest income on the Collateral Debt Obligations and floating rate Eligible Investments will
be calculated using the then current interest rates applicable thereto, (iii) such calculation will not include interest
scheduled to be received in respect of Defaulted Obligations or Deferred Interest Assets, unless actually received,
and (iv) for so long as a Hedge Counterparty payment default has occurred and is continuing, such calculation will
not include Hedge Receipt Amounts scheduled to be paid to the Issuer by such defaulting Hedge Counterparty.
The "Class B Interest Coverage Test" is a test (i) that will be deemed satisfied as of any Measurement Date
before the Effective Date; and (ii) that will be satisfied as of any Measurement Date on or after the Effective Date if
on such Measurement Date the Class B Interest Coverage Ratio is equal to or greater than 115.0%.
The Class C Overcollateralization Test
The "Class C Overcollateralization Ratio" is equal, as of any Measurement Date, to the ratio (expressed as a
percentage) obtained by dividing: (1) the Principal Collateral Value (as of such Measurement Date); by (2) the
Aggregate Outstanding Amount of the Class A Notes, the Class B Notes and the Class C Notes (each, as of such
Measurement Date).
The "Class C Overcollateralization Test" is a test (i) that will be deemed satisfied as of any Measurement Date
before the Effective Date; and (ii) that will be satisfied as of any Measurement Date on or after the Effective Date if
on such Measurement Date the Class C Overcollateralization Ratio is equal to or greater than 103.1%.
The Class C Interest Coverage Test
The "Class C Interest Coverage Ratio" is equal, as of any Measurement Date, to the ratio (expressed as a
percentage) obtained by dividing:
(a) the sum (without duplication), with respect to the Due Period in which such Measurement Date occurs,
of the Interest Proceeds received in cash or, in the Collateral Manager's judgment, scheduled to be received
between such Measurement Date and the end of the related Due Period minus the amounts, if any, scheduled to
be applied on the Distribution Date relating to such Due Period in accordance with clauses (1) through (5) of the
allocation of payments described above under "Application of Funds—Priority of Payments—Distributions of
Interest Proceeds"; by
(b) with respect to the next Distribution Date, the sum (without duplication) of amounts payable in respect
of interest on the Class A Notes, the Class B Notes and the Class C Notes pursuant to clauses (6), (7), (10)
(other than Class B Deferred Interest) and (12) (other than Class C Deferred Interest) of the allocation of
payments described above under "Application of Funds—Priority of Payments—Distributions of Interest
Proceeds."
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For the purposes of calculating the Class C Interest Coverage Ratio, (i) such calculation will not include any
scheduled interest payments as to which the Collateral Manager has actual knowledge that such payment will not be
made, (ii) the expected interest income on the Collateral Debt Obligations and floating rate Eligible Investments will
be calculated using the then current interest rates applicable thereto, (iii) such calculation will not include interest
scheduled to be received in respect of Defaulted Obligations or Deferred Interest Assets, unless actually received,
and (iv) for so long as a Hedge Counterparty payment default has occurred and is continuing, such calculation will
not include Hedge Receipt Amounts scheduled to be paid to the Issuer by such defaulting Hedge Counterparty.
The "Class C Interest Coverage Test" is a test (i) that will be deemed satisfied as of any Measurement Date
before the Effective Date; and (ii) that will be satisfied as of any Measurement Date on or after the Effective Date if
on such Measurement Date the Class C Interest Coverage Ratio is equal to or greater than 110.0%.
The Reinvestment Overcollateralization Test
The "Reinvestment Overcollateralization Ratio" is equal, as of any Measurement Date, to the ratio (expressed as
a percentage) obtained by dividing: (1) the Principal Collateral Value (as of such Measurement Date); by (2) the
Aggregate Outstanding Amount of the Class A Notes, the Class B Notes and the Class C Notes (each, as of such
Measurement Date).
The "Reinvestment Overcollateralization Test" is a test (i) that will be deemed satisfied as of any Measurement
Date before the Effective Date or after the Reinvestment Period; and (ii) that will be satisfied as of any Measurement
Date on or after the Effective Date and during the Reinvestment Period if on such Measurement Date the
Reinvestment Overcollateralization Ratio is equal to or greater than the Reinvestment Overcollateralization Test
Level for such Measurement Date.
The "Reinvestment Overcollateralization Test Level" is, initially, 107.7%, until the day following the
Distribution Date in April 2007, and on the day following such Distribution Date and on the day following the
Distribution Date in each April thereafter, the Reinvestment Overcollateralization Test Level will be reduced by
0.50%.
Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL
One of the following charts will be elected by the Collateral Manager on behalf of the Issuer on the Effective
Date (such elected chart to be referred to herein as the "Minimum Diversity/Maximum Rating/Minimum
Spread/Maximum WAL Matrix") and will be used to determine which of the "row/column combinations" are
applicable for purposes of determining compliance with the Moody's Diversity Test, the Weighted Average Rating
Factor Test, the Weighted Average Spread Test and the Weighted Average Life Test, as set forth below.
Minimum Diversity Score
Maximum Weighted
Average Life
Minimum Weighted
Average Spread 55 60 65 70
10.0 years 1.750% 1950 1990 2010 2040
10.0 years 1.875% 2050 2090 2110 2140
10.0 years 2.000% 2150 2170 2200 2230
10.0 years 2.125% 2230 2260 2280 2310
10.0 years 2.250% 2300 2350 2370 2400
10.0 years 2.375% 2360 2410 2460 2490
10.0 years 2.500% 2410 2450 2505 2535
Maximum Weighted Average Moody's Rating Factor
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Minimum Diversity Score
Maximum Weighted
Average Life
Minimum Weighted
Average Spread 55 60 65 70
11.0 years 1.750% 1810 1850 1870 1900
11.0 years 1.875% 1910 1950 1970 2000
11.0 years 2.000% 2010 2030 2060 2090
11.0 years 2.125% 2100 2130 2170 2190
11.0 years 2.250% 2150 2200 2230 2270
11.0 years 2.375% 2210 2260 2310 2340
11.0 years 2.500% 2260 2300 2355 2385
Maximum Weighted Average Moody's Rating Factor
On and after the Effective Date, the Collateral Manager will determine which Minimum Diversity/Maximum
Rating/Minimum Spread/Maximum WAL Matrix and which "row/column combination" thereof will be applicable
for purposes of determining compliance with the Moody's Diversity Test, the Weighted Average Rating Factor Test,
the Weighted Average Spread Test and the Weighted Average Life Test. Thereafter, at any time on written notice of
one Business Day to the Trustee and the Rating Agencies, the Collateral Manager may elect a different "row/column
combination" of such Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL Matrix or a
different Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL Matrix (and the "row/column
combination" thereof) to apply to the Collateral Debt Obligations; provided that if: (i) the Collateral Debt
Obligations are currently in compliance with the Minimum Diversity/Maximum Rating/Minimum Spread/Maximum
WAL Matrix and "row/column combination" thereof then applicable, the Collateral Debt Obligations comply with
the Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL Matrix and "row/column
combination" thereof to which the Collateral Manager desires to change or (ii) the Collateral Debt Obligations are
not currently in compliance with the Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL
Matrix and "row/column combination" thereof then applicable or would not be in compliance with any other
Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL Matrix and "row/column combination"
thereof, the Collateral Debt Obligations need not comply with the Minimum Diversity/Maximum Rating/Minimum
Spread/Maximum WAL Matrix and "row/column combination" thereof to which the Collateral Manager desires to
change. If the Collateral Manager does not notify the Trustee that it will alter the Minimum Diversity/Maximum
Rating/Minimum Spread/Maximum WAL Matrix and/or the "row/column combination" thereof chosen on the
Effective Date in the manner set forth above, then such Minimum Diversity/Maximum Rating/Minimum
Spread/Maximum WAL Matrix and "row/column combination" thereof chosen on the Effective Date will continue
to apply. Notwithstanding the foregoing, the Collateral Manager may elect at any time, in lieu of selecting a
"row/column combination" of the applicable Minimum Diversity/Maximum Rating/Minimum Spread/Maximum
WAL Matrix, to interpolate between two adjacent rows and/or two adjacent columns, as applicable, on a straightline
basis and round the results to two decimal points.
The Weighted Average Rating Factor Test
The weighted average rating factor test for the Notes (the "Weighted Average Rating Factor Test") will be
satisfied on any Measurement Date if the Moody's Average Rating of the Collateral Debt Obligations (excluding
Defaulted Obligations) on such Measurement Date is less than or equal to (i) the maximum rating factor
corresponding to the applicable Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL Matrix
and "row/column combination" thereof elected by the Collateral Manager plus (ii) the Recovery Rate Modifier.
The "Moody's Average Rating" on any Measurement Date is the number determined by adding the products
obtained by multiplying the Principal Balance on such Measurement Date of each Collateral Debt Obligation,
excluding Defaulted Obligations, by its Moody's Rating Factor on such Measurement Date and dividing such sum by
the Aggregate Principal Balance on such Measurement Date of all Collateral Debt Obligations, excluding Defaulted
Obligations, and rounding the result up to the nearest whole number. The "Moody's Rating Factor" relating to any
Collateral Debt Obligation is the number set forth in the table below opposite the Moody's Rating of such Collateral
Debt Obligation.
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Moody's Rating Moody's Rating Factor Moody's 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
Baa2 360 Caa3 8,070
Baa3 610 Ca or below 10,000
For purposes of the Weighted Average Rating Factor Test, (i) any Defaulted Obligation will not be included in
such calculation and (ii) with respect to any Synthetic Security, the Moody's Rating Factor will be as assigned by
Moody's.
The Moody's Diversity Test
The diversity test (the "Moody's Diversity Test") is a test that measures diversity of the portfolio of Collateral
Debt Obligations of the Issuer and requires that such portfolio equal or exceed a minimum Diversity Score that is
derived from a Diversity Score Table (included as Exhibit A to this Offering Memorandum) published by Moody's.
The Moody's Diversity Test will be satisfied on any Measurement Date if the Diversity Score equals or exceeds the
requirement corresponding to the applicable Minimum Diversity/Maximum Rating/Minimum Spread/Maximum
WAL Matrix and "row/column combination" thereof elected by the Collateral Manager.
The "Diversity Score" means, with respect to the Collateral Debt Obligations, the sum of each of the Industry
Diversity Scores. Generally, an "Average Par Amount" is calculated by summing the Issuer Par Amounts divided by
the number of issuers of Collateral Debt Obligations; provided that, for purposes of calculating the number of
issuers of Collateral Debt Obligations, any issuers, originators or obligors affiliated with one another (other than
issuers that are affiliated solely by reason of common ownership by a common Financial Sponsor) and that are in the
same industry will be considered one issuer.
With respect to Collateral Debt Obligations (other than Defaulted Obligations):
(1) An "Issuer Par Amount" is calculated for each issuer represented in the Collateral Debt Obligations by
summing the Principal Balance of all Collateral Debt Obligations in the Collateral issued by that issuer or an
affiliate of that issuer; provided that, for purposes of calculating the Issuer Par Amount, the Principal Balance of
a Defaulted Obligation will be deemed to be zero.
(2) An "Equivalent Unit Score" is calculated for each issuer of a Collateral Debt Obligation by taking the
lesser of (A) one and (B) the Issuer Par Amount for such issuer divided by the Average Par Amount.
(3) An "Aggregate Industry Equivalent Unit Score" is then calculated for each of the Moody's industry
classification groups by summing the Equivalent Unit Scores for each issuer of a Collateral Debt Obligation in
such Moody's industry classification group.
(4) An "Industry Diversity Score" is then established by reference to the Diversity Score Table shown set
forth on Exhibit A for the related Aggregate Industry Equivalent Unit Score; provided that, if the Aggregate
Industry Equivalent Unit Score falls between any two such scores, then the applicable Industry Diversity Score
will be the lower of the two Industry Diversity Scores in the Diversity Score Table.
The Weighted Average Life Test
The "Weighted Average Life Test" is a test that will be satisfied as of any Measurement Date during the
Reinvestment Period if the Weighted Average Life of the Collateral Debt Obligations (excluding Defaulted
Obligations) is less than (a) the number of years corresponding to the applicable Minimum Diversity/Maximum
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Rating/Minimum Spread/Maximum WAL Matrix and "row/column combination" thereof elected by the Collateral
Manager, minus (b) the product of 25.0% times the aggregate number of quarter-year periods that have elapsed since
the Effective Date.
At any time with respect to the Collateral Debt Obligations, the "Weighted Average Life" is the number
obtained by dividing (i) the sum of the products obtained by multiplying (a) the Average Life of each Collateral Debt
Obligation that is not a Defaulted Obligation at such time by (b) the outstanding Principal Balance of such Collateral
Debt Obligation that is not a Defaulted Obligation at such time by (ii) the Aggregate Principal Balance of all
Collateral Debt Obligations that are not Defaulted Obligations at such time.
At any time with respect to any Collateral Debt Obligation, the "Average Life" is the quotient obtained by
dividing (i) the sum of the product of (a) the number of years (rounded to the nearest hundredth) from the relevant
Measurement Date to the respective dates of each successive scheduled distribution of principal of such Collateral
Debt Obligation and (b) the respective amounts of the principal of such scheduled distributions by (ii) the sum of all
future scheduled distributions of principal of such Collateral Debt Obligation; provided that, (x) at the sole
discretion of the Collateral Manager and for a maximum of Collateral Debt Obligations representing 2% of the
Principal Collateral Value, if a put option is exercisable at par on the principal of a Collateral Debt Obligation, the
date of the last scheduled distribution of principal in respect of such Collateral Debt Obligation will be deemed to be
the date as of which such put option is so exercisable and (y) if the related Underlying Instrument provides for more
than one possible payment schedule, the schedule resulting in the largest Average Life will be used for this purpose
(except as provided in (x) above).
The Weighted Average Coupon Test
The "Weighted Average Coupon Test" is a test that will be satisfied on any Measurement Date, if the Weighted
Average Coupon is greater than or equal to 7.25%.
The "Weighted Average Coupon" is the fraction (expressed as a percentage) obtained by (a) adding the products
obtained by multiplying (i) the then current coupon on each Fixed Rate Collateral Debt Obligation (other than a
Defaulted Obligation or a PIK Security that is currently deferring interest) by (ii) the Principal Balance of such
Fixed Rate Collateral Debt Obligation, and (b) dividing such sum by the Aggregate Principal Balance of all such
Fixed Rate Collateral Debt Obligations, and if such result is less than the applicable percentage set forth in the
definition of "Weighted Average Coupon Test" for such Measurement Date, adding to such result the amount, if
any, of the Spread Excess as of such Measurement Date; provided that, in the case of any Fixed Rate Collateral Debt
Obligation as to which any interest or other payment thereon is subject to withholding tax or other deductions on
account of tax of any jurisdiction, such rate shall be deemed to be the effective after-tax rate determined by the
Collateral Manager (based upon withholding or other applicable tax rates in effect on such date of determination)
unless, in the case of a withholding tax, the issuer thereof or obligor thereon is required to make additional payments
to fully compensate the Issuer for such withholding taxes (including in respect of any such additional payments).
The Weighted Average Spread Test
The "Weighted Average Spread Test" is a test that will be satisfied on any Measurement Date if the Weighted
Average Spread on any Measurement Date is greater than or equal to the applicable percentage corresponding to the
applicable Minimum Diversity/Maximum Rating/Minimum Spread/Maximum WAL Matrix and "row/column
combination" thereof elected by the Collateral Manager.
The "Weighted Average Spread" is the number obtained by dividing:
(a) the amount equal to the sum of (i) the Aggregate Spread, plus (ii) the Aggregate Excess
Spread, by
(b) an amount equal to the lesser of (i) (A) the Target Par Amount minus (B) the aggregate
unfunded amount of Floating Rate Collateral Debt Obligations that are Revolving Credit Facilities or
Delayed Drawdown Term Loans and (ii) the Aggregate Principal Balance of the Collateral Debt
Obligations (other than Defaulted Obligations or PIK Securities that are currently deferring interest and
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excluding the aggregate unfunded amount of Floating Rate Collateral Debt Obligations that are Revolving
Credit Facilities or Delayed Drawdown Term Loans),
and if such result is less than the applicable percentage set forth in the definition of "Weighted Average Spread Test"
for such Measurement Date, adding to such result the amount, if any, of the Fixed Rate Coupon Excess as of such
Measurement Date; provided that for purposes of this definition, in the case of any Floating Rate Collateral Debt
Obligation as to which any interest or other payment thereon is subject to withholding tax or other deductions on
account of tax of any jurisdiction, such rate will be deemed to be the effective after-tax rate determined by the
Collateral Manager (based upon withholding or other applicable tax rates in effect on such date of determination)
unless, in the case of a withholding tax, the issuer thereof or obligor thereon is required to make additional payments
to fully compensate the Issuer for such withholding taxes (including in respect of any such additional payments).
The Weighted Average Recovery Rate Test
The "Weighted Average Recovery Rate Test" is a test that will be satisfied if the Moody's Average Recovery
Rate is 43.63% or greater and the Standard & Poor's Average Recovery Rate is 54.0% or greater.
The "Moody's Average Recovery Rate" is the number (expressed as a percentage) obtained by summing the
product of the Moody's Recovery Rate (as determined in accordance with the tables below) of each Collateral Debt
Obligation that is not a Defaulted Obligation (which will be the recovery rate (expressed as a decimal) applicable to
such Collateral Debt Obligation) multiplied by the Principal Balance of such Collateral Debt Obligation, dividing
such sum by the Aggregate Principal Balance of all such Collateral Debt Obligations that are not Defaulted
Obligations and rounding up to the first decimal place. For purposes of determining the Moody's Recovery Rate of
a Collateral Debt Obligation that is a loan or a bond, (i) with respect to Collateral Debt Obligations that are Senior
Secured Loans, the "Ratings Subcategory Differential" referred to in the table below will be the number of Moody's
ratings subcategories difference between the Moody's rating of such Collateral Debt Obligation and the Corporate
Family Rating of the related obligor and (ii) with respect to Collateral Debt Obligations that are either (A) loans that
are non-Senior Secured Loans or (B) bonds, the "Ratings Subcategory Differential" referred to in the table below
will be the number of Moody's ratings subcategories difference between the Moody's rating of such Collateral Debt
Obligation and the Moody's senior unsecured rating of the related obligor. For purposes of this definition, a Second
Lien Loan will be deemed to be a Senior Secured Loan only if the Moody's rating of such Collateral Debt Obligation
is not lower than Moody's Corporate Family Rating of the related obligor, and in all other cases, a Second Lien Loan
will be deemed to be a non-Senior Secured Loan.
Moody's Recovery Rate for Collateral Debt Obligations that are loans or bonds
(other than DIP Loans and Non-USD Debt Obligations) as to which a Ratings Subcategory Differential is able
to be determined:
Ratings Subcategory Differential
Senior Secured Loan
Recovery Rate
Non-Senior Secured
Loan Recovery Rate
Bond Recovery Rate
+2 or more 60% 45% 40%
+1 50% 42.5% 35%
0 45% 40% 30%
-1 40% 30% 15%
-2 30% 15% 10%
-3 or less 20% 10% 2%
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Moody's Recovery Rate for All Other Collateral Debt Obligations
DIP Loans
Non-USD Debt Obligations
Collateral Debt Obligation
All Synthetic Securities and all other Collateral Debt
Obligations (including loans and bonds for which a
Moody's Recovery Rate cannot be determined using the
table above and Structured Finance Securities)
Moody's Recovery Rate
50% or such greater percentage, if any, assigned by Moody's
on a case by case basis in connection with the purchase of the
Collateral Debt Obligation
20% or such greater percentage, if any, assigned by Moody's
on a case by case basis in connection with the purchase of the
Collateral Debt Obligation
As assigned by Moody's on a case by case basis in connection
with the purchase of the Collateral Debt Obligation
The "Standard & Poor's Average Recovery Rate" is the number (expressed as a percentage) obtained by
(i) summing the product of the Standard & Poor's Recovery Rate (as set forth below) of each Collateral Debt
Obligation that is not a Defaulted Obligation (based on its Standard & Poor's Priority Category) and the Principal
Balance of such Collateral Debt Obligation, (ii) dividing such sum by the Aggregate Principal Balance of all
Collateral Debt Obligations that are not Defaulted Obligations and (iii) rounding up to the first decimal place;
provided that for the purposes of this definition, any Eligible Investments purchased with Principal Proceeds will be
considered Senior Secured Loans.
Standard & Poor's Priority Category
Standard & Poor's Recovery Rate
Cash* 100%
Senior Secured Loans*
57.5% or such greater percentage, if any, as assigned by
Standard & Poor's on a case by case basis in connection with
the purchase of a Collateral Debt Obligation
Senior Secured Bond* 48.0%
Senior Unsecured Loans and Second Lien Loans* 43.8%
Senior Unsecured Bond* 35.0%
Subordinated Loans* 22.0%
Subordinated Bonds* 22.0%
Non-USD Debt Obligations
20% or such greater percentage, if any, as assigned by Standard
& Poor's on a case by case basis in connection with the
purchase of a Collateral Debt Obligation
All other Collateral Debt Obligations
As assigned by Standard & Poor's on a case by case basis in
connection with the purchase of the Collateral Debt Obligation
* Other than Non-USD Debt Obligations.
The Standard & Poor's CDO Monitor Test
The "Standard & Poor's CDO Monitor Test" is a test that will be satisfied if, after giving effect to the purchase
or sale of a Collateral Debt Obligation (or both), as the case may be, (i) the Class A-1 Loss Differential, the
Class A-2 Loss Differential, the Class B Loss Differential or the Class C Loss Differential, as the case may be, of
the Standard & Poor's Proposed Portfolio is positive or (ii) the Class A-1 Loss Differential, the Class A-2 Loss
Differential, the Class B Loss Differential or the Class C Loss Differential, as the case may be, of the Standard &
Poor's Proposed Portfolio is greater than the Class A-1 Loss Differential, the Class A-2 Loss Differential, the
Class B Loss Differential or the Class C Loss Differential, as the case may be, of the Standard & Poor's Current
Portfolio. For the purpose of the Standard & Poor's CDO Monitor Test, (i) a Synthetic Security will be included as a
Collateral Debt Obligation having the rating of the Synthetic Security and the industry code of the Reference
Obligation and (ii) multiple Structured Finance Securities from collateralized debt obligation transactions managed
by the same asset manager or multiple Structured Finance Securities issued by the same master trust will be
considered to be obligations of one issuer.
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The "Class A-1 Loss Differential" will be, at any time, the rate calculated by subtracting the Class A-1 Scenario
Default Rate at such time from the Class A-1 Break-Even Default Rate at such time.
The "Class A-1 Scenario Default Rate" will be, at any time, an estimate (determined by application of the
Standard & Poor's CDO Monitor at such time) of the maximum cumulative default rate for the Current Portfolio or
the Proposed Portfolio, as applicable, that would be consistent with a "AAA" rating of the Class A-1 Notes by
Standard & Poor's.
The "Class A-1 Break-Even Default Rate" will be, on any date of determination, the maximum percentage of
defaults that the Current Portfolio or the Proposed Portfolio, as applicable, can sustain, through application of the
Standard & Poor's CDO Monitor, and that, after giving effect to Standard & Poor's assumptions on recoveries on
defaulted obligations and timing of such recoveries and to the Priority of Payments, will result in sufficient funds
remaining for the payment of the Class A-1 Notes in full by their Stated Maturity and the timely payment of interest
on the Class A-1 Notes.
The "Class A-2 Loss Differential" will be, at any time, the rate calculated by subtracting the Class A-2 Scenario
Default Rate at such time from the Class A-2 Break-Even Default Rate at such time.
The "Class A-2 Scenario Default Rate" will be, at any time, an estimate (determined by application of the
Standard & Poor's CDO Monitor at such time) of the maximum cumulative default rate for the Current Portfolio or
the Proposed Portfolio, as applicable, that would be consistent with a "AA" rating of the Class A-2 Notes by
Standard & Poor's.
The "Class A-2 Break-Even Default Rate" will be, on any date of determination, the maximum percentage of
defaults that the Current Portfolio or the Proposed Portfolio, as applicable, can sustain, through application of the
Standard & Poor's CDO Monitor, and that, after giving effect to Standard & Poor's assumptions on recoveries on
defaulted obligations and timing of such recoveries and to the Priority of Payments, will result in sufficient funds
remaining for the payment of the Class A-2 Notes in full by their Stated Maturity and the timely payment of interest
on the Class A-2 Notes.
The "Class B Loss Differential" will be, at any time, the rate calculated by subtracting the Class B Scenario
Default Rate at such time from the Class B Break-Even Default Rate at such time.
The "Class B Scenario Default Rate" will be, at any time, an estimate (determined by application of the
Standard & Poor's CDO Monitor at such time) of the maximum cumulative default rate for the Current Portfolio or
the Proposed Portfolio, as applicable, that would be consistent with a "A" rating of the Class B Notes by Standard &
Poor's.
The "Class B Break-Even Default Rate" will be, on any date of determination, the maximum percentage of
defaults that the Current Portfolio or the Proposed Portfolio, as applicable, can sustain, through application of the
Standard & Poor's CDO Monitor, and that, after giving effect to Standard & Poor's assumptions on recoveries on
defaulted obligations and timing of such recoveries and to the Priority of Payments, will result in sufficient funds
remaining for the payment of the Class B Notes in full by their Stated Maturity and the timely payment of interest on
the Class B Notes.
The "Class C Loss Differential" will be, at any time, the rate calculated by subtracting the Class C Scenario
Default Rate at such time from the Class C Break-Even Default Rate at such time.
The "Class C Scenario Default Rate" will be, at any time, an estimate (determined by application of the
Standard & Poor's CDO Monitor at such time) of the maximum cumulative default rate for the Current Portfolio or
the Proposed Portfolio, as applicable, that would be consistent with a "BBB" rating of the Class C Notes by Standard
& Poor's.
The "Class C Break-Even Default Rate" will be, on any date of determination, the maximum percentage of
defaults that the Current Portfolio or the Proposed Portfolio, as applicable, can sustain, through application of the
Standard & Poor's CDO Monitor, and that, after giving effect to Standard & Poor's assumptions on recoveries on
defaulted obligations and timing of such recoveries and to the Priority of Payments, will result in sufficient funds
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emaining for the payment of the Class C Notes in full by their Stated Maturity and the ultimate payment of interest
on the Class C Notes.
There can be no assurance that actual defaults of the Collateral Debt Obligations will not exceed those assumed
in the application of the Standard & Poor's CDO Monitor or that default timing and recovery rates with respect
thereto will not differ from those assumed in such test. The Standard & Poor's CDO Monitor has been provided by
Standard & Poor's to the Collateral Administrator as an accommodation in connection with Standard & Poor's rating
of the Notes. Standard & Poor's does not require that the Collateral Manager use the Standard & Poor's CDO
Monitor in managing the Collateral Debt Obligations; however, the Standard & Poor's CDO Monitor will affect the
Collateral Manager's ability to reinvest in Substitute Collateral Debt Obligations on behalf of the Issuer. Standard &
Poor's makes no representation or warranty with respect to the use of the Standard & Poor's CDO Monitor. In
particular, Standard & Poor's makes no representation or warranty that actual defaults on the Collateral Debt
Obligations will not exceed those determined by the Standard & Poor's CDO Monitor. Standard & Poor's does not
guarantee the accuracy, adequacy or completeness of the Standard & Poor's CDO Monitor and is not responsible for
the results obtained from the use thereof. The ratings on the Notes are subject to review for potential downgrade due
to the Collateral Manager's ability to sell Collateral Debt Obligations that are deemed Credit Risk Obligations by the
Collateral Manager. None of the Collateral Administrator, the Collateral Manager, the Placement Agent or either of
the Co-Issuers makes any representation as to the expected rate of defaults of the Collateral Debt Obligations or the
timing of defaults or as to the expected recovery rate or the timing of recoveries or as to the Standard & Poor's CDO
Monitor.
Sales, Substitute Securities and Reinvestment Criteria
The Collateral Debt Obligations may be retired prior to their respective final maturities due to, among other
things, the existence and frequency of exercise of any optional or mandatory redemption features of such Collateral
Debt Obligations. In addition, subject to the requirements of the Indenture, so long as no Event of Default has
occurred and is continuing the Collateral Manager on behalf of the Issuer may direct the Trustee in writing to sell,
and the Trustee will so sell in the manner so directed any:
(a) Defaulted Obligation;
(b) Equity Security;
(c) Credit Risk Obligation; or
(d) Credit Improved Obligation.
A Collateral Debt Obligation (other than a Defaulted Obligation, Equity Security, Credit Risk Obligation or
Credit Improved Obligation) may be disposed during the Reinvestment Period so long as:
(a) the Collateral Manager on behalf of the Issuer certifies to the Trustee on the trade date that the
Collateral Manager reasonably believes in good faith and in the exercise of commercially reason judgment that
(A) the portion of the Sale Proceeds that constitute Principal Proceeds to be received in connection therewith
(together with such amounts from concurrent sales) can be used to purchase one or more Substitute Collateral
Debt Obligations that satisfy the Reinvestment Criteria and the Principal Balance of the Substitute Collateral
Debt Obligation or Substitute Collateral Debt Obligations will not be less than 100% of the Principal Balance of
the Collateral Debt Obligation or Collateral Debt Obligations being sold or (B) at the time of purchase of a
Substitute Collateral Debt Obligation or Substitute Collateral Debt Obligations, and taking into account such
purchase, the Class C Overcollateralization Ratio is at least 108.67% and the Standard & Poor's CDO Monitor
Test is satisfied;
(b) the Aggregate Principal Balance of all such Collateral Debt Obligations sold during any 12-month
period commencing the day after the Effective Date and ending on the day before the applicable anniversary
thereof does not exceed 25% of the Principal Collateral Value at the beginning of the period; and
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(c) unless a Majority of the Controlling Class shall have consented to such sale:
(1) the Moody's rating of the Class A-1 Notes and the Class A-2 Notes has not been withdrawn or reduced
by Moody's by one or more rating subcategories below the Moody's rating of the Class A-1 Notes and the
Class A-2 Notes, respectively, on the Closing Date (unless it subsequently has been upgraded or reinstated to at
least the rating assigned on the Closing Date); and
(2) the Moody's rating of the Class B Notes and the Class C Notes has not been withdrawn or reduced by
Moody's by two or more rating subcategories below the Moody's rating of the Class B Notes and the Class C
Notes, respectively, on the Closing Date (unless it subsequently has been upgraded or reinstated to at least one
rating subcategory below the rating assigned on the Closing Date).
Notwithstanding the above but subject to the Indenture, the Collateral Manager on behalf of the Issuer may
direct the Trustee in writing to sell, and the Trustee will so sell in the manner so directed, Collateral Debt
Obligations without regard to the foregoing limitations in the event of an Optional Redemption or Tax Redemption.
The Collateral Manager on behalf of the Issuer may at any time direct the Trustee in writing to sell, and the
Trustee will so sell in the manner so directed, any Credit Risk Obligation. Following any such sale that occurs
during the Reinvestment Period, (A) the Collateral Manager on behalf of the Issuer will use commercially
reasonable efforts to purchase, with the resulting portion of the Sale Proceeds that constitute Principal Proceeds,
together with, at the Collateral Manager's discretion, any funds in the Principal Collection Account, no later than 30
Business Days after such Credit Risk Obligation is sold, one or more Substitute Collateral Debt Obligations having
an Aggregate Principal Balance no less than such resulting Principal Proceeds, and any Sales Proceeds (excluding
Sales Proceeds that constitute Interest Proceeds) remaining after such reinvestment will be deposited in the Principal
Collection Account; provided that the use of commercially reasonable efforts shall not require the Collateral
Manager to purchase any Substitute Collateral Debt Obligation the purchase of which is not, in its reasonable
business judgment, in the best interests of the holders of the Notes; and (B) after giving effect to such sale and to the
purchase of Substitute Collateral Debt Obligations, the Reinvestment Criteria must be satisfied.
During the Reinvestment Period, the Collateral Manager on behalf of the Issuer may direct the Trustee in
writing to sell, and the Trustee will so sell in the manner so directed, a Credit Improved Obligation if the Collateral
Manager reasonably believes in good faith and in the exercise of commercially reasonable business judgment that
the resulting Principal Proceeds portion of Sale Proceeds will be reinvested within 60 Business Days of the receipt
of the Sale Proceeds of such Credit Improved Obligation in one or more Substitute Collateral Debt Obligations;
provided that such sale can be made in compliance with the Indenture and reinvestment can be made in compliance
with the Reinvestment Criteria; provided, further, that if the Class C Overcollateralization Ratio is less than
108.67% or the Standard & Poor's CDO Monitor Test is not satisfied after giving effect to such contemplated
reinvestment, such Substitute Collateral Debt Obligation or Substitute Collateral Debt Obligations shall have an
Aggregate Principal Balance at least equal to 100% of the Principal Balance of such Credit Improved Obligation.
Notwithstanding anything to the contrary set forth in the Indenture, the Issuer will have the right to effect any
transaction that has been consented to by the holders of Notes evidencing 100% of the Aggregate Outstanding
Amount of each Class of Notes and each holder of a Preferred Share, and of which each Rating Agency has been
notified in writing at least ten Business Days prior to such date; provided that in no event shall the Issuer acquire or
hold any security, obligation or other asset the acquisition, ownership or disposition of which would cause the Issuer
to be engaged in a U.S. trade or business for U.S. federal income tax purposes or subject the Issuer to net income tax
in any jurisdiction.
During the period commencing on the Effective Date and ending on the last day of the Reinvestment Period, the
Collateral Manager may cause (and the Trustee shall release) funds on deposit in the Principal Collection Account to
be reinvested in new Collateral Debt Obligations (the "Substitute Collateral Debt Obligations") if, immediately after
giving effect to such reinvestment, the following criteria (the "Reinvestment Criteria") are satisfied:
(a) the Substitute Collateral Debt Obligation satisfies the definition of Collateral Debt Obligation;
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(b) the Overcollateralization Tests are satisfied, or if immediately prior to such acquisition an
Overcollateralization Test was not satisfied, the relevant Overcollateralization Ratio is maintained or improved
after giving effect to such acquisition;
(c) the Interest Coverage Tests are satisfied or, if immediately prior to such acquisition an Interest
Coverage Test was not satisfied, the relevant Interest Coverage Ratio is maintained or improved after giving
effect to such acquisition;
(d) the Collateral Quality Tests are satisfied or if, immediately prior to such acquisition, any Collateral
Quality Test was not satisfied, the extent of compliance with such Collateral Quality Test is maintained or
improved after giving effect to such acquisition; provided that the Weighted Average Spread Test need not be
satisfied, or the extent of compliance with such test need not be maintained or improved, in the case of a
reinvestment of Principal Proceeds received in connection with the refinancing of a Collateral Debt Obligation
within five Business Days of the Issuer's receipt of such Principal Proceeds in a Substitute Collateral Debt
Obligation issued by the issuer (or its successor by merger, conversion or consolidation) of the Collateral Debt
Obligation so refinanced so long as (I) the Spread of such Substitute Collateral Debt Obligation is lower than
the Spread of the Collateral Debt Obligation so refinanced, (II) the priority in right of payment and in right of
collateral of such Substitute Collateral Debt Obligation is the same as or higher than the priority in right of
payment and in right of collateral of the Collateral Debt Obligation so refinanced, (III) Moody’s shall have
upgraded or put on watch for possible upgrade the rating assigned by it to the Collateral Obligation so
refinanced within 60 days prior to receipt of such Principal Proceeds, (IV) the Moody's Rating of such
Substitute Collateral Debt Obligation is not lower than the Moody's Rating of the Collateral Debt Obligation so
refinanced and (V) the Standard & Poor's Rating of such Substitute Collateral Debt Obligation is not lower than
the Standard & Poor's Rating of the Collateral Debt Obligation so refinanced;
(e) except in connection with the reinvestment of Sale Proceeds in respect of any Defaulted Obligation,
Equity Security or Credit Risk Obligation, if the Class A-1 Loss Differential, the Class A-2 Loss Differential,
the Class B Loss Differential or the Class C Loss Differential is less than zero, the Standard & Poor's CDO
Monitor Test is satisfied;
(f) if such acquisition shall occur after the Effective Date, each applicable requirement of the Portfolio
Profile Test is satisfied or, if immediately prior to such acquisition, any such requirement was not satisfied, the
extent of compliance with such requirement is maintained or improved after giving effect to such acquisition;
and
(g) the procedures set forth in the Indenture relating to the perfection of the Trustee's security interest in
the Substitute Collateral Debt Obligation or Substitute Collateral Debt Obligations have been complied with to
the extent required to be complied with through the date of such acquisition.
No investment will be made in Collateral Debt Obligations after the termination of the Reinvestment Period,
except that the Issuer may reinvest (i) Unscheduled Principal Payments and (ii) Sale Proceeds of Credit Risk
Obligations and Credit Improved Obligations in Collateral Debt Obligations (and may use Interest Proceeds to pay
for the portion of the purchase price of any Collateral Debt Obligation so purchased that is allocable to accrued
interest) subject to the satisfaction of the Reinvestment Criteria and the following conditions (collectively, the
"Additional Reinvestment Conditions"):
(i) no Event of Default has occurred or is continuing;
(ii) the Aggregate Principal Balance of the Substitute Collateral Debt Obligation or Substitute Collateral
Debt Obligations is no greater than, (A) in the case of Unscheduled Principal Payments, the Aggregate Principal
Balance of the Collateral Debt Obligation that was the source of such Unscheduled Principal Payments (or, in
the case of Unscheduled Principal Payments that are partial prepayments, no greater than the amount of such
Unscheduled Principal Payments) or (B) in the case of Sale Proceeds, the Aggregate Principal Balance of the
sold Collateral Debt Obligation (less any Currency Hedge Termination Payment associated with any related
Currency Hedge);
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(iii) the stated maturity of the Substitute Collateral Debt Obligation or Collateral Debt Obligations is no
greater than, (A) in the case of Unscheduled Principal Payments, the stated maturity of the Collateral Debt
Obligation that was the source of such Unscheduled Principal Payments or (B) in the case of Sale Proceeds, the
stated maturity of the sold Collateral Debt Obligation;
(iv) not more than 7.5% of the Principal Collateral Value of the Collateral Debt Obligations may consist
of Triple-C Collateral Debt Obligations;
(v) the Weighted Average Rating Factor Test shall be satisfied;
(vi) (A) in the case of any other purchase of Substitute Collateral Debt Obligations (other than Collateral
Debt Obligations purchased with the Sale Proceeds from the sale of Non-USD Debt Obligations), either (I) the
Aggregate Principal Balance of the Collateral Debt Obligations will be maintained or increased or (II) the
Overcollateralization Tests will be satisfied and (B) in the case of any purchase of Substitute Collateral Debt
Obligations purchased with Sales Proceeds from the sale of Non-USD Debt Obligations not covered under
clause (ii) above, either (I) the Aggregate Principal Balance of the Substitute Collateral Debt Obligations
purchased with the Sale Proceeds will at least equal the Aggregate Principal Balance of the Non-USD Debt
Obligations sold or (II) the Overcollateralization Tests will be satisfied;
(vii) the Class A Notes and the Class B Notes will be rated at least as high by Moody's as the rating
assigned to such Class of Notes on the Closing Date and the Class C Notes will be rated no lower than one
subcategory below the rating assigned by Moody's to the Class C Notes on the Closing Date; and
(viii) if the Standard & Poor's CDO Monitor Test is not satisfied, the Standard & Poor's Rating of the
substitute Collateral Debt Obligation or Collateral Debt Obligations is equal to or greater than, (A) in the case
of Unscheduled Principal Payments, the Standard & Poor's Rating of the Collateral Debt Obligation that was the
source of such Unscheduled Principal Payments or (B) in the case of Sale Proceeds, the Standard & Poor's
Rating of the sold Collateral Debt Obligation.
In all other cases, Unscheduled Principal Payments and Sale Proceeds of Credit Risk Obligations and Credit
Improved Obligations, along with all other Principal Proceeds, must be applied after the Reinvestment Period to pay
the principal of the Notes in accordance with the Priority of Payments.
Notwithstanding anything to the contrary set forth herein, compliance with the Reinvestment Criteria shall be
measured by determining the aggregate effect of all sales of Collateral Debt Obligations and purchases of Substitute
Collateral Debt Obligations on a given date (or, at the election of the Collateral Manager, the aggregate effect of a
series of related sales of Collateral Debt Obligations and purchases of Substitute Collateral Debt Obligations during
a period (not to exceed two Business Days) as specified by the Collateral Manager) on the Issuer's level of
compliance with the Reinvestment Criteria, rather than considering the effect of each such purchase individually.
Mandatory Sales of Collateral Debt Obligations
The Issuer will:
(a) direct the Trustee in writing to sell, and the Trustee so will sell in the manner so directed, Defaulted
Obligations on or before the Required Sale Date; provided that Defaulted Obligations constituting not more
than 5% of the Aggregate Principal Balance of the Collateral Debt Obligations may be held after the Required
Sale Date for such Defaulted Obligations (and accordingly will not be required to be so sold) at the discretion of
the Collateral Manager. During the Reinvestment Period, the Issuer will use reasonable efforts in accordance
with its existing procedures and practices to purchase, no later than the end of the Due Period in which such
Defaulted Obligations are sold (or 30 days, if greater), Substitute Collateral Debt Obligations with an Aggregate
Principal Balance no less than the sum of the Sale Proceeds (excluding sale proceeds that constitute Interest
Proceeds) from such sale; and
(b) sell each Equity Workout Security or other Equity Security received by the Issuer as soon as
commercially reasonable following the date of acquisition thereof but in any event prior to the Required Sale
Date.
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The "Required Sale Date" means, (a) for any Collateral Debt Obligation that becomes a Defaulted Obligation,
the third anniversary of the Default Date therefor and (b) for any Equity Workout Security or any Equity Security
(other than an Equity Workout Security), three years after the Issuer's receipt thereof (or within three years of such
later date as such security may first be sold in accordance with its terms and to the extent permitted by applicable
law); provided that, if the Required Sale Date with respect to any Collateral Debt Obligation, Equity Workout
Security or Equity Security (other than an Equity Workout Security) is not a Business Day, such Required Sale Date
will instead be the next succeeding Business Day.
The Issuer may not acquire or own an Equity Security (other than an Equity Workout Security) unless either
(i) such Equity Security is issued by an entity that is treated as a corporation that is not a United States real property
holding corporation as defined in Section 897(c)(2) of the Code for U.S. federal income tax purposes, or (ii) the
Collateral Manager has received advice of Milbank, Tweed, Hadley & McCloy LLP or an opinion of other nationally
recognized U.S. tax counsel in such matters to the effect that acquiring and owning such Equity Security will not
cause the Issuer to be treated as engaged in a trade or business within the United States for U.S. federal income tax
purposes. If the Issuer or acquires or owns an Equity Security (other than an Equity Workout Security) and the
Collateral Manager determines that neither of the foregoing requirements can be satisfied, the Collateral Manager
shall sell such Equity Security as soon as commercially reasonable following the date of determination.
Sales Relating to Redemptions
In the event of a redemption of the Notes pursuant to an Optional Redemption or Tax Redemption, the
Collateral Manager on behalf of the Issuer may direct the Trustee to sell Collateral Debt Obligations without regard
to the limitations described under "—Substitute Securities and Reinvestment Criteria" above (which sales may be by
assignment or by a 100% participation with respect to such Collateral Debt Obligation); provided that (1) the
proceeds therefrom will be at least sufficient to pay certain expenses and other amounts and redeem in whole but not
in part all Notes to be redeemed simultaneously; and (2) such proceeds are used to make such redemption.
Notwithstanding anything contained in the Indenture to the contrary, any amounts received by the Trustee on behalf
of the Issuer with respect to any Collateral Debt Obligation subsequent to a sale by 100% participation of such
Collateral Debt Obligation in the manner contemplated in the preceding sentence will not be considered as Interest
Proceeds or Principal Proceeds and the Trustee, upon Issuer Order, shall pay such amounts to the relevant
participant. See "Description of the Offered Securities—Redemption."
Sales of Non-USD Debt Obligations
The Collateral Manager on behalf of the Issuer may direct the Trustee to sell Non-USD Debt Obligations from
time to time in accordance with the requirements of certain provisions of the Indenture relating to sales of Collateral
Debt Obligations; provided, however, that (A) the Collateral Manager, on behalf of the Issuer, will sell or terminate
the Currency Hedge related thereto on market terms on or about the date of such sale (except as otherwise described
under "—Hedge Agreements—Currency Hedges"), (B) (x) any Currency Hedge Termination Payments payable by
the Issuer to the Hedge Counterparty as a result of such termination will be paid out of the Sale Proceeds of the sale
of such Non-USD Debt Obligation and (y) if such Sale Proceeds are not sufficient to pay such Currency Hedge
Termination Payments, then the remaining Currency Hedge Termination Payments shall be paid from the Currency
Account in accordance with the Indenture and (C) any Currency Hedge Termination Receipts payable by the Hedge
Counterparty to the Issuer as a result of such termination will constitute part of the Sale Proceeds of the sale of such
Non-USD Debt Obligation. On any date during the Reinvestment Period, the Collateral Manager on behalf of the
Issuer is hereby authorized to direct the Trustee to effect an exchange of any Sale Proceeds and other amounts
received in respect of any Non-USD Debt Obligation that, if denominated in Dollars, would constitute Principal
Proceeds and any Currency Hedge Termination Receipts into U.S. Dollars or a Permitted Currency, as applicable,
pursuant to a Permitted Currency Exchange at the Applicable Spot Market Exchange Rate, to the extent that such
amounts are not payable to any Hedge Counterparty and are to be reinvested in additional Collateral Debt
Obligations denominated in such currency.
Investment in Eligible Investments and Non-USD Debt Obligations
Subject to the conditions described herein, Principal Proceeds (including those resulting from dispositions of
Collateral Debt Obligations as aforesaid) may be reinvested in Collateral Debt Obligations if the Reinvestment
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Criteria are satisfied. If, however, at the time of sale the Collateral Manager is not required to and has not identified
Collateral Debt Obligations for purchase, Principal Proceeds may be reinvested in Eligible Investments (to be
credited to the Principal Collection Account), pending reinvestment in Collateral Debt Obligations.
Notwithstanding the foregoing provisions, (A) cash on deposit in the Collection Accounts may be invested in
Eligible Investments pending investment in Collateral Debt Obligations and (B) if an Event of Default shall have
occurred and be continuing, no Collateral Debt Obligation may be acquired unless it was the subject of a
commitment entered into by the Issuer prior to the occurrence of such Event of Default.
The Issuer, at the direction of the Collateral Manager, may from time to time purchase Non-USD Debt
Obligations in accordance with the requirements of the Indenture; provided, that, on or promptly after the date of
each such purchase, the Issuer, at the direction of the Collateral Manager, will enter into one or more Currency
Hedges that satisfies the Currency Hedge Requirements with respect to such Non-USD Debt Obligation. The costs
(if any) of the entry into each Currency Hedge in connection with the purchase of a Non-USD Debt Obligation will
be paid out of Principal Proceeds and will be considered part of the purchase price of the related Non-USD Debt
Obligation.
Accounts
The Trustee will, on the Closing Date, establish the following segregated trust accounts and subaccounts which
will be held in the name of the Trustee for the benefit of the Secured Parties, the Replacement Swap Counterparty (if
applicable) and the Swap Counterparty (it being understood that the Issuer will have the right to allocate any
additional funds received by it, which funds (upon receipt) do not constitute proceeds from the sale of the Notes,
Collateral, any proceeds from the sale, liquidation or exchange of Collateral or share capital, to any account in its
sole discretion and to treat such funds as Interest Proceeds and/or Principal Proceeds, as elected by the Collateral
Manager):
Interest Collection Account
All distributions on the Collateral Debt Obligations and any proceeds received from the disposition of any such
Collateral Debt Obligations to the extent such distributions or proceeds constitute Interest Proceeds will be remitted
to a single, segregated account established and maintained under the Indenture by the Trustee (the "Interest
Collection Account"). The Trustee will credit to the Interest Collection Account (A) all Interest Proceeds and
(B) any other Interest Proceeds not specifically identified for application elsewhere in the Indenture.
The Collateral Manager on behalf of the Issuer may, by Issuer Order, direct the Trustee to, and upon receipt of
such Issuer Order the Trustee will, on any Business Day during a Due Period transfer an amount equal to the
Administrative Expenses out of the Interest Collection Account, at the sole discretion of the Collateral Manager, and
deposit such amount into the Expense Account in accordance with the requirements of such Issuer Order; provided
that the aggregate of such expenditures during such period will not exceed the Administrative Expense Cap for the
related Distribution Date. The amount of such Administrative Expenses will be immediately paid from the Expense
Account.
In addition, the Collateral Manager may, in its discretion, by Issuer Order direct the Trustee to, and upon receipt
of such Issuer Order the Trustee will, on any Business Day during a Due Period withdraw or apply funds on deposit
in, or otherwise to the credit of, the Interest Collection Account for the purchase of accrued interest in connection
with the purchase by the Issuer of any Substitute Collateral Debt Obligation in accordance with the terms and
conditions set forth in "Security for the Notes—Substitute Securities and Reinvestment Criteria."
On the Business Day prior to the first Determination Date (or, upon the Trustee's receipt of an Issuer Order, on
an earlier Business Day designated by the Issuer), the Trustee will transfer to the Principal Collection Account as
Principal Proceeds an amount of the Interest Proceeds on deposit in the Interest Collection Account, which amount
represents interest received in respect of Collateral Debt Obligations owned by the Issuer on the Closing Date
(including accrued interest received by the Issuer in connection with a Sale of any such Collateral Debt Obligation)
to the extent that such interest was accrued and unpaid as of the Closing Date (whether or not such interest is
actually received by the Issuer).
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Principal Collection Account
All principal distributions on the Collateral Debt Obligations, any principal proceeds received from the
disposition of any such Collateral Debt Obligations, certain amounts received under a Hedge Agreement, and all
other Principal Proceeds will be remitted to a single, segregated account established and maintained under the
Indenture by the Trustee (the "Principal Collection Account"). The Trustee will credit to the Principal Collection
Account (A) all Principal Proceeds and (B) any Principal Proceeds not specifically identified for application
elsewhere in the Indenture.
In addition, the Collateral Manager on behalf of the Issuer may by Issuer Order direct the Trustee to, and upon
receipt of such Issuer Order the Trustee will, pay the amounts specified and as directed in such Issuer Order, from
amounts on deposit in the Collection Accounts on any Business Day during any Interest Accrual Period, in the event
that the Currency Account does not have sufficient funds to pay any unpaid amounts to any Hedge Counterparty, but
after payments thereof from such funds available in the Currency Account, or in the event that amounts in the
Collection Accounts are required to pay any Currency Hedge Termination Payments in accordance with the
Indenture, as follows: (i) from Principal Proceeds only, an amount after conversion from U.S. Dollars into the
applicable Permitted Currency or Permitted Currencies pursuant to a Permitted Currency Exchange at the
Applicable Spot Market Exchange Rate equal to any unpaid amount of any Currency Hedge Principal Exchange
Payments and any Currency Hedge Termination Payments, (ii) from Interest Proceeds only, an amount after
conversion from U.S. Dollars into the applicable Permitted Currency or Permitted Currencies pursuant to a
Permitted Currency Exchange at the Applicable Spot Market Exchange Rate equal to any unpaid amount of any
Scheduled Periodic Currency Hedge Payment thereunder, and (iii), if such Principal Proceeds amounts under
clause (i) above do not satisfy such unpaid amount thereunder, then such remaining unpaid amount from Interest
Proceeds or, if such Interest Proceeds amounts under clause (ii) above do not satisfy such unpaid amount thereunder,
then any remaining unpaid amount from Principal Proceeds; provided, however, that Interest Proceeds payable to
any Hedge Counterparty pursuant to clauses (ii) and (iii) above will not be paid if Interest Proceeds in the Interest
Collection Account are not expected to be enough to cover all interest payments with respect thereto on the Class A
Notes after giving effect to the foregoing payments.
Custodial Account
The Trustee will credit all Collateral Debt Obligations to the "Custodial Account."
Payment Account
The only permitted withdrawals from or application of funds on deposit in, or otherwise to the credit of, the
"Payment Account" will be to pay the interest on and the principal of the Notes and to make distributions on the
Preferred Shares in accordance with the terms and the provisions of the Indenture or to transfer accrued interest into
the Interest Collection Account, and upon Issuer Order, to pay Administrative Expenses and other amounts referred
to in the Priority of Payments as specified therein, each in accordance with the Priority of Payments. The Payment
Account will remain at all times with the trust department of an Eligible Financial Institution.
As provided for in the Indenture, the Trustee will transfer to the Payment Account for application pursuant to
the Priority of Payments and in accordance with the calculations and the instruction contained in the note valuation
report any amounts then held in the applicable Collection Account on the last day of the applicable Due Period that
are required to be distributed pursuant to the Priority of Payments on the Distribution Date as shown in such note
valuation report with respect to such Distribution Date and any amounts on deposit in the Interest Reserve Account
and the Proceeds Account designated as Interest Proceeds or Principal Proceeds by the Collateral Manager for
application in accordance with the Priority of Payments on such Distribution Date. By Issuer Order executed by an
Authorized Officer of the Collateral Manager (which may be in the form of standing instructions), the Issuer will
direct the Trustee to, and, upon receipt of such Issuer Order, the Trustee will (i) invest all funds received into the
Payment Account on the last day of the Due Period as so directed in Eligible Investments having stated maturities no
later than the Business Day immediately preceding the applicable Distribution Date for such Due Period and (ii) the
Trustee will transfer all interest accrued from the last day of the applicable Due Period until the last day of the
Interest Accrual Period upon such investment (net of losses) from the Payment Account into the Interest Collection
Account for the Due Period applicable for the next Distribution Date. The Issuer may direct the Trustee to retain
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amounts in the applicable Collection Account that are not required to be distributed pursuant to the Priority of
Payments.
Expense Account
On the Closing Date, there will be credited to the "Expense Account" the amount of approximately
U.S.$2,000,000, which amount will be used to pay upfront fees and expenses at the direction of the Collateral
Manager relating to the transactions contemplated in the Indenture, to the extent not otherwise paid. By the
Determination Date relating to the second Distribution Date, all then remaining funds in the Expense Account will
be deposited in the Collection Accounts as Interest Proceeds and/or Principal Proceeds (in the respective amounts
directed by the Collateral Manager in its discretion). In addition on and after the second Distribution Date amounts
will be deposited into the Expense Account at the discretion of the Collateral Manager in accordance with the
Priority of Payments. By Issuer Order, executed by an Authorized Officer of the Collateral Manager (which may be
in the form of standing instructions), the Issuer will at all times direct the Trustee to, and, upon receipt of such Issuer
Order, the Trustee will, invest all funds received into the Expense Account in Eligible Investments having stated
maturities no later than the last day of the current Due Period and all monies deposited in the Expense Account will
be held by the Trustee as part of the Collateral and will be applied to the purposes provided in the Indenture;
provided that any income earned on amounts deposited in the Expense Account will be deposited in the Interest
Collection Account as Interest Proceeds as it is paid. Amounts on deposit in the Expense Account will be used at
the direction of the Collateral Manager to pay Administrative Expenses.
Swap Collateral Accounts
At any time the Issuer enters into a Swap Agreement, the Collateral Manager will (a) direct the Trustee by
Issuer Order to establish, and the Trustee will establish, a segregated subaccount within the "Trustee Swap Collateral
Account" for each different entity that is a Swap Counterparty, and assets on deposit in each such subaccount will be
held for the benefit of the applicable Swap Counterparty in accordance with the security interests granted in the
Indenture or (b) cause the establishment of a segregated non-interest bearing trust account in respect of such Swap
Agreement at an organization or entity (other than the Trustee) (any such organization or entity, the "Alternative
Swap Collateral Account Bank") organized and doing business under the laws of the United States or of any state
thereof, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at
least U.S.$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 Standard & Poor's and having an office within the United States (any
such account, an "Alternative Swap Collateral Account" and collectively with the Trustee Swap Collateral Account,
the "Swap Collateral Accounts"). With respect to any Alternative Swap Collateral Account, the related Swap
Counterparty, except upon maturity of the related Swap Agreement, will have exclusive control over, and the sole
right of withdrawal from, such account in accordance with the applicable Swap Agreement. Upon the Collateral
Manager's direction by Issuer Order to transfer funds from the Principal Collection Account to the applicable Swap
Collateral Account or applicable subaccount in connection with the posting by the Issuer of collateral to secure the
Issuer's obligations under a Swap Agreement (as provided in such Swap Agreement), the Trustee will immediately
transfer such funds into or to the applicable Swap Collateral Account or applicable subaccount. By Issuer Order
executed by an Authorized Officer of the Collateral Manager (which may be in the form of standing instructions),
the Issuer will at all times (x) direct the Trustee, and from and after receipt of such Issuer Order the Trustee will, or
(y) if permitted pursuant to the related Swap Agreement, cause each Alternative Swap Collateral Account Bank to,
invest funds received into the applicable Swap Collateral Account in investments of a type that would qualify as
Eligible Investments maturing on the next Business Day. All interest and other income from such investments
received by the Trustee will be deposited in the Interest Collection Account, whereupon the security interest of any
Swap Counterparty in such interest and other income will be released, any gain realized from such investments will
be credited to the Interest Collection Account and any loss resulting from such investments will be charged to the
Interest Collection Account. On each Business Day, the proceeds received upon maturity or sale of any item of
Swap Collateral in the Swap Collateral Accounts or, if applicable, any subaccount thereof, (A) will be applied by the
Trustee or the related Alternative Swap Collateral Account Bank, as applicable, as directed by the Collateral
Manager on behalf of the Issuer (i) to pay any amounts then owing by the Issuer on any Swap Agreement (or the
related Swap Agreement, in the case of the Alternative Swap Collateral Account) or, in the case of a subaccount,
any Swap Agreement under which the relevant entity is a Swap Counterparty or (ii) upon the exercise by the Issuer
of its termination rights under any such Swap Agreement if the Swap Counterparty has defaulted under such Swap
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Agreement, or if any such Swap Agreement has been terminated for any other reason, to be deposited in the Interest
Collection Account in an amount equal to the excess, if any, of the amount previously deposited in the applicable
Swap Collateral Account or applicable subaccount in respect of such Swap Agreement over any amount paid or to
be paid by the Issuer as specified in clause (i) above, whereupon the security interest of any Swap Counterparty in
such proceeds will be released or (B) if no such direction is received, will be reinvested in investments of the type
described above.
Until the Issuer, or the Collateral Manager on behalf of the Issuer, notifies the Trustee or the related Alternative
Swap Collateral Account Bank that it has made all payments due under each Swap Agreement, each item of Swap
Collateral will be subject to a lien in favor of the applicable Swap Counterparty except to the extent that such lien
may be released pursuant to the preceding paragraph. The Trustee, and the Issuer will cause the related Alternative
Swap Collateral Account Bank to, agree to give the Issuer immediate notice if it obtains knowledge that the
applicable Swap Collateral Account or any funds on deposit therein, or otherwise to the credit thereof, will become
subject to any writ, order, judgment, warrant of attachment, execution or similar process.
Delayed Funding Obligation Account
The "Delayed Funding Obligation Account" will be held in trust in the name of the Trustee for any additional
funding obligations of the Issuer under any Delayed Draw Term Loans and Revolving Credit Facilities included in
the Collateral Debt Obligations and will have subaccounts for each Currency applicable to Delayed Draw Term
Loans and Revolving Credit Facilities from time to time owned by the Issuer.
Upon any draws by the related borrower under a Delayed Draw Term Loan or a Revolving Credit Facility, the
Collateral Manager may direct the Trustee by Issuer Order to, and upon receipt of such Issuer Order the Trustee will,
withdraw from the Delayed Funding Obligation Account the amount specified in such Issuer Order and satisfy the
Issuer's obligation in respect of such Delayed Draw Term Loan or Revolving Credit Facility with such funds and
only funds in the Delayed Funding Obligation Account shall be used for such purpose.
Amounts in the Delayed Funding Obligation Account will be invested in overnight funds that are Eligible
Investments selected by the Collateral Manager denominated in the Currency of the applicable subaccount and
(x) earnings from all such U.S. Dollar denominated investments will be deposited in the Interest Collection Account
as Interest Proceeds and (y) earnings from all such Permitted Currency denominated investments will be deposited
in the interest subaccounts of the Currency Account related to the Delayed Draw Term Loans and Revolving Credit
Facilities to which such earnings relate. If a Delayed Draw Term Loan or Revolving Credit Facility is sold or
otherwise disposed of before the full commitment thereunder has been drawn or if the commitment thereunder is
terminated in whole or in part, such Eligible Investments on deposit in the Delayed Funding Obligation Account for
the purpose of fulfilling such commitment (or the portion thereof so terminated in part) will be transferred to the
Principal Collection Account.
Upon the purchase by the Issuer of any Delayed Draw Term Loan or Revolving Credit Facility, the Collateral
Manager will direct the Trustee to deposit Principal Proceeds into the applicable Currency subaccount of the
Delayed Funding Obligation Account such that the amount of funds on deposit in such subaccount will be equal to
or greater than the sum of the unfunded funding obligations under all such Delayed Draw Term Loans and
Revolving Credit Facilities in such Currency that are then included in the Collateral and the Principal Proceeds so
deposited shall be considered part of the purchase price of such Delayed Draw Term Loans or Revolving Credit
Facilities for purposes of certain provisions of the Indenture relating the sales of Collateral Debt Obligations.
Principal payments received with respect to any Delayed Draw Term Loan or Revolving Credit Facility will be
deposited into the Delayed Funding Obligation Account. Any funds in the Delayed Funding Obligation Account
will be available solely to cover any drawdowns on the Delayed Draw Term Loans and Revolving Credit Facilities;
provided, that any excess of (A) the amounts on deposit in the subaccount of the Delayed Funding Obligation
Account for any Currency over (B) the sum of the unfunded funding obligations under all Delayed Draw Term
Loans and Revolving Credit Facilities that are denominated in such Currency and are included in the Collateral may
be transferred by the Trustee (at the direction of the Collateral Manager) from time to time as Principal Proceeds
(I) to the Principal Collection Account if such excess amount is denominated in U.S. Dollars or (II) to the principal
subaccounts of the Currency Account relating to the Delayed Draw Term Loans and Revolving Credit Facilities as
to which such excess amount relates if such excess amount is denominated in a Permitted Currency.
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Interest Reserve Account
The Trustee will deposit U.S.$2,000,000 of the proceeds received upon the sale of the Notes into the "Interest
Reserve Account." Funds on deposit in the Interest Reserve Account will be withdrawn on the initial Distribution
Date for application as Interest Proceeds, or Principal Proceeds in such allocation as the Collateral Manager, in its
sole discretion, may decide, to be distributed in accordance with the Priority of Payments on the initial Distribution
Date.
Securities Lending Account
The Trustee will, upon deliverance of an Issuer Order, establish one or more securities lending accounts (each a
"Securities Lending Account") with an Eligible Financial Institution for the purpose of satisfying the Issuer's
obligations under a Securities Lending Agreement, and the Issuer will grant to the Trustee a security interest in each
such Securities Lending Account and perfect such security interest as soon as possible in accordance with applicable
law. The Trustee will deposit any amount identified to the Trustee as Securities Lending Collateral pledged
pursuant to a related Securities Lending Agreement into a Securities Lending Account. Any cash on deposit in the
Securities Lending Account shall be invested as directed in writing by the Collateral Manager and in accordance
with the relevant Securities Lending Agreement. Upon any default by any Securities Lending Counterparty under
the related Securities Lending Agreement known to the Trustee, subject to the terms of the Indenture and the
applicable Securities Lending Agreement, the Trustee will promptly exercise its remedies under such Securities
Lending Agreement, including liquidating, or causing the liquidation of, the related Securities Lending Collateral.
Funds credited to a Securities Lending Account will be applied as directed by the Collateral Manager on behalf of
the Issuer in accordance with the related Securities Lending Agreement.
Hedge Counterparty Collateral Account
The Trustee will deposit all collateral received from a Hedge Counterparty under a Hedge Agreement in the
"Hedge Counterparty Collateral Account." If at any time the Issuer enters into a Hedge Agreement, the Collateral
Manager will direct the Trustee by Issuer Order to establish a segregated subaccount within the Hedge Counterparty
Collateral Account for each different entity that is a Hedge Counterparty. The only permitted withdrawal from or
application of funds on deposit in, or otherwise to the credit of, the Hedge Counterparty Collateral Account will be
(i) pursuant to the terms of the related Hedge Agreement for application to obligations of the Hedge Counterparty to
the Issuer under a Hedge Agreement if such Hedge Agreement becomes subject to early termination or upon default
by the relevant Hedge Counterparty or (ii) to return collateral to the relevant Hedge Counterparty when and as
required by a Hedge Agreement. Proceeds of liquidation of any related Hedge Collateral will be deposited in the
applicable Collection Account for application as Interest Proceeds or Principal Proceeds, as applicable. Funds
credited to the Hedge Counterparty Collateral Account will be applied as contemplated in the Hedge Agreement.
Swap Counterparty Collateral Account
The Trustee will deposit all collateral received from the Swap Counterparty under each Swap Agreement in the
"Swap Counterparty Collateral Account." If at any time the Issuer enters into a Swap Agreement involving a Swap
Counterparty other than an existing Swap Counterparty, the Collateral Manager will direct the Trustee by Issuer
Order to establish a segregated subaccount within the Swap Counterparty Collateral Account for each different
entity that is a Swap Counterparty. The only permitted withdrawal from or application of funds on deposit in, or
otherwise to the credit of, the Swap Counterparty Collateral Account will be (i) for application to obligations of the
Swap Counterparty to the Issuer under a Swap Agreement if such Swap Agreement becomes subject to early
termination or upon default by the relevant Swap Counterparty or (ii) to return collateral to the relevant Swap
Counterparty when and as required by a Swap Agreement. Funds credited to the Swap Counterparty Collateral
Account will be applied as contemplated in the Swap Agreement. All amounts deposited in the Swap Counterparty
Collateral Account will be deposited in overnight funds in Eligible Investments
Proceeds Account
The Trustee will credit to the "Proceeds Account" proceeds from the sale of the Notes on the Closing Date that
will not be used to purchase Collateral Debt Obligations on the Closing Date. Funds on deposit in the Proceeds
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Account will be utilized to purchase Collateral Debt Obligations as directed by the Collateral Manager on behalf of
the Issuer; provided that after the Effective Date, all or any portion of the funds in deposit in the Proceeds Account,
up to U.S.$2,000,000 on a cumulative basis, may be designated as Interest Proceeds by the Collateral Manager, in its
sole discretion, and be applied in accordance with the Priority of Payments.
Currency Account
The Trustee will, on or prior to the Closing Date, establish a single, segregated trust account in the name of the
Issuer, subject to the lien of the Trustee (the "Currency Account"). The Trustee will, on or prior to the Closing Date
and from time to time thereafter, establish within the Currency Account, two segregated subaccounts for each
Currency Hedge Obligation included in the Collateral, one of which will be designated the interest subaccount with
respect to such Currency Hedge Obligation and the other of which will be designated the principal subaccount with
respect to such Currency Hedge Obligation. The Trustee will pay amounts due and payable to the Hedge
Counterparty under the Currency Hedge forming part of such Currency Hedge Obligation out of amounts available
in the subaccounts of the Currency Account relating to such Currency Hedge Obligation; provided, that when there
are insufficient funds in the applicable subaccount of the Currency Account, amounts on deposit in the Collection
Accounts may be used to pay such amounts due and payable to any such Hedge Counterparty.
The Trustee will from time to time deposit into the interest subaccount of the Currency Account relating to each
Currency Hedge Obligation, immediately upon receipt thereof, all payments received during such Due Period (A) in
respect of interest on the Non-USD Debt Obligation forming a part of such Currency Hedge Obligation and
(B) in respect of Eligible Investments on deposit in the interest subaccount and the principal subaccount relating to
such Currency Hedge Obligation. In addition to other withdrawals permitted under the Indenture, the only permitted
withdrawal from or application of funds on deposit in or otherwise to the credit of the interest subaccount of the
Currency Account relating to each Currency Hedge Obligation will be as so directed, upon Issuer Order:
(A) on the applicable Currency Hedge Payment Date (1) to the payment of Scheduled Periodic
Currency Hedge Payments to the Hedge Counterparty under the Currency Hedge forming a part of such
Currency Hedge Obligation and (2) to the payment of other amounts due to the Hedge Counterparty under the
Currency Hedge forming a part of such Currency Hedge Obligation if amounts on deposit in the principal
subaccount of the Currency Account relating to such Currency Hedge Obligation are insufficient to make a full
payment;
(B) on the applicable Currency Hedge Payment Date, to the transfer of all remaining amounts credited
to such interest subaccount (to the extent not allocated for use in accordance with clause (C) below at the
written direction of the Collateral Manager) to the Interest Collection Account as Interest Proceeds after
conversion into U.S. Dollars pursuant to a Permitted Currency Exchange at the Applicable Spot Market
Exchange Rate;
(C) at any time, to apply toward the purchase of accrued interest in connection with the acquisition of
additional Collateral Debt Obligations that are Non-USD Debt Obligations; or
(D) on the Business Day prior to the Distribution Date relating to the Stated Maturity of the Notes or
prior to any Redemption Date relating to a redemption of the Notes in whole, to the transfer of all amounts
credited to such interest subaccount to the Payment Account as Interest Proceeds after conversion into U.S.
Dollars pursuant to a Permitted Currency Exchange at the Applicable Spot Market Exchange Rate, for
application in accordance with the Priority of Payments.
The Trustee will from time to time deposit into the principal subaccount of the Currency Account relating to
each Currency Hedge Obligation, immediately upon receipt thereof, (x) all amounts received during the Due Period
in respect of the Non-USD Debt Obligation forming a part of the related Currency Hedge Obligation and Eligible
Investments on deposit in the principal subaccount relating to such Currency Hedge Obligation that, if denominated
in Dollars, would constitute Principal Proceeds and (y) any Currency Hedge Termination Receipts and Currency
Hedge Replacement Receipts with respect to the Currency Hedge forming a part of the related Currency Hedge
Obligation (after conversion into the applicable Permitted Currency at the Applicable Spot Market Exchange Rate, if
necessary). In addition to other withdrawals permitted under the Indenture, the only permitted withdrawal from or
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application of funds on deposit in or otherwise to the credit of the principal subaccount of the Currency Account
relating to each Currency Hedge Obligation will be as so directed, upon Issuer Order:
(A) in the case of amounts (including amounts received upon the sale of a Non-USD Debt Obligation)
received during each Due Period in respect of the Non-USD Debt Obligation forming a part of such Currency
Hedge Obligation or in respect of Eligible Investments that, if denominated in Dollars, would constitute
Principal Proceeds, at the sole discretion of the Collateral Manager:
(1) to the payment of Currency Hedge Termination Payments payable by the Issuer in
connection with the termination of the Currency Hedge forming part of such Currency Hedge Obligation as
a result of the sale, prepayment or default of the related Non-USD Debt Obligation;
(2) to the payment of Currency Hedge Principal Exchange Payments and all other amounts in
respect of any Non-USD Debt Obligation scheduled to be paid by the Issuer to a Hedge Counterparty under
the Currency Hedge forming a part of the Currency Hedge Obligation on the applicable Currency Hedge
Payment Date;
(3) at any time, subject to the Reinvestment Criteria, to the acquisition of additional
Collateral Debt Obligations that are Non-USD Debt Obligations and the entry into related Currency
Hedges, which are denominated in any Permitted Currency, if and to the extent necessary, after the
conversion of such amounts into another Permitted Currency pursuant to a Permitted Currency Exchange at
the Applicable Spot Market Exchange Rate;
(4) at any time, to apply toward the purchase of accrued interest in connection with the
acquisition of additional Collateral Debt Obligations that are Non-USD Debt Obligations only if and to the
extent that there are insufficient amounts available in the interest subaccount relating to such Non-USD
Debt Obligation (repayments of which will thereafter constitute Principal Proceeds); or
(5) at any time, in the case of Principal Proceeds remaining after reinvestment in additional
Non-USD Debt Obligations, to the Principal Collection Account as Principal Proceeds after the conversion
of such amounts into U.S. Dollars pursuant to a Permitted Currency Exchange at the Applicable Spot
Market Exchange Rate;
(B) at any time, out of Currency Hedge Termination Receipts paid into the principal subaccount of the
Currency Account relating to such Currency Hedge Obligation (at the direction of the Collateral Manager):
(1) to the payment of Currency Hedge Replacement Payments up to an amount equal to the
Currency Hedge Termination Receipts received by the Issuer upon termination of the Currency Hedge that
is being replaced; or
(2) if and to the extent that (x) the Collateral Manager, in its sole discretion, determines not
to replace a Currency Hedge and Rating Confirmation is obtained in respect of such determination, (y) the
termination of a Currency Hedge under which such Currency Hedge Termination Receipts are payable
occurs in connection with a redemption of the Notes in whole, or (z) such Currency Hedge Termination
Receipts are not required for application towards costs of entry into a replacement Currency Hedge, then to
the transfer of such amounts (except for accrued interest thereon) to the Principal Collection Account as
Principal Proceeds after conversion (if necessary) into U.S. Dollars pursuant to a Permitted Currency
Exchange at the Applicable Spot Market Exchange Rate;
(C) at any time, out of Currency Hedge Replacement Receipts paid into the principal subaccount of
the Currency Account relating to such Currency Hedge Obligation (at the direction of the Collateral Manager):
(1) to the payment of any Currency Hedge Termination Payments due and payable to a
Hedge Counterparty under the Currency Hedge being replaced; or
(2) if and to the extent that such Currency Hedge Replacement Receipts are not required for
payment of Currency Hedge Termination Payments under the Currency Hedge being replaced, then to the
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transfer of such amounts (except for accrued interest thereon) to the Principal Collection Account as
Principal Proceeds after conversion (if necessary) into U.S. Dollars pursuant to a Permitted Currency
Exchange at the Applicable Spot Market Exchange Rate; and
(D) on the Business Day prior to the Distribution Date relating to the Stated Maturity of the Notes or
prior to any Redemption Date relating to a redemption of the Notes in whole, to the transfer of all amounts
credited to such principal subaccount to the Payment Account, after conversion into U.S. Dollars pursuant to the
applicable Currency Hedge if conversion of such amounts is covered by a Currency Hedge or else pursuant to a
Permitted Currency Exchange at the Applicable Spot Market Exchange Rate, in each case, for application in
accordance with the Priority of Payments.
The Trustee, within one Business Day after receipt of any distribution or other proceeds in respect of the
Collateral in the Currency Account that are not cash in U.S. Dollars or a Permitted Currency, will so notify the
Collateral Manager on behalf of the Issuer, and the Issuer will use its commercially reasonable efforts to, within five
Business Days of receipt of such notice from the Trustee (or as soon as practicable thereafter), sell Collateral that
represent such distribution or other proceeds for cash in U.S. Dollars or any Permitted Currency in the manner and
during the time period provided for herein. The Trustee shall deposit cash proceeds received in U.S. Dollars, in the
applicable Collection Account and cash proceeds received in any Permitted Currency in the applicable subaccount
of the Currency Account; provided, however, that the Issuer (A) need not sell such distributions or other proceeds if
it delivers an Issuer Order or an Officer's certificate to the Trustee certifying that such distributions or other proceeds
constitute Collateral Debt Obligations or Eligible Investments or (B) may otherwise retain such distribution or other
proceeds for up to two years from the date of receipt thereof if it delivers an Officer's certificate to the Trustee
certifying that (x) it will use its commercially reasonable efforts to sell such distribution within such two-year period
and (y) retaining such distribution is not otherwise prohibited by this Indenture.
At any time when reinvestment is permitted pursuant to certain provisions in the Indenture relating the sale of
Collateral Debt Obligations, the Collateral Manager on behalf of the Issuer may by Issuer Order direct the Trustee
to, and upon receipt of such Issuer Order the Trustee will, withdraw funds on deposit in the applicable principal
subaccount of the Currency Account (in each case, together with accrued interest received with regard to any sold
Collateral Debt Obligation and Interest Proceeds but only to the extent used to pay for accrued interest on an
additional Collateral Debt Obligation) and reinvest such funds in additional Collateral Debt Obligations, in each
case in accordance with the requirements of the Indenture and such Issuer Order.
Hedge Agreements
General
Under the Indenture, the Issuer will be authorized to enter into Hedge Agreements from time to time in order to
manage interest rate, currency exchange and other risks in connection with the Issuer's issuance of, and making of
payments on, the Notes and ownership and disposition of the Collateral Debt Obligations and with such Hedge
Counterparties as it may elect in its sole discretion, subject in all cases to the receipt of a Rating Confirmation with
respect thereto; provided that no Rating Confirmation with be required with respect to Form-Approved Hedge
Agreements. The number of different Hedge Counterparties, when added to the number of Securities Lending
Counterparties, Selling Institutions selling Participations and Synthetic Security Counterparties currently involved in
transactions with the Issuer, may not exceed ten. All payments due to any Hedge Counterparty under any Hedge
Agreement will be paid in accordance with the Priority of Payments.
Concurrently with entering into the Hedge Agreements, the Issuer will assign them to the Trustee for the benefit
and security of the Secured Parties pursuant to the Indenture and a collateral assignment agreement; provided that
such assignment will not impair or diminish the obligations of the Issuer thereunder nor will such obligations be
imposed on the Trustee.
(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
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(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
(3) the short-term debt rating by Standard & Poor's is below "A-1+" or its long-term debt rating is less
than "A+" (but such Hedge Counterparty has a short term debt rating by Standard & Poor's of at least "A-3"
and, if applicable, a long term debt rating by Standard & Poor's of at least "BBB-");
and the debt ratings of such Hedge Counterparty's guarantor, if applicable, fail to equal or exceed the above criteria,
then such Hedge Counterparty will 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 the amount calculated pursuant to such Hedge Agreement (or, if the calculation
methodology is not set forth in such Hedge Agreement, in an amount sufficient to enable the Rating
Agencies to issue Rating Confirmations);
(2) obtain a guarantor whose short-term and long-term debt ratings equal or exceed the above criteria
(with such guarantor's guarantee to comply with Standard & Poor's published criteria with respect to
guarantees);
(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 (with such guarantor's guarantee to comply with Standard & Poor's
published criteria with respect to guarantees) equal or exceed the above criteria); or
(4) take such other actions as is necessary to obtain Rating Confirmations;
(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;
(2) both a short-term and long-term debt rating by Moody's; and either:
(A)
(B)
the long-term debt rating by Moody's is "A3" or below or is suspended or withdrawn; 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 the above criteria, 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-to-market value of the Hedge
Agreement (or such greater amount required under Standard & Poor's then-current collateral posting
requirements); 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 the above
criteria and the appointment of which will enable Standard & Poor's Rating to issue a Rating
Confirmation (with such guarantor's guarantee to comply with Standard & Poor's published
criteria with respect to guarantees);
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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 enable Standard & Poor's Rating to
issue a Rating Confirmation; or
(z) take such other actions as is necessary to obtain Rating Confirmations.
(c) If the Hedge Counterparty has a short term debt rating by Standard & Poor's below "A-3" and, if such
Hedge Counterparty has a long term rating by Standard & Poor's, a long term debt rating by Standard & Poor's
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 will 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 Standard & Poor'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 10 days of the failure to equal or
exceed the above criteria.
The Indenture will require that if at any time any Hedge Agreement becomes subject to early termination due to
the occurrence of specified events of default or termination events thereunder (such as a failure to make payments
when due, bankruptcy or a change in law making the performance of the obligations under any Hedge Agreement
unlawful and failure to comply with the remedial requirements described above following a failure to satisfy the
required rating criteria described above) with respect to the related Hedge Counterparty, the Issuer and the Trustee
(subject to the terms of the Indenture and in consultation with the Collateral Manager) will take such actions to
enforce the rights of the Issuer and the Trustee thereunder as may be permitted by the terms of each Hedge
Agreement and consistent with the terms of the Indenture, and will apply the proceeds of any such actions
(including, without limitation, the proceeds of the liquidation of any collateral pledged by the related Hedge
Counterparty), if the Collateral Manager determines that it is advisable to do so, to enter into a replacement Hedge
Agreement(s) on substantially identical terms or on such other terms so long as (other than in the case of a Form-
Approved Hedge Agreement) a Rating Confirmation is obtained from Standard & Poor's. Each Hedge Agreement
also will be subject to early termination upon the occurrence of specified events of default or termination events
thereunder (such as those described above) with respect to the Issuer. In addition, any termination payments payable
by the Issuer to the related Hedge Counterparty upon an early termination of a Hedge Agreement will be paid in the
priority specified therefor in "Application of Funds—Priority of Payments."
If a Non-USD Debt Obligation related to a Currency Hedge becomes a Defaulted Obligation or is sold by the
Issuer or is called or prepaid, such Currency Hedge will be terminated. If a Currency Hedge is terminated as a result
of the related Non-USD Debt Obligation becoming a Defaulted Obligation, the Collateral Manager may, but shall
not be required to, cause the Issuer to enter into additional, supplemental or replacement Currency Hedge, and each
such Currency Hedge and related Hedge Counterparty is subject to the receipt of a Rating Confirmation from each
Rating Agency with respect thereto (unless such Hedge Agreement is a Form-Approved Hedge Agreement). Upon
written direction of the Collateral Manager, the Trustee shall agree to any such additional, supplemental or
replacement Hedge Agreement.
The Issuer will have the right to vary the procedures set forth above to comply from time to time with thenprevailing
practices.
The Hedge Agreements will be governed by New York law.
Currency Hedges
On or promptly after the purchase of a Non-USD Debt Obligation, the Issuer will enter into one or more
Currency Hedges with respect to such obligation (or maintain one or more existing Currency Hedges in respect of
the related Permitted Currency covering such Non-USD Debt Obligation as permitted below). If the Issuer
maintains one or more existing Currency Hedges to cover such Non-USD Debt Obligation as permitted below and
the scheduled termination date thereof does not comply with clause (iv) below, the Issuer may satisfy such
clause (iv) by entering into an additional Currency Hedge that is a forward starting transaction satisfying such
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clause (iv) in conjunction with such existing Currency Hedge. The Issuer will not enter into any Currency Hedge
unless such Currency Hedge provides that any costs attributable to entering into a replacement Currency Hedge
which exceed the sum of the proceeds of the liquidation of any such Currency Hedge will be borne solely by the
Hedge Counterparty; provided that such liquidation is not the result of a Currency Hedge Termination Event. Each
Currency Hedge will satisfy the following requirements with respect to the Non-USD Debt Obligation being hedged
(collectively, the "Currency Hedge Requirements"):
(i) such Currency Hedge will contain (1) a notional amount denominated in the foreign currency of
the related Non-USD Debt Obligation (the "Non-USD Notional Amount"), (2) a notional amount denominated
in U.S. Dollars (the "USD Notional Amount"), (3) a floating payment relating to the index applicable to such
Non-USD Debt Obligation payable by the Issuer, (4) a floating payment relating to LIBOR payable by the
Hedge Counterparty, and (5) a scheduled termination date;
(ii) such Currency Hedge will provide that (1) (x) the Issuer will pay to the Hedge Counterparty, in
the currency in which the related Non-USD Debt Obligation is denominated, a floating rate coupon on the Non-
USD Notional Amount of such Currency Hedge and (y) in exchange, the Hedge Counterparty will pay to the
Issuer, in U.S. Dollars, a floating rate coupon on the USD Notional Amount of such Currency Hedge; (2) (x) the
Issuer will pay to the Hedge Counterparty, in the currency in which the related Non-USD Debt Obligation is
denominated, a specified portion of the Non-USD Notional Amount as a final principal exchange amount and
(y) in exchange, the Hedge Counterparty will pay to the Issuer, in U.S. Dollars, a specified portion of the USD
Notional Amount as a final principal exchange amount;
(iii) such Currency Hedge will have a Non-USD Notional Amount equal to the Principal Balance
(without giving effect to the proviso to such definition) or any lower amount that the Collateral Manager on
behalf of the Issuer may elect to use of the Non-USD Debt Obligation being hedged;
(iv) such Currency Hedge will have a scheduled termination date equal to the date which the Collateral
Manager reasonably expects to be the final scheduled payment date or, at the option of the Collateral Manager,
the date on which its average life or duration expires for the Non-USD Debt Obligation being hedged;
(v) such Currency Hedge will be entered into pursuant to a Hedge Agreement in substantially the
form attached to the Indenture, or other form of Hedge Agreement as long as Rating Confirmations are obtained
with respect to such other form of Hedge Agreement;
(vi) the Issuer shall obtain an opinion of counsel substantially in the form set forth in the Indenture in
connection with the execution of the ISDA schedule relating to such Currency Hedge and the first transaction
entered into under the ISDA Master Agreement and schedule relating to such Currency Hedge; and
(vii) such Currency Hedge will contain appropriate and customary non-petition and limited recourse
provisions substantially similar to those contained in the Indenture;
provided, however, that in lieu of satisfying the foregoing requirements, the Collateral Manager on behalf of the
Issuer may (x) obtain Rating Confirmation with respect to such Currency Hedge or (y) satisfy the Currency Hedge
Requirements using another method and Rating Confirmation is obtained with respect thereto.
The Collateral Manager on behalf of the Issuer, upon any default, prepayment or partial sale with respect to a
Non-USD Debt Obligation, may direct the Trustee to terminate, completely or partially, the Currency Hedge related
thereto and will so direct the Trustee to the extent necessary to ensure that such default, prepayment or partial sale
does not result in the notional amount of the Currency Hedge exceeding the principal amount of the Non-USD Debt
Obligation (together with any other Non-USD Debt Obligation denominated in the same Permitted Currency
acquired by the Issuer on or prior to the date of such default, prepayment or partial sale for which the Collateral
Manager, on behalf of the Issuer, has not entered into a separate Currency Hedge with a notional amount equal to its
entire Principal Balance (without giving effect to the proviso to such definition)), and any Currency Hedge
Termination Payments payable by the Issuer to the Hedge Counterparty as a result of any such termination shall be
paid from the Collection Accounts in accordance with the Indenture; provided, however, that when such Non-USD
Debt Obligation is sold completely, the Collateral Manager will direct the Trustee to sell or terminate such Currency
Hedge completely pursuant to the Indenture unless (x) the Issuer has acquired another Non-USD Debt Obligation
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denominated in the same Permitted Currency, (y) the Collateral Manager, on behalf of the Issuer, has not entered
into a separate Currency Hedge with a notional amount equal to its entire Principal Balance (without giving effect to
the proviso to such definition) and (z) the Collateral Manager elects to hedge such additional Non-USD Debt
Obligation under such Currency Hedge.
The Indenture requires that if at any time a Currency Hedge becomes subject to early termination due to the
occurrence of an event of default or a termination event, the Issuer and the Trustee (subject to the terms of the
Indenture and in consultation with the Collateral Manager) will take such actions (following the expiration of any
applicable grace period) to enforce the rights of the Issuer and the Trustee under such Currency Hedge as may be
permitted by the terms of such Currency Hedge and consistent with the terms of the Indenture, and will 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 Currency Hedge on such terms as satisfy the
Currency Hedge Requirements (unless such early termination is due to an additional termination event caused by an
Optional Redemption). No Currency Hedge entered into by the Issuer may include an additional termination event
resulting from an Optional Redemption unless such additional termination event is not effective until the notice of
such Optional Redemption given by the Co-Issuers has become irrevocable.
Securities Lending
Provided that no Event of Default has occurred and is continuing, the Collateral Manager on behalf of the Issuer
may from time to time instruct the Trustee to lend (pursuant to Securities Lending Agreements with maturity dates
not greater than 90 days) Collateral Debt Obligations to banks, broker-dealers and other financial institutions (other
than insurance companies) (each, a "Securities Lending Counterparty") that (i) in the case of a loan with a term of at
least 90 days but less than a year, have short-term debt ratings or a guarantor with such ratings of "P-1" from
Moody's and at least "A-1" from Standard & Poor's and (ii) in the case of a loan for a one-year term or more, a longterm
senior unsecured debt rating or counterparty rating that, individually and together with all other Securities
Lending Counterparties ratings, is consistent with the limits set forth in the tables below. At the time a Securities
Lending Agreement for a term of one year or more is entered into by the Issuer, the percentage of the Principal
Collateral Value loaned to a single counterparty shall not exceed the individual percentage set forth on Table 1
below (as long as any Class of Notes is rated by Moody's) and Table 2 below (as long as any Class of Notes is rated
by Standard & Poor's) for the credit rating of such counterparty, and the percentage of the Principal Collateral
loaned by the Issuer to counterparties having the same credit rating shall not exceed the aggregate percentage set
forth on Table 1 below (as long as any Class of Notes is rated by Moody's) and Table 2 below (as long as any Class
of Notes is rated by Standard & Poor's) for such credit rating:
Moody's Long-Term
Senior Unsecured Debt
Rating of Securities
Lending Counterparty*
Table 1
Individual
Securities Lending
Counterparty Limit
Aggregate
Securities Lending
Counterparty Limit
Aaa 15% 20%
Aa1 15% 20%
Aa2 15% 20%
Aa3 15% 20%
A1 15% 15%
A2** 10% 10%
* If the actively-monitored Moody's long-term senior unsecured debt rating of a Securities Lending
Counterparty has been put on a watch list for possible downgrade, such rating will be one
subcategory below its then current Moody's rating or, if such rating has been put on a watch list for
possible upgrade, one sub-category above its then current Moody's rating.
** The percentages in this row apply only if such Securities Lending Counterparty also has a shortterm
debt rating of "P-1" by Moody's. If such Securities Lending Counterparty does not also have a
short-term debt rating of "P-1" by Moody's, both the individual and the aggregate percentage limits
are zero.
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Table 2
Standard & Poor's Long-
Term Senior Unsecured
Debt Rating of Securities
Lending Counterparty
Individual
Securities Lending
Counterparty Limit
Aggregate
Securities Lending
Counterparty Limit
AAA 20% 20%
AA+ 10% 10%
AA 10% 10%
AA- 10% 10%
A+ 5% 5%
A 5% 5%
Such Securities Lending Counterparties may be affiliates of the Placement Agent and/or affiliates of the
Collateral Manager pursuant to one or more agreements (each, a "Securities Lending Agreement"), which
arrangements may create certain conflicts of interest. See "Risk Factors—Certain Conflicts of Interest Relating to
the Collateral Manager" and "—Certain Conflicts of Interest Relating to the Placement Agent." Collateral Debt
Obligations that are loans must be loaned pursuant to a Securities Lending Agreement to a Securities Lending
Counterparty that has posted with the Trustee and deposited into the Securities Lending Account, as collateral
security to secure its return of such Collateral Debt Obligations, Securities Lending Collateral in an amount at least
equal to 102% of the current market value (as determined by the Collateral Manager) of the loaned Collateral Debt
Obligations and that are identical in terms of issue and class, each as required by the related Securities Lending
Agreement and as further provided below; provided that Collateral Debt Obligations with a rating of "B3" or lower
by Moody's or "B-" or lower by Standard & Poor's shall not be loaned. The value of the Securities Lending
Collateral shall be determined daily by the Collateral Manager based on information obtained from a recognized
pricing source. In addition, (i) the duration of any Securities Lending Agreement shall not exceed the Stated
Maturity of the Notes and no Collateral Debt Obligations may be loaned pursuant to Securities Lending Agreements
with maturity dates greater than 90 days; (ii) the Securities Lending Collateral shall be denominated in dollars and
shall be subject to a first priority perfected security interest in favor of the Trustee or its agent and any Securities
Lending Collateral in the form of funds may be invested in obligations of issuers having short-term debt ratings or a
guarantor with such ratings of at least "P-1" from Moody's and at least "A-1" from Standard & Poor's; (iii) Collateral
Debt Obligations representing no more than 20% of the Principal Collateral Value of the Collateral Debt Obligations
may be loaned pursuant to Securities Lending Agreements; (iv) Collateral Debt Obligations representing no more
than 15% of the Principal Collateral Value of the Collateral Debt Obligations may be loaned to a single Securities
Lending Counterparty; and (v) each Securities Lending Agreement shall be on market terms as determined by the
Collateral Manager in its reasonable business judgment (except as may be required below) and shall (1) 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 Debt Obligations; (2) 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 Debt
Obligation is entitled to receive for the period during which the Collateral Debt Obligation is loaned; (3) require that
each of the Rating Agencies shall have confirmed in writing that the entry into the given Securities Lending
Agreement will not, at that time, result in the downgrade or withdrawal of the Rating Agency's ratings of the Notes;
(4) satisfy any other requirements of Section 1058 of the Code and the Treasury regulations promulgated thereunder,
as certified by the Collateral Manager, unless the Issuer and the Trustee shall have received an opinion of tax
counsel of nationally recognized standing in the United States experienced in such matters to the effect that the
absence of such requirement in such Securities Lending Agreement will not cause the Issuer to be engaged, or
deemed to be engaged, in a trade or business in the United States for United States federal income tax purposes or
otherwise to be subject to United States federal income tax on a net basis or otherwise cause adverse tax
consequences to the Issuer; (5) be governed by the laws of New York; and (6) permit the Issuer to assign its rights
thereunder to the Trustee pursuant to the Indenture. Each Securities Lending Agreement shall provide that if either
of the Rating Agencies downgrades a Securities Lending Counterparty such that the Securities Lending Agreement
to which the Securities Lending Counterparty is a party is no longer in compliance with the requirements relating to
the credit ratings of the Securities Lending Counterparty, then either (A) the Securities Lending Counterparty, within
ten days thereof, shall (i) obtain a guarantor for the Securities Lending Counterparty's obligations under the
Securities Lending Agreement and a Rating Confirmation from Standard & Poor's in respect thereto; (ii) reduce the
percentage of the Aggregate Principal Balance of the collateral portfolio loaned to such downgraded Securities
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Lending Counterparty so that the Securities Lending Agreement or Securities Lending Agreements to which such
Securities Lending Counterparty is a party, together with all other Securities Lending Agreements, are in compliance
with the requirements relating to the credit ratings of Securities Lending Counterparties; or (iii) take such other steps
as each Rating Agency that has downgraded such Securities Lending Counterparty may require in order to confirm
to the Issuer in writing that such Securities Lending Counterparty's obligations under the Securities Lending
Agreement or Securities Lending Agreements to which such Securities Lending Counterparty is a party will be
treated by such Rating Agency as if such obligations were owned by a counterparty having a rating at least
equivalent to the rating that was assigned by such Rating Agency to such downgraded Securities Lending
Counterparty immediately prior to its being downgraded or (B) if the Securities Lending Counterparty fails to
comply with subclause (A) above, the Issuer may terminate such Securities Lending Agreement.
The Trustee shall be authorized to enter into or acknowledge any Securities Lending Agreement (and any
account control agreement, collateral agreement or any similar agreement) at the instruction of the Collateral
Manager on behalf of the Issuer and to perform in accordance therewith, and to make delivery and accept delivery
and return (directly or through a Custodian) of any collateral pursuant thereto, or pursuant to such instruction as
shall be provided by the Collateral Manager in connection therewith and to take any actions and exercise any rights
and remedies under any such Securities Lending Agreement (and any account control agreement, collateral
agreement or any similar agreement) as the Collateral Manager may instruct; provided, however, that the Trustee
will not be under any obligation to enter into or acknowledge any Securities Lending Agreement (or any account
control agreement, collateral agreement or any similar agreement), or to deliver or receive any collateral pursuant
thereto, without specific written instruction of the Collateral Manager; and provided, further, that the Trustee will
not be obligated to enter into or acknowledge any Securities Lending Agreement (or any account control agreement,
collateral agreement or any similar agreement) that would in its judgment, subject it to any liability, whether
financial or otherwise, or cause it to incur or subject it to risk of any expense, cost or disbursement for which it is
not, in its judgment, adequately indemnified, or that would impose upon it any duties, obligations or responsibilities
that are unacceptable to it. The Collateral Manager shall provide written instructions to the Trustee with respect to
the administration of any such Securities Lending Agreement (and any account control agreement, collateral
agreement or any similar agreement) including, without limitation, with respect to any default and the exercise of
rights and remedies thereunder, as the Trustee may reasonably require. Any instruction by the Issuer or Collateral
Manager to the Trustee with respect to any Securities Lending Agreement (and any account control agreement,
collateral agreement or any similar agreement), the lending or return of Collateral Debt Obligations thereunder, the
posting of collateral thereunder or other matters concerning the administration thereof or exercise of rights or
remedies thereunder, shall contain such information as the Trustee reasonably may require to enable it to perform
and carry out the terms thereof. In connection with any such instruction by the Collateral Manager, the Trustee will
be entitled to receive and rely upon an officer's certificate of the Collateral Manager to the effect that such Securities
Lending Agreement and any related agreement, and the Securities Lending Counterparty thereunder, is each in
compliance with the requirements of the Indenture. The execution or acknowledgment of any Securities Lending
Agreement (and any account control agreement, collateral agreement or any similar agreement) by the Trustee will
not cause, or be deemed to imply, any responsibility of evaluation on the part of the Trustee for the sufficiency,
validity or adequacy of the terms thereof. None of the foregoing shall be construed to cause the Trustee to have any
fiduciary duties to any Securities Lending Counterparty.
So long as any Collateral Debt Obligation is on loan pursuant to a Securities Lending Agreement, (a) the
Trustee shall have no liability for any failure or inability on its part to receive any information or take any action in
respect of such Collateral Debt Obligation by reason of its being on loan (including, without limitation, any failure
to take action in respect of a notice of redemption, consent solicitation, exchange or tender offer or similar corporate
action) and (b) any such loaned Collateral Debt Obligation shall not be disqualified for return to the Trustee as a
Pledged Investment by reason of any change in circumstance or status during the time while on loan (including any
change which would cause such Collateral Debt Obligation to be ineligible for purchase by the Issuer under the
terms of the Indenture if applied to a proposed purchase thereof in the open market at the time of such return from
loan).
In any Securities Lending Agreement, each Securities Lending Counterparty will be required to acknowledge
and agree that the Issuer's obligations under the Securities Lending Agreement will be solely the corporate
obligations of the Issuer, and the Securities Lending Counterparty will not have any recourse to any of the directors,
officers, shareholders, incorporators, parties, agents, members or affiliates of the Issuer with respect to any claims,
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losses, damages, liabilities, indemnities or other obligations in connection with any transactions contemplated
thereby. Recourse in respect of any obligations of the Issuer under the Securities Lending Agreement will be limited
to the Collateral and on the exhaustion thereof all claims against the Issuer thereunder or any transactions
contemplated thereby will be extinguished and will not thereafter revive. In addition, each Securities Lending
Counterparty will be required to agree that it will not institute against the Issuer, or join, cause, cooperate with or
encourage any other Person in instituting against the Issuer, any bankruptcy, insolvency, reorganization, receivership
or similar proceeding so long as any Notes will be outstanding and there will have elapsed one year plus one day or,
if longer, the applicable preference period then in effect, including, without limitation, any period established
pursuant to the laws of the Cayman Islands since the last day on which any Notes will have been outstanding.
The number of different Securities Lending Counterparties, when added to the number of Hedge Counterparties,
Selling Institutions selling Participations and Synthetic Security Counterparties currently involved in transactions
with the Issuer, may not exceed 15.
A/B Exchanges
The Indenture provides that, notwithstanding anything therein to the contrary, a Collateral Debt Obligation that
is a security (the "A Item") may be exchanged for another security (the "B Item") solely for purposes of effecting an
A/B Exchange (as defined below) with respect to the A Item if the Trustee shall have received (i) an Issuer Order
with respect to such exchange and (ii) a certification from the Issuer that the relevant sections of the Indenture shall
have been complied with in respect of such A/B Exchange. An "A/B Exchange" with respect to an A Item means an
exchange of the A Item for (1) a B Item, which will be issued by the issuer or issuers of the A Item and will have
substantially identical terms to the A Item, except that one or more restrictions on the ability of the holder to sell or
otherwise dispose of the A Item (including the requirement that the holder deliver a prospectus to the transferee in
such sale or other disposition) are intended to be inapplicable to the B Item and (2) cash or cash equivalents in
settlement of fractional or unauthorized denominations of A Items tendered for exchange or B Items received in the
exchange.
Margin Stock
Regulation U governs certain extensions of credit by Regulation U Lenders. Under current interpretations of
Regulation U by the FRB and its staff, the purchase of debt securities such as the Notes in a private placement may
constitute an extension of credit. Among other things, Regulation U generally imposes certain limits on the amount
of Purpose Credit that Regulation U Lenders may extend that is secured directly or indirectly by Margin Stock.
Because Regulation U Lenders are not subject to the Regulation U credit limits with respect to extensions of credit
that are not Purpose Credit, the provisions of the Indenture and the Collateral Management Agreement are intended
to ensure that any credit extended by purchasers of the Notes is not Purpose Credit.
Regulation U also generally requires Regulation U Lenders (other than persons that are banks within the
meaning of Regulation U) to register with the FRB. Under an interpretation of Regulation U by the FRB staff,
Qualified Institutional Buyers purchasing debt securities secured by Margin Stock in a transaction in compliance
with Rule 144A are not required to register with the FRB where the proceeds of the securities are not used for
Purpose Credit. Non-U.S. Persons purchasing Notes in reliance on Regulation S who do not have their principal
place of business in a Federal Reserve District of the FRB also are not required to register with the FRB.
Any purchaser of Notes who is not a bank (as defined in Regulation U) and is not required to register with the
FRB will not be subject to any provisions of Regulation U. Any purchaser of the Notes who is a bank or who is
already registered with the FRB as a Regulation U lender generally must obtain from any person to whom they
extend credit secured by Margin Stock a Federal Reserve Form U-1 (for bank lenders) or Form G-3 (for non-bank
lenders). Initial purchasers of the Notes may obtain a Form U-1 or G-3, as applicable, executed by the Issuer or the
Co-Issuers, as applicable, from the Issuer, for execution and retention by such purchaser on or prior to the Closing
Date. Form U-1 or Form G-3, as applicable, also will be made available by the Trustee to any investors in the Notes
after the Closing Date. Each purchaser of Notes will be responsible for its own compliance with Regulation U,
including the filing by the purchaser of any required registration or annual filings under Regulation U, and
purchasers of Notes should consult with their own legal advisors as to Regulation U and its application to them.
Purchasers of Notes not otherwise exempt from registering with the FRB will be deemed to have covenanted and
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agreed that if such purchaser is not registered with the FRB on or prior to the date of their purchase, such purchaser
will, within the required time period, register with the FRB.
Under the Indenture, each purchaser of an interest in a Regulation S Global Note will be deemed to have
represented that either (x) such purchaser's principal place of business is not located within any Federal Reserve
District of the United States Federal Reserve Bank or (y) such purchaser has satisfied and will satisfy any applicable
registration or other requirements of the FRB including, without limitation, Regulation U, in connection with its
acquisition of the Notes.
The Collateral Manager shall not cause the Issuer to use the proceeds from the sale of the Notes (or any Interest
Proceeds or Principal Proceeds) for the purpose of buying or carrying any security (including any convertible
security) that is Margin Stock.
Certain Determinations in Respect of the Collateral
Unless otherwise specified, the assumptions described below will be applied to the determination of the
Portfolio Profile Test, the Collateral Quality Test, the Coverage Tests and the Reinvestment Overcollateralization
Test.
All calculations with respect to Scheduled Distributions on the Pledged Investments securing the Secured
Obligations will be made on the basis of information as to the terms of each such Pledged Investment and upon any
report of payments, if any, received on such Pledged Investment that are furnished by or on behalf of the issuer of
such Pledged Investment and, to the extent they are not manifestly in error, such information or report may be
conclusively relied upon in making such calculations.
For each Due Period, the Scheduled Distributions on any Collateral Debt Obligation (other than a Defaulted
Obligation, which, except as otherwise provided in the Indenture, will be assumed to have a Scheduled Distribution
of zero) will be the sum of (i) the total amount of payments and collections in respect of such Collateral Debt
Obligation (including the proceeds of the sale of such Collateral Debt Obligation received, and in the case of sales
which have not yet settled, to be received during the Due Period and not reinvested in Collateral Debt Obligations or
retained in the Principal Collection Account for subsequent reinvestment pursuant to the Indenture) that, if paid as
scheduled, will be available for payment on the Offered Securities and of certain expenses of the Co-Issuers at the
end of the Due Period and (ii) any such amounts received in prior Due Periods that were not disbursed on a previous
Distribution Date.
Each Scheduled Distribution receivable with respect to a Collateral Debt Obligation will be assumed to be
received on the applicable Due Date, and each such Scheduled Distribution will be assumed to be immediately
deposited in the Interest Collection Account or the Principal Collection Account, as the case may be, and except as
otherwise specified, to earn interest at a rate per annum equal to (a) three-month LIBOR minus (b) 0.25%, computed
on the basis of a 360-day year and 12 30-day months. All such funds will be assumed to continue to earn interest
until the date on which they are required to be available in a Collection Account for transfer to the Payment Account
and 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.
With respect to any Collateral Debt Obligation as to which any interest or other payment thereon is subject to
withholding tax of any Relevant Jurisdiction, each Distribution thereon will, for purposes of the Coverage Tests, the
Reinvestment Overcollateralization Test and the Collateral Quality Tests, be deemed to be payable net of such
withholding tax unless the issuer thereof or obligor thereon is required to make additional payments to fully
compensate the Issuer for such withholding taxes (including in respect of any such additional payments). On any
date of determination, the amount of any Scheduled Distribution due on any future date will be assumed to be made
net of any such uncompensated withholding tax based upon withholding tax rates in effect on such date of
determination.
On any Determination Date, for purposes of determining whether any Coverage Test or the Reinvestment
Overcollateralization Test is satisfied in connection with any provision of the Priority of Payments, and for purposes
of determining the amount of any required application of funds pursuant to any provision of the Priority of
Payments, such determination will be made after giving effect to any application of funds required to be made
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pursuant to such provision and pursuant to (and in the order and according to the priority set forth in) all preceding
provisions of the Priority of Payments.
Wherever a determination will be made pursuant to the Indenture as to where an issuer or obligor of a Collateral
Debt Obligation will be principally located, such determination will be made by the Collateral Manager in its good
faith judgment.
With respect to any Swap Agreement, for purposes of calculating compliance with the Portfolio Profile Test and
all other Collateral Debt Obligations statistics, (i) the notional amount stated in such Swap Agreement will be
deemed to be the Principal Balance, (ii) the rate or spread will be deemed the rate or spread to be paid by the Swap
Counterparty to the Issuer as described in clause (i) of the definition of "Swap Agreement," (iii) the associated
country and industry classification group of any Synthetic Security will be that of the issuer of the related Reference
Obligation and the assigned rating factor of any Synthetic Security will be that of the issuer of the related Reference
Obligation assigned in connection with any Rating Confirmation obtained in connection with the entering into of
such Swap Agreement, (iv) the Recovery Rate will be deemed to be the lower of the recovery rates assigned by the
Rating Agencies to the Swap Agreement as provided in the Indenture and (v) the Final Maturity will be the
scheduled termination date of such Swap Agreement. In the case of a Collateral Debt Obligation that matures
subsequent to the Stated Maturity but at the time of commitment to acquire is subject to a put option exercisable
only by the Collateral Manager on behalf of the Issuer, the lower of the rating of the obligor and the rating of the
Person to which the Collateral Debt Obligation may be put will be utilized for purposes of calculating compliance
with the Portfolio Profile Test and all other applicable Collateral Debt Obligations statistics.
For purposes of calculating the Principal Collateral Value, the Collateral Quality Tests, the Portfolio Profile
Test, the Coverage Tests and the Reinvestment Overcollateralization Test and for purposes of certain provisions of
the Indenture relating to sales of Collateral Debt Obligations, a Collateral Debt Obligation that is a Non-USD Debt
Obligation will be treated as a Collateral Debt Obligation having (i) a Principal Balance equal to the USD Notional
Amount of the related Currency Hedge, (ii) a spread equal to the sum of (a) the spread payable by the Hedge
Counterparty pursuant to the related Currency Hedge and (b) the product of (x) one minus the Unhedged Reduction
Percentage (expressed as a decimal) and (y) the Unhedged Interest Spread and (iii) the other characteristics of the
Non-USD Debt Obligation.
For purposes of the Indenture, monetary calculations with respect to all amounts received or required to be paid
in a currency other than U.S. Dollars shall be made on a "pro forma basis" after giving effect to the conversion of all
such amounts into U.S. Dollars, as of the date of such calculation, either (x) pursuant to the applicable Currency
Hedge if such amounts are covered by a Currency Hedge, (y) in a transaction at the Applicable Spot Market
Exchange Rate if such amounts are not hedged pursuant to a Currency Hedge and such amounts are actually
converted on the date of determination or (z) in any other case, using the Bloomberg Professional Service or a
reasonably equivalent service provided by Bloomberg L.P. All other monetary calculations under the Indenture shall
be in U.S. Dollars.
THE INDENTURE
The following summary describes certain provisions expected to be included in the Indenture. 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. The Co-Issuers believe that this Offering Memorandum contains descriptions of all material provisions
of the Indenture. See "Summaries and Incorporation by Reference of Transaction Documents."
Trustee
The Co-Issuers, the Collateral Manager and their affiliates may maintain other banking relationships, in the
ordinary course of business, with the Trustee. The payment of the fees and expenses of the Trustee relating to the
Notes is the obligation of the Co-Issuers. The Trustee and/or its affiliates may receive compensation in connection
with the investment of trust assets in certain Eligible Investments as provided in the Indenture.
The Indenture will contain provisions for the indemnification of the Trustee and its officers, directors,
employees and agents thereunder for any loss, liability or expense incurred without negligence, willful misconduct
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or bad faith on its part, arising out of or in connection with the acceptance or administration of the Indenture. In the
Indenture, the Trustee will agree not to cause the filing of a petition in bankruptcy against the Issuer for nonpayment
to the Trustee of amounts payable thereunder until at least one year and one day, or if longer, the applicable
preference period then in effect, after the payment in full of all of the Notes. The Trustee may resign at any time by
providing 60 days' prior written notice to the other Program Parties and the Rating Agencies. The Trustee may be
removed at any time by a Majority of the Controlling Class (with the consent of the Collateral Manager (such
consent of the Collateral Manager not to be unreasonably withheld)), upon notice delivered to the Rating Agencies
and each Hedge Counterparty or, in certain circumstances set forth in the Indenture, by order of a court of competent
jurisdiction. The Trustee may be removed at any time (i) when an Event of Default shall have occurred and be
continuing or (ii) when a successor Trustee has been appointed pursuant to the Indenture, in either case, by a
Majority of the Controlling Class. No resignation or removal of the Trustee and no appointment of a successor
Trustee will become effective until the acceptance of appointment of a successor Trustee. Promptly after such
removal of the Trustee and such appointment of the successor Trustee, the Co-Issuers must transmit notices of such
removal and appointment of a successor Trustee to the holders of the Notes, the Collateral Manager, each Rating
Agency, each Hedge Counterparty and the Preferred Share Paying Agent.
If the Trustee resigns, is removed or becomes incapable of acting, or if a vacancy occurs in the office of the
Trustee for any reason, the Co-Issuers, by Issuer Order and with the consent of the Collateral Manager and each
Hedge Counterparty, will promptly appoint a successor Trustee. If the Co-Issuers fail to appoint a successor Trustee
within 30 days after such resignation, removal or incapability or the occurrence of such vacancy, a successor Trustee
may be appointed by act of a Majority of the Controlling Class. The successor Trustee so appointed will, forthwith
upon its acceptance of such appointment, become the successor Trustee and supersede any successor Trustee
proposed by the Co-Issuers. If no successor Trustee has been so appointed by the Co-Issuers or a Majority of the
Controlling Class and have accepted appointment in the manner described in the Indenture, any holder of Notes
may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
Events of Default
An "Event of Default" is defined in the Indenture as any one of the following events:
(a) default in the payment of any interest in respect of any Class A Notes or, if no Class A Notes are
outstanding, any Class B Notes or, if no Class A Notes or Class B Notes are outstanding, any Class C Notes
when the same becomes due and payable, which default shall continue for a period of five Business Days;
(b) default in the payment of principal of any Note when the same becomes due and payable (whether at
the Stated Maturity of such Note or Redemption Date or otherwise);
(c) failure on any Distribution Date to disburse amounts available in the Payment Account in accordance
with the Priority of Payments (other than as provided in clause (a) or (b) above), and continuation of any such
failure for a period of five Business Days;
(d) either of the Co-Issuers or the pool of Collateral becomes an investment company required to be
registered under the 1940 Act (unless such requirement is eliminated within 30 days to the extent permitted
under applicable law);
(e) default in the performance, or material breach, of any other covenant or other agreement of the Issuer
or the Co-Issuer in the Indenture (other than (i) default in the performance, or breach, of (A) a covenant or other
agreement the default, performance or breach of which is elsewhere in this section or in the Indenture
specifically dealt with or (B) a covenant or other agreement the remedy for a default or breach of which is
specifically dealt with in the Indenture, or (ii) for the avoidance of doubt, failure to comply with or satisfy any
of the Collateral Quality Tests, the Coverage Tests, the Reinvestment Overcollateralization Test or the Portfolio
Profile Test), 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 any material respect when the same shall have been made, which default, breach or failure would
have a material adverse effect on the holders of any Class of Notes, and in each case the continuation of such
default, breach or failure for a period of 30 days after notice thereof shall have been given by registered or
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certified mail or overnight courier, to the Co-Issuers and the Collateral Manager by the Trustee or to the Issuer,
the Collateral Manager and the Trustee by the holders of at least 25% of the Aggregate Outstanding Amount 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;
(f) the institution by the Issuer or the Co-Issuer of Proceedings to be adjudicated as bankrupt or insolvent,
or the consent by it to the institution of bankruptcy or insolvency Proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under the Bankruptcy Code or any other similar
applicable law of any applicable jurisdiction, or the consent by it to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of the Issuer or
the Co-Issuer or of any substantial part of its property or to the ordering of the winding up or liquidation of its
affairs, respectively, or the making by it of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due, or the taking of any action by the Issuer or
the Co-Issuer in furtherance of any such action;
(g) (x) the entry of a decree or order by a court having competent jurisdiction in the premises adjudging
the Issuer or the Co-Issuer as bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the Issuer or the Co-Issuer under the
Bankruptcy Code or any other applicable law of any applicable jurisdiction, or appointing a receiver, liquidator,
assignee, or sequestrator (or other similar official) of the Issuer or the Co-Issuer or of any substantial part of its
property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days or (y) the rendering of one or more final judgments
against the Issuer or the Co-Issuer which exceed, in the aggregate, U.S.$5,000,000 (or such lesser amount as
any Rating Agency may specify) and which remain unstayed, undischarged and unsatisfied for 30 days after
such judgment(s) becomes nonappealable, unless the Collateral Manager in its reasonable business judgment
determines that adequate funds have been reserved or set aside for the payment thereof, and unless (except as
otherwise specified in writing by each Rating Agency) each Rating Agency shall have confirmed in writing its
then current rating, if any, of each Class of Notes;
(h) the Trustee fails at any time or for any reason to have a perfected, first priority security interest in
Collateral Debt Obligations and Eligible Investments with an Aggregate Principal Balance greater than or equal
to 5% of the sum of the Aggregate Outstanding Amount of the Notes, which failure continues for more than
15 Business Days, unless each of the Rating Agencies shall have confirmed in writing its then current rating, if
any, on the Notes;
(i) other than any deduction or withholding for or on account of any tax with respect to any payment
owing in respect of any Equity Security or Hedge Agreement, the imposition of taxes, fees, assessments or other
similar charges imposed by any governmental taxing authority on the Issuer or the Co-Issuer in an aggregate
amount in any 12-month period in excess of U.S.$5,000,000 (which amount shall be exclusive of any amounts
of such taxes, fees, assessments or other similar charges in respect of which the Issuer has received a "gross-up"
payment from the related obligor or reference counterparty); or
(j) if the Class A Overcollateralization Ratio is less than 102% on any Measurement Date on or after the
Effective Date.
A "Default" means any Event of Default or any occurrence that is, or with notice or the lapse of time or both
would become, an Event of Default.
If an Event of Default occurs and is continuing (other than an Event of Default specified in clause (f) or (g)
above), (i) the Trustee shall, at the direction of a Majority of the Controlling Class, by notice to the Co-Issuers or
(ii) the Trustee may, with the consent of a Majority of the Controlling Class, by notice to the Co-Issuers, the
Collateral Manager, each Hedge Counterparty and the Trustee of such consent, declare the principal of all Notes to
be immediately due and payable, and upon any such declaration such principal, all accrued and unpaid interest
thereon, and all other amounts payable under the Indenture with respect to the Notes will become immediately due
and payable (subject, however, to the provisions set forth in the Indenture). If an Event of Default specified in
clause (f) or (g) above occurs, all unpaid principal of all Notes, together with all accrued and unpaid interest thereon,
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and all other amounts payable under the Indenture with respect to the Notes, will automatically become due and
payable without any declaration or other act on the part of the Trustee or any holder of Notes.
Each Hedge Agreement will provide by its terms that if it is in effect upon a declaration of acceleration of the
Notes it will remain in effect until liquidation of the Collateral has begun and such declaration is no longer capable
of being rescinded or annulled.
If an Event of Default occurs and is continuing when any Notes are outstanding, the Trustee shall retain the
Collateral intact, refrain from liquidating the Collateral, collect and cause the collection of all payments in respect of
the Collateral and continue making payments in the manner described under "Application of Funds—Priority of
Payments" unless, subject to the terms of the Indenture, either (a) the Trustee determines, in consultation with the
Collateral Manager, that the anticipated net proceeds of a sale or liquidation of such Collateral (after deducting the
reasonable expenses of such sale or liquidation) would be sufficient to discharge in full the amounts then due and
unpaid on the Notes for principal and interest and all other amounts then due and payable under "Application of
Funds—Priority of Payments" above, and the Majority of the Controlling Class agrees with such determination or
(b) the holders of at least 66-2/3% of the Aggregate Outstanding Amount of each Class of Notes, voting as a
separate Class, and each Hedge Counterparty direct the sale and liquidation of the Collateral.
The Majority of the Controlling Class will have the right to direct the Trustee in connection with the Event of
Default (with respect to time, method and place) in the conduct of any proceedings for any remedy available to the
Trustee or exercising any trust, right, remedy or power conferred on the Trustee; provided that (i) such direction will
not conflict with any applicable rule of law or with any expressed provisions of the Indenture; (ii) the Trustee may
take any other action deemed proper by the Trustee that is not inconsistent with such direction; (iii) the Trustee has
been provided with security or indemnity reasonably satisfactory to it; and (iv) any direction to undertake a sale of
the Collateral may be made only as described above.
Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default
occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers vested in it
under the Indenture at the request of any holders of any of the Notes unless such holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities that might reasonably be incurred by it in
compliance with such request or direction. The Majority of the Controlling Class may, prior to the time a judgment
or decree for the payment of money due has been obtained by the Trustee, on behalf of the holders of all the Notes,
waive any past default and its consequences, except a default in the payment of principal of or interest or other
distributions on or of a covenant, a default arising under clauses (d), (f) or (g) of the definition of Event of Default or
a provision of the Indenture that cannot be modified or amended without the waiver or consent of the holders of
each outstanding Note affected thereby.
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 a continuing Event of Default, (ii) except in certain cases
of a default in the payment of principal or interest, the holders of at least 25% in Aggregate Outstanding Amount of
the Notes of the Controlling Class have made a written request upon the Trustee to institute such proceedings in
respect of such Event of Default in its own name as Trustee and such holders have offered the Trustee reasonable
indemnity, (iii) the Trustee for 30 days after receipt of such notice, request and offer of indemnity 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 a Majority of the Controlling Class.
In determining whether the holders of the requisite Aggregate Outstanding Amount of Notes have given any
request, demand, authorization, direction, notice, consent or waiver, (i) all accrued and unpaid Class B Deferred
Interest and Class C Deferred Interest will be disregarded and not included in the calculation of Aggregate
Outstanding Amount, (ii) Notes owned by the Issuer, the Co-Issuer or any other obligor upon the Notes or any
affiliate thereof will be disregarded and deemed not to be outstanding and (iii) Notes and Preferred Shares owned or
beneficially owned by the Collateral Manager or any of its affiliates will be disregarded and deemed not to be
outstanding solely in the following cases: (A) with respect to a vote to remove for "cause" the Collateral Manager as
Collateral Manager or any affiliate thereof that is appointed as a replacement collateral manager in accordance with
the terms of the Collateral Management Agreement or the related appointment of a successor collateral manager, (B)
with respect to a vote to consent to the assignment by the Collateral Manager of its rights and responsibilities under
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the Collateral Management Agreement, and (C) with respect to the waiver of any Event of Default under the
Indenture which resulted primarily from an action taken or failed to be taken by the Collateral Manager.
Notices
Notices to the holders of the Notes will be given by first-class mail, postage prepaid, or electronically
transmitted to the registered holders of the Notes at their addresses appearing in the register maintained in respect of
the Notes or, if so requested, via facsimile. In addition, for so long as any Notes are listed on the Irish Stock
Exchange and the rules thereof so require, notices will be published via the Company Announcement Office of the
Irish Stock Exchange or as otherwise required by the rules of the Irish Stock Exchange. Notwithstanding the
foregoing, in the case of Notes in global form, there may be substituted for such mailing the delivery of the relevant
notice to DTC for communication by such clearing agency to the holders of interests in the relevant Note in global
form, as applicable.
Modification of Indenture
Subject to the receipt of a Rating Confirmation with respect thereto, without the consent of the holders of any
Notes or Preferred Shares, but with the prior written consent of the Collateral Manager (if such supplemental
indenture would reduce the rights, decrease the fees or increase the obligations of the Collateral Manager, otherwise
impose greater duties or liabilities on the Collateral Manager or affect its rights or obligations) or any former
Collateral Manager (if such supplemental indenture would change any provision hereof entitling such former
Collateral Manager to any fee or other amount payable to it under the Indenture so as to reduce or delay the right of
such former Collateral Manager to such payment), the Co-Issuers, when authorized by board resolutions, each
Hedge Counterparty and the Trustee, at any time and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the Issuer or the Co-Issuer and the assumption by
any such successor Person of the covenants of the Issuer or the Co-Issuer in the Indenture and in the Notes
pursuant to the Indenture;
(b) 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 herein conferred upon the Co-Issuers;
(c) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee for the benefit
of the Secured Parties;
(d) 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;
(e) 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 to 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;
(f) to modify the restrictions on and procedures for resale and other transfer of the Notes in
accordance with any change in any applicable law or regulation (or the interpretation thereof) or to enable the
Co-Issuers to rely upon any less restrictive 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 thereunder;
(g) to correct any inconsistency, defect or ambiguity arising under the Indenture or in connection with
any other Program Document;
(h) to take any action necessary or advisable to prevent the Issuer, the holders of the Notes, or the
Trustee from being subject to withholding or other taxes, fees or assessments or to prevent the Issuer from being
engaged in a United States trade or business for U.S. federal income tax purposes or otherwise subject to U.S.
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federal, state, local or foreign income or franchise tax on a net income tax basis; provided that such action will
not cause the holders of the Notes to experience any material change to the timing, character or source of the
income from the Notes;
(i)
(j)
(k)
to facilitate or maintain the listing of any of the Notes on any exchange;
to facilitate hedging transactions;
to facilitate the ability of the Issuer to lend collateral pursuant to a Securities Lending Agreement;
(l) to modify the Collateral Quality Tests, the definition of the term "Moody's Rating" or "Standard &
Poor's Rating" or any of the defined terms used in the Collateral Quality Tests; or
(m) to facilitate the addition of additional collateral quality tests required by the Rating Agencies to
measure the characteristics of the pool of Collateral or add or modify defined terms related thereto.
The Trustee is authorized under the Indenture, subject to the terms thereof, to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee will not be obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties, liabilities or indemnities under the Indenture or otherwise, except to the extent required
by law.
The Trustee will not enter into any such supplemental indenture unless the Trustee has received advice from
Milbank, Tweed, Hadley & McCloy LLP or an opinion from another nationally recognized U.S. tax counsel
experienced in such matters (on which the Trustee will be entitled to rely) that (i) the modification will not cause the
holders of the Notes to experience any material change to the timing, character or source of the income from the
Notes, and (ii) the proposed supplemental indenture will not cause the Issuer to be treated as engaged in a U.S. trade
or business or otherwise subject to U.S. federal income or foreign income or franchise tax on a net income tax basis.
Subject to the provisions of the Indenture, the Trustee shall not enter into any such supplemental indenture:
(i) if, as a result of such supplemental indenture, the interests of any holder of the Notes or Preferred
Shares or Hedge Counterparty (for so long as it is a party under its Hedge Agreement) would be materially
adversely affected thereby, and
(x) in the case of any such supplemental indenture referred to in clauses (a) through (k)
above and, solely with respect to the holders of the Preferred Shares and any Hedge Counterparties,
clauses (l) and (m) above, unless notified within ten Business Days of giving of notice of such proposed
supplemental indenture to such parties by a Majority of any Class affected thereby, by a Majority of
holders of Preferred Shares or each Hedge Counterparty (for so long as it is a party under its Hedge
Agreement), as the case may be (after giving notice of such proposed change to such Persons), that the
interests of such Class or holders of Preferred Shares or Hedge Counterparty will be materially adversely
affected by the proposed supplemental indenture, the interests of such Class or holders of Preferred Shares
or Hedge Counterparty will be deemed not to be materially adversely affected by such proposed
supplemental indenture and
(y) in the case of any such supplemental indenture referred to in clauses (l) and (m) above,
the interests of the holders of the Notes of each Class will be deemed not to be materially adversely
affected by such proposed supplemental indenture if Rating Confirmation with respect to such Class is
received with respect to such supplemental indenture; and
(ii) without first obtaining the consent of the Collateral Manager, if such supplemental indenture
would reduce the rights, decrease the fees or increase the obligations of the Collateral Manager, otherwise
impose greater duties or liabilities on the Collateral Manager or affect its rights or obligations, it being expressly
acknowledged and understood that the Collateral Manager will not be bound by any such supplemental
indenture unless the Collateral Manager shall have consented thereto in writing.
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At the cost of the Co-Issuers, the Trustee will provide to the Secured Parties and to the Preferred Share Paying
Agent (for forwarding to the holders of the Preferred Shares) a copy of any proposed supplemental indenture at least
ten Business Days prior to the execution thereof by the Trustee and a copy of the executed supplemental indenture
after its execution. At the cost of the Co-Issuers, the Trustee will provide to the Rating Agencies a copy of any
proposed supplemental indenture at least ten Business Days prior to the execution thereof by the Trustee and, as
soon as practicable after the execution by the Trustee and the Co-Issuers of any such supplemental indenture,
provide to the Rating Agencies a copy of the executed supplemental indenture.
Subject to the receipt of a Rating Confirmation with respect thereto, with the consent of (1) a Majority of the
outstanding Notes voting together as a single class, by Act of such Majority delivered to the Trustee and the
Co-Issuers, (2) a Majority of the Preferred Shares adversely affected thereby, by Act of such Majority delivered to
the Trustee and the Issuer, (3) each Hedge Counterparty (if materially adversely affected thereby), (4) the Collateral
Manager, if such supplemental indenture would reduce the rights, decrease the fees or increase the obligations of the
Collateral Manager, otherwise impose greater duties or liabilities on the Collateral Manager or affect its rights or
obligations and (5) any former Collateral Manager, if such supplemental indenture would materially change any
provision of the Indenture entitling such Person to any fee or other amount payable to it under the Indenture so as to
reduce or delay the right of such Person to such payment, the Trustee and Co-Issuers may enter into one or more
indentures supplemental to the Indenture to add any provisions to, or change in any manner or eliminate any of the
provisions of, the Indenture or modify in any manner the rights of the holders of the Notes under the Indenture;
provided that, notwithstanding anything to the contrary contained under this caption "—Modification of Indenture,"
no such supplemental indenture may be entered into without the Issuer first having received the consent of the
Collateral Manager, each holder of each outstanding Note materially adversely affected thereby the holder of each
outstanding Preferred Share adversely affected thereby (which consent, in the case of the Preferred Shares, will be
evidenced by an officer's certificate of the Issuer certifying that such consent has been obtained) and each Hedge
Counterparty adversely affected thereby if such supplemental indenture would:
(a) change the Stated Maturity of the principal of or the due date of any installment of interest on any
Note, reduce the principal amount thereof or the interest rate (or, in the case of the Preferred Shares, the
amounts (if any) distributable to such holders on any Distribution Date pursuant to clause (19) and clause (21)
of the allocation of payments described below under "Application of Funds—Priority of Payments—
Distributions of Interest Proceeds" and each of clause (9) and clause (11) of the allocation of payments
described below under "Application of Funds—Priority of Payments—Distributions of Principal Proceeds")
thereon, or the Redemption Price with respect thereto, or change the earliest date on which any Note may be
redeemed, change the provisions of the Indenture relating to the application of proceeds of any Collateral to the
payment of principal of or interest on Notes (or, in the case of the Preferred Shares, the amounts (if any)
distributable to such holders on any Distribution Date pursuant to clause (19) and clause (21) of the allocation
of payments described below under "Application of Funds—Priority of Payments—Distributions of Interest
Proceeds" and each of clause (9) and clause (11) of the allocation of payments described below under
"Application of Funds—Priority of Payments—Distributions of Principal Proceeds") or change any place
where, or the coin or currency in which, any Note 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);
(b) reduce the percentage of the Aggregate Outstanding Amount of holders of Notes or holders of
each Class or the percentage of Preferred Shares held by the holders of Preferred Shares 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 or otherwise amend or modify
the requirements for such consent;
(c) 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 Collateral or terminate such lien on any property at any time subject hereto (other than
as permitted thereby or in connection with the sale thereof in accordance with the Indenture) or deprive the
holder of any Note or any other Secured Party of the security afforded by the lien of the Indenture;
(d) reduce the percentage of the Aggregate Outstanding Amount of Notes of each Class or the
aggregate outstanding principal amount of Notes, the consent of the holders of which is required to request the
Trustee to preserve the Collateral or rescind the Trustee's election to preserve the Collateral pursuant to the
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elevant provisions of the Indenture or to sell or liquidate the Collateral pursuant to the relevant provisions of
the Indenture;
(e) modify any of the provisions of the Indenture with respect to supplemental indentures, except
(x) to increase any required voting percentage of outstanding Notes whose holders' consent is required for such
actions or (y) to provide that certain other provisions of the Indenture (including, without limitation, certain
Events of Default) cannot be modified or waived without the consent of the holder of each outstanding Note
affected thereby;
(f) among other things, modify the Priority of Payments or the definition of the term "Holder,"
"Noteholder," or "Outstanding," or the subordination provisions of the Indenture;
(g)
increase the permitted minimum denominations of the Notes of any Class; or
(h) 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 on or principal of any Note (or, in the case of the Preferred Shares, the
amounts (if any) distributable to such holders on any Distribution Date pursuant to clause (19) and clause (21)
of the allocation of payments described below under "Application of Funds—Priority of Payments—
Distributions of Interest Proceeds" and each of clause (9) and clause (11) of the allocation of payments
described below under "Application of Funds—Priority of Payments—Distributions of Principal Proceeds") or
to affect the rights of the holders of Notes to the benefit of any provisions relating to payments to be made in
respect of or redemption of such Notes contained herein;
provided that no supplemental indenture may reduce the minimum denominations of the Notes.
In addition, with the consent of the Majority of the Preferred Shares delivered to the Trustee, the Co-Issuers and
the Collateral Manager, the Trustee and the Co-Issuers may enter into one or more supplemental indentures (i) in
connection with an Optional Redemption effected through a Redemption by Refinancing involving the issuance of
additional notes, to accommodate the issuance of such additional notes and to establish the terms thereof or (ii) in
connection with an Optional Redemption effected by a Redemption by Refinancing involving secured loans, to
accommodate borrowings under such secured loans and to establish the terms thereof; provided that, if a
supplemental indenture is entered into in connection with the issuance of additional notes or incurrence of secured
loans related to a Redemption by Refinancing, such supplemental indenture shall not be effective unless each of the
Rating Agencies has (a) if additional notes are issued in substantially the same capital structure as the Notes issued
on the Closing Date, confirmed in writing that such supplemental indenture will not result in a reduction or
withdrawal of the then current rating of any Class of Notes or (b) in any other case, provided a rating to the
additional notes to be issued or the secured loans to be incurred as agreed upon by the investors in such Redemption
by Refinancing.
The Trustee will not enter into any such supplemental indenture of the type contemplated by the immediately
preceding paragraph without first receiving a Rating Confirmation with respect thereto, unless each holder of the
Notes and the Collateral Manager have, after notice that a Rating Confirmation with respect thereto is not being
received, consented to such supplemental indenture. Unless notified by a Majority of any Class of Notes (after prior
written notice of the form and substance of the proposed supplemental indenture) that each such Class of Notes will
be adversely or materially adversely affected, as applicable, the Trustee will be entitled to rely as to the effect of
such supplemental indenture on the economic interests of the holders of Notes, on (x) the satisfaction of the
conditions, if any, of the Rating Agencies to their respective Rating Confirmation and/or (y) written certification of
the Collateral Manager as to the effect of such supplemental indenture on the economic interests of the holder of the
Notes. Such determination will be conclusive and binding on all present and future holders of the Notes. The
Trustee will not be liable for any such determination made in good faith and in reliance in good faith upon a Rating
Confirmation as described in clause (x) of the preceding sentence or the certification of the Collateral Manager as
described in clause (y) of the preceding sentence.
At the cost of the Co-Issuers, the Trustee will provide to the Program Parties, the Rating Agencies and to the
Preferred Share Paying Agent (for forwarding to the holders of the Preferred Shares) a copy of any proposed
supplemental indenture at least ten Business Days prior to the execution thereof by the Trustee and a copy of the
executed supplemental indenture after its execution (except to the extent that a period shorter than such ten-Business
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Day period shall have been consented to by all the holders of the Notes and not objected to by either Rating
Agency). At the cost of the Co-Issuers, the Trustee will provide to the Rating Agencies a copy of any proposed
supplemental indenture at least ten Business Days prior to the execution thereof by the Trustee (except to the extent
that a period shorter than such ten-Business Day period shall have been consented to by all the holders of the Notes
and not objected to by either Rating Agency) and, as soon as practicable after the execution by the Trustee and the
Co-Issuers of any such supplemental indenture, provide to the Rating Agencies a copy of the executed supplemental
indenture.
Confirmation of Ratings; Ramp-Up Failure
If, following the Effective Date, (x) the Collateral Debt Obligations then owned by the Issuer, and amounts on
deposit in the Proceeds Account that have been designated as Principal Proceeds by the Collateral Manager and
Principal Collection Account, fail to satisfy the Collateral Quality Tests, the Coverage Tests or the Reinvestment
Overcollateralization Test as of the Effective Date (a "Ramp-Up Failure"), then (A) the Collateral Manager will
request Moody's to confirm, within 60 Business Days following the Effective Date, that Moody's will not reduce or
withdraw its ratings of the Notes assigned thereto on the Closing Date and (B) if, by the 60th Business Day
following the Effective Date, Moody's has not provided the confirmation described in the preceding clause (x)(A),
the Collateral Manager will, if the Ramp-Up Failure is still continuing, instruct the Trustee to transfer amounts from
the Interest Collection Account to the Principal Collection Account (and with such funds the Issuer will purchase
Substitute Collateral Debt Obligations) in an amount sufficient to obtain from Moody's written confirmation that
Moody's will not reduce or withdraw its ratings of the Notes assigned thereto on the Closing Date or to cause the
Collateral Debt Obligations to satisfy the Collateral Quality Tests, the Coverage Tests and the Reinvestment
Overcollateralization Test (provided that the amount of such transfer would not result in deferral of interest with
respect to any Class of Notes on the next succeeding Distribution Date) or (y) Standard & Poor's provides the Issuer
written notice, within 60 Business Days following the Effective Date, that Standard & Poor's has or will imminently
reduce or withdraw its ratings of the Notes assigned thereto on the Closing Date, then the Collateral Manager will
instruct the Trustee to transfer amounts from the Interest Collection Account to the Principal Collection Account
(and with such funds the Issuer will purchase Substitute Collateral Debt Obligations) in an amount sufficient to
obtain from Standard & Poor's written confirmation that Standard & Poor's will not reduce or withdraw its ratings of
the Notes assigned thereto on the Closing Date (provided that the amount of such transfer would not result in
deferral of interest with respect to any Class of Notes on the next succeeding Distribution Date) (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 Collateral Manager on behalf of the
Issuer may take such other action, including but not limited to a Special Redemption, sufficient to obtain from each
Rating Agency written confirmation that such Rating Agency will not reduce or withdraw its ratings of the Notes
assigned thereto on the Closing Date.
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 holders of Notes of each Class will be deemed to agree in the Indenture and the holders of Preferred Shares
will be deemed to agree in the Fiscal Agency Agreement not to cause the filing of a petition in bankruptcy against
the Issuer or the Co-Issuer for failure to pay them amounts due under such Class of Notes or Preferred Shares until
one year and one day have elapsed since the final payments to the holders of the Notes or Preferred Shares or, if
longer, the applicable preference period then in effect.
Satisfaction and Discharge of Indenture
The Indenture will, subject to certain limitations, be discharged with respect to the Notes and the Collateral
securing the Notes upon delivery to the Trustee for cancellation of all of the Notes (or, within certain limitations,
upon deposit with the Trustee of funds sufficient for the payment or redemption thereof) and the payment by the
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Co-Issuers of all other amounts due under the Indenture, the Notes, the Administration Agreement, the Collateral
Administration Agreement, each Hedge Agreement and the Collateral Management Agreement.
Except as otherwise required by applicable law, any money deposited with the Trustee or any paying agent in
trust for the payment of the principal of or interest on any Note and remaining unclaimed for two years after such
principal or interest have become due and payable will be paid to the Co-Issuers on request of the Issuer; and the
holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuer or the Co-Issuer for
payment of such amounts and all liability of the Trustee or such paying agent with respect to such money (but only
to the extent of the amounts so paid to the Co-Issuers) will terminate.
Intended Tax Treatment of the Notes
The Indenture provides that each of the Issuer and the Co-Issuer intends that, for U.S. federal income tax
purposes, (i) the Notes be treated as debt of the Issuer and (ii) the Preferred Shares be treated as equity in the Issuer.
In addition, the Indenture provides that each holder of a Note or any interest therein shall, by virtue of its purchase
or other acquisition of such Note or interest therein, as applicable, be deemed to have agreed to treat (A) such Note
as indebtedness of the Issuer and (B) such Preferred Share as equity in the Issuer, in each case, for U.S. federal
income tax purposes.
Governing Law
The Indenture, the other Program Documents and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York. The Memorandum and Articles, the Declaration of Trust, the
Administration Agreement and the Preferred Shares will be governed by, and construed in accordance with, the law
of the Cayman Islands.
CERTAIN PARTICULARS OF THE PREFERRED SHARES
The Preferred Shares will consist of 44,800 Mandatorily Redeemable Preferred Shares, U.S.$0.01 par value per
share, of the Issuer, having an aggregate original issue price of U.S.$44,800,000, or U.S.$1,000 per Preferred Share.
The Preferred Shares will be unsecured equity interests in the Issuer and will be issued pursuant to the Issuer's
Amended and Restated Memorandum of Association and Amended and Restated Articles of Association (the
"Memorandum and Articles") and certain resolutions of the Board of Directors of the Issuer passed on or before the
Closing Date authorizing the issue of the Preferred Shares (the "Resolutions "). The Issuer will enter into a Fiscal
Agency Agreement, to be dated as of the Closing Date (the "Fiscal Agency Agreement" and collectively with the
Memorandum and Articles and the Resolutions, the "Preferred Share Documents"), among the Issuer, U.S. Bank
National Association, as preferred share paying agent (in such capacity, the "Preferred Share Paying Agent"), and
Maples Finance Limited, as share registrar. Amounts available for distribution to the Preferred Shares will be
distributed pursuant to the terms of the Indenture and the Preferred Share Documents.
The following summary describes certain provisions of the Preferred Share Documents, but does not purport to
be complete and is subject to, and qualified in its entirety by reference to, the provisions of the Preferred Share
Documents.
The Preferred Shares will be equity interests in the Issuer and will be fully subordinated to the Notes and to the
payment of all debts, fees and expenses of the Co-Issuers. The Preferred Shares will not be secured by the
Collateral or otherwise entitled to the benefits of the Indenture, but under the terms of the Indenture the Trustee will
pay to the Preferred Share Paying Agent amounts available for distribution to the Preferred Shares on each
Distribution Date pursuant to the Priority of Payments.
Distributions of dividends on, and the redemption amount of, the Preferred Shares will be made solely from the
proceeds of the Collateral available to be paid under the Indenture by the Trustee to the Preferred Share Paying
Agent in accordance with the Priority of Payments. To the extent that following realization of the Collateral, these
amounts are insufficient to pay the redemption amount of the Preferred Shares or dividends thereon, no other funds
will be available to make such payments.
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To the extent funds are available for such purpose under the Indenture as described above, dividends on the
Preferred Shares will be payable out of realized or unrealized profits and/or out of the Issuer's share premium
account, to the extent legally permitted, on each Distribution Date. Dividends may be paid, however, to the holders
of the Preferred Shares only to the extent there are funds legally available therefor and only if the Issuer is able to
pay its debts as they come due in the ordinary course of the Issuer's business on the applicable Distribution Date.
Pursuant to the Fiscal Agency Agreement, U.S. Bank National Association will be appointed as the Preferred
Share Paying Agent. The Issuer may at any time and from time to time terminate the appointment of the Preferred
Share Paying Agent through written notice and appoint one or more additional paying agents to perform the duties
of the Preferred Share Paying Agent. The Issuer will give prompt notice to the Trustee of the appointment or
termination of the Preferred Share Paying Agent and of the location and any change in the location of the Paying
Agent's office or agency. The Preferred Share Paying Agent will provide notice to the holders of the Preferred
Shares of any such change of which it receives notice.
The Preferred Share Paying Agent will make distributions on the Preferred Shares and perform various fiscal
services on behalf of the Issuer. On or prior to the Closing Date, the Preferred Share Paying Agent will establish a
segregated non-interest bearing account designated as the "Preferred Shares Distribution Account." The Preferred
Share Paying Agent will deposit any funds received from the Trustee pursuant to the Priority of Payments into the
Preferred Shares Distribution Account.
Pursuant to the Fiscal Agency Agreement, the Preferred Share Paying Agent, on behalf of the Issuer, will
promptly give notice of the amount of all distributions thereunder for the relevant Distribution Date to the holders of
the Preferred Shares and to the Issuer, the Collateral Manager and to the Trustee. The Preferred Share Paying Agent
will also make such information available to the holders of Preferred Shares at the offices of the Preferred Share
Paying Agent. Distributions to holders of the Preferred Shares, if any, will be paid on each Distribution Date other
than its mandatory redemption date to the persons in whose name the Preferred Shares are registered at the close of
business on the Record Date for such Distribution Date. Pursuant to the Fiscal Agency Agreement, distributions to
the holders of Preferred Shares will be paid pro rata in the proportion that the number of Preferred Shares held by
such holder bears to the total number of outstanding Preferred Shares.
On its mandatory redemption date, the Issuer will redeem all outstanding Preferred Shares at the Redemption
Price unless the Preferred Shares have been redeemed earlier through an Optional Redemption as described herein
under "Description of the Offered Securities—Redemption—Optional Redemption of the Preferred Shares" or
otherwise. Upon final redemption of the Preferred Shares, the holders thereof must present and surrender the
certificates representing the Preferred Shares at the office of the Preferred Share Paying Agent in exchange for final
payment. Pursuant to the Fiscal Agency Agreement, all redemption payments to a holder of Preferred Shares will be
made pro rata in the proportion that the number of Preferred Shares held by such holder bears to the total number of
outstanding Preferred Shares.
The Issuer and the Preferred Share Paying Agent, at any time and from time to time without the consent of any
holders of Preferred Shares, may enter into one or more amendments to the Fiscal Agency Agreement, in form
satisfactory to the Preferred Share Paying Agent, (A) to prevent the Issuer or the Preferred Share Paying Agent from
being subject to withholding or other taxes, fees, or assessments or to prevent the Issuer from being treated as
engaged in a trade or business within the United States for United States Federal income tax purposes or otherwise
subject to United States Federal, state, or local income or franchise tax on a net income tax basis, 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 the opinion)
or (B) if the modification does not, 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 the opinion) or a certificate of an officer of the Collateral Manager,
adversely affect in any material respect the interests of any Preferred Shares, to modify any provision or to remove
or modify any legend of any Preferred Share to reflect changes in applicable law or regulation relating to restrictions
on its transfer or eligibility to hold it or the passage of time such that any such restriction or any limitation on
eligibility has ceased to be applicable. Otherwise, the Fiscal Agency Agreement may not be amended except by the
Issuer and the Preferred Share Paying Agent in writing (with the consent of a Majority of the Preferred Shares);
provided that no such amendment will, without the consent of the holders of each outstanding Preferred Share
affected thereby (i) reduce in any manner the amount of, or delay the timing of, or change the allocation among the
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holders of the Preferred Shares of, the payment or distributions on the Preferred Shares or (ii) change the number or
percentage of the holders of Preferred Shares required to consent to any amendment to the Fiscal Agency
Agreement.
The Fiscal Agency Agreement provides for the terms of transfer of the Preferred Shares. Pursuant to the Fiscal
Agency Agreement, the Administrator is irrevocably appointed by the Issuer to act as the "Share Registrar" for the
purposes of registering the Preferred Shares and all transfers and redemptions of the Preferred Shares.
The payment of the fees and expenses of the Preferred Share Paying Agent and Share Registrar is solely the
obligation of the Issuer. The Fiscal Agency Agreement contains provisions for the indemnification of the Preferred
Share Paying Agent 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 Fiscal Agency Agreement.
The Fiscal Agency Agreement will be governed by, and construed in accordance with, the laws of the State of
New York. The Preferred Shares and the Memorandum and Articles will be governed by, and construed in
accordance with, the laws of the Cayman Islands.
THE COLLATERAL MANAGER
The information appearing herein has been prepared by the Collateral Manager and has not been independently
verified by the Issuer, the Co-Issuer or the Placement Agent. None of the Issuer, the Co-Issuer or the Placement
Agent assume any responsibility for the accuracy, completeness or applicability of such information.
General
Octagon Credit Investors, LLC ("Octagon" or the "Collateral Manager") will manage the Collateral Debt
Obligations and perform certain other reporting functions pursuant to the Collateral Management Agreement.
Octagon is expected to purchase up to 2,240 Preferred Shares on the Closing Date. Octagon is not required to retain
any of such Preferred Shares for any period of time.
Octagon currently manages approximately U.S.$3.0 billion in assets, comprised principally of bank loans and
high-yield bonds, for seven active investment vehicles other than the Issuer. Such vehicles consist of five arbitrage
cash flow collateralized debt obligation vehicles ("CDOs"), one market value CDO, one loan trust having
investment parameters similar to those of an arbitrage cash flow CDO, and one proposed arbitrage cash flow CDO
that is currently warehousing assets substantially similar to those in which the Issuer will invest.
Octagon commenced activities in late 1994 as CHL High Yield Advisors, a unit of Chemical Bank, predecessor
to JPMorgan Chase Bank, N.A. The unit was founded by James P. Ferguson, previously a senior officer of
Chemical Bank, to build an asset management business focused on loans and high-yield securities. In May of 1999,
the unit was reconstituted as Octagon Credit Investors, LLC, a Delaware limited liability Company. Octagon is
managed by its Managing Members, who consist of James P. Ferguson, who is its Executive Managing Member,
and Andrew D. Gordon, and Michael B. Nechamkin. Octagon is majority-owned by its employees and minorityowned
by certain other investors, including affiliates of JPMorgan Partners, the global private equity investment
affiliate and an indirect subsidiary of JPMorgan Chase, which affiliates own approximately 30% of Octagon's
equity. Octagon expects that JPMorgan Partners' ownership interest is likely to decline over time and eventually be
reduced to zero.
Biographies of Certain Key Individuals
Set forth below is information regarding certain persons who constitute certain key personnel of Octagon,
although such persons may not necessarily continue to be so employed during the entire term of the Collateral
Management Agreement. See "Risk Factors—Dependence on Key Personnel of the Collateral Manager" and "The
Collateral Management Agreement—Termination of the Collateral Management Agreement; Resignation or
Removal of the Collateral Manager; Assignment and Delegation."
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James P. Ferguson, Senior Portfolio Manager. Mr. Ferguson is the Senior Portfolio Manager of Octagon,
which he founded in 1994. Previously, Mr. Ferguson was the Group Credit Officer for the Global Banking Division
of Chemical Bank. Prior to that, he held numerous relationship management positions at Manufacturers Hanover
Trust Co., most notably in acquisition finance. Mr. Ferguson holds a B.S.B.A degree from Bucknell University.
Andrew D. Gordon, Portfolio Manager. Mr. Gordon serves as Portfolio Manager of Octagon Investment
Partners V, Ltd., Octagon Investment Partners VI, Ltd., Octagon Investment Partners II, LLC (a market value fund)
and a managed account. Prior to joining Octagon, Mr. Gordon was a Managing Director of Chemical Securities,
Inc. and prior to that, was a Vice President in the Acquisition Finance Division of Manufacturers Hanover Trust.
Mr. Gordon holds a B.A. degree from Duke University.
Michael B. Nechamkin, Portfolio Manager. Mr. Nechamkin serves as Portfolio Manager of Octagon
Investment Partners IV, Ltd., Octagon Investment Partners VII, Ltd., and Octagon Investment Partners VIII, Ltd.
Prior to joining Octagon, Mr. Nechamkin was a Vice President and Senior Analyst in the High Yield Research
Group of BT Alex Brown. Prior to that, Mr. Nechamkin was the Convertible Securities Analyst at Mabon Securities
and a Financial Consultant at Merrill Lynch and Co. Mr. Nechamkin holds a Bachelors degree and a Masters degree
of Talmudic Law from Ner Israel College and an M.B.A. degree from the University of Baltimore.
Patrick J. Steiner, Portfolio Manager. Mr. Steiner will serve as Portfolio Manager of Octagon's European cash
flow CDO. Prior to joining Octagon in June 2001, Mr. Steiner was Director of JPMorgan Chase's European High
Yield Research Group, which he created in 1998. Mr. Steiner joined JPMorgan Chase from American Express/IDS'
investment department in Minneapolis, where he covered the telecom, media and textile industries. Prior to that,
Mr. Steiner spent five years at a private equity boutique investing in international petrochemical projects and U.S.
domestic industrial companies, and three years as a corporate finance generalist at Bankers Trust Company.
Mr. Steiner holds a B.A. degree in Economics from Georgetown University, and an M.B.A. degree from Columbia
University. Mr. Steiner has received the Chartered Financial Analyst (CFA) designation.
Brendan Miles, Principal. Prior to joining Octagon, Mr. Miles was a Vice President and Director of Citigroup
in New York and Hong Kong where he specialized in leveraged finance, corporate debt restructuring and loan
syndications. Most recently, Mr. Miles was the head of distressed asset sales for Citibank's North American Credit
Card business where he managed a U.S.$15 billion portfolio of consumer loan charge-offs. Prior to joining
Citigroup, Mr. Miles was a U.S. Army Officer. Mr. Miles holds an M.B.A. degree from the Darden School of
Business Administration, University of Virginia and a B.S. degree from the United States Military Academy, West
Point, NY. Mr. Miles' coverage areas include the middle market, stressed and distressed issuers and issuers in the
automobile, defense and aerospace, and general industrials industries.
Mark W. Bodie, Associate. Prior to joining Octagon, Mr. Bodie worked in The Chase Manhattan Bank's Global
Investment Banking Group. Prior to joining Chase, Mr. Bodie worked as a Trading Assistant at Eaton Vance
Management. Mr. Bodie holds a B.S. degree and an M.S. degree in Finance from Boston College. Mr. Bodie
received the Chartered Financial Analyst (CFA) designation in 1998. Mr. Bodie's industry concentrations include
services, metals and mining, power and utilities, and oil and gas.
Matthew Lee, Associate. Prior to joining Octagon, Mr. Lee worked in Chase Securities, Inc.'s Latin America
Debt Capital Markets Group. Before joining Chase, Mr. Lee worked at MetLife analyzing Emerging Markets and
Project Finance debt. Mr. Lee holds a B.A. degree in Economics, International Relations and Psychology from the
University of Pennsylvania. Mr. Lee received the Chartered Financial Analyst (CFA) designation in 2000. Mr. Lee
follows credits in the telecommunications, broadcasting and publishing, and cable industries.
Gretchen M. Mohr, Associate. Ms. Mohr joined Octagon in 1999. Ms. Mohr's coverage area include the
gaming, lodging, real estate and home building, forest products, and packaging industries. Prior to joining Octagon,
Ms. Mohr attended Babson College from which she graduated Summa Cum Laude and holds a B.S. degree in
Investments.
Lauren M. Sokol, Associate. Prior to joining Octagon, Ms. Sokol worked in Chase Securities, Inc.'s Acquisition
Finance Group. Ms. Sokol holds a B.S. degree in Finance and Economics from the Stern School of Business at New
York University, from which she graduated Cum Laude. Ms. Sokol focuses on the leisure and entertainment, retail
and consumer products industries.
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Zhen Tao, Associate. Prior to joining Octagon, Ms. Tao covered chemicals and cable/telecom for Trust
Company of the West's CLO Group. Previous to that, Ms. Tao was part of the high yield chemicals research team
and leveraged finance origination team at Deutsche Bank. Ms. Tao holds a B.S. degree in Finance and Information
Systems from the Wharton School at the University of Pennsylvania. Ms. Tao follows credit in the chemical,
healthcare and business services industries.
Thomas A. Connors, Chief Financial & Administrative Officer. Prior to joining Octagon, Mr. Connors was a
Vice President and the Product Controller for the mortgage and asset-backed securities business at Lehman Brothers
Inc., and he held other positions in the new products accounting and financial reporting groups. Prior to that,
Mr. Connors was a Senior Manager in the Audit and Executive Office Divisions at KPMG LLP. Mr. Connors holds
a B.S. degree from St. Peter's College and is a Certified Public Accountant.
THE COLLATERAL MANAGEMENT AGREEMENT
Pursuant to a collateral management agreement between the Issuer and the Collateral Manager (the "Collateral
Management Agreement"), the Collateral Manager will perform certain portfolio management functions, including
without limitation, directing the investment and reinvestment of Collateral Debt Obligations and will perform certain
administrative functions on behalf of the Issuer in accordance with the applicable provisions of the Indenture. The
Collateral Manager will be authorized to supervise and direct the investment, reinvestment and disposition of
Collateral, with full authority and at its discretion (without reference to the Issuer), on the Issuer's behalf and at the
Issuer's risk. Without limiting the foregoing, except under certain limited circumstances, the Collateral Manager
will be authorized to select, and instruct the Trustee with respect to (a) Collateral Debt Obligations and Eligible
Investments to be acquired by the Issuer, (b) Collateral Debt Obligations, Equity Securities and Eligible Investments
to be sold or tendered by the Issuer and (c) the Securities Lending Agreements, if any. The Collateral Management
Agreement will provide that the services performed by the Collateral Manager thereunder will be provided on a nonexclusive
basis.
Compensation
As compensation for its services under the Collateral Management Agreement, the Collateral Manager will be
entitled to receive, subject to and in accordance with "Application of Funds—Priority of Payment", a Base
Collateral Management Fee, a Subordinated Collateral Management Fee and a Collateral Management Incentive
Fee.
The "Base Collateral Management Fee" is a fee that will accrue from the Closing Date and be payable to the
Collateral Manager, if and to the extent funds are available for such purpose in accordance with the Priority of
Payments, in arrears on each Distribution Date in an amount equal to the Base Collateral Management Fee Rate per
annum of the Principal Collateral Value measured as of the first day of the Due Period immediately preceding such
Distribution Date plus the amount of all Base Collateral Management Fees not paid on any previous Distribution
Date; provided that the Base Collateral Management Fee payable on the first Distribution Date will be equal to
0.125% per annum of the Principal Collateral Value measured as of the last day of the first Due Period. The Base
Collateral Management Fee will be calculated on the basis of a 360-day year and the actual number of days elapsed.
The Collateral Manager will also be entitled to receive "Base Collateral Management Fee Interest", which is interest
on any unpaid Base Collateral Management Fee when due (solely as a result of the operation of the Priority of
Payments). Such unpaid Base Collateral Management Fee will bear interest at the rate of three-month LIBOR plus
the Base Collateral Management Fee Rate per annum for the period from (and including) the date on which such
Base Collateral Management Fee is payable through (but excluding) the date of payment thereof. The Base
Collateral Management Fee Interest will be calculated on the basis of a 360-day year and the actual number of days
elapsed. The Base Collateral Management Fee and the Base Collateral Management Fee Interest payable on any
Distribution Date will be payable from Interest Proceeds remaining after payment of certain fees and expenses of the
Issuer but prior to payment of interest on the Notes. To the extent Interest Proceeds are insufficient to pay any
accrued and unpaid Base Collateral Management Fee and the Base Collateral Management Fee Interest payable on
any Distribution Date, the Base Collateral Management Fee and the Base Collateral Management Fee Interest will
be payable from Principal Proceeds available for such purpose as described under "Application of Funds—Priority
of Payments."
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The "Subordinated Collateral Management Fee" is a fee that will accrue from the Closing Date and be payable
to the Collateral Manager, if and to the extent funds are available for such purpose in accordance with the Priority of
Payments, in arrears on each Distribution Date in an amount equal to the Subordinated Collateral Management Fee
Rate per annum of the Principal Collateral Value measured as of the first day of the Due Period immediately
preceding such Distribution Date; provided that the Subordinated Collateral Management Fee payable on the first
Distribution Date will be equal to 0.375% per annum of the Principal Collateral Value measured as of the last day of
the first Due Period. The Subordinated Collateral Management Fee will be calculated on the basis of a 360-day year
and the actual number of days elapsed. The Collateral Manager may elect in its sole discretion, by notice to the
Trustee not later than two Business Days after the related Determination Date, to defer all or a portion of the
Subordinated Collateral Management Fee on any Distribution Date. The Collateral Manager will also be entitled to
receive Subordinated Collateral Management Fee Interest, which is interest on any unpaid Subordinated Collateral
Management Fee when due (whether as a result of the operation of the Priority of Payments or the Collateral
Manager's voluntary deferral of receipt). Such unpaid Subordinated Collateral Management Fee will bear interest at
the rate of three-month LIBOR plus the Subordinated Collateral Management Fee Rate per annum for the period
from (and including) the date on which such Subordinated Collateral Management Fee is payable through (but
excluding) the date of payment thereof. The Subordinated Collateral Management Fee Interest will be calculated on
the basis of a 360-day year and the actual number of days elapsed. The Subordinated Collateral Management Fee
and the Subordinated Collateral Management Fee Interest payable on any Distribution Date will be payable from
Interest Proceeds remaining after payment of certain fees and expenses of the Issuer, the Base Collateral
Management Fee, interest (and, if any of the Overcollateralization Tests or the Interest Coverage Test are not
satisfied on the related Distribution Date or if an Effective Date Ratings Downgrade exists, principal) on the Notes
and certain other amounts. To the extent Interest Proceeds are insufficient to pay any accrued and unpaid
Subordinated Collateral Management Fee and the Subordinated Collateral Management Fee Interest payable on the
Final Maturity Date, the Subordinated Collateral Management Fee and the Subordinated Collateral Management Fee
Interest will be payable from Principal Proceeds available for such purpose as described under "Application of
Funds—Priority of Payments."
The "Collateral Management Incentive Fee" with respect to (and from and including) the Distribution Date on
or immediately following the Distribution Date as of which the holders of the Preferred Shares have first received an
Internal Rate of Return of at least 10% (after taking into account any distributions made or to be made on the
Preferred Shares on such Distribution Date and on all prior Distribution Dates in accordance with and subject to the
Priority of Payments), is a fee payable to the Collateral Manager (or any former Collateral Manager, as described
below) equal to (i) 20% of the funds remaining, if any, after the payment on such Distribution Date of all amounts
available for distribution pursuant to each of clause (19) under "Application of Fund—Priority of Payments—
Distributions of Interest Proceeds" and clause (9) under "Application of Fund—Priority of Payments—Distributions
of Principal Proceeds," plus (ii) any such amount not previously distributed as a Collateral Management Incentive
Fee when due and payable on any prior Distribution Date (whether as the result of the operation of the Priority of
Payments or the Collateral Manager's voluntary deferral of receipt thereof), plus (iii) interest (computed on the basis
of a 360-day year and the actual number of days elapsed) on any Collateral Management Incentive Fees not paid
when due (whether as the result of the operation of the Priority of Payments or the Collateral Manager's voluntary
deferral of receipt thereof) at the rate equal to three-month LIBOR per annum for the period from (and including)
the date on which such Collateral Management Incentive Fee was payable through (but excluding) the date of
payment thereof. The Collateral Manager may elect in its sole discretion, by notice to the Trustee not later than two
Business Days after the related Determination Date, to defer all or a portion of the Collateral Management Incentive
Fee on any Distribution Date.
If amounts distributable on any Distribution Date as described under "Application of Funds—Priority of
Payments" are insufficient to pay the Base Collateral Management Fee or the Subordinated Collateral Management
Fee, then the payment thereof will be deferred and will be payable with interest on subsequent Distribution Dates as
described herein.
The Collateral Manager may assign or grant a security interest in its right under the Collateral Management
Agreement (including its right to receive all or a portion of the Base Collateral Management Fee, the Subordinated
Collateral Management Fee or the Collateral Management Incentive Fee) without the consent of the Issuer or any
holders of the Notes or Preferred Shares; provided that such assignment or grant will not release the Collateral
Manager from its duty to perform its obligations thereunder.
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If the Collateral Management Agreement is terminated for any reason or the entity then serving as Collateral
Manager resigns or is removed, (a) all Base Collateral Management Fees and Subordinated Collateral Management
Fees accrued but not paid prior to the date of such termination, removal, resignation or assignment, as the case may
be (the "Exit Date"), will continue to be payable to the Collateral Manager on Distribution Dates occurring after the
Exit Date and (b) the Specified Percentage (as defined below) of Collateral Management Incentive Fees payable on
each Distribution Date occurring after the Exit Date will continue to be payable to the Collateral Manager on such
Distribution Dates, in each case, in accordance with the Priority of Payments. As used herein, (i) "Specified
Percentage" means with respect to each Distribution Date occurring after the Exit Date, the ratio, expressed as a
percentage (but in no event to exceed 100%), of (x) the Internal Rate of Return of the Preferred Shares as of the
Distribution Date occurring on or immediately preceding the Exit Date to (y) the Internal Rate of Return of the
Preferred Shares as of such Distribution Date.
Termination of the Collateral Management Agreement; Resignation or Removal of the Collateral Manager;
Assignment and Delegation
The Collateral Management Agreement will automatically terminate if the Collateral Manager determines in
good faith that the Issuer, the Co-Issuer or the pool of Collateral becomes an investment company required to be
registered under the 1940 Act and the Collateral Manager notifies the Issuer of such determination.
The Collateral Manager may resign upon 90 days' written notice to the Issuer (or such shorter notice period as is
acceptable to the Issuer).
The Collateral Manager may be removed for cause upon ten days' prior written notice to the Collateral Manager
at the direction of (a) the holders of at least 66-2/3% of the Preferred Shares (other than Preferred Shares owned by
the Collateral Manager or any affiliate of the Collateral Manager) or (b) the holders of at least 66-2/3% of the
Aggregate Outstanding Amount of each Class of Notes (excluding any Notes owned by the Collateral Manager or
any affiliate of the Collateral Manager). For this purpose, "cause" means the following events:
(i) the Collateral Manager willfully violates, or takes any action that it knows breaches, any material provision
of the Collateral Management Agreement or the Indenture applicable to it;
(ii) the Collateral Manager breaches in any respect any provision of the Collateral Management Agreement or
the Indenture applicable to it (other than as specified in clause (i)) and (x) such breach has a material adverse effect
on holders of Notes of any Class or on holders of Preferred Shares and (y) the Collateral Manager fails to cure such
breach within 30 days of becoming aware of, or receiving notice from the Issuer or Trustee of, such breach or if such
breach is remediable but is not capable of cure within 30 days, the Collateral Manager fails to cure such breach
within the period in which a reasonably diligent person could cure such breach (but in no event longer than 60 days);
(iii) any representation, warranty, certification or statement made or delivered by the Collateral Manager in or
pursuant to the Collateral Management Agreement or the Indenture fails to be correct in any material respect when
made and (x) such failure has a material adverse effect on the holders of Notes of any Class or on holders of
Preferred Shares and (y) no correction of the underlying condition that caused such representation, warranty,
certification or statement to be incorrect is made for a period of 30 days after the Collateral Manager becoming
aware of, or receiving notice from the Issuer or the Trustee of, such failure or if such underlying condition is
remediable but is not capable of correction within 30 days, the Collateral Manager fails to correct such underlying
condition within the period in which a reasonably diligent person could correct such underlying condition (but in no
event longer than 60 days);
(iv) the Collateral Manager is wound up or dissolved or there is appointed over it or a substantial portion of its
assets a receiver, administrator, administrative receiver, trustee or similar officer, or certain insolvency or
bankruptcy related events occur with respect to the Collateral Manager (as specified in the Collateral Management
Agreement); or
(v) there occurs an act by the Collateral Manager that constitutes fraud or criminal activity in the performance
of its obligations under the Collateral Management Agreement, or the Collateral Manager is indicted for a criminal
offense materially related to its primary businesses.
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In addition, the Collateral Manager may be removed upon 10 days' prior written notice to the Collateral
Manager at the direction of (a) a Majority of the Outstanding Notes voting together as a single class (excluding any
Notes owned by the Collateral Manager or any Affiliate of the Collateral Manager) and (b) a Majority of the
Preferred Shares (excluding Preferred Shares owned by the Collateral Manager or any Affiliate of the Collateral
Manager) upon the occurrence of both of the following events:
(i) a Person or "group" (as such term is defined in Section 13 of the Exchange Act), other
than the Persons that own any ownership interest of OCI as of the Closing Date or any Affiliate thereof,
acquires, directly or indirectly, whether by purchase, corporate reorganization, merger or consolidation, at
least 51% of the ownership interest of OCI (outstanding immediately prior to such acquisition); and
(ii)
failure to maintain at least one Key Manager on or after the KM Date.
Failure to maintain the above Key Manager requirement is referred to herein as a "Key Manager Event". A
"Key Manager" is a person employed by the Collateral Manager or an Affiliate of the Collateral Manager as an
employee or a portfolio manager or in a management level position which is actively involved in the management of
the Collateral on behalf of the Issuer and is either one of the Initial Key Managers or a person subsequently
appointed as such pursuant to the procedures described below. The "Initial Key Managers" are James P. Ferguson,
Andrew D. Gordon and Michael B. Nechamkin. If at any time there are no Key Managers, the Collateral Manager
will notify the Trustee within 30 days of such event and include in such notice the name of one or more proposed
replacement Key Managers. Upon receipt of any such notice, the Trustee will be required to give prompt written
notice of each such proposed replacement Key Manager(s) to the Holders of the Notes and the Preferred Share
Paying Agent (for forwarding to the Holders of the Preferred Shares). As to any such proposed replacement Key
Manager, if (a) a Majority of the Outstanding Notes voting together as a single class (excluding any Notes owned by
the Collateral Manager or any Affiliate of the Collateral Manager) and (b) a Majority of the Preferred Shares
(excluding Preferred Shares owned by the Collateral Manager or any Affiliate of the Collateral Manager) do not
object to such proposed replacement Key Manager within 30 days, the appointment of such proposed replacement
key manager will be deemed confirmed. If no replacement Key Manager is appointed pursuant to the foregoing, a
Majority of the Preferred Shares (excluding Preferred Shares owned by the Collateral Manager or any Affiliate of
the Collateral Manager) will have the right to nominate a proposed replacement Key Manager within 30 days, which
will be subject to approval or deemed approval as provided in the immediately preceding sentence (the deadline for
obtaining such approval, whether pursuant to this sentence or the immediately preceding sentence, is referred to as
the "KM Date"). If after the occurrence of a Key Manager Event, one or more replacement Key Managers are
approved or deemed approved in accordance with the foregoing, and as a result a Key Manager Event no longer
exists, then the Collateral Manager will not be removed as described in this clause (b) unless a new Key Manager
Event subsequently occurs and continues beyond the time permitted herein. In addition, even in the absence of a
Key Manager Event, the Collateral Manager may propose an additional Key Manager (including in replacement of a
Person that ceases to be a Key Manager) in accordance with, and who will be subject to approval or deemed
approval as provided in, the foregoing procedures.
No removal or resignation of the Collateral Manager will be effective unless a successor has agreed in writing
to assume all of the Collateral Manager's duties and obligations pursuant to the Collateral Management Agreement
and such successor has been approved by (i) a Majority of the Preferred Shares (excluding any Preferred Shares
owned by the Collateral Manager or any affiliate of the Collateral Manager) and (ii) a Majority of the Controlling
Class (excluding any Notes owned by the Collateral Manager or any affiliate of the Collateral Manager) and each
Rating Agency has confirmed that it will not reduce or withdraw the rating assigned by it on the Closing Date to any
Class of Notes as a result thereof. If the Collateral Manager is removed or resigns for any reason, any holder or
group of holders of 10% or more of the Aggregate Outstanding Amount of the Notes or any holder or group of
holders of 10% or more of the Preferred Shares may nominate a Successor Collateral Manager.
Such successor Collateral Manager must be ready and able to assume the duties of the Collateral Manager
within 45 days after the date of such notice of resignation or removal of the Collateral Manager. If no successor
Collateral Manager has been appointed or an instrument of acceptance by a successor Collateral Manager has not
been delivered to the Collateral Manager (a) within 45 days after approval of the successor Collateral Manager by
the Issuer and the issuance of a notice of a vote regarding the successor Collateral Manager to the holders of the
Notes and Preferred Shares or (b) within 90 days after the date of notice of resignation or removal of the Collateral
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Manager, the resigning or removed Collateral Manager may petition any court of competent jurisdiction for the
appointment of a successor Collateral Manager without the approval of the holders of the Notes.
The Collateral Manager will not be permitted to delegate or assign its rights or responsibilities under the
Collateral Management Agreement without the consent of the Issuer and a Majority of the Preferred Shares
(excluding any Preferred Shares owned by the Collateral Manager or any affiliate of the Collateral Manager);
provided that any successor to the Collateral Manager by way of merger, conversion, consolidation or acquisition of
all or substantially all of the Collateral Manager's portfolio management business will be the successor Collateral
Manager under the Collateral Management Agreement automatically and immediately upon such merger,
conversion, consolidation or acquisition and the Collateral Manager may assign its rights and delegate its
responsibilities under the Collateral Management Agreement to an Affiliate of the Collateral Manager without the
consent of the Issuer, or any holder of Notes or Preferred Shares, provided, however, that such Affiliate has
demonstrated the ability to professionally and competently perform the duties imposed under the Collateral
Management Agreement with a substantially similar level of expertise as the initial Collateral Manager. A change
of control (within the meaning of the Advisers Act) with respect to the Collateral Manager will not constitute an
assignment or delegation for the foregoing purpose.
No provision of the Collateral Management Agreement may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by the Issuer and the Collateral Manager; provided that any
amendment that affects the rights and obligations of a Collateral Manager that has resigned or been removed will
also require the written consent of such Collateral Manager; provided, further, that neither the Issuer nor the
Collateral Manager will enter into any agreement amending, modifying or terminating the Collateral Management
Agreement (other than in respect of an amendment or modification of the type that may be made to the Indenture
without the consent of any holder of Notes), without notifying each Rating Agency thereof and (a) until each Rating
Agency has confirmed that it will not reduce or withdraw the rating assigned by it on the Closing Date to any Class
of Notes with respect thereto and (b) unless such amendment or modification would not adversely affect the rights
of the holders of the Preferred Shares, the consent of a Majority of the Preferred Shares.
The duties and obligations of the Collateral Manager are solely those of Octagon and will not be guaranteed by
any entity that owns or is otherwise affiliated with Octagon. The Notes do not represent an interest in or obligations
of, and are not insured or guaranteed by Octagon or any entity that owns or is otherwise affiliated with Octagon.
Affiliate Transactions
The Collateral Management Agreement will provide that, except as provided in clauses (a) through (e) below
and by applicable law, the Collateral Manager will not cause the Issuer (i) in the event that, and for so long as, the
Collateral Manager is a JPMorgan Chase affiliate, to engage in transactions with JPMorgan Chase affiliates with
respect to securities (including Collateral Debt Obligations) or (ii) to purchase securities (including Collateral Debt
Obligations) from or sell securities (including Collateral Debt Obligations) to any account or portfolio for which the
Collateral Manager or any of its affiliates serves as investment advisor or any other affiliate of the Collateral
Manager, without, in each case, the prior approval of the Issuer, but subject to certain terms and conditions set forth
in the Collateral Management Agreement, acting for this purpose at the direction or with the approval of a Majority
of the Preferred Shares (excluding Preferred Shares owned by the Collateral Manager or any affiliate of the
Collateral Manager) and to the extent permitted by applicable law. Notwithstanding the foregoing, to the extent
permitted by applicable law, the Collateral Manager may cause the Issuer to:
(a) purchase Collateral Debt Obligations or Eligible Investments from JPMorgan Chase affiliates (other than
Specified Octagon Affiliates) in connection with the primary syndication or underwriting of such Collateral Debt
Obligations, provided that, in each case, (i) such purchase is made on the same terms as are, to the knowledge of the
Collateral Manager, offered to and contemporaneously purchased at least 51% in principal amount by third parties in
connection with the syndication or underwriting of such Collateral Debt Obligations or Eligible Investments and
(ii) after giving effect to such purchase, the Issuer may not own more than 33-1/3% in principal amount of such
Collateral Debt Obligations or Eligible Investments;
(b) acquire interests in Collateral Debt Obligations or Eligible Investments from JPMorgan Chase affiliates
(other than Specified Octagon Affiliates) in secondary market transactions, in each case for a price no greater than
fair market value, as determined on the basis of "ask" quotes obtained from an Approved Source or, in the case of
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ank loans, on the basis of the composite price determined by a Loan Pricing Corporation or Markit Loans, Inc.
(formerly known as LoanX, Inc.);
(c) sell Collateral Debt Obligations or Eligible Investments, or interests therein, to JPMorgan Chase affiliates
(other than Specified Octagon Affiliates), in each case for a price no less than fair market value, as determined on
the basis of "bid" quotes obtained from an Approved Source or, in the case of bank loans, on the basis of the
composite price determined by a Loan Pricing Corporation or Markit Loans, Inc. (formerly known as LoanX, Inc.);
(d) engage a JPMorgan Chase affiliate as broker in connection with transactions relating to Collateral Debt
Obligations or Eligible Investment, provided that the Collateral Manager determines on a reasonable basis that in the
case of a purchase by the Issuer, the net price that would be paid by the Issuer for the Collateral Debt Obligations or
Eligible Investments will be no higher than the net price what would be paid by the other purchasers, or in the case
of a sale by the Issuer the net price that would be received by the Issuer for the Collateral Debt Obligations or
Eligible Investment will be no lower than the net price to be received by other sellers, in each case in a comparable
transaction of similar dollar amount and at a similar time with respect to the same asset, and that such JPMorgan
Chase affiliates will not charge any greater commission or other compensation than that which is reasonable and
customary for such transactions; and
(e) upon the winding up or liquidation of the affairs of the Issuer in accordance with the terms of the Indenture
or in connection with an Optional Redemption or Tax Redemption, sell all or any of the Collateral Debt Obligations
to any account or portfolio for which the Collateral Manager or any of its affiliates serves as investment advisor or
any other affiliate of the Collateral Manager; provided that the sale price for each such Collateral Debt Obligation so
sold is either (i) not less than the offered price determined by Loan Pricing Corporation or Markit Loans, Inc.
(formerly known as LoanX, Inc.) or any other generally recognized pricing service for the applicable Collateral Debt
Obligation or (ii) approved by the Issuer, acting for this purpose at the direction or with the approval of a Majority
of the Preferred Shares (excluding Preferred Shares owned by the Collateral Manager or any affiliate of the
Collateral Manager).
In addition to the foregoing, the portfolio of Collateral Debt Obligations expected to be owned by the Issuer on
the Closing Date will include approximately U.S.$75,000,000 principal amount of Collateral Debt Obligations
consisting of loans that the Issuer purchased from Octagon III in connection with the optional redemption of the
securities issued by Octagon III and a material amount of Collateral Debt Obligations consisting of loans that the
Issuer purchased from JPMorgan Chase affiliates. Each such Loan purchased from Octagon III during the
warehousing period preceding the Closing Date was purchased by the Issuer for a price equal to the offered price
provided by Markit Loans, Inc. (formerly known as LoanX, Inc.) at approximately the time the Issuer entered into a
commitment to sell such Loan plus 1/16 of 1%.
As used herein, (a) "Approved Source" means any of (i) two or more Approved Dealers, (ii) an Approved
Exchange or (iii) an Approved Pricing Service; (b) "Approved Exchange" means any major securities exchange, the
NASDAQ, TRACE or any other exchange or quotation system providing regularly published securities prices that is
disclosed in writing to the Trustee and the holders of the Notes and not objected to by a Majority of the Controlling
Class within 15 days of such disclosure; and (c) "Specified Octagon Affiliate" means any affiliate of Octagon that is
owned or controlled by Octagon.
For purposes of this "—Affiliate Transactions" section, the term "affiliate" shall have the meaning assigned to
such term in the Advisers Act.
See "Risk Factors—Relating to Certain Conflicts of Interest—The Issuer Will be Subject to Various Conflicts
of Interest Involving the Collateral Manager and its Affiliates."
COLLATERAL ADMINISTRATION
The Issuer will retain U.S. Bank National Association as collateral administrator (the "Collateral
Administrator") under the terms to be contained in the Collateral Administration Agreement. Under such terms, the
Collateral Administrator will assist the Collateral Manager in monitoring the assets in the portfolio by maintaining a
database of certain characteristics of the assets in the portfolio and will provide to the Issuer and the Collateral
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Manager certain reports, schedules and calculations with respect to the portfolio. The compensation paid to U.S.
Bank National Association in its capacity as Collateral Administrator will be in addition to the fees paid to it in
conjunction with its responsibilities as Trustee.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary was not intended or written to be used, and cannot be used, for the purpose of avoiding
U.S. federal, state or local tax penalties. The following summary was written in connection with the promotion or
marketing by the Placement Agent and/or the Co-Issuers of the Offered Securities. Each holder of Offered
Securities should seek advice based on its particular circumstances from an independent tax advisor.
General
The following is a general discussion based upon present law of certain United States Federal income tax
considerations for prospective purchasers of the Notes and Preferred Shares. The discussion addresses only persons
that purchase Notes or Preferred Shares in the original offering, hold the Notes or Preferred Shares as capital assets,
and use the United States dollar as their functional currency. The discussion does not consider the circumstances of
particular purchasers, some of which (such as financial institutions, insurance companies, regulated investment
companies, tax exempt organizations, dealers, traders who elect to mark their investment to market, person subject
to the alternative minimum tax and persons holding the Notes or Preferred Shares as part of a hedge, straddle,
conversion, constructive sale or integrated transaction) are subject to special tax regimes. The discussion does not
address any state, local or foreign taxes or the federal alternative minimum tax. Special rules also apply to
individuals, certain of which may not be discussed below.
T0 ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE CIRCULAR 230, HOLDERS ARE
HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS OFFERING
MEMORANDUM IS NOT INTENDED OR WRITTEN BY US TO BE RELIED UPON, AND CANNOT BE
RELIED UPON BY HOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED
ON HOLDERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS WRITTEN IN
CONNECTION WITH THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS
ADDRESSED HEREIN; AND (C) HOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR
CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
EACH PROSPECTIVE PURCHASER IS ALSO URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES AND PREFERRED SHARES UNDER
THE STATE AND LOCAL LAWS OF THE UNITED STATES AND THE LAWS OF THE CAYMAN ISLANDS
AND ANY OTHER JURISDICTION WHERE THE PURCHASER MAY BE SUBJECT TO TAXATION.
For purposes of this discussion, "U.S. Holder" means the beneficial owner of a Note that is (i) a citizen or
resident of the United States, (ii) a corporation organized in or under the laws of the United States or any political
subdivision thereof, (iii) a trust subject to the control of one or more U.S. persons and the primary supervision of a
United States court or (iv) an estate the income of which is subject to United States Federal income taxation
regardless of its source. "non-U.S. Holder" means a person other than a U.S. Holder. The treatment of partners in a
partnership that owns Notes or Preferred Shares may depend on the status of such partners and the status and
activities of the partnership and such persons should consult their own tax advisors about the consequences of an
investment in the Notes or Preferred Shares.
United States Federal Tax Treatment of the Issuer
The Issuer will adopt certain operating procedures designed to reduce the risk that the Issuer will be deemed to
have engaged in the conduct of a trade or business in the United States. The Issuer will receive an opinion of
Milbank, Tweed, Hadley & McCloy LLP subject to customary assumptions and qualifications to the effect that,
assuming the Issuer and Collateral Manager comply with the Issuer's operating procedures and the transaction
documents, the Issuer will not be engaged in a trade or business in the United States. The Issuer will not obtain any
ruling from the Internal Revenue Service ("IRS") and such an opinion of counsel is not binding on the IRS or any
court. If the Issuer is not engaged in a United States trade or business, the Issuer will not be subject to United States
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Federal income tax on its net income. If the Issuer were found to be engaged in a United States trade or business, it
could be subject to substantial United States Federal income taxes the imposition of which would materially impair
its ability to pay interest on and principal of the Notes and make distributions on the Preferred Shares. In addition, if
the Issuer is found to be engaged in a United States trade or business, payments in respect of the Notes may be
treated as U.S. source income subject to withholding tax unless non-U.S. investors have provided appropriate
certifications entitling them to an exemption.
The Issuer expects that, based on current law and market practice, payments received on the Collateral Debt
Obligations (other than those that are permitted to be subject to withholding tax), Eligible Investments and Hedge
Agreements generally will not be subject to withholding tax imposed by the United States or reduced by withholding
taxes imposed by any other country. However, the treatment under current law of certain types of income the Issuer
may receive (such as commitment fees and income on certain derivatives) may not be entirely clear. The Collateral
Debt Obligations (other than those that are permitted to be subject to withholding tax) are required at the time of
purchase not to be subject to withholding tax unless the issuer of the Collateral Debt Obligation is required to make
"gross-up" payments to cover the full amount of such withholding tax. There can be no assurance, however, that
payments on the Collateral Debt Obligations, Eligible Investments and Hedge Agreements will not become subject
to withholding as a result of any change in, or in the interpretation or administration of any applicable law, treaty,
rule or regulation or other causes. The imposition of unanticipated withholding taxes could materially impair the
Issuer's ability to pay interest on and principal of the Notes and make distributions with respect to the Preferred
Shares.
United States Federal Tax Treatment of U.S. Holders
U.S. Holders of Notes. The Notes will be treated as debt for United States Federal income tax purposes. The
Internal Revenue Service may, however, take the position that one or more of the Classes of Notes represent equity
interests in the Issuer for United States Federal income tax purposes. If that position were sustained, a U.S. Holder
of such Notes generally would be treated like a holder of Preferred Shares (as described below).
Subject to the discussion of original issue discount below, interest paid on Notes treated as debt generally will
be includible in the gross income of a U.S. Holder in accordance with its regular method of tax accounting. Interest
on a Note will be ordinary income from sources outside the United States.
In general, if the issue price of a Note (the first price at which a substantial amount of the relevant class of
Notes is sold to investors) is less than its principal amount by more than a statutory de minimis amount, the Note
will be considered to have original issue discount ("OID"). If a U.S. Holder acquires a Note with OID, then
regardless of such Holder's method of accounting, the U.S. Holder will be required to include such OID in income
on a yield to maturity basis.
The Issuer will be permitted to defer interest payments on the Class B Notes and Class C Notes. Interest
payable on a class of Notes that provides for interest deferral (including interest on accrued but unpaid interest) will
be treated as OID if there is more than a remote likelihood, within the meaning of applicable regulations, that the
Issuer will defer interest payments. A U.S. Holder must include OID in ordinary income on a constant yield to
maturity basis, whether or not it receives a cash payment on any payment date. The Issuer believes that, solely for
purposes of the applicable regulations, there is more than a remote likelihood that interest on the Class B Notes and
the Class C Notes will be deferred, and therefore such Notes will likely be treated for United States Federal income
tax purposes as having OID. A U.S. Holder of a Class B Note or Class C Note therefore will be required to include
such OID in income on a yield to maturity basis. The Issuer intends to treat the Class B Notes and Class C Notes as
subject to a special rule for debt instruments with OID that have a fixed yield regardless of the timing of principal
payments. Based on these rules, the amount of OID accrued on a Class B Note or Class C Note generally would be
equal to the interest accrued on the Note for such period. It is also possible that the Class B Notes and Class C
Notes could be treated as subject to special rules applicable to contingent payment debt instruments or instruments
the timing of payments on which may be accelerated by prepayments on debt instruments that secure the instrument.
In that event, the timing of income and character of gain or loss on the Class B Notes or Class C Notes would be
different. A U.S. Holder of Class B Notes and Class C Notes should consult its own tax advisor about the possible
application of these rules.
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A U.S. Holder generally will recognize a gain or loss on the disposition of a Note in an amount equal to the
difference between the amount realized (other than with respect to accrued and unpaid interest, which will be treated
as interest income) and the holder's adjusted tax basis in the Note. The gain or loss generally will be capital gain or
loss. Gain and loss (other than loss attributable to accrued but unpaid interest) recognized by a U.S. Holder
generally will be from sources within the United States.
U.S. Holders of Preferred Shares. The Preferred Shares will likely be treated as equity. Subject to the passive
foreign investment company rules and the controlled foreign corporation rules discussed below, a U.S. Holder of
Preferred Shares generally would be required to treat distributions received with respect to such Notes as dividend
income. Except as otherwise required by the rules discussed below, gain or loss on the sale or other disposition of
Preferred Shares generally would be capital gain or loss.
The Issuer will be a passive foreign investment company (a "PFIC") for United States Federal income tax
purposes. Because the Issuer will be a PFIC, a U.S. Holder of Preferred Shares will be subject to additional tax on
excess distributions received with respect to the Preferred Shares or gains realized on the disposition of such
Preferred Shares. A U.S. Holder will have an excess distribution if distributions during any tax year exceed 125%
of the average amount received during the three preceding tax years (or, if shorter, the U.S. Holder's holding period).
A U.S. Holder may realize gain on a Preferred Share not only through a sale or other disposition, but also by
pledging the Preferred Share as security for a loan or entering into certain constructive disposition transactions. To
compute the tax on an excess distribution or any gain, (i) the excess distribution or gain is allocated ratably over the
U.S. Holder's holding period, (ii) the amount allocated to the current tax year is taxed as ordinary income, and
(iii) the amount allocated to each previous tax year is taxed at the highest applicable marginal rate in effect for that
year and an interest charge is imposed to recover the deemed benefit from the deferred payment of the tax. These
rules effectively prevent a U.S. Holder from treating the gain realized on the disposition of the Preferred Shares as
capital gain.
A U.S. Holder of Preferred Shares may wish to avoid the risk of the PFIC treatment just described by making an
election to treat the Issuer as a qualified electing fund ("QEF"). If the U.S. Holder has made a valid QEF election,
the holder will be required to include in gross income each year (i) as ordinary income, its pro rata share of the
Issuer's earnings and profits in excess of net capital gains and (ii) as long-term capital gains, its pro rata share of the
Issuer's net capital gains, in each case, whether or not the Issuer actually makes any distribution. The amounts
recognized by a U.S. Holder making a QEF election generally are treated as income from sources outside the United
States. If, however, U.S. Holders hold at least half of the Preferred Shares, a percentage of those amounts equal to
the proportion of its income that the Issuer receives from United States sources will be United States source income
for the U.S. Holders for purposes of computing a U.S. Holder's foreign tax credit limitation. Because such amounts
are subject to tax currently as income of the U.S. Holder, the amounts recognized will not be subject to tax when
they are distributed to a U.S. Holder. An electing U.S. Holder's basis in the Preferred Shares will be increased by
any amounts included in income currently as described above and decreased by any amounts not subjected to tax at
the time of distribution. The Issuer will endeavor to provide U.S. Holders on request with the information they will
need to make a QEF election but cannot provide any absolute assurance that it will be able to do so in a timely
manner.
As discussed above, a U.S. Holder that makes a QEF election will be required to include in income currently its
pro rata share of the Issuer's earnings and profits (computed based on Federal income tax principles) whether or not
the Issuer actually distributes earnings. Accordingly, in a number of circumstances a U.S. Holder could be required
to include amounts in taxable income in excess of the cash distribution they are actually entitled to receive on the
Preferred Shares ("phantom income"). For example, the use of investment proceeds to fund reserves or pay down
debt could cause a U.S. Holder to recognize income in excess of amounts it actually receives from the Issuer. In
addition, the Issuer's income from an investment for Federal income tax purposes may exceed the amount the Issuer
actually receives. The U.S. Holder may be able to elect to defer payment, subject to an interest charge for the
deferral period, of the tax on income recognized on account of the QEF election. Prospective purchasers should
consult their tax advisors about the advisability of making the QEF election, protective QEF election and deferred
payment election.
The Issuer also may be a controlled foreign corporation (a "CFC") if U.S. Holders that each own (directly,
indirectly, or by attribution) at least 10% of the Issuer's voting shares (each, a "U.S. 10% Shareholder") together
own more than half of such voting shares. It is not entirely clear whether the Preferred Shares would be treated as
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voting shares for this purpose. If the Issuer is a CFC, a U.S. Holder that is a U.S. 10% Shareholder on the last day of
the Issuer's taxable year will be required to recognize ordinary income equal to its pro rata share of the Issuer's
earnings (including both ordinary earnings and capital gains) for the tax year, whether or not the Issuer makes a
distribution. Under these rules a U.S. Holder could recognize material amounts of phantom income. The income
will be treated as income from sources within the United States to the extent derived by the Issuer from United
States sources for purposes of computing a U.S. Holder's foreign tax credit limitation. Earnings subjected to tax
currently as income of the U.S. Holder will not be taxed again when they are distributed to the U.S. Holder. A U.S.
Holder's basis in such Preferred Shares is increased by any amounts included in income currently as described above
and decreased by any amounts not subjected to tax at the time of distribution. Subject to a special limitation in the
case of individual U.S. Holders that have held such Preferred Shares for more than one year, gain from disposition
of a Preferred Share by a U.S. Holder that is a U.S. 10% Shareholder will be treated as dividend income to the extent
the Issuer has accumulated earnings and profits attributable to the Preferred Share while it is held by that holder that
have not previously been included in income.
The relationship among the PFIC and CFC rules and the possible consequences of those rules for a particular
U.S. Holder depend upon the circumstances of the Issuer and the U.S. Holder. In general, if the Issuer is both a CFC
and a PFIC, a U.S. Holder subject to the CFC rules will not be subject to the PFIC rules. Each prospective
purchaser should, however, consult its tax advisor about the possible application of the PFIC and CFC rules to its
particular situation.
A U.S. Holder that owns more than 10% of the combined voting power or value of the Issuer's equity (and each
officer or director of the Issuer that is a United States citizen or resident) may be required to file an information
return on Form 5471. A U.S. Holder is required to provide additional information regarding the Issuer annually on
Form 5471 if it owns more than 50% of the combined voting power or value of the Issuer's equity. While it is
unclear how the voting power of the Preferred Shares would be measured for this purpose, a U.S. Holder that owns
less than 10% of the Preferred Shares should not be required to file this return. U.S. Holders also will be required to
report cash transfers to the Issuer on Form 926 to the IRS. Failure to comply with these requirements may subject
such persons to penalties and other adverse consequences.
Non-U.S. Holders. Provided that the Issuer is not treated as engaged in a U.S. trade or business, interest on a
Note paid to a Non-U.S. Holder and distributions on a Preferred Share to such a holder generally will not be subject
to United States Federal income tax if the income is not effectively connected with the holder's conduct of a trade or
business in the United States. Gain realized by a Non-U.S. Holder on the disposition of a Note or Preferred Share
generally will not be subject to United States Federal income tax unless (i) the gain is effectively connected with the
holder's conduct of a United States trade or business or (ii) the holder is an individual present in the United States
for at least 183 days during the taxable year of disposition and certain other conditions are met.
Information Reporting and Backup Withholding
Information reporting to the IRS may be required with respect to payments of principal or interest (including
any original issue discount) on the Notes, distributions on the Preferred Shares and payments of proceeds of the
disposition of Notes or Preferred Shares to holders other than corporations and other exempt recipients. A "backup"
withholding tax may apply to those payments that are subject to information reporting if the holder fails to provide
certain required documentation to the payor. Non-U.S. Holders may be required to comply with certification
procedures to establish that they are not U.S. Holders in order to avoid information reporting and backup
withholding. Holders should consult their tax advisers about the procedures for obtaining an exemption from
backup withholding. Amounts withheld under the backup withholding rules will be refunded or allowed as a credit
against a holders U.S. federal income tax liabilities if the required information is furnished to the IRS.
Foreign, State and Local Taxes
Holders of Notes and Preferred Shares may be liable for foreign, state and local taxes in the country, state, or
locality in which they are resident or doing business. Since the tax laws of each country, state, and locality may
differ, each prospective investor should consult its own tax counsel with respect to any taxes other than United
States Federal income taxes that may be payable as a result of an investment in the Notes and Preferred Shares.
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CAYMAN ISLANDS TAX CONSIDERATIONS
The following discussion of certain Cayman Islands income tax consequences of an investment in the Offered
Securities is based on the advice of Maples and Calder as to Cayman Islands law. The discussion is a general
summary of present law, which is subject to prospective and retroactive change. It assumes that the Issuer will
conduct its affairs in accordance with assumptions made by, and representations made to, counsel. 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 principal and interest in respect of, or distributions on, the Offered Securities will not be
subject to taxation in the Cayman Islands and no withholding will be required on such payments to any holder
of an Offered Security and gains derived from the sale of Offered Securities will not be subject to Cayman
Islands income or corporation tax. The Cayman Islands currently has no income, corporation or capital gains
tax and no estate duty, inheritance tax or gift tax; and
(ii) certificates evidencing the Offered Securities, in registered form, to which title is not transferable by
delivery, will not attract Cayman Islands stamp duty. However, an instrument transferring title to a Note or an
agreement to sell Preferred Shares, if brought to or executed in the Cayman Islands, would be subject to
Cayman Islands stamp duty.
The Issuer has been incorporated under the laws of the Cayman Islands as an exempted company and, as such,
has obtained, an undertaking from the Governor In Cabinet of the Cayman Islands in substantially the following
form:
The Tax Concessions Law
(1999 Revision)
Undertaking as to Tax Concessions
In accordance with Section 6 of The Tax Concessions Law (1999 Revision), the Governor In Cabinet
undertakes with:
Octagon Investment Partners IX, Ltd. (the "Company")
(a) that no Law which is hereafter enacted in the Islands imposing any tax to be levied on profits, income,
gains or appreciations will apply to the Company or its operations; and
(b) 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 will be payable
(i) on or in respect of the shares, debentures or other obligations of the Company; or
(ii) by way of the withholding in whole or in part of any relevant payment as defined in Section 6(3) of
The Tax Concessions Law (1999 Revision).
These concessions will be for a period of TWENTY years from the 24th day of May 2005.
Governor In Cabinet
The Cayman Islands does not have an income tax treaty arrangement with the U.S. or any other country.
THE PRECEDING DISCUSSION IS ONLY A SUMMARY OF CERTAIN OF THE TAX IMPLICATIONS
OF AN INVESTMENT IN THE OFFERED SECURITIES. PROSPECTIVE INVESTORS ARE URGED TO
CONSULT WITH THEIR OWN TAX ADVISORS PRIOR TO INVESTING TO DETERMINE THE TAX
IMPLICATIONS OF SUCH INVESTMENT IN LIGHT OF EACH SUCH INVESTOR'S PARTICULAR
CIRCUMSTANCES.
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CERTAIN ERISA CONSIDERATIONS
General
Subject to the following discussion and transfer restrictions, the Offered Securities may be acquired by pension,
profit-sharing or other employee benefit plans subject to Title I of ERISA, as well as individual retirement accounts
("IRAs"), Keogh plans and other plans covered by Section 4975 of the Code, as well as entities deemed to hold
"plan assets" of any of the foregoing under the Plan Asset Regulations (as defined below) (each a "Plan"). Section
406 of 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") prohibit a Plan from engaging in certain transactions with
persons that are "parties in interest" under ERISA or "disqualified persons" under the Code with respect to such
Plan. A violation of these "prohibited transaction" rules may result in an excise tax or other penalties and liabilities
under ERISA and the Code for such persons or the fiduciaries of the Plan. In the case of an IRA, a prohibited
transaction or conflict of interest that involves the beneficiary of the IRA could result in disqualification of the IRA.
In addition, Title I of ERISA also requires fiduciaries of a Plan subject to ERISA to make investments that are
prudent, diversified and in accordance with the governing plan documents.
Employee benefit plans that are governmental plans (as defined in Section 3(32) of ERISA), foreign plans and
certain church plans (as defined in Section 3(33) of ERISA) are not subject to ERISA requirements; however, such
plans may be subject to substantially similar non-U.S., federal, state or local law restrictions.
Plan Assets: the Class A Notes, the Class B Notes and the Class C Notes
Certain transactions involving the Co-Issuers might be deemed to constitute prohibited transactions under
ERISA and the Code with respect to a Plan if assets of the Co-Issuers were deemed to be assets of the Plan. Under
regulations issued by the United States Department of Labor at 29 C.F.R. 2510.3-101 (the "Plan Asset
Regulations"), the assets of the Co-Issuers would be treated as plan assets of a Plan for the purposes of ERISA and
the Code only if the Plan acquired an "equity interest" in the Co-Issuers and none of the exceptions to plan assets
status contained in the Plan Asset Regulations was applicable. An equity interest is defined under the Plan Asset
Regulations as an interest other than an instrument which is treated as indebtedness under applicable local law and
which has no substantial equity features.
Although there is little guidance on the subject, the Co-Issuers believe that, at the time of their issuance, the
Class A Notes, the Class B Notes and the Class C Notes should not be treated as an equity interest in the Co-Issuers
for purposes of the Plan Asset Regulations. This determination is based in part upon the traditional debt features of
such Notes, including the reasonable expectation of purchasers of such Notes that such Notes will be repaid when
due, as well as the absence of conversion rights, warrants and other typical equity features. The debt treatment of
the Class A Notes, the Class B Notes and the Class C Notes for ERISA purposes could change if the Co-Issuers
incurred losses. This risk of recharacterization is enhanced for Notes that are subordinated to other classes of
securities.
Plan Assets: the Preferred Shares
The Issuer believes that the Preferred Shares will be treated as equity for purposes of the Plan Asset
Regulations. Under one exception to the Plan Asset Regulations, however, the assets of the Co-Issuers will not be
treated as plan assets if participation in the Co-Issuers by Benefit Plan Investors is not "significant." Benefit Plan
Investor participation will not be "significant" for purposes of the Plan Asset Regulations if less than 25% of each
class of equity interests is held by Benefit Plan Investors, excluding interests held by persons (other than Benefit
Plan Investors) who have discretionary authority or control with respect to the assets of the Co-Issuers, or who
provide investment advice for a fee (direct or indirect) with respect to such assets, or any affiliate of any such person
(each, a "Controlling Person"). A Benefit Plan Investor is defined as (a) any "employee benefit plan" within the
meaning of section 3(3) of ERISA (whether or not subject to ERISA, and including, without limitation, foreign or
governmental plans), any "plan" described in section 4975(e)(1) of the Code (including an IRA), or any entity whose
underlying assets include "plan assets" of any of the foregoing by reason of an employee benefit plan's or a plan's
investment in such entity (including an insurance company general account).
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The Issuer intends to limit purchase of the Preferred Shares so that participation in the Issuer by Benefit Plan
Investors is not "significant." Accordingly, each purchaser or transferee of the Preferred Shares will be required to
represent and agree as to whether it is a Benefit Plan Investor or a Controlling Person and to agree that no transfer of
any Preferred Share (or any interest therein) will be effective, and the Preferred Share Paying Agent will not
recognize such transfer, if after giving effect to such transfer 25% or more of the value of the Preferred Shares or
any other class of equity interest in the Issuer would be held by Benefit Plan Investors. In addition, any insurance
company purchasing Preferred Shares with the assets of an insurance company general account will be required to
represent and warrant the maximum percentage of such general account that represents (and will represent as long as
it owns any interest in the Preferred Shares) ownership by Benefit Plan Investors. There can be no assurance,
however, that participation by Benefit Plan Investors in the Preferred Shares will not be "significant."
Prohibited Transaction Exemptions
Aside from the plan asset issues, the acquisition or holding of the Offered Securities by or on behalf of a Benefit
Plan could be considered to give rise to a prohibited transaction if the Co-Issuers, the Collateral Manager, the
Placement Agent, the Trustee, a Swap Counterparty, a Hedge Counterparty, sellers of Collateral Debt Obligations to
the Issuer or any of their respective affiliates, is or becomes a party in interest or a disqualified person with respect
to such Plan. Certain exemptions from the prohibited transaction rules could be applicable to the purchase and
holding of the Offered Securities by a Plan depending on the type and circumstances of the plan fiduciary making
the decision to acquire such Offered Securities. Included among these exemptions are: Prohibited Transaction
Class Exemption ("PTCE") 96-23, regarding transactions effected by "in-house asset managers"; PTCE 95-60,
regarding investments by insurance company general accounts; PTCE 91-38, regarding investments by bank
collective investment funds; PTCE 90-1, regarding investments by insurance company pooled separate accounts;
and PTCE 84-14, regarding transactions effected by "qualified professional asset managers." There can be no
assurance that any of these Prohibited Transaction Class Exemptions or any other exemption will be available with
respect to any particular transaction involving the Offered Securities.
Accordingly, each purchaser will be deemed or required to make certain representations with respect to the
Offered Securities. With respect to the Notes, each purchaser and each transferee of any interest in a Note will be
deemed to have represented and agreed, on each day from the date on which such beneficial owner acquires its
interest in such Note through and including the date on which such beneficial owner disposes of its interest in such
Note, either that (A) it is neither a Plan nor an entity whose underlying assets include "plan assets" by reason of a
Plan's investment in the entity, nor a governmental, foreign, church or other plan which is subject to any federal,
state, local or foreign law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of
the Code or (B) its acquisition, holding and disposition of a 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,
foreign, church or other plan, any substantially similar law). With respect to the Preferred Shares, each purchaser
and each transferee of a Preferred Share (or any interest therein) will be required to represent and agree, on each day
from the date on which such beneficial owner acquires such Preferred Share (or any interest therein) through and
including the date on which such beneficial owner disposes of such Preferred Share (or any interest therein), either
that (A) it is neither a Plan nor an entity whose underlying assets include "plan assets" by reason of a Plan's
investment in the entity, nor a governmental, foreign, church or other plan which is subject to any federal, state,
local or foreign law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the
Code or (B) its acquisition, holding and disposition of a Preferred Share (or any interest therein) 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, foreign, church or other plan, any substantially similar law).
The sale of any Offered Securities to a Plan is in no respect a representation by the Co-Issuers, Collateral
Manager, Trustee, Preferred Share Paying Agent or Placement Agent that such an investment meets all relevant
legal requirements with respect to investments by Plans generally or any particular Plan, or that such an investment
is appropriate for Plans generally or any particular Plan.
THE CO-ISSUERS, COLLATERAL MANAGER, TRUSTEE, PREFERRED SHARE PAYING AGENT AND
PLACEMENT AGENT SHALL BE ENTITLED TO RELY CONCLUSIVELY UPON THE REPRESENTATIONS
OF PURCHASERS AND TRANSFEREES OF THE OFFERED SECURITIES WITHOUT ANY FURTHER
INQUIRY.
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ANY POTENTIAL INVESTOR CONSIDERING AN INVESTMENT IN THE OFFERED SECURITIES
THAT IS, OR IS ACTING ON BEHALF OF, A PLAN IS STRONGLY URGED TO CONSULT ITS OWN
LEGAL AND TAX ADVISORS REGARDING THE CONSEQUENCES OF SUCH AN INVESTMENT UNDER
ERISA AND SECTION 4975 OF THE CODE AND THE ABILITY TO MAKE THE REPRESENTATIONS
DESCRIBED ABOVE.
CERTAIN LEGAL INVESTMENT CONSIDERATIONS
Institutions the investment activities of which are subject to legal investment laws and regulations or to review
by certain regulatory authorities may be subject to restrictions on investments in the Offered Securities. Any such
institution should consult its legal advisors in determining whether and to what extent there may be restrictions on
its ability to invest in the Offered Securities. Without limiting the foregoing, any financial institution that is subject
to the jurisdiction of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration,
any state insurance commission, or any other federal or state agencies with similar authority should review any
applicable rules, guidelines and regulations prior to purchasing Offered Securities. Depository institutions should
review and consider the applicability of the Federal Financial Institutions Examination Council Supervisory Policy
Statement on Securities Activities, which has been adopted by the respective federal regulators.
None of the Issuer, the Co-Issuer, the Collateral Manager and the Placement Agent makes any representation 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 Offered Securities for legal investment or other purposes or as to the ability of
particular investors to purchase Offered Securities under applicable investment restrictions. 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. Accordingly,
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 Collateral Manager and
the Placement Agent 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
The Co-Issuers and the Placement Agent will enter into a placement agency agreement (the "Placement
Agreement"), pursuant to which, on the terms and subject to the conditions contained therein, the Placement Agent
will agree to use its reasonable efforts to solicit offers to purchase Offered Securities. The Placement Agent will not
act as placement agent in connection with any sales of Offered Securities by the Co-Issuers or the Issuer, as the case
may be, to the Collateral Manager or its Affiliates. The Placement Agent or its affiliates may, but are not obligated
to, purchase any Offered Securities (including upon their initial issuance) pursuant to the Placement Agreement.
Any Offered Securities purchased by the Placement Agent may be sold by the Placement Agent.
The Offered Securities will be offered by the Placement Agent to prospective investors from time to time in
negotiated transactions at varying prices to be determined at the time of sale. The Offered Securities will be placed
by the Placement Agent, when, as and if issued, subject to prior sale, withdrawal, cancellation or modification of the
offer without notice, to the right of the Placement Agent to reject orders, in whole or in part, and to certain other
conditions, including, approval of certain legal matters by counsel.
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In the Placement Agreement, each of the Issuer and the Co-Issuer will agree to indemnify the Placement Agent
against certain liabilities under certain securities laws or to contribute to payments the Placement Agent may be
required to make in respect thereof. In addition, the Co-Issuers will agree to reimburse the Placement Agent for
certain of its expenses incurred in connection with the closing of the transactions contemplated hereby.
The Offered Securities have not been and will not be registered under the Securities Act and may not be offered
or sold except (i) within the United States or to, or for the benefit of, U.S. Persons, except to persons that are both
Qualified Institutional Buyers and Qualified Purchasers, purchasing for their own account or one or more accounts
with respect to which they exercise sole investment discretion, each of which is both a Qualified Institutional Buyer
and a Qualified Purchaser, in accordance with Rule 144A (or, in the case of the initial sale of such Notes, in reliance
on Section 4(2) of the Securities Act), and (ii) outside the United States to persons that are not U.S. Persons,
purchasing for their own account or one or more accounts with respect to which they exercise sole investment
discretion, each of which is a non-U.S. Person, in offshore transactions in reliance on Regulation S, and (iii) with
respect to the Preferred Shares only, also in the United States to persons that are both (x) Accredited Investors and
(y) Qualified Purchasers, Knowledgeable Employees with respect to the Issuer or companies owned exclusively by
Knowledgeable Employees and/or Qualified Purchasers, in reliance on an exemption from registration under the
Securities Act.
In addition, an offer or sale of Offered Securities within the United States 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 in accordance with Rule 144A under the Securities Act.
No action has been taken or is being contemplated by the Issuer or the Co-Issuers, as applicable, 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 in this Offering Circular will constitute an offer to sell or a solicitation of an offer to purchase any securities
in any jurisdiction where it is unlawful to do so absent the taking of the action or the availability of an exemption
therefrom. For certain restrictions on resale of the Notes, see "Transfer Restrictions."
The Offered Securities are a new issue of securities for which there is currently no market. 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. The Placement Agent is not 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. Accordingly, no assurance can be
given as to the liquidity of or trading market for the Offered Securities.
The Placement Agent will represent, warrant and agree in the Placement Agreement that:
(i) it has only communicated or caused to be communicated and will only communicate or cause to
be communicated any invitation or inducement to engage in investment activity (within the
meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of any
Offered Securities in circumstances in which Section 21(1) of the FSMA does not apply to the
Co-Issuers, and
(ii)
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.
In addition, no invitation to subscribe for Offered Securities may be made to the public in the Cayman Islands.
Application has been made to the Irish Financial Services Regulatory Authority, as competent authority under
Directive 2003/71/EC, for the Prospectus to be approved. Application has been made to the Irish Stock Exchange to
admit the Notes to the Official List of the Irish Stock Exchange and to trading on the regulated market of the Irish
Stock Exchange. There can be no assurance that the admission will be granted or maintained.
In the Placement Agreement, the Placement Agent will agree to offer the Offered Securities in accordance with
any applicable securities laws of any state of the United States and any other relevant jurisdiction (i) within the
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United States or to, or for the benefit of, U.S. Persons, to persons that are both Qualified Institutional Buyers and
Qualified Purchasers, purchasing for their own account or one or more accounts with respect to which they exercise
sole investment discretion, each of which is both a Qualified Institutional Buyer and a Qualified Purchaser,
(ii) outside the United States to persons that are not U.S. Persons, purchasing for their own account or one or more
accounts with respect to which they exercise sole investment discretion, each of which is a non-U.S. Person, in
offshore transactions in reliance on Regulation S, and (iii) with respect to the Preferred Shares only, also in the
United States to persons that are both (x) Accredited Investors and (y) Qualified Purchasers, Knowledgeable
Employees with respect to the Issuer or companies owned exclusively by Knowledgeable Employees and/or
Qualified Purchasers, in reliance on an exemption from registration under the Securities Act. For certain restrictions
on resale of the Offered Securities, see "Transfer Restrictions."
The Offered Securities are a new issue of securities for which there is currently no market. 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. The Placement Agent is not 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. 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 Placement Agent may, as permitted by applicable
law, overallot or effect transactions that stabilize or maintain the market price of the 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 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 U.S.$5,000,000 in investments; any person who in
the aggregate owns and invests on a discretionary basis, not less than U.S.$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 Notes
Each Person who becomes a beneficial owner of Notes represented by an interest in a Global Note will be
deemed, by its purchase or other acquisition of the Global Notes, 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 Global Notes: (A) none of the Co-Issuers, the
Collateral Manager, the Placement Agent 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 Collateral Manager, the Trustee or the Placement Agent or
131

any of their respective affiliates other than, solely in the case of the Co-Issuers, any statements in the final
offering memorandum for such Global Notes, and such beneficial owner has read and understands such
final offering memorandum; (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 Collateral Manager, the Trustee 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 Note) 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.$25,000,000 in securities of issuers that are not affiliated persons of the
dealer and is not a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A under the
Securities Act or a trust fund referred to in paragraph (a)(1)(i)(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" as defined in Section 2(a)(51)(A) of the Investment
Company Act and the rules and regulations thereunder or (2) not a "U.S. person" as defined in Regulation S
and is acquiring the Global Notes 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 Global Notes for its own account; (F) such beneficial owner was not formed for the purpose of
investing in such Global Notes; (G) such beneficial owner understands that the Issuer may receive a list of
participants holding interests in the Global Notes from one or more book-entry depositories; (H) such
beneficial owner will hold and transfer at least the minimum denomination of such Global Notes; and
(I) such beneficial owner will provide notice of the relevant transfer restrictions to subsequent transferees.
(ii) On each day from the date on which such beneficial owner acquires its interest in such
Global Note through and including the date on which such beneficial owner disposes of its interest in such
Global Note either that (A) such beneficial owner is neither a Plan nor an entity whose underlying assets
include "plan assets" by reason of such Plan's investment in the entity, nor a governmental, foreign, church
or other plan which is subject to any federal, state, local or foreign law that is substantially similar to the
provisions of Section 406 of ERISA or Section 4975 of the Code or (B) such beneficial owner's acquisition,
holding and disposition of a Global 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, foreign,
church or other plan, any substantially similar law).
(iii) Such beneficial owner understands that such Global Notes are being offered only in a
transaction not involving any public offering in the United States within the meaning of the Securities Act,
such Global Notes 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 Global Notes, such Global
Notes may be offered, resold, pledged or otherwise transferred only in accordance with the provisions of
the Indenture and the legend on such Global Notes. 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 Global Notes. Such beneficial owner understands that the Issuer has not
been registered under the Investment Company Act, and that the Issuer is relying on Section 3(c)(7) of the
Investment Company Act for its exemption from registration thereunder and that no representation has
been made as to the availability of such exemption.
(iv) Such beneficial owner is aware that, except as otherwise provided in the Indenture, any
Global Notes being sold to it in reliance on Regulation S will be represented by one or more Regulation S
Global Notes and that in each case beneficial interests therein may be held only through DTC for the
respective accounts of Euroclear or Clearstream.
(v) Such beneficial owner understands that any resale or other transfer of beneficial interests
in a Regulation S Global Note to U.S. Persons, and any resale or other transfer of beneficial interests in a
Rule 144A Global Note to any person other than a qualified institutional buyer (as defined in Rule 144A)
who is also a qualified purchaser (within the meaning of Section 2(a)(51) of the Investment Company Act
and the rules thereunder), shall not be permitted.
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(vi) With respect to Rule 144A Global Notes, such beneficial owner is a qualified purchaser
(as defined in Section 2(a)(51) of the Investment Company Act and the rules thereunder), such beneficial
owner is acquiring such Notes as principal for its own account for investment and not for sale in connection
with any distribution thereof, such beneficial owner was not formed for the specific purpose of investing in
such Notes or any other securities of the Issuer or the Co-Issuer, and additional capital or similar
contributions were not specifically solicited from any person owning a beneficial interest in such beneficial
owner for the purpose of enabling such beneficial owner to purchase any Notes. Such beneficial owner is
not a (i) corporation, (ii) partnership, (iii) common trust fund or (iv) special trust, pension, profit sharing or
other retirement trust fund or plan in which the shareholders, equity owners, partners, beneficiaries,
beneficial owners or participants, as applicable, may designate the particular investments to be made or the
allocation of any investment among such shareholders, equity owners, partners, beneficiaries, beneficial
owners or participants, and such beneficial owner represents and agrees that it shall not hold such Notes for
the benefit of any other person and shall be the sole beneficial owner thereof for all purposes and that it
shall not sell participation interests in such Notes or enter into any other arrangement pursuant to which any
other person shall be entitled to a beneficial interest in the distributions on such Notes and further that such
Notes purchased directly or indirectly by it constitute an investment of no more than 40% of such beneficial
owner's assets after giving effect to its purchase of Notes and/or other securities of the Issuer. Such
beneficial owner is not an investment company that relies on the exclusion from the definition of
"investment company" provided by Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act (or a
foreign investment company under Section 7(d) thereof relying on Section 3(c)(1) or 3(c)(7) with respect to
its holders that are U.S. Persons), which was formed on or before April 30, 1996, unless it has received the
consent of its beneficial owners who acquired their interests on or before April 30, 1996, with respect to its
treatment as a qualified purchaser (as defined in Section 2(a)(51) of the Investment Company Act and the
rules thereunder) in the manner required by Section 2(a)(51)(C) of the Investment Company Act and the
rules and regulations thereunder. Such beneficial owner understands and agrees that any purported transfer
of such Notes to a purchaser (including, without limitation, the transfer of Notes to such beneficial owner)
that does not comply with the requirements of this paragraph or clause (D) of paragraph (i) shall be null and
void ab initio and the Co-Issuers retain the right to resell any Notes sold to any purchaser (including,
without limitation, such beneficial owner) unless such purchaser complies with this paragraph and
clause (D) of paragraph (i) above.
(vii) Such beneficial owner understands and agrees that the Trustee shall have no
responsibility or obligation to any beneficial owner, a member of, or a participant in, DTC or other Person
with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Notes or with respect to the delivery to any participant,
member, beneficial owner or other Person (other than DTC) of any notice (including any notice of
redemption) or the payment of any amount or delivery of any Notes (or other security or property) under or
with respect to such Notes. All notices and communications to be given to the Holders and all payments to
be made to Holders in respect of the Notes shall be given or made only to or upon the order of the
registered Holders (which shall be DTC or its nominee in the case of a Global Note). The Trustee may rely
and shall be fully protected in relying upon information furnished by DTC with respect to its members,
participants and any beneficial owners.
(viii) Such beneficial owner will provide notice to each person to whom it proposes to transfer
any interest in the Global Notes of the transfer restrictions and representations set forth in the Indenture.
Preferred Shares
No purchase or transfer of a Preferred Share (or any interest therein) will be recorded or otherwise recognized
unless the purchaser thereof has provided the Preferred Share Paying Agent with certificates substantially in the
form of Annex A and Annex B hereto and the conditions set forth in such certificates have been satisfied.
133

Additional Restrictions
No transfer of any Preferred Share (or any interest therein) will be effective, and the Preferred Share Paying
Agent will not recognize any such transfer, if after giving effect to such transfer 25% or more of the value of the
Preferred Shares or any other class of equity interest in the Issuer would be held by Benefit Plan Investors (the "25%
Limitation"). For purposes of this determination, the value of equity interests held by the Placement Agent, the
Preferred Share Paying Agent, the Collateral Manager and 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 the 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. See "Certain ERISA Considerations" and
"Certain Legal Investment Considerations."
Each purchaser or subsequent transferee of Preferred Shares will be required to provide the Issuer and the
Preferred Share Paying Agent written certification as to whether it is an Affected Bank by delivery of a certificate in
the form of Annex B hereto (or another form of certification acceptable to the Issuer). No transfer of any Preferred
Shares to an Affected Bank will be effective, and the Preferred Share Paying Agent will not recognize any such
transfer, unless such transfer is specifically authorized by the Issuer in writing; provided 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 Preferred Shares, or (y) the
transferor is an Affected Bank previously approved by the Issuer.
To the extent required by the Issuer, as determined by the Issuer or the Collateral Manager on behalf of the
Issuer, the Issuer may, upon notice to the Preferred Share Paying Agent, impose additional transfer restrictions on
the Preferred Shares 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 Preferred Share to make representations to the Issuer in connection with
such compliance.
Legends
The certificates in respect of the Class A-1 Notes, the Class A-2 Notes, the Class B Notes and the Class C Notes
in the form of a Global Note 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 UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE
SECURITIES LAWS IN THE UNITED STATES OR THE SECURITIES LAWS OF ANY OTHER
JURISDICTION AND MAY NOT BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT AS PERMITTED BY THIS LEGEND. THE HOLDER HEREOF, BY ITS
ACCEPTANCE OF THIS NOTE, REPRESENTS, ACKNOWLEDGES AND AGREES THAT IT WILL
NOT REOFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND EXCEPT (A)
TO A TRANSFEREE (1) THAT IS A "QUALIFIED INSTITUTIONAL BUYER", AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT, WHO IS ALSO A "QUALIFIED PURCHASER"
(WITHIN THE MEANING OF SECTION 2(a)(51) OF THE UNITED STATES INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, AND THE RULES THEREUNDER) PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER WHO
IS ALSO A QUALIFIED PURCHASER AND (2) THAT (i) WAS NOT FORMED FOR THE SPECIFIC
PURPOSE OF INVESTING IN EITHER OF THE CO-ISSUERS, AND ADDITIONAL CAPITAL OR
SIMILAR CONTRIBUTIONS WERE NOT SPECIFICALLY SOLICITED FROM ANY PERSON
OWNING A BENEFICIAL INTEREST IN SUCH BENEFICIAL OWNER FOR THE PURPOSE OF
ENABLING SUCH BENEFICIAL OWNER TO PURCHASE ANY NOTES, (ii) IS NOT AN
INVESTMENT COMPANY THAT RELIES ON THE EXCLUSION FROM THE DEFINITION OF
"INVESTMENT COMPANY" PROVIDED BY SECTION 3(c)(1) OR SECTION 3(c)(7) OF THE
INVESTMENT COMPANY ACT (OR A FOREIGN INVESTMENT COMPANY UNDER SECTION
7(d) THEREOF RELYING ON SECTION 3(c)(1) OR 3(c)(7) WITH RESPECT TO ITS HOLDERS
134

THAT ARE U.S. PERSONS), WHICH WAS FORMED ON OR BEFORE APRIL 30, 1996, UNLESS IT
HAS RECEIVED THE CONSENT OF ITS BENEFICIAL OWNERS WHO ACQUIRED THEIR
INTERESTS ON OR BEFORE APRIL 30, 1996, WITH RESPECT TO ITS TREATMENT AS A
QUALIFIED PURCHASER IN THE MANNER REQUIRED BY SECTION 2(a)(51)(C) OF THE
INVESTMENT COMPANY ACT AND THE RULES AND REGULATIONS THEREUNDER, (iii) IS
NOT A BROKER-DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS
THAN U.S.$25,000,000 IN SECURITIES OF UNAFFILIATED ISSUERS, (iv) IS NOT A
CORPORATION, PARTNERSHIP, COMMON TRUST FUND, SPECIAL TRUST, PENSION, PROFIT
SHARING OR OTHER RETIREMENT TRUST FUND OR PLAN IN WHICH THE SHAREHOLDERS,
EQUITY OWNERS, PARTNERS, BENEFICIARIES, BENEFICIAL OWNERS OR PARTICIPANTS,
AS APPLICABLE, MAY DESIGNATE THE PARTICULAR INVESTMENTS TO BE MADE OR THE
ALLOCATION OF ANY INVESTMENT AMONG SUCH SHAREHOLDERS, EQUITY OWNERS,
PARTNERS, BENEFICIARIES, BENEFICIAL OWNERS OR PARTICIPANTS, AS APPLICABLE,
AND IN A TRANSACTION THAT MAY BE EFFECTED WITHOUT LOSS OF ANY APPLICABLE
INVESTMENT COMPANY ACT EXEMPTION, (v) IS NOT AN ENTITY THAT, IMMEDIATELY
SUBSEQUENT TO ITS PURCHASE OR OTHER ACQUISITION OF A BENEFICIAL INTEREST IN
THIS NOTE, WILL HAVE INVESTED MORE THAN 40% OF ITS ASSETS IN BENEFICIAL
INTERESTS IN THIS NOTE AND/OR IN OTHER SECURITIES OF THE ISSUER, (vi)
UNDERSTANDS, ON BEHALF OF ITSELF AND EACH PERSON FOR WHICH IT IS ACTING,
THAT THE ISSUER MAY RECEIVE A LIST OF DTC PARTICIPANTS HOLDING NOTES (I.E.
BENEFICIAL INTERESTS IN THE GLOBAL NOTES) FROM DTC AND ANY OTHER DEPOSITORY
THROUGH WHICH THE NOTES (OR BENEFICIAL INTERESTS THEREIN) MAY BE HELD, AND
(vii) AGREES TO PROVIDE NOTICE TO ANY SUBSEQUENT TRANSFEREE OF THE TRANSFER
RESTRICTIONS PROVIDED IN THIS LEGEND OR (B) TO A PERSON THAT IS NOT A U.S.
PERSON (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE
SECURITIES ACT AND (C) IN EACH CASE (1) UPON DELIVERY OF ALL CERTIFICATIONS,
OPINIONS AND OTHER DOCUMENTS THAT THE CO-ISSUERS OR THE TRUSTEE MAY
REQUIRE AND (2) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAW OF ANY
STATE OF THE UNITED STATES AND ANY OTHER JURISDICTION.
THIS NOTE IS NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE
RESTRICTIONS DESCRIBED HEREIN AND IN THE INDENTURE. ANY SALE OR TRANSFER IN
VIOLATION OF THE FOREGOING WILL BE OF NO FORCE AND EFFECT, WILL BE VOID AB
INITIO, AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE,
NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE CO ISSUERS, THE
TRUSTEE OR ANY INTERMEDIARY. EACH TRANSFEROR OF THIS NOTE AGREES TO
PROVIDE NOTICE OF THE TRANSFER RESTRICTIONS SET FORTH HEREIN AND IN THE
INDENTURE TO THE TRANSFEREE. A BENEFICIAL INTEREST IN A RULE 144A GLOBAL NOTE
WITHIN THE MEANING OF THE INDENTURE MAY BE HELD ONLY BY PERSONS SPECIFIED
IN CLAUSE (A) OF THE IMMEDIATELY PRECEDING PARAGRAPH AND A BENEFICIAL
INTEREST IN A REGULATION S GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
MAY BE HELD ONLY BY PERSONS SPECIFIED IN CLAUSE (B) OF THE IMMEDIATELY
PRECEDING PARAGRAPH.
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.
EACH PURCHASER AND EACH TRANSFEREE OF ANY INTEREST IN THIS GLOBAL
NOTE WILL BE DEEMED TO HAVE REPRESENTED AND AGREED, ON EACH DAY FROM THE
DATE ON WHICH SUCH BENEFICIAL OWNER ACQUIRES ITS INTEREST IN THIS GLOBAL
NOTE THROUGH AND INCLUDING THE DATE ON WHICH SUCH BENEFICIAL OWNER
DISPOSES OF ITS INTEREST IN THIS GLOBAL NOTE, EITHER THAT (A) IT IS NEITHER AN
135

EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE UNITED STATES EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), NOR A PLAN
SUBJECT TO SECTION 4975 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), NOR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
ASSETS" BY REASON OF SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S INVESTMENT IN
THE ENTITY, NOR A GOVERNMENTAL, FOREIGN, CHURCH OR OTHER PLAN WHICH IS
SUBJECT TO ANY FEDERAL, STATE, LOCAL OR FOREIGN LAW THAT IS SUBSTANTIALLY
SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR
(B) ITS ACQUISITION, HOLDING AND DISPOSITION OF THIS GLOBAL 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,
FOREIGN, CHURCH OR OTHER PLAN, ANY SUBSTANTIALLY SIMILAR LAW). EACH
BENEFICIAL OWNER OF ANY INTEREST IN THIS NOTE WILL BE DEEMED TO HAVE MADE
THE REPRESENTATIONS AND AGREEMENTS SET FORTH IN SECTION 2.5 OF THE
INDENTURE.
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.).
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.
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.
[THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID"). THE ISSUE
PRICE, ORIGINAL ISSUE DATE, TOTAL AMOUNT OF OID, YIELD TO MATURITY, AND, IF
APPLICABLE, THE COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE OF THE
NOTE MAY BE OBTAINED BY CONTACTING THE TRUSTEE AT U.S. BANK NATIONAL
ASSOCIATION, ONE FEDERAL STREET, THIRD FLOOR, BOSTON, MASSACHUSETTS 02110,
ATTENTION: CORPORATE TRUST SERVICES/CDO UNIT—OCTAGON IX CLO.] 1
1 Applicable to the Class B Notes and the Class C Notes.
136

The certificates in respect of the Preferred Shares will bear a legend substantially to the following effect unless
the Issuer determines otherwise in compliance with applicable law:
THE PREFERRED SHARES REPRESENTED HEREBY HAVE 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 OR ANY OTHER
JURISDICTION, 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 ALSO (2) (X) A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
CONNECTION WITH A SALE MADE 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)(i)(D) OR (a)(1)(i)(E) OF RULE 144A OR A
TRUST FUND REFERRED TO IN PARAGRAPH (a)(1)(i)(F) OF RULE 144A THAT HOLDS THE
ASSETS OF SUCH A PLAN, IF INVESTMENT DECISIONS WITH RESPECT TO THE PLAN ARE
MADE BY THE BENEFICIARIES OF THE PLAN OR (Y) AN "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A) OF REGULATION D 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 PREFERRED SHARE 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 AND EACH TRANSFEREE OF THE PREFERRED SHARES
REPRESENTED HEREBY (OR ANY INTEREST HEREIN) SHALL BE REQUIRED TO REPRESENT
AND AGREE, ON EACH DAY FROM THE DATE ON WHICH SUCH BENEFICIAL OWNER
ACQUIRES THE PREFERRED SHARES REPRESENTED HEREBY (OR ANY INTEREST HEREIN)
THROUGH AND INCLUDING THE DATE ON WHICH SUCH BENEFICIAL OWNER DISPOSES OF
THE PREFERRED SHARES REPRESENTED HEREBY (OR ANY INTEREST HEREIN), EITHER
THAT (A) IT IS NEITHER AN EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE UNITED
STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"),
NOR A PLAN SUBJECT TO SECTION 4975 OF THE UNITED STATES INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"), NOR AN ENTITY WHOSE UNDERLYING ASSETS
INCLUDE "PLAN ASSETS" BY REASON OF SUCH EMPLOYEE BENEFIT PLAN'S OR PLAN'S
INVESTMENT IN THE ENTITY, NOR A GOVERNMENTAL, FOREIGN, CHURCH OR OTHER
PLAN WHICH IS SUBJECT TO ANY FEDERAL, STATE, LOCAL OR FOREIGN LAW THAT IS
SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION
4975 OF THE CODE OR (B) ITS ACQUISITION, HOLDING AND DISPOSITION OF THE
PREFERRED SHARES REPRESENTED HEREBY (OR ANY INTEREST HEREIN) 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,
FOREIGN, CHURCH OR OTHER PLAN, ANY SUBSTANTIALLY SIMILAR LAW). EACH
BENEFICIAL OWNER OF THE PREFERRED SHARES REPRESENTED HEREBY (OR ANY
INTEREST HEREIN) WILL BE DEEMED TO HAVE MADE THE REPRESENTATIONS AND
AGREEMENTS SET FORTH IN THE FISCAL AGENCY AGREEMENT.
THE ISSUER HAS THE RIGHT, UNDER THE INDENTURE, TO COMPEL ANY
BENEFICIAL OWNER OF AN INTEREST IN A PREFERRED SHARE THAT IS A U.S. PERSON
137

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 PREFERRED SHARES, OR MAY SELL SUCH
INTEREST ON BEHALF OF SUCH OWNER.
ANY PURCHASER OR TRANSFEREE OF THIS PREFERRED SHARE (OR ANY INTEREST
HEREIN) IS REQUIRED TO PROVIDE THE PREFERRED SHARE PAYING AGENT WRITTEN
CERTIFICATION OF ITS ERISA STATUS IN THE FORM SET FORTH IN THE OFFERING
MEMORANDUM OR FISCAL AGENCY AGREEMENT. NO TRANSFER OF THE PREFERRED
SHARES REPRESENTED HEREBY (OR ANY INTEREST HEREIN) WILL BE EFFECTIVE, AND
THE PREFERRED SHARE PAYING AGENT WILL NOT RECOGNIZE ANY SUCH TRANSFER, IF
IT WOULD RESULT IN 25% OR MORE OF THE VALUE OF THE PREFERRED SHARES OR ANY
OTHER CLASS OF EQUITY INTEREST IN THE ISSUER BEING HELD BY BENEFIT PLAN
INVESTORS.
THE FAILURE TO PROVIDE THE ISSUER, THE PREFERRED SHARE PAYING AGENT
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 THE
PREFERRED SHARES REPRESENTED HEREBY.
Non-Permitted Holder/Non-Permitted ERISA Holder
If any U.S. person that is not a Qualified Institutional Buyer and a Qualified Purchaser shall become the
beneficial owner of an interest in any Global Note, or 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 of a Preferred Share (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 from (a) the
Trustee or the Co-Issuer, in the case of the Global Notes, or (b) the Preferred Share Paying Agent, in the case of the
Preferred Shares, to the Issuer, if any of them 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 Holder within 30 days of the date of such notice. If such
Non-Permitted Holder fails to so transfer its Offered Security, the Issuer or the Collateral Manager acting for the
Issuer shall have the right, without further notice to the Non-Permitted Holder, to sell such Offered Security to a
purchaser selected by the Issuer that is not a Non-Permitted Holder on such terms as the Issuer may choose. The
Issuer, or the Collateral 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 Offered
Securities and selling such Offered Securities to the highest such bidder. However, the Issuer or the Collateral
Manager may select a purchaser by any other means determined by it in its sole discretion. The holder of each
Offered Security, the Non-Permitted Holder and each other person in the chain of title from the holder to the
Non-Permitted Holder, by its acceptance of an interest in the Offered Securities, agrees to cooperate with the Issuer,
the Collateral Manager and the Trustee or the Preferred Share Paying Agent, as applicable, 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.
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If any person shall become the beneficial owner of an interest in a Preferred Share who has made a Benefit Plan
Investor or Controlling Person 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 from the Preferred Share Paying Agent if it makes the discovery (who agrees to notify the Issuer of
such discovery, if any)), 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 30 days of the date
of such notice. If such Non-Permitted ERISA Holder fails to so transfer its Preferred Shares, as applicable, the
Issuer shall have the right (and the Collateral Manager may require the Issuer), without further notice to the Non-
Permitted ERISA Holder, to sell such Preferred Shares, as applicable, or interest in such Preferred Shares, 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 Preferred Shares, as applicable, and selling
such Preferred Shares, 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 Preferred Share (or any interest therein), by
its acceptance of an interest in the Preferred Shares, as applicable, shall agree 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 Preferred Shares sold as a result of any such sale or the exercise of such discretion.
Cayman Islands Placement Provisions
The Placement Agent has agreed that it has not made and will not make any invitation to the public in the
Cayman Islands to subscribe for the Offered Securities.
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 Memorandum to be approved. Application has been made
to the Irish Stock Exchange, through ACLSL, for the Notes to be admitted to the Irish Stock Exchange’s Daily
Official List, and traded on its regulated market. The cost of approval and admission to trading of the Notes will be
€12,690. There can be no assurance that such listings will be granted or, if granted, will be maintained. ACLSL is
not seeking admission to listing on the Irish Stock Exchange for the purposes of the Prospectus Directive.
2. So long as any Notes are listed on the Irish Stock Exchange, copies of the Amended and Restated
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, in either electronic or physical form, will be available for inspection and
will be obtainable at the principal office of the Issuer and the offices of Maples Finance Dublin 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
Collateral Management Agreement, and the Collateral Administration Agreement will be available in either
electronic or physical form 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
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warehouse facility (including the loans borrowed thereunder and certain preference shares issued in connection
therewith) and the Notes described herein.
5. Neither of the Co-Issuers is, or has since incorporation been, involved in any governmental, legal
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 governmental,
legal or arbitration proceedings 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 or, if one has, specifying the same.
8. The Co-Issuers do not intend to provide any post-issuance information in relation to the Notes or
the performance of the Collateral Debt Obligations.
9. The Notes sold in offshore transactions in reliance on Regulation S under the Securities Act and
represented by the Regulation S Global Notes 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 (or, in the case of initial sales, in reliance on Section 4(2) of the Securities Act) and
represented by Rule 144A Global Notes have been accepted for clearance through DTC.
The CUSIP Numbers and International Securities Identification Numbers (ISIN) for the Global Notes, the
Definitive Notes and the Preferred Shares:
CUSIP ISIN Common Code
Class A-1 Notes (Regulation S) ............... G6710LAA2 USG6710LAA29 025456068
Class A-1 Notes (Rule 144A) .................. 675726AA1 US675726AA18 025455975
Class A-2 Notes (Regulation S)............... G6710LAB0 USG6710LAB02 025456238
Class A-2 Notes (Rule 144A) .................. 675726AC7 US675726AC73 025456203
Class B Notes (Regulation S)................... G6710LAC8 USG6710LAC84 025456343
Class B Notes (Rule 144A)...................... 675726AE3 US675726AE30 025456254
Class C Notes (Regulation S)................... G6710LAD6 USG6710LAD67 025456432
Class C Notes (Rule 144A)...................... 675726AG8 US675726AG87 025456416
Preferred Shares (accredited)................... 675725303 US6757253033 N/A
Preferred Shares (Regulation S)............... G67102106 KYG671021064 N/A
Preferred Shares (Rule 144A).................. 675725204 US6757252043 N/A
Certain Additional Issues Relating to Listing of the Notes
The Indenture provides that, if the Collateral Manager on behalf of the Co-Issuers determines that the
maintenance of the listing of any Class of Notes on the Irish Stock Exchange (or any alternative listing on another
securities exchange as described below in this paragraph) is unduly onerous or burdensome, the Co-Issuers will have
the right to cause such Class of Notes to be delisted from the Irish Stock Exchange (or such other securities
exchange). The Indenture also provides that, if any such delisting occurs with respect to such Class, the Co-Issuers
will use reasonable efforts to apply for the alternative listing of such Class on such other securities exchange as the
Collateral Manager on behalf of the Co-Issuers may choose, except to the extent that the Collateral Manager
determines on behalf of the Co-Issuers that obtaining or maintaining such alternative listing would itself be unduly
onerous or burdensome. Without limiting the Collateral Manager's discretion with respect to any determination that
maintaining or obtaining a listing is unduly onerous or burdensome, the Collateral Manager may take into account
various factors, including any requirement, resulting from a listing, that either Co-Issuer prepare financial statements
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of any particular kind or provide additional disclosure of any particular kind, in each case including any such
requirement arising out of disclosure or transparency directives of the European Union or any other law or
governmental rule.
CERTAIN LEGAL MATTERS
Certain legal matters with respect to the Offered Securities will be passed upon for the Co-Issuers by Milbank,
Tweed, Hadley & McCloy LLP, New York, New York. Certain matters with respect to Cayman Islands corporate
law and tax law will be passed upon for the Issuer by Maples and Calder. Certain legal matters with respect to the
Collateral Manager will be passed upon for the Collateral Manager by Milbank, Tweed, Hadley & McCloy LLP,
New York, New York. Sidley Austin LLP, New York, New York, is representing the Placement Agent in connection
with the offering of the Offered Securities. No separate counsel has been appointed to represent purchasers of any
of the Offered Securities.
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GLOSSARY
"Accredited Investor" means an "accredited investor" as defined in Rule 501(a) of Regulation D.
"Adjusted Class C Overcollateralization Ratio" means, as of any Determination Date, to the ratio (expressed as
a percentage) obtained by dividing: (1) the Principal Collateral Value (as of such Determination Date); by (2) the
Aggregate Outstanding Amount of the Class A Notes, the Class B Notes and the Class C Notes (each, as of such
Determination Date).
"Adjusted Purchase Price" means, with respect to any Collateral Debt Obligation at any time, (i) the amount
(excluding accrued interest, if any) originally paid by the Issuer for such Collateral Debt Obligation (determined by
the Collateral Manager after taking into account (a) discounts and syndication and other up-front fees received by
the Issuer and (b) premiums and fees paid by the Issuer, in connection with such purchase) plus (ii) the amount of
each additional advance made by the Issuer thereunder minus (iii) all Principal Proceeds (including, without
limitation, the portion of any Sale Proceeds constituting Principal Proceeds) received by the Issuer with respect to
such Collateral Debt Obligation prior to such time. For purposes of the foregoing, if a Collateral Debt Obligation
shall be sold in part and not in whole, the portions thereof sold and retained will be deemed to be two separate
Collateral Debt Obligations.
"Administrative Expenses" means amounts (including in respect of any indemnities) due or accrued with
respect to any Distribution Date and payable by the Issuer or the Co-Issuer in the following order to: (i) the Trustee
pursuant to the Indenture; (ii) the Collateral Administrator under the Collateral Administration Agreement; (iii) the
Note Registrar under the Indenture; (iv) the Independent accountants, administrators, agents and counsel of the
Co-Issuers for fees and expenses; (v) the Securities Intermediary under the Indenture; (vi) the Administrator under
the Administration Agreement; (vii) the Preferred Share Paying Agent and the share registrar under the Fiscal
Agency Agreement; (viii) the Rating Agencies for fees and expenses in connection with their rating and surveillance
of any Class of Notes and fees and expenses due or accrued in connection with rating and surveillance of the
Collateral Debt Obligations and the provisions of credit estimates; (ix) the Collateral Manager under the Indenture
and the Collateral Management Agreement (including, without limitation, reasonable expenses of the Collateral
Manager incurred in connection with purchases and sales of Collateral Debt Obligations and other amounts payable
under the Collateral Management Agreement but excluding any Base Collateral Management Fee, Collateral
Management Incentive Fee or Subordinated Collateral Management Fee or any other collateral management fees
payable to the Collateral Manager or fees or expenses or indemnities to be borne by the Collateral Manager without
reimbursement therefor as set forth in the Collateral Management Agreement); (x) the co-trustee (if any) pursuant to
the Indenture; (xi) any other person in respect of any governmental fee, charge or tax in relation to the Issuer or the
Co-Issuer; and (xii) any other person in respect of any other fees or expenses relating to either the Issuer or the
Co-Issuer, the Notes or the documentation relating to the transactions contemplated by the Indenture and any
amendment or other modification of any such documentation, in each case unless expressly prohibited under the
Indenture (including, without limitation, the payment of the fees of the NAV calculation agent, all transaction fees
and all legal and other fees and expenses required in connection with the purchase of any Collateral Debt
Obligations, any Securities Lending Agreement or any other transaction authorized by the Indenture and any
amounts due in respect of the listing of any Notes on the Irish Stock Exchange).
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and any successor statute, and the
rules thereunder.
"Affected Bank" means 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 nor (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%.
"Affiliated Person" has the meaning given in Section 2(a)(3) of the Investment Company Act.
"Aggregate Excess Spread" means as of any Measurement Date, the amount obtained by multiplying:
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(a) (i) LIBOR applicable to the Notes during the Interest Accrual Period in which the Measurement
Date occurs minus (ii) 0.15%, by
(b) the greater of (i) the amount equal to (A) the Aggregate Principal Balance of the Collateral Debt
Obligations (other than Defaulted Obligations or PIK Securities that are currently deferring interest and
excluding the aggregate unfunded amount of Floating Rate Collateral Debt Obligations that are Revolving
Credit Facilities or Delayed Drawdown Term Loans) minus (B) the Target Par Amount minus the aggregate
unfunded amount of Floating Rate Collateral Debt Obligations that are Revolving Credit Facilities or Delayed
Drawdown Term Loans and (ii) zero.
"Aggregate Outstanding Amount" means, when used with respect to any of the Notes at any time, the aggregate
principal amount of such Notes or Class outstanding at such time plus (i) in the case of the Class B Notes, all
accrued and unpaid Class B Deferred Interest at such time, if any, and (ii) in the case of the Class C Notes, all
accrued and unpaid Class C Deferred Interest at such time, if any; provided that, in determining whether the holders
of the requisite Aggregate Outstanding Amount have given any request, demand, authorization, direction, notice,
consent or waiver under the Indenture, (i) all accrued and unpaid Class B Deferred Interest and Class C Deferred
Interest shall be disregarded and not included in the calculation of Aggregate Outstanding Amount and (ii) Notes
owned or beneficially owned by the Issuer or the Co-Issuer or any other obligor upon the Notes or any affiliate of
any of the Issuer, the Co-Issuer, or any other obligor upon the Notes 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 or
beneficially owned shall be so disregarded; provided, further, that, in determining whether the holders of the
requisite Aggregate Outstanding Amount of Notes have given any request, demand, authorization, direction, notice,
consent or waiver under the Indenture or the Collateral Management Agreement, Notes owned or beneficially
owned by the Collateral Manager or any of its affiliates shall be disregarded and deemed not to be outstanding solely
in the following cases: (1) with respect to a vote to remove for "cause" the Collateral Manager as Collateral
Manager or any affiliate thereof that is appointed as a replacement collateral manager in accordance with the terms
of the Collateral Management Agreement, or the related appointment of a successor collateral manager, (2) with
respect to a vote to consent to the assignment by the Collateral Manager of its rights and responsibilities under the
Collateral Management Agreement, and (3) with respect to the waiver of any Event of Default under the Indenture
which resulted primarily from an action taken or failed to be taken by the Collateral Manager. Notes so owned or
beneficially 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 Collateral Manager, or any other obligor upon the Notes or any affiliate of the Issuer, the
Co-Issuer, the Collateral Manager, or such other obligor.
"Aggregate Principal Balance" means, on a date of determination, the sum, without duplication, of the Principal
Balances of Collateral Debt Obligations, Defaulted Obligations and Eligible Investments purchased with Principal
Proceeds.
"Aggregate Spread" means the sum of:
(a) in the case of each Floating Rate Collateral Debt Obligation (other than Defaulted Obligations or
PIK Securities that are currently deferring interest and excluding the aggregate unfunded amount of Floating
Rate Collateral Debt Obligations that are Revolving Credit Facilities or Delayed Drawdown Term Loans) that
bears interest at a spread over a London interbank offered rate index, (i) the stated interest rate spread on such
Floating Rate Collateral Debt Obligation above such index multiplied by (ii) the Principal Balance of such
Floating Rate Collateral Debt Obligation (excluding the aggregate unfunded amount of such Floating Rate
Collateral Debt Obligations that are Revolving Credit Facilities or Delayed Drawdown Term Loans); and
(b) in the case of each Floating Rate Collateral Debt Obligation (other than Defaulted Obligations or
PIK Securities that are currently deferring interest and excluding the aggregate unfunded amount of Floating
Rate Collateral Debt Obligations that are Revolving Credit Facilities or Delayed Drawdown Term Loans) that
bears interest at a spread over an index other than the London interbank offered rate index, (i) the excess of the
sum of such spread and such index over LIBOR as of the immediately preceding LIBOR Determination Date
(which spread or excess may be expressed as a negative percentage) multiplied by (ii) the Principal Balance of
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such Floating Rate Collateral Debt Obligation (excluding the aggregate unfunded amount of such Floating Rate
Collateral Debt Obligations that are Revolving Credit Facilities or Delayed Drawdown Term Loans).
"Applicable Spot Market Exchange Rate" means, with respect to any date on which the Collateral Manager on
behalf of the Issuer converts amounts pursuant to a Permitted Currency Exchange in accordance with the terms of
the Indenture, the spot exchange rate for such Permitted Currency Exchange determined approximately as of such
date based upon quotations obtained by the Trustee (i) from U.S. Bank National Association (or any of its affiliates)
for so long as U.S. Bank National Association, is the Trustee or (ii) if U.S. Bank National Association is no longer
the Trustee, from a successor Trustee or such other party at the direction of the Collateral Manager if Rating
Confirmation is obtained.
"Approved Dealer" means (i) in the case of any Collateral Debt Obligation that is a U.S. government security,
any primary dealer in U.S. government securities, as reported by the Federal Reserve Bank of New York and (ii) in
the case of any Collateral Debt Obligation that is not a U.S. government security, (A) any Approved Dealer listed in
Schedule B to the Indenture or (B) any dealer disclosed in writing by the Issuer to the Trustee, the holders of the
Notes (and not objected to by a Majority of the Controlling Class within 15 days of such disclosure), and with
respect to which the Issuer has received Rating Confirmation from Standard & Poor's.
"Approved Pricing Service " means any Approved Pricing Service listed in Part II of Schedule B to the
Indenture or any other pricing service disclosed in writing by the Issuer to the Trustee and the holders of the Notes
(and not objected to by a Majority of the Controlling Class within 15 days of such disclosure), and with respect to
which the Issuer has received a Rating Confirmation from Standard & Poor's.
"Authenticating Agent" means, with respect to any Notes, the Person designated by the Trustee, if any, to
authenticate such Notes on behalf of the Trustee pursuant to the Indenture.
"Authorized Officer" means, with respect to the Issuer or the Co-Issuer, any officer or attorney-in-fact or other
authorized agent who is authorized to act for the Issuer or the Co-Issuer, as applicable, in matters relating to, and
binding upon, the Issuer or the Co-Issuer, as applicable. With respect to the Collateral Manager, any officer,
employee or agent of the Collateral Manager who is authorized to act for the Collateral Manager in matters relating
to, and binding upon, the Collateral Manager with respect to the subject matter of the request, certificate or order in
question. With respect to the Trustee or Authenticating Agent or any other bank or trust company acting as trustee
of an express trust or as custodian, a trust officer. Each party may receive and accept a certification of the authority
of any other party as conclusive evidence of the authority of any person to act, and such certification may be
considered as in full force and effect until receipt by such other party of written notice to the contrary.
"Bankruptcy Code" means the United States Bankruptcy Code, Title 11 of the United States Code, as amended.
"Business Day" means a day that satisfies the following conditions: (1) it is a day on which commercial banks
and foreign exchange markets settle payments in New York, New York and (2) it is a day on which commercial
banks are open for business in the location of the Corporate Trust Office and, in the case of the final payment of
principal of any Note, the place of presentation of such Note; provided that if any action is required of the Irish
Paying Agent, then, for purposes of determining when such Irish Paying Agent action is required, Dublin, Ireland
will be considered in determining "Business Day."
"CDO" means a special purpose entity organized to issue collateralized debt obligations secured by debt
obligations.
"CDO Security" means any security issued by a CDO.
"Class" means a class of Notes, consisting of, as applicable: (A) the Class A-1 Notes, (B) the Class A-2 Notes;
(C) the Class B Notes; or (D) the Class C Notes.
"Class A-1 Note Interest Rate" means, with respect to the Class A-1 Notes, the per annum rate equal to threemonth
LIBOR plus 0.24%; provided that, with respect to the initial Interest Accrual Period, LIBOR will be
determined by interpolating linearly between (i) four-month LIBOR and (ii) five-month LIBOR.
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"Class A-2 Note Interest Rate" means the per annum rate equal to three-month LIBOR plus 0.37%; provided
that, for the period from the Closing Date to the end of the initial Interest Accrual Period, LIBOR will be determined
by interpolating linearly between (i) four-month LIBOR and (ii) five-month LIBOR.
"Class B Note Interest Rate" means, with respect to the Class B Notes, the per annum rate equal to three-month
LIBOR plus 0.65%; provided that for the period from the Closing Date to the end of the initial Interest Accrual
Period, LIBOR will be determined by interpolating linearly between (i) four-month LIBOR and (ii) five-month
LIBOR.
"Class C Note Interest Rate" means, with respect to the Class C Notes, the per annum rate equal to three-month
LIBOR plus 1.58%; provided that, for the period from the Closing Date to the end of the initial Interest Accrual
Period, LIBOR will be determined by interpolating linearly between (i) four-month LIBOR and (ii) five-month
LIBOR.
"Collateral Administration Agreement" means the Collateral Administration Agreement, dated as of the Closing
Date, by and among the Issuer, the Collateral Manager and the Collateral Administrator.
"Collateral Administrator" means U.S. Bank National Association, solely in its capacity as Collateral
Administrator under the Collateral Administration Agreement and not individually, unless a successor Person shall
have become the Collateral Administrator pursuant to the applicable provisions of the Collateral Administration
Agreement, and thereafter Collateral Administrator will mean such successor Person.
"Collateral Assignment of Interest Rate Hedge" means the Collateral Assignment of Interest Rate Hedge,
substantially in the form of Exhibit I of the Indenture, among the Issuer, the Trustee and a Hedge Counterparty
pursuant to which the Issuer grants to the Trustee, for the benefit of the Secured Parties, all of the Issuer's right, title
and interest in and to an Interest Rate Hedge, as from time to time amended in accordance with the terms of the
Indenture.
"Collection Accounts" means the Interest Collection Account and the Principal Collection Account.
"Controlling Class" means (i) so long as the Class A-1 Notes are outstanding, the Class A-1 Notes; (ii) after the
Class A-1 Notes are no longer outstanding and so long as the Class A-2 Notes are outstanding, the Class A-2 Notes;
(iii) after the Class A Notes are no longer outstanding and so long as the Class B Notes are outstanding, the Class B
Notes; and (iv) after the Class A Notes and the Class B Notes are no longer outstanding and so long as the Class C
Notes are outstanding, the Class C Notes.
"Corporate Family Rating" means with respect to an issuer of a Collateral Debt Obligation, an obligor in respect
thereof or a guarantor that unconditionally and irrevocably guarantees such Collateral Debt Obligation, the senior
implied rating (including "corporate family rating") of such issuer, obligor or guarantor as assigned by Moody's
from time to time.
"Corporate Trust Office" means the designated corporate trust office of the Trustee, currently located at One
Federal Street, Third Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Services/CDO Unit—
Octagon IX CLO, telephone number 617-603-6500 or such other address within the United States as the Trustee
may designate from time to time by notice to the Secured Parties, the Collateral Manager and the Issuer or the
principal corporate trust office within the United States of any successor Trustee.
"Credit Improved Obligation" means, on any date of determination, any Collateral Debt Obligation that in the
Collateral Manager's commercially reasonable business judgment, has significantly improved in credit quality or
price since the date on which such Collateral Debt Obligation was purchased by the Issuer; provided that if (i) the
rating of either the Class A-1 Notes or the Class A-2 Notes has been reduced by Moody's by one or more rating
subcategories from that in effect on the Closing Date or withdrawn by Moody's (unless it subsequently has been
upgraded or reinstated to at least the rating assigned on the Closing Date), or (ii) the rating of either the Class B
Notes or Class C Notes has been reduced by Moody's by two or more rating subcategories from that in effect on the
Closing Date or withdrawn by Moody's (unless it subsequently has been upgraded or reinstated to at least one rating
subcategory below the rating assigned on the Closing Date), then such Collateral Debt Obligation will be considered
a Credit Improved Obligation only if (A) in the case of any Floating Rate Collateral Debt Obligation, the instrument
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has decreased its spread over a London interbank offered rate index (or any other reference index) by 25 basis points
or more since the date on which such Collateral Debt Obligation was purchased by the Issuer, (B) such Collateral
Debt Obligation has been upgraded or put on a watch list for possible upgrade by either of the Rating Agencies since
the date on which such Collateral Debt Obligation was purchased by the Issuer, (C) in the case of any Collateral
Debt Obligation that is a loan, such Collateral Debt Obligation changed in price (expressed as a percentage of par
value) during the period from the date on which it was purchased by the Issuer to the date of determination by a
percentage either more positive or less negative, as the case may be, than the percentage change during the same
period in the average market price of a portfolio of no fewer than 30 loans identified by the Collateral Manager with
similar terms and credit characteristics plus 1.0%, or (D) in the case of any Collateral Debt Obligation that is a highyield
debt security, such Collateral Debt Obligation changed in price (expressed as a percentage of par value) during
the period from the date on which it was purchased by the Issuer to the date of determination by a percentage either
more positive or less negative, as the case may be, than the percentage change during the same period in the average
market price of a portfolio of no fewer than 30 high-yield debt securities identified by the Collateral Manager with
similar terms and credit characteristics plus 3.0%.
"Credit Risk Obligation" means, on any date of determination, a Collateral Debt Obligation that (i) in the
Collateral Manager's commercially reasonable business judgment, has a significant risk of declining in credit quality
and, with a lapse of time, becoming a Defaulted Obligation, (ii) is a Collateral Debt Obligation that constitutes a
loan which changed in price (expressed as a percentage of par value) during the period from the date on which it was
purchased by the Issuer to the date of determination by a percentage either more negative or less positive, as the case
may be, than the percentage change during the same period in the average market price of a portfolio of no fewer
than 30 loans identified by the Collateral Manager with similar terms and credit characteristics minus 3.0%, or (iii)
is a Collateral Debt Obligation that constitutes a high-yield debt security which changed in price (expressed as a
percentage of par value) during the period from the date on which it was purchased by the Issuer to the date of
determination by a percentage either more negative or less positive, as the case may be, than the percentage change
during the same period in the average market price of a portfolio of no fewer than 30 high-yield debt securities
identified by the Collateral Manager with similar terms and credit characteristics minus 5.0%; provided that if (x)
the rating of either the Class A-1 Notes or the Class A-2 Notes has been reduced by Moody's by one or more rating
subcategories from that in effect on the Closing Date or withdrawn by Moody's (unless it subsequently has been
upgraded or reinstated to at least the rating assigned on the Closing Date) or (y) the rating of either the Class B
Notes or the Class C Notes has been reduced by Moody's by two or more rating subcategories from that in effect on
the Closing Date or withdrawn by Moody's (unless it subsequently has been upgraded or reinstated to at least one
rating subcategory below the rating assigned on the Closing Date), then such Collateral Debt Obligation will be
considered a Credit Risk Obligation only if the conditions set forth in clause (ii) or clause (iii) above are satisfied.
"Cure Period" means the definition specified in clause (a) of the definition of Defaulted Obligation.
"Currency" means: U.S. Dollars and/or a Permitted Currency.
"Currency Hedge" means (i) a currency swap agreement entered into between the Issuer and a Hedge
Counterparty in a notional amount not to exceed the collateral principal amount of the Non-USD Debt Obligation
being purchased, pursuant to which a portion of the currency risks arising from the receipt of cash flows from a
Non-USD Debt Obligation are hedged through the swapping of such cash flows for U.S. Dollar payments to be
made by a Hedge Counterparty, as such transaction may be amended from time to time, and (ii) any replacement
currency hedge transaction entered into pursuant to the Indenture; provided, that such transaction or replacement
transaction shall at all times satisfy the Currency Hedge Requirements.
"Currency Hedge Obligation" means a Non-USD Debt Obligation and its related Currency Hedge.
"Currency Hedge Payment Date" means, with respect to any Currency Hedge, any date scheduled for payment
thereunder.
"Currency Hedge Principal Exchange Payment" means any amount payable by the Issuer to a Hedge
Counterparty upon scheduled maturity or termination of a particular Currency Hedge pursuant to the terms thereof
which will result in a corresponding reduction of the notional amount thereof, but excluding any Scheduled Periodic
Currency Hedge Payment.
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"Currency Hedge Principal Exchange Receipt" means any amount payable to the Issuer by a Hedge
Counterparty upon scheduled maturity or termination of a particular Currency Hedge pursuant to the terms thereof
which will result in a corresponding reduction of the notional amount thereof, but excluding any Scheduled Periodic
Currency Hedge Receipt.
"Currency Hedge Replacement Payment" means any amount payable to a Hedge Counterparty by the Issuer
upon entry into a Currency Hedge that replaces a Currency Hedge terminated in full.
"Currency Hedge Replacement Receipt" means any amount payable to the Issuer by a Hedge Counterparty upon
entry into a replacement Currency Hedge that is replacing a Currency Hedge terminated in full.
"Currency Hedge Termination Event" means the occurrence of any termination of a Currency Hedge as a result
of any sale, prepayment or default on the underlying Non-USD Debt Obligation(s).
"Currency Hedge Termination Payment" means any amount payable by the Issuer to a Hedge Counterparty
upon early termination of any Currency Hedge (excluding any Currency Hedge Principal Exchange Payment).
"Currency Hedge Termination Receipt" means any amount payable by a Hedge Counterparty to the Issuer upon
early termination of any Currency Hedge (excluding any Currency Hedge Principal Exchange Receipts and any
unpaid amounts with respect thereto).
"Current Pay Obligation" means any debt obligation included in the Collateral Debt Obligations that would be a
Defaulted Obligation but for the exclusion of Current Pay Obligations from the definition thereof and as to which
either:
(a) (i) all payments due have been paid in cash and the Collateral Manager certifies to the Trustee in
writing that, in its commercially reasonable judgment, it believes that scheduled interest and principal payments
due will be paid in cash;
(ii) either (1) such Collateral Debt Obligation (x) is rated at least "Caa2" by Moody's and (y) has a
Market Value Percentage of at least 85% or (2) such Collateral Debt Obligation is (x) rated at least "Caa1" by
Moody's and (y) has a Market Value Percentage of at least 80% or (3) such Collateral Debt Obligation is rated
at least "B3" by Moody's; provided that, if the rating by Moody's of any Collateral Debt Obligation has been
withdrawn, the last rating by Moody's of such Collateral Debt Obligation prior to such withdrawal will be used;
and
(iii) a bankruptcy court has authorized the payment of interest due and payable on such Collateral Debt
Obligation; or
(b) the Issuer will have received a Rating Confirmation from each Rating Agency with respect to the
treatment of such Collateral Debt Obligation as a Current Pay Obligation.
If the Aggregate Principal Balance of Collateral Debt Obligations that would otherwise be Current Pay Obligations
exceeds 7.5% of the Principal Collateral Value, one or more Collateral Debt Obligations that would otherwise be
Current Pay Obligations with an Aggregate Principal Balance equal to or greater than the amount of excess shall not
be Current Pay Obligations. The Collateral Manager shall designate in writing to the Trustee the Collateral Debt
Obligations that shall not be Current Pay Obligations pursuant to the preceding sentence.
"Current Portfolio" means the portfolio (measured by Principal Balance) of Collateral Debt Obligations and the
proceeds of the disposition thereof held as cash and Eligible Investments purchased with the proceeds of the
disposition of Collateral Debt Obligations, existing immediately prior to the sale, maturity or other disposition of a
Collateral Debt Obligation or immediately prior to the acquisition of a Collateral Debt Obligation, as the case may
be.
"Custodial Account" means an account at the Securities Intermediary in the name of the Trustee pursuant to the
Indenture.
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"Defaulted Obligation" means for any date of determination, a Collateral Debt Obligation as to which:
(a) the obligor or issuer thereof has defaulted in the payment of principal and/or interest for the lesser of
five Business Days and any applicable grace period, as the case may be (the "Cure Period"), but only until such
default has been cured through the payment of all past due principal and/or interest (provided that such Cure
Period will be available only if the Collateral Manager has certified to the Trustee in writing that, to the
knowledge of the Collateral Manager, which knowledge is not based solely on information received from the
obligor of such Collateral Debt Obligation, such default resulted from non-credit related causes);
(b) any bankruptcy, insolvency or receivership proceeding has been initiated in connection with the issuer
of such Collateral Debt Obligation and is unstayed and undismissed; provided that, if such proceeding is an
involuntary proceeding, the condition of this clause (b) will not be satisfied until the earliest of the following:
(i) the issuer consents to such proceeding, (ii) an order for relief under the Bankruptcy Code, or any
substantially similar order under a proceeding not taking place under the Bankruptcy Code, has been entered
and (iii) such proceeding remains unstayed and undismissed for 60 days; and provided, further, that a DIP Loan
will not constitute a Defaulted Obligation under this clause (b) notwithstanding such bankruptcy, insolvency or
receivership proceeding unless (i) such proceeding commences after the date on which such DIP Loan was
issued, or (ii) such DIP Loan does not have a Standard & Poor's Rating above "D" or "SD";
(c) the Collateral Manager has actual knowledge that the issuer thereof is in default (without giving effect
to any applicable grace period or waiver) as to payment of principal and/or interest on another obligation of
such issuer (and such default has not been cured), and at least one of the following conditions is met: (i) both
such other obligation and the Collateral Debt Obligation are full recourse unsecured obligations and the other
obligation is senior to or pari passu with the Collateral Debt Obligation in right of payment or (ii) all of the
following conditions (1), (2) and (3) are satisfied: (1) both such other obligation and the Collateral Debt
Obligation are full recourse secured obligations secured (in whole or in part) by identical collateral, (2) the
security interest securing the other obligation is senior to or pari passu with the security interest securing the
Collateral Debt Obligation and (3) the other obligation is senior to or pari passu with the Collateral Debt
Obligation in right of payment; provided that a Collateral Debt Obligation will not constitute a Defaulted
Obligation under this clause (c) if (x) the Collateral Manager has notified each of the Rating Agencies in writing
of its decision not to treat the Collateral Debt Obligation as a Defaulted Obligation and (y) each Rating Agency
has confirmed in writing that such decision will not result in the downgrade or withdrawal of any rating of the
Notes; provided further, that a Collateral Debt Obligation will not constitute a Defaulted Obligation under this
clause (c) if it is a DIP Loan unless the other obligation was issued after the date on which the DIP Loan was
issued;
(d) the issuer of such Collateral Debt Obligation (i) has a Standard & Poor's issuer rating of "D" or "SD,"
(ii) had a Standard & Poor's issuer rating of "D" or "SD" that was withdrawn or (iii) has any obligation that is
senior or pari passu in right of payment to such Collateral Debt Obligation that has a Standard & Poor's Rating
of "D" or "SD"; provided that a DIP Loan will not constitute a Defaulted Obligation (x) pursuant to
subclause (i) of this clause (d), if the issuer of such DIP Loan had a Standard & Poor's issuer rating of "D" or
"SD" at the time such DIP Loan was issued and (y) pursuant to subclause (ii) of this clause (d), if the issuer of
such DIP Loan had a Standard & Poor's issuer rating of "D" or "SD" that was withdrawn prior to the date such
DIP Loan was issued;
(e) such Collateral Debt Obligation (i) is a Structured Finance Security and (ii) (1) is rated "CC" or lower
by Standard & Poor's or has had its rating withdrawn by Standard & Poor's or (2) is rated "Ca" or lower by
Moody's;
(f) such Collateral Debt Obligation is a Synthetic Security with respect to which a "Credit Event" (within
the meaning of such Synthetic Security) that is or, with the passage or lapse of time or both, will be the basis for
a reduction in the principal amount payable to the Issuer in respect of such Synthetic Security has occurred and
is continuing (a "Defaulted Synthetic Security");
(g) such Collateral Debt Obligation is a Synthetic Security (other than a Defaulted Synthetic Security)
with respect to which the Synthetic Security Counterparty has defaulted in the performance of any of its
payment obligations under the Synthetic Security;
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(h) such Collateral Debt Obligation is a Participation in a loan or other debt security that would, if such
loan or other debt security were a Collateral Debt Obligation, constitute a "Defaulted Obligation" (a "Defaulted
Participation Security");
(i) such Collateral Debt Obligation is a Participation in a loan or in a security (other than a Defaulted
Participation Security) with respect to which the Selling Institution has defaulted in the performance of any of
its payment obligations under the related participation agreement; or
(j) there has been effected any distressed exchange or other distressed debt restructuring where the issuer
of such Collateral Debt Obligation has offered the holder or holders of such Collateral Debt Obligation a new
security or package of securities that, in the reasonable business judgment of the Collateral Manager, amounts
to a diminished financial obligation;
provided that Defaulted Obligations will not include Current Pay Obligations.
Notwithstanding the foregoing definition, the Collateral Manager may declare any Collateral Debt Obligation to
be a Defaulted Obligation if, in the Collateral Manager's reasonable business judgment, (i) the credit quality of the
issuer of such Collateral Debt Obligation (or, in the case of a Synthetic Security, the credit quality of the Reference
Obligor with respect thereto) has significantly deteriorated such that there is a reasonable expectation of payment
default as of the next scheduled payment date with respect to such Collateral Debt Obligation, (ii) the terms of such
Collateral Debt Obligation were amended while such Collateral Debt Obligation was in default and such
amendments resulted in a materially diminished value of such Collateral Debt Obligation or (iii) collateral received
in exchange for collateral securing a Collateral Debt Obligation that has been restructured has materially diminished
in value as compared to the value of the collateral surrendered in the restructuring.
"Deferred Interest Asset" means a PIK Security that has deferred payments of interest or other amounts in cash
and not reduced such deferred interest (or other amount) balance to zero and that:
(i) in the case of a PIK Security that has a Moody's Rating of "Baa3" or above, has either (a) deferred
any interest for a period of 12 months or more or (b) deferred payments of interest in an amount equal to (or
greater than) two periodic interest payments; or
(ii) in the case of a PIK Security that has a Moody's Rating of "Ba1" or below, has either (a) deferred any
interest for a period of six months or more or (b) deferred payments of interest in an amount equal to (or greater
than) one periodic interest payment.
Notwithstanding the foregoing definition, the Collateral Manager may declare any PIK Security a Deferred
Interest Asset if, in the Collateral Manager's commercially reasonable judgment, the credit quality of the issuer of
such asset has significantly deteriorated such that there is a reasonable expectation that such PIK Security will defer
interest on the next scheduled and future payment dates.
"Delayed Funding Advance Amount" means an amount, if greater than zero, by which (i) the sum of the
unfunded portions of all Collateral Debt Obligations that are Delayed Draw Term Loans or Revolving Credit
Facilities as of the last day of the Reinvestment Period exceeds (ii) the amount then on deposit in the Delayed
Funding Obligation Account.
"Deliverable Obligation" means a debt obligation or other security that is delivered to the Issuer upon an early
termination of a Swap Agreement as a result of a "Credit Event" (as defined in such Swap Agreement).
"DIP Loan" means any interest in a loan or financing facility explicitly rated by the Rating Agencies (including
any estimated rating by the Rating Agencies) that is acquired directly by way of assignment (i) which is an
obligation of a person (a "Debtor") (A) that is a debtor in possession as described in §1107 of the Bankruptcy Code
or any other applicable federal or state bankruptcy law, including, without limitation, any bankruptcy, insolvency,
reorganization or similar law enacted under the laws of the Cayman Islands or any other applicable jurisdiction or
(B) for which a trustee (if appointment of such trustee has been ordered pursuant to §1104 of the Bankruptcy Code
or any other applicable federal or state bankruptcy law, including, without limitation, any bankruptcy, insolvency,
reorganization or similar law enacted under the laws of the Cayman Islands or any other applicable jurisdiction)
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organized under the laws of the United States or any state therein has been appointed; (ii) the terms of which have
been approved by an order of the United States Bankruptcy Court, the United States District Court, or any other
court of competent jurisdiction, the enforceability of which order is not subject to any pending contested matter or
proceeding (as such terms are defined in the Federal Rules of Bankruptcy Procedure) and which order provides that:
(a) such DIP Loan is secured by liens on the Debtor's otherwise unencumbered assets pursuant to §364(c)(2) of the
Bankruptcy Code or any other applicable federal or state bankruptcy law, including, without limitation, any
bankruptcy, insolvency, reorganization or similar law enacted under the laws of the Cayman Islands or any other
applicable jurisdiction; or (b) such DIP Loan is secured by liens of equal or senior priority on property of the
Debtor's estate that is otherwise subject to a lien pursuant to §364(d) of the Bankruptcy Code or any other applicable
federal or state bankruptcy law, including, without limitation, any bankruptcy, insolvency, reorganization or similar
law enacted under the laws of the Cayman Islands or any other applicable jurisdiction; provided, however, that such
DIP Loan is fully secured based upon a current valuation or appraisal report; and (iii) which has paid its most recent
scheduled interest and principal payments (if any) and the Collateral Manager reasonably expects that such loan or
financing facility will continue to pay interest and principal.
"Discounted Obligation" means any Collateral Debt Obligation that satisfies the criteria specified in clause (h)
of the definition of Principal Balance. For avoidance of doubt, all Synthetic Securities with related Reference
Obligations that satisfy the criteria specified in clause (h) of the definition of Principal Balance, will be deemed
Discounted Obligations under the Indenture.
"Distribution" means with respect to any obligation or security, any payment of principal, interest or fee or any
dividend or premium or other payment made thereon.
"Distribution Compliance Period" means, with respect to the Notes, the period beginning upon the later of
(i) the completion of the distribution thereof (as certified by the Co-Issuers to the Trustee if later than the Closing
Date) and (ii) the Closing Date and ending on (and including) the 40 th day thereafter.
"Due Date" means each date on which a Distribution is due on a Pledged Investment.
"Due Period" means, with respect to any Distribution Date, the period commencing immediately following (but
not including) the seventh Business Day prior to the preceding Distribution Date (or commencing on the Closing
Date, in the case of the Due Period relating to the first Distribution Date) and ending on and including the seventh
Business Day prior to such Distribution Date (or, in the case of a Due Period that is applicable to the Final
Distribution Date, ending on the day preceding the Final Distribution Date); provided that, with respect to Hedge
Receipt Amounts under any Hedge Agreement, "Due Period" will mean the period commencing on the day after the
prior Distribution Date and ending on such Distribution Date.
"Effective Date" means the earlier of: (i) October 23, 2006 and (ii) the date on which the Issuer purchases or
commits to purchase Collateral Debt Obligations such that the Aggregate Principal Balance of all Collateral Debt
Obligations (determined after giving effect to the consummation of such commitments to purchase and without
giving effect to any reductions of that amount that may have resulted from scheduled principal payments or principal
prepayments made with respect to the Collateral Debt Obligations on or before the Effective Date) equals or exceeds
the Target Par Amount.
"Eligible Financial Institution" means a corporation or trust company (including, without limitation, U.S. Bank
National Association, if it is otherwise eligible) organized and doing business under the laws of the United States or
of any state thereof, authorized under such laws to exercise corporate trust powers, having a combined capital and
surplus of at least U.S.$200,000,000, subject to supervision or examination by federal or state banking authority,
having a rating of at least "Baa1" by Moody's and "BBB+" by Standard & Poor's and having an office within the
United States. If such corporation or trust company publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority, then for the purposes of determining
whether such corporation or trust company constitutes an Eligible Financial Institution, the combined capital and
surplus of such corporation will be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published.
"Eligible Investment" means any dollar or Permitted Currency denominated investment that, at the time it is
delivered to the Trustee (directly or through a securities intermediary or bailee), is one or more of the following
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obligations or securities (which may include investments for which the Trustee or an affiliate thereof provides
services):
(a) cash;
(b) direct Registered obligations of, and Registered obligations the timely payment of principal and
interest on which is fully and expressly guaranteed by, the United States or any agency or instrumentality of the
United States the obligations of which are expressly backed by the full faith and credit of the United States;
(c) demand and time deposits in, certificates of deposit of, bankers' acceptances issued by or federal funds
sold by any depositary institution or trust company incorporated under the laws of the United States or any state
thereof (including U.S. Bank National Association or the commercial department of any successor Trustee, as
the case may be; provided that such person otherwise meets the criteria specified herein) and subject to
supervision and examination by federal and/or state banking authorities so long as the commercial paper and/or
the debt obligations of such depositary institution or trust company (or, in the case of the principal depositary
institution in a holding company system, the commercial paper or debt obligations of such holding company) at
the time of such investment or contractual commitment providing for such investment have a credit rating not
less than "Aa2" by Moody's and "AA" by Standard & Poor's in the case of long-term debt obligations, and "P-1"
by Moody's and "A-1+" by Standard & Poor's, in the case of commercial paper and short-term debt obligations;
provided that, in the case of commercial paper and short-term debt obligations, the issuer thereof also must have
at the time of such investment a long-term senior unsecured debt rating or counterparty debt rating of not less
than "Aa2" by Moody's and "AA" by Standard & Poor's;
(d) unleveraged repurchase obligations with respect to (i) any security described in clause (b) above or
(ii) any other security issued or guaranteed by an agency or instrumentality of the United States, in either case
entered into with a depositary institution or trust company (acting as principal) described in clause (b) above
(including U.S. Bank National Association or the commercial department of any successor Trustee, as the case
may be; provided that such person otherwise meets the criteria specified herein) or entered into with a
corporation (acting as principal) whose long-term senior unsecured debt rating or counterparty debt rating is not
less than "Aa2" by Moody's and "AA" by Standard & Poor's or whose short-term debt rating is "P-1" by
Moody's and "A-1+" by Standard & Poor's; provided, further, that the issuer thereof must also have at the time
of such investment a long-term senior unsecured debt rating or counterparty debt rating of not less than "Aa2"
by Moody's Required Rating and "AA" by Standard & Poor's;
(e) Registered securities bearing interest or sold at a discount issued by any corporation incorporated
under the laws of the United States or any state thereof that have a credit rating of not less than "Aa2" by
Moody's and "AA" by Standard & Poor's; provided that no more than 20% of the Eligible Investments may be
invested in these types of securities;
(f) commercial paper or other short-term obligations (including that of U.S. Bank National Association or
the commercial department of any successor Trustee, as the case may be, or any affiliate thereof; provided that
such person otherwise meets the criteria specified herein) having at the time of such investment a credit rating
of "P-1" by Moody's and "A-1+" by Standard & Poor's and that are Registered and either are bearing interest or
are sold at a discount from the face amount thereof and have a maturity of not more than 183 days from their
date of issuance; provided that the issuer thereof must also have at the time of such investment a long-term
senior unsecured debt rating or counterparty debt rating of not less than "Aa2" by Moody's and "AA" by
Standard & Poor's;
(g) a Reinvestment Agreement issued by any bank (if treated as a deposit by such bank), including U.S.
Bank National Association, or a Registered Reinvestment Agreement issued by any insurance company or other
corporation or entity in each case having a credit rating of not less than "P-1" by Moody's and "A-1+" by
Standard & Poor's; provided that the issuer thereof must also have at the time of such investment a long-term
senior unsecured debt rating or counterparty debt rating of not less than "A1" by Moody's and "AA" by
Standard & Poor's;
(h) offshore money market funds with respect to any investments described in clauses (b), (c), (d), (e) or
(f) above (which may include any such fund for which U.S. Bank National Association or any of its affiliates
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provides services; provided that U.S. Bank National Association or such affiliates otherwise meet the criteria
specified herein) having at the time of such investment a credit rating of not less than "Aaa" by Moody's and
"AAAm" or "AAAm-G" by Standard & Poor's; and
(i) any other investment similar to those described in clauses (b) through (h) above that (i) Standard &
Poor's has confirmed in writing may be included in the portfolio of Collateral Debt Obligations as an Eligible
Investment without adversely affecting its then current ratings on the Notes and (ii) has a long-term senior
unsecured debt rating or counterparty debt rating of not less than "Aa2" by Moody's and "AA" by Standard &
Poor's and a short-term debt rating of not less than "P-1" by Moody's and "A-1+" by Standard & Poor's;
provided that mortgage-backed securities shall not constitute Eligible Investment);
and, in the case of clauses (a) through (g) and (i) above, with a stated maturity (after giving effect to any applicable
grace period) no later than the Business Day immediately preceding the Distribution Date in the next Due Period
following the date such investment occurs; provided that (1) Eligible Investments will not include: (w) any security
that is subject to an Offer, (x) any interest-only security, (y) any security purchased at a price in excess of 100% of
par and (z) any security whose repayment is subject to substantial non-credit-related risk as determined in the sole
judgment of the Collateral Manager, (2) not more than 5% of the Principal Collateral Value will consist of Eligible
Investments denominated in any Permitted Currency, (3) Eligible Investments denominated in any Permitted
Currency may be purchased by the Issuer solely from proceeds of Collateral Debt Obligations or Eligible
Investments that were received by the Issuer in the applicable Permitted Currency, (4) payments in respect of such
Eligible Investments which are not subject to any material amount of deduction or withholding in respect of tax
under Sections 871 and 881 of the Code, taking into account the American Jobs Creation Act of 2004 and any
amendments promulgated hereafter, (5) such Eligible Investments either shall be treated as indebtedness for U.S.
federal income tax purposes, or the Issuer has received advice from Milbank, Tweed, Hadley & McCloy LLP or an
opinion of another nationally recognized U.S. tax counsel experienced in such matters to the effect that the
acquisition, ownership or disposition of such investment shall not cause the Issuer to be treated as engaged in a trade
or business in the United States for U.S. federal income tax purposes or otherwise subject the Issuer to U.S. federal
income tax on a net income tax basis, and (6) such Eligible Investments shall not be subject to deduction or
withholding for or on account of any withholding or similar tax, unless the payor is required to make "gross up"
payments that ensure that the net amount actually received by the Issuer (free and clear of taxes, whether assessed
against such obligor or the Issuer) will equal the full amount that the Issuer would have received had no such
deduction or withholding been required. In making or disposing of any investment permitted by the Indenture, the
Trustee is authorized to deal with itself (in its individual capacity) or with any one or more of its affiliates, in each
case, on an arms-length basis, whether it or such affiliate is acting as a subagent of the Trustee or for any third
person or dealing as principal for its own account.
"Equity Security" means (i) any equity security or any other security that is not eligible for acquisition by the
Issuer as a Collateral Debt Obligation; (ii) any security acquired as part of a "unit" or similar combination with a
Collateral Debt Obligation and that itself is not eligible for purchase by the Issuer as a Collateral Debt Obligation; or
(iii) any obligation that, at the time of commitment to acquire such obligation, qualified as a Collateral Debt
Obligation but that, as of any subsequent date of determination, no longer satisfies the requirements of a Collateral
Debt Obligation, for so long as such obligation fails to satisfy such requirement.
"Equity Workout Security" means any Equity Security received in exchange for a Defaulted Obligation upon
foreclosure or exercise of remedies, which security does not entitle the holder thereof to receive periodic payments
of interest and one or more installments of principal, provided that, prior to receipt of such Equity Workout Security,
the Issuer has received advice from Milbank, Tweed, Hadley & McCloy LLP or an opinion of another nationally
recognized U.S. tax counsel experienced in such matters to the effect that the acquisition, ownership or disposition
of such Equity Workout Security will not cause the Issuer to be treated as engaged in a trade or business in the
United States for U.S. federal income tax purposes or otherwise subject the Issuer to U.S. federal, state or local
income or franchise tax on a net income basis.
"Excepted Property" means (i) the proceeds of the issue of the Ordinary Shares, (ii) any transaction fee paid to
the Issuer for issuing the Offered Securities, (iii) the Initial Capital Amount Account and (iv) the Preferred Shares
Distribution Account and any sums credited thereto or deposited therein.
"Final Maturity" means with respect to the Notes, the latest of the Stated Maturities of all Classes thereof.
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"Finance Lease" means a lease or other agreement entered into in connection with and evidencing a transaction
pursuant to which the obligations of the lessee to pay rent or other amounts on a triple net basis under any lease (or
other agreement conveying the right to use) real or personal property, or a combination thereof, are required to be
classified and accounted for as a capital lease on a balance sheet of such lessee under generally accepted accounting
principles in the United States; provided that (i) such lease or other transaction provides for the unconditional
obligation of the lessee to pay a stated amount of principal no later than a stated maturity date, together with interest
thereon, and the payment of such obligation is not subject to any material non-credit related risk as determined by
the Collateral Manager, (ii) the obligations of the lessee in respect of such lease or other transaction are fully
secured, directly or indirectly, by the property that is the subject of such lease, (iii) the interest held in respect of
such lease or other transaction is treated as debt for U.S. federal income tax purposes and (iv) a Rating Confirmation
from Standard & Poor's must be obtained with respect to the acquisition of any such asset by the Issuer.
"Financial Sponsor" means any person, including any subsidiary of another person, whose principal business
activity is acquiring, holding and selling investments (including controlling interests) in otherwise unrelated
companies that each are distinct legal entities with separate management, books and records and bank accounts,
whose operations are not integrated one with another and whose financial condition and creditworthiness are
independent of the other companies so owned by such person.
"First Lien Loan" means any loan under which the Issuer and any other lenders are granted a valid, perfected
first-priority security interest in designated collateral (whether or not the Issuer and any other lenders also are
granted a security interest of lower priority in additional collateral).
"Fixed Rate Collateral Debt Obligations" means the Collateral Debt Obligations that bear interest at a fixed rate.
"Fixed Rate Coupon Excess" means as of any Measurement Date, a fraction (expressed as a percentage) the
numerator of which is equal to the product of (a) the greater of (x) zero and (y) the excess, if any, of the Weighted
Average Coupon for such Measurement Date over the percentage set forth in the definition of "Weighted Average
Coupon Test" and (b) the Aggregate Principal Balance of all Fixed Rate Collateral Debt Obligations (other than
Defaulted Obligations and PIK Securities that are currently deferring interest) held by the Issuer as of such
Measurement Date, and the denominator of which is the Aggregate Principal Balance of all Floating Rate Collateral
Debt Obligations (other than Defaulted Obligations and PIK Securities that are currently deferring interest) held by
the Issuer as of such Measurement Date. In computing the Fixed Rate Coupon Excess, the Weighted Average
Coupon shall be computed as if the Spread Excess were equal to zero.
"Floating Rate Collateral Debt Obligations" means the Collateral Debt Obligations that are not Fixed Rate
Collateral Debt Obligations.
"Form-Approved Hedge Agreement" means a Hedge Agreement:
(i) the documentation of which conforms (but for the amount and timing of periodic payments, the notional
amount, the type of interest rate protection and the applicable interest rate (in the case of an Interest Rate
Hedge), the applicable Non-USD Debt Obligations and the implied exchange rate (in the case of a Currency
Hedge), the effective date, the termination date and other similarly necessary changes) to a form (A) approved
by each of the Rating Agencies prior to the Closing Date for use in this transaction or (B) with respect to which
the Issuer has received Rating Confirmation from Standard & Poor's; and
(ii) for which the Issuer has provided the Rating Agencies prior written notice of its entry into such Hedge
Agreement;
provided, however, that any Rating Agency may revoke its consent to any such previously approved form of
documentation upon 10 Business Days' prior notice to the Issuer, the Trustee and the Collateral Manager; provided,
further, however, that any Hedge Agreement that was entered into prior to such Rating Agency's revocation of its
consent to such previously approved form and the documentation of which conforms to such previously approved
form shall continue to qualify as "Form-Approved Hedge Agreement."
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"Form-Approved Synthetic Security" means a Synthetic Security:
(i) the documentation of which conforms (but for the amount and timing of periodic payments, the name of
the Reference Obligation, the notional amount, the premium or coupon, the effective date, the termination date
and other similarly necessary changes) to a form (x) approved by each of the Rating Agencies prior to the
Closing Date for use in this transaction or (y) with respect to which the Issuer has received Rating Confirmation
from Standard & Poor's; and
(ii) for which the Issuer has provided the Rating Agencies notice of the purchase of such Synthetic
Security within five Business Days after such purchase;
provided, however, that any Rating Agency may revoke its consent to any such previously approved form of
documentation upon 10 Business Days' prior notice to the Issuer, the Trustee and the Collateral Manager; provided,
further, however, that any Synthetic Security that was purchased or entered into prior to such Rating Agency's
revocation of its consent to such previously approved form and the documentation of which conforms to such
previously approved form shall continue to qualify as "Form-Approved Synthetic Security."
"Hedge Agreement" means any Interest Rate Hedge or Currency Hedge, as the context may require.
"Hedge Collateral" means all rights, title and interest of the Issuer in, under and to the Hedge Agreements, each
transaction (as defined in any Hedge Agreement) thereunder, and all present and future Hedge Receipt Amounts
under or otherwise in connection with any Hedge Agreement or transaction thereunder, whether or not evidenced by
a confirmation.
"Hedge Counterparty" means any (i) counterparty entering into an Interest Rate Hedge and/or (ii) counterparty
entering into a Currency Hedge, in each case, that receives a Rating Confirmation from Standard & Poor's in respect
thereto, as the context may require.
"Hedge Payment Amount" means, with respect to any Hedge Agreement and any Distribution Date, the amount,
if any, then payable to the Hedge Counterparty by the Issuer (other than Specified Hedge Termination Payments).
"Hedge Receipt Amount" means, with respect to a Hedge Agreement and any Distribution Date, the amount, if
any, received by the Issuer from the relevant Hedge Counterparty during the Due Period with respect to such
Distribution Date.
"Increased Rate Withholding Tax Obligation" has the meaning specified in clause (i)(A) of the definition of Tax
Event.
"Initial Capital Amount Account" means an account established by or on behalf of the Issuer in the Cayman
Islands in connection with the initial subscription for 250 ordinary shares of the Issuer in the amount of U.S.$250
and the payment of a transaction fee in the amount of U.S.$250. For the avoidance of doubt, the Initial Capital
Amount Account is not a Transaction Account.
"Institutional Accredited Investor" means an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D.
"Interest Rate Hedge" means any interest rate protection agreement, including an interest rate swap, an interest
rate cap, interest rate collar or interest rate floor entered into between the Issuer and the Hedge Counterparty on or
following the Closing Date for the sole purpose of hedging interest rate risk between the portfolio of Collateral Debt
Obligations and the Notes, as amended, supplemented or otherwise modified and in effect from time to time in
accordance with the terms thereof, and any replacement thereto entered into pursuant to the terms thereof.
"Internal Rate of Return" means with respect to each Distribution Date, the annualized internal rate of return
(computed using the "XIRR" function in Microsoft Excel 2002® or any successor version or program thereto) for
the following cash flows, assuming all Preferred Shares were purchased on the Closing Date at a purchase price of
U.S.$1,000 per share: (i) each distributions of Interest Proceeds made to the Preferred Share Paying Agent (for
deposit into the Preferred Shares Distribution Account for payment to the holders of the Preferred Shares) on any
prior Distribution Date and, to the extent necessary to cause the Preferred Shares to reach the applicable Internal
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Rate of Return, such Distribution Date and (ii) each distributions of Principal Proceeds made to the Preferred Share
Paying Agent (for deposit into the Preferred Shares Distribution Account for payment to the holders of the Preferred
Shares) on any prior Distribution Date and, to the extent necessary to cause the Preferred Shares to reach the
applicable Internal Rate of Return, such Distribution Date.
"Issuer Order" means a written order or request dated and signed in the name of the Issuer by an Authorized
Officer of the Issuer and (if appropriate) the Co-Issuer, or by an Authorized Officer of the Collateral Manager.
"loan" means any loan or advance, including, for the avoidance of doubt, any letter of credit reimbursement
obligation.
"Majority" means, (i) with respect to any group of Notes identified by reference to one or more Classes
(including the Controlling Class), the holders at the relevant time of determination of more than 50% of the
Aggregate Outstanding Amount of the Notes of such group and (ii) with respect to the Preferred Shares, the holders
of more than 50% of the Preferred Shares.
If (a) the Trustee, solely in its capacity as Trustee under the Indenture, is a holder of any Note for its own
account, or (b) the Preferred Share Paying Agent, solely in its capacity as Preferred Share Paying Agent under the
Preferred Share Documents, is a holder of any Preferred Share for its own account, the Trustee or the Preferred
Share Paying Agent, solely in its capacity as Trustee under the Indenture or as Preferred Share Paying Agent under
the Preferred Share Paying Agent, respectively, will be excluded as a holder for purposes of this definition in
connection with any supplemental indenture that affect the applicable provisions of the Indenture.
In addition, for purposes of this definition, with respect to voting rights relating to the rights or obligations of
the Collateral Manager under the Indenture or the Collateral Management Agreement, Notes or Preferred Shares
owned by or pledged to the Collateral Manager or any affiliate thereof shall be disregarded and deemed not to be
outstanding, as applicable, unless all the Notes of the related Class or Preferred Share, as applicable, are owned by
or pledged to the Collateral Manager and/or any affiliates thereof.
"Margin Stock" means Margin Stock as defined under Regulation U.
"Market Value" means, as of any date of determination, for a Collateral Debt Obligation (including Defaulted
Obligations, but excluding Non-USD Debt Obligations):
(i) the value determined by any Approved Pricing Service;
(ii) if a value cannot be obtained pursuant to the means contemplated by clause (i) or the Collateral
Manager has reason to believe that the price obtained is not legitimate, the value determined as the average of
the bid side prices determined by the Collateral Manager based upon information from three Approved Dealers
active in the trading of such Collateral Debt Obligations or obligations or securities similar thereto;
(iii) if a value cannot be obtained pursuant to the means contemplated by clause (i) or (ii), the value
determined as the lower of the bid side prices determined by the Collateral Manager based upon information
from two Approved Dealers active in the trading of such Collateral Debt Obligation or obligations or securities
similar thereto;
(iv) if such Collateral Debt Obligation is a loan that, in the Collateral Manager's commercially reasonable
judgment, is not broadly syndicated and a value cannot be obtained pursuant to the means contemplated by
clause (i), (ii) or (iii), the bid side price determined by the Collateral Manager based upon information from a
single Approved Dealer active in the trading of such Collateral Debt Obligation or obligations or securities
similar thereto; provided, however, that the Collateral Manager may base Market Value pursuant to the means
contemplated by this clause (iv) only with respect to Collateral Debt Obligations constituting not more than 5%
of the Principal Collateral Value;
(v) if a value cannot be obtained pursuant to the means contemplated by clause (i), (ii), (iii) or (iv), the
value determined as the bid side market value of such Collateral Debt Obligation as certified by the Collateral
Manager and determined by the Collateral Manager consistent with its customary practices; provided, however,
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that the Collateral Manager may base Market Value pursuant to the means contemplated by this clause (v) only
(A) with respect to Collateral Debt Obligations constituting not more than 5% of the Principal Collateral Value
and (B) until the earlier of (x) the date on which bid prices are available from two Approved Dealers or (y) the
expiration of a 30-day period from the date of such determination; or
(vi) if a value cannot be obtained pursuant to the means contemplated by clauses (i), (ii), (iii), (iv) or (v),
the value will be deemed to be zero.
As of any date of determination, the Market Value of a Non-USD Debt Obligation will be deemed the Market
Value of the Currency Hedge Obligation related thereto in U.S. Dollars, as determined by the Collateral Manager.
For purposes of the foregoing, accrued interest, if any, will not be included in the Market Value and an Equity
Security will be deemed to have no Market Value.
"Market Value Percentage" means with respect to any Collateral Debt Obligation, the ratio (expressed as a
percentage) obtained by dividing (i) the Market Value of such Collateral Debt Obligation by (ii) the principal
balance of such Collateral Debt Obligation.
"Maturity" means with respect to any Note, the date on which all outstanding unpaid principal of such Note
becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption or otherwise.
"Moody's Industry Classification Group" means any of Moody's industry classification groups set forth in
Exhibit B, and any additional such industry classification groups that may be subsequently established by Moody's
and provided by the Collateral Manager or Moody's to the Trustee.
"Moody's Rating" means, with respect to any Collateral Debt Obligation, as of any date of determination a
rating determined as follows:
(a) A "Moody's Actual Rating" shall be determined as follows:
(i) with respect to a Collateral Debt Obligation that is a Senior Secured Loan (a) if the issuer of such
Collateral Debt Obligation has a Corporate Family Rating or a guarantor that unconditionally and irrevocably
provides a guarantee of such Collateral Debt Obligation has a Corporate Family Rating, then the Moody's
Rating of such Collateral Debt Obligation shall be such Corporate Family Rating; (b) otherwise if the Collateral
Debt Obligation itself is rated, then the Moody's Rating of such Collateral Debt Obligation shall be one
subcategory below such rating, (c) otherwise if the issuer of such Collateral Debt Obligation has a senior
unsecured obligation publicly rated by Moody's, then the Moody's Rating of such Collateral Debt Obligation
shall be such rating and (d) otherwise if neither such Collateral Debt Obligation has been rated by Moody's nor
any senior unsecured obligation of the issuer has been publicly rated by Moody's, but another obligation of the
issuer has been rated, then the Moody's Rating of such Collateral Debt Obligation shall be such rating as
determined in accordance with clause (iii) below, as if such Collateral Debt Obligation were a senior unsecured
Collateral Debt Obligation;
(ii) with respect to a Collateral Debt Obligation other than a Senior Secured Loan, if such Collateral Debt
Obligation is rated by Moody's, then the Moody's Rating of such Collateral Debt Obligation shall be such
rating;
(iii) if such Collateral Debt Obligation is not a Senior Secured Loan rated pursuant to clause (i) above, if
such Collateral Debt Obligation is not rated by Moody's but another security or obligation of the issuer is rated
by Moody's then the Moody's rating of such Collateral Debt Obligation shall be determined as follows: (A) if
there is a rating of a security of the issuer of the same priority, then the Moody's Rating of such Collateral Debt
Obligation shall be such rating; (B) if the rating is on a senior unsecured obligation of the issuer, then the
Moody's Rating of such Collateral Debt Obligation (1) shall be (i) one subcategory above such rating if such
rating is "Ba1" or below and (ii) the same rating if such rating is "Baa3" or above, if in each case (i) and (ii)
such Collateral Debt Obligation is a senior secured obligation of the issuer; (2) shall be two subcategories below
such rating if such rating is "B1" or higher and if such Collateral Debt Obligation is a subordinated obligation of
the issuer; (3) shall be one subcategory below such rating if such rating is between "B2" and "Ca," inclusive,
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and if such Collateral Debt Obligation is a subordinated obligation of the issuer; and (4) otherwise shall be "Ca"
if such Collateral Debt Obligation is a subordinated obligation of the issuer; (C) if the rating is on a
subordinated obligation of the issuer and if such Collateral Debt Obligation is a senior secured obligation of the
issuer, then the Moody's Rating of such Collateral Debt Obligation (1) shall be one subcategory above such
rating if such rating is "Baa3" or higher; (2) shall be two subcategories above such rating if such rating is "B2"
or higher but less than "Baa3"; (3) shall be one subcategory above such rating if such rating is "B3"; and
(4) otherwise shall equal such rating; (D) if there is a rating on a subordinated obligation of the issuer and if
such Collateral Debt Obligation is a senior unsecured obligation of the issuer, then the Moody's Rating of such
Collateral Debt Obligation (1) shall be one subcategory above such rating if such rating is "B3" or higher and
(2) otherwise shall equal such rating; and (E) if the rating is on a senior secured obligation of the issuer, then the
Moody's Rating of such Collateral Debt Obligation (1) shall be one subcategory below such rating if such rating
is "Ca" or higher and such Collateral Debt Obligation is a senior unsecured obligation of the issuer; (2) shall be
(i) two subcategories below such rating if such rating is "B1" or lower and (ii) three subcategories below such
rating if such rating is "Ba3" or higher, in each case (i) and (ii) such Collateral Debt Obligation is a
subordinated obligation of the issuer; and (3) otherwise shall be "Ca"; or
(b) If such Collateral Debt Obligation is not rated by Moody's, and no other security or obligation of the
issuer is rated by Moody's, then the "Moody's Derived Rating" shall be determined as follows:
(i) if such Collateral Debt Obligation is rated by Standard & Poor's, then the Moody's Rating of such
Collateral Debt Obligation shall be (A) one subcategory below the Moody's equivalent of the rating assigned by
Standard & Poor's if such security is rated "BBB-" or higher by Standard & Poor's and (B) two subcategories
below the Moody's equivalent of the rating assigned by Standard & Poor's if such security is rated "BB+" or
lower by Standard & Poor's; or
(ii) if such Collateral Debt Obligation is not rated by Standard & Poor's but another security or obligation
of the issuer is rated by Standard & Poor's (a "parallel security"), then the Issuer or the Collateral Manager on
behalf of the Issuer may elect (x) to apply the Moody's equivalent of the rating of such parallel security
determined in accordance with the methodology set forth in subclause (i) above, in which case the Moody's
Rating of such Collateral Debt Obligation shall be determined in accordance with the methodology set forth in
clause (a)(iii) above (for such purpose treating the parallel security as if it were rated by Moody's at the rating
determined pursuant to this subclause (ii)) or (y) to present such Collateral Debt Obligation to Moody's for an
estimate of such Collateral Debt Obligation's Moody's Rating as provided in clause (c) below; provided that for
such purpose all Collateral Debt Obligations consisting of Senior Secured Loans or participations in Senior
Secured Loans shall be treated as if they were senior unsecured Collateral Debt Obligations; and provided,
further, that the Aggregate Principal Balance of Collateral Debt Obligations that may be given a rating based on
a rating given by Standard & Poor's as provided in this clause (b) may not exceed 10% of the Principal
Collateral Value;
(c) the "Moody's Estimated Rating" shall be determined as follows:
(i) if the Collateral Debt Obligation is not rated by Moody's or Standard & Poor's and (A) no other
security or obligation of the issuer of such Collateral Debt Obligation is rated by Moody's or Standard & Poor's
or (B) another security or obligation of the issuer of such Collateral Debt Obligation is rated by Standard &
Poor's and the Issuer or the Collateral Manager on behalf of the Issuer so elects as provided in clause (b)(ii)(y)
above, then the Issuer or the Collateral Manager on behalf of the Issuer may present such Collateral Debt
Obligation to Moody's for an estimate of such Collateral Debt Obligation's Moody's Rating Factor, from which
its corresponding Moody's rating may be determined, which shall be its Moody's Rating; provided that pending
receipt from Moody's of such estimate, such Collateral Debt Obligation shall have a Moody's Rating of "B3" if
(x) the Collateral Manager certifies to the Trustee that the Collateral Manager believes that such estimate shall
be at least "B3"(provided that application for such estimate must be made within two weeks of purchase of such
Collateral Debt Obligation) and (y) the Aggregate Principal Balance of Collateral Debt Obligations having such
Moody's Rating by reason of this proviso does not exceed 10% of the Principal Collateral Value;
(ii) if such Collateral Debt Obligation is a senior secured obligation, with respect to such Collateral Debt
Obligation, if (1) neither the issuer nor any of its affiliates is subject to reorganization or bankruptcy
proceedings, (2) no debt securities or obligations of the issuer are in default, (3) neither the issuer nor any of its
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affiliates have defaulted on any debt during the past two years, (4) the issuer has been in existence for the past
five years, (5) the issuer is current on any cumulative dividends, (6) the fixed-charge ratio for the issuer exceeds
125% for each of the past two fiscal years and for the most recent quarter, (7) the issuer had a net profit before
tax in the past fiscal year and the most recent quarter, and (8) the annual financial statements of the issuer are
unqualified and certified by a firm of independent accountants of national reputation, and quarterly statements
are unaudited but signed by a corporate officer, the Moody's Rating of such Collateral Debt Obligation shall be
"Caa1";
(iii) if such Collateral Debt Obligation is a senior secured obligation, if (1) neither the issuer nor any of its
affiliates is subject to reorganization or bankruptcy proceedings and (2) no debt security or obligation of the
issuer has been in default during the past two years, the Moody's Rating of such Collateral Debt Obligation shall
be "Caa3"; or
(iv) if a debt security or obligation of the issuer has been in default during the past two years, the Moody's
Rating of such Collateral Debt Obligation shall be "Ca."
Notwithstanding the foregoing, unless Moody's publicly declares or otherwise confirms in writing to the Collateral
Manager and the Issuer that it has ceased to require such adjustment, if any Collateral Debt Obligation (other than a
Structured Finance Security) is on credit watch by Moody's for possible upgrade or downgrade, the Moody's Rating
of such Collateral Debt Obligation shall be increased or reduced, as applicable, by one rating subcategory from the
otherwise applicable Moody's Rating determined under this definition. If any Collateral Debt Obligation that is a
Structured Finance Security that is rated is on credit watch by Moody's for possible upgrade or downgrade, the
Moody's Rating of such Collateral Debt Obligation shall be increased or reduced, as applicable, by two rating
subcategories from the otherwise applicable Moody's Rating determined under this definition.
"Moody's Recovery Rate" shall have the meaning ascribed to such term in the table that is included in the
definition of Moody's Average Recovery Rate.
"Non-USD Debt Obligation" means any Collateral Debt Obligation purchased by or on behalf of the Issuer that
is (a) denominated in a Permitted Currency, (b) not convertible into or payable in, at the option of the issuer thereof
or obligor thereunder, any other currency, (c) a Floating Rate Collateral Debt Obligation and (d) not a multicurrency
Revolving Credit Facility or Delayed Draw Term Loan.
"Note Interest Rate" means with respect to any Note, the per annum rate at which interest accrues on such Note.
"Note Payment Sequence" means the application, in accordance with the Priority of Payments, of Interest
Proceeds or Principal Proceeds, as applicable, in the following order:
(i) to the payment of principal on the Class A-1 Notes until the Aggregate Outstanding Amount thereof
has been paid in full;
(ii) to the payment of principal on the Class A-2 Notes until the Aggregate Outstanding Amount thereof
has been paid in full;
(iii) to the payment of principal of the Class B Notes until the Aggregate Outstanding Amount thereof has
been paid in full; and
(iv) to the payment of principal of the Class C Notes until the Aggregate Outstanding Amount thereof has
been paid in full.
"Note Registrar" means the Trustee who is initially appointed as a registrar for the purpose of registering Notes
and transfers of such Notes as provided in the Indenture.
"Obligation" means any one or more obligations of an Obligor, whether present or future, contingent or
otherwise, or incurred in the capacity of principal, surety or otherwise, for the payment or repayment of borrowed
money.
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"Obligor" means any borrower, issuer or obligor (whether principal, guarantor, surety or otherwise) on an
obligation.
"Offer" means, with respect to any obligation or security, (i) any offer by the obligor or issuer of such obligation
or security or by any other Person made to all of the holders of such obligation or security to purchase or otherwise
acquire such obligation or security or to convert or exchange such obligation or security into or for cash, securities
or any other type of consideration (other than pursuant to any redemption in accordance with the terms of the related
Underlying Instruments) or (ii) any solicitation by the obligor or issuer of such obligation or security or any other
Person to amend, modify or waive any provision of such obligation or security or any related Underlying
Instrument.
"Original Issuance Amount" means with respect to an obligation, such obligation together with all obligations
then outstanding that were issued or incurred by the issuer or obligor thereof as part of the same senior credit
agreement or senior credit facility during either (x) the two-year period prior to such obligation being incurred or
(y) the two-year period following such obligation being incurred that, in each case, (i) is senior to or pari passu with
such obligation and (ii) in respect of a commitment to advance funds, includes the maximum amount of such
commitment.
"Partially PIKable Security" means a security or a loan that permits not more than 50% of the total interest or
other periodic distribution due on any Due Date therefor to be deferred and/or capitalized. Each Collateral Debt
Obligation constituting a Partially PIKable Security will be considered for purposes of the Collateral Quality Tests,
the Coverage Tests, the Reinvestment Overcollateralization Test and the Portfolio Profile Test as having a Principal
Balance which excludes any deferred or capitalized interest or other periodic distributions thereon.
"Permitted Currency" means (i) Sterling, (ii) Euros and (iii) Canadian Dollars.
"Permitted Currency Exchange" means an exchange of currencies by the Trustee at the direction of the
Collateral Manager (i) from a Permitted Currency into U.S. Dollars, (ii) from U.S. Dollars into a Permitted Currency
or (iii) from one Permitted Currency into another Permitted Currency, in each case in accordance with the terms of
the Indenture.
"Permitted Non-U.S. Obligor" means any borrower, issuer or obligor principally located in (or in a political
subdivision of) Australia, Bermuda, Canada, the Cayman Islands or New Zealand (provided that, with respect to
Bermuda and the Cayman Islands, a majority of the assets of any company organized in such country are located in
such country) or any borrower, issuer or obligor located in any other country that has a Moody's foreign currency
rating of at least "Aa2" and Standard & Poor's foreign currency rating of at least "AA" and has received a Rating
Confirmation from Standard & Poor's with respect thereto.
"Permitted Offer" means an offer (a) pursuant to the terms of which the obligor in respect of a debt obligation
offers to acquire such debt obligation (including a Collateral Debt Obligation) and (b) as to which the Collateral
Manager has determined in its reasonable commercial judgment that the offeror has sufficient access to financing to
consummate the offer.
"Person" means an individual, corporation (including a business trust), partnership, limited liability company,
limited liability partnership, joint venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated association or government or any agency or political subdivision thereof.
"PIK Security" means a security (other than a Partially PIKable Security) that permits deferral and/or
capitalization of interest or other periodic distribution otherwise due. Except as otherwise provided, each Collateral
Debt Obligation constituting a PIK Security will be considered for purposes of the Collateral Quality Tests, the
Coverage Tests, the Reinvestment Overcollateralization Test and the Portfolio Profile Tests as having a Principal
Balance which excludes any deferred or capitalized interest thereon.
"Pledged Investments" means, on any date of determination, (a) the Collateral Debt Obligations and the Eligible
Investments that have been granted to the Trustee and any Equity Security that forms part of the Collateral and
(b) all non-cash proceeds thereof.
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"Principal Balance" means with respect to (i) any Collateral Debt Obligation (other than a Non-USD Debt
Obligation), Defaulted Obligation, Equity Security or Eligible Investment purchased with Principal Proceeds, as of
any date of determination, the outstanding principal amount of such Collateral Debt Obligation, Defaulted
Obligation, Equity Security or Eligible Investment purchased with Principal Proceeds, as the case may be, and
(ii) any Non-USD Debt Obligation, as of any date of determination, the USD Notional Amount of the Currency
Hedge Transaction with respect thereto; provided that:
(a) the Principal Balance of a Synthetic Security shall be the notional amount specified as
such in the Synthetic Security;
(b) the Principal Balance of a Collateral Debt Obligation received upon acceptance of an
Offer (as described in clause (i) of the definition thereof) to exchange a Collateral Debt Obligation for such
Collateral Debt Obligation will be deemed to be the least of (w) the Market Value of such Collateral Debt
Obligation, (x) a percentage of the outstanding principal amount equal to the Moody's Recovery Rate for
such Collateral Debt Obligation or (y) a percentage of the outstanding principal amount equal to the
Standard & Poor's Recovery Rate for such Collateral Debt Obligation based upon its Standard & Poor's
Priority Category, until such time as Interest Proceeds or Principal Proceeds, as applicable, are first
received when due with respect to such Collateral Debt Obligation; provided that, for the purposes of
calculating amounts payable to the Trustee or the Collateral Manager under the Indenture, the Principal
Balance of such Collateral Debt Obligation shall be the outstanding principal amount thereof;
(c)
the Principal Balance of each Equity Security will be deemed to be zero;
(d) except for the purposes of calculating amounts payable to the Collateral Manager under
the Indenture, the Principal Balance with respect to the Collateral Debt Obligations that are loaned pursuant
to a Securities Lending Agreement will be reduced by any shortfall between the amount of Securities
Lending Collateral required to be posted by the counterparty thereto and the amount actually posted;
(e) except for the purposes of calculating amounts payable to the Collateral Manager under
the Indenture, the Principal Balance of any Collateral Debt Obligations and any Eligible Investments with
respect to which the Trustee does not have a first priority perfected security interest (other than Collateral
Debt Obligations loaned to a Securities Lending Counterparty; provided that no default has occurred under
the related Securities Lending Agreement) will be deemed to be zero;
(f) the Principal Balance of any Deferred Interest Asset will not include any deferred or
capitalized interest and, except for the purposes of calculating amounts payable to the Collateral Manager
under the Indenture, will be the Recovery Value thereof;
(g) solely for purposes of calculating the Coverage Tests and the Reinvestment
Overcollateralization Test, the Principal Balance of any Collateral Debt Obligation that was purchased by
the Issuer for an amount that was (i) less than 85% of its outstanding principal balance, in the case of a
Collateral Debt Obligation that is a loan that was rated no higher than "Caa1" by Moody's or "CCC+" by
Standard & Poor's at the time of such purchase, (ii) less than 80% of its outstanding principal balance, in
the case of a Collateral Debt Obligation that is a loan that was rated at least "B3" by Moody's or "B-" by
Standard & Poor's at the time of such purchase or (iii) less than 75% of its outstanding principal balance, in
the case of any other Collateral Debt Obligation, will be the Adjusted Purchase Price (as determined by the
Collateral Manager and reported to the Collateral Administrator and the Trustee); provided that, in the
event the Market Value of such Collateral Debt Obligation (as determined by the Collateral Manager and
indicated to the Collateral Administrator and Trustee) exceeds 90% of the outstanding principal amount of
such Collateral Debt Obligation for 30 consecutive Business Days, the Principal Balance of such Collateral
Debt Obligation for purposes of calculating the Coverage Tests and the Reinvestment Overcollateralization
Test will be the outstanding principal balance of such Collateral Debt Obligation;
(h) solely for purposes of calculating the Coverage Tests and the Reinvestment
Overcollateralization Test, if, at any time, the Aggregate Principal Balance of all Triple-C Collateral Debt
Obligations exceeds 7.5% of the Principal Collateral Value (as measured without giving effect to this
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clause (h)), then the Principal Balance of each such Collateral Debt Obligation represented in such excess
of such 7.5% threshold will be equal to the product of (x) the outstanding principal amount of each such
Collateral Debt Obligation, and (y) the weighted average Market Value Percentage of all Triple-C
Collateral Debt Obligations; provided that, for the purposes of this clause (h), if any Collateral Debt
Obligation has been assigned a rating by Moody's or Standard & Poor's, the rating so assigned shall be used
rather than the Moody's Rating and the Standard & Poor's Rating, respectively;
(i) solely for purposes of calculating the Adjusted Class C Overcollateralization Ratio, if, at
any time, the Aggregate Principal Balance of Collateral Debt Obligations (other than Defaulted
Obligations) with a Standard & Poor's Rating of "CCC+" or below exceeds 2.5% of the Principal Collateral
Value (as measured without giving effect to this clause (i)), then the Principal Balance of each such
Collateral Debt Obligation represented in such excess of such 2.5% threshold will be equal to the product
of (x) the outstanding principal amount of each such Collateral Debt Obligation, and (y) 50%; provided
that, for the purposes of this clause (i), if any Collateral Debt Obligation has been assigned a rating by
Standard & Poor's, the rating so assigned shall be used rather than the Standard & Poor's Rating;
(j) with respect to Defaulted Obligations, (A) prior to the related Required Sale Date and
solely for the purpose of calculating the Coverage Tests and the Reinvestment Overcollateralization Test,
the Principal Balance of a Collateral Debt Obligation that is a Defaulted Obligation will be deemed to be
the least of (x) the Market Value of such Collateral Debt Obligation, (y) a percentage of the outstanding
principal amount equal to the Moody's Recovery Rate for such Collateral Debt Obligation or (z) a
percentage of the outstanding principal amount equal to the Standard & Poor's Recovery Rate for such
Collateral Debt Obligation based upon its Standard & Poor's Priority Category and (B) after the related
Required Sale Date, the Principal Balance of any Defaulted Obligation will be deemed to be zero;
price;
(k)
the Principal Balance of any Zero-Coupon Security will be deemed to be its purchase
(l) for purposes of the Portfolio Profile Test, the Coverage Tests, the Reinvestment
Overcollateralization Test and the Collateral Quality Tests and for purposes of calculating amounts payable
to the Collateral Manager and the Trustee under the Indenture, the Principal Balance of a Delayed Draw
Term Loan or Revolving Credit Facility refers to the sum of (i) the outstanding principal balance of such
Delayed Draw Term Loan or Revolving Credit Facility, as the case may be, and (ii) the amounts on deposit
in the Delayed Funding Obligation Account in respect of the unfunded portion of such Delayed Draw Term
Loan or Revolving Credit Facility, as the case may be; and
(m) the Principal Balance of any Partially PIKable Security will be deemed not to include any
deferred or capitalized interest thereon;
provided that, if any two or more of the foregoing clauses are applicable to any particular Collateral Debt
Obligation, Defaulted Obligation, Equity Security or Eligible Investment, then the "Principal Balance" of such
Collateral Debt Obligation, Defaulted Obligation, Equity Security or Eligible Investment, as applicable, shall be the
lower (or lowest) value derived from the application of all such clauses.
"Program Documents" means collectively, the Indenture, the Administration Agreement, the Collateral
Administration Agreement, the Collateral Management Agreement, the Placement Agreement, the Fiscal Agency
Agreement, each Hedge Agreement, if any, and each Swap Agreement, if any.
"Program Parties" means, collectively, the Issuer, the Co-Issuer, the Collateral Administrator, the Collateral
Manager, the Trustee, the holders of the Notes, the holders of the Preferred Shares, the Preferred Share Paying
Agent, the Placement Agent, each Hedge Counterparty (so long as it is a party under its Hedge Agreement) and each
Swap Counterparty (so long as it is a party under its Swap Agreement).
"Proposed Portfolio" means the portfolio (measured by Principal Balance) of Collateral Debt Obligations and
the proceeds of the disposition thereof held as cash and Eligible Investments purchased with the proceeds of the
161

disposition of Collateral Debt Obligations resulting from the sale, maturity or other disposition of a Collateral Debt
Obligation or a proposed purchase of a Collateral Debt Obligation, as the case may be.
"Pro Rata Special Redemption Conditions" will be satisfied with respect to any Distribution 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 (cc) of the Portfolio
Profile Test is satisfied, (D) the Class C Overcollateralization Ratio is at least 108.67% and (E) the Adjusted Class C
Overcollateralization Ratio is at least 107.9%.
"Qualified Institutional Buyer" means a "qualified institutional buyer" as defined in Rule 144A under the
Securities Act.
"Qualified Purchaser" has the meaning given in Rule 2(a)(51) of the 1940 Act for the purposes of Section
3(c)(7) thereof and the rules and interpretations thereunder.
"Rating Confirmation" means, with respect to any proposed or actual course of action or inaction or
circumstance to be taken or arising under the Indenture or other documents related thereto, a written confirmation
from each of the Rating Agencies (or, if so specified, a Rating Agency) to the Issuer, the Trustee and the Collateral
Manager, which written confirmation will be given prior to any such action, inaction or circumstance, to the effect
that the then current rating or ratings of the Notes rated by them (or it) will not be reduced, withdrawn, qualified or
downgraded (and no other adverse action with respect to such rating or ratings will be taken) immediately by such
Rating Agencies (or Rating Agency) at the time of, and as a result of, such action, inaction or circumstance.
"Recovery Rate Modifier" means, as of any Measurement Date, the product of (i) the Moody's Average
Recovery Rate as of such Measurement Date minus 43.63% and (ii) 5000; provided, that, if the Moody's Average
Recovery Rate shall be (a) greater than or equal to 60.0%, then solely for the purposes of the calculation of the
Recovery Rate Modifier, the Moody’s Average Recovery Rate shall be deemed to be equal to 60.0%, or (b) less than
or equal to 43.63%, then solely for the purposes of the calculation of the Recovery Rate Modifier, the Moody's
Average Recovery Rate shall be deemed to be equal to 43.63%.
"Recovery Value" means, in the case of each Defaulted Obligation (and other Collateral Debt Obligations the
Principal Balance of which, at the time of determination, is required to be determined by reference to the Recovery
Value pursuant to the definition of Principal Balance), the lower of (A) the Market Value of such Collateral Debt
Obligation and (B) the product obtained by multiplying (a) the lower of (i) the Moody's Recovery Rate applicable to
such Collateral Debt Obligation and (ii) the Standard & Poor's Recovery Rate applicable to such Collateral Debt
Obligation by (b) the Principal Balance thereof immediately before such Collateral Debt Obligation became a
Defaulted Obligation (or was required to calculate its Principal Balance by reference to Recovery Value pursuant to
the definition of Principal Balance).
"Reference Obligation" means a debt security or other obligation upon which a Synthetic Security is based.
"Reference Obligor" means the obligor on a Reference Obligation.
"Registered" means, with respect to any debt obligation, a debt obligation (a) that is (in the case of a U.S.
issuer) issued after July 18, 1984 and (b) that is in registered form for purposes of the Code.
"Regulation D" means Regulation D under the Securities Act.
"Regulation S" means Regulation S under the Securities Act.
"Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, 12 C.F.R.
§ 221, or any successor regulation.
"Reinvestment Agreement" means a guaranteed reinvestment agreement from a bank, insurance company or
other corporation or entity organized under the laws of the United States or any state thereof (that is treated as debt
for U.S. federal income tax purposes by such issuer) under which no payments are subject to any withholding tax;
provided that such agreement provides that it is terminable by the purchaser, without premium or penalty, in the
162

event that the rating assigned to such agreement by the Rating Agencies is at any time lower than the rating required
pursuant to the terms of the Indenture to be assigned to such agreement in order to permit the purchase thereof.
"Relevant Valuation Percentage" means, for any item of collateral posted as part of any Swap Counterparty
Credit Support, the percentage specified in Table 1 below (if, for an item of collateral, a Valuation Date under the
agreement under which such collateral is posted occurs not less frequently than every five Business Days) or in
Table 2 below (if, for an item of collateral, a valuation date under the agreement under which such collateral is
posted occurs on each Business Day) opposite the period until the stated maturity of such collateral:
Table 1
Valuation Dates Every Five Business Days
Time to Stated Maturity
Valuation Percentages
U.S. Treasury
Obligations
U.S. Agency
Obligations
Other Debt
Obligations
Less than or equal to six months........................................................ 99.00% 99.00% 99.00%
Greater than six months and less than or equal to one year ............... 97.18% 98.00% 99.00%
Greater than one year and less than or equal to two years ................. 95.51% 96.15% 99.00%
Greater than two years and less than or equal to three years.............. 94.34% 95.25% 98.00%
Greater than three years and less than or equal to five years ............. 93.32% 92.60% 98.00%
Greater than five years and less than or equal to seven years ............ 91.75% 90.90% 96.15%
Greater than seven years and less than or equal to ten years.............. 90.25% 90.10% 95.25%
Greater than ten years and less than or equal to twelve years ............ 90.10% 89.25% 93.50%
Table 2
Valuation Dates Every Business Day
Time to Stated Maturity
Valuation Percentages
U.S. Treasury
Obligations
U.S. Agency
Obligations
Other Debt
Obligations
Less than or equal to six months....................................................... 99.00% 99.00% 99.00%
Greater than six months and less than or equal to one year .............. 99.00% 99.00% 99.00%
Greater than one year and less than or equal to two years ................ 98.00% 98.00% 99.00%
Greater than two years and less than or equal to three years............. 97.10% 97.10% 99.00%
Greater than three years and less than or equal to five years ............ 96.15% 95.25% 99.00%
Greater than five years and less than or equal to seven years ........... 95.25% 94.35% 98.00%
Greater than seven years and less than or equal to ten years............. 93.50% 92.60% 97.10%
Greater than ten years and less than or equal to twelve years ........... 92.60% 91.75% 96.15%
"Repository" means the internet-based password protected electronic repository of transaction documents
relating to privately offered and sold collateralized debt obligation securities located at "www.cdolibrary.com."
"Required Hedge Counterparty Rating" means, in respect of a counterparty or entity guaranteeing the
obligations of such counterparty, (x) either (i) a long-term, unsecured, unsubordinated debt obligation rating or other
similar rating of at least "Aa3" by Moody's and, if not rated higher than "Aa3," is not on negative credit watch by
Moody's (if such counterparty or entity has only a long-term rating) or (ii) a long-term rating of at least "A1" by
Moody's and a short-term rating of "P-1" by Moody's and neither such rating is on negative credit watch by Moody's
(if such counterparty or entity has a long-term rating and a short-term rating by Moody's) and (y) either (i) a longterm
rating of at least "A+" by Standard & Poor's or (ii) a short-term debt rating of at least "A-1" by Standard &
Poor's.
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"Sale Proceeds" means with respect to any Pledged Investment, all proceeds received as a result of the sale of
such Pledged Investment, net of all out-of-pocket expenses of the Issuer, the Collateral Manager and the Trustee
incurred in connection with any such sale.
"Schedule of Closing Collateral Debt Obligations" means the Collateral Debt Obligations listed on Schedule A
of the Indenture.
"Scheduled Distribution" means with respect to any Pledged Investment, for each Due Date, the scheduled
payment of principal and/or interest and/or fee due on such Due Date with respect to such Pledged Investment,
determined in accordance with the assumptions specified in the Indenture.
"Scheduled Periodic Currency Hedge Payment" means, with respect to any Currency Hedge, the amount
scheduled to be paid by the Issuer to the applicable Hedge Counterparty pursuant to the terms of such Currency
Hedge, excluding any Currency Hedge Termination Payment or Currency Hedge Principal Exchange Payment, each
related thereto.
"Scheduled Periodic Currency Hedge Receipt" means with respect to any Currency Hedge, the amount
scheduled to be paid to the Issuer by the applicable Hedge Counterparty pursuant to the terms of such Currency
Hedge, excluding any Currency Hedge Termination Receipt or Currency Hedge Principal Exchange Receipt, each
related thereto.
"Second Lien Loan" means any assignment of or Participation 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 First Lien 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
in 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 First Lien Loan
on such specified collateral; provided that, with respect to clauses (i) and (ii) above, such right of payment, security
interest or lien may be subordinate to customary permitted liens, including, without limitation, tax liens.
"Securities Intermediary" means that person or entity designated as such pursuant to the Indenture. Initially, the
Securities Intermediary will be U.S. Bank National Association. Any successor securities intermediary shall be a
state or national bank or trust company that is not an affiliate of the Issuer or the Co-Issuer and has capital and
surplus of at least U.S.$10,000,000.
"Securities Lending Collateral" means any funds or direct Registered dollar-denominated debt obligations of the
United States of America that will mature no later than the date that the loaned Collateral Debt Obligations are to be
returned to the Issuer pursuant to the relevant Securities Lending Agreement and that are pledged by a Securities
Lending Counterparty as collateral pursuant to a Securities Lending Agreement.
"Security Owner Certificate" means a certificate to be signed by the holder or beneficial holder of a Note,
substantially in the form attached as Exhibit O to the Indenture.
"Senior Secured Loan" means, together with similar terms, senior secured loans as well as senior secured notes
and senior secured bonds, except where specific provision is made for the separate treatment of senior secured loans
or senior secured bonds (such as the "Senior Secured Bond" row in the definition of "Standard & Poor's Average
Recovery Rate" or the "Bond Recovery Rate" row in the definition of "Moody's Average Recovery Rate").
"Special Purpose Vehicle" means a special purpose vehicle organized under the laws of (i) the Cayman Islands,
Bermuda, the Netherlands Antilles or the Channel Islands or (ii) any other sovereign jurisdiction that (a) is
commonly used as a place of organization, (b) as determined by the Collateral Manager, generally imposes no or
only nominal tax on the income of special purpose vehicles and (c) with respect to which a Rating Confirmation
from Standard & Poor's shall have been received in respect of its treatment as a sovereign jurisdiction for purposes
of this definition.
"Specified Hedge Termination Payments" means any termination payments and interest accrued thereon
payable by the Issuer to the Hedge Counterparty upon an early termination of a Hedge Agreement due to an event of
164

default or a termination event (other than "Illegality" or "Tax Event" as defined in the Hedge Agreement) where the
Hedge Counterparty is the "Defaulting Party" or the sole "Affected Party" (each as defined in such Hedge
Agreement) under any Hedge Agreement as certified by the Collateral Manager on behalf of the Issuer to the
Trustee.
"Spread" means:
(a) in the case of a Collateral Debt Obligation that bears interest at a spread over a London interbank
offered rate index, the stated interest rate spread on such Collateral Debt Obligation above such index; and
(b) in the case of a Collateral Debt Obligation that does not bear interest at a spread over a London
interbank offered rate index, the excess of the rate at which such Collateral Debt Obligation bears interest over
LIBOR as of the immediately preceding LIBOR Determination Date (which spread or excess may be expressed
as a negative percentage).
"Spread Excess" means as of any Measurement Date, a fraction (expressed as a percentage) the numerator of
which is equal to the product of (a) the excess, of any, if the Weighted Average Spread for such Measurement Date
over the applicable percentage set forth in the definition of "Weighted Average Spread Test" for such Measurement
Date and (b) the Aggregate Principal Balance of all Floating Rate Collateral Debt Obligations (other than Defaulted
Obligations and PIK Securities that are currently deferring interest) held by the Issuer as of such Measurement Date,
and the denominator of which is the Aggregate Principal Balance of all Fixed Rate Collateral Debt Obligations
(other than Defaulted Obligations and PIK Securities that are currently deferring interest) held by the Issuer as of
such Measurement Date. In computing the Spread Excess, the Weighted Average Spread will be computed as if the
Fixed Rate Coupon Excess were equal to zero.
"Standard & Poor's Industry Classification Group" means any of Standard & Poor's industry classification
groups set forth in Exhibit B, and any additional such industry classification groups that may be subsequently
established by Standard & Poor's and provided by the Collateral Manager or Standard & Poor's to the Trustee.
"Standard & Poor's Priority Category" shall have the meaning ascribed to such term in the table that is included
in the definition of Standard & Poor's Average Recovery Rate.
"Standard & Poor's Rating" means, with respect to any Collateral Debt Obligation, a rating determined in the
following manner:
(a) A "Standard & Poor's Actual Rating" shall be determined as follows:
(i) (A) if there is an issuer credit rating of the issuer of such Collateral Debt Obligation, or the guarantor
who unconditionally and irrevocably guarantees such Collateral Debt Obligation, then the Standard & Poor's
Rating of such issuer, or the guarantor shall be such rating (regardless of whether there is a published rating by
Standard & Poor's on the Collateral Debt Obligations of such issuer held by the Issuer); (B) if there is no such
issuer credit rating of the issuer of such Collateral Debt Obligation, or the guarantor who unconditionally and
irrevocably guarantees such Collateral Debt Obligation, and such Collateral Debt Obligation is rated by
Standard & Poor's, then the Standard & Poor's Rating of such Collateral Debt Obligations shall be one
subcategory below such rating; and (C) if there is no issuer credit rating of the issuer of such Collateral Debt
Obligation, or the guarantor who unconditionally and irrevocably guarantees such Collateral Debt Obligation
and such Collateral Debt Obligation is not rated by Standard & Poor's, but another security or obligation of the
issuer is rated by Standard & Poor's, then the Standard & Poor's Rating of such Collateral Debt Obligation shall
be the issuer credit rating or shall be determined as follows: (1) if there is a rating on a senior secured
obligation of the issuer, then the Standard & Poor's Rating of such Collateral Debt Obligation shall be one
category below such rating if such Collateral Debt Obligation is a senior secured or senior unsecured obligation
of the issuer; (2) if there is a rating on a senior unsecured obligation of the issuer, then the Standard & Poor's
Rating of such Collateral Debt Obligation shall equal such rating if such Collateral Debt Obligation is a senior
secured or senior unsecured obligation of the issuer; and (3) if there is a rating on a subordinated obligation of
the issuer, and if such Collateral Debt Obligation is a senior secured or senior unsecured obligation of the issuer,
then the Standard & Poor's Rating of such Collateral Debt Obligation shall be one subcategory above such
165

ating if such rating is higher than "BB+," and shall be two subcategories above such rating if such rating is
"BB+" or lower;
(ii) with respect to any Collateral Debt Obligation that is a Synthetic Security (other than a Form-
Approved Synthetic Security) or a Structured Finance Security, the Standard & Poor's Rating of such Synthetic
Security or Structured Finance Security, as the case may be, shall be the rating assigned thereto by Standard &
Poor's in connection with the acquisition thereof by the Issuer;
(iii) with respect to any Form-Approved Synthetic Security, the rating assigned by Standard & Poor's to
the issuer or guarantor of such Synthetic Security, or if the issuer or the guarantor of such Synthetic Security is
not rated by Standard & Poor's, then the Standard & Poor's Rating of such Synthetic Security shall be the rating
assigned thereto by Standard & Poor's in connection with the acquisition thereof by the Issuer upon the request
of the Issuer or the Collateral Manager; and
(iv) with respect to any Collateral Debt Obligation that is a DIP Loan, the Standard & Poor's Rating of
such Collateral Debt Obligation shall be the public or private rating assigned thereto by Standard & Poor's;
provided that, in the case of such private rating not requested by the Issuer, the Collateral Manager and Standard
& Poor's shall have received the consent from the related obligor to such use of such private rating;
(b) If a Standard & Poor's Actual Rating cannot be determined by a method described above, a "Standard
& Poor's Derived Rating" shall be determined as follows:
(i) if there is not an issuer credit rating published by Standard & Poor's with respect to the issuer, then
the Standard & Poor's Rating for such issuer may be determined using the methods provided below;
(ii) if an obligation of the issuer is rated by Moody's, then the Standard & Poor's Rating shall be
determined in accordance with the methodologies for establishing the Moody's Rating set forth below, except
that the Standard & Poor's Rating of such obligation shall be (A) one subcategory below the Standard & Poor's
equivalent of the senior secured rating assigned by Moody's if such security is rated "Baa3" or higher by
Moody's, and (B) two subcategories below the Standard & Poor's equivalent of the senior secured rating
assigned by Moody's if such security is rated "Ba1" or lower by Moody's; provided that the aggregate Principal
Balance of Collateral Debt Obligations having such Standard & Poor's Rating by reason of this paragraph (ii)
shall not exceed 10% of the Principal Collateral Value; and
(iii) if no other security or obligation of the issuer is rated by Moody's, then the Issuer or the Collateral
Manager, on behalf of the Issuer, may apply to Standard & Poor's for a corporate credit estimate, which shall
then be its Standard & Poor's Rating; provided that pending receipt from Standard & Poor's of such estimate,
such Collateral Debt Obligation shall have a Standard & Poor's Rating of "B-" if the Collateral Manager
believes that such estimate shall be at least "B-" and if the aggregate Principal Balance of Collateral Debt
Obligations having such Standard & Poor's Rating by reason of this proviso does not exceed 10% of the
Principal Collateral Value, unless Standard & Poor's gives approval for a different rating to apply during the
interim period;
provided that, unless Standard & Poor's publicly declares or otherwise confirms in writing to the Collateral Manager
and the Issuer that it has ceased to require such adjustment, then, if any Collateral Debt Obligation is on credit watch
by Standard & Poor's for possible upgrade or downgrade, the Standard & Poor's Rating of such Collateral Debt
Obligation shall be increased or reduced, as applicable, by one rating subcategory from the otherwise applicable
Standard & Poor's Rating determined under this definition.
"Standard & Poor's Recovery Rate" shall have the meaning ascribed to such term in the table that is included in
the definition of Standard & Poor's Average Recovery Rate.
"Step-Up Coupon Security" is a security (but not, for the avoidance of doubt, a commercial loan as to which the
rate of interest is adjusted pursuant to a schedule or one or more credit-related triggers included in the Underlying
Instruments for such loan) that provides that (i) it does not pay interest over a specified period of time ending prior
to its maturity, but that does provide for the payment of interest after the expiration of such specified period or (ii)
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the interest rate of which increases over a specified period of time other than due to the increase of the index relating
to a Floating Rate Collateral Debt Obligation.
"Swap Agreement" means a Synthetic Security in a form of a swap agreement between the Issuer and a Swap
Counterparty that provides for (i) periodic payments from the Swap Counterparty to the Issuer calculated at a stated
rate on the notional amount stated therein (herein, the "notional amount"); (ii) upon a termination of such agreement
as a result of a "Credit Event" (as defined in such Swap Agreement), physical delivery by the Swap Counterparty of
a Deliverable Obligation; (iii) the posting by the Issuer of collateral, by the transfer of cash to the Swap Collateral
Accounts (or related subaccount thereof) to be held and applied in accordance with the Indenture, to secure the
payment obligations of the Issuer referred to in clause (ii) above; and (iv) the posting by the Swap Counterparty of
collateral in an amount determined to be sufficient by Standard & Poor's as evidenced by such Rating Agency's
Rating Confirmation received in connection therewith; provided that the economic and tax characteristics of such
Swap Agreement, taken together with the underlying Reference Obligation and, if applicable, Deliverable
Obligation, meet, at the time such agreement is entered into, the requirements of the definition of Collateral Debt
Obligation, and satisfy the Portfolio Profile Test (or if any percentage requirement specified therein is not satisfied
would cause such requirement to be at least as close to being satisfied after giving effect to entering into such
agreement).
"Swap Collateral" means all rights, title and interest of the Issuer in, under and to the Swap Collateral Accounts
and all investments purchased with, and all income from the investment of, funds on deposit therein.
"Swap Counterparty" means the counterparty under a Swap Agreement.
"Swap Counterparty Credit Support" means, with respect to any Swap Counterparty if (and for so long as) its
long-term debt obligations are (or whose counterparty rating is) (directly or by way of guarantee) rated below the
minimum threshold as determined by Moody's in connection with the relevant Swap Agreement, the obligation to
deliver Eligible Investments pursuant to a 1994 ISDA Credit Support Annex (New York Law) having the following
terms: (1) an infinite "Threshold" for the Issuer; (2) a zero "Threshold" for such Swap Counterparty when such
delivery obligation is effective and an infinite "Threshold" otherwise; (3) a "Minimum Transfer Amount" and
"Rounding" amount of U.S.$100,000; (4) a provision to the effect that, in calculating the "Credit Support Amount"
with respect to the Issuer, the Issuer's "Exposure" will be deemed to be equal to 102% of the Issuer's "Exposure"
(calculated without regard to such provision); (5) "Eligible Collateral" consisting of cash, U.S. Treasury Obligations
or U.S. Agency Obligations (in each case with a "Valuation Percentage" related thereto equal to the Relevant
Valuation Percentage therefor); and (6) a "Valuation Date" occurring not less frequently than each "Local Business
Day" for each of the Issuer and such Swap Counterparty. Quoted terms used but not defined in this definition have
the respective meanings given to such terms in the 1994 ISDA Credit Support Annex (New York Law) published by
ISDA.
"Swap Guarantor" means with respect to any Swap Agreement, any guarantor or any permitted assignee or
successor under the guaranty related thereto.
"Swap Receipt Amount" means with respect to any Swap Agreement and any date, the amount of any scheduled
settlement payment, if any, then payable to the Issuer by the Swap Counterparty party thereto.
"Synthetic/Participation Sublimit" means a test that limits, as a percentage of Principal Collateral Value, the
amount of Synthetic Securities and loan participations that can be held by the Issuer. The various limits that apply
are set forth in Table 1 below (for as long as any Class of Notes is rated by Moody's) and Table 1 below (for so long
as any Class of Notes is rated by Standard & Poor's).
Table 1
Moody's Long-Term Senior
Unsecured Debt Rating of
Synthetic Security Counterparty/
Selling Institution
Individual Synthetic
Security Counterparty/
Selling Institution Limit
Aggregate Synthetic
Security Counterparty/
Selling Institution Limit
Aaa 20% 20%
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Aa1 15% 20%
Aa2 10% 20%
Aa3 7.5% 15%
A1 5% 10%
A2 * 5% 10%
* The percentages in this row apply only if such Synthetic Security Counterparty or Selling Institution also has
a short-term debt rating of "P-1" by Moody's. If such Synthetic Security Counterparty or Selling Institution
does not also have a short-term debt rating of "P-1" by Moody's, both the individual and the aggregate
percentage limits are zero.
Table 2
Standard & Poor's Long-Term
Senior Unsecured Debt Rating
of Synthetic Security
Counterparty/Selling Institution
Individual Synthetic
Security Counterparty/
Selling Institution Limit
Aggregate Synthetic
Security Counterparty/
Selling Institution Limit
AAA 20% 20%
AA+ 10% 10%
AA 10% 10%
AA- 10% 10%
A+ 5% 5%
A 5% 5%
Pursuant to the Synthetic/Participation Sublimit, the Issuer will not be permitted to acquire a Synthetic Security
or loan participation (a "Target Instrument") unless immediately following the acquisition thereof:
(a) the percentage of the Principal Collateral Value represented by the sum of (i) the Principal Balance of
the Target Instrument and (ii) the Principal Balance of the Synthetic Securities and loan participations of the
Synthetic Security Counterparty/Selling Institution (and/or its affiliates) in respect of the Target Instrument then
held by the Issuer will not exceed the Individual Counterparty Percentage for the applicable Long-Term Senior
Unsecured Debt Rating of such Synthetic Security Counterparty/Selling Institution; and
(b) the percentage of the Principal Collateral Value represented by the sum of (i) the Principal Balance of
all Synthetic Securities and loan participations then held by the Issuer of Synthetic Security
Counterparties/Selling Institutions (and their respective affiliates) having the same Long-Term Senior
Unsecured Debt Rating as that of the Synthetic Counterparty/Selling Institution in respect of the Target
Instrument, plus (ii) the Principal Balance of the Target Instrument will not exceed the Aggregate Counterparty
Percentage for such Long-Term Senior Unsecured Debt Rating.
In the event the long-term senior unsecured debt rating or counterparty debt rating assigned by Standard &
Poor's is different from such rating assigned by Moody's, the lower of the two ratings will be utilized.
"Target Par Amount" means, as of any date of determination, an amount equal to U.S.$386,000,000 in
aggregate Principal Balance of Collateral Debt Obligations (measured, for each Collateral Debt Obligation, as of the
time of purchase of such Collateral Debt Obligation).
"Transaction Accounts" means, collectively, the Expense Account, the Interest Collection Account, the
Proceeds Account, the Principal Collection Account, the Interest Reserve Account, the Payment Account, the
Custodial Account, the Delayed Funding Obligation Account, the Hedge Counterparty Collateral Account, the Swap
Collateral Accounts, each Securities Lending Account, the Swap Counterparty Collateral Account, the Currency
Account (including the related subaccounts) and any subaccounts of any thereof that the Trustee may deem
necessary or appropriate for convenience in administration of the aforesaid accounts.
"Triple-C Collateral Debt Obligation" means, as of any date of determination, a Collateral Debt Obligation
(other than a Defaulted Obligation) with a Moody's Rating of "Caa1" or below or a Standard & Poor's Rating of
"CCC+" or below.
168

"Underlying Instruments" means the indenture, loan agreement, credit agreement, participation agreement or
other agreement pursuant to which a Pledged Investment has been issued or created and each other agreement that
governs the terms of or secures the obligations represented by such Pledged Investment or of which the holders of
such Pledged Investment are the beneficiaries.
"Unhedged Interest Spread" means the excess, if any, of the interest rate payable pursuant to a Non-USD Debt
Obligation less the interest rate payable by the Issuer pursuant to the related Currency Hedge.
"Unhedged Reduction Percentage" means 65.0%.
"U.S. Agency Obligations" means the registered obligations of any agency or instrumentality of the United
States, the timely payment of principal and interest on which is fully and expressly guaranteed by the United States,
or any agency or instrumentality of the United States the obligations of which are expressly backed by the full faith
and credit of the United States, but excluding (x) any such obligations that are Zero-Coupon Securities and (y) any
such obligations that are interest only securities.
"U.S. Obligor" means any Obligor organized or incorporated in the United States.
"U.S. Treasury Benchmark" means for any Collateral Debt Obligation, the interest rate on U.S. Treasury
securities used as a benchmark for that Collateral Debt Obligation by two market makers, selected by the Collateral
Manager, in that Collateral Debt Obligation.
"U.S. Treasury Obligations" means the direct Registered obligations of the United States, the obligations of
which are expressly backed by the full faith and credit of the United States, but excluding (x) any such obligations
that are Zero-Coupon Securities and (y) any such obligations that are interest only securities.
"Weighted Average Purchase Price" means the number (expressed as a percentage) obtained by (i) summing the
products obtained by multiplying the purchase price of each Collateral Debt Obligation by the Principal Balance of
such Collateral Debt Obligation and (ii) dividing such sum by the Principal Balance of all Collateral Debt
Obligations at such time.
"Weighted Average Rating" means the number obtained by (a) multiplying the Principal Balance of each
Collateral Debt Obligation (excluding Defaulted Obligations) by its Moody's Rating Factor on any Measurement
Date; (b) summing the products obtained in clause (a) for all Collateral Debt Obligations; (c) dividing the sum
obtained in clause (b) by the Aggregate Principal Balance on such Measurement Date of all Collateral Debt
Obligations that are not Defaulted Obligations; and (d) rounding the result to the nearest whole number.
"Zero-Coupon Security" means a security that by its terms does not make periodic payments of interest.
169

INDEX OF DEFINED TERMS
$..............................................................................xiv
€..............................................................................xiv
25% Limitation......................................................134
A Item....................................................................101
A/B Exchange........................................................101
Accountholder .........................................................56
Accredited Investor................................................142
Accredited Investors...................................................i
ACLSL .................................................................... iii
Additional Reinvestment Conditions.................19, 84
Adjusted Class C Overcollateralization
Ratio ...................................................................142
Adjusted Purchase Price ........................................142
Administration Agreement ......................................49
Administrative Expense Cap .............................21, 62
Administrative Expenses .......................................142
Administrator...........................................................49
Advisers Act ..........................................................142
Affected Bank........................................................142
Affected Class .........................................................53
Affiliated Person....................................................142
Aggregate Excess Spread ......................................142
Aggregate Industry Equivalent Unit Score..............77
Aggregate Outstanding Amount............................143
Aggregate Principal Balance .................................143
Aggregate Spread ..................................................143
Alternative Swap Collateral Account ......................89
Alternative Swap Collateral Account Bank.............89
Applicable Spot Market Exchange Rate................144
Approved Dealer....................................................144
Approved Exchange ..............................................121
Approved Pricing Service......................................144
Approved Source ...................................................121
Assignments ............................................................71
Authenticating Agent.............................................144
Authorized Officer.................................................144
Available Redemption Amount ...............................52
Average Life............................................................78
Average Par Amount ...............................................77
B Item ....................................................................101
Bankruptcy Code ...................................................144
Base Collateral Management Fee ..........................116
Base Collateral Management Fee Interest .............116
Base Collateral Management Fee Rate....................25
Benefit Plan Investor ...............................................46
Business Day .........................................................144
Canadian Dollars ....................................................xiv
cause ......................................................................118
CDO.......................................................................144
CDO Security ........................................................144
CDOs.....................................................................114
CFC .......................................................................124
Class ......................................................................144
Class A Coverage Tests.............................................9
Class A Interest Coverage Ratio..........................9, 73
Class A Interest Coverage Test..........................10, 73
Class A Notes .........................................................i, 1
Class A Overcollateralization Ratio ....................9, 73
Class A Overcollateralization Test ......................9, 73
Class A-1 Break-Even Default Rate ........................81
Class A-1 Loss Differential .....................................81
Class A-1 Note Interest Rate .............................3, 144
Class A-1 Notes......................................................i, 1
Class A-1 Scenario Default Rate .............................81
Class A-2 Break-Even Default Rate ........................81
Class A-2 Loss Differential .....................................81
Class A-2 Note Interest Rate .............................3, 145
Class A-2 Notes......................................................i, 1
Class A-2 Scenario Default Rate .............................81
Class B Break-Even Default Rate............................81
Class B Coverage Tests ...........................................10
Class B Deferred Interest...........................................2
Class B Interest Coverage Ratio ........................10, 74
Class B Interest Coverage Test..........................10, 74
Class B Loss Differential.........................................81
Class B Note Interest Rate.................................3, 145
Class B Notes .........................................................i, 1
Class B Overcollateralization Ratio...................10, 73
Class B Overcollateralization Test ....................10, 73
Class B Scenario Default Rate.................................81
Class C Break-Even Default Rate............................81
Class C Coverage Tests ...........................................11
Class C Deferred Interest...........................................3
Class C Interest Coverage Ratio ........................11, 74
Class C Interest Coverage Test..........................11, 75
Class C Loss Differential.........................................81
Class C Note Interest Rate.................................3, 145
Class C Notes .........................................................i, 1
Class C Overcollateralization Ratio...................11, 74
Class C Overcollateralization Test ....................11, 74
Class C Scenario Default Rate.................................81
Clearstream..............................................................57
Clearstream-Luxembourg...................................... i, ii
Closing Date ...............................................................i
Code.......................................................................127
Co-Issuer.....................................................................i
Co-Issuer Equity......................................................48
Co-Issuers...................................................................i
Collateral .................................................................65
Collateral Administration Agreement..............25, 145
Collateral Administrator ................................121, 145
Collateral Assignment of Interest Rate
Hedge..................................................................145
Collateral Debt Obligation...................................6, 66
Collateral Management Agreement.................21, 116
Collateral Management Incentive Fee ...................117
Collateral Manager .......................................i, 21, 114
Collateral Quality Tests .....................................12, 72

Collection Accounts ..............................................145
Controlling Class ...................................................145
Controlling Person.................................................127
Corporate Family Rating .......................................145
Corporate Trust Office...........................................145
Coverage Tests ....................................................8, 72
Credit Event...........................................................167
Credit Improved Obligation...................................145
Credit Risk Obligation...........................................146
Cure Period....................................................146, 148
Currency ................................................................146
Currency Account....................................................92
Currency Hedge.....................................................146
Currency Hedge Obligation...................................146
Currency Hedge Payment Date .............................146
Currency Hedge Principal Exchange
Payment ..............................................................146
Currency Hedge Principal Exchange Receipt........147
Currency Hedge Replacement Payment ................147
Currency Hedge Replacement Receipt..................147
Currency Hedge Requirements................................97
Currency Hedge Termination Event......................147
Currency Hedge Termination Payment .................147
Currency Hedge Termination Receipt ...................147
Current Pay Obligation..........................................147
Current Portfolio....................................................147
Custodial Account ...........................................88, 147
Debtor....................................................................149
Declaration of Trust.................................................47
Default ...................................................................105
Defaulted Obligation .............................................148
Defaulted Participation Security............................149
Defaulted Synthetic Security .................................148
Deferred Interest Asset ..........................................149
Delayed Draw Term Loan .......................................70
Delayed Funding Advance Amount ......................149
Delayed Funding Obligation Account .....................90
Deliverable Obligation ..........................................149
Depository Event .....................................................58
Determination Date..................................................12
DIP Loan ...............................................................149
Discounted Obligation...........................................150
Distribution............................................................150
Distribution Compliance Period ............................150
Distribution Date ...................................................... ii
Distribution Dates......................................................4
Diversity Score ........................................................77
dollars .....................................................................xiv
DTC............................................................................i
Due Date................................................................150
Due Period.............................................................150
Effective Date........................................................150
Eligible Financial Institution .................................150
Eligible Investment................................................150
Equity Security ......................................................152
Equity Workout Security .......................................152
Equivalent Unit Score..............................................77
ERISA ...................................................................127
EUR........................................................................xiv
Euro ........................................................................xiv
Euroclear.......................................................... i, ii, 57
Event of Default ....................................................104
Excepted Property..................................................152
Exchange Act..........................................................xiv
Exit Date................................................................118
Expense Account .....................................................89
Final Distribution Date ..............................................4
Final Maturity........................................................152
Finance Lease ........................................................153
Financial Sponsor ..................................................153
First Lien Loan ......................................................153
Fiscal Agency Agreement......................................112
Fixed Rate Collateral Debt Obligations.................153
Fixed Rate Coupon Excess ....................................153
Floating Rate Collateral Debt Obligations.............153
Form-Approved Hedge Agreement .......................153
Form-Approved Synthetic Security.......................154
FRB .........................................................................34
German Investors.....................................................47
Global Notes............................................................57
Hedge Agreement..................................................154
Hedge Collateral....................................................154
Hedge Counterparty...............................................154
Hedge Counterparty Collateral Account..................91
Hedge Payment Amount........................................154
Hedge Receipt Amount .........................................154
holder......................................................................xiv
Holder....................................................................122
Increased Rate Withholding Tax Obligation .........154
Increased Rate Withholding Tax Obligations..........53
Indenture.....................................................................i
Industry Diversity Score..........................................77
Industry Group...................................................15, 69
Initial Capital Amount Account.............................154
Initial Key Managers .............................................119
Institutional Accredited Investor ...........................154
Interest Accrual Period ............................................50
Interest Amount .......................................................51
Interest Collection Account .....................................87
Interest Coverage Ratios......................................9, 72
Interest Coverage Tests .......................................8, 72
Interest Proceeds......................................................59
Interest Rate Hedge ...............................................154
Interest Reserve Account.........................................91
Internal Rate of Return ..........................................154
Investment Company Act ...........................................i
Investment Tax Act .................................................47
IRAs.......................................................................127
Irish Listing Agent................................................... iii
Irish Paying Agent...................................................57
IRS...................................................................33, 122
Issuer ..........................................................................i
171

Issuer Par Amount ...................................................77
JPMCB ....................................................................44
JPMorgan..............................................................i, 20
JPMorgan Chase......................................................44
JPMorgan Companies..............................................44
JPMorgan Partners...................................................44
Key Manager .........................................................119
Key Manager Event...............................................119
KM Date ................................................................119
knowledgeable employees.....................................131
Knowledgeable Employees ........................................i
LIBOR.....................................................................50
LIBOR Business Day ..............................................51
LIBOR Calculation Agent .......................................50
LIBOR Determination Date.....................................51
LIBOR Period..........................................................51
LLC Manager ..........................................................50
loan ........................................................................155
Majority .................................................................155
Margin Stock ...................................................34, 155
Market Value.........................................................155
Market Value Percentage.......................................156
Maturity .................................................................156
Measurement Date...................................................12
Memorandum and Articles ....................................112
Minimum Diversity/Maximum Rating
/Minimum Spread/Maximum WAL Matrix..........75
Minimum Reporting Requirements .........................47
Moody's ................................................................i, 65
Moody's Actual Rating ..........................................156
Moody's Average Rating .........................................76
Moody's Average Recovery Rate ............................79
Moody's Derived Rating........................................157
Moody's Diversity Test......................................13, 77
Moody's Estimated Rating.....................................157
Moody's Industry Classification Group .................156
Moody's Rating......................................................156
Moody's Rating Factor.............................................76
Moody's Recovery Rate.........................................158
New Withholding Tax Obligations..........................53
Non-Permitted ERISA Holder...............................139
Non-Permitted Holder ...........................................138
non-U.S. Holder.....................................................122
Non-USD Debt Obligation ....................................158
Non-USD Notional Amount....................................97
Note Interest Rate ..................................................158
Note Payment Sequence ........................................158
Note Registrar........................................................158
Notes.......................................................................i, 1
Notice of Default ...................................................105
notional amount .....................................................167
Obligation..............................................................158
Obligor...................................................................159
Octagon ...........................................................21, 114
Octagon III...............................................................44
Offer ......................................................................159
Offered Securities...................................................i, 1
Offering Memorandum............................................ iii
offshore transaction .................................................57
OID........................................................................123
Optional Redemptions .............................................52
Ordinary Shares .......................................................47
Original Issuance Amount .....................................159
Overcollateralization Ratios ................................9, 72
Overcollateralization Tests ..................................8, 72
parallel security .....................................................157
Partially PIKable Security .....................................159
Participations .....................................................39, 71
Paying Agent ...........................................................54
Payment Account.....................................................88
Permitted Currency................................................159
Permitted Currency Exchange ...............................159
Permitted Non-U.S. Obligor..................................159
Permitted Offer......................................................159
Person ....................................................................159
PFIC.......................................................................124
phantom income ..............................................33, 124
PIK Security ..........................................................159
Placement Agent.........................................................i
Placement Agreement............................................129
Plan........................................................................127
Plan Asset Regulation..............................................46
Plan Asset Regulations ..........................................127
Pledged Investments..............................................159
Portfolio Profile Test .........................................14, 68
Preferred Share Documents ...................................112
Preferred Share Paying Agent ...............................112
Preferred Shares......................................................i, 1
Preferred Shares Distribution Account..................113
Principal Balance...................................................160
Principal Collateral Value........................................70
Principal Collection Account...................................88
Principal Proceeds ...................................................60
Priority of Payments ................................................61
Pro Rata Special Redemption Conditions..............162
Proceeds Account ....................................................91
Program Documents ..............................................161
Program Parties .....................................................161
Proposed Portfolio .................................................161
Prospectus...................................................................i
PTCE .....................................................................128
Purpose Credit .........................................................34
QEF .......................................................................124
Qualified Institutional Buyer .................................162
Qualified Institutional Buyers.....................................i
Qualified Purchaser ...............................................162
Qualified Purchasers...................................................i
Ramp-Up Failure ...................................................111
Rating Agencies.................................................. i, xiv
Rating Agency........................................................xiv
Rating Confirmation..............................................162
Record Date.............................................................56
172

Recovery Rate Modifier ........................................162
Recovery Value .....................................................162
Redemption by Liquidation .....................................52
Redemption by Refinancing ....................................52
Redemption Date .....................................................54
Redemption Price ....................................................55
Reference Banks......................................................51
Reference Obligation.............................................162
Reference Obligor..................................................162
Registered..............................................................162
Regulation D..........................................................162
Regulation S .................................................. i, ii, 162
Regulation S Global Note......................................... ii
Regulation S Global Notes ......................................57
Regulation U....................................................34, 162
Regulation U Lenders..............................................34
Reinvestment Agreement.......................................162
Reinvestment Criteria........................................18, 83
Reinvestment Overcollateralization Ratio .........11, 75
Reinvestment Overcollateralization Test...........11, 75
Reinvestment Overcollateralization Test
Level ...............................................................12, 75
Reinvestment Period............................................5, 72
Relevant Valuation Percentage..............................163
Repository..............................................................163
Required Hedge Counterparty Rating....................163
Required Sale Date ..................................................86
Resolutions ............................................................112
Revolving Credit Facility ........................................71
Rule 144A.............................................................. i, ii
Rule 144A Global Note ............................................ ii
Rule 144A Global Notes..........................................57
Sale Proceeds.........................................................164
Schedule of Closing Collateral Debt
Obligations..........................................................164
Scheduled Distribution ..........................................164
Scheduled Periodic Currency Hedge
Payment ..............................................................164
Scheduled Periodic Currency Hedge Receipt........164
SEC..........................................................................35
Second Lien Loan..................................................164
Secured Parties ........................................................50
Securities Act..............................................................i
Securities Intermediary..........................................164
Securities Lending Account.....................................91
Securities Lending Agreement ................................99
Securities Lending Collateral ................................164
Securities Lending Counterparty .............................98
Security Owner Certificate ....................................164
Senior Secured Loan..............................................164
Share Registrar ......................................................114
Share Trustee...........................................................47
Special Purpose Vehicle ........................................164
Special Redemption.................................................53
Special Redemption Amount...................................53
Specified Hedge Termination Payments................164
Specified Octagon Affiliate ...................................121
Specified Percentage..............................................118
Spread....................................................................165
Spread Excess........................................................165
Standard & Poor's.................................................i, 65
Standard & Poor's Actual Rating...........................165
Standard & Poor's Average Recovery Rate .............80
Standard & Poor's CDO Monitor Test...............13, 80
Standard & Poor's Derived Rating.........................166
Standard & Poor's Industry Classification
Group..................................................................165
Standard & Poor's Priority Category .....................165
Standard & Poor's Rating ......................................165
Standard & Poor's Recovery Rate..........................166
Stated Maturity ......................................................... ii
Step-Up Coupon Security......................................166
Sterling ...................................................................xiv
Structured Finance Security.....................................71
Subordinated Collateral Management Fee.............117
Subordinated Collateral Management Fee
Rate.......................................................................25
Substitute Collateral Debt Obligations ..............18, 83
Swap Agreement ...................................................167
Swap Collateral .....................................................167
Swap Collateral Accounts........................................89
Swap Counterparty ................................................167
Swap Counterparty Collateral Account ...................91
Swap Counterparty Credit Support........................167
Swap Guarantor .....................................................167
Swap Receipt Amount...........................................167
Synthetic Security....................................................71
Synthetic Security Counterparty..............................71
Synthetic/Participation Sublimit............................167
Target Instrument ..................................................168
Target Par Amount ................................................168
Tax Event.................................................................53
Tax Redemption ......................................................53
Transaction Accounts ............................................168
Treasury...................................................................35
Triple-C Collateral Debt Obligation......................168
Trustee ........................................................................i
Trustee Swap Collateral Account ............................89
U.S..........................................................................xiv
U.S. 10% Shareholder ...........................................124
U.S. Agency Obligations .......................................169
U.S. dollars .............................................................xiv
U.S. Obligor...........................................................169
U.S. person ..............................................................57
U.S. Person ............................................................... ii
U.S. Treasury Benchmark......................................169
U.S. Treasury Obligations .....................................169
Underlying Instruments .........................................169
Unhedged Interest Spread......................................169
Unhedged Reduction Percentage...........................169
United States...........................................................xiv
Unscheduled Principal Payments.............................19
173

USA PATRIOT Act.................................................35
USD........................................................................xiv
USD Notional Amount ............................................97
Weighted Average Coupon......................................78
Weighted Average Coupon Test........................13, 78
Weighted Average Life ...........................................78
Weighted Average Life Test..............................13, 77
Weighted Average Purchase Price.........................169
Weighted Average Rating......................................169
Weighted Average Rating Factor Test...............12, 76
Weighted Average Recovery Rate Test.............13, 79
Weighted Average Spread .......................................78
Weighted Average Spread Test .........................13, 78
Zero-Coupon Security ...........................................169
174

FORM OF PURCHASER REPRESENTATION LETTER FOR PREFERRED SHARES
U.S. Bank National Association
One Federal Street, Third Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Services/CDO Unit—Octagon IX CLO
ANNEX A
Re:
Octagon Investment Partners IX, Ltd (the "Issuer")
Preferred Shares
Reference is hereby made to the Fiscal Agency Agreement, dated as of May 25, 2006, among the Issuer,
U.S. Bank National Association, as Preferred Share Paying Agent, and Maples Finance Limited, as Share Registrar
(the "Fiscal Agency Agreement"). Capitalized terms used but not defined herein shall have the meanings given
them in the Fiscal Agency Agreement.
This letter relates to our proposed purchase or acquisition of ___________ Mandatorily Redeemable
Preferred Shares with an aggregate original issue price of U.S.$___________ (the "Preferred Shares"), which are
held in the form of one or more certificated Preferred Shares in the name of ______________ (the "Transferor") to
effect the transfer of the Preferred Shares to ______________ (the "Transferee").
In connection with such request, and in respect of such Preferred Shares, the Transferee does hereby certify
that the Preferred Shares are being transferred (i) in accordance with the transfer restrictions set forth in the Fiscal
Agency Agreement 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)
_____
_____
_____
(b)
(PLEASE CHECK ONLY ONE)
a "qualified institutional buyer" as defined in Rule 144A under the Securities Act that is not a broker-dealer
which owns and invests on a discretionary basis less than U.S.$25,000,000 in securities of issuers that are
not affiliated persons of the dealer and is not a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of
Rule 144A under the Securities Act or a trust fund referred to in paragraph (a)(1)(i)(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 are acquiring the Preferred Shares in reliance on the exemption from
Securities Act registration provided by Rule 144A thereunder;
an "accredited investor" as defined in Rule 501(a) under the Securities Act; or
a person that is not a "U.S. person" as defined in Regulation S under the Securities Act, and are acquiring
the Preferred Shares in an offshore transaction (as defined in Regulation S) in reliance on the exemption
from Securities Act registration provided by Regulation S; and
acquiring the Preferred Shares for our own account (and not for the account of any other Person) in a
minimum denomination of 250 shares and in integral multiples of 1 in excess thereof.
The Transferee further represents and warrants as follows:
1. We understand that the Preferred Shares have not been and will not be registered under the Securities Act,
and, if in the future we decide to offer, resell, pledge or otherwise transfer the Preferred Shares, such
Preferred Shares may be offered, resold, pledged or otherwise transferred only in accordance with the
provisions of the Fiscal Agency Agreement and the legends on such Preferred Shares, including the
A-1

equirement for written certifications. In particular, we understand that the Preferred Shares 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, or (c) a company owned
exclusively by Knowledgeable Employees and/or Qualified Purchasers; 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
that is not a broker-dealer which owns and invests on a discretionary basis less than U.S.$25,000,000 in
securities of issuers that are not affiliated persons of the dealer and is not a plan referred to in
paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A under the Securities Act or a trust fund referred to in
paragraph (a)(1)(i)(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 who purchases such
Preferred Shares 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) under the Securities Act or (d) a person
that is not a "U.S. person" as defined in Regulation S under the Securities Act, and is acquiring the
Preferred Shares in an offshore transaction (as defined in Regulation S thereunder) in reliance on the
exemption from registration provided by Regulation S thereunder. We acknowledge 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 Preferred Shares.
2. In connection with our purchase of the Preferred Shares: (i) none of the Issuer, the Placement Agent, the
Collateral Manager or any of their respective affiliates are acting as a fiduciary or financial or investment
adviser for us; (ii) we are not relying (for purposes of making any investment decision or otherwise) on any
written or oral advice, counsel or representations of the Issuer, the Placement Agent, the Collateral
Manager, the Preferred Share Paying Agent or any of their respective affiliates other than any statements in
the final offering memorandum for such Preferred Shares; (iii) we have read and understand the final
offering memorandum for such Preferred Shares (including, without limitation, the descriptions therein of
the structure of the transaction in which the Preferred Shares are being issued and the risks to purchasers of
the Preferred Shares); (iv) we have consulted with our own legal, regulatory, tax, business, investment,
financial and accounting advisers to the extent we have deemed necessary, and have made our own
investment decisions (including decisions regarding the suitability of any transaction pursuant to the
Indenture) based upon our own judgment and upon any advice from such advisers as we have deemed
necessary and not upon any view expressed by the Issuer, the Placement Agent, the Collateral Manager, the
Preferred Share Paying Agent or any of their respective affiliates; (v) we will hold and transfer at least the
minimum denomination of such Preferred Shares; (vi) we were not formed for the purpose of investing in
the Preferred Shares; and (vii) we are a sophisticated investor and are purchasing the Preferred Shares with
a full understanding of all of the terms, conditions and risks thereof, and we are capable of assuming and
willing to assume those risks.
3. (i) We are 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, or (C) a company owned exclusively by Knowledgeable Employees and/or
Qualified Purchasers; 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 that is not a broker-dealer which owns and invests
on a discretionary basis less than U.S.$25,000,000 in securities of issuers that are not affiliated persons of
the dealer and is not a plan referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A under the
Securities Act or a trust fund referred to in paragraph (a)(1)(i)(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 who purchases such Preferred Shares 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)
under the Securities Act or (D) not a "U.S. person" as defined in Regulation S under the Securities Act and
are acquiring the Preferred Shares in an offshore transaction (as defined in Regulation S thereunder) in
reliance on the exemption from registration provided by Regulation S thereunder; (ii) we are acquiring the
Preferred Shares as principal solely for our own account for investment and not with a view to the resale,
distribution or other disposition thereof in violation of the Securities Act; (iii) we are not a (A) corporation,
(B) partnership, (C) common trust fund, or (D) 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
A-2

e made; (iv) we agree that we shall not hold any Preferred Shares for the benefit of any other person, that
we shall at all times be the sole beneficial owner thereof for purposes of the Investment Company Act and
all other purposes and that we shall not sell participation interests in the Preferred Shares or enter into any
other arrangement pursuant to which any other person shall be entitled to a beneficial interest in the
distributions on the Preferred Shares; (v) we are not an investment company that relies on the exclusion
from the definition of "investment company" provided by Section 3(c)(1) or Section 3(c)(7) of the
Investment Company Act (or a foreign investment company under Section 7(d) thereof relying on Section
3(c)(1) or 3(c)(7) with respect to its holders that are U.S. Persons), which was formed on or before April
30, 1996, unless we have received the consent of our beneficial owners who acquired their interests on or
before April 30, 1996, with respect to our treatment as a qualified purchaser (as defined in Section 2(a)(51)
of the Investment Company Act and the rules thereunder) in the manner required by Section 2(a)(51)(C) of
the Investment Company Act and the rules and regulations thereunder; and (vi) we will hold and transfer at
least the minimum denomination of the Preferred Shares and provide notice of the relevant transfer
restrictions to subsequent transferees.
4. We acknowledge and agree that all of the assurances given by us in certifications required by the Fiscal
Agency Agreement as to our status under ERISA or as to our status as an Affected Bank are correct and are
for the benefit of the Issuer, the Preferred Share Paying Agent, the Placement Agent and the Collateral
Manager. We agree and acknowledge that neither the Issuer nor the Preferred Share Paying Agent will
recognize any transfer of the Preferred Shares if such transfer may result in 25% or more of the value of the
Preferred Shares or any other class of equity interest in the Issuer being held by Benefit Plan Investors. We
further agree and acknowledge that no transfer of a Preferred Share to an Affected Bank will be effective
and the Preferred Share Paying Agent will not recognize any such transfer, unless such transfer is
specifically authorized by the Issuer in writing; provided 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 Preferred Shares or (y) the transferor
is an Affected Bank previously approved by the Issuer.
5. We will treat our Preferred Shares as equity of the Issuer for United States federal income tax purposes.
6. We are ______ (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. We understand and
acknowledge that failure to provide the Issuer or the Preferred Share Paying Agent 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 us in
respect of the Preferred Shares.
7. We agree not to seek to commence in respect of the Issuer, or cause the Issuer to commence, a bankruptcy
proceeding before a year and a day has elapsed since the payment in full to the holders of the Preferred
Shares issued pursuant to the Memorandum and Articles 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 Collateral Manager on behalf of the
Issuer, the Issuer may, upon notice to the Preferred Share Paying Agent, impose additional transfer
restrictions on the Preferred Shares 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 Preferred
Share to make representations to the Issuer in connection with such compliance.
A-3

9. We understand that the Issuer, the Preferred Share Paying Agent, the Placement Agent and their respective
counsel will rely upon the accuracy and truth of the foregoing representations, and we hereby consent to
such reliance and agree to indemnify each such party from any loss or damages caused by any
misrepresentation by us.
10. We understand that the Issuer will have the right (exercisable in its sole discretion) to require us to sell all
of the Preferred Shares owned by us at the then-current market price therefor if any representation,
warranty or covenant made by us in this Representation Letter is or becomes untrue.
11. We are not a member of the public in the Cayman Islands.
[Remainder of the page intentionally left blank]
A-4

Dated:
[Insert Name of Purchaser Above]
By:
Name:
Title:
__________________________
Aggregate original issue price of Preferred Shares: U.S.$
Taxpayer identification number:
Address for notices:
Wire transfer information for payments:
Bank:
Address:
Bank ABA#:
Account #:
Telephone:
Facsimile:
Attention:
FAO:
Attention:
Denominations of certificates (if more than one):
Registered name:
cc:
Octagon Investment Partners IX, Ltd.
c/o Maples Finance Limited
P.O. Box 1093GT
Queensgate House
South Church Street, George Town
Grand Cayman, Cayman Islands
A-5

ANNEX B
FORM OF PREFERRED SHARE 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 Preferred Shares issued by Octagon Investment
Partners IX, Ltd. (the "Issuer") is held by "Benefit Plan Investors" as contemplated and defined under the U.S.
Department of Labor's regulations set forth at 29 C.F.R. Section 2510.3-101 (the "Plan Asset Regulations") 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 Preferred Shares, (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 Preferred Shares. 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 memorandum of the Issuer or the Indenture.
Please review the information in this Certificate and check the box(es) that are applicable to you.
you.
If a box is not checked, you are agreeing that the applicable Section does not, and will not, apply to
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. Employee Benefit Plans Not Subject to ERISA or the Code. We, or the entity on whose behalf
we are acting, are a plan or retirement arrangement of a type described in the definition of an
"employee benefit plan" within the meaning of Section 3(3) of ERISA but which is NOT subject
to the fiduciary provisions of ERISA or to Section 4975 of the Code.
Examples: (i) governmental plans, (ii) certain church plans that did not elect to be subject to the taxqualification
provisions of the Code and (iii) non-US plans.
3. 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, as determined under the Plan Asset Regulations.
Examples: (i) an insurance company separate account, (ii) a bank collective trust fund and (iii) 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.
Note:
The Plan Asset Regulations are technical. Accordingly, if you have any question regarding
whether you may be an entity described in this Section 3, you should consult with your counsel.
4. Insurance Company General Account. We, or the entity on whose behalf we are acting, are an
insurance company purchasing the Preferred Shares 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.
B-2

If you check Box 4, 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.
5. None of Sections (1) Through (4) 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
(4) above.
6. No Prohibited Transaction. If we checked any of the boxes in Sections (1) through (4) above, we
represent and agree that our acquisition, holding and disposition of the Preferred Shares, as applicable, do
not and will not constitute or result in a non-exempt prohibited transaction under ERISA, under Section
4975 of the Code, or under any substantially similar federal, state, local or foreign law, as applicable.
7. Controlling Person. We are, or we are acting on behalf of any of: (i) the Preferred Share Paying
Agent, (ii) the Collateral 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 Preferred Shares, the value of any Preferred Shares held by Controlling
Persons (other than Benefit Plan Investors) are required to be disregarded.
Compelled Disposition. We acknowledge and agree that:
(i)
(ii)
(iii)
(iv)
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 Preferred Share Paying Agent if the
Preferred Share Paying Agent 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;
if we fail to transfer our Preferred Shares (or any interest therein), the Issuer shall have the right
(and the Collateral Manager may require the Issuer), without further notice to us, to sell our
Preferred Shares (or any interest therein), 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 Preferred Shares 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;
by our acceptance of an interest in the Preferred Shares, we agree to cooperate with the Issuer to
affect such transfers;
B-2

(v)
(vi)
the proceeds of such sale, net of any commissions, expenses and taxes due in connection with such
sale shall be remitted to us; and
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 a result of any such sale or the
exercise of such discretion.
Required Notification. We hereby agree that we (a) will inform the Preferred Share Paying Agent of any
proposed transfer by us of the Preferred Shares (or any interest therein) owned by us to any transferee or of
any proposed change in our status under ERISA and (b) will not permit any such transfer or change in
status to become effective that would cause the 25% Limitation to be exceeded. We hereby acknowledge
that the Preferred Share Paying Agent shall use such notice of such transfer or change in status in
calculating the 25% Limitation.
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) nor (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 Preferred Share Paying Agent will not
register the transfer of the Preferred Shares to us unless such transfer is specifically authorized by
the Issuer in writing; provided 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 such Preferred Shares or (y) the transferor
of the Preferred Shares 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 Preferred Shares. We understand and agree
that the information supplied in this Certificate will be used and relied upon by the Issuer and the Preferred
Share Paying Agent to determine that (i) Benefit Plan Investors own or hold less than 25% of the value of
the Preferred Shares upon any subsequent transfer of the Preferred Shares in accordance with the Fiscal
Agency Agreement and (ii) no Affected Bank, directly or in conjunction with its affiliates, owns or holds
more than 33⅓% of the Preferred Shares at any time.
10. Further Acknowledgment. We acknowledge and agree that (i) all of the assurances contained in this
Certificate are for the benefit of the Issuer, the Preferred Share Paying Agent, the Placement Agent and the
Collateral Manager as third-party beneficiaries hereof, (ii) copies of this Certificate and any information
contained herein may be provided to the Issuer, the Preferred Share Paying Agent, the Placement Agent,
the Collateral 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 Preferred Shares 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.
[Remainder of the page intentionally left blank]
B-2

11. Future Transfer Requirements.
Transferee Letter and its Delivery. We acknowledge and agree that we may not transfer any Preferred
Shares to any person unless the Preferred Share Paying Agent 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:
follows:
Unless you are notified otherwise, the name and address of the Preferred Share Paying Agent is as
U.S. Bank National Association
One Federal Street, Third Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Services/CDO Unit—Octagon IX CLO
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Certificate.
____________________________
[Insert Purchaser's Name Above]
By:
Name:
Title:
______________________
Dated:
This Certificate relates to U.S.$_________ of Preferred Shares
B-2

EXHIBIT A
Aggregate
Industry Unit
Score
Diversity
Score
Aggregate
Industry Unit
Score
Moody's Diversity Score Table
Diversity
Score
Aggregate
Industry Unit
Score
Diversity
Score
Aggregate
Industry Unit
Score
Diversity
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
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
Source: Moody's Investors Service, Inc.
A-1

EXHIBIT B
Industry Classification Groups
Moody's Industry Classification Groups
1. Aerospace and Defense
2. Automobile
3. Banking
4. Beverage, Food and Tobacco
5. Buildings and Real Estate
6. Chemicals, Plastics and Rubber
7. Containers, Packaging and Glass
8. Personal and Non-Durable Consumer Products (Manufacturing Only)
9. Diversified/Conglomerate Manufacturing
10. Diversified/Conglomerate Service
11. Diversified Natural Resources, Precious Metals and Minerals
12. Ecological
13. Electronics
14. Finance (including structured products)
15. Farming and Agriculture
16. Grocery
17. Healthcare, Education and Childcare
18. Home and Office Furnishings, Housewares and Durable Consumer Products
19. Hotels, Motels, Inns and Gaming
20. Insurance
21. Leisure, Amusement, Motion Pictures, Entertainment
22. Machinery (Non-Agriculture, Non-Construction and Non-Electronic)
23. Mining, Steel, Iron and Nonprecious Metals
24. Oil and Gas
25. Personal, Food and Miscellaneous Services
26. Printing, Publishing and Broadcasting
27. Cargo Transport
28. Retail Stores
29. Telecommunications
30. Textiles and Leather
31. Personal Transportation
32. Utilities
33. Broadcasting and Entertainment
B-1

Standard & Poor's Industry Classification Groups
Industry Code
Description
0 Zero Default Risk
1 Aerospace & Defense
2 Air transport
3 Automotive
4 Beverage & Tobacco
5 Radio & Television
6 Brokers, Dealers & Investment houses
7 Building & Development
8 Business equipment & services
9 Cable & satellite television
10 Chemicals & plastics
11 Clothing/textiles
12 Conglomerates
13 Containers & glass products
14 Cosmetics/toiletries
15 Drugs
16 Ecological services & equipment
17 Electronics/electrical
18 Equipment leasing
19 Farming/agriculture
20 Financial intermediaries
21 Food/drug retailers
22 Food products
23 Food service
24 Forest products
25 Health care
26 Home furnishings
27 Lodging & casinos
28 Industrial equipment
29 Insurance
30 Leisure goods/activities/movies
31 Nonferrous metals/minerals
32 Oil & gas
33 Publishing
34 Rail industries
35 Retailers (except food & drug)
36 Steel
37 Surface transport
38 Telecommunications/cellular
39 Utilities
49 Project Finance
50 CDO
51 ABS Consumer
52 ABS Commercial
53 CMBS Diversified (Conduit and CTL)
54 CMBS (Large Loan, Single Borrower, and Single Property)
55 REITs and REOCs
56 RMBS A
57 RMBS B&C, HELs, HELOCs, and Tax Lien
58 Manufactured Housing
59 U.S. Agency (Explicitly Guaranteed)
60 Monoline/FER Guaranteed
61 Non-FER Company Guaranteed
62 FFELP Student Loans (Over 70% FFELP)
B-2

PRINCIPAL OFFICE OF ISSUER
Octagon Investment Partners IX, Ltd.
c/o Maples Finance Limited
P.O. Box 1093GT
Queensgate House
South Church Street, George Town
Grand Cayman, Cayman Islands
PRINCIPAL OFFICE OF CO-ISSUER
Octagon Investment Partners IX, LLC
c/o Puglisi & Associates
850 Library Avenue
Suite 204
Newark, Delaware 19711
TRUSTEE AND PAYING AGENT
U.S. Bank National Association
One Federal Street, 3 rd Floor
Boston, Massachusetts 02110
Attention: Corporate Trust Services/CDO Unit—Octagon IX CLO
COLLATERAL MANAGER
Octagon Credit Investors, LLC
52 Vanderbilt Avenue, 18 th Floor
New York, New York 10017
IRISH LISTING AGENT
Arthur Cox Listing Services Limited
Earlsfort Centre
Earlsfort Terrace
Dublin 2, Ireland
IRISH PAYING AGENT
Maples Finance Dublin
40 Lower Baggot Street
Dublin 2, Ireland
LEGAL ADVISORS
To the Co-Issuers and the Collateral Manager
as to United States law
Milbank, Tweed, Hadley & McCloy LLP
One Chase Manhattan Plaza
New York, New York 10005-1413
To the Placement Agent as to United States law
Sidley Austin LLP
787 Seventh Avenue
New York, New York 10019
To the Issuer as to
Cayman Islands law
Maples and Calder
P.O. Box 309 GT
Ugland House
South Church Street, George Town
Grand Cayman, Cayman Islands